Fidelity National Financial (FNF) 9 May 242024 Q1 Earnings call transcript

Ladies and gentlemen, good morning, and welcome to FNF First Quarter Earnings Call. [Operator Instructions] 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. Please go ahead.

Great. Thanks, operator, and welcome, everyone.

Mike Officer. Executive are Park, and today Financial Chief me Nolan, Officer; Chief Tony Joining

forward addressing Young, look of Blunt, join We to for today's F&G's remarks. our us CEO; Chris call. prepared and Q&A Wendy the F&G's will your CFO, portion questions following

to Securities future any Today's call statements events in events update We not undertake Private or to subsequent forward-looking Act, revise which such projections under statements performance. new earnings Reform and do duty or or include strategy. the may information, Litigation reflect not guarantee do changes

and Please a refer to annual that to our reports the expressed of from other most could for recent or filings materially actual results quarterly differ SEC factors cause and discussion those implied.

financial meaningful may non-GAAP available been earnings we This on accordance measures required have our company's also measures to to Non-GAAP SEC website. morning's be GAAP where with materials the reconciled in includes believe investors. within that rules discussion

Yesterday, call May also we for at issued a also through our fnf.com. at be telephone beginning X:XX It Time being be webcast today and is website. Eastern p.m. available replay replay will XXXX. is will on available through recorded available XX, press release, which Today's

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

morning. you, Lisa, Thank and good

market We Title Both year. businesses results quarter segment for pleased a are the growth. start very for longer-term to the are current with for and the provides both and our first positioned strong F&G, which well

title the for quarter, achieved of an basis adjusted the a $XXX and segment earnings adjusted points Title and quarter. in increase Our prior pretax in of margin continues title challenging environment. well business pretax an margin We the delivered perform XX% volatile XX to XX.X% year in million over first of industry-leading our

orders last seasonality X,XXX year, purchase like forward. with that first and the opened per April, normal per expectation In historic we quarter, This off to roughly open coming the quarter continue much resilient mortgage saw order temper sequential consistent. orders margins pressure XXXX fourth our Refis volumes with is purchase in higher going line in year. steady low but last In volumes quarter. with would up X% entering purchase first Commercial are at performance improvement be holding day at rates over floor. current may day were volumes the

We generated multifamily, XXXX. and affordable with quarter, to in recent housing trending $XXX the first annual in years. $X in in revenue other strength continued billion commercial of industrial in similar energy saw like the line approximately revenue in levels segments and million seen We

the closely, for daily fourth Looking XXXX, X% at versus the March. of the XX% first quarter first X% up year and over quarter for the month of the XXXX, X% up of volumes were versus April more of up up April prior purchase opened quarter orders over month

Our opened of for XXXX, and day XX% up down March. over from month refinance versus year the of the April per quarter the X% XXXX, down versus quarter of X% orders for were down prior month of X% the the fourth April first

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

if a versus day, some we year. this orders with March. later up For proxy in opened down were upside time, continue to At X% XXXX our the remain of performance per and month come as this X,XXX cautious April, view total rates for XXXX

to expected the housing range, mortgage challenges However, the inventory in higher affordability rates low mid-X% running are to near in from persist and term. currently market low

rate of low couple the the to could mortgage range next mid-teens we pretax Given over into adjusted quarters. move see margin title volatility

for timing come a scenario down, into the mortgage housing more the is inventory performance. market where rebound are last lower in and In to The comes largely upside market we well potential rates. the uncertain, year's positioned dependent on to and rates capture

Overall, footprint XXXX levels higher saw and volumes trough much through incremental margins stronger provides help we XXXX. above diversified our the current to in showcase what efficiencies would scale drive and that like national

in our business and current headcount the orders monitor focused In continue we carefully. remain trend opened we'll and to environment, managing our footprint on the to

develop Over recruit the all in to margins. market, talent we'll maintaining estate long term, while make and continue remain real and industry-leading acquisitions technology, the top invest on and bullish we strategic

on I also costs Washington homeownership wanted the in buying a on from associated emanating recent America and some with headlines to home. comment

strongly CFPB and value to and comments a economy in it dream critical more in we to broader reality. role make American support broader to provides recent the the consumers insurance While and title the of relative we plays that affordable, the insurance FHFA the homeownership effort from are homeownership a the the misguided display make believe role helping misunderstanding and the of vital title

not protects but property consumers The ownership records. only land also rights, of integrity industry the title critical

insurance unlike and value Title event insurance from for conversations many homebuyers in wire to duty policies, we and the GSE deliver their is our sellers, to participants helping opinion provides CFPB addition, claim, of continue their and first fraud. lenders real services that waiver. insurers America's in the transaction. with standing state opportunity or and estate what a defense attorney buyers important in covered with to settlement and letters a real most In to are we'll a We and line also the FHFA and other mandated behind in reserves continue welcome title and discussing engage insures actively title them stakeholders the have sellers of fundamental defend protect estate all

record to March billion profitably reinsurance F&G management Turning to our at F&G a has $XX business. XX. under its assets flow grown before

