f11bitco.htm


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, 2008


 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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BITUMINOUS 401(K) SAVINGS PLAN

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OLD REPUBLIC INTERNATIONAL CORPORATION
307 NORTH MICHIGAN AVENUE
CHICAGO, ILLINOIS 60601


















Total Pages: 17

 
 
 
 
 
 
 
SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the Committee Members have duly caused this annual report to be signed on behalf of the undersigned, thereunto duly authorized.


 
 
BITUMINOUS 401(K) SAVINGS PLAN, Registrant
 
 
                                        
By              /s/ Greg Ator                                                            
   Greg Ator, Committee Member
 
 
 
By              /s/ Janine Happ                                                                  
   Janine Happ, Committee Member
 
 
 
By              /s/ Robert Rainey                                                                    
   Robert Rainey, Committee Member
 


 


Dated:  June 17, 2009


 
 
 
 

SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C.  20549
 
_______________
 
FORM 11-K
 
_______________
 
ANNUAL REPORT
 
Pursuant to Section 15(d) of the
 
Securities Exchange Act of 1934
 
For The Years Ended December 31, 2008 and 2007
 
_______________
 
BITUMINOUS 401(k) SAVINGS PLAN
_______________
 
OLD REPUBLIC INTERNATIONAL CORPORATION
307 NORTH MICHIGAN AVE
CHICAGO, ILLINOIS  60601

 
 
 
 





BITUMINOUS 401(K) SAVINGS PLAN

FINANCIAL STATEMENTS AND
SUPPLEMENTAL SCHEDULE

YEARS ENDED DECEMBER 31, 2008 AND 2007





 
 
 
 


BITUMINOUS 401(k) SAVINGS PLAN
Index to Financial Statements
 

Page No.

 
Report of Independent Registered Public Accounting Firm                            1

 
Financial Statements:
 
  Statements of Net Assets Available for Benefits at
 
  December 31, 2008 and 2007                                           2

 
Statements of Changes in Net Assets Available for Benefits
 
  for the years ended December 31, 2008 and 2007                                3
 
 
Notes to Financial Statements                                                                         4 - 10
 
 
Supplemental Schedule:
 
  Schedule of Assets (Held at End of Year) at December 31, 2008                            12























Note
 
Supplemental schedules required by the Employee Retirement Income Security Act of 1974, as amended that have not been included herein are not applicable.
 
 
 
 
 
 


 


 
Report of Independent Registered Public Accounting Firm
 
 

To the Participants and Administrator of the
Bituminous 401(K) Savings Plan


We have audited the accompanying statements of net assets available for benefits of the Bituminous 401(K) Savings Plan (the “Plan”) as of December 31, 2008 and 2007 and the related statements of changes in net assets available for benefits for the years ended December 31, 2008 and 2007.  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 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.  The Plan is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting.  Accordingly, we expressed no such opinion.  An audit also 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, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 2008 and 2007, and the changes in net assets available for benefits for the years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole.  The supplemental schedule of assets (held at end of year) as of December 31, 2008 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 audit of the basic financial statements and, in our opinion, is fairly stated in all material respects when considered in relation to the basic financial statements taken as a whole.


 
/s/ Mayer Hoffman McCann P.C.
 
 
MAYER HOFFMAN MCCANN P.C.
Minneapolis, Minnesota
June 17, 2009

 
 
 
 
BITUMINOUS 401(K) SAVINGS PLAN

STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31, 2008 and 2007



ASSETS
2008
2007
Investments, at fair value:
    
Pooled separate accounts
$ 15,395,964   
$ 19,808,664   
Old Republic International Corporation common stock account
2,963,229   
3,838,672   
Participant loans receivable
     504,047   
     535,690   
Net assets available for benefits
$18,863,240   
$24,183,026   
     
     
     
     

 
 
 
 
 
 
 
 
 
 

 


 

The accompanying notes are an integral part of these financial statements.

 
 
2
 
 
BITUMINOUS 401(K) SAVINGS PLAN

STATEMENTS OF CHANGES IN NET ASSETS
AVAILABLE FOR BENEFITS
For the years ended December 31, 2008 and 2007


 
2008
2007
     
Additions (reductions):
    
Investment (loss):
    
Net investment (loss) from pooled separate accounts
$(4,873,327)
$   736,411
Net depreciation of Old Republic International common stock account
(774,019)   
(2,021,355)   
Dividends from Old Republic International Corporation   common stock
158,312    
162,050    
Interest from participant loans
47,132
35,705
   Total investment loss
(5,441,902)
(1,087,189)
     
Contributions:
    
Employer
277,595
263,765
Employee
1,493,283
1,392,056
Rollover
120,002
342,940
   Total contributions
1,890,880
1,998,761
Total additions (reductions)
(3,551,022)
911,572
     
Deductions:
    
Benefits paid to participants
1,767,504
1,826,510
Administrative expenses
1,260
3,128
   Total deductions
1,768,764
1,829,638
     
   Net decrease
(5,319,786)
(918,066)
     
Net assets available for benefits:
    
Beginning of year
24,183,026
25,101,092
End of year
$18,863,240
$24,183,026

 




 

The accompanying notes are an integral part of these financial statements.

