Good afternoon ladies and gentlemen. Welcome to the Old Republic International Second Quarter 2008 Earnings Conference Call. Today's conference is being recorded. All participants in a listen-only mode. Following the presentation, we will conduct a question-and-answer session, instructions will be provided at that time for you to queue up for a question. At this time for opening remarks and introductions I'll turn the conference over to Ms. Leslie Loyet of the Financial Relations Board. Please go ahead, ma'am.

Thank you Good afternoon and thank you all for joining us today for Old Republic's conference call to discuss second quarter 2008 results. This morning we distributed a copy of the press release and hopefully you have all had a chance to review the results. If there in anyone online who did not receive a copy you may access it at Old Republic's website at www.oldrepublic.com or you may call Liz Dolezal at 312-640-6771 and she will send you a copy immediately. Before I turn the call over to Al Zucaro, Old Republic's Chairman and Chief Executive Officer, please be advised that this call may involve forward-looking statements as discussed in the press release dated July 24, 2008. Risk associated with these statements can be found in the Company's latest SEC filings. With that I would like to turn the call over to Al for his opening remarks. Please go ahead.

Thank you, Leslie. And again, welcome to this Old Republic quarterly up-to-date visit. As we said the last time we came together on this type of call, our most current report really smacks of deja vu all over again and with just a few wrinkles thrown in to make at it little less repetitive in this latest installment. The lesser similarity that you'll notice in this morning's release comes from our general insurance business. As you can see it posted a composite underwriting ratio that breached the 100% mark ever so slightly after it had rested safely below that level for some 24-prior consecutive quarters, which is pretty much of a record for us over time. For the first half nonetheless, first half of this year, the ratio still sports a reasonably good underwriting margin of about 2.5 points, as you see, and at this level the margin is within the expected range of the 95 to 98% underwriting ratio that we factored in to this year's operating plan early in 2008. The more significant factor in this latest or current rise in the composite ratio is the loss portion and it rose by about 13% to the 76% level that we posted in the release and it rose by almost 11% in this year's first half when you compare both periods to the same periods of 2007. Loss reserves grew very moderately in these two periods, so that … of 2008 … so that most of the increase in the ratio stemmed from the higher paid losses for many, if not most, of our coverages. In the second quarter of this year, in particular, we did experience higher paid losses in the line of coverage that we call consumer credit indemnity, which is a consumer loan type of coverage…

[Operator Instructions] We'll have our first question from David Lewis, Raymond James.

Good afternoon and thank you.

Hi, David.

Al, just touch on general insurance for a minute. That's a pretty big spike from the first quarter to the second quarter.

Yes, indeed.

And I know that you talked about the two primary lines that impacted that. You indicated that consuming indemnity or consumer credit indemnity might return to normalcy. What is normalcy? And is that anticipated in kind of your guidance for the full year? And anticipated… kind of moves toward that in the second half? Because I guess that would imply a combined ratio at… we'll call it somewhere in the 96, 97% range for the second half, versus the 102 for the second quarter.

Yes.

Or the 100 or so.

Yes. Yes. Well, the comment about normalcy, if I wasn't clear about it, David, had to do with the spike we had in claim payments for that line in the 2Q. And what I meant to say was that we should not have a spike in paid losses… as much of a spike in paid losses for the rest of the year.

Okay.

But to follow-on to your question and the effect that the greater loss costs in general insurance are having in the second quarter and what is to be expected for the second half of the year, I would just like to rest on the point we've made relative to our expectation that the full year is still going to land within a 95 to 98% composite for the totality of that general insurance book, and of course, doesn't take a rocket scientist to figure that looking at the first half of this year, we probably will or should end up on the higher end of that range of the 95 to 98, rather than the lower end. I think that's reality at this time.

Okay. And on the MI business, based on your comments, I would guess that you would believe that the second quarter of '08's loss ratio is probably near or if not at the peak; is that--?

Yes, I think that's what I tried to say when I indicated that the second half was going to be within a range of 175 to 200. You figure that all of this legislative and so forth activity that's taking place, as we speak, is about to have an effect, but yet my gut for what it is worth tells me that it's going to take at least a couple of three months before these institutions, the FHA and what have you, are able to get their act together and in fact institute the legislative intent of the… that's taking place.

And last question…

It's going to take a while.

