Fidelity National Financial (FNF) 8 Nov 232023 Q3 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to the Fidelity National Financial, Inc.

Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Lisa Foxworthy-Parker, SVP, Investor and External Relations. ahead. go Please

and operator, Great. welcome, Thanks, everyone.

today Officer; Executive me addressing questions remarks. Nolan, look Chief Tony Park, your prepared our Mike and following Chief to Joining forward are Financial We Officer.

Wendy and Q&A include Securities the today's forward-looking statements CEO; F&G's and of not do Blunt, Young, CFO, revise under us do portion call will which strategy. earnings guarantee reflect Today's such Litigation projections F&G's call. not statements for join or may Private any Chris Act or in We future subsequent Reform performance. information, to undertake duty update changes events the to new events or

cause most to for financial differ materially actual Please our recent meaningful refer implied. filings and from those other a expressed annual to investors. morning's non-GAAP the reports includes may or discussion of also believe be SEC could results and discussion This measures to quarterly that we that factors

telephone where It within measures required website. issued Non-GAAP to which with a the on press earnings is Yesterday, available our SEC Today's company's available for we our release, fnf.com. have on accordance will in call and be X:XX available will Eastern today beginning be also November materials is available at replay also website. XX, been XXXX. at reconciled webcast being GAAP through p.m. replay through recorded Time rules

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

industry-leading in morning. to have peaking over level at highs title Overall, that of This November the delivered Starting is earnings XX.X%. and an adjusted had of adjusted is which good market. recently given we an result, with XXXX. despite especially of margin million you, multi-decade October, since Thank business, highest tough U.S. rates mortgage advanced outstanding in pretax X% $XXX strong title Lisa, we've a quarter our the pretax

decades ago. keeping have lowest since which X is decreased on residential a level this XXXX, turn, their to almost In lid purchase applications,

result, have a managing operating we expenses and year. As focused be and on staffing this reduced continue to expenses

operations by XX, has our over September reduced count employee the total been As XX% of field past XX months. about

about run in savings quarter the of has rate third XXXX. This personnel in million quarter the to compared generated cost as third $XX

direct We also from about X,XXX, locations our million reduced in savings. to title per approximately office have generating X,XXX month $X expense below

Commercial volumes with expectations. trending are in line our

on revenue $XXX quarter third in full for We first and of $X the billion in seen line the commercial normal levels and in XXXX have year us years the to like $XXX with track generated million X more months, XXXX. million for putting in

Looking the versus day month at for of month refinance prior from sequential for volumes year. X% purchase versus the down X% the of more line quarter October with prior and of for versus of the XXXX, X% September, month were per orders orders second up quarter September X% the opened down year the XX% and versus of October of X% October month opened and down second the October for in down closely. seasonal expectations Daily were down from the XXXX,

in Overall, the X,XXX with total the day averaged versus and September July total September. quarter August October October were X% opened month the X% quarter quarter in of flat the down versus year. both in per Our third day, commercial for orders prior of versus the for X,XXX the for orders per $XXX month X,XXX and second opened XXXX, down and of third

September. down opened X% the month X,XXX versus were of day, October, For per total orders

much year the historic turn like close and which pressure our industry expected we performance pleased is order out lows we first at While we volumes cautious to anticipate in remain profitability, the are continued enter as margins and near strong with we or last as year. quarter,

open protect in trend the our to business profitability. our manage orders will to we always, As

strength, pressures, real profitability the benefit bullish estate recruiting making our we the market. our A title in industry-leading business Beyond financial continue is mid- near-term while clear our margins. of and of investing on the maintaining fundamentals long-term and to strategically and expand scale technology, by have remain to acquisitions, to talent to do build which we ability continued

Turning to our F&G business.

provided an pleased and to employing stakeholders are its October is of to $X.X benefit of last capitalization its for of on billion. approximately to dive We the track increased growth Investor deep and spinoff as $X into investor recognition record time as X see F&G's value which the will shareholder. company's recently create December that strategic partial from a at team F&G FNF has which the highlighted market the success proven levers held Day billion majority

F&G's X upside recap, areas. future potential To from

asset sustainable retail growth growth and First, pension risk from transfer its strategies.

