Please standby, we’re about to begin. Good day and welcome to the Old Republic International Second Quarter 2014 Earnings Conference Call. Today’s conference is being recorded. At this time, all participants are 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 questions. I would like to remind everyone that this conference is being recorded. And I’d now like to turn the conference over to Scott Eckstein with MWW Group. Please go ahead.

Thank you, Operator. Good afternoon. And thank you for joining us today for Old Republic’s conference call to discuss second quarter 2014 results. This morning, we distributed a copy of the press release. If there is anyone online who did not receive a copy, you can access it at Old Republic’s website which is www.oldrepublic.com. Please be advised that this call may involve forward-looking statements as discussed in the press release dated July 24, 2014. Risks associated with these statements can be found in the company’s latest SEC filings. Participating in today’s call, we have Al Zucaro, Chairman and Chief Executive Officer; Scott Rager, President and Chief Operating Officer; Karl Mueller, Senior Vice President and Chief Financial Officer and Rande Yeager, Chairman and Chief Executive Officer of Old Republic Title Insurance companies. At this time, I’d like to turn the call over to Al Zucaro for his opening remarks. Please go ahead, sir.

Okay. Thank you, Scott. And this is Al Zucaro, and on behalf of all of us here, I bid you a good afternoon. We’re going to follow the same approach we’ve taken in the past. And that means that we’ll have several of our senior officers that Scott has just identified to participate in this discussion. Today, therefore Scott Rager will address happenings in our General Insurance business; Rande Yeager will pick up the microphone for and discuss our Title business; Karl Mueller will talk about the significant financial aspects of our consolidated operations. And I’ll say a few words initially and then at the end of the discussion, at which point as we’ve indicated open it up to questions. So, let me begin by first addressing the RFIG runoff business, which has continued obviously to surprise both positively and negatively in this particular quarter as a matter of fact. As we reported this morning, if you do the calculations a little more than 80% of the approximate $110 million reduction in the latest quarter’s consolidated earnings for Old Republic came from the RFIG runoff. And this overall RFIG operation obviously ended up in deep red territory on the heels, and following I should say four consecutive quarters of positive performance, which began in the second quarter of 2013 and which was driven principally by the mortgage guarantee insurance operation which was during those quarters and has remained in this later quarter, favorably appreciating to the bottom line. Now, as we show in the release, there is some turn into red. Obviously stand from the consumer credit indemnity or the CCI portion as we refer to it – in the business of the runoff book of business. And as we also said in the release, there are two basic reasons…

Thanks Al. Okay, we’ll now address the General Insurance Group results exclusive of the CPI product impact on those numbers. Net premium earned were up nicely for the quarter and year-to-date at 9.4%. And we believe that trend will continue for the remainder of the year. As we’re seeing new business opportunities for many segments – for our operations and that coupled with increasing payrolls associated with the slowly recovering economy, as well as moderate rate increases would indicate that this increase is sustainable for at least the remainder of the year. Premium growth is really taking place across all underwriting units but it is particularly extenuated in our risk management (inaudible) transportation and construction operations. Growth in the latter is much more driven by increased rate levels and organic growth of existing accounts. On the claims side of the ledger, as our release indicates, we are still experiencing increased loss cost particularly in working compensation and general liability. These trends are more pronounced in the middle markets and construction segments of our business and much less pronounced in the loss sensitive products. In the latter, it shouldn’t have skin on the games so to speak through higher retention levels or other insuring mechanisms. And thus that’s our strategy to move our underwriting focus away from largely mainstream rate sensitive writing to more loss sensitive products and programs. As for the construction results, we believe the implications of the recession and the slower recovery in the commercial construction arena, have definitely impacted claims past to a greater degree and in other markets in which we participate. Pressures on opportunities for light duty and return to work status continued to impact the long-term cost of claims. Loss cost such amount and more adequate rate levels are necessary to address this phenomenon.…

