Fidelity National Financial (FNF) 4 May 232023 Q1 Earnings call transcript

Good morning, and welcome to FNF's First Quarter Earnings Call.

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

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

As a reminder this conference call is being recorded.

I would now like to turn the call over to Lisa Foxworthy-Parker, SVP Investor and External Relations. ahead. go Please

and operator, Great. welcome Thanks everyone.

Chris today Officer; of call. Executive me addressing Young, questions remarks. F&G's Nolan, and Officer, Executive look for Chief Tony Park, your the Also prepared our join Mike Chief and following F&G's Chief Wendy today's to Chief Officer; Joining forward are Blunt, will Financial us Financial We Officer. portion Q&A

subsequent future events under update which that to call actual or earnings results and refer may reports guarantee or Today's do other Private our or Act, information, Litigation Reform SEC from revise implied. to statements to do projections filings differ include could We most cause new materially discussion Please Securities those factors to recent the and duty for expressed quarterly not the not such events annual performance. any reflect forward-looking in changes and undertake statements or a strategy. of

also This is fnf.com. be is PM Time our to that which release, beginning at morning's be replay and today GAAP in discussion also XXXX. rules will a may accordance company's today's available reconciled materials on website. through with XX, issued Non-GAAP within where the call X:XX available Eastern have on investors. press also And be being we Yesterday, for to required available website. SEC It measures webcast been available May at will recorded believe replay through we telephone earnings measures our includes non-GAAP financial meaningful

our Nolan. the to CEO, I'll turn now And Mike call over

Thank morning. you, Lisa, good and

for volatile title providing protecting long-term, margins customers the as given as we our in our quarter with focus remains Starting a business and with service, well the solid our the pleased business, as We market. environment. continue exceptional policyholders our a to navigate challenging in maximizing building and our on our are performance

staff in low X% reduction given prior the inventory field XXXX, This the fourth to net an history. additional is decline of monitor our light quarter, the mortgage In acquisitions a XX% coming in compared to and by reduced we in quarter. of volumes first our of one of in year and as of continue reductions the the largest field the staff, steep closely out expenses after

As industry-leading title delivered actions, adjusted result of a of we pre-tax of adjusted in these margin XX%. title and million, earnings an pre-tax our $XXX segment

We with levels. given this are pleased volumes low result remain historically that at

quarters March build expect sequential In time, Moving encouraging into indications orders volumes, last open residential purchase albeit the last to XXXX, fourth April April quarter. we both purchase improvement for monitoring seeing have closely opened in in are of and the we year, per years. orders and typical improving first trends the day and than this been off year. we volumes. At in purchase seasonal a sequential month second lower low the Residential showed our was few of of best order August coming of levels off since

and daily building XXXX per up the March, versus were of Looking opened for month flat April up day over over quarter versus XXXX, X% purchase lower fourth XX% volumes up a at although X% And orders the sequential fourth the month of for March. closely, quarter April opened orders base. of of the refinance were more off and

of first the with in per total for X,XXX orders the down day, up commercial XXXX fourth X% month X,XXX; over March. total day Our orders XXX quarter opened per of quarter X,XXX. Overall, April versus and X,XXX; at X% February, and January averaged the opened March were

up X% were opened March. over month of the X,XXX For orders day, April, total per

a continue tailwinds for and market participants. provide volatile expect environment to From headwinds will here, we market both

solid market. fundamentals pent-up the rebound for once footing side, working a are not there demand are support a is age to and more in rates there and rates downward buyer return that home On such expected first-time although firm to population as yet move the affordability, sellers residential fully buyers growing and and

perspective, multifamily continues and consistent industrial, and commercial to commercial affordable million, towards first which housing, of we energy and mix like our a XXXX XXXX. sectors the quarter, quarters first revenue $XXX weigh hospitality. From our with generated is In between

our the for what Reflecting modest low on second the we mean closed have relatively given of improvement seen expect open near-term that business, which the to level orders, is quarter. these orders will indicative have factors in FNF's be in we first Title quarter volumes of margin we

the remain confident pressures, enhancing near-term expand and for and acquisitions of talent business our title recruiting Title continue Beyond to in fundamentals through and the the we business capabilities. these our strategically build long-term

to Finally, its in-force deliver growth off assets at of is and strong as to start top-line F&G retention. $XX company continues stable diversified a driven growth by a reported public and record XX management billion F&G under strategy. on March record

merger provide in at XXXX nearly F&G on the of assets our are double a detail expectation five and minute. over segment more ahead Tony the mark since years. well F&G three-year will the management original We its to is under results

the I'd our employees challenges. for track year despite to thank their on us like commitment deliver solid to to a keeping up, the start and Wrapping dedication to market

to first call Park quarter now to over Tony FNF's turn financial me highlights. Let review the

