Fidelity National Financial (FNF) 27 Oct 182018 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by. And welcome to the FNF 2018 Third Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Dan Murphy. Please go ahead.

you. Thank joining call. for for XXXX third this conference earnings us you our afternoon quarter Thank

today our and Foley. the review This call of concluding the Bill expectations, me the regarding overview business, that future, strategies Mike open your We'll remarks statements facts, Joining and forward-looking our are finish questions risks then with historical intentions statements financial from including Nolan; Quirk; Statements number call some CEO, with begin conference finish are review that for CFO, highlights. President, and Bill. Randy Tony uncertainties. are a Randy We'll forward-looking Tony contain the brief not will of or Park; hopes, about a EVP, will may from involve and Bickett. statements. Chairman, Brent strategic Bill title Foley; a with

and This dated today and November to, is conference the factors in XXX-XXXX, phone of management's are to results in and available sections by is be available number and p.m. and yesterday webcast X. statements actual information will currently for X The based XXXXXX. statements assumptions release with at based of are statement and as be expectations through Forward-looking company's Because are factors made website on operating replay as fact, the Time the at other results the beginning and financial forward-looking statements and on management. beliefs to not well such via fnf.com future as materially whether differ Form press code of but replay a call those may uncertainties, and information, obligation filings available undertake statements The not SEC. subject Eastern which other are replay new otherwise. access events risk risks as future other or result limited risks through at our our XX-K forward-looking [XXX] any forward-looking the projected. also regarding information, to detailed update include, no are from will and statements, We to

turn to now call Foley. me over Chairman, our Bill the Let

Dan. you, Thank

solid Randy third The title quarter let and adjusted margin. our on title earnings the into I'll million business. details as pretax for more a we performance adjusted go was XX.X% title pretax of another title generated $XXX business

On capital we to X.X% allocation pay issued $XXX September a August million We dividend front, stock our of the cash XX-year $XX used in maturity used senior credit share. the of and million repay notes common to outstanding in value the and proceeds million $XXX the of the our notes. on convertible $XXX borrowing those of sell face of to majority facility million $XX the existing million $X.XX

$XXX to than FNF, dividends combined more company, in non-underwriter third up underwriter paid Additionally, were the and quarter. holding the in million

ended of that with Title cash. ready when to in cash the with the for available need received result we was amount Stewart sale the transaction earnout and in also potential that we'll proceeds of close. cash about stock holding at to cash the quarter from payments of nearly some It's million close portion precise Pacific transaction's that closing the $XX We Union $XXX company acquirer. of million the future The net

repurchase Additionally, today, XX,XXX the closes to we market have stock weakness after ending least and our the restart per day. with our shares earnings in blackout recent stock decided tomorrow the program at

acquisition Services regulatory March the through work to process the XX. that on we continue announced for We Stewart Information

New information the states. by York reviewed Second have FTC's submitted. and the engaged request being to currently Texas are of for filings been nearly to are in regulatory related FTC's Request all We The of documentation review those Form Responses states A with the transaction. the the HSR and

the the transaction Stewart by anticipate title acquisition first XXXX the believe that a still also or meaningful now over I'll for discuss closing We continue business. Canada Quirk turn to second We quarter Randy create and call our have to will U.K. the long-term for value been to approved shareholders. the and

Bill. continue X.X% increase of a our margin the you, And quarter title XXXX. basis year. business. Thank We XX revenue the commercial over generated a or title the the $XX million, increase residential million to total the XXXX, adjusted our continuing adjusted quarter pre-tax third our $XXX X% earnings The prior over as was pretax and of purchase XX.X%, point a main versus very of year quarter markets for drivers third be by in of third commercial commercial performance strong grew

by by the While residential prior per declined closed X% purchase by XX% orders that title year. offset X%, file orders in open per per was direct over purchase fee provided increase growth day an X.X%, day premiums residential this in and increased the

declined On fell and nearly the orders side, XX% orders refinance closed opened refinance XX%. by by refinance

For July September opened and X,XXX X,XXX X,XXX, the third averaged total orders quarter, at per day. day, X,XXX near August with at per

third quarter, X% a to we X% As per X purchased from points softening X.X of I orders by mentioned, the growth year. purchase moderate the the day opened orders saw for in the first increased of quarters

total X,XXX weeks by per the per over prior the X.X% For and purchase were declined X October, orders day period. year in opened opened day, first orders

