OVERVIEW

This management analysis of financial position and results of operations pertains to the consolidated accounts of Old Republic International Corporation ("Old Republic" or "the Company"). The Company conducts its operations through three major regulatory segments, namely, its General (property and liability), Mortgage Guaranty, and Title insurance segments. A small life and health insurance business, accounting for 2.5% of consolidated operating revenues for the quarter ended March 31, 2009 and 1.9% of consolidated assets as of March 31, 2009, is included within the corporate and other caption of this report. The consolidated accounts are presented on the basis of generally accepted accounting principles ("GAAP"). This management analysis should be read in conjunction with the consolidated financial statements and the footnotes appended to them.

The insurance business is distinguished from most others in that the prices (premiums) charged for various insurance products are set without certainty of the ultimate benefit and claim costs that will emerge or be incurred, often many years after issuance and expiration of a policy. This basic fact casts Old Republic as a risk-taking enterprise managed for the long run. Management therefore conducts the business with a primary focus on achieving favorable underwriting results over cycles, and on the maintenance of financial soundness in support of the insurance subsidiaries' long-term obligations to insurance beneficiaries. To achieve these objectives, adherence to insurance risk management principles is stressed, and asset diversification and quality are emphasized. In addition to income arising from Old Republic's basic underwriting and related services functions, significant investment income is earned from invested funds generated by those functions and from shareholders' capital. Investment management aims for stability of income from interest and dividends, protection of capital, and sufficient liquidity to meet insurance underwriting and other obligations as they become payable in the future. Securities trading and the realization of capital gains are not objectives. The investment philosophy is therefore best characterized as emphasizing value, credit quality, and relatively long-term holding periods. The Company's ability to hold both fixed maturity and equity securities for long periods of time is in turn enabled by the scheduling of maturities in contemplation of an appropriate matching of assets and liabilities.

In light of the above factors, the Company's affairs are managed without regard to the arbitrary strictures of quarterly or even annual reporting periods that American industry must observe. In Old Republic's view, such short reporting time frames do not comport well with the long-term nature of much of its business. Management believes that the Company's operating results and financial condition can best be evaluated by observing underwriting and overall operating performance trends over succeeding five to ten year intervals. Such extended periods can encompass one or two economic and/or underwriting cycles, and thereby provide appropriate time frames for such cycles to run their course and for reserved claim costs to be quantified with greater finality and effect.

EXECUTIVE SUMMARY

Old Republic's consolidated operating results, which exclude net realized investment gains, declined year over year. The reduced performance stemmed from ongoing weakness in the Company's housing-related mortgage guaranty and title insurance lines, and from lower general insurance profits. As noted in each quarterly report since 2007's third quarter, the substantial dislocations that have enveloped all businesses with housing and mortgage-lending exposures are likely to exert earnings pressures throughout 2009, and most likely into 2010 as well. In comparison with the final quarter of 2008, however, both mortgage guaranty and title insurance segments registered some improvement in underwriting performance, while year over year loss costs were greater for mortgage guaranty and slightly lower for title. Year over year general insurance earnings were dampened by greater loss costs for nearly all coverages.

Consolidated Results - The major components of Old Republic's consolidated results and other data for the periods reported upon are shown below:

                                                 Quarters Ended March 31,
                                           2009             2008          Change
Operating revenues:
General insurance                      $     523.7       $   581.5        -9.9    %
Mortgage guaranty                            171.2           172.4         -.7
Title insurance                              160.2           167.1       -4.1
Corporate and other                           23.2            29.6
Total                                  $      878.5      $   950.7        -7.6  %
Pretax operating income (loss):
General insurance                      $       58.2      $    89.8       -35.2  %
Mortgage guaranty                          (144.6) )       (122.3)       -18.2
Title insurance                              (9.0) )       (12.6) )       28.7
Corporate and other                             2.6            4.6
Sub-total                                   (92.8) )        (40.5))     -128.6
Realized investment gains (losses):
From sales                                         -           0.9
From impairments                                   -              -
Net realized investment gains (losses)             -           0.9
Consolidated pretax income (loss)           (92.7) )        (39.6)      -134.0
Income taxes (credits)                      (38.8) )        (20.5)       -88.7
Net income (loss)                      $    (53.9) )     $  (19.0)      -183.0  %

