Fidelity National Financial (FNF) 30 Oct 192019 Q3 Earnings call transcript

Ladies and gentlemen, thank you for standing by and welcome to the Fidelity National Financial 2019 Third Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Instructions will be given at that time. [Operator Instructions] As a reminder, today's call is being recorded.

conference your the Jamie turn I'll over host, to Lillis. Now ahead. go Please

call. you, everyone. third for conference morning, and quarter you earnings Thank good us Thank operator, for joining XXXX our

CEO, call of Joining and finish Randy the CFO, me then Tony your Park. with Bill, will overview begin the with and We'll finish brief We'll Chairman, open the Randy today Bill will Tony Quirk; Mike review financial Nolan; questions are highlights. President, for concluding and strategic from review from remarks a a Foley; title business with Bill.

about I to Statements expectations, may uncertainties. a strategies or Before would we future hopes, conference that of this number you that call are begin, forward-looking intentions forward-looking involve our statements statements. the like statements regarding remind not and that are historical risks contain including facts,

as Forward-looking as to statements well currently assumptions made management's based available on and information management. are beliefs by

on and any those new statements undertake events financial whether such materially future from obligation future projected. are statements based a result results as differ statements information, or expectations actual update to not fact, are no otherwise. as to may Because results forward-looking We operating of and of

Form to to in risk which factors include other and statement risks and information, forward-looking dated other filings the are XX-K regarding press The other SEC. not yesterday limited and and of release forward-looking detailed statements the our but uncertainties with subject Company's the risks are factors the and sections in

beginning PM Time available number X. access also XXXXXX. available our at is November code will website and call X:XX The be will at Eastern the be replay phone XXX-XXX-XXXX fnf.com. This replay for through replay webcast via conference is today through It at

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

Thank you, Jamie.

business, generated of third quarterly which on XX.X% let and as XXXX. margin, third Randy was pre-tax go title since pre-tax earnings title of detail for the million into quarter adjusted performances of business. represent another strong adjusted record an $XXX title more we quarter title our The quarter both I’ll the

Services. Information Stewart to Turning

we our insurmountable As decision hurdles agreement in terminate the given the face. that with we we September, to regulatory announced merger made proposed Stewart

we of in capital creating with to our value allocation and process our committed the forward, meaningful for our reviewing are Board. strategy shareholders Looking remain long-term

Our focused consistent priorities the to for growth continue enhances growth strategic share profile time be and repurchases, M&A capital and company. dividend on the of diversification over that

from cash our As yesterday we we a our dividend announced title to of increased $X.XX share dividend result of flow share generation $X.XX business. our strong very afternoon, the X% per as per previous of

our from share which third In holding a declared per in July, Board $X.XX dividend the available million XXXX $XX September. cash in the quarter company in used of

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

company underwriter up primarily $XXX $XX of was dividends cash. quarter holding paid and intercompany we FNF on Cannae third $XXX and the in of inflows that in principal the million [ph] on interest ended were million to interest credit. $XXX in Cash the million, note the third quarter, in million approximately The result million and net company holding with $X ServiceLink we from non-underwriter line the available

I’ll business. title the Randy over now call to turn the to discuss

XX% pre-tax quarter generated title increase of Thank a $XXX XXXX. earnings million $XXX the adjusted We million, you, Bill. or of third strong over

over increase a was XX.X%, title Our adjusted XXX the point prior margin year. basis pre-tax or XX%

in a XXX% orders direct a in closed. increase a We increase in closed, closed, total of orders commercial orders purchase refinance X% closed increase a comprised and orders increase XX% daily in had XX% daily

rates XXXX X% versus second the as XXX% Purchase improvement increased quarter year. mortgage XXXX, orders quarter drive third by continues decrease the X% strong versus increased sequential opened XXXX of of refinance opened in volumes. Refinance the to versus the a prior of by third the quarter orders a from decline in

Lastly, third total quarter the XXXX. of more XX% orders opened commercial increased than over by

strong opened. refinance positioned third opened, we produced strength orders in XXXX. to continued quarter to purchase of the in strong of remainder commercial business orders Due This well orders quarter, trends as the of continue are opened improving our title results quarter a producing ongoing as strength for well

