Nat Otis – Director-Investor Relations Matt Morris – Chief Executive Officer Jason Nadeau – Group President-Mortgage Services Allen Berryman – Chief Financial Officer.

John Campbell – Stephens Inc Ryan Byrnes – Janney Kevin Kaczmarek – Zelman and Associates Geoffrey Dunn – Dowling and Partners.

Good day and welcome all in webcast. Today’s call is being recorded. The webcast is currently unavailable. We are taking all measures to remedy that during the call. We will continue with the call. At this time, all participants are in a listen-only mode and the floor will be opened for your questions following the presentation.

I would now like to turn the call over to Mr. Nat Otis, Director of Investor Relations..

Thank you, Keith. Good morning. Thank you for joining us for our second quarter 2015 earnings conference call. We will be discussing results earlier this morning. Joining me today are CEO, Matt Morris; CFO, Allen Berryman; and Group President for Mortgage Services, Jason Nadeau.

I will remind participants that this conference call may contain forward-looking statements that involve a number of risks and uncertainties because such statements are based on an expectation of future financial operating results and are not statements of facts. Actual results may differ materially from those projected.

The risk and uncertainties with forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release published this morning and in the statements regarding forward-looking information, risk factors and other sections of the company’s Form 10-K and other filings with the SEC.

Let me now turn the call over to Matt..

Thanks, Nat. We appreciate everyone joining us this morning. As you know this morning we’ve reported second quarterly 2015 earnings. And while our title segment produced the quarter of solid results, our mortgage services segment did not meet expectations due to continued deterioration of the delinquent loan servicing business.

The rapidly fall in volume have defaulted in delinquent loans in the industry as well as the previously mentioned pricing pressures on existing contract was sharper than expected.

So on accessing our ongoing smart growth in the mortgage services segment, we have made the decision – strategic decision to exit our delinquent loan servicing business and focus on maximizing our profits from recent acquisitions in that segment.

And then we do have dates in a doe [ph] here with us this morning to provide further color around our decision as well as some thoughts on our expectations going forward. So as the overall revenues, we are pleased to report continued growth with full operating revenues increasing 19% over last year’s second quarter.

While a portion of that growth stems from the 2014 acquisitions, which were finalized in August of last year. We saw strong growth in residential retail orders as well with closings at 17% over prior year quarter. Opened orders, thus far July, steady with June’s rate and are still showing significant growth over the comparable prior year period.

We also remain on target, but the strategic objectives described over the past several quarters including the value creation strategies announced in February of 2014. As of July 1, we completed a significant milestone in our cost management program with the first transition of certain back office functions through a third-party service provider.

The remaining functions identified, so outsourcing will be transitioned by the end of August. At that point, we will have essentially completed the cost management program announced in 2014 and we’ll have achieved our revised target of $30 million of annualized savings exceeding our original goal of $25 million.

Related to this program, we incurred non-operating cost of $7.7 million this quarter, which Allen will describe in more detail in a moment. We also made significant progress on our capital return program, buying back approximately 720,000 shares of stock and paying our first quarterly dividend on the previously announced a dollar per share dividend.

I’ll now turn it over to Jason for some commentary regarding the changes in the mortgage services segment..

Thank you, Matt.

Revenues in our mortgage services segment were $58 million for the second quarter of 2015, up from $22 million in the second quarter of 2014 to $35.8 million with the increase both due to acquisitions completed in the second and third quarters of 2014 as well as increased refinancing volume in our centralized title operations that we acquired last year.

Revenues for the second quarter fell sequentially $5.7 million from first quarter’s $63.7 million. Second quarter’s 2015 operating revenue run rate was favorably impacted by growth in origination-based revenue due to increased refinancing volume.

However, we experienced a much softer than anticipated fall in delinquent loan-servicing revenue with a drop off accelerating through the quarter and industry trend we expect to continue. Another contributor to the decline in revenue was the continued pricing pressure on existing delinquent loan-servicing contracts.

As a result of this declining revenue, pretax earnings for the quarter fell from $2.6 million in the first quarter to a loss of $3.3 million.

With ongoing mortgage delinquencies and for quarter inventory levels experiencing ongoing substantial decline, future demand plus delinquent loan-servicing related services are expected to diminish considerably from today’s already depressed levels.