Consolidated underwriting ratio:

Benefits and claims ratio         83.9  %    76.6  %
Expense ratio                     39.6       39.1
Composite ratio                  123.5  %   115.7  %

Components of diluted earnings per share:

Net operating income (loss)               $ (0.23)    $ (0.08)     -187.5  %
Net realized investment gains (losses)            -           -
Net income (loss)                         $ (0.23)    $ (0.08)     -187.5  %

Cash dividends paid per share             $   0.17    $   0.16        6.3  %

The above table shows both operating and net income to highlight the effects of realized investment gain or loss recognition and any non-recurring items on period-to-period comparisons. Operating income, however, does not replace net income computed in accordance with Generally Accepted Accounting Principles ("GAAP") as a measure of total profitability.

The recognition of realized investment gains or losses can be highly discretionary and arbitrary due to such factors as the timing of individual securities sales, recognition of estimated losses from write-downs for impaired securities, tax-planning considerations, and changes in investment management judgments relative to the direction of securities markets or the future prospects of individual investees or industry sectors. Likewise, non-recurring items which may emerge from time to time, can distort the comparability of the Company's results from period to period. Accordingly, management uses net operating income, a non-GAAP financial measure, to evaluate and better explain operating performance, and believes its use enhances an understanding of Old Republic's basic business results.

General Insurance Results - First quarter 2009 general insurance earnings were mainly affected by a lower earned premium base and the higher claim ratio shown in the following table:

                                   General Insurance Group
                                  Quarters Ended March 31,
                                  2009        2008     Change
Net premiums earned            $    457.3    $ 512.7   -10.8 %
Net investment income                63.4       64.5    -1.6
Pretax operating income (loss) $     58.2    $  89.8   -35.2 %

Claims ratio 74.8 % 69.9 %
Expense ratio 25.6 24.4
Composite ratio 100.4 % 94.3 %

A moderately declining rate environment for most commercial insurance prices in the past three years or so and the current economic slowdown have precluded meaningful additions to Old Republic's premium base and made business retention more difficult. Most of the latest quarter's decline in earned premiums stemmed from lower volumes of commercial auto (trucking), workers' compensation, and consumer credit indemnity coverages. With respect to the latter, new premium production has been effectively curbed by much lower consumer credit extensions in the current recessionary environment.

The lower top line for this year's first quarter was accompanied by an increase in the claims ratio to 74.8% from 69.9% in the same period last year, and from an average of 67.9% for the five most recent calendar years. The higher claims ratio was driven mostly by greater loss costs among Old Republic's financial indemnity coverages, most prominently the consumer credit indemnity (CCI) and directors' and officers' (D&O) liability line. As noted in recent quarterly and annual financial reports, the CCI line continues to be impacted by higher loss costs emanating from the loan repayment difficulties encountered by increasingly large numbers of consumers. The rise in D&O claim costs was mainly caused by greater loss provisions on several older claims which the Company does not expect to re-occur in light of currently expected full year results.

The expense ratio of 25.6% in the first three months of 2009 increased slightly by comparison with that registered in last year's first quarter, and the average of 24.4% for the most recent five calendar years. General Insurance Group net investment income was basically flat in this year's first quarter and was influenced by a slightly lower invested asset base and lower yields on fixed maturity and equity holdings.

Mortgage Guaranty Results - The cyclical downturn in the economy and, in particular, in its housing and mortgage lending sectors continued to drive trends in mortgage guaranty earned premium and claim costs during this year's first three months. Key indicators of the Mortgage Guaranty Group's first quarter 2009 operating performance are shown in the following table:

                                   Mortgage Guaranty Group
                                  Quarters Ended March 31,
                                 2009        2008      Change
Net premiums earned            $   145.3   $   147.6    -1.6 %
Net investment income               22.4        21.5     4.2
Pretax operating income (loss) $ (144.6)   $ (122.3)   -18.2 %

Claims ratio 199.9 % 181.1 %
Expense ratio 13.7 16.4
Composite ratio 213.6 % 197.5 %

The first quarter 2009 reduction in premium volume reflected the combination of more stringent underwriting guidelines we've imposed gradually since late 2007, a contracting mortgage lending market place, and broader acceptance of competing Federal Housing Administration (FHA) loan guaranty programs. These factors outweighed the favorable effect of higher business persistency, and led to a 3.4% decline of risk in force since year-end 2008.

