Good day. Thank you for standing by, and welcome to the Old Republic International Second Quarter 2021 Earnings Conference Call. Q and A session. Thank you. I would now like to hand the conference over to your speaker today, Mr.
Joe Calabrese. The floor is yours.
Thank you. Good afternoon, everyone, Thank you for joining us for the Old Republic conference call to discuss Q2 2021 results. This morning, We distributed a copy of the press release and posted a separate statistical supplement, which we assume you have seen and or otherwise have access to during the call. Both of the documents are available at Old Republic's website, which is www.oldrepublic.com. Please be advised this call may involve forward looking statements as discussed in the press release and the fiscal supplements dated July 22, 2021.
Risks associated with these statements can be found in the company's latest SEC filings. This afternoon's conference call will be led by Craig Schmidt, President and CEO of Old Republic International Corporation and several other senior executive members as planned for this meeting. At this time, I'd like to turn the call over to Karstenji. Please go ahead, sir.
Okay. Thank you, Joe. Well, good afternoon, everyone, and welcome again to Old Republic's 2nd quarter earnings call. With me today, we have our CFO, Frank Sedaro. Frank is joining us for the first time on this call following Karl Miller's retirement.
But Frank has been working alongside Carl for several years as Deputy CFO. So Frank, welcome. And we also have Carolyn Monroe, the President of our Title Insurance Group. So I'll kick things off here. ORI produced another terrific quarter with general insurance and title insurance each posting exceptional results that drove the strong consolidated results that we posted.
Compared to the Q2 of 2020, total net premium and fees increased to just under $2,000,000,000 up almost 30%. Pretax operating income increased to $275,000,000 and that's up 80%. And the consolidated combined ratio improved to 90.6%, a 5.5 percentage point improvement. Again, comparing to the Q2 of 2020, general insurance saw growth return with net Written premium increasing by 13%. And in title insurance, we grew net premiums and fees earned by 57%.
So our specialty strategy with our diverse portfolio of Specialty Products in both the General Insurance and Title Insurance Groups Continue to deliver strong growth and strong profitability. So with that introduction, I'll now turn the discussion over to Frank to discuss some of the per share figures along with our investment portfolio. And then he'll turn things back to me to cover general insurance. And that will be followed by Carolyn, who will discuss title insurance. And then, Of course, we'll open it up to Q and A after that.
So, Frank, I hand it over to you. Thank you, Craig, and good afternoon, everyone. This morning, we announced 1st quarter net income, excluding all investment gains and losses of 221,000,000 or $0.73 per share, a 78% increase compared to last year's Q2. For the 1st 6 and 6 months of this year, net operating income was $427,000,000 which was up 61%. Results for both periods were driven by Financial growth and underwriting profitability within our general and title insurance segments and you'll hear more about that shortly.
Additionally, shareholders' equity rose to just under $6,800,000,000 resulting in book value per share growing to a record $22.59 So taking into account dividends, this was an 11% increase from last year end. This growth was driven by a combination of our strong earnings along with further market within the investment portfolio. At June 30, that investment portfolio consisted of approximately 68 percent of highly rated bonds and short term investments with the remaining 32% allocated to large cap stocks that have a long history of not only paying dividends, but increasing them. The fair value of the equity portfolio improved by another $120,000,000 during the quarter and ended with an unrealized gain of nearly 1,300,000,000 Net investment income decreased slightly for the quarter and almost 5% year to date as the impact of lower yields on new investment purchases more than offset a modest increase in the average investment base. The average maturity on the bond portfolio remained consistent at approximately 4 years and the book yield was 2.6% compared to a market yield of 2.5%.
Now turning to the liability side of the balance sheet, Claim reserves grew to just over $11,000,000,000 at June 30. All three operating segments recognized favorable claim reserve development for the quarter. In total, the consolidated claim ratio benefited by 1.8 percentage points for both this year's 2nd quarter and first half compared to 0.3.6 percentage points for the same periods a year ago. Finally, our mortgage runoff operations continue to generate results aligned with our expectations. The group paid another $25,000,000 dividend to parent, bringing the total to $50,000,000 for the year.
We expect that pace of dividends to continue through the remainder of the year. Total GAAP shareholders' equity for the mortgage companies ended the quarter at just under 220,000,000 And I'll turn the call back to Craig for a discussion of General Insurance. Okay, Frank. Thank you. So turning to General Insurance.
