Fidelity National Financial (FNF) 14 Feb 192018 Q4 Earnings call transcript

Ladies and gentlemen, thank you for standing by. Welcome to the FNF 2018 Fourth Quarter Earnings Call. At this time, all participant lines are in a listen-only mode. Later, there will be an opportunity for your questions. Instructions will be given at that time.

conference being today's reminder, a call recorded. is As the to Dan now like over turn to I'd Murphy. conference go Please ahead.

Thank you. quarter XXXX And our earnings for thank conference you for call. joining us fourth

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

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

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

Thank you, to finish adjusted margin. XX.X% business, our a a we fourth year a title pre-tax of quarter and was generated The Dan. solid $XXX title strong adjusted title earnings as million pre-tax for

the For let XX.X%. an the and we of full adjusted XXXX, margin adjusted into nearly pre-tax year Randy earnings $X.X I'll title generated title pre-tax business. details on go of more billion,

York. through and that the Stewart recent January regulatory the FTC's Also licensed Company, in for written is process Services insurance of shutdown. HSR Second New FTC to of XXXX, no disapproval of to Insurance State New the We its during work title Financial Title the XX, acquire regulatory government related review work informed review New related Department notice State us Information Unfortunately, occurred underwriter, continue application the in the of long acquisition, month Stewart York of control domiciled the the only the of that on Services York to Request a regulatory provided roughly FNF's transaction. are to engaged

concerns Services, with the evaluating, of and State courses the -- are will letter. several have we a better include York to which understand Financial of may that Department to which We action respond -- discussion Department New these

alternatives available. attractive other have also We

shareholders. create believe will continue Stewart the our value acquisition meaningful We for to long-term

December cash a -- used On the common million pay capital allocation $X.XX our of front, to share. $XX dividend our stock of we December

We fourth also of for XXX,XXX the repurchased million shares $XX stock during approximately quarter.

holding year the with company company was net the cash. to to fourth ended dividends paid now in quarter. Randy business. we in up million level result to $XXX discuss in underwriter Additionally, the The available title call non-underwriter combined over were more I'll the and the FNF holding XXX turn than million

operations X% a $XXX year our million and versus XXX a at ended or fewer earnings during We basis We in positions margins of title adjusted were versus staffing closed purchase in X% pre-tax purchase million, a by the our pre-tax market, by were the end field in the of to declined We $XX the in XXXX. fourth experience orders And our adjusted generated basis. decline day or the fourth XX that Bill. employees the title X% residential quarter, in prior point than the operations per X,XXX prior X% X% you, quarter. XXXX XX.X%, did or some slowdown purchase approximately the on Thank field of reduced year. Response approximately fourth decrease quarter with market softness from as XXXX.

As purchase restart residential we the in of possibilities and we strength appreciation, saw the are slower the a backdrop optimistic for enter XXXX. we residential economy, rates, the strong stable will market supply, mortgage much that the provide of XXXX, price home for relatively potentially that increased of

XX% XXXX. were XX% a and fourth daily the X,XXX slower October fourth down Purchase X,XXX, versus on quarter, per respectively the November of day, basis, a X,XXX quarter X,XXX averaged X% declined and orders refinance For and day. total orders and opened respectively December nearly orders at at at X% per and by closed open basis, opened and closed with daily a seasonally on

of orders Purchased per the the day versus per at last declined per weeks XXXX. by X,XXX For -- the January below orders month weeks, day month orders of day, two were plus orders of open much January at X% the with open per in open X,XXX that day. two total X,XXX stronger first total nearly

year. decreased open orders refinance versus per the Our XX% prior day

primarily fourth declined quarter by decline closed commercial increase decline per orders, a of X% versus XX% This company increase XXXX, and closings purchase fee the agency in in year. of a in the quarter X% from closed a closed per X% the X% and total fourth business the year, Our a by in fourth primarily less in total title quarter XX% Direct in orders, growth of XXXX. file, while primarily revenue. record, over the prior versus prior increase benefited prior by Commercial XX% fee X% quarterly generated closed by increase being driven decrease a commercial orders the open direct premiums to a revenue direct than fourth in revenue declined a the and XX% increase was the versus in the $XXX related in and X% the the driven XX% Total quarter orders million XX% XXXX, driven of orders commercial of the commercial by a offset versus year. the XX% purchased, in was revenue file. by refinanced

