defa14a.htm
                 UNITED STATES
           SECURITIES AND EXCHANGE COMMISSION
              WASHINGTON, DC 20549

                               SCHEDULE 14A
                      (RULE 14a-101)

               INFORMATION REQUIRED IN
               PROXY STATEMENT

                               Proxy Statement Pursuant to Section 14(a) of the
              Securities Exchange Act of 1934
                                                          (Amendment No.   )


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Old Republic International Corporation
          (Name of Registrant as Specified In Its Charter)
 
 
                                                        ________________________________
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ORI Logo
                                                                                                                                    
 
                                                             
                                 
May 16, 2016
 
 
Dear Old Republic International Corporation Shareholders:
 
Subject: BOARD OF DIRECTORS’ RECOMMENDATION TO VOTE “AGAINST” THE CalPERS PROPOSAL SET FORTH IN PROXY ITEM #4
 
This year CalPERS is once again taking it upon itself to recommend that Old Republic change yet another feature of its overall system of corporate governance. This time CalPERS wants the Company to adopt a so-called “proxy access” feature as a part of its by-laws. CalPERS maintains that such a feature would foster director accountability and long-term value creation. In support of its recommendation, CalPERS specifically refers to an academic study published by the CFA Institute. This academic study has been criticized by commentators who suggest opposite views, particularly as it relates to the assertion that proxy access can raise overall U.S. market capitalization. Moreover, the Company does not believe that academic studies are necessarily linked to business realities on the one hand, nor are they necessarily based on irrefutable evidence supportive of their conclusions. Additionally, the Company’s decades-long experience in interacting with serious investors in its stock or fixed income securities has rarely, if ever, shown any interest by them in the details or substance of its corporate governance. This governance system has been in place over the decades of the Company’s existence as a publicly held institution. Instead, serious long and short-term investors have always been focused on basic, tradition-honed expectations for:

Ø
A business’ ability to produce sustainable earnings over time;
 
Ø
A business’ ability to grow the shareholders’ equity account over time;
 
Ø
A business’ ability to deliver a reliably steady return of cash dividends over time;
 
Ø
A business’ long-term strategy for achieving these three critically important returns in an ethical and legal manner.
 
Old Republic’s long-term record and success in meeting these basic expectations of serious investors is empirically self-evident. It is portrayed with absolute clarity in the two accompanying charts. The Company’s long-term performance for the benefit of serious investors in its stock is foundational to the Board of Directors’ conclusion that the entirety of the system of corporate governance is not broken and is not in need of theory-inspired change for the sake of change.

THE BOARD OF DIRECTORS THEREFORE BELIEVES THE CalPERS PROPOSAL IS NOT EMPIRICALLY PROVEN TO BE IN THE SHAREHOLDERS’ BEST INTERESTS.  ACCORDINGLY, THE BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT OLD REPUBLIC’S SHAREHOLDERS VOTE AGAINST THIS PROPOSAL.
 
                                    


 
 

 

 
Please see the two attached schedules that show Old Republic’s strong, index-beating performance over the decades. They provide clear evidence of its long-term benefits to serious investors. These investors have included the Directors, executives, and the vast majority of the Company’s employees who together currently own nearly 10% of Old Republic’s common stock.
                                         


 
Respectfully submitted on behalf of the Company’s Board of Directors.

/s/ A. C. Zucaro

Aldo C. Zucaro
Chairman of the Board and Chief Executive Officer

Attachments:
Old Republic International Corporation – Total Book Return Compared S&P 500 - 50 Year Table
Old Republic International Corporation – Total Market Return Compared S&P 500 – 50 Year Table

The tables that follow reflect the Company’s annual operating results over the past 50 years. To put them in perspective, the Company has included information on the stock market’s valuation. The first table compares Old Republic’s annual total book return with the total pretax annual return for the Standard & Poor’s 500 Index. (The Company calculates total book return by taking the annual post-tax change in shareholders’ equity per share, plus the pretax dividend yield on that account.) For this period, Old Republic’s total book return averaged 14.7%, versus 11.1% for the S&P 500 Index.

The second table compares the Company’s annual total market return on a per-share basis with the S&P 500’s performance. (This is calculated by taking the year-to-year percentage change in the closing price of Old Republic’s stock, plus the cash dividend as a percentage of the closing price per share at the beginning of each year.) During this time, Old Republic’s shares posted an annual average return of 16.7% versus 11.1% for the S&P 500.

Both charts reflect the Company’s poorer performance relative to the S&P 500 Index in the Great Recession years, as this recession seriously impacted the Company’s Run-Off financial indemnity business. This relatively poorer performance is expected to turn more positive as Old Republic’s recalibrated capital resources restore an earnings momentum driven by its General and Title insurance businesses. The Company has paid cash dividends without interruption for each of the 74 years since 1942, and the annual rate has been increased in each of the past 34 years through year end 2015.

