Fidelity National Financial (FNF) 4 Aug 212021 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the FNF 2021 Second Quarter Earnings Call.

During today's presentation, all parties will be in a listen-only mode.

Following the presentation, the conference will be opened for questions with instructions to follow at that time.

As a reminder, this conference is being recorded. I would now like to turn the call over to Jamie Lillis, Investor Relations for FNF. sir. ahead, go Please

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

But to extent is we Park; Chris Title begin, today Nolan; of from I Randy, a that me our the review pandemic. statements. Quirk; you overview statements and Randy Joining COVID-XX pandemic. conference the would this the strategies your statements review then the Randy. will intentions including open a particular, We'll like President, call brief forward-looking CFO, facts, forward-looking will will of may questions are strategic historical our the Chris of Statements number that Tony We'll remarks There highlights. finish expectations, before and business, concluding in involve finish about and hopes, with call Blunt. remind regarding for CEO, or Mike impact financial Tony contain F&G's F&G, begin a about and is this uncertainty with uncertainties, with review the and are of not risks the CEO, Mike that significant future duration from

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

Randy. Let turn CEO, me to now call the over our

the generated in with quarter, second the of Title cash $XXX see the a year-ago pressure the but I new XX.X% already Retail F&G Title one-year would business. market start like whether rise second earnings, revenue; to in to Their $XXX million office over allowed and million, the performance industry working you, to of for continue record home. Title company the or thank pandemic, and from records to Jamie. margin, business since us, as about the of rates earnings to market acquire and the deliver signs earnings our set Title our our Thank our made We're pre-tax the Annuity as has decision performance lead designed have from they us that share industry. a company, XX.X% compared entire to margins, working we further flow interest and and results record employees early history hard while the produce quarter of in sales building only expanding and not the just sacrifices eventually excited and the work the XXXX. more continues the company for change dedication their validating In produce can we quarter into And our compared of conditions Title stable We're best adjusted adjusted second and our to quarter, pre-tax channels, in ago. institutional success.

in automation of in worked margin improve the as our setting record the fourth our the we market technology, Our and quarter cycles. and our over operations efficiency matches XXXX to margin years our Title our and quarter maximize have profitability for achieved business investments benefited in over from

earnings, Turning acquisition to we when highly provide to closed interest counterbalance F&G, June of we to sensitive to our a expected mortgage on XXXX, in rates. F&G are our which

distribution the first sales believe our expectations as would bank F&G and accelerate has launch, F&G's growth. growth new sales in the far we to channels also channels dealer broker that acquisition channels. as of and have significant their year in momentum our upgrades of well in strong We open ratings, exceeded enhance existing gained as

ended maintained week. way achieving spreads MD quarter note with While in is $XXX acquisition we its accelerates. attractive F&G entered past nearly environment have under its risk awarded towards the backed retail that delivering which institutional $XXX also billion sales, deal since first and just management, rate interest XX% assets goal market F&G issuance, assets increase low continue of doubling has a it's despite million agreement momentum a pension to we the second the experience. funding was with sales on transfer well the our the over and as record

remain future our supporting value of allocation also while the evaluate to long-term for continue growth will we shareholders, to business. our strategy creation we capital committed forward, our on focusing Looking as

dividend an the for average the million Since price shares quarter, XX buyback during of $XXX million purchased shares. XX and yesterday previous per average for dividend up flows and million XXXX, $XX.XX end our and share a share. at we per earnings of share of $XXX we share, year, per price through at second increase from announced purchased of buyback Board million the cash strong have quarterly share. an our we our the program first three-year authorized half million million quarterly At of XX% of Given of to the a we $XXX plan X shares $X.XX an a cash plan, repurchase of $XX.XX announced announcing

call Insurance Nolan the Mike now discuss Title to to me in turn over business detail. more Let the

Thank rates, demand, our driving commercial interest and as benefit results, estate our you, of taking origination from focus the efforts record upon in employees customers. low touched our Randy. continued second care real rebound strong activity in the we Randy to quarter of and continue

adjusted earnings quarter, For generated million, of we pre-tax an $XXX over of the Title quarter XXXX. second XX% second increase the

fee over direct offset closed, Our by in closed, XX% margin $XXX refinance increase ago XXX quarter a year purchase XX% in and a XX% was was a Title $XXX closed, pre-tax with daily record closed adjusted a file by XX% XX.X%, increase ago with basis in X% point increase in a the orders partially commercial quarter. total increase prior and year driven With orders orders a decrease million daily year million, revenue orders compared orders Total increase closed. quarter. total the to compared of the in due the commercial in per commercial XX% a increase

