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, 2005
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 E. Gerke
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John E. Gerke, Member of the Administration Committee
By: /s/ Donna W. Ball
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Donna W. Ball, Member of the Administration Committee
Date: June 12, 2006
The Republic Mortgage
Insurance Company and
Affiliated Companies
Profit Sharing Plan
Financial Statements and Supplemental Schedule
December 31, 2005 and 2004
Tax Identification Number: 56-1031043
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Index
December 31, 2005 and 2004
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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, 2005 and 2004..................................................2
Statement of Changes in Net Assets Available for Benefits
Year Ended December 31, 2005................................................3
Notes to Financial Statements..............................................4-7
Supplemental Schedule
Schedule H, line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005...........................................................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, 2005 and 2004, and the changes in net
assets available for benefits for the year ended December 31, 2005 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 of 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. This 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/ PricewaterhouseCoopers, LLP
Charlotte, NC
June 12, 2006
The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
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2005 2004
Assets
Investments, at fair value
Insurance company pooled separate accounts
Domestic equity $ 12,683,291 $ 11,425,741
Asset allocation 2,854,256 2,837,425
Fixed income 1,496,435 1,339,471
International equity 2,009,226 1,159,433
Flexible equity 1,608,814 1,533,871
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20,652,022 18,295,941
Parent company common stock pooled account 7,880,866 6,487,026
Participant loans 971,124 1,097,476
Insurance company guaranteed interest fund,
at contract value 20,021,266 22,612,408
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Total investments 49,525,278 48,492,851
Employer contributions receivable 3,421,417 3,563,142
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Total assets 52,946,695 52,055,993
Liabilities
Refund of excess participant contributions 52,437 100,669
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Net assets available for benefits $ 52,894,258 $ 51,955,324
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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, 2005
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Additions to net assets attributed to
Investment income
Net appreciation in fair value of investments $ 1,216,379
Interest, guaranteed interest fund 913,800
Dividends and net appreciation, common stock pooled account 752,442
Interest, participant loans 46,270
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Investment income 2,928,891
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Contributions
Employer 3,421,417
Participants 968,735
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4,390,152
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Total additions 7,319,043
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Deductions from net assets attributed to
Benefits and withdrawals 6,375,949
Administrative expenses 4,159
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Total deductions 6,380,108
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Net increase 938,935
Net assets available for benefits
Beginning of year 51,955,324
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End of year $ 52,894,258
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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, 2005 and 2004
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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 $52,437 and $100,669 for the
years ended December 31, 2005 and 2004, 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 $607,445
at December 31, 2005, and of the total, $253,679 will be allocated in
2006.
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, 2005 and 2004
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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 parent company common stock
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, 2005
and 2004, 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.
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The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2005 and 2004
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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.
2005 2004
Investments at fair value
Insurance company separate accounts
Domestic equity subaccounts
Large Cap Value $ 3,904,534 * $ 3,330,726 *
Small Cap Equity 2,518,187 * 2,657,733 *
Indexed Equity 2,672,805 * 2,477,347 *
Small Cap Growth 1,244,282 1,006,588
Mid Cap Value 1,800,409 1,579,096
Mid Cap Growth 103,693 -
Large Cap Growth 439,381 404,251
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12,683,291 11,425,741
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Asset allocation subaccounts
Balanced 2,854,256 * 2,837,425 *
Fixed income subaccount
Bond 1,496,435 1,339,471
Flexible equity subaccount
Growth and Income 1,608,814 1,533,871
International equity subaccount 2,009,226 1,159,433
ORI common stock pooled account 7,880,866 * 6,487,026 *
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$ 28,532,888 $ 24,782,967
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Investment at contract value
Guaranteed Interest Fund $ 20,021,266 * $ 22,612,408 *
*Exceeds 5% of net Plan assets at December 31, 2005 and 2004.
The net appreciation in fair value of the Plan's insurance company
pooled separate accounts for the year ended December 31, 2005, was
$1,216,379.
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The Republic Mortgage Insurance Company and Affiliated Companies
Profit Sharing Plan
Notes to Financial Statements
December 31, 2005 and 2004
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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, 2005 and 2004 was $20,021,266 and
$22,612,408, respectively. The average yield and crediting rates ranged
from 4.0% to 4.7% for 2005 and 2004. 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 $77,693 for the year ended December 31, 2005.
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, 2005.
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, 2005 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 22,577 $ 3,904,534
Small Cap Equity 2,562 2,518,187
Indexed Equity 8,142 2,672,805
Small Cap Growth 7,384 1,244,282
Mid Cap Value 8,476 1,800,409
Mid Cap Growth 492 103,693
Large Cap Growth 2,860 439,381
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12,683,291
* Asset allocation subaccount
Balanced 22,133 2,854,256
* Fixed income subaccount
Bond 1,289 1,496,435
* Flexible equity subaccount
Growth and Income 22,795 1,608,814
* International Equity Subaccount 7,658 2,009,226
* ORI Common Stock Pooled Account 251,005 7,880,866
* Guaranteed Interest Fund 188,209 20,021,266
Participants loans 4.0% to 7.25% 971,124
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$ 49,525,278
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Note: Historical cost not provided by the recordkeeper.
* Indicates an assets which is a party-in-interest to the Plan.
8