Additionally, decreased the refinance orders year. per day XX% versus prior opened

headcount then making quarter volumes. have lower the enter we the to we the shorter, started to fourth As of seasonally first slower adjustments respond order and seasonal quarter XXXX,

quarter, XX, headcount our September in at positions we XXX field operations field our approximately did fewer in had by third we During employees XX, XXXX. operations At than the X%. XXX or reduce September

through move staff reductions anticipate pattern. the X further we if quarters, the follow we As volumes order seasonal next normal

driven increased the X% and is the increase in direct growth by revenue the prior by flat file, title from essentially with million refinance increase a somewhat a closed X% generated third This versus over X% in primarily closings per primarily closed revenue XX% year. orders. Commercial closed Total was agency in year. decline benefited of commercial the file, percentage the orders third revenue in XX% increase was an third in of offset of prior an XXXX. decrease XX% the fee the the X% XXXX of quarter by by in driven Direct quarter primarily the fee quarter by Our driven quarter the while opened XXXX, direct orders offset in the orders, X% by total an in X% higher over decrease commercial revenue. $XXX purchase of commercial versus the premiums per commercial business a increase

closed we Additionally, third third over quarter for XX% total the of of versus regularly so were commercial related purchase finish fee fourth the of of year, strong quarter The quarter of file XXXX in as forward a quarter to strongest in the by is operations XXXX. our XX% the per the increased XXXX. $X,XXX look orders XX%

me the now to to Let turn Tony over review the highlights. call Park financial

total revenue real $XXX the the We million you, expect on XXXX. earnings and revenue. million increase of generating with $X Thank third primarily $XX per in did quarter, and and diluted primarily over $X.XX of to revenue, estate we the technology quarter billion our title of sale the $X.X Adjusted Other Pacific generated technology million, Randy. million businesses revenue from $XXX Adjusted September Other nearly segment Corporate segment pretax $XXX a or or title beginning quarter. share. Corporate and in our were the in in X.X% billion estate Union, earnings consist contributing close segment fourth were third net real nearly and our On total we brokerage XX,

and increase due X% $XX of third securities to the the quarter expenses gains premiums. revenue of X% agency in increased segment realized Personnel billion of by premiums over new for operating XXXX, X%, costs third was X% mark-to-market and in Excluding versus title direct our in by revenue X%. equity portfolio, of line increase the a flat. quarter, generated preferred essentially treatment $X.X XXXX. Direct third quarter increased total with million by accounting investment Other stock the increased title in the the

that sales was million onetime and the a pretax warranty from prior higher includes excluded earnings million in that $X $X versus adjusted However, losses contingency home year. tax

those of expenses as over as adjusted quarter capital both interest our a the Interest fixed funds title the a earn see operating short-term increase the the $XX year. income exchange we business debt of over on escrow year million a securities. the to impact XX%. FNF well XXXX. in as on in, debt-to-total third $XX from margin, higher XX $XXX versus business Excluding was maturing the of the on basis of for just was items, X continued X% we All interest increased a XXXX prior improvement rates the generated proceeds outstanding point million ratio positive by title reinvestment pretax XX.X% prior million, of income other

million to allowed. due or XX% was quarter currently acquired for of million paid reserve $XX a from $X of third X% on claim quarter. claims provision third the million the in onetime is Our rate our $XX contingency lower million than tax reversal $XX $X the The The the above of carried actuary's reserve estimate. that for losses of NOLs central benefit were ultimately Florida a certain million were

from following the XXXX we million realized Additionally, adjustments the return. filing of tax various $X our benefit

to We fourth quarter. in XX% rate return to approximately the tax expect the

million minimum regulatory of billion we September have revenue September an cash more $X.X XX. investments, are all From $XXX and billion company Finally, for our in There's million $XXX than primarily statutory total XX. cash $XX in million in warranty of or investments investment million at which have our requirements. regulated regulated as and restricted million we cash of $XXX and in standpoint, regulated more by billion and $XXX method other From at a and totaled nearly cash deferred perspective, in trust equity in unregulated $X.X portfolio in than other and $X.X capital subsidiaries $X.X reserves, investments. ServiceLink investments, home working unregulated a at secured deposits billion of

operator the to to for Let call questions. back me now our any turn allow

open. with Thank first of go your George question from line George Bose the Our ahead. line Please KBW. comes is you. [Operator Mr. Instructions]