Yes. And last question have you changed the average reserve per delinquent loan it was either in the first quarter or the fourth quarter, I think you bumped it from around 12,500 to 15,000.

I think it's higher than that, I don't have that number in front of me, but that is not… severity which is what you are talking about?

Right.

Has not increased significantly from what I remember. As I said, I don't have those numbers in front of me, but my recollection is what I saw a while ago, is that, no, there has not been a significant change there. We are currently at 103% of the… of the cost. So we're assuming a 3% cost to get rid of… in addition to the insured-loan value, to get rid of these loans.

All right. Thanks very much.

Yes, sir.

We'll go next to Mike Randolph [ph] with P Colony [ph].

Yes. Thanks for taking the call. I had two questions. First off, can you talk a little bit about some of the price increases that you are getting in the mortgage insurance area? And then could you give us the number of delinquent units or loans at the end of June and March?

Let's see in terms of price, I think… well, Chris, why don't you handle that, since you are closer to it? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: What has gone in to effect throughout the first half of this year, I think, was when the bulk of the actions took place; it would result in about a 20% plus price increase across the board in all products. So I think they will all be in effect as of date of August 1, of this year. And, again, it's pretty well across the board on all classes of products, and it equals out to on a weighted average basis to about 20, 21%.

And also, Chris, by the way, do you have a different answer on David Lewis's earlier question about the severity of the average? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: No, you got that right. It's about 103% is what we have… yes. But the per-case number is up significant over a period of time.

Let's see have we answered both questions that were just raised? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, what is really driving now the per-case up is the Florida and California.

Yes. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: We talked about on previous calls. You have got much higher loan amounts in Florida and California, and they have been the primary driver of that and the upper Midwest the job situation in Michigan, Ohio, they have been the driver of the increases in delinquencies, and obviously with those delinquents come much risk higher amounts.

Do you have a specific number though for just the delinquencies at the end of June or March? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, give me a second; I don't think I have those right in front of me.

Al, while he's grabbing those, could you talk a little bit about… you seem to be running at a lot higher risk to capital than some of your peers. Can you just talk about your comfort running at 16.5 to 1?

Yes. Well as we… as I said, as we said to everyone, that as an interest in this issue, we recall our experience, some of us who have been around a long time, recall our experience back to the mid-1980s in the mortgage guaranty industry, and while the issues were somewhat dissimilar, the extent of the stress that we were feeling in the business was not very significantly different than it is today. The industry was also much smaller than it is today, but the hurt was nonetheless there, and we were able to run those businesses as an industry, and I may be corrected on this, but I think it was close to a 21 to 1 for a period of time, and we survived very nicely. There was the same effect at the time of significant price increases around the bend, and those within a year or year and a half's time did serve to… as is expected in the cyclicality of the business… of all of our insurance business, really, those had the effect of repairing profit margins and the balance sheet of the various companies that were in the business today, which are fundamentally the same ones that are in it today. So taking that as a… using that as a base, we feel very comfortable to move it to a 20 to 1, based on the way we calculate the risk in our company, which I believe is similar to our competitors. And we still leave ourselves, you know, a 20% cushion when you compare that to the 25 to 1, which is the bare bones requirement under… that's mandated by the Insurance Department regulations.

Got you.

As I say, we're taking a look at this thing, every quarter. And again, as I say, we're going to be fully prepared to put some money on the table, as we come close to that… if and when we come close to that 20 to 1. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: The only other thing I would add there, Al, is that you did a good job with it, but the risk to capital ratio is a relatively static number. It doesn't take into account the volatility or the nature of the risks in the book. So if you had a book that was more volatile, had higher risks attributes to it, you would look at… maybe a lower risk to capital ratio, if you had a book that you felt had lower volatility in it, you might be more comfortable with the higher number.

Yes, I think that's a good point, Chris. Okay. Have you got any information Chris? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, the ratios and if you look at the delinquency ratio, particularly the traditional primary, at year end '07, it was at 4.36%, and then at year end '08, it had gone to 6.92, and as I had mentioned earlier, if you look at the individual states, the real two large drivers in that increase have continued to be Florida and California. While the upper Midwest has been difficult for us, the Michigan, Ohio, Indiana, those delinquency rates have not jumped quite as high or as quickly as Florida and California. They have been at a more elevated state, really, for the past few years.