For and the orders June XX,XXX. opened per XX,XXX April at averaged with total May day, at second quarter, XX,XXX, at XX,XXX,

orders prior year's XX% orders per For while demand in the day we see versus the were last July, the year. moderate Daily as opened continues compared levels. strong to continue in with refinance were purchase to as robust XX,XXX up total opened market quarter purchase activity,

of opened prior For July, on basis X% XXXX. the versus daily orders daily Refinance were second purchase by year. versus a decreased XX% opened quarter up orders the

year. refinance For opened versus the were prior down XX% orders July daily

over second per commercial of levels orders Commercial by Lastly, day per all-time increased orders second total record through are opened the quarter XXXX. the XX% day at opened quarter.

order commercial we For We continued of quarters the July July, strong second volumes remain optimistic that opened per XXXX. in have up performance day the commercial the half over several drive were XXXX. total orders of last XX% over seen will

Randy automation into throughout -- and validation the investments improve our mentioned, we and client integrate results a are As of operations strong to our have how efficiencies enhanced we made satisfaction. technology clear approve

orders management have We our our cycles. automation also on rise through that expense focus time often real performance and focus But believe our about longer-term integrating in we market has significantly and profitability open fall. spoken improved on ass

enhance to we notarize improving estate a start, experience our and to inHere close track, estate safety by and transforms real transaction. simplicity platform, Additionally, which the needed transaction experience continue the real

During customers announced market our will in-person FNF our our improve security the package, on consumers solutions our level transaction the demand significant on share. Last quarter, the eager of tutorial by acts most financial improve help while inHere and only completing client positioning to believe digital transactions. their not transaction for an is million us our reached to opening when a completed the X ensures will which hours spent satisfaction, service, also that also and focused available startHere and notarize platform customer's We're take reducing estate confirming milestone inHere; week, online. experience we but efficiency improving customers we ready is real than more are same for belief integrity important digital that during

turn review now over Blunt Chris F&G's quarter call the me highlights. Let to to second

Mike. Thanks

acquisition year a provider and our in our diversifying business previously F&G one space. the mono-line transforming of sources into is a premium, mentioned, in institutional into markets life by solutions executing retail Randy leading As FNF, and both annuity of on

scale on deliver As investment consistent management to while we under generating benefits spread. capabilities by grow, we're assets management, leveraging focused unique increasing Blackstone's

of up retail become $X.X we significant the made investments provider leverage the quarter, annuity sequential XX% XXXX, a X% we breed our the had second and to in second best allowing in us record as operating and platform quarter quarter. our we've In to from of of Additionally, scale. efficiencies service billion, sales from channel

new secured to also of we entered the newer $X.X exceed and million generated week. our backed and institutional We of independent and we continue core the agent clients, market to have the distribution XXXX first premium channel, over are comfortably where broker our note half to first transaction see distribution agreement funding two banks, on over market last In with in pension the successfully track which channels, full-year. success billion for transfer with the dealers $XXX and risk institutional

FABN F&G opportunistically strong our a the FABN, Let with Also we details. agreement to X.XX%. billion. our FABN or risk pension brief book me Market of a deal transfer late first successfully few issuances. In order funding at in million execute excess an $XXX June, market in have attractive $X intend issuance entered we going reception additional securing And issued extremely was forward, note, July. of to coupon initial an backed provide

a transaction X,XXX annuity this in to $XX will We and expected close to assume month. million in over pension approximately provide retirees liabilities benefits

the expectations a and we sales XXXX. channels quarter. strong of quarter channels. and have we that surpassed contributed our quarter, addition, sales $X.X institutional where launch the in the compared growth the $X.X Total very sequential additional top-line will results pipeline the very the to of $X.X on robust be billion to In bidding by third in second billion driven second were quarter, retail in into in two channels in billion Both deals

first record the achieved the in billion, $X.X billion half double XXXX. of nearly of half year, total of For the first we of $X.X sales sales the

the With second under these top-line AAUM flows driven surpassed billion strong $X.X in or approximately results, assets management milestone by billion $XX of the net average new business has quarter.

second was driven product in in summary, on continue above those pricing. business, consistent as the were spread spread turning by In second by disciplined in Next spread well Net maintained first first basis net as book. trend up both spread, from consistent to product Total record net our were $XX and it's $XX to though, historical million. spread XXX notable we a primarily on the points Strong at total quarter, important a our the XXX strong. driven the CLO And items as $XX of investment earnings in-force were actions items favorable earnings results Investment results par. with basis redemptions investment net our the Adjusting million favorable F&G. with million. to was $XX defining to FIA XXX an and investment for points our yield been margin Adjusted have notable items discount earnings in half was and were basis expectation income of net quarter those strong be held new disciplined pricing in was line points. period driver million, excluding quarter. for one-time approach product items the Adjusted for year AAUM quarter.