Thank you, Mike.

the capital. results, which or only LDTI and consolidated segment. X, we with statutory cash insurance US effective our impacted accounting no new to regulatory only turn impact GAAP company duration as related XXXX our is flows adopted contracts is a have to F&G known standard I to standard accounting long Before LDTI, results, January

Now revenue billion total in We turning in $X.X quarter. consolidated first generated to the results. our

loss the million was million of $X including recognized net net $XX million including losses gains of versus net earnings million, net $XXX first quarter XXXX. recognized of First of $XXX quarter in

net F&G loss a contributed of had unfavorable segment million loss mark-to-market earnings $XX a the Corporate Title due had million. largely $XXX net $XXX The of The and of net million. segment segment to movement

our mark-to-market in the due held preferred and whether The investment are securities continue equity of in net accounting or and losses gains portfolio. the in of recognized were each disposed treatment to to securities stock primarily period be quarter

losses our net total as $X.X first recognized billion XXXX. gains with in Excluding was $X.X the compared billion quarter revenue of and

$XX from share net $X.XX $XX segment operations earnings $XXX million the was million. or first contributed net quarter Corporate an contributed $X.XX for of The adjusted per with diluted million XXXX. $XXX the Title compared per or $XXX had F&G loss continuing share segment Adjusted segment million million. and of The

QX financial to Title the highlights to Turning specific segment.

of generated billion of segment the in million compared Title first recognized excluding revenue billion in $X.X $X.X Our net total first quarter gains XXXX. $XX with in quarter, the

the quarter of Agency and and title-related versus operating prior premiums versus decreased fees XX% XX% by decreased by XX% and XX% other decreased XXXX. the other by Personnel decreased by first premiums XX%. costs Direct by escrow expenses decreased year.

the Title quarter the adjusted margin in versus pre-tax XX.X% adjusted title business year title pre-tax a XX% for All-in earnings the generated quarter. $XXX of million prior and

of investment other securities Title $XXX of and three average cash. investments billion billion an and $X totaled of and $X.X Our having and average securities, rating of assets equity as maturity billion duration million $X.X at Corporate of billion portfolio and as preferred AX, March fixed short-term $X.X Invested XX. well included years of an

in million $XX the and cash million business quarter, $XX income Interest our compared and Title with short-term as segments in and to Exchange investment Corporate from year primarily of income investments. increased prior increases XXXX the and due

higher would through rate environment, three-year-duration Given we the reinvestment rising income fixed income anticipate portfolio our investment of maturities.

spreads balances of expect with and million $XX remainder declining interest the cash in short-term investment Exchange range moderate and XXXX, For $XX XXXX to declining investment and the and we quarterly income million balances. to potentially

approximately million, were the million provision $XX title central our paid is actuary X.X% of above the Our The first million losses $XX estimate. reserve title for quarter. higher million claims or for $XX of than carried claim $XX

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

update. specific to morning turning F&G the earnings QX and a its call this Next hosted financial provided thorough highlights segment. F&G to earlier

financial products first and savings in given seek the So higher the the over fourth quarterly record volatility, highlights prior higher increase the quarter, a the billion This as quarter key interest for out a which spur increase sales guaranteed year total quarter. performance. and gross quarter, rates I XX% XX% will vehicles. first sales over $X.X on advisers reflects F&G demand in market annuity reported often fixed consumers of and of focus retail its

billion for from in the F&G XX% the compared first retained the sequential XXXX. XX% which in net of XX% September quarter, third-party MYGA was $X.X increased prior sales reflects reflects of to quarter, This for sales, reinsurance, as trend sales and XX% to which quarter. gross XX% of year flow

is As a This new retained fee-based ceded business, earnings lower reinsurance enhances returns. F&G returning accretive allocating the reminder, which F&G's capital a to business. provides requirement and provides highest while on to capital flow utilizes cash flow

first March This of segment as alternative valuation $XX expense from were includes $XX investment the a first movement short-term Record as quarter in volatility compared tax of quarter were portfolio ending return differs net current long-term as for million billion under assets the earnings that management from allowance Adjusted for million the for well expectation, period. XXXX. mark-to-market the F&G $XX.X with XX.