X,XXX. X.X% the in July open were daily prior September in the For X% August up September Purchase August opened quarter. X% X,XXX period, the respectively were third X% basis by down X,XXX versus and third period. July versus year quarter, at prior total were the opened were on per orders day, and X% with and averaged up orders down while at and closed X,XXX, orders at a Purchase

opened orders of quarter of daily refinance opened and was by of month third basis versus by and August respectively closed XXX% 'XX. XXX% the when a orders XX% August quarter increased XXXX. Refinance best increased the over The on

increased the opened total prior refinance For prior approximately data by year over opened and orders October, day. XXX% the first orders purchase orders were of four increased opened weeks by the year X,XXX period. Daily versus X% per

versus primarily of XXXX, Total a increased X% well quarter of XX% for in a in fee the orders decrease was million prior closed revenue file. us of third commercial positioning offset a XX% XXXX. increase increase Commercial driven the by remainder per by the third over in the opened $XXX the X% orders, year, quarter somewhat

revenue total XXXX, For performance the revenue the of months in total commercial revenue nine-month first commercial was million XXXX. largest began $XXX of we since nine tracking

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

generated of $X.X segment. $XX you, We third revenue generated but in more total than we the quarter, Thank segment in corporate title revenue our with the the Randy. all in billion million generating

Adjusted $X earnings $XXX or in per net included $XXX million $X.XX gains. were diluted share. which million, realized were million earnings Net

title for the Excluding realized quarter, of segment million, third generated total from $X the $X a billion of gains revenue quarter third XXXX. over XX% increase in the

versus increased prior XX% by quarter grew other the XX% the escrow, increased XXXX. and of premiums by also and nearly premiums third related Agency Direct versus XX% year. title fees

in, generated an operating XXXX. costs by X%. by and XX.X% third Personnel All title title the business pre-tax adjusted increase point basis other a X% XXX increased quarter only margin, the expenses grew of versus

prior was our $XX see increase we exchange million income fixed we year investments. and impact million higher the the over to income XXXX from proceeds of short-term earn, funds cash of interest we hold continue the business, exchange a in on $XX maturing on from the positive reinvestment client Interest rates interest as the short-term of and securities

September of for was debt ratio debt $XXX to capital FNF total on outstanding XX XX.X%. million a

paid than of provision claims million $XX $XX for $XX million were our Our quarter. of the third million lower

claim million $XX losses currently carried X% actuary's above for The or the is central reserve estimate.

total at claims title premiums. of for provide to continue We X.X%

$X.X nearly equity X.X portfolio $X.X than XXth. $XXX billion. Included of an cash, totaled in billion $X.X preferred AX; in and sits investment of average billion holding rating Of fixed term at $X.X duration more billion of of at short and are and of million; other securities September $X.X the cash the average company the an years and with our securities billion, currently billion of investments million; $X Finally, $XXX maturity level.

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

Thank go from of come the line you. Please ahead. from first Instructions] [Operator question Stephens. John Campbell will Our

a great quarter. guys. Good on morning. Hey, Congrats

John. Thanks,

Obviously, to I commercial you're strength just for good second. want seeing a touch on there. continued

maybe of board? of kind basis is seeing just of the could asset from or just across on the guess Any by region kind maybe you there? I color strength class a it coming where unpack you or kind are If region

multifamily, out, Sure, it's office, stronger very seeing others. strong the mean, energy, broad most John. strong; industrial kind But the really of based. very quarter on but in asset there. are It's and doing and Mike. very gaming And than I classes comes depending we're well, some is

I exported Texas, Pittsburgh, of then terms markets and lot Minnesota, And out the country; Washington DC-Virginia area, some very, XX third our at around York Philly, just of really in our we York a well; look country. into and in National and strong in field geography, New California our of operations in doing the New very quarter, are [indiscernible] saw as the throughout particularly the deals offices,

And in of hear. It maybe size a mix now? you that through probably on But result a to the then like opened the any while. in that's strongest at looks growth sense even guys XQ. deals the I've maybe good path good XX% the the XQ seen the That's for pretty commercial, on order put and

via And and the of file orders fee commercial the XQ? how influence type might two then of refi per purchase those that maybe - for how