 
 
3
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

1.         Description of Plan
 
The following description of the Bituminous 401(k) Savings Plan (the "Plan") provides only general information.  Participants should refer to the Plan document for a more complete description of the Plan's provisions.
 
A.           General
 
The Plan is a defined contribution plan covering substantially all of the employees of Bituminous Casualty Corporation (the "Company" or the “Plan Sponsor”).  Employees are eligible to participate in the Plan on the last to occur: (A) date of hire or (B) the start of the payroll period in which the employee attains age twenty-one.  Participation in the Plan is optional.  If an employee does not elect to join the Plan on the first date he/she is eligible to do so, he/she may join the Plan at the start of any subsequent payroll period.  The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA) and Internal Revenue Code (IRC).
 
 
B.           Contributions
 
Participants may contribute up to 12 percent of their annual eligible compensation on a before-tax basis subject to applicable IRS limitations. The Company provides a matching contribution equal to 25 percent of the participant's contribution on the first 6 percent of earnings.  Participants may elect to have their voluntary contributions invested in any one or more of eleven Pooled Separate Accounts as well as the Old Republic International Corporation (“ORI”) Common Stock Account.  Company matching contributions are invested in the same manner as participants have elected for their contributions.  Participants may also make rollover contributions into the plan.  A rollover is a transfer to the plan of a qualified distribution in accordance with the provisions of the plan.  Rollovers are not subject to company matching contributions.  Employees who are age 50 and older at any time during the year may make catch-up contributions, subject to applicable IRS limitations.  Catch-up contributions are not subject to company matching contributions.  Participant and Company contributions to the Plan are limited to the maximum amount under the IRC.  Contributions in excess of IRC limitations are returned to the participants or company when determined.
 
 
C.           Participant Accounts
 
Each participant's account is credited with the participant's contributions, an allocation of the Company's contribution and Plan earnings or losses.  Allocations are based on participant contributions or account balances as defined.  The benefit to which a participant is entitled is the benefit that can be provided from the participant’s vested account.
 
Cash dividends received with respect to ORI common stock previously credited to participants shall be applied to purchase additional shares of ORI common stock in the ORI Common Stock Account.  Such dividends and the additional shares (including fractional shares) subsequently purchased with the dividends shall be allocated and credited to the accounts of participants, pro rata, according to the shares (including fractional shares) credited to the accounts of participants on the applicable dividend record date.  Any ORI common stock received as a stock split or stock dividend or as a result of a reorganization or recapitalization of ORI shall be allocated and credited to the accounts of participants in proportion to the ORI common stock previously credited to their account.
 
 
4
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
 
 
1.
Description of Plan (continued)
 
D.           Vesting
 
Participants are immediately vested in their voluntary contributions plus actual earnings thereon.  Participants are vested in the remainder of their accounts upon death, disability, attainment of normal retirement age or based on the participant’s number of years of service using the following table:
 
Years of Service
Vested Percentage
Fewer than 1
                 0%
              1
               10%
              2
               20%
              3
              40%
              4
              60%
              5
              80%
    6 or More
             100%
 
 
E.           Payment of Benefits
 
On termination of service, retirement, or death, a participant or his/her beneficiary may elect to leave funds in the Plan or receive either a single-sum payment or purchase of a single premium life annuity contract as defined in the Plan agreement.  Net assets at December 31, 2008 and 2007, include funds totaling $1,734,724 and $2,596,994, respectively, which represent the account balance of retired and terminated participants who have elected to leave the funds in the Plan upon retirement or termination.
 
 
F.           Forfeitures
 
If a participant terminates employment with the Plan Sponsor prior to becoming fully vested, the nonvested portion of the Plan sponsors contributions and allocated earnings thereon are forfeited.  All forfeitures are segregated annually and used as an offset to the Company’s matching contribution.  There were unallocated assets of $9 and $1 at December 31, 2008 and 2007, respectively, related to these forfeitures.
 