with thoughts balanced liquidity. and Let few remain We me a a strategy. allocation wrap-up capital capital focused on ensuring on

and capital sensible and dividend, through investments in generous strategic real share quarterly M&A in to support to strategic businesses shareholders repurchases. and business to to addition our organic we In returning are innovation the estate-related making evaluate continuing opportunities our growth, and

the with of holding quarter operating combination acquisition the level. $XXX cash of and $XXX in of million in at company and ended of This balance XXXX liquid company $XX million TitlePoint holding FNF's investments cash. short-term January We from a reflects million cash

million was notes $XXX early F&G's debt January. $X.X FNF's in quarter from million primarily consolidated on preceding March to $XXX up XX, issuance the approximately billion due senior new

future the growth F&G business of senior support from net liquidity the to proceeds needs. use intends and notes the for to

excluding, result AOCI. Our expect our debt-to-capitalization we This target our And in XXst. shareholders' excluding as with long-term balance of XX.X% XX% as naturally delever to of of in ratio March growth line sheet AOCI, that will equity a XX%. is range was

of Going our and interest million million, debt. on holding FNF's outstanding for forward, $XX debt debt -- $XXX approximately company interest comprised approximately million F&G's for consolidated expense is $XX annual

approximately quarter returned capital or shareholders, have repurchases. dividends million common share million $XXX million share of our During of of per we and through the $XXX $X.XX to first $X.X

as first in record and XXXX we challenging close flexibility, at of Following share total million, repurchase cycle. extended to moderated year-end $XXX preserve navigate our market of level due the prudently repurchases blackout the the cost to a we financial volume in quarter period our

view sustainable. common capital overtime, The quarterly dividend reviewed approximately as of We of $XXX flows, dividend our increase to uses market to and is cash conditions. and expected continue alternative million annual to current subject

our questions. This let turn to And operator, concludes our the me now call remarks. prepared for back

you. Thank

And now Please you. Instructions] John proceed first will question Stephens conducting your with Thank our comes Inc. be We session. from question. a with [Operator question-and-answer Campbell

HI guys. Good morning.

Hey, John.

Morning.

guys. Hey

a obviously there's reported of that guys complexity of dynamics with But And it feels they change modeling down regardless of and that how in, GAAP get accounting the F&G maybe lot of a come couple to like expectations. extra like cash With noise stage. to free you actually this at needed really the steps business. versus obviously flow these results what

Tony all there's that's And no day. the flow, of end matters the the cash you that to mentioned impact at really that

was So how you shortcut to that you And does F&G this compare also, results? it What generation then, the cash stemming that expected? I'm hoping How period? to could prior from compared for what us.

LDTI course, of And our and accounting for the on because to years didn't which question. little pieces of moving really frustration of alternative all about investment results the the some adjustment. but obviously an expectation. impact then point current to John much here just primarily to tax allowance a period and on parts returns valuation Thanks related your the Yeah. there's Yeah, prior introduced have restated relative a

excluding which can can don't we've you think, was there Wendy's to the have to that net mean, good, cash reading. so here, is Wendy, earnings you. the answer adjusted And in? can flow cash I but I you're guide the weigh number. you you tried basis have items, where just continues get of points I the flow, right. be right but don't And you to and keep XXX find have answer I significant

repurchase first announced we we'll the and second the So dividend $XX quarter. over the a pay up paid years. distributable in in cash, about quarter million the to we've we And the also similar three that dividend announced

our growth. the continue to to we we'll so business addition growth which have the continue then, generation a the of to at managing reinsurance about from target. of in right in-force new now XX% debt and capitalized use the we're support capital use We with to that And debt-to-capitalization right with help help to to the the lot course,

of of lot accounting is, And through. I'd nothing only yes, think noise, the lot the has that We but around story a accounting to add walk economic. changed, thing considering come a we don't

the I And, this but tariffs mean, in helpful. obviously, today. about off think guys number a for what tongue a I good there that's It's actually calls help us. just surprising Wendy ago, Yes, asked kind said I just of are XXX two you to cheek in asked where little is bit adjusted that can way number, for. adjusted the said provide to us Is the because looking we're and shortcut, exactly the future? Tony as a question