 
 

 


OLD REPUBLIC INTERNATIONAL CORPORATON – Total Book Return Compared S&P 500
                     
Relative
 
Old Republic International Corporation (a)
 
S&P 500 (b)
 
Results
 
Ending
Cash
 
Percentage
   
Total
 
Total
 
ORI
 
Book
Dividends
 
Change in
Dividend
 
Book
 
Annual
 
vs.
Year
Value
Paid (c)
 
Book Value
Yield
 
Return (d)
 
Return
 
S&P 500
                       
1966
$0.16
$0.006
 
14.3%
4.3%
 
18.6%
 
-10.0%
 
28.6%
1967
0.25
0.007
 
56.3%
4.4%
 
60.7%
 
23.7%
 
37.0%
1968
0.28
0.007
 
15.2%
2.8%
 
18.0%
 
11.0%
 
7.0%
1969
0.31
0.011
 
9.4%
3.8%
 
13.2%
 
-8.4%
 
21.6%
1970
0.36
0.012
 
15.5%
4.0%
 
19.5%
 
4.0%
 
15.5%
                       
1971
0.47
0.014
 
31.3%
3.9%
 
35.2%
 
14.3%
 
20.9%
1972
0.48
0.016
 
2.3%
3.4%
 
5.7%
 
19.0%
 
-13.3%
1973
0.47
0.019
 
-2.2%
3.9%
 
1.7%
 
-14.7%
 
16.4%
1974
0.38
0.020
 
-19.3%
4.2%
 
-15.1%
 
-26.5%
 
11.4%
1975
0.29
0.020
 
-23.9%
5.3%
 
-18.6%
 
37.2%
 
-55.8%
                       
1976
0.56
0.011
 
94.4%
3.9%
 
98.3%
 
23.8%
 
74.5%
1977
0.79
0.022
 
41.9%
3.9%
 
45.8%
 
-7.2%
 
53.0%
1978
0.98
0.033
 
22.8%
4.2%
 
27.0%
 
6.6%
 
20.4%
1979
1.08
0.052
 
10.9%
5.3%
 
16.2%
 
18.4%
 
-2.2%
1980
1.22
0.054
 
12.8%
5.0%
 
17.8%
 
32.5%
 
-14.7%
                       
1981
1.39
0.054
 
14.0%
4.4%
 
18.4%
 
-4.9%
 
23.3%
1982
1.65
0.056
 
18.4%
4.0%
 
22.4%
 
21.6%
 
0.8%
1983
1.89
0.058
 
14.6%
3.6%
 
18.2%
 
22.6%
 
-4.4%
1984
2.21
0.059
 
16.9%
3.3%
 
20.2%
 
6.3%
 
13.9%
1985
2.30
0.062
 
4.3%
2.9%
 
7.2%
 
31.7%
 
-24.5%
                       
1986
2.53
0.065
 
9.7%
2.7%
 
12.6%
 
18.7%
 
-6.1%
1987
2.95
0.068
 
16.7%
2.7%
 
19.4%
 
5.3%
 
14.1%
1988
3.15
0.071
 
6.9%
2.3%
 
9.2%
 
16.6%
 
-7.4%
1989
3.54
0.076
 
12.4%
2.4%
 
14.8%
 
31.7%
 
-16.9%
1990
3.92
0.081
 
10.7%
2.2%
 
13.1%
 
-3.1%
 
16.2%
                       
1991
4.46
0.086
 
13.7%
2.2%
 
15.9%
 
30.5%
 
-14.6%
1992
5.07
0.093
 
13.8%
2.1%
 
15.9%
 
7.6%
 
8.3%
1993
5.75
0.102
 
13.4%
1.9%
 
15.3%
 
10.1%
 
5.2%
1994
6.11
0.111
 
6.3%
2.0%
 
8.3%
 
1.3%
 
7.0%
1995
7.24
0.121
 
18.5%
2.0%
 
20.5%
 
37.6%
 
-17.1%
                       
1996
7.77
0.148
 
7.3%
2.0%
 
9.3%
 
23.0%
 
-13.7%
1997
8.31
0.178
 
7.0%
2.3%
 
9.3%
 
33.4%
 
-24.1%
1998
9.21
0.206
 
10.8%
2.5%
 
13.3%
 
28.6%
 
-15.3%
1999
9.59