My is had title Last Sorry, I the dividend, quarter, you first on. the mute on that million. income. guys investment $X plant had question

quarter? this et unusual anything it just Or there strength was of So increasing going up, the cetera? rates was

our here title I which gross up of relates is the mean, is income sheet unrelated the there Yes, income, a in compensation one balance statement. and that plan, Bose, plant -- of it but also to item to deferred

So because portfolio But any it's a realized funded. income. our matter it's for deferred our our through not in asset fully It's investment runs that liability or gets -- performance comp. that

income. grossed investment was as million And we $X of I So up. it mentioned, again, have

we had personnel So $X costs. also million of

to no earn a it show pretax And model. flow We dollars number. stronger QX and to million on But is couple is really million it $XXX $XX going the asset than to I earnings onetime pure. and is more but give this on think, a portfolio relative you It's can't up that, probably million we interest through in cash as pretty hard I asset, income IPEX periodically. short-term our that, So liability a books, item. little because Other on a a the it's rates. item. and of income that'll that -- performance line impact, had as rising

Okay, from Pacific revenue on helpful. sale, And us can and contribution what earnings that's was remind just Thanks. the Pacific actually Union then you the Union?

couple a mean, I Sure. different pieces.

all share $XX of that. $XX If at look have pretax. you brokerage in million with was other $X adjusted from They're of million, probably about of brokerage, lion's Pacific about million Union revenue. we revenue the

of out earnout of $XX So we the gain adjusted Pacific Union. we've we as to a to but a earnings, $XX an of we with cash the carved which gain mentioned, our call $XX the million. future. more it -- Bill impact did million, potential received And about million million in $XX in with the receive And realized about realize P&L, of

don't Okay, October? you great. Again, can for But us this. I just you if know give one the more. order trends said

trends XX, is X,XXX X and on run in October order day. But October orders X,XXX orders got a Randy. per we that XX, we October and last up purchase per of opened the refinance on per X,XXX all day; a October on day; Actually, also. little lift for on -- bit week. this orders weeks Yes, the The through orders X, orders I'll

somewhat aspect of the of side, purchase seasonal year down and into been of interest has the the rates. which an coming influence with because stepping On the

X,XXX in purchase side the XX, X, October X,XXX at day. we X,XXX October per day; XX, we On were per October, October were at day; per and

little held Bose starting Again, And really last the And off think head, the is we of rates softening. the are a the weeks. Okay. culprit. downturn. - with that interest it the of running actually, of do just the early Q top see your year-over-year, you somewhat little couple So over we're know purchase? seasonal how a bit We just George

up we're about... points. Mike, X about up We're

Yes.

side. open on It's X% little the a year-over-year over purchase

Thanks great. lot. a Okay,

you. Thank

We have a Barclays. question from Mark Please go ahead. with DeVries

Was on buybacks Should resumption pleased expect Stewart helpful. Any buybacks. of to of Increase? to we kind same? remain deals? the was the some returns closing capital to think I hear the cadence kind get about we deal. M&A more of the color post the should how color we hoping of expect Should about the be of smaller will the

Yes.

on and I after quarter amount think company cash-short payments, And allow And Title to probably you of be have that with pay level be fair going us to have of of Fidelity we're first of to Stewart -- what really us to really the into the we're -- repurchases. first I going stock synergies cognizant a kind integrating coming months be that is reevaluate going we our are and out us, going that's the that Stewart what quarter, of have after X for over in that of be that to and to it. with least balance we the of that because too quarter, the that is the cash That there transaction. a We bonus now, want in price issue we're my about always shares XX the a will share -- which mean, dividend. repurchase And when system, have we Stewart really -- goal focus. or to as last over -- mean, generated we of the for the to enable the would time shares Title. will be the going right close to bank have shape the equivalent cash the the that many just check obviously or sure we've the count Stewart we of stock. the want make over that at comes the -- portion so, the and to then and in get months we following transaction to close cash I XX down, we is number X outstanding. the good -- to write purchase we're to months that next

we're payments of hope generation stock So and be into dividend cash quarter the our or the answered capability year. having repurchase, of that we really the the once the we X is going get normally cash allocation forward flow-generating and to kind that capital second -- -- going I quarters have start last the question.

helpful. very that's No, Yes.