Further declines in home values, diminished availability of mortgage financing, negative employment trends, and rising levels of reported loan defaults and paid claims, were most responsible for an 8.7% increase in incurred claim costs in this year's first quarter vis-à-vis the same period of 2008. As of March 31, 2009, net claim reserves of $1.51 billion were 82.6% higher than they were twelve months earlier. The effect of varying amounts of periodic paid losses and reserve provisions on reported mortgage guaranty incurred loss ratios is shown in the following table:

                              Quarters Ended
                                March 31,
                              2009      2008
Incurred loss ratio from:
Paid losses                  107.1 %    55.0 %
Reserve provisions            92.8     126.1
Total                        199.9 %   181.1 %

The expense ratio benefited primarily from lower operating costs, particularly those which respond to changes in production volumes and operating results. Positive operating cash flow for the quarter, attributable almost exclusively to the recovery of prepaid federal income taxes, was additive to the high quality and liquid invested asset base which reached $2.35 billion, up 22.8% from the level registered as of the end of March, 2008.

Title Insurance Results - Old Republic's title insurance business registered an operating loss somewhat lower than we expected in this year's first quarter. Key indicators of its results are shown in the following table:

                                    Title Insurance Group
                                   Quarters Ended March 31,
                                  2009         2008     Change
Net premiums and fees earned   $    154.3    $  160.7    -4.0 %
Net investment income                 5.8         6.4    -9.0
Pretax operating income (loss) $    (9.0)    $ (12.6)    28.7 %

Claims ratio 6.6 % 7.0 %
Expense ratio 102.9 104.5
Composite ratio 109.5 % 111.5 %

The cyclical downturn in the housing and related mortgage lending sectors of the U.S. economy also had a dampening effect on the title segment's premiums and fees revenue. However, recently higher levels of loan refinancing activity and some market share improvements provided a positive offset to top line weakness and operating expense coverage.

Corporate and Other Operations - The Company's small life and health insurance business and the net costs associated with the parent holding company and internal services subsidiaries produced a much lower gain in this year's first quarter. Period-to-period variations in the results of these relatively minor elements of Old Republic's operations usually stem from the volatility inherent to the small scale of its life and health business, fluctuations in the costs of external debt, and net interest on intra-system financing arrangements. Substantially all of the year-over-year decline in earnings was due to foreign exchange adjustments for U.S. dollar conversions from the currency of Old Republic's Canadian life and health insurance subsidiary.

Cash, Invested Assets, and Shareholders' Equity - The following table reflects Old Republic's consolidated cash and invested assets as well as shareholders' equity at the dates shown:

                                                                                     % Change
                                           March     December      March     March '09/    March '09/
                                           2009        2008        2008        Dec '08      March '08
Cash and         : fair value basis      $ 9,052.4   $ 8,855.1   $ 8,895.1        2.2  %         1.8 %
invested assets
                 : original cost basis   $ 9,407.1   $ 9,210.0   $ 8,942.1        2.1  %         5.2 %

Shareholders' equity:
Total                                    $ 3,643.2   $ 3,740.3   $ 4,376.7       -2.6  %       -16.8 %
Per common share                         $   15.47   $   15.91   $   18.99       -2.8  %       -18.5 %

Composition of shareholders' equity
per share:
Equity before items below                $   15.69   $   16.10   $   19.08       -2.5  %       -17.8 %
Unrealized investment gains (losses)
and
other accumulated comprehensive income
(loss)                                      (0.22)      (0.19)      (0.09)
Total                                    $   15.47   $   15.91   $   18.99       -2.8  %       -18.5 %

Consolidated cash flow from operating activities amounted to $263.3 for the first three months of 2009 versus $199.3 for the same period in 2008. Other than title insurance, each insurance segment remained cash flow-positive in this year's first quarter, with General Insurance and Mortgage Guaranty contributing $39.4 and $233.5, respectively.