0.261
 
4.2%
2.8%
 
7.0%
 
21.0%
 
-14.0%
2000
11.00
0.293
 
14.6%
3.1%
 
17.7%
 
-9.1%
 
26.8%
                       
2001
12.48
0.315
 
13.5%
2.9%
 
16.4%
 
-11.9%
 
28.3%
2002
13.96
0.336
 
11.8%
2.7%
 
14.5%
 
-22.1%
 
36.6%
2003
15.65
0.890
(c)
12.1%
6.4%
(c)
18.6%
 
28.7%
 
-10.1%
2004
16.94
0.402
 
8.2%
2.6%
 
10.8%
 
10.9%
 
-0.1%
2005
17.53
1.312
(c)
3.5%
7.7%
(c)
11.2%
 
4.9%
 
6.3%
                       
2006
18.91
0.590
 
7.9%
3.4%
 
11.3%
 
15.8%
 
-4.5%
2007
19.71
0.630
 
4.2%
3.3%
 
7.5%
 
5.5%
 
2.0%
2008
15.91
0.670
 
-19.3%
3.4%
 
-15.9%
 
-37.0%
 
21.1%
2009
16.49
0.680
 
3.6%
4.3%
 
7.9%
 
26.5%
 
-18.6%
2010
16.16
0.690
 
-2.0%
4.2%
 
2.2%
 
15.1%
 
-12.9%
                       
2011
14.76
0.700
 
-8.7%
4.3%
 
-4.4%
 
2.1%
 
-6.5%
2012
14.03
0.710
 
-4.9%
4.8%
 
-0.1%
 
16.0%
 
-16.1%
2013
14.64
0.720
 
4.3%
5.1%
 
9.4%
 
32.4%
 
-23.0%
2014
15.15
0.730
 
3.5%
5.0%
 
8.5%
 
13.7%
 
-5.2%
2015
$15.02
$0.740
 
-0.9%
4.9%
 
4.0%
 
1.4%
 
2.6%
                       
Annual Average – 1966 to 2015 (50 years)
 
11.1%
3.6%
 
14.7%
 
11.1%
 
3.6%
                       
(a) Old Republic’s per share statistics have been retroactively restated for stock dividends and splits. The data applicable to the Company are reported on a post-tax basis relative to book value, and on a pre-tax basis with respect to the dividend yield. 1967 and prior years’ information is based on the statutory results of Old Republic Life Insurance Company, predecessor to Old Republic International Corporation. (b) Data for the Standard & Poor’s 500 Index (“S&P 500“) are calculated on a pre-tax basis. (c) In December, 2003 and 2005, special year-end cash dividends of $.534 and $.800 per common share were declared and paid. (d) Total book return represents the sum of each year’s dividend yield as a percentage of beginning book value per share, plus the percentage change in each year’s book value per share.
 

 
 

 


OLD REPUBLIC INTERNATIONAL CORPORATON – Total Market Return Compared S&P 500
                     
Relative
 
Old Republic International Corporation (a)
 
S&P 500 (b)
 
Results
 
Ending
Cash
 
Percentage
   
Total
 
Total
 
ORI
 
Market
Dividends
 
Change in
Dividend
 
Market
 
Annual
 
vs.
Year
Value
Paid (c)
 
Market Value
Yield
 
Return (d)
 