Okay.

[Operator Instructions] We'll go next to Mark Aydin, KeyBanc.

Good afternoon.

Yes, sir.

Just a quick question on the MI business. I was just interested to know if you were surprised by the amount of losses in the MI business.

Surprised? Well, not really. Again, we have been looking at this business over the entire 30 months period that we expect it will take to more or less fix it. Our reasoning has been that mortgage lending and housing took, what, five, six years to get in it's current straits. And, on a judgmental basis, we think it's going to take half as long to fix it. And our expectation, as I have indicated before, and as we have indicated on several other past occasions, is that when it's all said and done, we will have posted something akin to a 150% loss ratio. We are currently at first 12 months in to that 30-month period, as I said before, about 176, 179, I forget exactly. It's going to get a little worse for the second half of this year, and then starting next year, it will very slowly, we think, as all of these fixes that are being talked about the help that's being given to Freddie and Fannie, the greater charter authorizations being given to FHA. And the other band aids that are being put on the system, all of those will, we believe conspire to alleviate the pressure, and lead to a lessened loss ratio, and then, of course you have got the new production in both starting… sometimes in first quarter of this year, second quarter of this year, going into next year, which we expect will represent a profitable book of business, which will offset the loss costs of the past. Those are our thoughts, and they have been there now for the past nine months, 12 months or so. And we see no basis for changing those expectations. So from that standpoint, we're not surprised by the level of losses we're incurring. The only surprise comes in from the standpoint of when they'll occur, whether it occurs in the second quarter or the third quarter. The other element of surprise has to some degree to do with the recoveries from captive reinsurance. Those are really done on account-by-account basis, and each account tends to have a somewhat different mix of business, and therefore the loss recoveries for each of those mixes will tend to be different, but there's no question that those recoveries are on the rise, and they will continue to rise, we believe, and therefore, also contribute to a attenuation, if you will, of the loss costs.

Okay. Thank you very much.

Yes, sir.

We'll go next to Dan Johnson, Citadel Investment Group.

Hello, Dan.

Good afternoon. Thanks for taking my call. I have a question on the delinquency statistic that we use referencing, I guess, in this quarter, a...I guess it's a 6.92% delinquency ratio. Couple of questions around that. I see that there's a heading that says 12 months ended. So I'm assuming that is not the delinquency status for the quarter. It's actually a --?

The delinquency rate as of a point in time, namely, as of...in this case, June 30. Correct, Chris? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, it's always kind of a period end delinquency calculation.

Okay. So this isn't some delinquency number...that sort of is a very real time snapshot of what the portfolio looks like --?

Where it is right now, right. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: That is where it is today.

Okay. Well that takes care of a good part of the question. Then the second part is in the last quarter, we have moved up about 120 basis points in the primary and probably 200 basis points in the book. Can you just give a little color as to sort of where we're seeing that, whether you want to answer that in terms of geography, sort of nature of the borrower, however you want to discuss it? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Sure. Now, there is a couple of different moves pieces there. One is a mechanical one that I'll cover first. We had a one-time catch-up, if you will, from a large national lender that occurred in the first half of the year, and that makes up a good piece of the jump in number of delinquents in the second quarter, and I think that's as we report that, you have seen that reported, pretty much throughout the industry. The other...it's kind of the mechanical event--.

Is that for the traditional or the book? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Traditional primary.

Okay. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: That was a big chunk in the jump of the traditional primary. For the rest of the traditional primary, again, it's the rapid increase in delinquencies in Florida and California. Those are the ones that continue to rise at a rate that is much faster than the...the other states in the country.

And if you tried to delineate between something that looked more like a prime borrower, versus a Alt-A or sub-prime borrower, can we get an update on what the prime borrower statistics look like? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: I don't split them out or report them by discrete borrower characteristic, but I think it's safe to say that the early delinquents have been particularly heavy in the reduced stock in the lower FICO, and the higher LTV buckets. The prime borrower in those markets is obviously holding up much better than the borrower that came in with what we refer to around here as a crack on the egg shell, so to speak, the reduced stock, the low FICO, or the 100% LTVs.