The investment portfolio reflects a current allocation of approximately 84% to fixed-maturity securities and 3% to equities. As has been the case for many years, Old Republic's invested assets are managed in consideration of

enterprise-wide risk management objectives intended to assure solid funding of its subsidiaries' long-term obligations to insurance policyholders and other beneficiaries, as well as evaluations of their long-term effect on stability of capital accounts. The portfolio contains little or no insurance risk-correlated asset exposures to real estate, mortgage-backed securities, collateralized debt obligations ("CDO's"), derivatives, junk bonds, hybrid securities, or illiquid private equity investments. In a similar vein, the Company does not engage in hedging or securities lending transactions, nor does it invest in securities whose values are predicated on non-regulated financial instruments exhibiting amorphous counter-party risk attributes.

Substantially all changes in the shareholders' equity account reflect the Company's net income or loss, dividend payments to shareholders, and changes in market valuations and impairments of invested assets during the periods shown below:

                                                             Shareholders' Equity
                                                                  Per Share
                                                              Three Months Ended
                                                                  March 31,
                                                              2009          2008
Beginning balance                                          $     15.91    $   19.71

Changes in shareholders' equity for the periods:
Net operating income (loss)                                     (0.23)       (0.08)
Net realized investment gains (losses)                               -            -
Net unrealized investment gains (losses)                        (0.04)       (0.48)
Total realized and unrealized investment gains (losses)         (0.04)       (0.48)
Cash dividends                                                  (0.17)       (0.16)
Stock issuance, foreign exchange, and other transactions             -            -
Net change                                                      (0.44)       (0.72)

Ending balance                                             $     15.47    $   18.99

Old Republic's significant investments in the stocks of two leading publicly held mortgage guaranty ("MI") businesses (MGIC Investment Corp. and The PMI Group) account for a substantial portion of the realized and unrealized investment losses incurred in 2008, and reflected in the above and following tables. Unrealized losses, including losses on securities categorized as other-than-temporarily impaired ("OTTI"), represent the net difference between the most recently established cost and the fair values of the investments at a point in time. The aggregate costs, original and impaired, fair value, and latest reported underlying equity values of the aforementioned two mortgage guaranty investments are shown below.

                                                            March 31,             December 31,
                                                               2009            2008          2007
Total value of the two        Original cost               $        416.4    $     416.4   $    429.7
investments:
                              Impaired cost                        106.8          106.8          N/A
                              Fair value                            32.1           82.7        375.1
                              Underlying equity(*)        $        496.2    $     515.9   $    679.7

(*) Underlying equity based on latest reports (which may lag by one quarter) issued by investees.

When making investment decisions, management considers the Company's ability to retain its holdings for a period sufficient to recover their cost and to obtain a competitive long-term total return. It also considers such factors as balance sheet effects of potential changes in market valuations, asset-liability matching objectives, long term ability to hold securities, tax planning considerations, and the investees' reported book values and ability to continue as going concerns. The above-noted mortgage guaranty holdings were acquired as passive long-term investment additions to core segments of Old Republic's business in anticipation of a turn-around for the MI industry in 2010. In management's judgment, the currently depressed market valuations of companies operating in the housing and mortgage-lending sectors of the American economy have been impacted significantly by the cyclical and macroeconomic conditions affecting these sectors, and by the recent dysfunctionality of the banking and mortgage lending industries.

For external GAAP reporting purposes, however, Old Republic uses relatively short time frames in recognizing OTTI adjustments in its income statement. In this context, absent issuer-specific circumstances that would result in a contrary conclusion, all unrealized investment losses pertaining to any equity security reflecting a 20% or greater decline for a six month period is considered OTTI. Unrealized losses that are deemed temporary and all unrealized gains are recorded directly as a separate component of the shareholders' equity account and in the consolidated statement of comprehensive income. As a result of accounting idiosyncrasies, however, OTTI losses recorded in the income statement of one period can not be offset in the income statement of a subsequent period by fair value gains on the previously impaired securities unless the gains are realized through actual sales. Such unrealized fair value gains can only be recognized through direct credits in the shareholders' equity account and in the consolidated statement of comprehensive income.