if seeing the question. And well from comment you more one from Just what the since the deal? at franchise to Was value all hoping deal you're for are on to announced. what Stewart's -- kind of can was How extract ability up? that's implications that holding

really responded our way the Stewart hall various responded, meetings our has field with managers. and individual and actually with to pleased the town has We're meetings

actually If noticed, improved Stewart revenue you quarter the margins. their and their in held third

to going that. get bump we're So a from

for lost funds and to we're with, responded dysfunctional, some Stewart of, staff the little they so, were wanted, their board they was the And the they pleased acquisition. It's way like the their a kind had have really had bit Stewart few hedge that a corporate were, way sell wanted to positions. with employees and years the

be. company So used it it that family didn't become the to

So market we're pleased think They've and XX% particularly a really it, we and side. share, hold agency Stewart. expand share most on got of with the that can market we

go Please of Piper have do line Instructions] from question We Jaffray. ahead. Deleeuw with Jason the [Operator a

third or I'm helping quarter. the just in was is that just wondering quarter for and And Or not? still what lapped that remind the the us now? order M&A count impact we fourth us, the have

we purchase count into of And Guaranty of a look have only significant comparison, last their real count We closed included a Hawaii. and on purchase you only But year. of XX deal September side only September. get when last August, because included last the transaction, when The Title title that you side Randy. is was the we at the an October came running day. XX, they're order in transactions year the acquisition this apples-to-apples into the really over Yes,

the about would maybe impact much. to and the So numbers think, there other year There's, maybe We acquisitions down X.X% impact that no were that is acquisition. through insignificant. on really the we're really quarter-over-quarter impact

Stewart we to slow We negotiating transactions/acquisitions. felt the really agency we the like that individual transaction Yes. after started on needed down

particularly a we become we the in family, we part anything because Fidelity didn't working we buy really And engaging other have companies So the with Stewart. have while on the didn't on after distraction agencies want and put hold been having the, fold, were into these Guaranty Stewart. that into come Title negotiations to of come other of

in So much there's overlap. be of to not forward going going terms

some like, slowing margins home expanded we've and additional the then this on quarter, sounds even slowing, some had October. purchase it for And

we higher pretty solid. got the benefits and you how commercial going but So rates think, of can short-term still

I rationalization we margins So expect still there's can sounds some mean, expense since it come? like to especially to expand,

you Well, into expense part management, done with the we that and many labor is into a metrics. go big back that back quarter I'll go of like And to tell so fourth quarter our the we times, we've the expense. fourth

positions, margins in we different We've and XX eliminate done October the We're bit XXX is. But, the little what with And people work the out. So through different going go to the a fourth quarter. on had fourth way probably numbers, through mix country into ballpark, as continue play we as of weeks that we're so is quarter. we based some to parts X protect in we've go the target set another got so QX. to

XX%. We strong fourth optimistic Commercial in XX.X% finish commercial As did world. fourth last a quarter. you quarter the know, is We're target about our always strong. is

our like again, through, I like and done we we pretty and through. said, seasonal have this, we much have times. weather many to we this that push metrics on so And our rely just fundamentals come So just issue

the what's in then And remind there? just estate And real now. tech us the strategy what's the for growth businesses one, right last all Okay.

teams Well, is Inc., we lead-generating have of companies, realtors. Commissions, a for elite which X platform

Geeks, We which agents. platform is individual for lead-generating a elite have Real

a terms We those. digital brokers. Combined, out record we're I have around management be estate SoftPro, companies. transaction have for had growth into SkySlope, and X our revenue that. XX% received, storage companies that the sales believe integrating of is single up lead as country. has reps puts transaction the X And the title of of We'll strategy top in on real year-over-year. good at qualified us And an X some with to close, improve and our and really know, estate ultimately, smartVIEW, We've relationship and escrow XX% holding management different with solution keep platform have a our for level in all these real system; you referring system; ultimate brokers. able to business agents those to margin. it well the and we been They've with very at kind a our They're

integration be So we're to growth. keep be to significant It's it's going sustained to overnight, going growth, still sustainable growing. and going but it's There's not underway. and

you. Thank

Hughes We question Mark SunTrust. of from a have

wanted make clear you. the the X.X%? daily year-over-year change remember order through on Good sure was just Thank I was correctly, down count, I afternoon. If to October. that I

just October, over Correct. October, year-to-date. October In not

the Right. open And side, on was the up that year-to-date? X% then

purchase. That was year-to-date on

much. Thank Got very you. Okay. All right. you

Campbell you. Thank Please from Instructions] John have with go ahead. question Stephens, Inc. [Operator We a

including Hey what's But I morning. caught the consideration, Back initial payout. possible the guys, Pacific total good the cash contingents? to union,