Certainly that's where the deterioration has been earlier on. I was wondering maybe are...are we seeing an increased deterioration amongst the prime borrower class? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Well, I don't have that in front of me, but I still think the bulk of the problem has been in the higher risk buckets. Where we'll get the deterioration in the prime borrower is a more economic-driven delinquency, let's say, not that he couldn't afford the house when he got in it at the beginning, but one who was more affected by overall job loss in the economy. The one that you mentioned in bulk bit, what you're seeing in the run-up in the delinquency rate in the bulk is simply the run-off of the business. We haven't been adding any new production in the bulk arena, so you'll obviously see a big jump in the delinquency rates because there's no new business being added on top of it.

Great. And then the last question around delinquencies is what are you seeing from delinquencies in the first quarter or let's just call it the 2008 book of business? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: What I would tell you...that's a good question, what I would tell you is we feel better about what we would see as the anticipated delinquency development in the first half of 2008. I mean, it's obviously very early to tell, but we have come to learn that the very early delinquency development is a good predictor of how the books will play out, and we, suffice it to say, we felt much better about what we've seen in 1Q and 2Q. That's a very good question.

So you feel better about what you are seeing at 2Q on the '08 business versus what you saw last year for the '07 business? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, I mean I think if you look at this market, you can see the stress really start to hit in '06 and '07, and those being books that developed delinquencies very early on in their lives. So, yes, the early '08 development is more comforting than the early development in the previous years.

Would you go so far to compare it as good as you saw it maybe back in '04 or maybe '05? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: I have to think about that for a second, but, yes, it probably looks like...if I had the numbers in front of me, which I don't...but my guess is it looks like development, well prior to '06.

Great. Thank you very much for the question. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, the one thing...when you mentioned that the other thing you got to look in there is the environment in which those delinquencies cure out. So while you may feel better about the early development of the '08 delinquents, those delinquents will age in a little bit of a tougher environment than maybe the '04 delinquencies would have aged. So there's a lot of moving parts in there, but, again, the early development is a positive.

We'll go next to Geoffrey Dunn, Dowling and Partners.

Hi Al, how are you?

Hello, Geoffrey, how are you? Long time, no hear.

Yes. Glad to be back.

How you like your new house?

Enjoying it very much. Thanks.

Good.

I have two quick questions. First, at the holding Company level are there any other revolver or line of credit facilities beyond the CP facility?

No, that's it.

It is. And then --?

But we do have a large shelf, $1 billion shelf.

Right. You were very clear that if and when you needed to look for capital for the MI operations you would look for the least dilutive means, it sounded like. If…I know you like your business mix, but if that included a potential asset sale is that something you would entertain?

No.

Okay. Thank you.

We'll go next to William Clark, KBW.

Afternoon.

Hi, there.

Last quarter, I think you gave us the dollar amount of captive benefit in the MI business --?

I'm sorry, I cannot hear you.

Sure. Sorry about that.

That's okay.

Last quarter you gave us the dollar amount of captive benefit in the MI business. Do you have that for this quarter?

Yes, I think you have it, Chris, right. I know I have it someplace. I can't put my finger on it. Was it around 67 million this quarter or year-to-date period? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, it might have been a tiny bit higher...yeah, it was about 65...about 65 million, Al.

And that was the quarter or the year-to-date? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: That was the quarter.

Quarter. Okay.

Yes, here it is. As matter of fact I just looked at this yesterday. In...it's gone from 25.5 in the 1Q, to 65...almost 65.8 in the 2Q, and it was a very small 8.7 million according to this number here in 2007 as...in total. So it's accelerating significantly.

Great. Thank you. And second, you mentioned about an increased frequency in the consumer credit indemnity business --?

We're losing you again.

Sure. Sorry. You mentioned increased frequency in the consumer credit indemnity business in the general insurance. Just wondering if you can give us maybe a little more detail around that in terms of...maybe a metric in terms of how much frequency went up or whether you expected it to maybe--?

I don't have...that business we manage very much in the...within the framework of a property and liability business. We use different statistical methods to develop reserves and so forth specific...more specifically we use link ratio methods, and Bornhuetter/Ferguson methods, not to get technical on you. So therefore, the type of information you are looking for, we just don't use it. It suffice to say, though, that those loss ratios, as I indicated before, do move in tandem with consumer-oriented issues, so that...some of the issues that you read about in consumer lending, such as credit card receivables, automobile loan receivables, and so forth, do have an impact, and you also have the effect...the housing and mortgage lending effect as it applies to...home equity loan-type of borrowings. So you have got a mixed bag of loans and a mixed back of issues that affect those...the pattern of losses, but, they are up significantly, perhaps a little higher than we expected from a loss ratio standpoint, but not yet to any significant degree anywhere close to what we're experiencing in the MI segment of the business.

