SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 11-K
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[X] Annual Report Pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the Fiscal Year Ended December 31, 2004
or
[ ] Transition Report Pursuant to Section 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______________ to ______________
Commission File Number: 001-10607
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THE REPUBLIC MORTGAGE INSURANCE COMPANY AND
AFFILIATED COMPANIES PROFIT SHARING PLAN
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OLD REPUBLIC INTERNATIONAL CORPORATION
307 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60601
Total Pages: 13
SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
Administration Committee has duly caused this Annual Report to be signed on
behalf of the undersigned, thereunto duly authorized.
THE REPUBLIC MORTGAGE INSURANCE COMPANY AND
AFFILIATED COMPANIES PROFIT SHARING PLAN
(Registrant)
By: /s/ John Gerke
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John Gerke, Member of the Administration Committee
By: /s/ Donna Ball
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Donna Ball, Member of the Administration Committee
Date: April 22, 2005
The Republic Mortgage
Insurance Company and
Affiliated Companies
Profit Sharing Plan
Financial Statements and Supplemental Schedule
December 31, 2004 and 2003
Tax Identification Number: 56-1031043
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Index
December 31, 2004 and 2003
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Page(s)
Report of Independent Registered Public Accounting Firm.....................1
Financial Statements
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003..................................................2
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2004................................................3
Notes to Financial Statements..............................................4-7
Supplemental Schedule
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004...........................................................8
Report of Independent Registered Public Accounting Firm
To the Participants and Administrator of
The Republic Mortgage Insurance Company and
Affiliated Companies Profit Sharing Plan
In our opinion, the accompanying statements of net assets available for benefits
and the related statements of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of The Republic Mortgage Insurance Company and Affiliated Companies Profit
Sharing Plan (the "Plan") at December 31, 2004 and 2003, and the changes in net
assets available for benefits for the year ended December 31, 2004 in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Supplemental Schedule H, Line 4i -
Schedule of Assets (Held at End of Year) is presented for the purpose of
additional analysis and is not a required part of the basic financial statements
but is supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ PricewaterhouseCooper LLP
Charlotte, North Carolina
April 28, 2005
1
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31, 2004 and 2003
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2004 2003
Assets
Investments, at fair value
Insurance company pooled separate accounts
Domestic equity $ 11,425,741 $ 9,087,239
Asset allocation 2,837,425 2,458,256
Fixed income 1,339,471 1,317,075
International equity 1,159,433 847,092
Flexible equity 1,533,871 436,690
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18,295,941 14,146,352
Parent company common stock pooled account 6,487,026 5,107,879
Participant loans 1,097,476 795,822
Insurance company guaranteed interest fund,
at contract value 22,612,408 21,972,863
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Total investments 48,492,851 42,022,916
Employer contributions receivable 3,563,142 3,921,203
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Total assets 52,055,993 45,944,119
Liabilities
Refund of excess participant contributions 100,669 142,684
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Net assets available for benefits $ 51,955,324 $ 45,801,435
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The accompanying notes are an integral part of these financial statements.
2
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2004
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Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments $ 1,848,695
Interest, guaranteed interest fund 894,824
Dividends, common stock pooled account 227,096
Interest, participant loans 38,853
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Investment income 3,009,468
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Contributions
Employer 3,563,142
Participants 1,351,563
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4,914,705
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Total additions 7,924,173
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Deductions from net assets attributed to
Benefits and withdrawals 1,764,301
Administrative expenses 5,983
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Total deductions 1,770,284
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Net increase 6,153,889
Net assets available for benefits
Beginning of year 45,801,435
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End of year $ 51,955,324
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The accompanying notes are an integral part of these financial statements.
3
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2004 and 2003
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1. Description of Plan
The following description of The Republic Mortgage Insurance Company and
Affiliated Companies Profit Sharing Plan (the "Plan") is provided for
general information purposes only. Participants should refer to the
Summary Plan Description or the Plan document for more complete
information.
The Plan is a qualified defined contribution plan covering all employees
of Republic Mortgage Insurance Company, RMIC Corporation, and Republic
Mortgage Insurance Company of North Carolina (the "Sponsor"). Employees
are eligible for coverage at the start of their employment and must elect
to enroll in the plan. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA").
