Good day and welcome to the Old Republic International First Quarter 2016 Earnings Conference. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session and instructions will be given at that time for you to queue up for questions. I would like to remind everyone that this conference is being recorded. And I would now like to turn the conference over to Ms. Marilynn Meek with MWW Group. Please go ahead.

Thank you. Good afternoon, everyone and thank you for joining us for Old Republic's conference call to discuss first quarter 2016 results. This morning, we distributed a copy of the press release and posted a separate statistical exhibit, which we assume you’ve seen and/or otherwise have access to during the call. Both documents are available 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 and statistical exhibit dated April 28, 2016. Risks associated with these statements can be found in the company's latest SEC filings. Participating in today's call, we have Karl Mueller, Senior Vice President and Chief Financial Officer, Craig Smiddy, President of the Old Republic's General Insurance Group; Rande Yeager, Chief Executive Officer of the Old Republic's Title Insurance Company; and Al Zucaro, Chairman and Chief Executive Officer. At this time, I'd like to turn the call over to Al Zucaro. Please go ahead, sir.

Okay. Well, thank you, Marilynn and good day to everyone on this call. As was just said, we have our regular cast of four Old Republic senior executives here today and they will participate if necessary and answer questions that are related to this morning’s earnings release. And with this first quarter’s call, we thought we would do something a little different by limiting ourselves to just a few remarks that highlight what we consider to be the most important points in the release and then open it up to the question and answer period as was just said. In doing this, we are assuming of course that you -- everyone that’s listening has read the release or alternatively can see it on your computer screen as we speak or otherwise can go back to it after the call. So, here it goes. Starting with the results for the general insurance group in the most recent quarter, those were somewhat below par for the reasons that we’ve given on page 2 of the release. Title Insurance on the other hand performed quite a bit better than we anticipated, particularly in light of the fact that new mortgage disclosure requirements have been slowing down the closing process throughout the country. But judging from the results that we have posted, this obviously seems to have been largely avoided by both our agency and direct operations people in a very nice way I might say. The RFIG run-off, as we state on page 4 of the release, that performed up to par so far as the MI portion is concerned, but it did unfortunately underperform however in regard to the much smaller CCI line. And in this latter case, we’re still dealing with litigation costs that are still sapping the vitality that remains…

[Operator Instructions] And we’ll take our first caller Greg Peters with Raymond James. Please go ahead.

I wanted to ask just a big picture question around risk management. Clearly there has been some other participants in the market like AIG that have been having some financial challenges and I'm wondering if you can speak to your ability to grow that business with new account growth not only last year but the prospects for the outlook for this year.

Well as you know Greg, we have a big chunk of our business, historically we've had a large section particularly of the workers comp line and that it bounces around but over time it's been anywhere between 45% and as much as 60% of our comp business but lesser percentage of the trucking business and a lesser percentage of the general liability business that has been written on some sort of while sensitive alternative market approach as we've heard in the industry. And that business has stuck to us through thick and thin, we've got a great history throughout our system of keeping that business we are always typically looking at 90% retention rate it's been a wonderful service oriented and risk taking business for us with major US financial services and industrial corporations. We do our own stick as you know in our business; we don't pay much attention to the competition because we don't know typically what makes them tick. And so we only have our service capabilities and our knowledge and our good name and brand to deal with. And each year we have had very good results in increasing the business whether it is in the general financial services or general industry trucking or other parts of our business into our major operations. So it's all good it helps us achieve very good results and we like the obviously the partnership approach that's achieved through that type of underlying process in our company.

When I was going through the press release, you spoke of the uptrend in the claims ratio I think was on page 2 of your release was related to general insurance results. It looked like at least on a quarter-over-quarter basis, the claims ratio improved a little bit but I was struck by your commentary later on that page 2 where you talked about reverting back to a long term average of the high 60s, low 70s. As you think about targeting that type of result, when do you think you might be able to get there, is it, are we still couple of years away or do you think it's a lot closer than that?

The comment was made in the context of the quarter-to-quarter and year-to-year changes in our loss ratio for years starting from 01/01/12 to-date. And if you - as I'm sure you've had in your files, you can see that there is a substantial and gradual increase in the ratio through 2014 and then it became a little more attenuated in 2015 and then it's all about the same level as we see in 2016. What we mean by reaching back to the high 60s, low 70s which would be in the area of let’s say 68% to 71%, 72%, okay, that range, well that's a range again if you go back to our long underwriting history in the general insurance business that's a range that we have achieved fairly regularly and even with a few bumps here and there that we usually overcome prior to 2012. So that's what we mean by the last paragraph in the general insurance section of the release.