With these business lines having been profitable for many years in the past, given this outlook, these service offerings which we collectively referred to as delinquent loan-servicing no longer meet our profitability objectives and so we’ve made the decision to exit these operations.

We are mindful of our clients' need for an orderly wind down that ensures minimal disruption to their operations. As such, we anticipate that we will continue to operate the delinquent loan servicing business lines in a phased exit process. This will continue to impact the margin in the segment for the remainder of the year.

We believe this decision was significant to historic segment revenue will focus our capital and resources on our business units that have the strongest future for ongoing and stable growth. We will retain our capability to provide services to this segment.

Our remaining mortgage services operations constituted core set of diversified offering to satisfy the needs of lenders to manage vendor risk in a heightened regulatory environment.

With the anticipated decline in refinancing volume, we expect the mortgage services segment to continue annualized revenues of $120 million to $140 million in 2015, down from 2014’s year-end run rate of approximately $230 million.

Given the percentage of revenues tied to centralized title and valuation services going forward, we expect EBITDA margins in the low teens. I’ll turn it back over to Matt now for any comments on some of our consolidated results and operations..

Thanks Jason. We are committed to improving our consolidated pretax margins and these actions will definitely support that objective. So now to summarize our consolidated finance results, both total and operating revenues increased 19% over second of 2014.

Pretax earnings for the second quarter of 2015 were $31 million, compared to $11.5 million for the second quarter of 2014. Net income attributable to Stewart for the second quarter 2015 was $17.1 million or $0.72 per diluted share, as compared to net income of $6.3 million or $0.27 per diluted share for the second quarter of 2014.

As I noted earlier, both years’ second quarters include a number of non-operating chargers, as well as litigation cost pertaining to legacy legal issues and title policy loss adjustments relating to prior policy years.

We’ve included in the earnings release a table that details the items which presents a normalized view of both quarters’ results of operations.

As you can see on that basis, our pretax earnings increased 92% on a 19% increase in revenues, further given the increase in non-tax amortization attributable to the acquisitions the table also presents a normalized view of EBITDA. On that measure adjusted EBITDA improved 76.9%.

So now I’ll turn it over to Allen for more detail on the financial results..

Thank you, Matt. As was mentioned a moment ago, we reported several charges during the quarter which were partially offset by a net title loss reserve release.

And while I’ll provide more detail as the underlying drivers of these items as I discuss business unit results, I want to summarize them here, provide some context to the quarters overall results.

We incurred $7.7 million of expense relating to the cost management program in CFPB readiness, of which $2.6 million was severance, and recorded in the employee cost, with remainder recorded is other operating expense. $6.8 million of these costs were recorded in the corporate segment.

We expect to incur cost in this problematic third quarter of this year, as we finalize execution of various project plans although now incurred will be less than in second quarter as no further material severance is expected.

We completed our semi-annual actuarial review of title policy loss reserves, because of favorable experience on non-large losses we lowered our estimate of total policy loss reserves and accordingly recorded a net $7.3 million reserve released in the quarter. A similar reserve release was recorded in second quarter 2014 as $6.5 million.

We also incurred $4.5 million of litigation cost relating to the final trial of a previously disclosed matter dating back to 2005. With that background I’ll turn to our business unit results. With respect our direct title operations; revenues increased 17% from the second quarter 2014.

Our direct revenues include the acquired title operations revenues of DataQuick and LandSafe, which we closed April 1 and June 1 respectively in the second quarter 2014.

Excluding these revenues, the increase would have been approximately 15%, driven by higher residential resale orders, increasing refinancing orders since acquisition date and growth in our commercial business.

Residential fee profile in the quarter was $1,894, up from $1,775 in the first quarter, as increased purchase transactions led to a more favorable mix of closed orders. U.S.-only commercial revenues increased to 19.7% to $36.9 million, compared to the second quarter 2014.

Total worldwide commercial revenues for the quarter were $41.4 million, an increase of 3.3% from the second quarter of 2014. For the second quarter of 2015, total international revenues were $28.4 million, down 13.5% from $32.8 million in the second quarter of 2014.

While there were slightly fewer international closings than in the prior year periods, the majority of the revenue decline was due to changing foreign currency exchange rates as a result of the strengthening U.S. dollar. Overall, our direct operations had a solid quarter from a revenue perspective.

Our offices reported strong revenue growth, our commercial business continues to show gains, and our international business remains solid when viewed on a local currency basis. Direct revenues constituted 49% of our total title revenues, up from 47% in the first quarter.