Sure, thanks Scott. As we reported, the Title Company experienced a nice profit rebound in the second quarter. As we reported in this morning, earnings were positive at $26 million. Industry-wide real-estate activity remains sluggish. This year, refinance is running about 65% below last year and purchase money resale new building money transactions are running at about 10% below 2013 levels. But in this context, our commercial business has continued to grow and our market share ticked up to 15.5% in the latest sale TA report. At this juncture, we don’t see signs of a rapidly improving real-estate market. Refinances are not going to improve to 2013 levels and sales of new and existing homes are not going to improve quickly enough to compensate for the currently smaller refinance segment of the market. We’re going to see a gradually improving purchase money market but it probably will take two or three quarter look-back at our business to say that things aren’t as slowest as they were at least what they seem they are. Industry-wide, the first quarter was an aberration. Interest rates, regulatory influences as well as the weather contributed to the fall-off in the business. And I think in the second quarter results represent some of the make-up for the difficulties we encountered in the first quarter. As you see in the release, premiums and fees were down about 18% for the quarter and 16.5% year-over-year. We’ve always concentrated on the long-term value of our business and we’ll continue to do so. Our emphasis on the agency side of the industry helps us to keep our variable cost more in line with market downturns. Agency growth has certainly benefited are rapidly increasing national market share. And it does not appear to be stalling up or confident that the strategy will continue to benefit our bottom line. We remain highly committed to the success of our company and its long-term growth and profitability. We are continuing to search and have been succeeding in identifying additional sources of profitable revenue. We believe we are out there and we really believe that we’ll continue to enhance our performance and industry presence. With that, I will turn it over to my associate Karl Mueller.

Okay. As we’ve done with previous quarterly calls, I’ll comment briefly on Old Republic’s financial condition as of June 30 before we then open up this call for your questions. This morning we reported that Old Republic ended the quarter with consolidated assets going to nearly $17.2 billion. And that’s up about 4% from year-end 2013. The cash in invested asset balance of $11.4 billion is up slightly from the first quarter as the portfolio continues to benefit from, and the investment of positive operating cash flows and higher market valuations on those securities. The fair value of the bond portfolio increased slightly from 103.6% of book value at the end of March to 104.6% at June 30. The credit quality of the portfolio remains at an overall A minus rating which is unchanged from the prior year-end. As noted in this morning’s release, we continue to place greater emphasis on common equity investments which now make up approximately 13% of the total portfolio. And that’s up from around 9% at year-end ‘13. Investment income increased to $85.4 million in the second quarter as new investments and fixed income securities are benefiting from slightly higher market yields. In addition, investment income benefited from the shift to higher yield income stocks and equity funds which I just noted. On a year-to-date basis, these factors have resulted in net investment income increasing to $168 million which is up from $158 million during the same period a year ago. Claim costs on a year-to-date basis have developed essentially even with the prior year-end consolidated loss reserve balances. And that’s in contrast to a modest to favorable development for the same period in 2013. This year’s reserve development was most significantly impacted by the CCI claim settlement that was noted earlier in this call…

Okay, Karl. So, looking ahead to the next few quarters, we think that the RFIG runoff acts any litigation surprise should proceed on fairly even keel. In General Insurance, as Scott intimated, we should experience a very gradual lessoning of the upward pressure on worker’s compensation and general liability claim costs in particular, as the benefits of rate changes that have been instituted steadily in the past 30 months or so continued to kick into the premium income stream. And moreover as Rande Yeager has indicated, our Title business is in good shape to also gradually provide upside potential over time to the Old Republic timeline. So, now having settled this as we promised and as was indicated, we’ll now entertain the questions that any call participants may have. You can all direct your questions to me and we’ll in turn direct them to each of our associates here as necessary. So, let’s move on.

And we’ll take our first question from Vincent DeAugustino with KBW. Vincent DeAugustino – KBW: Hi, good afternoon everyone.

Hi. Vincent DeAugustino – KBW: Just to start off with Al or Scott, to the points that you made about expecting worker’s comp and GL margins to moderate towards 2013 levels. I guess from what angle it would seem that the market really isn’t going to tolerate a rapid acceleration and rate increases. And so to your point on the loss cost side, I’m just curious what it is exactly about the loss cost environment that you expect to become more favorable or if it’s really to clarify that you would expect some of the reserve pressure on worker’s comp in GL 2 sort of taper off?