Yes.

the and So XX% are so I off we of also fee of quarter. big XX% it some other closings we John. closings per transactions in than pretty had in third was But the those amount closed and down that tremendous bit up file pull a were more quarters, our that did deals local mean, for quarter, a volume.

per had fee commercial in We XX,XXX. pipeline. and for have typically file large quarter. the back fourth file come in highest below where fee transactions a anticipate quarter commercial the up while, the It’s don't I would to I think the was a we've per National in our the year, fourth some

I it's for So the looking think pipeline. very good

obviously hear. [ph] with kind of mean, That’s good I high-class then you company. the now lastly, at a guys Bill, cash pass to have And the holding

options. You mentioned at guys were level of discussing kind you your the Board

at? kind a just that sense larger is and kind on at outside title if of any pipeline, level, heads - guys there of do what M&A at if might for are high the looking be have of your a you you side you But anything where transformational

be engaged it'd be all presently what it or in. doing personally - would we're Well, to what to complementary we're countercyclical

and in transactions title can low trend, the be know, rewards that them would we would that the balance are business something rates that when reap interesting down. And transactional us. the nature to very you the rates if the is we are higher when find slow As and

ways is of another don't are Obviously, large really going title have areas but coverage. we presently not related other deal. businesses ServiceLink are there there Then in in business to that that be

make revenue increase of our dividend. - seem in the review the That also of we are X%, a sure we increased go our up and and is $X.XX like We backward we share. was when to increases, terms dividend lot. dividend. never get And normally a year trouble just doesn't our and time want in we It this

And look doing. basis our buyback. daily at But been just share we've we’re be kind then of a as consistent taking increasing good would on a it

the through. that's going we're So process

terrific quarter. to Fourth a So great quarter, of is it was generated going a a cash. be lot quarter

so that of and next already from October, several be revealed be We’re more the - is to to seeing the months. there month

back just what guys First the to of then - that countercyclical - you And interest Okay. having internal Is maybe their approach want commentary with a around bank? the M&A be on on rates? touch from could with countercyclical are thoughts and your the I angle that anything American

that. pursuing actually are We

been we’ve bank some it’s and And half a depository would a a on pursuing a not close for funds. but that about be it long and we’re escrow just there for and We’re to steady quite and year filing, our we're of yet. process

Good hear. guys. to Thanks,

you. Thank

will of question ahead. line come Barclays. from next go Mark DeVries Please Our the from

you. the here to you thoughts Obviously robust the very Thank think the margin Yes. on have of add about and Wanted to your expense particularly refi a your the to need should how we get strong implications kind on for quarter. margin? on pipeline side fulfill pretty the

Randy. is This Yes.

strong employees still less with and of quarter, than our in a I second up over quarter little but hundred XX%. openings. year-over-year, I mean, a third employees correct. You're year XX% running up believe third We ago. XXX openings quarter third added a closings the were we're quarter couple

labor expense real in costs. we to as only quarter. So the swing And around we fourth adding would staff don’t forward, the revolve anticipate go

about so employees October. far into XX We’re up

have end lot back the the go We you of year. of we expect But off that will level as closings. through a that

changing costs. So, labor expense-wise, outside I of anything dramatically don’t see the

Okay.

that implication fair? even margin we particularly the we in about bigger another contribution commercial. strong is Is So pretty think XQ, from expect should as that

another of and is Well, very you impact commercial to very end through always into us, going course was for as be record But of XX.X% have Bill had said, a as be into some December. November seasonality get strong. to and quarter. you it's going back strong the

the the with up more in third on had fourth we closings side, we quarter. in the actually, refinance refinance end quarter And than could

be quarter. be should will it good So -- a very, it very fourth

Thank Great. you. Okay.

you. Thank

Thank you.