As I already noted, we saw growth return with premium increasing by 13% and net premiums earned increasing 6%. Compared to the Q2 of 2020, pre tax operating income rose by almost 45%, primarily from our improved claim ratios. The overall combined ratio improved 4.4 percentage points from 98.4 percent to 94%. The claim ratios we reported were of course inclusive of Favorable prior year development and that came in at 2.9 percentage points for the quarter. Net premiums written in commercial auto grew by 13% with the tailwind we have from continued rate increases in auto liability.
And those rate increases right now are coming in, in the 15% range. Our 2nd quarter commercial auto claim ratio improved to 75.4% compared to 83.4 percent in the Q2 of 2020. As far as frequency, claim frequency is returning, but Still lower than pre pandemic levels. And however, offsetting that is higher severity that continues due to greater fees and the continued pressure on settlement values. Turning to workers' compensation, net premiums written were even compared with the Q2 of 2020.
However, that's a notable improvement from recent quarters where we've experienced Some declines. Rates in work comp were slightly negative and that's fluctuated between quarters between a range of plus or minus 2% over the most recent quarters. So relatively flat trend there. The workers' compensation 2nd quarter claim ratio came in at 59.6 percent and that compares to 65.7% In the Q2 of 2020. Claim frequency here in workers' comp is trending back toward pre pandemic levels.
Given that we typically provide commercial auto, workers' Comp and general liability together in our product offering. This combined claim ratio Came in at 69.1% compared to 74.6% In last year's Q2. Highlighting the results in financial indemnity, property and other coverages, Which we show in the financial supplement. We've expanded our product offering in these areas. And collectively, in those three areas, we grew net written premium by 25% this quarter and the favorable claim ratios helped contribute to the improved combined ratio in the General Insurance Group.
So we in general insurance continue to enhance our underwriting excellence through better segmentation, improved risk selection, pricing precision and increased use of analytics. And we feel confident that these efforts will continue to facilitate strong underwriting profitability as we move through the year. The marketplace is generally disciplined and it's therefore favorable for us to continue to obtain appropriate prices for our products while maintaining our high retention ratios. So that will wrap it up for the General Insurance Group for the time being. And I'll now turn the discussion over to Carolyn, who along with the rest of her team have put together a string of terrific quarters.
So Carolyn, I'll let you take it from here.
Thank you, Craig. As reported this morning, the title group posted all time second quarter and year to date was up nearly 57% from the prior year. This was a combination of strong contributions from both agency business up 61% and our direct production channels up 44%. For the 6 month year to date period, premium and fee revenue has already surpassed the $2,000,000,000 mark, a 48.6% increase from the comparable period last year. Our pretax operating income of $138,000,000 for the quarter compared to $65,000,000 in last year's 2nd quarter, an increase of approximately $73,000,000 or 112.3 percent.
The second quarter also marks 4 consecutive quarters in which the $100,000,000 pretax operating income threshold has been exceeded. The high premium and fee volume provide greater leverage of our expense structure as noted in our 85.4% expense ratio for the Q2 this year at 86.3 percent for year to date June results versus 89.6% and 90.6 percent for the comparable prior periods. Per the Mortgage Banker Association's Full year 2021 mortgage originations are expected to be one of the top years on record, although trailing by 10.5 percent, the record setting 2020 results. Since Q2 2020, Refinances have made up the lion's share of the mortgage origination growth and this trend continued through the Q2 of 2021. There is a marked decrease expected in refinances for the second half of the year as compared to the strong volumes experienced during the second half of twenty twenty.
However, on the flip side, the purchase market is expected to increase by over 15% in 2021, which helps the title insurance industry with a higher fee profile. Technology continues to be a cornerstone for advancement in our industry as well as a key piece of Old Republic's ability to deliver on our business goals and objectives. During the Q3 2020 earnings call, we introduced a proof of concept project we had initiated around robotic process automation or RPA while creating our first bot. This proof of concept proved measurable ability to reallocate human hours of work. More importantly and really more exciting, This elasticity allows for increases in volume without an increase in corresponding expense.
The proof of concept created the results we were hoping for and we will continue to deploy and leverage this technology. We know that we are only starting to tap the potential of RPA and other automation technologies and are excited to implement their capabilities. This represents just one initiative in our portfolio of technology projects that we are working on. The last year showed the increased usage of all digital solutions and platforms. We saw a similar trend with the usage of our digital closing platform, Pravaso.