Our independent agency operations also saw strong growth with revenues increasing 19.7% over the second quarter of 2014. Our remittance rate of 18.6% was unchanged from the second quarter of 2014.

Title offices were $19.6 million in the second quarter of 2015, or 4% of title revenues, as compared to $18.2 million in the second quarter of 2014, or 4.4% of title revenues. As noted earlier, both second quarters of 2015 and 2014, include net reserve releases of $7.3 million and $6.5 million respectively.

Excluding those releases, the core title loss rate for the second quarters of 2015 and 2014 was 5.5% and 5.9% respectively. Remember that quarter-to-quarter fluctuations in the overall title loss ratio were not unusual due to any new large claims incurred, as well as adjustments to reserves for existing large claims or escrow losses.

Our total balance sheet policy loss reserves were $41.8 million at quarter end and remained above the auctorial midpoint of total estimated policy loss reserves.

With respect to operating expenses, employee cost for the second quarter including the acquisitions increased 13.1% from the second quarter of 2014 employee cost for the second quarter 2015 through $2.6 million of severance relating to the cost management program; excluding severance, employee costs increased by 11.6% from the second quarter 2014 as a result increased transactional activity driving the increase in operating revenues.

As a percentage of total operating revenues, employee costs in the second quarter 2015 improved 170 basis points from 34.2% to 32.5% compared to the prior year quarter. Other operating expenses increased 9.9% in the second quarter 2015 compared to the second quarter 2014.

During the quarter, we incurred other operating expenses associated with cost management program and CFPB readiness aggregating $5.1 million and a $4.5 million litigation charge is noted above. As a percentage of total operating revenues, other operating expenses were 18.6%, and 20.1% in the second quarter 2015 and 2014 respectively.

Depreciation and amortization expense was $7.3 million in the second quarter, an increase of $2.2 million compared to the second quarter 2014.

This increase is due to amortization expense on acquired intangibles in the mortgage services segment of $1.1 million and $1.1 million of amortization expenses relating to an underwriter production system placed into service July 1, 2014. Lastly, few comments on other matters.

Cash provided by operations was $32.4 million in the second quarter 2015 compared to $18.3 million for the same period in 2014, an improvement of 77%. The improvement is principally due to better results in our core operations, collection of receivables, a modest increase in payables and lower title loss payments.

During the first quarter we announced an increase in our dividends and $0.10 per share of paid annually to $1 per share. We paid our first $0.25 per share quarterly dividend in June. During the second quarter, we acquired 719,756 shares of our common stock of an aggregate purchase price of $26.4 million.

With respect to our existing the delinquent loan servicing business, we anticipate a charge relating to this restructuring totaling of $5 million to $7 million in the third and fourth quarter.

We will also conduct to reduce the potential goodwill and intangible asset impairment during the third quarter and any impairment charge will be recorded at the end. And with that, I will turn the call back over to the operator for questions..

[Operator Instructions] Thank you. Now we can take our first question from John Campbell with Stephens Inc. Please go ahead..

Hi, guys good morning, congrats on a great quarter..

Thanks, John..

Just want to clarify a few items just kind of related to the mortgage services segment. You guys said $120 million to $140 million run rate next year that’s almost segment basis and not let’s report on the P&L.

Is that right?.

That’s correct..

And then you said the low teens margin goal is that on EBIT or do you see EBITDA..

Is that EBITDA, John..

EBITDA, got it. And then by the end of this year, just understand this correctly. You’re going to have zero default exposure in that segment..

You mean zero revenues or zero – and then quite next question..

Just know, you’re basically going to I guess in online basis no revenues going to be tied to default exposure..

Well, I mean, we’ll retain the expertise to providing services to the delinquent loan margin – market that’s not to say we will eliminate our ability to provide services in that market going forward to the market come back..

And John we still have REO tittle, there are some other services there to provided, but again the bulk of where the historic revenues have come pre-acquisitions on the distressed component servicing piece is going away. But obviously there are still some REO and other title related services that we handle for in the bulk marketplace..

Got it. And so that the contract – the large contract, did you guys just renewed at a little bit lower terms. Is that going to be an annual type deal or is that part of the – what’s rolling off at the end of this year..

That’s part of what’s rolling off this year..