 
G.  
        Participant Loans
 
Participants may elect to borrow from their accounts a maximum amount equal to the lesser of $50,000 or 50% of their vested account balance.  Loan transactions are treated as a transfer to (from) the investment account from (to) the Participant Loans account.  Loan terms shall not extend beyond five years.  The loans are collateralized by the balance in the participant’s account and bear interest at a rate which is based on the prevailing prime interest rate as published in The Wall Street Journal on the first business day of the month in which the loan is made plus one percentage point.  Interest rates range from 5.00 percent to 9.25 percent with loans maturing at various dates through 2013.  Principal and interest are paid ratably through periodic payroll deductions.
 

 
5
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

 
1.
Description of Plan (continued)
 
H.  
        Administrative Expenses
 
Investment management fees and other fees related to investments of the Plan are paid from the earnings of the Plan’s investments.  Audit fees, legal fees, and other fees related to the administration of the Plan are paid by the Company.  Expenses related to participant loans are paid by the Plan and charged to the respective participants account.
 
 
I.            Recently Issued Accounting Pronouncements
 
During September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standard 157, “Fair Value Measurements” (“SFAS 157”), which establishes a framework for measuring fair value and applies to existing accounting pronouncements that require or permit fair value measurements.  The adoption of SFAS 157 by the Plan on January 1, 2008 has had no impact on the financial statements.  See note 4 for SFAS 157 disclosures.
 
 
2.
Summary of Significant Accounting Policies
 
A.  
        Basis of Accounting
 
The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles.
 
 
B.           Use of Estimates
 
The preparation 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 net assets available for benefits and disclosures of contingent assets and liabilities at the date of the financial statements and the changes in net assets available for benefits during the reporting period.  Actual results may differ from those estimates.
 
 
C.           Risks and Uncertainties
 
The Plan provides for various investment options in investment securities.  Investment securities are exposed to various risks, such as interest rate, market and credit risk.  Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statement of net assets available for benefits and the statement of changes in net assets available for benefits.
 

 
6
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

 
2.
Summary of Significant Accounting Policies (continued)
 
D.           Investments and Income Recognition
 
The Plan’s investments are stated at fair value.  The Plan has eleven pooled separate account investment funds under its group annuity contract with Prudential Retirement Insurance and Annuity Company (Prudential) available for participants to direct their investments therein.  Investments in pooled separate accounts are valued on a per unit market value basis as determined by Prudential, which reflects the fair value of the investments comprising the separate pooled funds.  In addition the Plan has an ORI common stock account, which is invested in ORI common stock, that is stated at fair value based on the quoted closing market value on the last business day of the year.  Participant loans are valued at unpaid principal balance and related accrued interest, which approximates fair value.  Purchases and sales of securities are recorded on a trade-date basis.  Interest income is recorded as earned on an accrual basis.  Dividend income is recorded on the ex-dividend date.
 
The Plan presents in the Statement of Changes in Net Assets Available for Benefits the net increase (decrease) in value of its investments, which consist of realized gains and losses, unrealized appreciation (depreciation) and interest and dividend earnings on the investments.
 
 
E.           Benefit Payments
 
Benefit payments to participants are recorded upon distribution payment.  At December 31, 2008 and 2007, there were no significant amounts due but unpaid to participants.
 
 
3.
Investments
 
A.           Assets Greater Than 5% of Plan Assets
 
Investments that represent 5% or more of plan assets at December 31, 2008 and 2007, are as follows:
 
 

   
December 31,
   
2008
2007
Prudential Short-term Bond Fund
  
$4,830,730
$4,186,263
Old Republic International Corporation Common Stock
  
           
 
Account
  
2,963,229
3,838,672
Prudential Balanced I Fund / Wellington Management Co.
      
Fund
  
1,920,595
2,773,868
Dryden S&P 500 Index Fund
  
1,914,971
2,921,374
Prudential Large Cap Value / Aronson & Johnson & Ortiz
      
Fund
  
1,663,664
2,520,774
Prudential Small Cap Growth / TimesSquare Fund
  
1,084,674
1,496,729
Prudential Mid Cap Growth / TimesSquare Fund
  
1,072,120
1,683,091
Prudential Small Cap Value / Mellon Equity Associates
      
Fund
  
-
1,382,794
T Rowe Price Growth Stock Fund
  
-
1,320,067
 

 
7
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

 
3.
Investments (continued)
 
During 2008 and 2007, the Plan’s investments (including gains and losses on investments bought and sold, as well as held during the year) appreciated (depreciated) in value as follows:
   
2008
2007
Prudential pooled separate accounts
  
$(4,873,327)
$736,411
Old Republic International Corporation Common Stock
      
Account
  
(774,019)
(2,021,355)
   
$(5,647,346)
$(1,284,944)

 
B.           SFAS 157 Fair Value Measurements
 
As discussed in Note 1 (I), effective January 1, 2008, the Plan adopted SFAS 157 which establishes a framework for measuring fair value.  SFAS 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants (an exit price) at the measurement date.  A fair value hierarchy is established that prioritizes the sources (“inputs”) used to measure fair value into three broad levels:  inputs based on quoted market prices in active markets (Level 1); observable inputs based on corroboration with available market data (Level 2); and unobservable inputs based on uncorroborated market data or a reporting entity’s own assumptions (Level 3).  The adoption of SFAS 157 has had no impact on the Plan’s financial statements.
 