In fact, we remain the clear market leader in this space as the majority of the digital closings and eNotes completed nationwide occur on Pivasa. As a result, we constantly invest in improvements that will continue to expand the adoption of digital closings in the industry. One other quick example of our technology focus that I would like to share with you is that one of the major challenges identified in the industry was the work required to tag documents to allow electronic signatures by all parties in the transaction. Historically, on the title side, it required manual and time consuming preparation to apply the tags. To address this, we released the recent enhancement of white text tagging, which allows for the reduction of or even eliminates manual tagging efforts.
So this is specifically targeted for the title Street. It will be used by any party that doesn't currently have a document tagging standard. We are committed to easing the challenges to adoption and we'll have a continued focus on that. Essentially, our business roadmap and our technology roadmap have converged into 1 as they must to achieve our results. I look forward to continuing to share the results of these with you in the future.
Our plan is to blend the history of Old Republic solid business practices, procedures and expertise with technology to fully unlock measurable benefits across our business units. As we enter the second half of the year, our order counts remain strong, Mortgage rates are projected to remain low and continued improvements in the unemployment rate are all drivers that should equate to a healthy real market to finish off the year. I'd like to close with my appreciation to all our employees and customers as they continue to meet the high demands of the current real estate market. As always, our guiding principles of integrity, managing for the long run, financial strength, protection of our policyholders and the well-being of our employees and customers will be at the forefront of all that we do. And with that, I'll turn the call back over to Craig.
Okay, Carolyn. Thank you very much. Well, again, we're very pleased with another quarter of exceptional operating results. And we're also very pleased with our specialty strategy providing specialty insurance and products to core industries served by General Insurance and Title Insurance, which in turn produces value for our shareholders. So that concludes our prepared remarks.
And we'll now open up the discussion to Q and A. And I'll either answer your question or I'll ask Frank or Carolyn to respond.
Your first question comes from the line of Greg Peters from Raymond James. Your line is now open.
Good afternoon, team Old Republic. And congratulations, Frank, on the promotion. You did a good job With your first conference call. So, hopefully, many more to come. Let's Just in order general insurance, thank you for the color.
I was wondering if you could give us As we look at the growth, can you give us a sense of where the growth is coming in exposure? Is it new business? Is it rate? Sort of give us how is the balance of that working across the entire book? And then maybe as you're answering that question, Craig, include the discussion around retention?
Okay. I'd be happy To do that, Greg. So the answer to your question is that it is indeed coming From all three. Exposure is up, particularly in workers' comp as people have Returned to work and we've seen our payroll numbers grow on our existing business. Other example of exposures of course is miles driven and number of vehicles and fleets that are returning and increasing.
So exposure growth is certainly One component. New business, absolutely. The folks Here have been working very hard through exceptional constraints throughout the pandemic to Continue to have relationships with various distribution sources That we have relationships with and expand those and make sure that the flow of business opportunity has continued. So new business writings is a portion of it. And included in that would be Some areas geographically where we have expanded some of our businesses.
And also as I Touched on earlier, our product offering has also expanded. And So that contributes to new business growth as well. And then rate, Obviously, my comments about comp being relatively flat. That doesn't help growth On the top line. However, where we do get help, as I mentioned, the tailwind on commercial Auto liability in particular, we're still getting rates of 15%.
On our D and O business, on our aviation business, I know I talked about those two areas in prior quarters because We were getting significant rates in those areas. The rate increases there are less robust than they were, but Still around the 10% range for those lines. So that's helpful. So it's a combination of the 3, Greg. And as far as retention is concerned our retention ratios across virtually all of our lines of coverages, All of our various specialty segments is extremely strong.
We believe through our specialty offering that the specialty risk control, the specialty claim services, the specialty underwriting approach that we have Really creates a stickiness and some greater pricing elasticity because of that. And as such, we enjoy very high retention ratios. And as my comments Earlier indicated, the marketplace certainly can influence that as well, but in a disciplined Relatively disciplined marketplace. That's helpful to retention as well. So Hopefully that answers your question, Greg.
That was great additional color. Appreciate it. Just one more question on the general insurance before I pivot The title, you did report favorable reserve development in the Q2 and through the 6 months. Can you talk to us about where the sources, what years, what accident years, where the developments coming from, just To give us some additional perspective.
Well, I'll kick it off and then see if Frank has any follow-up. But It's fair to say that the there's been favorable development on workers' compensation. And the other Contributing factor is that we really have not seen any contributing unfavorable development Of a significant nature from any other lines. So once you put it all together, It creates a pretty decent favorable development number on an aggregated basis. So I don't know Frank, if there's anything you would add to that.