first board's $XXX even performs which will F&G invest current environments, of to higher rate quarter, environment exchange nice F&G F&G's compelling during provides convertible low our well and counterbalance are better demonstrated, accelerate Their AUM. growth a business. the business title the As and a in for and mandatory in to rate a security. led opportunity its for the retained enable of million to decision advantage to growth This take preferred in prospects

expectations recognized in growing well. that Overall, value be strong shares FNF's since in F&G's December pleased price performance being its seen performance, of our the with share exceed this as as in F&G is continues we are which F&G's to performance the We pleased is even market recognized that believe listing more to by XXXX. of beginning and

that, I and for delivering me outstanding highlights. the the another like employees to to provide our the to efforts thank year, despite including would over call in Tony turn tough financial start review additional market. With their a performance performance FNF's to quarter now let industry-leading first solid

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

Excluding held preferred net the recognized the billion, losses XXXX. are off investment $X.X gains equity were revenue accounting be and mark-to-market The continue in our quarter of period compared stock in treatment in in each $X to total net first losses, securities portfolio. disposed the securities quarter or primarily to of was as billion whether recognized and due our with gains and

million net $X the recognized $XX net million XXXX. million, quarter $XXX first versus in loss a of first gains including net of of million, reported We net of $XXX earnings of gains including quarter recognized

Adjusted $XXX with compared $X.XX million per net quarter the per diluted $X.XX earnings or or for $XXX were first share share XXXX. million of

F&G Corporate our segment in and financial the segment The statements. segment contributed F&G contributed contributed of $XXX million. before million million $XX Title The income million eliminating from $XX dividend $X consolidated

Turning to specific Title financial the QX segment. highlights to

Personnel the and million and million Our $X.X adjusted gains billion of $XX for Title generated first quarter, XXXX. XX% margin other compared in earnings quarter. the a $XXX prior fees increased compared premiums increased X% escrow title other X%. and the versus operating Agency increased related with pretax premiums the and title billion $X.X in segment XXXX first revenue title prior the in title quarter of adjusted pretax decreased first generated net with the in, million for Direct increased excluding recognized year. expenses versus quarter $XXX of X%. All total year quarter X%, business XX.X% costs the of in X%

from corporate business $X.X in and Our increase our balances. from Interest primarily of million $X March the and cash, title Exchange income by investment quarter, segments declining income due at portfolio and the lower income XX. billion over million, year fixed short-term an XXXX investments, title prior offset income investment $XX from resulting totaled corporate partially higher and to was

points quarterly million, over For stable XX with income to cuts expect of months. remainder and the $XX XX Fed funds anticipated of next interest we to basis $XXX million be the at investment XXXX,

quarter in per segment. addition, approximately F&G we our income expect million corporate to $XX In dividend from

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

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

billion F&G provided F&G Turning highlights first thorough market earnings call morning line strong hosted the this quarterly sales $X.X the continued first key F&G in net in reported its sales specific XXXX, sales. the sales increase year institutional with of quarter, quarter. of quarter, quarter a on will first gross a to I F&G's and segment. the in of $X.X robust were from its X% highlights by to prior performance. so retail financial driven and earlier the update, retained focus billion the

was per quarter. long-term under the its million March first $XX investment for share. grown flow reinsurance XX. $X $X.XX management expectations in net and to billion or $XX or AUM below per segment were million profitably $XX.X record million assets significant billion. of Adjusted $XX alternative before has items the income at $X.XX share by our earnings retained F&G This returns F&G a includes

cycle share items and the To bring $X.XX net or $XXX segment, F&G together, in a million balance adjusted it consolidated quarter. From significant liquidity capital maintaining per diluted perspective, strong a the excluding all first in earnings, the the are as million and were we FNF's short-term level a in capital investments XXst. allocation at the at $XXX of balanced current cash We navigate environment. holding at strategy March the focused and liquid remain held on company ensuring sheet trough we

investment January XXXX, given grow the As the reflects F&G million in in opportunities $XXX many reminder, business. their a made amount to this

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

AOCI, line XX% long-term our Our with to XX%. of target consolidated debt-to-capitalization range excluding ratio, in remains

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

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

to opportunistic year. title long-term growth see $XXX invest in continue We averaged spend million business typically on acquisitions per $XXX strategic million and the for to

XXXX paused uncertainty repurchases, share in history. we of the activity one years terms of our In weakest in during due the industry to

no were let call there repurchases market, tough in me a turn questions. first in now share still operator are prepared for our concludes our to and the remarks, we As quarter. This the back

with [Operator line Instructions] the of is Our question Bhonsle first BTIG Pactual. Soham from

First think on more of as one, a margin next trending Can up April. so margin just similar a comment, few or low Mike, Should little something the X% there? you put looks bit down, we orders to on your over were you like more just far to maybe the on in Because the last maybe are elaborate just year-over-year better? and quarters. that that mid-teens higher year orders

the Or just that if coming are down that wondering just So maybe this seeing? we're not there are conservatism? some is costs pipe