over we further opportunity about have strategy ahead. to our Our key in profitable financial With Park growth sources and excited second to FNF's the quarter highlights. now FNF diversified to strategy all turn of focus. remain premiums, is firing that, call cylinders strategic successfully the contribute to I'll the Tony We overall years a review the on

generating producing Thank $XXX producing you, $XX total $X.X Chris. corporate million. in F&G second We the the revenue million, generated quarter, the billion in segment billion, and Title $X with segment

Second quarter million net earnings net The losses the net net of XXXX. includes in stock $XXX accounting quarter mark-to-market gains each the investment be second continue preferred the recognized or and gains our recognized in recognized million million, period which were of $XXX whether gains securities to disposed $XXX to in and of are securities primarily of of treatment due quarter portfolio. in equity were versus held

net $XX our million F&G from second revenue with and quarter Excluding net net of the billion total per and continuing gains other recognized operations corporate $X.XX or in and an compared loss were Adjusted $X.X the $XXX had share. Title The billion earnings $X.X was contributed million, adjusted losses, $XXX segment of XXXX. diluted million, segment contributed million. $XX as

escrow by XX% operating XXXX. with of by $X.X the adjusted segment billion a and as $XX of XX% Direct and with XXX increase in title business decreases fees Title point basis debt net segments June received by increased generated XX XX.X%. XXXX. income capital in declined Personnel expenses other $X million, revenue versus versus on second our Agency and by increased quarter in, by increased compared second and income was the prior billion XXXX $X.X a slight second versus prior stock, in compared to All preferred second and $XX the of XX% FNF premiums the costs for decrease business. a Excluding our of interest, Interest premiums quarter in XXXX. bond the decreases recognized million, quarter quarter, representing billion year a debt pre-tax and margin, of the the XX.X% total on outstanding in of due grew dividends total losses the year. title-related Title to for Title in exchange quarter common Corporate ratio $XX generated million from and increased XX%. XX% other investment

$XX Title The were a million for currently for million actuary central paid second the losses claims claim million estimate. of Our the X.X% or $XX lower million, quarter. than reserve is $XX Title $XX our provision carried above

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

of preferred in the Finally, an cash $X.X $X.X our Title maturity with totaled investment rating over $X.X holding at portfolio years of We $XXX XX. $X.X June X.X and securities $X.X are duration fixed average and billion the billion, Corporate and of an Included AX, securities and equity cash other average of at quarter of investments of ended million, and $X.X company liquid the short-term investments short-term with billion. level. in and billion, billion billion

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

we'll this session. At you. Thank conducting a time, question-and-answer be [Operator Instructions].

question comes Stephens. Hawley question. with with James your the first line John proceed from Campbell of Our Please

John quarter. for James Hey, This congratulations on and good Campbell. is stepping the afternoon, in Hawley

Thank you.

you. Thank

Hey.

So first one one, here. kind just of quick

can mix commercial, local So the on breakout and what the the refinance national was and levels? you on

Mike. It's Sure.

to get me Let that.

mentioned. XX% total as So we were and for XX% up open orders XX% and up were the the the second orders the quarter, was national local

closed up to previous the was XX%. XX% national the side, the and quarter the second up local On orders were

seeing and larger with of coming the we're kind national the signs certainly encouraging mix. the into orders back So

appreciation in going you. your one anything can Okay. enough Thank not on I this, is daily any if into then price thoughts for forward? I'm helpful. Yes. squeeze here, That's but going on your and and And price can if insights data give there you that's sure granular more

think You is of the on file, fee where mean impact per in terms going. I you're

correct. Yes, yes,

previous over roughly June against per file point XXXX a So on of a guess we order, up that's a and a June year. a of is June XX% fee a reference up up X% lot is I Refi June. I if over June just of in to the XXXX, compare $X,XXX little purchase relative see $X,XXX about which of closer transaction, about to

Thank you.