No, I mean that's it for the quarter in a nutshell, it's $25,000,000 of favorable in total. The year as you would expect, it's coming from older years predominantly 2012 to 2017 are the 1,000,000 years that it's coming from. But workers' comp is the lion's share. Got it. And as you know, Greg, we're very conservative when we set our loss ratio and very conservative about Releasing favorable development.
If we see unfavorable development, we put it up immediately. If we see Favorable development. We're going to hold loss ratios till we're absolutely certain. And on long tail lines, We're holding those loss ratios for 3 to 5 years, generally speaking. And that continues to be our practice.
And I'll just add that as well to the mix of your question.
Yes. Thanks for reminding me about that. I appreciate it. I'll pivot to the title business. And Carolyn, What a phenomenal result.
Congratulations. Obviously, it's The tailwind of the housing boom that's really helping you here. And if I I was listening with interest about your comments around agency being up over 60% direct being up over 40%, all really positive stats. But you really didn't comment What's going on commercial versus non commercial? And I was wondering maybe you could add some color, just give us a sense of how Your commercial book is growing during this period of time relative to the residential side.
So Actual premiums were up 19.4% for the Q2 over Q2 of 2020. And they represented about 14% of our total premiums, but that's It's really more of a result of how strong the residential market was. But we're starting to see A little more of an uptick in commercial. We started seeing it towards the end of the second quarter. And we feel like going into the Q3 that We'll see stronger commercial results.
We're seeing more, I would say, midsize. And by midsize, we mean $100,000,000 up to $250,000,000 in deals. We're starting to see a lot more construction projects We did during the pandemic, which is it makes sense, but we're excited about seeing That and we're still seeing a lot of energy projects come our way.
And when I think about the midsize, you said the $100,000,000 to $200,000,000 Is that sort of your sweet spot? Are you doing deals larger than that? Or how should I?
No, we're doing deals larger than that. But the pandemic had slowed a lot of those deals down. And We're starting to see a lot of investor more investor activity getting excited. And that's where you see a lot of The more the $100,000,000 and up deals. But now we have a couple of pretty large portfolio deals we're working on right now.
But we're just seeing a lot more activity and that we're excited about.
Got it. Well, I have other questions, but I realize there's other people on the call. So, I'll thank you for the answers and I'll circle back if I have to. Thanks.
Again, we have a follow-up question coming from the line of Greg Peters from Raymond James. Your line is now open.
Great. So I'm trying to be mindful of others, but I'm just going to fire away. Carolyn, when you spoke about the commercial being about 14%, that was at the second quarter. Is it still 14% for the first half of twenty twenty two? Is that or is that just trying to get my percentages right?
Yes. It represented 14% of our overall business year to date.
Year to date, year to date. Perfect. Thanks. And then the other thing I noticed, Carolyn, in the disclosure on in the supplement was that The reserves to paid loss ratio has crept up again. It looks like at this point in time, it's as high as it's ever been.
Can you give us some views on what's going on there?
A lot of that I would say is because of the slowdown in paid activity Because of the pandemic. Things courts were closed that type, claims was slow to be processed by attorneys and lawsuits can be filed, those type of things.
Got it. Okay. The last question I'll have for you is, I did notice that in your press release on Page 8, Where you give us segment composition of shareholders' equity per share that the RFIG Runoff segment Had $1.50 of equity in it at year end and through June, it's come down to $1.40 I think you've talked about pulling some or upstreaming some of the capital From that subsidiary, can you give us just sort of the status update of that? And that's my last question.
Sure, Greg. Yes, we took 25 $5,000,000 out in the Q1 and did the same in the Q2. So $50,000,000 for the year and we just anticipate that that's probably the pace For this no guarantees, but that's the pace we're expecting throughout the rest of this year. So Shareholders' equity there on a GAAP basis ended at $420,000,000
Perfect. Thank you very much for the answers. Congratulations on the quarter guys and girls. Sorry.
Thank you very much, Greg.
Yes.
We have no more questions at this time. I'll turn the call back over to the presenters for closing remarks.
Okay. Well, thank you everyone who participated. We appreciate your interest. It's obviously the middle of summer and When you have a quarter like this, there tends to be less questions, the better it is. So Again, thank you everyone.
Enjoy the rest of your summer and we look forward to talking to you all next quarter. Thank you.