And just Al, when we think about the numbers going forward, is there sort of a timeframe you have in mind in terms of when you're going to be able to get back to those historical long-term averages?

Yeah, I think within the next 18 months we should be there, 18, 24 months. It's a gradual process, I mean we can't predict as you know in our business what loss ratios are going to be quarter to quarter, let alone year to year. So that's why we look at trends more so than anything and when you look at trends, we don't look at trends in the loss ratio by itself, we also look at trends in the underwriting quality of the business, changes in that quality and we look at trends in the pricing situation for each of our businesses. And the composite of that is what leads us to, if you are pretty good that we're going to gradually evolve towards longer better or lower loss ratios.

Perfect. Thank you for the color in that area. Just two other quick questions and then I will re-queue. First, you did mention in your comments the litigation issue and I know in previous quarterly conference calls you have spoken about the potential for some settlement and it seems to continually delay. Can you give us an update on that?

Yeah, I think, I hope I am not [indiscernible] out of school, but I believe that we are finished with the litigation or the substantial litigation we had in the mortgage guarantee business. So I think as I understand that in our 10-Q you will see that there is either an elimination of reference to that litigation or as an attenuation of it to the extent that it’s been in the final stages of settlement and it will be resolved within our reserve structure, so that will not come back to haunt us going forward. So the only litigation - we have two pieces of litigation there, the largest one of which being the Bank of America and it’s country-wide acquisition which as you know has been a source of, I assume a source of [indiscernible] for Bank of America and country-wide and that’s a slow boat to China and we will get it done. It’s just a matter that because of the money is involved and the aberration that has been created over all these years of legal battles that it’s harder for us to come to conclusion, but we will get it done. I don’t think that we are going to see any significant upward adjustment in our estimate of what it is going to take to resolve that situation. Having said all that, I hope I will not be quail but that’s the best I can say right now.

So it looks like today in the 10-Q that’s going to come out you are going to have the removal of the language with no financial impact that is a subsequent event to the end of the quarter, is that correct? This is all in the context of –

With respect to the LMIC litigation.

Yes, that’s correct.

There were two litigations with Bank of America, on mortgage guarantee and then the CCI. Mortgage guarantee is what I was speaking to, CCI is still in both.

Got it. Thank you. Thank you for the clarification. And then just the final question and then I would be remiss if I didn’t throw something in Rande’s direction, but Rande perhaps you could give us an update on your perspective of the title backlog. There seems to be a lot of mixed signals on the economy these days and perhaps it has caused you to have changed perspective on origination volumes for 2016 and the outlook for the business, but perhaps you could just give us some color there. And again that would be my last question.

Thanks, Greg. I have every reason to believe that the mortgage origination numbers will actually increase our original estimates. [indiscernible] last week and we refinanced buying 41% I think that’s about $585 million from 13 or something like or so that was up 45% and it is a purchase money transactions where I should be able to have 10%, so looking at that that signals a stronger year than we had in 2015 and so looking at it in terms of that perspective in fact Al and I was talking about this morning, while we have done what we would call a robust economy of one that is growing quickly rapidly, we’ve at least got a softer economy and all that’s good. That signals a lot of good things for the mortgage industry and I also would just within the last couple of days rents are increasing while the affordability of homes are going down which means that we might get some of those first time homebuyers into the market that we alluded for a long time, so it’s really good to see them again. While I was cautiously optimistic that the beginning of the year and beginning to remove [indiscernible] and we really look forward to pretty good year now.

Thank you for the color.

[Operator Instructions] And we will move next to Adam Liebhoff with Loomis, Sayles.

Good afternoon, guys. How are you?

Good, thank you.

My one question I think is just for Rande. I wonder whether there is any way for you to quantify or maybe give some color around the impact that CFPB’s increased disclosure rules had on the title business and I think I am looking for something in terms of timing as well as maybe cost of closing.