Well, I think to first answer your question, I think we’re implementing obviously some loss cost mitigations factors in terms of on medical side, I think we’re seeing lesser degree of medical inflation than we’ve seen in the past, particularly past five years The other option is I still think in the areas in which we seem to be having our issues with respect to worker’s compensation. We are still able to achieve what we think are fair but adequately increases in those areas. Our business is spread over such a large spectrum of the industry, different industries actually that some are – shall we say low risk, some are high risk classifications. And where we’re having the most issues, we are still capable at this point in time where we’re getting moderate, by moderate I mean anywhere from mid single-digit percentage to high single-digit percentage increases on those books of business. Also with respect to, as I indicated earlier, it depends on where the book is and on the accounts, individual accounts and how well we move those again to more risk sharing opportunities and programs versus middle market guaranteed cost type products. And I think as we move the book and we’ve been successful in that endeavor with over the last couple of years, gradually shifting that book more towards a loss sharing book versus a rate driven book. I think the results will be forthcoming. Does that answer your question? Vincent DeAugustino – KBW: Most certainly does.

Thank you. Vincent DeAugustino – KBW: And then Al, just completely understanding that your first priority is the responsibility runoff, the MI unit. If we go back to last quarter, I think one of the thoughts that was still kind of around was that at some point, again some point down the road, when the time was right that there was maybe going to be an opportunity for you to part ways with RMIC. And I’m just curious if with some of the GSC capital rules coming out, if you would think that some of those capital requirements being a little bit more onerous would make it just a little bit more difficult to really recapitalize RMIC and turn the lights back on if you will?

Well, I think it’s all going to be dependent on what appetite there is in the marketplace to have one or two or three additional players in the business. It remains to be seen what is done with the GSCs, specifically the extent to which they are pulled back from the major activities that they had at one time. And if that happens, obviously there is going to be greater room for the private sector to step in. And if it can be shown that the results can be there, the private sector usually fills the vacuum. As to your point about the greater capital requirements, I mean those capital requirements are going to be uniformly greater for everyone. So, whether you have an active company or a new company, it all comes down to this – can you make money in this money, can you get a decent return? And if the answer to that is yes, the money will be there. That’s what I’m feeling right now. As to when this might be an active prospect for us, time will tell. I mean, we’re just overcoming a bunch of activity, namely the payment as DPO, the recapitalization to stabilize the companies, etcetera. So now we’re going to sit back and relax for a while for – we attend to any other approach with respect to that business. Vincent DeAugustino – KBW: Okay. And you may or may not want to comment on this but if we look at AIG’s favorable settlement with Bank of America over their MI claims. Is that something we can maybe look at as a good indication of how your own litigation with Bank of America might turn out?

I think the issues tend to be similar. And I think that’s why you’ve not had not just Bank of America but other banks Chase, Citi, you name them, all coming to the trough and settling. And I think our time is going to come and I think our feeling is that the settlement with anybody that we are having difficulties with would be fine, it will work out fine because as I say the issues are similar, and they all deal with misrepresentations of one sort or another and sometimes systemic fraud. Vincent DeAugustino – KBW: Then, if I can sneak down one last one and then I’ll let somebody else have a turn. On the Title side, just with the environment from volume standpoint being a little bit more challenged. Just has the pricing environment on the agency and indirect side, has not changed at all or is things either would have been stable or more competitive just looking for some dynamics on what the environment might be like?

If you want, Al, I can certainly address that.

Please, I’m sorry.

It’s stable. We haven’t seen any knots to higher and lower pricing. Agency splits have remained the same and as far as the different regulatory schemes that we have around the countries, we’re not seeing much difference at this particular point. Vincent DeAugustino – KBW: Okay, great. That’s all very helpful. Thanks guys.

Okay.

You’re welcome.

And we’ll take our next question from Christine Worley with JMP Securities. Christine Worley – JMP Securities: Hi, I just wanted to dig in a little bit on the reserve development and the general liability and worker’s comp-lines. Would it be possible to quantify that?