DETAILED MANAGEMENT ANALYSIS

FINANCIAL ACCOUNTING AND REPORTING POLICIES

The Company's annual and interim financial statements incorporate a large number and types of estimates relative to matters which are highly uncertain at the time the estimates are made. The estimation process required of an insurance enterprise is by its very nature highly dynamic inasmuch as it necessitates a continuous evaluation, analysis, and quantification of factual data as it becomes known to the Company. As a result, actual experienced outcomes can differ from the estimates made at any point in time, and thus affect future periods' reported revenues, expenses, net income, and financial condition.

Old Republic believes that its most critical accounting estimates relate to: a) the determination of other-than-temporary impairments in the value of fixed maturity and equity investments; b) the establishment of deferred acquisition costs which vary directly with the production of insurance premiums; c) the recoverability of reinsured paid and/or outstanding losses; and d) the establishment of reserves for losses and loss adjustment expenses. The major assumptions and methods used in setting these estimates are discussed in the Company's 2008 Annual Report on Form 10K.

In July 2006, the Financial Accounting Standards Board ("FASB") issued its Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), which became effective for the Company in the first quarter of 2007. FIN 48 provides recognition criteria and a related measurement model for uncertain tax positions taken or expected to be taken in income tax returns. FIN 48 requires that a position taken or expected to be taken in a tax return be recognized in the financial statements when it is more likely than not that the position would be sustained upon examination by tax authorities. The Company's unrecognized tax benefits, including interest and penalty accruals, are not considered material to the consolidated financial statements and did not change significantly upon the adoption of FIN 48. There are no tax uncertainties that are expected to result in significant increases or decreases to unrecognized tax benefits within the next twelve month period. As indicated in Note 1 of the Notes to Consolidated Financial Statements, the Company believes that the major uncertainties relating to its tax position pertain to timing differences in the recognition of taxable income. Accordingly, the annual effective tax rate, other than possible interest and penalties, would be largely unaffected as an increase in currently due income taxes would likely be offset by a corresponding deferred income tax adjustment.

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157 "Fair Value Measurements" ("FAS 157"), which establishes a framework for measuring fair value. FAS 157 applies to existing accounting pronouncements that require or permit fair value measurements, and became effective for the Company in the first quarter of 2008. FAS 157 was amended by FASB Staff Position No. 157-2 "Effective Date of FASB Statement No. 157" ("FSP 157-2"), which delayed the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities that are not remeasured at fair value on at least an annual basis until fiscal years beginning after November 15, 2008. The adoption of FSP 157-2 by the Company on January 1, 2009 did not have an impact on the consolidated financial statements. Additionally, in October 2008, the FASB issued Staff Position No. 157-3 "Determining the Fair Value of a Financial Asset When the Markets for That Asset is Not Active" ("FSP 157-3"). This Staff Position, which will be superseded upon the Company's adoption of FSP 157-4 as discussed in Note 1 of the Notes to Consolidated Financial Statements, provides additional technical guidance regarding the application of FAS 157 in a market that is not active. The impact of the adoption of FAS 157 and FSP 157-3 is discussed in Note 3 of the Notes to Consolidated Financial Statements.

In April 2009, the FASB issued three related Staff Positions to provide additional technical guidance regarding the application of FAS 157 to fair value measurements in the current economic environment, modify the recognition of other-than-temporary impairments of debt securities, and require companies to disclose the fair values of financial instruments in interim periods. These Staff Positions are effective for interim and annual periods ending after June 15, 2009 and are discussed further in Note 1 of the Notes to Consolidated Financial Statements.

The above accounting policy changes result primarily in additional financial statement disclosures and do not have any effect on management's conduct of the business, its financial condition or reported results.

FINANCIAL POSITION

The Company's financial position at March 31, 2009 reflected increases in assets and liabilities of .2% and 1.3%, respectively, and a decrease in common shareholders' equity of 2.6% when compared to the immediately preceding year-end. Cash and invested assets represented 68.1% and 66.8% of consolidated assets as of March 31, 2009 and December 31, 2008, respectively. Consolidated operating cash flow was positive at $263.3 in the first quarter of 2009 compared to $199.3 in the same period of 2008. As of March 31, 2009, the invested asset base increased 2.3% to $8,885.2 principally as a result of positive operating cash flows.

Investments - During the first quarter of 2009 and 2008, the Company committed substantially all investable funds to short to intermediate-term fixed maturity securities. At both March 31, 2009 and 2008, approximately 99% of the Company's . . .