I hate to quantify it, but I can tell you that yes we definitely select the branches and if you – verified lenders out - there two weeks after the month generally speaking so that branch is more advanced. It should signal a much quarter first quarter than we saw the company experience and so we are quite satisfied with the results of the title company based on what we have seen happening since last October so that was really good signal for us. In 50 years in keeping people from buying loans and trying to make it easier for them to acquire homes and make the lending practice more transparent and what is happening in that will be up to the consumer. All I can tell you is that we are working hard to adjust the renewals as an industry and we will compete for it and I think we will be able to take advantage of situation if we turned out and I won’t say it’s turning to positive because things have slowed, but I don’t see it greatly impacting our business, but as I said, the CFPV is trying to do their job and the lenders are trying to do their job to deal with the new requirements and disclosures and like all the issues that are out there that they have to deal with.

I mean, has that sort of impacted the close rate at all thinking about the delays and the increased level of disclosure. If not, is it just sort of a tale of deferred activity versus activity being absent?

Yeah, it’s not curtailing deals. What it did and I think we absorb that. That’s for a period into the closing process. In other words let’s just sell, closing down for two weeks, but after we have that two-week period in the last October, November, beginning of December. Things now are just proceeding at a -- although at slower pace, but it’s not – just from our company’s perspective, it’s not slowing our business at all or causing us to see much of an impact [indiscernible]. I would have to say that we are dealing with it and I don’t see it being a continuing problem for our company.

All right, Rande, thanks so much. I appreciate it guys.

And we will move next to Christine Worley with JMP Securities.

Thank you. I have a question on the loss ratio and the workers’ compensation line, it looks like it took a pretty decent stuff down, and somewhat it has been running for the past couple of years and especially versus 1Q last year. Can you just talk about what’s driving that and if there is any favorable development in that number?

Craig, you want to take that?

Sure. Christine, yes, I think as we mentioned in some of the prior calls, we were taking some reserve strengthening over the course of the last few years and we expected that to moderate this year, and it has. So I wouldn’t say there is favorable development in that number, but certainly the degree of reserve strengthening has gone according to our expectations and we haven’t seen that to the degree this quarter.

Great. Thank you.

At this time, we have one question remaining in the queue. [Operator Instructions] We will take our next question from Greg Peters with Raymond James.

Thank you for letting me have a follow-up question. I wanted to circle back to the commentary that appears in page 2 of your press release as it specifically relates to the pricing and declining volume in your construction book of business. I was wondering if you could provide us some color on how large that book of business is and what the rate of price decreases that you’re seeing in the marketplace and how much is the business down in the first quarter?

Craig, you want to address that, and I can add.

Sure, I would be happy to do that. Greg, I think the majority of the decline is coming as we stated here from the large account business. As you know, we have construction within several portions of our general insurance group. But it’s really the large account construction that we are seeing very competitive rate environment. Even though some competitors have indicated, they are exiting the business or tightening the screws. It seems that there are a lot of other competitors that are very aggressive in that large account space right now. So as I mentioned last quarter, we are maintaining our underwriting discipline. We will not chase underpriced business. And as such we have seen the business decline somewhat in the large account space, as far as a top line percentage, I would say in the area of 15% to 20%.

And just as a follow-up, when you speak about large account construction business, that’s not to be confused with the risk management portion of your business for workers’ comp and some commercial auto, correct?

That’s right. Even though in construction we do write large deductible business that we would consider loss sensitive, and to a degree, risk management business. The risk management business that we write within our other segments is not as affected there. We are very far removed from the risk and it is the client that is taking the majority of that risk. So it is not that business where we are seeing the challenges.

You might mention, Craig the size of the accounts that generally – range of accounts that we categorize as large, mostly risk transfer business.

Yes, the large construction accounts that we write are in the area of 250,000 premium to excess of a $1 million of premium. Hence, on a large deductible basis, given that the client is retaining a lot of that risk, the premiums are less than that.

Just a follow-up, Craig, are the Aon GRIP’s program or the Willis’ WillPLACE or the Marsh MarketConnect programs, are they helping you to generate any incremental premium?

Let me address that. As you know, I didn’t follow those for a long time, Greg. You know, we always view ourselves as living in glass houses, and therefore we don’t like to throw stones and therefore we don’t address competitor specific questions.

That’s fair enough. Thank you very much for the color. Congratulations on the quarter.

Sure.

And it appears that we have no further questions in the telephone queue at this time. I would like to turn the conference back over to today’s presenters for any additional or closing remarks.

Well, thank you very much. It is very good visiting with you all and look forward to our next calls and next views, and hopefully they will be positive as we expect them to be. Hope, you will have a good day.

And this concludes today’s call. Thank you for your participation and you may now disconnect.