from effectively from operational earnings reinsurance fee-based benefit expansion margin investment Next, operating flow expenses opportunities, owned for incremental managing and distribution. scale and

the to and And performance nature its more as fully reflect reinsurance core finally, scale we business price believe distribution its time. flow and share over owned for potential is of accretive there strategies F&G's they

grown management F&G September $XX the before and comprises now adjusted XX For reinsurance net to under at quarter, profitably its billion of XX% earnings. has assets record flow current FNF's a

headwinds. for delivering manage market industry-leading to despite that opportunities team I'd quarter wrap is our while like up of the invest prudently take the continuing seasoned longer-term thanking for cycles performance to growth. by tough all This advantage business a to to how in another through knows employees this

Park me let financial Tony With the to to highlights. FNF's turn call review quarter third over now that,

total third revenue you, Mike. results, Starting we Thank our the billion consolidated with quarter. $X.X generated in in

of earnings including losses losses quarter XXXX. million of million net in the third million $XXX were of $XXX of net earnings net recognized versus including net recognized quarter $XXX $XXX Third million,

in segment $XX The The and Title net a recognized will securities segment whether in to our contributed primarily The $XXX quarter net securities, net $XXX were due equity loss million, and of held gains are portfolio. losses the contributed disposed period of stock the treatment in million. had of investment of earnings be Corporate F&G to million. mark-to-market and accounting preferred the continue each segment

as revenue the gains for recognized or with net share per continuing losses, per $X.XX was $X.XX billion diluted million third third from share quarter XXXX. compared Excluding net compared $X.X billion or Adjusted quarter and our $XXX in with XXXX. $X.X million the earnings operations $XXX of was of total

million. segment Title F&G $XXX and contributed Corporate segment The contributed million. segment net the loss an The of $XXX adjusted million had $XX

financial Turning segment. the highlights to QX to specific Title

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

decreased Title in adjusted year expenses of and other XX% and title-related prior decreased decreased and pretax business premiums decreased costs title XXXX. XX% escrow, the versus a by decreased $XXX premiums by by adjusted by Direct quarter. title XX% pretax third versus other the versus fees the X% quarter Personnel quarter million and All Agency by of the earnings prior operating the XX%. XX.X% margin XX.X% generated in, year. for

portfolio investments. exchange Our at prior to Title income business segments and investment quarter, and and and totaled investment and short-term our XX. due higher XXXX in primarily income the increased as Corporate year Title $X Interest billion from compared of the September $XX million with Corporate cash million $XXX

and to in ahead the investment million and XXXX, moderate spreads and assuming Looking balances. with to range income expect short-term we cash gradually million and to quarterly $XXX Exchange $XX interest declining level investment balances XXXX

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

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

earnings its update, turning key F&G Next, QX and earlier so to a morning focus specific third down to quarter. highlights financial reported hosted X% provided call This will on channel F&G from the the billion in of higher lower this I of institutional its sales, the market segment. F&G highlights offset performance. reflects the year quarter, sales quarterly sales. by retail $X.X gross prior thorough

a F&G quarter. seen sharp in and environment, sales has record for sales product in off annuity were in submitted in market agreements annuity enhanced provide the create and this first finalized a retail its which sales half growth to Coming position for Within intentionally reinsurance October, XXXX. to the strong increase as to fourth and of for features September XXXX the expected in finish year, strong F&G is a quarter lower momentum premium the trajectory

F&G's billion quarter. prior retained in $X.X were with line net the year sales the third quarter, in

F&G expected, as and to XX% sales in increased addition, flow MYGA of XXXX. of has In reinsurance September

flow returning retained As reinsurance, new to utilizes provides a on reminder, F&G business highest requirement the capital allocating lower while ceded business. which capital a

billion cash flow, profitably grown its provides F&G's record is assets This a to fee-based and at enhances management accretive returns. September XX. to retained has under F&G $XX earnings

the for of reinsurance ceded. $XX billion under Assets business adjusting before flow cumulative was management approximately net $X billion.

million expectations the in million below $XXX were includes or segment share. F&G investment long-term quarter. the for $XX alternative $X.XX our returns earnings net per Adjusted third This by

the liquidity. which and on We the million in level, low market relatively capital cash wrap Let year-end company up historical investments current steady at me has title and we the of remained the liquid holding capital business. quarter effect balanced We environment. on since with and remain volumes few a $XXX ensuring the short-term despite with focused headwinds strategy ended in navigate allocation as a thoughts

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

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

at Following a XXXX cost record a of level XXXX combined of billion. in and total repurchases share $X

there to flexibility the multi-decade million months volume moderated prudently only were share repurchases this Therefore, X this quarter financial cycle. through months have of market We in no the X of the volumes first of third year and $X the share low the in of our year. repurchase in first repurchases preserve