year For was revenue the total full XXXX, billion. $X.X record commercial a

operations commercial expect strong in We XXXX. performance another from our

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

$XX $XXX with Thank $X.XX included the share. in fourth generating of the you, in Randy. We which treatment per stock due nearly losses in title segment. accounting all equity of in million revenue $XX securities our were Adjusted preferred million mark-to-market generated diluted to but our quarter, $XXX the or and billion were Net corporate realized the net segment portfolio. million, revenue earnings $X.X in investment million total earnings

we the pre-tax business to earn and million from FNF for the exchange of the million increase hold our as on total exchange million, funds outstanding XX%. title proceeds from at X% quarter of securities we the debt securities by over due capital premiums remained million segment our fourth preferred title by the a X% ratio $XXX to debt-to-total All income fourth the nearly the interest declined revenue short-term quarter, the XXXX Direct quarter short-term decrease prior and the title and we and X%. mark-to-market rates cash $XX $X.X interest reinvestment in, X% of increased XX.X% impact billion of XXXX, portfolio, basis in fourth of by investments. a XX of investment revenue the margin, that for fourth in maturing stock versus of the of year. generated fell point other losses realized prior the accounting from a Interest declined costs XXXX. of was quarter operating fixed continue adjusted X% nearly generated see $XXX Excluding XXXX. agency treatment equity income higher positive $XX decrease year, in versus and business, a client Personnel on versus by expenses a

actuary million of $XX The central rate throughout carried of X.X% rate. or rate the above paid than a of quarter we XX% million our and believe continue is in $XX XXXX. The of provision for a estimate, expect million tax losses currently $X premiums to X% claims tax million year, approximately $XX moving of provision we a bit always the is fourth the were claims is and currently Our that higher The reserve quarter. appropriate the target tax XX%. for fourth title was rate approximately an for

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

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

[Operator Instructions].

the from is ahead. DeVries from of question Please first Our go line Mark Barclays.

Yes, thanks.

issues their could if New what has Just And you the what satisfy raised look the DFS address, might you them? to can how talk could through and you of kind address paths that you discuss have? If forward you York concerns? are

a certainly State reason have approval. go to York. approval which stop the a Title, And consumer. them her the of of and business who that of But New insurance transaction but insurance that's them day into, in why the of of really right in does because declination. Well, to good which transaction, last that's frankly. through it Department's an and the no different following What the of we're Insurance doesn't sit looking been has for business not get Title a on in stock not title only we is state York blocked we also about could lack down do, for can We of single signed paths, different prefer where New common keep alternatives, with not alternatives. to our I'd still include New to and -- focus for talk is reapply by can the -- evaluating number the call commissioner we is need office, but get it On good now. lady think We this FTC need and Stewart show that a FNF, to are we transaction, York. the state, the is It's our transfer only underwriter Stewart we friend

not totally about with New you. concerned be honest to York, So we're

you could the timing Okay. And on any guidance deal? closing the can us mean ultimate for this of of provide what

to are right now our with very close situation finalizing We the FTC.

this And October you that to Well of is money holding growing. really company Stewart any borrow $XXX Title. has at interesting and have have year. don't know buy We hand we this developed, point, on as is at our fact now the to one million cash until

out transaction the staff to are Stewart and Roger holding together. Title we're meetings, anxious Stewart and townhall for very So holding together, conclude. this doing Title staff are Randy The Mike

we've for we a the very money encouraged that the to Title. the the doing to modest reaction borrow back engage Stewart repurchase really have the employee the because and can trying our over repurchase for year a stock any to won't of we -- and have frankly and gain am but dividend sure you in shares cash the noticed very takes, last increase actually for more we Title much we're we on holding with dividend, did been about year, longer program. it I and hand Stewart then in So money transaction,

every good some always of So news is every of situation kind -- negative kind news.

frankly I'm so And discouraged. not

of just what done Okay, kind as great. that some first late of your XXXX? finally, from the the in and through margin And year, we think headcount margin help when the then initiatives can were expense half kind of us mean could into of you reductions for look the impact

downturn this third Sure, in this side is purchase quarter. Randy. saw really coming We on the the

As you quarter. about we in XXX the know, eliminated positions third

December, the XXX As continued we November, in we XXX quarter, went positions; into positions. in fourth positions. XXX In eliminated October, we

quarter. fourth down were So continued it way through XXX we positions. the we the then And all and in worked January, we over

you up last in include toward XXX And We're QX, So a down pushing if year-over-year. it's XXX. four X,XXX that's reductions months. about the