Got it, got it. Okay. That’s helpful. And then Allen, you said the 5.5% reserve ratio next to release this quarter.

Is that a good range to think about going forward?.

I think so, that’s really sort of what we deal with the core accrual rate, it’s right in the historic norms and you’re notwithstanding some of the reserved strengthening the end of the release as we had over the last several quarters that is sort of settled into that range..

Got it, and then good job on the progress on the $30 million cost savings you guys have outlined, but can you guys give us a little bit more color about what exactly being outsourced. And then if there is anything expects that you guys are looking at that might put you above that outline goal of $30 million..

Well, I think what we are doing initially it sort of some of the traditional back office services, whether it’s an accounting or IT or some of the other shared services, organizations that we have here, I mean certainly we won’t stop as we move forward in the 2016 looking for additional ways to remove cost out of the system.

The $30 million you remember as an increase from the $25 million and that was just the increase of – due to the last continuing to look for ways to probably streamline the cost structure and we didn’t stop.

So I’m not ready to really publish any sort of number at the moment just remember that we’ll continue to look at these opportunities going forward..

Great, nice work. Thanks guys..

And our next question comes from Ryan Byrnes with Janney. Please go ahead..

Good morning. Thanks guys. I just had a question; I am just trying to parse out what the impact currently is from the delinquent business in the mortgage services segment.

Is the current, I guess if you try to exclude that is the current – the remaining part of the mortgage services segment, is that currently running at low teens EBITDA margins or is there some expected improvement in 2015 in order to get those low teen EBITDA margins?.

No, we’re not quite there yet, Ryan. We’ve got a little more work to do before we can get there on some of the businesses behind – left behind or remaining for us.

And with respect to trying to parse out, the delinquent loan servicing business, just remember that in Q1 it was a contributor to earnings, in Q2, the less so, but it was really the outlook going forward that cause us to make that decision and that’s really sort of a relevance to us.

It’s not so much what it did in the first half of this year as what we expected to do in the back half as well as going forward..

Yes, Ryan, so we do have – I would say that this revenue related acquisitions that came on and while they’re integrated, there is further optimization of those operations from the acquired entities..

Okay, great, thanks. And then just quickly on the commercial business obviously another strong quarter there, your competitor put another strong quarter as well. Just wanted to again see if there were again one-time items or anything involved there, so again it was stronger that I think most of us were looking for..

Yes, I mean, obviously, commercial, it can be lumpy quarter-to-quarter and you have it – just for analyzed work competitors landed itself but nothing in our revenues that we look at this would say one significant transaction. So I think that was pretty steady for the quarter..

And then – okay, great. And then just within the – I’d realized international could be – international commercial could be lumpy, I think you guys have noticed some FX there too, but it’s kind of went down by over 50% there.

Is that just lumpiness there, again, we don’t have too much historical details on that segment, but just trying to figure out if anything is going out in there?.

Yes, it’s primarily just the FX impact, but there is some lumpiness in there, particularly as you’d look at a year-over-year basis. You know international commercial were really strong force in the first quarter. It could be subject to disclosing dates on transactions, had a really, really strong international quarter in 2014.

So you also have that global growth – growth, year-over-year growth consideration..

Yes, continued strong pipeline again the FX issue, it seem to be the dollar effect were in the explaining international this quarter?.

Okay, great. Thanks very much guys..

And we’ll take the next question from Kevin Kaczmarek with Zelman and Associates..

Hey, guys, good morning.

Do guys have a sense of what the EPS impact was on the delinquency business? So if you kind of excluded that from the quarter’s operations, how much that would have contributed to the EPS?.

Now we don’t – haven’t really broken it out that way. I mean like I said moment ago we’re truly blessed about what happened in Q1 or Q2 and more about the view out the windshield. The view in the rearview mirror, if you go back a few years is exceptionally good, that the market changed very rapidly and we felt like we needed to get ahead of it.

So we’ve really haven’t broken it out from a historic perspective..

Okay. On the residential purchase order growth, you know that mid-teen growth is like well above any metric I’ve seen from as our competitor or any other industries data. I guess where is the strength coming from? I assume that this isn’t some new warrants in the way the purchase orders are accounted or any sort of acquisition effect.

I mean, do you have a sense of where the strength is coming from?.

There was no one – geography that really stuck out to us as we looked at the quarter revenue growth, pardon me. We had solid revenue growth in pretty much all of our top 10, 15 states quarter-over-quarter because of that. So I can’t really pinpoint to a particular area that drove that sort of increase in orders..