Okay. Thank you.

We'll no next to Beth Malone, KeyBanc.

Hey, thank you. Good afternoon.

Hi, Beth.

Hi. I just had a couple of questions. On the in-line business, I assume...as you discussed the pricing and the underwriting standards of that business have dramatically improved in the last nine months, I would assume. So is there a way to just...when does the new business kind of outstrip the existing business where the losses are currently occurring. Is there any way to quantify that?

You run with that, Chris. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes. Well, not…I can't quantify while we're sitting here. It's a going to have multiple moving parts to it. One of the big ones would be what the overall size of the market plays out to be in 2008, and 2009. So we had a very large fourth quarter, a large first quarter and the second quarter was smaller yet. So you have got new business tapering down. That's obviously an impact of our improved credit guidelines, increased pricing, and then a bunch of penetration from the FHA into the marketplace. So to the extent that the new business is smaller, it will take longer for the new quality book to over…to essentially swamp the older book, particularly the '06 and '07 years. If the market plays out to be larger than we think towards the end of the year, then that will happen more quickly. Persistency is going to have some role in there as well, how long that new stuff is staying around. And then finally, even within the mix in the new business, the quality of the new business, you'll have varying rates depending on what type of loans you get, either by LTV or kind of prime credit quality, all has different rates into it. So it's difficult one to guess at. But suffice it to say, each quarter that we put on a quality new book and we feel pretty good about these last ones, the closer we are to that tipping point.

Okay. And I guess you can't take historic experience, like what happened...I guess you often refer to the...kind of the bottom of the market, relative to Houston environment in the '80s. Could you take that and make some assumption about when it turns? Or there's too many factors that are different? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Yes, there's just too many different factors.

Okay. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: For that comparison.

Okay. And then, on the MI business, what the outlook for combined or composite of 150 to 200% for the rest of this year, that would suggest according to my math, that you will be reporting losses...or potential reporting losses, total operating losses for the next couple of quarters. And I know your intent is to maintain the shareholder value, but is this...is there a possibility that the dividend would have to be cut to preserve capital, if that's the scenario of the outlook for losses?

Well, the best answer we can give you, Beth, at this time, is this. That, one, we review the annual rate of the dividend once each year at the February meeting, late February meeting of our Board of Directors. And we do that in the context of the operating plan that we have in place for the next 12 months. And in that context, we have...we factored in this year, the kind of loss that we're painting with the loss ratio guidance, if you will, that we are giving you. So that tells you that the dividend rate that we set took into account the fact that we would not be taking any money out of our Mortgage Guaranty group, certainly. Little money out of the title business. And some money out of the general insurance business to fuel the parent holding company's cash needs to pay dividends and what have you. Also, the amount of dividend that we have planned for the year are substantially below the amount of dividends that we can currently take out over the various insurance companies without regulatory approval.

Okay. And then one last question. On the results of the second quarter, are the rating agencies aware of where you are in terms of these losses? Or could we see more commentary coming from them as a result of what you've reported for the second quarter?

We have given the rating agencies the same kind of prospective or expected results that I just mentioned to you that we put together for this year relative to our decisions on dividends, capital and so forth. So there should be no surprise.

Okay. All right. Well, thank you very much.

Yes.

We'll have our final question from Greg Roeder, Adirondack Funds.

Good afternoon.

Yes, sir.

Yes. I'm trying to just get a better understanding of your new mortgage insurance business in terms of what you are underwriting today, versus what you did in '06 and '07. Now, you no longer are doing bulk deals, but are your LTVs different? Is your average loan size different? Is your FICO scores higher? Is there any difference in the geographic mix? Well, I would imagine there has to be some of that, but could you just help me out there?