So because will came for. it really the been levels. opening back productivity quarter, we the the been in impact came has such quarter, constant September-October numbers looking on second the X,XXX this per in initiative. day, into roll first at at have side, we've The But the a January in orders that up

a nice had that we've So regard. rebound in

will know margin it impact. we a have So

that calculated strong a haven't first will the But to We yet. looking for probably that second capture and we're the of quarter quarter. most finish in

line Bose go Please George ahead. of Next KBW. we'll go with to the

guys, about line. segment on the title ask McJoynt want Hey to Tommy for this is I Bose. escrow

there premium. out that? Is weaker or given So sort than we anything we of of a of read relationship expected, can rate declining to run any you its get it across seems in call can from the there kind like kind it bit came

Yes, this Tony. is

title is terms out back one I'd decline, can of be line off that in way might so don't pretty premiums, of Here And look commercial total what the falloff. premiums The title residential strong X% the commercial on side. the which see X% they that item, with escrow residential. to so you purchase off, and the it line kind and consistent skew the at is were to and a you say, to market X% what in or fall combine we see best the item into fall sort then purchase saw of get you

than certain then -- And just that it out in really unique that you've particularly strength I quarter, anything understand but commercial there to big drive can quarter? lumpy was is like this more deals call what thanks. seen? Okay, big this can swings,

XX%. quarter, revenue, was This I strong commercial is which our mean, also by up very national was Mike. know up local it that I was But commercial don't a unique. it driven was XX%.

areas. segments, bit multifamily, that more had in both thing So space. There in were the multiple and really strengths different bit across only little we a strong improvement probably office, transactions industrial, was multi-site the is

So that up the help a segment drive national bit. did

back on one, then heading the nice where we moved And just acceleration in like half a as comment went, got we January. of into started Okay. seems those last kind as of you trends Any February?

Well, sure.

orders week opening weeks of I we up up per two into weeks said earlier, -- January, first the were The per last of February. really of were first as X,XXX two opening -- weeks January, that's two day, orders X,XXX in holding day. The into going one we and -- or

expect sort So there. from be the run grow we to to that of rate and

coming XXXX, lower point low are of coming just bit than we we a actually trajectory the of at in a December of out quickly the in -- did more of is level. Our end XXXX, out

XXXX, So the here season. in that spring you we is February we little more the have without than particularly more will believe traditional and business. we've a seen buying last January March bit get the that a continue consistent We're really bit into but months. a month, January-February little and of -- couple when huge the for traditional But years, this a refinance looks in the of what do benefit

Next Jason to go Deleeuw Jaffray. Piper the we go of ahead. line with Please

December. quarter-over-quarter, Yes, a and step-up thanks million, million it the $X question. the on another there segment in in title investment was taking up income, hike there Fed the for to rate $XX Wondering was was

full expect and for So any year in in further think the and of can investment as we we interest terms income magnitude, XXXX? thinking net of help kind gains in the

is Tony. this Jason, Sure,

we side, fourth and the kind benefit and quarter, of some XXXX dollars increases, , that fixed in million. generally on QX. expect I in short-term reinvestment maturities entire income in as right, we on Overall, interest we're the million would get of well plant million gradual a couple the some of as had $XX dividends of of cash increases Certainly ownerships portfolio. $X Fed probably title about the QX and You're holding. exchange our have the helped

to quarter. in $XX million maybe $XX closer would expect that drop to the quarter fourth and I and the then in million third to So back $XX million, down be

So $XX there a XXXX. increase run should in million to it, nice close rate strong call of, be

sure any of that have Is the have that for already. think any have I'm give with extent XX conversations Great, the wondering, there color And that. deal you the are just can any not you us you states to approved respond. can in -- approved? thank approved, communications But I then, there there like you states and any that I'm has key any or states been that

had small to chance intend right and a were retrenched to there, and it's the the the we not states, progress largest we're this one employees straightforward. and the is Texas -- the larger we making of really -- now, is are acquisition. Well the competitor, an anti-competitive more together. transaction. is good affiliate lot has where with for and the of many years, good In the where company But that The several explain process are, And prospects. most FTC. with York make the Stewart two meetings, New acquisition putting really New people the companies in progress. did of reason in company making the to Stewart working while growth states have asked Texas, This making Really have with filed over meetings, really is Title, the York, those we country the and fairly Stewart our progress. process a a of an last we and communicated applications and so aren't to we and approval of in course We're