Contributions
The Sponsor makes contributions to the Plan at the discretion of the
Sponsor's Board of Directors at a sum determined by the Board without
regard to current and accumulated profits for the taxable year, for years
ending with or within such Plan year. Participants may contribute up to
25% of their compensation pre-tax and 25% after-tax for a combined maximum
of 50% of compensation any Plan year. Contributions are subject to certain
limitations as prescribed by the Internal Revenue Service. Excess
contributions to be returned to participants based on qualification
testing totaled $100,669 and $142,684 for the years ended December 31,
2004 and 2003, respectively.
Vesting
Participant account balances provided by Sponsor contributions and related
allocated earnings become 40% vested after one year of service. Vesting
percentages increase by 10% for each additional year, with full vesting
after seven years of service.
Account balances provided by participant contributions and allocated Plan
earnings are always fully vested.
Participant Accounts
A separate account balance is maintained for each participant and is
credited with participant contributions and allocations of Sponsor
contributions, Plan earnings, and forfeitures of terminated participants'
nonvested accounts. Allocations of Plan earnings are based on
participants' daily account balances. Sponsor contributions and
forfeitures of nonvested accounts are allocated based on annual
compensation of participants. Unallocated forfeitures totaled $737,195 at
December 31, 2004, and of the total, $369,499 will be allocated in 2005.
Payment of Benefits
In the event of retirement, disability, or death, accumulated benefits
become vested and are distributed to participants or designated
beneficiaries by lump-sum payment or through various annuity options.
In the event of termination of employment, participants have the option of
receiving vested accumulated benefits through lump-sum distributions,
leaving the vested value of their accounts in the Plan until retirement,
or transferring amounts into an individual retirement account.
Participants may withdraw their voluntary contributions at any time.
4
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2004 and 2003
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Participants may elect to take early withdrawals of employer contributions
if they have participated in the Plan for at least five years. Such early
withdrawals will not result in suspension of allocations of Sponsor
contributions.
Participant Loans
Participants may borrow a minimum of $1,000 from their accounts up to a
maximum equal to the lesser of $50,000 or 50% of their vested account
balance. Participants may have no more than two loans outstanding at one
time. Loans plus interest must be repaid within five years through payroll
deductions. These loans bear interest at the prevailing prime rate at the
loan inception date. The loans are collateralized by the vested balance in
the participant's account.
2. Summary of Significant Accounting Policies
General
The Plan prepares its financial statements under accounting principles
generally accepted in the United States of America.
Investment Valuation and Income Recognition
The Plan's guaranteed interest account is valued at contract value.
Insurance company pooled separate accounts are reported by Massachusetts
Mutual Life Insurance Company (the "Trustee") at the fair value of the
underlying investments. The pooled account invests solely in the common
stock of Old Republic International ("ORI"), the ultimate parent of the
Sponsor. The value of the pooled ORI common stock account is based on the
underlying quoted market value of the ORI common stock. Participant loans
are valued at unpaid principal balance, which approximates fair value. Net
appreciation (depreciation) in fair value of investments includes
unrealized and realized gains and losses. Interest income is recorded on
the accrual basis. Dividends are recorded on the ex-dividend date.
Benefits and Withdrawals
Benefits and withdrawals are recorded when paid. At December 31, 2004 and
2003, there were no significant amounts due but unpaid to participants.
Income Tax Status
The Plan obtained its latest determination letter on April 3, 1995, in
which the Internal Revenue Service stated that the Plan, as then designed,
was in compliance with the applicable requirements of the Internal Revenue
Code. The Plan has been amended since receiving the determination letter.
However, the Plan administrator believes that the Plan is currently
designed and being operated in compliance with the applicable requirements
of the Internal Revenue Code.
Use of Estimates
The presentation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, and changes therein, and disclosure of
contingent assets and liabilities. Actual results could differ from those
estimates.
5
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2004 and 2003
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3. Investments
The Plan is invested in a group annuity contract with the Trustee. The
contract allows for a participant-directed investment program in
commingled subaccounts sponsored by the Trustee. Investment options
include fixed income, asset allocation, domestic equity, flexible equity,
and international equity subaccount options and a guaranteed interest
fund. In addition to the investment options offered through the Trustee,
participants may also invest in a pooled account that invests solely in
common stock of the Sponsor's parent, ORI.