Our with from Barclays. question. Mark proceed question comes DeVries Please next your with

deal of how next Chris, transfer risk you particularly for on a to and you've this rate high Question this Yes. business the earnings, some quarter? revenues hit big pension said identified can if for meaningful you have pipeline be

Yes, big. no, it's

and you of $XX billions I growing. so believe probably market we type, market billion the tens glass saw or know, think as and it's I

it the feeling good We're to year really say quite certainly start that think we time going to make we're billions we've be got So off in place, infrastructure to can modestly in confident over per sales. all we I start but of the could sure significant, there. a compete and

everyone's to Okay. And still question, multiple exceeding separate F&G is the really a Title expectations. a if to Title ascribing much we performance apply value earnings, is the really not market despite

in shareholders? value thoughts business the kind So your do interested was getting that about can anything to monetize for if of latest what, of here you

is This start. Chris. I'll Look Yes.

to down a think comes this I it's issue. timing

is there. is the ours in like always we've where sitting So value under of today in on assets spread $XX management. the locked business a in-force, effectively value billion The in got

question is multiple assets, this to ability just of a the at how go the via that that deal belief at you premature your my And of expand where something timeline. the earnings, the to what's versus gather that and So we're regardless are market it something But your of timeframe scale, get to But nature. curve whether would road. would of say doesn't or value moment, block that tremendous. margins because values looking right I down is for benefits away, that be like in unlock re-insurance the try monetize really a an personal inflection or us of now,

you. Thank

your comes next Suisse. Kligerman from Andrew Our Credit question. with proceed with question Please

good Hey, morning.

you shares years? new right repurchase opportunities three over billion cash of of share the we as of lots million take want might the more saw at announced buybacks? liquidity, other smooth well so a also very, do very very should of kind that $X.XX advantage that authorization think XX steady -- I holdco, capitalized, of XX you cash a the So do mean Or see July share now? XXXX, had this of with a you through and you are you what seeing of million to for here and what might accelerate it on price kind I shares

This good is through Andrew, cash Yes. a Maybe our run question. bit. just I'll little Tony.

So subsidiaries then had million the we a interest quarter and million, quarter. million over expense then upstreamed a million, the of $XXX our $XXX dividend shareholder started We over and billion. little $XXX at roughly a $XX of of we little about buybacks from for $X.X

quarter roughly. the ended billion $X.XXX we So at

on expire did authorization buyback Our XX. July

So what formality, this $XXX million release will, over if about an a we're point; buyback the to we've last the reauthorization exhausted almost million was shares almost year you saw commitment. We you $XXX to in versus $XX of that yesterday a XX shares, of that announcement. million committed short course that following months. XX million And in of

not have We would be in I commitment, marketplace. say to going announced we're to continue but the another

don't We that think have commitment buyback announce we're the if authorization. know given be we'll And to price, I expect but to going the shares we'll we'll over in I marketplace. try to accelerate continue share time. a or if that, fully I our

an an to quarter, the quarter We also flow XX% increase. $X.XX $X.XX we're very relative to a bullish our cash that a announced think from in a sign increased generation or increase dividend seeing. And that's we

the a question, we cash answer lot to long optionality certainly So we're your that generating. but have with of

on it. big along And those that lines? there anything the anything Got out M&A

We you not in of some ServiceLink at be show about we announce to specifically, to areas, Stewart always continue kind have, relates would have be we've long before, yes, issues them, at had We deals There's or don't there of Title business. opportunity technology-related -- really number looking augment And maybe this business the it could we I a would but do as that technology, that but our always something the saying we we've the as opportunities, things say, inside given now. but number acquisition. This that businesses consistently. at and big our we're done Asian number Mike, talked And a that with up to then have, we as looking those things the look have we how don't is but we in the I'm core we're a those. know, Andrew. other those.

pre-tax on mean, with about I we three you up I If margin those are numbers trajectory? next guided so. orders these over that, Yes. remain just XX%? the stay with one previously know X% all XX%. XX% likely could you but in to talked we that maybe jump could numbers look thinking so on more, same And really And can I that up how assume or July, different purchase at months to commercial the the adjusted with your will about are your services, like

Well, Mike again. I think on the orders. It's

was when it. February day And had X,XXX we're You back per previous months look so through in of out a take at six day, year In which about the kind where for we've X,XXX per opens, opened row, XXXX, I to day. July, over look year the record averaged orders at of orders commercial. and for We've our we'll per averaging pandemic now XXX commercial XXXX, over year. we

So much we're XXXX. market market in best running we the stronger in a than that's had

So so closing quarter. X% we'll have but July, that we have business kind purchase where very we're a May into start And the X% peak commercial What on refi to then I month. second little good or half. the optimistic the in usually out a bit, we're or -- do. falling third will will year, purchase we're in activity around see side, we'll closings sequentially normal to be, in of off And have third typically a the getting seasonality that purchase area In a like come and starting the every opens in that June, strong quarter. less we're we'll very

in active markets seen it strong we power purchase the see the a quarter, business commercial. we open June. XX% and July very in on the the was sequential anticipate number a when your put margin would can't in side, to you've about margins up have Although, to but third of question, it, we refi active did increase But to

expect quarter. So we a good very would

Thank you.

from with comes Truist. your next proceed Mark with question questions. Please Our Hughes

orders but they for well terms Mike, the day, gave were you you. absolute Thank the Yes. refi what in per year-over-year, July?

little You from We X,XXX over get June over July. big about want orders XX% had jump. last of increase up And XXXX. against a that that. little July X,XXX to refinance day a We opened a was year per let a in last me

got So Rates had versus a as June tougher. opens did the in X% we little bit in in sub comp said, day sequential But I we a XX% July July. came an increase per down improvement have and of this year.

independent evolving And about independent is well Chris, channel, You're dealer doing broker then channels. the bang how the that on channel? these very the days? and How

Yes. That's doing really well.