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
 
The valuation methodologies used for assets measured at fair value are discussed further in Note 2 (D).  There have been no changes in the methodologies used at December 31, 2008 and 2007.
 
 
 
Level 1
Investments include publicly traded common stocks.
 
 
 
Level 2
Investments include pooled separate accounts.
 
 
 
Level 3
Investments include participant loans.
 

 
8
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

 
3.
Investments (continued)
 
 
B.           SFAS 157 Fair Value Measurements (continued)
 
The following table shows a summary of assets measured at fair value segregated among the various input levels required by SFAS 157:
 
 
Assets at Fair Value as of December 31, 2008
 
Level 1
Level 2
Level 3
Total
Old Republic International Corporation common stock account
$2,963,229
    
$2,963,229
Prudential pooled separate accounts
  
$15,395,964
  
15,395,964
Participant loans
                 
                   
  $504,047
       504,047
Total assets at fair value
$2,963,229
$15,395,964
$504,047
$18,863,240
 
 
Level 3 Gains and Losses
 
The table below sets forth a summary of changes in the fair value of the Plan’s level 3 assets for the year ended December 31, 2008.
 
 
Level 3 Assets
 
Year Ended December 31, 2008
 
Participant loans
Balance, beginning of year
$535,690  
Issuances, repayments and settlements(net)
(31,643)
Balance, end of year
$504,047  
 
 
4.         Tax Status
 
The Internal Revenue Service has issued a determination letter, dated May 29, 2002, stating that the Plan is designed in accordance with applicable sections of the Internal Revenue Code (IRC).  The Plan has been amended since receiving the determination letter.  However, the Plan Sponsor believes that the Plan is designed and is currently being operated in compliance with the applicable requirements of the IRC; therefore, no provision for income taxes has been included in the Plan Financial Statements.

 
9
 
 
BITUMINOUS 401(K) SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS

 
5.         Plan Termination
 
Although it has not expressed any intent to do so, the Company 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 shall become 100 percent vested in their accounts and are entitled to a distribution of their account balances.
 
 
6.         Related-Party Transactions
 
The ORI common stock account is invested in common stock of Old Republic International Corporation, the ultimate parent of the Company.
 
Plan assets include investments in eleven pooled separate accounts.  These funds are managed by related parties of Prudential which is the Trustee record keeper and custodian of Plan assets, which is a party in interest.
 

 

 
10
 
 


 

 

 

 

 

 

 

 

 

 

 
SUPPLEMENTAL SCHEDULE
 

 
11
 
 
BITUMINOUS 401(K) SAVINGS PLAN

SCHEDULE H, LINE 4I
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
December 31, 2008

EIN:     36-0810360     Plan Number:  003

(a)
(b)
 
Identity of issue
(c)
Description of investment
   including interest rate   
(d)
 
Cost
(e)
 
   Current value   
*
Prudential Short-term
Bond Fund
Pooled separate account
**
$   4,830,730
*
Prudential Balanced I
Fund /
Wellington Management Co.
Pooled separate account
**
1,920,595
*
Dryden S&P 500 Index Fund
Pooled separate account
**
1,914,971
*
Prudential Large Cap Value /
Aronson & Johnson &
Ortiz Fund
Pooled separate account
**
1,663,664
*
Prudential Small Cap Growth /
TimesSquare Fund
Pooled separate account
**
1,084,674
*
Prudential Mid Cap Growth /      
TimesSquare Fund
Pooled separate account
**
1,072,120
*
T Rowe Price Growth
Stock Fund
Pooled separate account
**
835,039
*
Prudential Small Cap Value /
Mellon Equity Associates Fund
Pooled separate account
**
829,276
*
Prudential Core Bond /
PIM Fund
Pooled separate account
**
691,130
*
Prudential International Blend / Munder Capital Fund
Pooled separate account
**
399,307
*
Prudential Mid Cap /
CRM Fund
Pooled separate account
**
154,458
*
Old Republic
International Corporation Common Stock Account
Common stock
**
2,963,229
*
Participant Loans
Participant loans, interest rates range from 5.00% to 9.25%, paid in a series of substantially equal payments over the term of the loan, maturing at various dates through 2013
-0-
    504,047
 
 
     Total
    
$18,863,240
 
*Party in interest
**Cost information is not applicable for participant directed investments
  

 
12