$X.XX During paid common of we quarter, share third dividends total a for of per million. $XXX the

view our to million current as continue approximately common $XXX dividend We annual sustainable. of

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

first Our Bhonsle Instructions] with from Soham [Operator question BTIG. is

well. doing you're Hope

margin. mortgage the you puts that first But of quarter that's about environment, the different talked pretty thinking know historically So to Should one range as there can't now? normalized. XX% talk a reason toughest XX.X% through we you've this be The in there? of be higher? about that, impressive. could one a I title And on and is And takes some maybe just XX% that's

Yes.

we a about the to inventory very take rates volatile quarter with range. in different care now, with We're just certainly a right low historically, of employees pleased third in performance and expenses. the margin environment but of in the continue at and manage X.X% customers, think to the work and very our still talk I wouldn't field volumes recruit

the But to little about from quarter, this a to about that past the need expense pull little quarter I think to -- margin margin some in pickup it's allowed that annualized stronger third greater second if look our XX% And get quarter. I then you to subservicing a we nontitle at really than the think of us second discipline talking think volatile and really bit like XX%. market businesses an to

Yes. quarters, down is of inventories so. couple I and in gets number. quarter an to mean, the But come last range. more annual XX% even XX% And when first keep quarter mind, challenging year, recall the that in we've from the fourth last been you then certainly, more the

you there. We're a in whole not still when the talk environment. year, tough about still you're So

so to on quarter we that, the Yes. in quarter. the add And remain term, cautious first for short fourth on I and to margins think

and inventory as similar pressured were fourth are we quarter into we you got year. quarters. saw going to fourth how first saw the through what levels And Our the margins open last

scale have. of to and this point, margins that the the But industry-leading positioned to importantly, market we're returns, structure we very your more we kind we're drive as cost well confident given have that

of of we as to returns, these this rates we'll moderate be to next think margins. market produce But and quarters. we very couple strong able got So kind through get

it. Got

of to. sort I you is FG performance adhere the And you want that -- obviously to know strong. That the XX% of on But in lack very makes one stock. that of the liquidity concerns And may we sense. there's be ownership of threshold then hear to continues Okay. sort

business talk also that would accelerate But of of interesting sort strategy ownership some unlock their considerations just it some capitalize the there for an And to would perhaps help and just the the way reduce over equity opportunities. use this maybe raise FNF's multiple. time on because the maybe through seem that capital could there could potential to be

thoughts there, So any please.

from see can seen Clearly, liquidity some No, and little share their a that price $XXX F&G there, their Yes. flow there's have new million plenty and generating is in-force and roughly challenge new great, of to Their good cash you of is growing probably stronger. They're in had. margins points. be business make a results. as because volatility reinvesting from into you you are the in book that. business

XX-plus percent that the at raise are do. preserve will they see the Board have do have yes, wants to so grow. And -- we'll mean, we'll ultimately, We want so Chris decides the to equity that how future ability that. FG more need and what see. to off in to But And spend about. now. if comes we ownership FNF equity I that's I ways but some thoughts, to that there may to preserve guess, continue tax-free XX% to We're

there. had Chris, I more know, add to And room so don't any there bit a or? of you there's if little

roughly X-year mark. it's the than other until No, months now XX about

And potential tax-free so, spin your related comment. to just

Mark next is from Securities. Our Truist Hughes question with

orders there the progression between the QX this if Last at from about headcounts to and you the XXXX, How margin, you from year XQ drop. that margins in was the -- or XXXX a that? 'XX 'XX all about and pretty year, XQ, Thinking QX. substantial do look just XQ more to well progression sequential I'm seeing that sorry, up you're held and and think given XQ,

closings less be the of similar. we're wildcard year, closing a what to are terms specific have can refi, We're did last much on to year like commercial but a in going the Mark, very not the bit I number, little maybe Well, going last of guide again, to inventories just a resale we look a less very, because would of fourth levels quarter. at happened margin,

the think But inventory given we be I it's have. tough to going quarter just levels a

other mix Some and quarter. takes the puts in agency be of the can

a push lower. the revenue to very If short in we're the really will, of because you -- way going an I or low the you gross have -- segment if sometimes more margins downward are other. and agency can on natural as inventory are businesses has that margins sort little have around it's pressure a just at levels just nontitle natural on margins Title edges, just that push bit term. But think, industry, on one margins, a down then And the the the that's in the