Return
 
S&P 500
                       
1966
$0.38
$0.006
 
-28.3%
1.1%
 
-27.2%
 
-10.0%
 
-17.2%
1967
0.34
0.007
 
-10.5%
1.8%
 
-8.7%
 
23.7%
 
-32.4%
1968
0.47
0.007
 
39.7%
2.1%
 
41.8%
 
11.0%
 
30.8%
1969
0.34
0.011
 
-28.4%
2.3%
 
-26.1%
 
-8.4%
 
-17.7%
1970
0.53
0.012
 
57.1%
3.7%
 
60.8%
 
4.0%
 
56.8%
                       
1971
0.84
0.014
 
59.6%
2.6%
 
62.2%
 
14.3%
 
47.9%
1972
1.24
0.016
 
47.5%
1.9%
 
49.4%
 
19.0%
 
30.4%
1973
0.45
0.019
 
-63.5%
1.5%
 
-62.0%
 
-14.7%
 
-47.3%
1974
0.41
0.020
 
-10.6%
4.4%
 
-6.2%
 
-26.5%
 
20.3%
1975
0.44
0.020
 
7.9%
5.0%
 
12.9%
 
37.2%
 
-24.3%
                       
1976
0.62
0.011
 
42.7%
2.6%
 
45.3%
 
23.8%
 
21.5%
1977
0.79
0.022
 
27.4%
3.5%
 
30.9%
 
-7.2%
 
38.1%
1978
0.98
0.033
 
22.8%
4.2%
 
27.0%
 
6.6%
 
20.4%
1979
1.11
0.052
 
14.2%
5.3%
 
19.5%
 
18.4%
 
1.1%
1980
0.89
0.054
 
-20.4%
4.8%
 
-15.6%
 
32.5%
 
-48.1%
                       
1981
1.14
0.054
 
28.8%
6.1%
 
34.9%
 
-4.9%
 
39.8%
1982
1.46
0.056
 
27.8%
4.9%
 
32.7%
 
21.6%
 
11.1%
1983
2.35
0.058
 
61.4%
4.0%
 
65.4%
 
22.6%
 
42.8%
1984
2.03
0.059
 
-13.7%
2.5%
 
-11.2%
 
6.3%
 
-17.5%
1985
3.01
0.062
 
48.4%
3.0%
 
51.4%
 
31.7%
 
19.7%
                       
1986
2.32
0.065
 
-23.2%
2.2%
 
-21.0%
 
18.7%
 
-39.7%
1987
1.86
0.068
 
-19.6%
2.9%
 
-16.7%
 
5.3%
 
-22.0%
1988
2.35
0.071
 
26.0%
3.8%
 
29.8%
 
16.6%
 
13.2%
1989
2.61
0.076
 
11.0%
3.2%
 
14.2%
 
31.7%
 
-17.5%
1990
2.46
0.081
 
-5.3%
3.1%
 
-2.2%
 
-3.1%
 
0.9%
                       
1991
4.21
0.086
 
70.7%
3.5%
 
74.2%
 
30.5%
 
43.7%
1992
5.90
0.093
 
40.2%
2.2%
 
42.4%
 
7.6%
 
34.8%
1993
5.37
0.102
 
-9.0%
1.7%
 
-7.3%
 
10.1%
 
-17.4%
1994
5.04
0.111
 
-6.1%
2.1%
 
-4.0%
 
1.3%
 
-5.3%
1995
8.42
0.121
 
67.1%
2.4%
 
69.5%
 
37.6%
 
31.9%
                       
1996
9.51
0.148
 
13.0%
1.8%
 
14.8%
 
23.0%
 
-8.2%
1997
13.22
0.178
 
39.0%
1.9%
 
40.9%
 
33.4%
 
7.5%
1998
12.00
0.206
 
-9.2%
1.6%
 
-7.6%
 
28.6%
 
-36.2%
1999
7.27
0.261
 
-39.4%
2.2%
 
-37.2%
 
21.0%
 
-58.2%
2000
17.06
0.293
 
134.8%
4.0%
 
138.8%
 
-9.1%
 
147.9%
                       
2001
14.93
0.315
 
-12.5%
1.8%
 
-10.7%
 
-11.9%
 
1.2%
2002
14.93
0.336
 
--%
2.2%
 
2.2%
 
-22.1%
 
24.3%
2003
20.29
0.890
(c)
35.9%
5.9%
(c)
41.8%
 
28.7%
 
13.1%
2004
20.24
0.402
 
-0.2%
2.0%
 
1.8%
 
10.9%
 
-9.1%
2005
21.01
1.312
(c)
3.8%
6.5%
(c)
10.3%
 
4.9%
 
5.4%
                       
2006
23.28
0.590
 
10.8%
2.8%
 
13.6%
 
15.8%
 
-2.2%
2007
15.41
0.630
 
-33.8%
2.7%
 
-31.1%
 
5.5%
 
-36.6%
2008
11.92
0.670
 
-22.6%
4.3%
 
-18.3%
 
-37.0%
 
18.7%
2009
10.04
0.680
 
-15.8%
5.7%
 
-10.1%
 
26.5%
 
-36.6%
2010
13.63
0.690
 
-35.8%
6.9%
 
42.7%
 
15.1%
 
27.6%
                       
2011
9.27
0.700
 
-32.0%
5.1%
 
-26.9%
 
2.1%
 
-29.0%
2012
10.65
0.710
 
14.9%
7.7%
 
22.6%
 
16.0%
 
6.6%
2013
17.27
0.720
 
62.2%
6.8%
 
69.0%
 
32.4%
 
36.6%
2014
14.63
0.730
 
-15.3%
4.2%
 
-11.1%
 
13.7%
 
-24.8%
2015
$18.63
$0.740
 
27.3%
5.1%
 
32.4%
 
1.4%
 
31.0%
                       
Annual Average – 1966 to 2015 (50 years)
 
13.2%
3.5%
 
16.7%
 
11.1%
 
5.6%
                       
(a) Old Republic’s per share statistics have been retroactively restated for stock dividends and splits. 1967 and prior years’ information is based on the statutory results of Old Republic Life Insurance Company, predecessor to Old Republic International Corporation. (b) Data for both the Company and  the Standard & Poor’s 500 Index (“S&P 500“) are calculated on a pre-tax basis. (c) In December, 2003 and 2005, special year-end cash dividends of $.534 and $.800 per common share were declared and paid. (d) Total market return has been calculated as the sum of the year-to-year increase or decrease in the closing price and the dividend yield for each year as a percentage of the closing price at the end of the preceding year. The total return shown would be higher if an interest factor were also applied to the reinvestment of cash dividends.