Well, as Karl indicated and as we have indicated, I think every quarter for many years Christine, we always point out first of all that one quarter or half a year in this case does not make a whole year, that’s point one. And point number two, we have indicated for at least the last couple of years I would say that the level of reserve are redundancy that we had been experiencing steadily at Old Republic for a good decade and more had been decreasing. And that is really reflective of the pricing issues that we have a bit dealing with particularly in the last four or five years before we started to as Scott mentioned before to rectify our pricing, both as a company as well as an industry. So, it bears repeating that the studies that we make of publicly held companies reserve developments as those are set forth in the triangles which appear in the full part of the 10K still show Old Republic as one of the relatively few companies that produce reasonably steady favorable developments of reserves. So, what we’re talking about and what I believe Karl indicated a few minutes ago is that we’re still in a positive manner. Overall, again as Karl I think mentioned, the main issues relates to the RFIG business, specifically the CCI as it’s gone into the red for a longstanding claim which got settled, which therefore by definition ends up reflected as a negative or unfavorable development of prior year reserves. And you see those numbers there, that’s been offset by the MI business. And we’ve indicated what the effect is there. And so what remains is the General Insurance business and that’s become much more of a touch-n-go. Typically we’ve had 2% to 3% reserve – favorable reserve developments in General Insurance over many years. And now, as I say, its touch-n-go, it’s pretty much on the button. That’s the best we can say to you or tell you about the dynamics of this reserved bill. Christine Worley – JMP Securities: No, that is helpful. Thank you. I’m just trying to I guess to get to the core of sort of where the accident here is running for this year and if there were any movements in that in the quarter?

Well, as we say in our footnote disclosures regularly, we do use a loss tick technology for current year’s long-tail business. And as you know what that reflects is our best assessment of what’s happened to pricing and the implications that has on prior year’s actual development cost. So, for the last three years in particular, we feel comfortable that the loss assumptions we’re making should prove reasonable. So the lion’s share of what we’re experiencing, which is throwing a bit of a monkey ranch into that relates to years 2010 to what would you say, Karl 2004, ‘05 that’s where the lion’s share of any adverse development is occurring. And it’s occurring in these lingering cases. As you know, the easy cases are settled first and the bad ones remain in the pipeline. And that’s what we’re trying to resolve right now to get some of these old ones paid off and settled as quickly as we can. But whenever we do that that’s where we’ve been experiencing some case reserve efficiencies. Christine Worley – JMP Securities: Okay. Did you experience I guess any of these hick-ups in the first quarter or are those sort of better run rate numbers for our modeling for the – for where the current accident year is running?

Karl, help me on that but I think this has been developing steadily over the last two years right?

That’s right. I would say the second quarter was perhaps a little more [fast paced] than the first. The conditions that Al described were a bit present in the first quarter as well. Christine Worley – JMP Securities: Okay. Thank you. That’s helpful. And then, in the general and in these lines that you say you want to keep getting rates, is there a way to sort of quantify the gap between the rates that you’re getting and where loss cost is currently trending?

Well, as Scott mentioned, we’re still experiencing not across the board, some rate increases in GL, General Liability and comp. But I think the biggest benefits for us again as Scott has mentioned already is going to come from the fact that we are moving, keep moving a greater portion of our business to what’s referred to as loss sensitive approaches to underwriting where the customer has got some skin of the game as Scott put it before and also the utilization of alternative market mechanisms such as retros and captives and (inaudible). That’s where I think our biggest benefit is going to come from going forward rather than straight forward rate increases. Christine Worley – JMP Securities: Okay, great. Thanks for the answer.

Okay.

It appears there are no further questions at this time. I’ll turn it back to our presenters for any closing remarks.

Well, as always we appreciate your interest. And look forward to our next visit. Hopefully, we will not have some of the adverse developments that we’ve had to report rather unpleasantly this quarter. So we look forward to visiting with you next time. You all have a good day.

And that concludes today’s conference call. We appreciate your participation.