Zelman & Our come from go then next Please line Aron question from will the Associates. ahead. Mackenzie of

Good morning. Thanks.

technology is to strong results quarter. you standpoint that from automation the up on strong drive a Following point to? anything maybe Is the can margins that this really helping there or

things. two Mackenzie. quarter, Mike. Sure, in to Particularly third It's point the I'd

and of business is title also India. all that our to First our commercial us. tends margin advantage automation just the work stage automation performance next really we’re able do side, for But the higher that great on in take we're the ability refis processing, to with be to

in orders touch. it's touch, get with centralized XX% of can no footprint, require so refi distributed in little We’re little on no process And - in we roughly to they ServiceLink, the out and come our or we like our about environments XX%. commitment refi our and human

over So better. a lift from we're matures the we'll time nice and just and seeing and get that better automation

And agenting, share you share agent don't picture Excellent. seems I the channel. all another then have that in full question we been it have market the like strength. revenue on gaining yet. But know

process? And just curious fully reallocating the how the driven field, deal the what is Stewart strength hearing sustainable if merger by going was the off are be table gains the now from you're that much those and to during of agent

number some agency the and particularly of like Yes. taking and Southeast we're We've East. in in markets is We a great share the good seen agency. a other which Florida, market markets, at feel growth

lot you but relative seen there. West we've do agency, the to As nice know, don't a growth in we

market we’ve know it And I I necessarily came taken that from wouldn’t say there. it's share Stewart. any away dislocation don't from

I from the marketplace. think just share taking we're overall broadly more

All much. Thanks right. Great. so

Thank you.

next line Jack the Please of from Our going go to SIG. come from ahead. is then question Micenko

sounds about refi file. Hi, ask another resi on at, resi in the maybe fee I It file pipeline per on - morning. to see decline fee the it’s with should we per wanted the side. year-to-year another where good like

thinking just in I in way? maybe the that think rebound Am quarter. fourth commercial a you in said correct earlier, confirm, to the I about

be the move the I to we right. refinance closings third I - and in quarter XX% were that's would the XX% that quarter, or quarter fourth XX% - in mean, could XX% our maybe think or last XX% of in third I anticipate year, versus low - Yes, that XXs.

a how gets the certainly much per that's on fee it commercial. And on it's by file. a lift So headwind offset just

what an the the buyback to - on announce waiting different going or Okay. it to about see Makes then more back are sense. ask on question. a something buyback guess way, And to I to substantial earlier side? maybe think to you

of be. Obviously, something us what in M&A, it like hopper it of volumes? you've about sustainability the some some the think sort XQ? but on of deciding Is would got things Help is factors

I of keep has mean, our allocation maintain dividends. on to and first really our increase capital been

dividend eight done the we're very So proud our or of last over we've what with years. seven

shares blacked increase, -- steady - out, share we have a certain buyback per the that's day, we and would that that buyback The per a program we that buy when we're really of day. we number not number to look purchase

auction, We'd Dutch a wouldn't do do of special be wouldn't a steady and consistent. We just we really buyback. kind really

don't number And buy the per day. of so shares announce we we

That's we're that be as fair number say out. of can the that going -- get. market, we the shares in blacked not we're just Is per enough? to increase specific We to and as day when we're purchase kind that's of looking I

Yes. did Makes $XX spent the in XXX,XXX sense. million. shares We quarter, buy

suggest would the value valuation. intrinsic you're and current guess approach. pretty automatic I that And that with that comfortable

yes. are, We

Absolutely.

Thanks.

Thank you.

Please the come from ahead. Deleeuw Our line Piper Jason then Jaffray. of go next will question from

a rate? Thanks the What's tax question. good for taking go-forward

increased in of a up - we refund QX out option tax in items. up blackout tax blacked third rate, for think time. have some following I which $X had did you activity that quarter State and model that XX%. Jason, discrete a really showed actually have were Florida unusual can stock them XX.X%. XX.X% against in call Stewart, our prior we We was rate had long We also we the the That million the period year the where at I'll - also quarter, some did third for had prolonged lowered exercise an

have approaching. some we did lifted, quickly that that were expirations when And

exercise us. tax so generate activity does that And benefit to a

at can And But you why kind going model so we're of forward. XX% that's sub-XX% this point. I think

forward. All title I right, in big traditionally market been insurance, that thanks. of in And then, going needle share. drives M&A market terms share in changes the mean, it's

the off that's like looks - that so And all table.

