Good day and welcome to the Old Republic International Second Quarter 2016 Earnings Conference Call. 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 provided at that time for you to queue up for questions. I would like to remind everyone that this conference is being recorded. And would now like to turn the conference over to 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 second quarter 2016 results. This morning, we distributed a copy of the press release and posted a separate statistical exhibit, which we assume you have 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 this call may involve forward-looking statements as discussed in the press release and statistical exhibit dated July 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 General Insurance Process Group; Mark Bilbrey, President of the Old Republic 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, thank you and again good afternoon to all. And as it was just announced we have the several Old Republic senior executives on the line and they will participate and answer such questions that may come up relative to this morning's earnings release. With the second quarter call, we thought we would once again limit ourselves to just a few remarks that I like to what we believe are the most important points in the release. And then we will the visit to the Q&A question as was just indicated. So, here it goes. The results for the most recent quarter were somewhat below par for both General and Title Insurance. And the reasons for that were given I think fairly on pages 2 and 3 of the release. On the other hand, again as we see in the release the RFIG run-off business provided the most positive lift to the latest quarter's performance and to a lesser degree to that of the first half of this year. Taking a look at General Insurance, it’s obviously its increasingly clear to us as the year is progressing that we will perhaps follow the experience a mid-single digit rise in earned premiums for this year in its totality and hasn’t been the case so for. Most of this is going to come from organic growth and a bit more from a still small start-up underwriting facility that we setup early in 2015. We think that we as we look at it today we think that the North American economy is likely to be stuck in a slow gear for the foreseeable future. And this means that we'll be looking to strong business retention. A modicum of new business in various specialty areas and also to the benefits of expanding the segment…

For questions, correct?

Yes.

[Operator Instructions] We'll move forward to our first question from Greg Peters with Raymond James.

Good afternoon, everyone. Thanks for hosting the call and taking our questions. I just thought to take this opportunity to circle back to some of your opening comments, and certainly what you said in your press release, the large account construction book, is that risk management related business or traditional risk transfer and if there is something more insidious on a competitive, from a competitive standpoint that's happening in that business.

Craig, you want to address that?

Sure. Hi, Greg. It's a combination of large deductible business and guaranteed cost business. So when we say large account construction, it would include both and as we also say, we’re operating in a very competitive environment. There is definitely evidence in the marketplace of competitive behaviors and I think as I discussed in the prior quarter or two, we are committed to not chasing business to maintain a top line and we’re willing to let business go that we don't think is priced adequately. So as we move down the line, we’ll continue to respond to the marketplace and if the competitiveness doesn't improve, then we’ll continue to maintain our underwriting discipline and let that business go.

So, just a follow-up Craig on that point, how big is the construction book in its totality in the context of Old Republic's general insurance business? Just so we have some idea of what the downside potential is?

Yes. We run construction in several of our segments. So when we talk about large construction business, it involves primarily a segment that is currently at about 300 million of premium on a gross written basis.

Okay. So I can't recall the last time I've seen you in your press release signal any expenses related to a startup business, I'm sure you probably don't want to share much about what that actual business is, but perhaps you can quantify what the actual expenses and then I’ll have one follow-up and then I will requeue?

Greg, I’m sorry, yes, I would refer back to the beginning of 2015, when we had our press release about a new joint underwriting venture that we were starting and so when we talk about the new start-up, we also talked about it in our first quarter 2015 conference call. So this is primarily coming from that operation.

And just what the expense, the relative expense, that’s what I was curious about?

Well, we have called correctly that we are over the lot there. You’re talking $2 million, $3 million here, $4 million, $5 million there, pluses and minuses. The point we’re making, Greg, is that when you take all these somewhat different types of expenses that are flowing through the income statement, particularly this last quarter, we believes that that accounts for most of the difference you see from longer term trends in the expense ratio and that's why we also said in the release as I recall, right, that we expected that as the year wears on, these, what I refer to as blips, should get less to some degree and be absorbed in the overall premium stream of the year.

Thanks. And just the one final question. In the title business, you mentioned -- you singled out how operating costs rose faster than revenue and maybe Mark wants to comment on this or Randy, but I’m curious what’s changed in the business model that would cause costs to go faster than -- rise faster than revenue or was there a shortfall in revenue relative to expectations?

Hey, Greg. Thank you. This is Mark. I don't think we really have a shortfall in that. What we have done is in some key areas, commercial and others, we’ve increased some staffing opportunities for us, obviously with new people on board, their book of business and follow-up on that is just a little delayed. A lot of it is just the timing issue for us, third thing to hit the bottom line before on the revenue side, so I don't feel there is any shortfall at all.

Okay, thanks for your answers. Congratulations on the quarter.

[Operator Instructions]

I guess everybody is on vacation or something.

And at this time, it seems we have no further questions in the queue. I would like to hand the conference. Everyone, we just received a question in the conference queue from Jennifer Callahan with Dowling & Partners.

I'm sorry. It's actually Gary Ransom from Dowling. I had a question on the commercial auto. I was wondering if you’re still seeing rate increases there. That was one of the places where the loss ratio is still rising, what is going on, on the rate side there?

Craig?

Right. On the commercial auto, we continue to see some severity in that business, and as such, as we talked about for the last few years and have many in the industry that are right commercial auto, we have taken necessary rate action and continue to take that. So we’re still getting the necessary rate to offset those severity trends that we’re seeing and I would put those in the mid-single digits and different than what I spoke about some of the behaviors we were seeing in the construction area in the commercial auto area, most of the competition is seeing the same kind of trends that we are and therefore responding accordingly. And we are able to get the necessary rate increases that we need. So the marketplace is more supportive certainly in that line of business.

Are there any other lines where you’re still getting rate increase?

I think as we said, generally, what's contributing to our top line growth is some moderate low single digit rate increases on average, if you average up together all of our lines of business. So, in general, and in the aggregate, we are, but the marketplace is certainly competitive and as we always say, it varies dramatically by class of business, line of business, geography. So depending upon those variables, the answer is, it can be very different.

Thank you. And then over on title, I wanted to understand better what you think the outlook might be for refis, with low interest rates obviously, there is a lot of activity, but it seems to me there is some limit to that activity over the long run. Do you have an outlook for what the refi activity might be doing over the next several months, say or a year?

Thank you. This is Mark. On that refi, lot of projections on that and they’re saying it should be up to 44% for this year, but it should drop down to that 27% for ’17. July has started off very, very strongly in that. As long as the rates stay low, there are still some opportunities in that and I think it would be fairly solid for at least the next quarter [indiscernible] because of our agency network. Sometimes, we’re delayed a little bit and the premiums hitting our bottom line, it should slow as ’17 goes, if you follow the projections.

Alright, thank you very much.

[Operator Instructions] And it seems that there are no further questions at this time. Mr. Zucaro, I would like to turn the conference back to you for any additional or closing remarks.

Okay. Well, thank you. I appreciate everyone's interest in Old Republic and your attendance in this visit. And so we’ll look forward to next one in a few months. You all have a good afternoon. Thank you.

And ladies and gentlemen, that concludes today's conference call. We thank you for your participation. You may now disconnect.