around I'm then maybe on impact F&G the if any earlier indexed Department this call sorry but annuities. on And the came Labor, up that? today, Understood. of proposing fixed some new Chris, rules

contending it's Yes. Honestly, different I different for a slightly we've -- have to same been of It's rule don't any the meaningful impact. just think version with years. that of going kind

the similarities best interest rule the A to from lot NAIC. of

a channel, We're maybe grown and total But the nothing and our I if in that is extra say little to compliance our so which that's want it. be the channel looks add to there's margin XX% within as And sales. to in the of probably. bit independent business, expanded, could agent independent still oversight digesting us particularly there of even expense to threatening we've obviously

services. do But and are that and through They're now lot the even within sophisticated firms. think a right, our IMOs very own business of the bulk value-added really their well through that, RIAs they're I positioned. Many of of broker-dealers of have competing them we

think editorializing particularly skip there's worried just I'll necessary, I So is anything on say about. whether we're but that this don't that

next Our Inc. John from Campbell Stephens is question with

Nice quarter. the work in

impressive across mortgage got just seems rates. ever X% order turning It RI given and On since that's backdrop obviously, things was like slightly, is the clear you've a board. the count, with positive kind of that the October and are

here. question Two-part

thing First, the and that's right? what's showing both the at side. industry in on you I mortgages, there mean, think, First I the both there the American MBA of of out guys clearly weekly better are, we on trends look mean, and mean I is apps. forecasters implied than from the based purchase kind I the number been market,

of I this year. rose sales morning That cash to up XX% stat last saw was the versus that the like I think mix. XX%

seeing to question purchase sales? the side? on fee is, rising might any to that's if And is the the guess deviations you seeing from are others a there meaningful I there per case, cash out the bit little So be in what guys due maybe of impact file market

a heard field the It's that Yes. really little seeing track question, a It's I good Mike. that I've cash been more has John. It I think don't sales we that. specifically. know and be bit anecdotally, more of maybe might

-- that's -- sequentially. opener, seasonal you But XX, rates mean, something I points be more orders a or And they movement. October up, third back that what frame. fall point, at much as the the XX don't I in honest time XX, then go And know, purchase in to to they you, your expected very happened fell quarter, when that said look were during I rate and X% given like basis our the but went off, with I off. fully with fall

I So sales little and maybe I maybe element are an your outperformance there's that on with of I'm sure that. going not agree a of cash it, think premise but

chime I'll in Maybe per fee file. the just on

X% maintained it sequentially year, up, a probably QX, to that of started a holding but QX bit to the it was the of QX I prices down but like people purchase me home back well still little we're I of felt up in right their QX which last Maybe thus have bit. came you from this surprised then last lot tick versus a think far. trending quarter pretty quarter value. little the it up as quarter down year, surprised of first first got year, into -- on about side, fourth

X I kind years, for point. on years, great feel the surprised last the on the downside. of all a been I we've mean It's negative X.X like Yes.

So that to it's turning are these sure. good for things see

Refi to a obviously driver not me, even I meaningful that's mean, anymore.

spend it. X% the mean, time So I higher sequential I rates. gain, But to backdrop of that's, hesitate even on against the again,

mean, trough as saying refi? slight right now? to out could I us mean, comfortable you are coming of send growth And you like that guys that we're in rates reduction go kind -- you true are I back saying any of on a far would feeling as

with I to that, agree John. tend would

If open orders. you refi look our at

in day. line, X,XXX XXX a And for the the And around, been we've averaged rates year. through generally open straight So it's This now a have on you is the quite did I right, Tony, across October know, a as we mean year. side, moved bit. October.

So it rates a that go were at a volumes I kind your market, time in refinance got back X% that's last XXXX. said bit last to take down the refi generate of come go certain absolutely does on But opportunity. amount little you feel -- think And like rates $XXX down, we're think to about small up, was floor. think, if I year. might was rates very that, true. It comment a to time That of I a that the I come this call, billion

it were a And trillion $X.X X% in was 'XX, rates and refinance market.