It sounds like you guys are gaining share though within residential purchase..

We looked and we gained more of that probably more the focus is on, our direct offices, to which we are getting share in certainty markets that we’re focused on.

So again we’ll analyze the data after we get to the quarter and see how share may or may not have played out, but I think if we’ve discussed this last year we definitely moved from really looking at our core and our footprints and then implementing some growth strategies here in certain segments and so anticipated that we’re gaining share in the direct retail side of the house..

Okay.

And at this point did you guys have, I may have missed this before, but do you know what the statutory liquidity ratio was as of end of the second quarter?.

No, we haven’t completed that statutory balance sheet yet..

Okay. That’s all I had. Thanks, guys..

Thanks, Kevin..

Okay. We have a follow-up from John Campbell with Stephens..

Hey, guys, just one last quick question.

Out of the $12 million or so one-time cost, how much was related to retail [ph] business? Or was it just that $4.5 million due to the litigation?.

I think it was – I don’t have that in front of me. We have the 4.5 of clearly title segment and the severance was title segment or – I’m sorry, the severance was corporate segment. So it’s principally that litigation charge, John..

So you’re looking at probably closer to 16.5% margin in that business I guess on an adjusted basis..

That sounds about right, yes..

400 something debt year-over-year and that’s a good result. And so, last question, the – as a corporate segment, if high deduction was one timer you’re looking at about $31 million or so in corporate cost.

Is that a pretty good run rate going forward?.

Well, remember that the cost management program particularly the part relative to the outsourcing is going to implement that cost in Q3 and then fully based into the Q4 numbers. So I expect it to take down in Q3 and then that Q4 you should have a more normalized run rate..

Got it, all right, thanks guys..

[Operator Instructions] We’ll go next to Geoffrey Dunn with Dowling and Partners..

Thanks. Good morning. My first question was really a follow-up on John’s question just now about the phase out these kinds of one timer.

So when can we expect the severance the cost management adjustments to begun and get a real clean results on that basis?.

The severance that we occlude in the quarter really relates to the actions that we’re taking in June, in July and August basically right now. So there is really material – as further severance expected with respect to the cost management program going forward.

Now, I referred to earlier the $5 million to $7 million that we will incur over the back half of the year relative to this decision mortgage services; there is obviously a severance component to that, but will flow through the mortgage services segment..

And on the cost management that should be out of the numbers of 4Q?.

Correct..

Okay.

So borrowing the new delinquency business development, we should be looking at clean numbers fourth quarter?.

That’s the expectation, yes..

Okay. And then Matt I had asked you before about the – how your score card basically what we could judge you in the MS business. And I think your previous comment have said a mid-teen pre-tax margin, now you’re talking low-teen EBITDA margins.

So am I reading that correctly that on the same basis, what was the mid-teen pre-tax margin is now a – probably a low-double-digit maybe 10% pre-tax margin expectation of that business going forward?.

Well, yes, I think what to consider here, there is definitely – I am sorry, I didn’t hear the full question, but essentially you did have what again has been very strong business for us at very high margins.

And as Jason alluded to not only his – we have been declining, but very rapidly toward the end of the quarter and our expectations and that has changed our expectations. And so essentially what you are left with is a lot of acquisitions that we brought on over.

And again, the amortization of that related to the expenses while we’re talking about the EBITDA at this point, because again a lot of that existing revenue going forward despite to the acquisitions that came on board..

Okay, but in terms of the core business that is still there, which is basically acquisitions from last year. That is a core pre-tax margin of maybe kind of 11%..

Yes, I think so….

Yes, okay..

I think so. I think that’s kind of margin that we’ll drive it to as we get into 2016..

Okay, great, thank you..

And it appears we have no further questions at this time. So I’ll turn the floor back to Matt Morris for some closing remarks..

Thank you. And again, thanks everyone for joining us. The second quarter of 2015 was a productive and positive quarter for us. We saw solid revenue growth had generated improved margins on our title segment and the finalization of our cost management and value creation strategies.

The proactive decision involving our mortgage services operations will focus capital and resources on our business units that we believe have the strongest future for continued and stable growth and we appreciate your comments today. Thank you very much..

And this does conclude today’s teleconference. Please disconnect your lines at this time and have a wonderful day..