So up independent we a in milestone. channel. in had We sales two number FIA moved the to

So a deal it us. for was big

it took which that's of us as XX% our in that drive I say IMOs, strong been. would now. And at growth business our channel, for relationship top is with as XX% right So ever along our it's

finance here, if strategy And respect company have are with much to then capital, F&G, approaching on capital, are you update going just capital how to success if you then? to do about, the you could with that how you talk reinsurance

Yes. can in. start. This Tony. Chris Maybe is weigh I'll

in, capital this room is I only to XXXX for of debt at point, their think intercompany debt capital, cap lending. maybe have in some because F&G million $XXX the that they needs ratio in

they've we'll company growing. equity into been out least and and I run, the third-party to loan and with about growing we then So to cash, think that short in year grow continue billion And on $X.XXX whether we'll front stand the at debt with piece us like this year allow next where to we further get well. internally parent sitting as take look F&G FNF into the as and wants F&G

the we that of like on. we a growth feel But strategy. that don't we'll we go. we're point, third-party at F&G need so to is weigh position a utilize that And this And certainly as trajectory like kind where in

Thank Instructions]. you. [Operator

question George proceed Our with Please KBW. question. with Bose next from comes your

there unusual on premium and like split, your quarter. XX.X% seems anything noise? it average or higher, agent this it or was a is Actually you that Was little XX.X% around usually first just just

Mike. it’s Bose,

versus growth had I think just markets. over you it's performance average stronger the other We that in can of splits really geographic revenue change higher where markets the of some have time. some

don't simply it's that think I I significant pressure. price So it's think any

Okay.

Okay, terms can different great. for the then about you margins, talk in of just And Thanks. margins segments? actually

Tony?

against Yes, I Where strong do was prior up XX%, XX% in agency about want roughly very to I that think X.X%. I've got year at start? Bose. somewhere, XX% quarter, performance operations, the roughly margins versus Direct

commercial margin at which ServiceLink for we national XX% sure. ServiceLink second off, are last really pandemic the mind, little a at influenced our margin year, bit -- good XX%. Our because business about quarter was refi but it a were versus last in had comps Keep we almost operational had within was centralized about exceptional outstanding. was our an was specifically XX% In versus XX% year. just channel XX%,

XX.X% say that help pieces are drive margin. So -- the record a would I those those big are

Thanks the the one that of the -- for this assets need breakout. And the actually funding investment, the is agreement, with the question great. in, and business the everything spread existing restrictions that business is essentially asset invested yield is business? be as same in going to else it that -- the is of for Okay, Thanks. Chris, or sort any being so are there this to was the same going the in the as

say Yes. comparable. I'd it's

The return on did we assets. was XXX basis first deal points

spread comparable. So be should

selling an like think of If optionality. about five-year annuity to it, fixed zero institution you it's deferred

tied money issuance for the five this is the for of So term years. case that in up

It channel lower to happens comparable exciting should spreads. that a have for is have yes, So new an us strain. capital also this

-- return on other a return on the equity, businesses. from So higher return capital the it's than actually

reached question-and-answer of our the have we gentlemen, end session. and Ladies you. Thank

closing comments. Quirk So any Mr. over I'd pass like for to the to floor

Thank you.

We results, businesses are continue very F&G records. pleased quarter and to as with our our set second Title

We our team success. are proud of

future. are about optimistic We the

improved to to and we Title while As F&G our over deliver business, in to initiatives poised lead time, technology is over share continue asset strong which efficiencies our will medium-term. implement growth market the

Taken conditions a cash and as strong to that are earnings building financial model has designed we change. flow a together, market company deliver

a way call. in our priorities We shareholder third that speaking on in you value allocation quarter continued our deploying through forward look quarterly capital capital our remain updating share and to businesses. and repurchases investment best Lastly, you maximize earnings the focused dividend, with our on

and this conclude lines Ladies participation your today's you webcast. your and thank does this may time. gentlemen, you teleconference We and at disconnect for