Yes. conversations. We've been having those

don't the I to the know, yes, components I think Wendy, you point answer where there. can is, -- are And

valuation then short-term the tax and just We supplement performance you you the help page QFS, the term for remove with and Yes. adjusting the and break out John. allowance. that it on basically nine replace should you're components you long

you'll for to transactions very commercial helpful. a wide of Eventually, heard in market. of concerns discovery will that right of around little questions where now. issue bit lot and pick come Obviously, see two that investor a week little then, bid That's me. up. spoke question is back from, We XQ being last your a competitors last too a Okay. the price bit ask the the and obviously, And

you sentiment. they from and year, bit a so, same what guys obviously, your XQ. year-over-year, seeing spoke And that encouragingly little in this recovery were I'm of down but about back you the still recovery -- a probably are in half a pretty curious if book share of

really near say would because to first order that knew is open of activity always just that And the last the going at is though the we're not window off, record best volumes Mike. our John. Sure, those into our market. in really And even least we the commercial be, to but year It's term. we have comp quarter

orders. our We over open on the improvement had sequentially X% an fourth quarter

right So would and first component of X.XX% April line. needs office, in think about at significant office yes, our you discovery we price was the a XXXX of were And, really But for was not orders. occur. I X.XX%, XXXX, with that quarter. there's to so kind agree when really

always than the in but important you housing affordable I and I in lesser hospitality. the part have mean, it certainly still multifamily is good years. of segments activity definitely would mean, story, pre-pandemic industrial seeing an we're seen like

really you quarter, million XXXX if look revenues So our at with XXXX. -- and $XXX the at through for in line

-- it's when $X.X market we you right focus think, market be two for in looking look last at we like would that's years. I aware total orders we mix said now open you certainly, to billion, not But, headlines, did billion year the maybe and this $X revenue what like. the the of the $X.X those So in the noise the direct all that together, a looking said similar to tend we're billion a really but that us that, last be we've years where on call before, we might on

color. That’s Mike. you, Okay. Thank great

Thank you.

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

that number pretty the which question to the sell-side there's reflects I around and doesn't attributable noise of you. there. if there's continue to fact it, results both to liquidity a I affecting in limits the a amount of clearly I you the it which think tremendous that results that past but follow-up Thank real a solid mean, the figure inefficiency on And is look pay work stock F&G. me, be in take buy-side of little had to it attention. the out quarter, the so people lot

as this and weighing on is -- FNF well. obviously So

full which versus is, accelerate business kind about spin-off living realize to to all are and given date market for monetization continuing later inefficiencies value. just those question the the or a persist, market potential F&G likely for that how you So these of the will of efficiencies look and the thinking of to my with grow just

in have is your to may this well. we taken. Mark. Yes. yes, and I'll tried well weigh Tony. not I point But is Maybe -- and Chris run and Mike by in as be Thanks want reporting. with little been just business and F&G's if a price extremely share you the have noise to to even performance tried have the performance distracted pleased mean,

point think FG we the been can't having and probably least being about help, stub it's it's so little been that recognized there FG bit frustrating doesn't or we what of do your still worth. since now just the stub to it not it's a -- disruption anything and a what December one But XX% out of There's now. macro is that it's at of is trading about time that we feel half lot at probably but

And as is Board going we our move mean things I all so, to yes, consider forward.

a five always mentioned spend the mentioned But in all. I'll in come there's in or decides spend three about easy if I've to Board stop year options, to there's think, I after at other process. go. an there guys maybe weigh would We're that's in tax-free also years. the tax-free where options, at other you And past least if the I've want

nailed, really, I me. really to you really, but No, nothing add think, for

Okay. that margin. near-term Great. clarify wanted the intended. comments outlook And the about just I Mike's assume was to for

it be specifically commercial sequentially the of Were or referring implying for I that XQ. you all think up Title? to in much you're wouldn't

referring I was -- to Title really good segment was Mark. question I margins.

in under the the XXXX. on were you that that's well seen about quarter think commented what saw. exactly -- I some fourth open the as we've last of would As we be orders call in and since as first quarter call pressure weakest the said the on the And margins

XX% sequential in seen quarter. April, first X% in to the the more in should those low six, but orders be an So the a with actually standpoint. on better improvement And also we're the prior still as closing margin at first expect help volumes But we're we from plus for side years the the That's quarter. average look side, in increase we've the seven quarter. given in forward improvement in the quarter by second modest than encouraged purchase second on improvements levels the

Thank Okay. That's helpful. you.

question Thank George with… you. [Operator Instructions] proceed from comes Please Our with KBW. Bose next

Hi, morning. Good guys.