Now to I'm do over market that that time the But now. build points it refinance not rates. how saying with drop happen in I will can think

last X% now, X% our fourth of QX and terms And of year. quarter that's X% direct quarter the revenue, X% and quarter. of and percentage in And was in a revenue the last in consistent. X% in It right is been pretty third refi as like

at just levels. flatlining low And so very it's

Instructions] next Our with George from question [Operator Bose is KBW.

are or you even wanted moderate head Or is I to I'm to to that maybe volumes it there XXXX flat that wondering, the mean, likely moderate. starting other that back balances just Tony, to that to noted income. investment like up? on back factors caused looks even go if are are your guidance volume-driven? I

investment it's as Yes, expectation more else. than predict the regular down. conservative, order come when we're forecast about income a be next to the anything that of really But counts year. talking especially trying for It's just to

as billion side, in year title come would down have consistently the Balances accounts well. $X.X range. On up very the held the XXXX we long to really expect all

that And points But hasn't those basis we're changed balances. so that, comes about XXX down. yet. earn just that We anticipating on

down as then down, And comes come so they come that, if that can or they down. you see

expect of into in million maybe decline so as maybe And -- would income XXXX. make in quarterly a way we I our $XX

Okay. Actually, commercial? residential the and XXXX That's what's of helpful. between me you remind split can the balances

a residential was recollection, more Mike, thought. you My question. That's than that? remember good do it I

of balances... terms numbers, in residential. But terms of in like it think I was XX%

don't I remember.

you I we on both, it think we I But have handy. have the that have to get but number, don't to one. back

at been while, been looked year we Yes, a either. it. probably I It's don't a that

would this, you probably than say residential I in order think of it's the more terms flow.

then helpful. just question. No, And Okay. one that's broader

the lawsuits recent against potential buy-side the commission especially in with the and change for there, realtors Just the structure agents.

that about do are Just if changes? what curious there what the your thoughts could landscape

really couple suppose. Yes. About buy-side a of predict a our to on that for companies probably hard impact point. big it's less that appeal. think to -- the impact was of Obviously, agents, a could I our probably go on this view this, while. will ruling But but going from at And I business. This it an against all are

for We still trusted very will still to sell and that continue community. that the working intermediaries that tremendous communities play the real will transaction closely homes. be think And really and people and role. bring remain. value expect They're important who we will we trusted will with And agents the estate real buy think local an I -- to estate that

Stephens with Our Campbell is next Inc. from question John

in just gap direct that's On couple here. there. in you've than the you've but the follow-up premiums. warranty other up obviously there, I Last to revisit quick One held The revenue and quarters, got has here lot title a -- subservicing got line. of I widened want late, escrow know of better

some of there, recurring subscription got revenues. revenue you've or in degree So

as getting And in well. TitlePoint also then I think there you're

margins? also maybe you if some some indication of from of could impact the unpack TitlePoint and us on on maybe So that kind give what was

the out John, and a little break recognition this primary Yes, is revenue But this you the in pieces. to bit. Tony. right, footnote you're helps named Jay Yes, XX-Q footnote,

to with better First premiums. in title there, tend and escrow but up premiums, fees direct they've of all, title they are held than direct trend

more And I a coming of part and think that's fees. could That percentage has lower bit off commercial a a combination it. little of of escrow maybe commercial be

a just fee. sometimes I you also escrow think flat have

come a And accordingly, down down, so if transaction a were you fee size fees XX%, to but the think be about down base were will that may have whereas XX%. there down premiums about then that's premium because direct escrow only I direct escrow

of care, percentage So And there which loan is the in subservicing same a year's that's part last was then against as actually down was the positive. saw Home loan It it. maybe what bit, third warranty title side. up we that little as in up a was QX, so quarter, not but on well. is

then has and default versus different some stable businesses we businesses fairly saw it on and And the was there, in title other, side. ServiceLink what some

there. of terms head it have off the is TitlePoint, as yes, In top in margins of what's my well. the there I don't

compared QX TitlePoint, Property in to revenue our was includes but last if think that follow-up. increase margin. I range somewhere have year, with million which the don't XX% Insight, as can My be a guess guess, is that in up I of $X revenue about I had but

would hand CEO, the no to now conference are comments. for there further closing over As Mike questions, I Nolan,

Thank you.

expand the year. first proud our title tough current and business the X We in remain strong the long months positioned of the term. to for build continue performance are navigate of and We market to well our very cycle

drive growth, demonstrates earnings Likewise, Thanks with our in deliver margin call. morning. to ahead expansion accretive look your you its returns. fourth forward and F&G's and asset your many quarter updating momentum opportunities for FNF to strong interest on profitable time this appreciate generate We growth

Thank National participation. Fidelity you now of conference Financial, The your Inc. concluded. you. Thank for has

your now disconnect lines. You may