2004 2003
Investments at fair value
Insurance company separate accounts
Domestic equity subaccounts
Large cap value $ 3,330,726 * $ 2,472,478 *
Small cap equity 2,657,733 * 2,139,805 *
Indexed equity 2,477,347 2,072,008
Small cap growth 1,006,588 888,682
Mid cap value 1,579,096 1,261,717
Large cap growth 404,251 252,548
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11,425,741 9,087,238
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Asset allocation subaccounts
Balanced 2,837,425 * 2,458,256 *
Fixed income subaccount
Core bond 1,339,471 1,317,075
Flexible equity subaccount
Growth and income 1,533,871 436,690
International equity subaccount 1,159,433 847,093
ORI common stock pooled account 6,487,026 * 5,107,879 *
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$ 24,782,967 $ 19,254,232
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Investment at contract value
Guaranteed interest fund $ 22,612,408 * $ 21,972,863 *
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*Exceeds 5% of Plan assets at December 31, 2004 and 2003.
The net appreciation in fair value of the Plan's investments for the year
ended December 31, 2004, was $1,848,695.
6
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2004 and 2003
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4. Guaranteed Interest Fund
The Plan holds an investment contract with Massachusetts Mutual Life
Insurance Company. Massachusetts Mutual Life Insurance Company maintains
the contributions in a pooled account. The account is credited with
earnings on the underlying investments, charges for Plan withdrawals, and
a proportionate share of administrative expense charges by Massachusetts
Mutual Life Insurance Company. The contract is included in the financial
statements at contract value, which represents contributions made under
the contract, plus earnings, less withdrawals and administrative expenses,
because it is considered fully benefit-responsive. For example,
participants may ordinarily direct the withdrawal or transfer of all or a
portion of their investment at contract value. There are no reserves
against contract value for credit risk of the contract issuer or
otherwise. The contract value of the investment contract at December 31,
2004 and 2003 was $22,612,408 and $21,972,863, respectively. The average
yield and crediting rates ranged from 4.5% and 4.7% for 2004 and 2003. The
crediting rate is adjusted every six months with the issuer, but cannot be
less than 3%.
5. Related Party Transactions
Certain Plan investments are insurance separate accounts sponsored by
Massachusetts Mutual Life Insurance Company. Massachusetts Mutual Life
Insurance Company is the Trustee as defined by the Plan and, therefore,
these transactions qualify as party-in-interest transactions. Fees paid by
the Sponsor on behalf of the Plan for the investment management services
amounted to $73,223 for the year ended December 31, 2004.
6. Plan Termination
Although it has not expressed any intent to do so, the Sponsor has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA.
In the event of Plan termination, participants would become 100% vested in
their employer contributions.
7. Reconciliation to Form 5500
There are no reconciling items from these financial statements to the
Plan's Form 5500 for the year ended December 31, 2004.
7
Supplemental Schedule
Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2004 Schedule I
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(a) (b) (c) (d) (e)
Description of
Investment Including
Identity of Issue, Borrower, Number of Units Current
Lessor, or Similar Party and Rate of Interest Cost Value
Insurance separate accounts
* Domestic equity subaccount
Large Cap Value 20,912 $ 3,300,726
Small Cap Equity 2,706 2,657,733
Indexed Equity 7,883 2,477,347
Small Cap Growth 6,644 1,006,588
Mid Cap Value 7,691 1,579,096
Large Cap Growth 2,763 404,251
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11,425,741
* Asset allocation subaccount
Balanced 22,604 2,837,425
* Fixed income subaccount
Core bond 984 1,339,471
* Flexible equity subaccount
Growth and Income 23,523 1,533,871
* International Equity Subaccount 3,617 1,159,433
* ORI Common Stock Pooled Account 225,524 6,487,026
* Guaranteed Interest Fund 220,818 22,612,408
Participants loans 4% to 9.5% 1,097,476
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$ 48,492,851
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Note: Historical cost not provided by the recordkeeper.
* Indicates an assets which is a party-in-interest to the Plan.