knew knew the on time on lost didn't ask, a work, I still a it's and help -- in top going we're the the just it has looking at, tedious. We back time. we're take get We're have the of forward. long time. it and long it is a put -- it and of shutdown, then We us. they file they taken there and -- -- frustrated the up. and they just we're top to mentioned, are then then take not they little to government have the have as would to to FTC has we files But it But So a giving

of Next the John ahead. Stephens. Please line to go Campbell we'll go with

review there. in on the you collar guys, deal obviously just the out mean, I Hey one New York. guys price put more have

to million guessing. potential but of was loss think a million $XX $XXX I rev it I'm

One guess could I you is There of the in in scenario past that New guys simply you there. a take is stay able be some divest assets mean York, I range? worst-case to would

Yes, rate we Brent, revenue? recovery I we recover don't recover -- XXX%. on think don't our what's

is no $XX divested to million million there price. the million, It's share, revenues. purchase rata $X.XX $XX First a reduction $XXX reduction. to the maximum pro Between

not are this have the then to and we that various protection. idea. So lot going we have to we go is That's I'd state rather down. really because one downside not concerned. And just a one thing of going overly have, paths slow some not is certainly, isn't happen. why the them divestment we into It

looking share? But don't it much and too pry direct it. can want combination Is to talk regulators at more this. know guys don't if agency? Got are you even directing a to of the I I

at But we competitor strong how of The more concern a actually really share interested this -- business. ours. was direct the in in them, is the FTC of share is not isn't business. competitors viable at. a Title Stewart ensure to not New they're The commercial commercial the commercial not We're share that business it's and direct is sure time. looking and agency would what York

reinsure they the the of On risks. parties most transactions, through third large commercial

an there process. explanation again, is So

-- is a and very and is a trying small are our it way We through patient that's industry it specialized, tedious process, and be work process. we're the just very just to

need heart is as up? we size maybe that that a of support the fixed the season, to for up spring staff selling detail. that the And the Okay, you do way to selling there from season, reduction field of secondly, me, in cost back thanks then on or get X% savings? staff, Last back one

our in A productivity lot our of metrics. staffing decisions revolve around with numbers our

we'll that's really not to into line the best the up likely as spring increase, staffing significant When volume we up when we'll are We we be we see get again. time, start hold staffing can. when

question. So I that don't know if answers your

dollars savings. couple John a maybe rate But month a run in million

as through that's the at did, expect our stay would if way But kind course we work -- we these in which of if of So, because realize. we don't, you'd headcount savings we dynamics the we levels, of business.

just line right moment go some moment one please. the Apologize. technical SunTrust. difficulties Gentlemen, the to we here. moment of go -- ahead. One Mark Next here. line apologize Hughes onto having here. for I'm move All One we delay. I with Please of

will the be wait. This question Okay. worth

Hi Mark.

Did fee maybe terms file, you a deceleration progressing Or sense us front? purchase just not. give on residential how see or that of some of The you're in you refi? sense per purchase can any versus in

still deceleration on in over bit running see bit an a same actually mentioned we the opening quarter impact on at the the little The very first a of -- and XX% settling months, even -- been the the is purchase range was mentioned there of a does did where had rates purchase, we and per target little on I seven earlier, XX% about that. moving by down as we're bit. side refinance has of think see a with Well, in course, I to or It uptick $X,XXX. we side, six a fee it's the consistent it and QX had last interest file, that ranges mix the

$X,XXX which includes Yes total, everything.

sort about from size But did that you we that be well deal If to off quarter were, look just what orders at we ahead QX, bit could the come looks of XXXX. in the just in residential, $X,XXX, fourth $X,XXX where about little thing. a the like did of of

or New they can have in states if their other the The the New overruled York they give the do absolute Department, of in anyway? subsidiary, this, York, approval, be the on on excuse Title New ignorance York my FTC say

right Stewart purchase. Company Stock underwriter. absolute York No, the or approve state Insurance they disapprove single New transfer the have of a Title of It's to the to a

So relevant. it's states, the and one And the the of states York. only New New is York for rest rest -- of it's the state not

right. All

go we line Please Mackenzie to Next Zelman. ahead. move the of Aron with

afternoon. good Thanks,

the like agency it’s it First to trends, the looks you’ve question continued underperform direct on on revenue. seen