But Or difficulty] this anything market you the anything agent in interesting is know you're [Technical side is ramping - standpoint? do you there is channel, I also from point? is there could but in there the of direct that at a acquisitions on share that terms said taking anything up share

that is back mid-sized small, where we agents were is to now agents, Stewart to us, at footprint. of couple This we're get Randy. Yes. behind looking Yes, years our going and infilling a ago,

We have complement solid footprint. a areas where very distributed pretty there brands through and But acquisition. can are existing our we

track. that on back be will we So

good And the to revenue then game in hire producing there is people. always recruiting. We're new

will So a of are at point. and it's currently looking we bit at, approach this acquisitions. organic an at But looking be

you. Thank Great.

you. Thank

of then question Partners. the & come will ahead. line next Dunn go Dowling from Geoffrey Please Our from

have at how I before leverage. mid-teens with us. the a somewhat past big In the about I of coming matter Can guess transaction deals coming you talk time would debt Holdco possibility It you just the versus strategy? billion of few. a in door a large, of $X a Fidelity Thanks. at tack-on transformational had more about be think the at

Well, intuitive, it's very Geoff.

sitting don't you like so. know I on money,

The looking have model. in the that from They're recurring insurance moved and are away rather presented space or related. stay We'd Yes. transactional to in the to to are that insurance nature. revenue are trying related us we're at that we somehow ideas to are things the space,

company that we're driven the rate most low we're to we toward if and we what title that what company or in, on. that's are in acquisitions interested And that's interest working move transactional, can insurance, can investments business, a that countercyclical really grow

type out there's that's extraneous not be We're really is on Company. running to any going would and see going be to to investments. not you're restaurants, any right anything There the going for a what trying make sense of most But focus the the line. now lot of we're to screens not

that or investments protect company. sheet. my here or really be goal an this acquisitions will and That's acquisition kind will or of like stand my -- my fortress at balance last These

a deal. rule So sizable you wouldn't out

a not would out deal. rule sizable I No,

deemed then Stewart I repurchase transaction, both And Stewart of cash think least of Okay. after it that to have for now the as because to the It in go -- rid seems shares changes was was amount and appetite? just the even me What more deal, you to at buyback. the attractive the buyback like planned to anticipation valuation issued the dilution. you get deemed

Yes.

increase to the going are We buyback.

we have are but outstanding. to We -- million going XXX-somewhat shares

Yes, XXX million. [ph]

so needle. It's doesn't shares, back chunk big if the a it money. really buy we XX move million And of

So in If back that. could XX we'd like annum, per to I'd consistent. buy be to share we million X the million happy be pretty range with

not stock I We're of going being price. We're be higher think consistent - average. to cost being of market. the at investing funds all dollar steady. a getting we're we're ahead our not It's

third that's we're what So quarter. talking bought about. Tony shares the we in around - about as that's sitting really mentioned, XXX,XXX And

expect move year to we this year can see into next during the as You forward that -- up and move during year.

million XX room. have available of under plenty still shares our so We authorization,

then title of All couple right. just specific. a And

indicated October for the quarter think Randy closed order refi. in September? see Is I pace closings could fourth it was we higher per exceeding day

on But October we're week-by-week September on last the in seeing pretty a on versus the two refinance the in what side. It's -- seeing softening steady the basis we're little a side. on side, purchase purchase weeks steady

And on thing the closed to side. just there, one add Geoff,

of month. heaviest week You closing our month last is the always know the

we're numbers, really and through week. it those So this just going influences that

expenses? both the you little see of more how I benefits announced incrementally the did side on launching -- and I a guess a question. you I your recently but a talk agency about And Could that closing think that then from hub. business, focus bit digital it's Sure. also last

to and there, we've Knight need fully announced It's closing and technologies really reality as more closing digital stage before, that things to Black we digital for customers want really become got these notarization. online it. remote with with initiatives. do talked use our We're called Expedite. with We've partnerships The can about of is initiative early what But we've you all a clients this capable.

customers, with really think just number early of they the we advantage to of so in digital it's reach And states is know agent the And I community, we out pilots of underway all can have hub to in play. these have take various but technologies very let some that a to of stage. them kind