Sure. Sure. Really, everything across the Board has changed from a mix standpoint. Obviously the new writings do not have anywhere near the component of low FICO scores in them that they had before. Now we've … the year-end numbers we released you can see the mix of low FICOs and reduced stock and other high-risk elements of our book. And we've always tried to manage the business by, one, limiting the higher risk on tested items to as small as we could, and yet, still be a participant in the marketplace, but what you'll see is low FICOs are mostly out of the new writings. The reduced stock are out of the new writings, and the LTV profile is lower than the previous writings. So if you were to think of those as kind of the big three risk items, they have all changed significantly. There are some more discrete items that are tougher to track just because the data is not as clean, but certainly those are all better as well. Things like debt to income ratio et cetera.

And are you doing the same amount of business with captives as you had done previously, or have you seen some captives exit the market?

Little bit of both, meaning you've had, one, you've had certainly the drop in seed rate from 40% to a maximum of 25 occur. So first off you're seeding less premium out of the shop today. The second thing is we have had a number of lenders simply exit the captive reinsurance business in 2008.

Okay. Thank you.

Sure.

We'll have a final question from Ron Bobman, Capital Returns

Hi, good afternoon.

Hi.

I had a question about captive reinsurance and sort of, I'll call it sort of collectible from the trust. I was curious to know if a trust … a captive reinsurance trust was depleted, if the cash was depleted, does the bank, the mortgage producer have an obligation to make up any shortfall? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: They have no specific contractual obligation to pay after the trusts have been depleted.

Plus whatever capital they have in there, right? Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Correct. Both of those.

Yes.

Is there any precedent, I mean has that ever happened before? And what has transpired in the marketplace? And obviously certain of these you will have … if it ever happened, the two parties may or may not have an ongoing trading relationship? Is there any sort of precedent? I'm curious. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: Well, I can only speak for the Mortgage Guaranty business, captives are relatively new, they have been around for 10 years.

Yes. Christopher S. Nard - Senior Vice President – Mortgage Guaranty, President and Chief Executive Officer – Republic Mortgage Insurance Companies: And I have not seen one pay through the complete trust balance, so I can't reference any precedent as to what would happen when that occurred.

But it would be the same set of issues that we face anywhere in the insurance business and other lines of insurance, whether it's a captive insurance company or a traditional reinsurance company, we as the seeding company are always taking a risk that the combination of the reserves that are carried by those assuming companies, together with the capital that's there are all the funds that will ever be available to those companies, or that those companies will make available to the seeding companies to honor their obligations. There is rarely any parental guarantee provided by reinsurance companies if they are owned by a holding company, and of course, if they are standalone insurance companies, certainly, what you see is what you get.

Got you. Thank you very much. Best of luck.

Okay.

We'll go next to Pat English, Fiduciary Management.

Hello, Pat.

Hi, Al. What is the flexibility that you have to transfer capital from the general insurance of the holding company to a MI writing company? A regulatory rating agency constraints and how much could theoretically be transferred?

We have no intention whatsoever to transfer capital from our P&C companies or other non-MI companies to the MI business. The extent of the capital transfer, if you want to call it that, resides solely in the amount of dividends that we can or would take out of the various companies, Pat, and as I indicated before, we have quite a bit of dividend paying capacity, but historically as well as speaking to the present, we have always shied away from maxing out on that because we've always wanted, particularly in our key operating companies, to maintain a sufficient cushion of capital to take care of eventualities that are not foreseen, such that, therefore, the amount of capital that we would add to the MI companies would come from, one, any excess dividends that we … any dividends that we take out in excess … that are in excess of the amounts we need to pay dividends to the holding company's shareholders as well as meet the holding company's cash flow requirements for debt service or what have you, and as we indicated also, from drawing down on our commercial paper as well as shelf offering. And as you know, you have been around a long time … around Old Republic a long time, Pat, you know that our history in terms of capital raising has been to issue equity-like securities, convertibles, in particular, whether they be of the preferred stock kind or debt kind, which I have always attempted to be non-dilutive of the common shareholders' interest, but yet could be counted as much as possible as permanent capital base as much as possible of the capital base of the company.

Thanks.

That concludes the question-and-answer session for today's call. I'll turn the conference back over to Mr. Zucaro for any additional or closing remarks.

Well, very good. I don't have any other comments. Chris and I and all of us at Old Republic appreciate your continued interest in our company and following its progress, and I'm certain that if not next quarter, the following quarter we will ultimately have some good news to report. Having said that I'll bid you a good afternoon.

That concludes today's conference. You may disconnect at this time. We do appreciate your participation.