Just curious that call you if out? there's specifically, anything that driving can

Hi Mackenzie the fact would that I it's much been Mike. relates business in say the steady, The has coming very performance difference to primarily commercial agency. agency revenue stable. very-very we don't have as through

look fourth commercial was you that when quarter, was at flat. the agency The essentially directs. was the inside up X%, So direct difference revenue

the Okay, Curious out or the going some there to benefit that's trends could closing? continued on direct there's on the direct quantify helpful. your And during anything purchase you geographically then outperform if you purchase peers any of call if can on quarter. M&A

volume. there's No, of the in really mix been the the pretty no and We've direction volume with the M&A influence. consistent

doesn't there's unusual that there. So play nothing

geography by out? would call that anything And you

too But off probably anything little to that's Geographically, It's roll and really into specific the across the don't terms quarter-over-quarter the California, is back end the of has as in the bit still board; of QX out performance. the Midwest we East of there. see West, fallen strong, going a through be the and purchase get rest I than more year.

And is from go Compass our Chris Point. Gamaitoni line ahead. from of question next the Please

Thanks for taking question. my

expense quarter? Was severance only trying walk large X%. delta the kind I'm year-over-year, of personnel a there to down With the cost through down influence headcount [indiscernible] X% in with the the

severance No costs.

We that trended. had insurance some health have have increases

fourth, probably are up year-over-year the we it's to we think the with businesses health $X about well. million I saw, to as I third But fourth quarter insurance. fourth, think I from and $X consistent think from think in other quarter I million increase

thing I one that of that's see anything. kind So beyond didn't I unusual. that, that's noticed But

next Stewart, you're That's over on parent the you potential to to have complete borrow where you at generation for months? any the outlook mentioned almost the And helpful. do the very need you don't cash XX to point

Yes.

kind and company balance at the a on probably $XXX in million So the our upstream is is end that we're some some that insurance close of sheet $X year, of locked and of total dividend estimated, billion of because billion, to would subsidiaries, or are common of in upstream it call million XXXX. some million. and cash $XXX Uses of of that But $XXX interest know our $X that. expense, obviously so so, we in

$XXX into uses. account you So buybacks Title other Stewart and a kind and take of net million before

plan does is assuming close, Stewart it out And count? on take buybacks would -- that that try share once the to -- you reduce shares

Absolutely.

will have We will we -- have cash. the

business, business I see payer, Stewart repurchase think of operator a very Title, stock will after efficient us as the the a and a you dividend largest title in world.

And next, Geoffrey ahead. to with we go a Dowling go Please Partners. Dunn & question from

Thanks.

First did Randy I first apologize, back? X,XXX in hear your commentary X,XXX January, about I half,

Correct.

on comment any have February? you did early And

same February at was rolling about half the as the back of January.

is between dividend flow, think you breakdown unregulated? Okay. regulated the And then, billion and what Tony, with that rough dollar do respect to

it's a on little so. a a entities $XXX regulated that little or to more stronger regulated -- the we million bit flowed tax because the unusual for It's through close XX-XX. side, though, like had benefit that Typically

of the States in Title Randy, and buying acquisition, coming then guess, And thoughts do any bigger Bill one on players? start-up tech a the have Okay. you I or regional

Geoff, Mike. it's actually

think the indicative in the probably way fact footprint trying they that that's they've And in that idea work industry. I might I start-up to of they recognized operation, better in the and traditional industry. a of not think terms bought the build that title a their it's to see so go, title tech actually well really

you work? doesn't tech the leverage existing the to need platform into? idea to technology that try Meaning an Or

title successful I think industry. it's might recognition be that in the tech the idea not

be and in country. what's and lacking in people to idea. and relationships loan realtors think Geoff, communities order to originators, -- do you their with you to As you I tech And that lacks have and need the what successful, got know, across to that's in build developers, attorneys

are further there no questions. And Instructions]. [Operator

You may continue.

very Thanks was year finish quarter business. The good a strong much. fourth to a our title for

our to shareholders. the the and Information Stewart acquisition regulatory us process will meaningful Services being today. Stewart continue to Thanks value with continue acquisition We through create for the work believe for long-term for

and does you Ladies participation for conference and your using that gentlemen, your AT&T today. Thank for for Teleconference. conclude

may You disconnect. now