Thanks. Okay.

you. Thank

question KBW. from line next from George Bose comes Our Please the ahead. of go

Hey, guys, good afternoon.

capital basically term? dry near buybacks I of and mean Just dead don't But does that a for in the horse be really just amount holding here. as returning the given more capital M&A fair cadence going to beat back opposed to that suggest the to powder that you've the of suggested, you'll

and going Then conscious I'd want our that that's transactions really an fruition, to statement. us thinking say probably have don't of would capital Yes, very come before kind a to to look we're about relook and that We at allocation we accurate of come value-oriented. we they be couple at strategy. are if cost

fortressed our like I sheet. balance a like of It I balance our mean, do I different just love sheet, lot to of a I low the on and flexibility cash things. lot the position gives debt us

Okay. helps. then margin from the I how you. refi switching channel? they just actually the Thank Can channel, margin. premiums your the versus the the premiums? just just refi do in to then on regular And And that centralized vary get -- That

margin. the on first Well,

against our an refi, centralized XX% national you've and our seen kind margin XX% had quarter phenomenal margin, is margin, that some was third probably XX% commercial a of mean, a I we year running before. example. up the in So what in operations, the is for which about of

of just with you volume can and shows talked it advantage automation, So before. I you as what do about taking

On with fee file pretty and the the model. probably per consistent it's average our distributed premium side,

an it's think I $X,XXX Tony? around order,

Yep.

think So I consistent, pretty it's Bose.

fee changes went all at quarter, file being the to see per as that effect Texas in this you forward? with premiums, And I do the into that guess going Thanks. Okay. then actually material

lot. as decrease. file it think It's it's see it or a was not X.X% Overall, fee pretty X% impacting immaterial. not whole -- a about do I per I

it was pretty like annual million, $XX the negligible. was revenue And impact something

to of of that. a We care could deals couple get commercial you take --

sense. Great. guys. Thanks, Makes Okay.

you. Thank

the Thank Please line a from you. from ahead. Chris question have We Gamaitoni of [Operator Compass go Instructions] Point.

my taking one It's reduce to to follow clearly in right where will employees back I for you In environment? of environment how amazing the able type an now. up down, wanted Thanks that refinance fast margin. go be call. thing on

How as very fast in Well, move But we what the first quickly fourth ourselves we'll Randy. the too investments with into is will in up move make have past. we will quarter. this open as Yes, order appropriate the versus the will get employees? probably It takes push quarter and traditionally in place we reduce our the count. metrics we stay behind volume, allow field. We to never far the

So the it event. And of a quarter quarter, of it the touch think I first bit probably it in maybe fashion. a will happen will at but back on be a we'll fourth real-time more

Okay. commentary, bank well, bank? that idea into the average of going your you the deposit go have And that to the move approvals any do assuming can on balances of size

be on studies to I we slow and kind some mean, of There are steady. have it.

a that bit it's fix probably could at number of Chris, $X there. more and be moving billion, but too time, looking Yes. over we're little a still it potentially -- little potentially But early to target.

of assuming cash Holdco be knew capitalized, were we of Okay. capital will your capitalize to billion when [indiscernible] we as source plus with deposits? bank And $X the just the that

X%, XX% Holdco. it X%, It somewhere. so from will would. to probably it Yes, start capital need capital something come from -- to you X% probably something I I like that come mean, have think or out, an would

much. so Thank you All right.

ahead. back at of Thank time, any I'd to the this for go you. sort to management like over Please conference closing remarks. turn And

on in years. Thank with you. very basis results, quarterly best for quarter We're business title third pleased our XX a performance our the

the We opened. third upward a strong commercial positioned of quarter purchase year opened, the and in well the on are opened with for in strength significant orders capitalize continued orders the refinance to remainder trend orders

Additionally, growing quarter Thanks fourth our maximize our forward we on for on base us to everyone to call. capital our value remain joining focused look shareholders. we deploying today, updating and for

for our that Thank your gentlemen, using and teleconference. for conference today. ladies And you. for you does AT&T conclude participation executive Thank

You may now disconnect.