Tony. it's John,

another million $XX intercompany paydown. an $XX million had we well as of proceeds from debt sale in as So the

earnout total we million of received And $XX which is the in we booked So actually XX% another million. potential. then $X.X receivable,

that. $XX potential on booked million. as million is $X.X So what But conservative the another actually conservatively, about total our is expectation we

you Okay, the ownership for me and what again percent-wise? guys remind was stake

XX%.

drove good of decision? why Okay. And What color now? that a kind just any sell that curious, offer? Was Or there? then it just

Well, what at relationships Compass. he developed internally I have and pretax at we manager who Pacific with We booking have little getting ready And Union. we the, out we the that resources good to company, were Union, And had, revenue process after-tax really of very frankly, was still of the move we this earnings a think on. had Pacific with a run to sale or and lot transaction. didn't

to the a reps, company. very escrow our still And get just net little we So really good have up initially was our title gross which invested. relationships. kind the kind is officers We'll referral of other reason earnings of revenue with a business, situation it back

our thought So -- our we statement sheet. just balance distorted balance it income

That maybe as synergy makes you're question. there there's a maybe looking customer higher-level estate channels a important the you And case? of and that's getting other just at you bigger guys, lots kind for there. sense. still the feel just little a real I of was bit acquisition is channel Do channel Or past that in? Bill, other know the ways, in

We we bring still Stewart the have We bit to Title. lot a we Title that get revenue to that our make a We're want by can ideas. we in, base, when sure of Stewart different little and maintain up margin. distracted margins their

that's So our focus. really

go terms some services And this ideas. that's really integrated a real own our we transaction rather underway, to in so consumer document process. back. become that's front But of customers, sell estate We've platform not house. our day, long them. end-to-end I'd the consumer-driven other have from and got with our end out company. It's prep fully to build We other and dealing we at going want to products into of buys of the company it's be being when someone our We a escrow many closing developed. out a

vision. a visions have big we So big require big work. But

what we're that's So, doing.

Absolutely.

Okay. Thanks, guys.

Aron Zelman go a Please question from have with We ahead. Mackenzie Associates. &

quick for corporate on run income, just one for rate clarify should wanted pretax be that the go-forward the Pacific a segment, me. what Just for the to I Union.

pretax current adjusted at with pretty consistent in million. QX $XX in million quarter, $XX had We loss Tony. is This sure. Yes, the

down was an look loss. in adjust -- you actually it prior at $XX ops, elimination disc a year and the If the for that's million

there. million So we're $X about by improved

expense makes maybe the estate $XX million don't we is the $XX rate, then technology, I or good $X than it is positive corporate think and good real million, of that probably $XX a for that. I I think $X million anywhere is little $XX call $X probably And million you. $XX which loss even But then to have lower run Interest rate balance. know, million million from, or a that. run million a up million is to

But Okay, average per the color how that terms And earlier. strong if driving the apologies of commercial, it fee on is file, we're perfect. then any what's sustainable I in And missed that that? growth seeing?

saw interesting. yes. we and local In Well, It's both But we growth. quarter, very them, the strong obviously, the had, the national side.

So national it a of broad wasn't was from really just lumpiness couple large based. very deals. It

I weakest quarter-over-quarter, to The had other thing average year. point was you're per quarter fairly the year. a out, of That last the would referring if the national we file fee soft

comp a that we're where the X%. more. numbers, I growth like at bit we'd XX% see going So up out really quarter-over-quarter I Yes, more the would look But know stands don't little yearly forward.

know. to Good Thank Okay. you.

Thank you.

We this have questions time. Please no at continue. further

Thank you.

business. for was performance another third title our quarter solid The

will meaningful the the also Title working for value through this with shareholders. for for create process Thanks We transaction us being today. regulatory acquisition continue long-term Stewart believe and our

conference today. using you participation Thank Executive your you. for conclude our Thank does That and AT&T Teleconference. for for

now may disconnect. You