If ask the seen not think in we we XQ this about go normalized occurred should of uncertainty more least? to for level buybacks financial buybacks of how a to TitlePoint XQ persists and at then buybacks. wanted year about have would and cadence back Just just had assuming

is Thanks, a and XXX,XXX did the we did quarter beginning the they have on $X just pause know in mean, flow did blackout buy of the it's really Bose. traditionally play. TitlePoint we given two Yes back the I Board ultimately Tony. the But the business but years. before quarter first at was year-end don't than past to into blackout. the economic the normal saw, quarter, quarter, we take very extended This decided always a cash and back our reporting later I which buy came an billion this shares of it's low because weighed really the decision, over buyback. stock of decided that then And that in in challenges everyone in quarter Title -- a period on over anyway.

basically as the well. it quarters historically at the for if I quarter, stand-alone which flow generation was we've look in zero cash first seen cash mean, you flow FNF's

just And cash. on out. But I how made company million remind think holding to think flexibility. sense So I'll maintain super plays we financial I a like sitting of everyone to We're this market unusual. $XXX wasn't pause it see

best others Chicago opportunistic we the when that maybe During do some historically, Title, didn't. distressed most made others our acquisitions to had of America, because Land wherewithal we've times,

it's moment. think want being just where us cash it and the to we And the so at prudent about put I

cadence buybacks Okay. And of is market of just the terms in that kind dependent? of

Yes, so. I think That makes sense.

any alternatives. then came outreach this have And there actually mentioned could you looking to what I been Has Thanks. Mae any great. ask Fannie of at Do that the sort they Housing on you to thoughts look guys? like? Program that potential wanted Okay, title pilot Equitable out

Mike. it's Bose Yes,

really that again on that to and kind that really we title than not not to Mae or ALTA ourselves through of impress We programs and lead with both kind through of Fannie respond tried are untested seen have anything even evaluate but to a upon those the some we've just could potential the more ALTA the with rumor FHFA pilot not. We've agencies we've could uncertainty waiver proposal. talked and seen

just try records explain and and we we really role to And to closing and process the the that. it's land very the of the safety important play in why what of do preservation

that So, They've a time if there's really come acceptance we AOLs alternative. the we they've as bit very product. that don't of lower-cost on it's uptick And indicated. out the more even or the also proposal not. this will little talked been expensive. a know may And we just lesser a there's think front little at AOL a think from be value certainly It we don't about it's

Okay, Thanks. great. That’s helpful.

you. Thank

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

happen to for Yes, April? you. Do on gave month purchase you thank of April. sequential some for commercial year-over-year and good the you the have data Mike

I do think Mark. I Yes, do. I

I me a second just up. give got to it dig Just here.

prior And April April open orders been So, purchase down XX%. XX%. the year it in March was down of on had over

that Refi commercial April-over-April. And down way. improvement here sequential you down of second it good was XX%. think give XX% of was when kind So, a me

indications on a but that. I improvement Thank margin? else it Anything the haven't going it like in orders the modest the of you some encouraging yet, seems Is You normal overall but study relatively think meaningful. is or returning. usually clearly margins of for historically seasonality was said weak -- done sequential you're of mentioned the with that I improvement you've something margin there level seeing

unusual margin the uplift? anything that to from QX this different a imply QX would way other than usual progression pattern the it ask about just I'll or -- Why year the

change progression rapidly we're a that know orders we such significantly have rates. that things there's can It's be different. just and thinking I with would the that volatile environment don't and Mark

potential the bit introduce headwinds and a then rates stability. inventories and around you and volatility think of banking given banking caution and this I it's So, just

from And historically dealing activity. of that of caution so fact still And a kind levels just the perspective. it's that with low really we're

Appreciate that clarification. Thank you.

will Thank question-and-answer conclude now you. the Mike for Nolan I closing our CEO, turn And over back session. remarks. conference this to will

you. Thank

in to market We year navigate to uncertainty current the to and with expand the and pleased despite FNF business the our macro are long-term. cycle the current solid the environment. build continues well-positioned start our is Title for volatility and

Likewise its F&G's momentum expansion many further business ahead drive profitable returns. expand and demonstrates with opportunities improve growth strong margin to the

this time you interest morning. your FNF our for appreciate on in We your Thanks and second look updating forward to call. earnings quarter

you presentation. call attending today's The conference Thank has concluded. for

Good You may now bye. time. disconnect at this