And refi volume you good as levels, when commentary guidance, relative Yes, And lot be we the lower don't revenue that think flat. to sure. lower you think part I but in about margins relatively know, I of environment. the fact levels, these reflects these to segments, at give particular expect we'd is a a the to take the mean, it around doesn't various quarter. and move margins

one other. see So you volatility don't or much way there the

margins a commercial your of so around. business, lumpiness kind particular quarter. the move given in that on be how And of And can kind margins will of out that dependent finishes

direction. in And then if secondarily, either there's rates overall mortgage on continued just volatility rate

it could affect purchase So down, it up be revenues. or the could

that revenue add where stronger we and are if positioned I grounded that's we in. would we're to see there, So well think have I the improvements And just more margins. comments drive

Got it.

And a whole place Okay. the to quarter right, contribution a it environment. EPS I this this this then your basis, able is exceeded offset kind F&G's on at in time, to mean and looks tough title first generated thesis, of earnings least core of being title like what

embolden factors owning maybe sort stay guess, to does management term? comes of longer of I on the the So this to performance course team sort the asset think F&G? that are should about you Or there and we it when just other

question. fair a It's Yes.

a there's for for the saying been and happen We while over can't very board might we've there. that intends and businesses, future, and F&G's will opportunistic if a you, better can't what think performance. pleased staying various do now. exactly predict least I is the is what with predict might the to happen what board opportunity, at so our we've been course history the I you tell with But

When And F&G rates the go feel that some like and to of probably you're title and the to think, closer premise. closer up, it right, we kind board's here, value initial that it's outperforms like business challenges. creation. creation feel A&E, its I we there's have of there's and and FG value quarter, -- recognition half, was can XX% been like And validates was last of now

pleased I the you been far. do will but what board not with again, investment, So on comment I'm the they've might tell ultimately thus that going to

And corporate segment million that guessing in. it's profit But so How one like the should turn produced segment related it. expect guess, quarter. you if -- does to profit just Tony, we could it we said that? this The that think a I expect about into forward? more going forward, I the going dividend. looks a Got squeeze I'm $XX should

add Thanks in to per segment. here is Yes. We now a and release, to our column, income was for highlight million quarter paying F&G our did $XX corporate observation. earnings that you the really, if will, point investment in that new

to our together. those And when that net it's million. But corporate financials think lost isolate our so netting want reality, you want In didn't to those that important get together. have that segments, I consolidated receiving we to to by see X $XX is

that's of $XX elimination have earnings then profit So do corporate see why, yes, adjusted in of adjusted million. million net the segment, that and $X you profit you a but of

highlight way point. the that that's to the that future, think in to I like So show we'd just

line comes next of question Our from George KBW. with Bose the

margin Actually I discussion. wanted to go back to the

muted in that you And think it that could April. margin muted when cadence noted volumes more to last a you XQ, up what saw is compare you than a than are you year, in year? we similar so could year? your the the be XQ So about versus But little guys improvement, last more see saw it last you it when or

years. quarter XX% an better bit the year first Yes. improvement was quarter average of Bose. Good XX% a It question, It's over last was sequential up probably over the about fourth actually Mike. The in little this handful against, than prior the of years.

of very So March then X% April encouraging. that was And was actually is up a year, it than this less little year. over last

I think about X%. were we

So not difference. much really

don't pressure were Bose, may of that We more moving on stay through months it of we were April. with impact May elevated, the move given up and that the see, back pleased If put June. And just know, as rates couple quarter. opens we last in rates the

part that's card. the So of wild

down, I as up they the quarter somewhere in And April, move there, X.X%. jump high back or hard think, and mean, in in the rates. fourth predict they hit around just I to as it's X.X%

if they're typically daily rates. I back X.X% volatile had you're And more than think down it's prior tracking to periods. just we've in the

So what's comment, color I that's of the the part think. of

well. That sense. the corporate makes -- follow up as then Okay. just And actually, the F&G sorry, to on question on

of that the So F&G is offset? the where the actually, out goes Is corporate coming segment up, segment?

Yes.

both preferred. is So shares their paying their F&G common dividend, on and

like the $XX dividends of come it's section $X equity million F&G. So another the million out in on -- actually preferred dividend, common

real to cash F&G. not But FNF So corporate. an to expense it's it's

it from in can't eliminate book show earnings earn, your the can't a since we in subsidiary income we so financials. it And you then and you

in And dividend, the the that's that why terms it's but preferred that's quarter, dividend, netted an that I absent we know together. like offset. just don't And it was it that last was it prior we common quarter, had so in of the just had

somewhere? below is sort And the Okay. of in line that or is the income the elimination statement,

is statement. the actually elimination the release a shows that Yes, million now a can in There's segment. negative our offsets that earnings see $XX you the corporate column that in income

the of Campbell Stephens is question [Operator Instructions] line John next with Inc. Our from

It looks quarter. more up ended like in title-filled staff you with the

was I period. since weaker XQ a 'XX. first the sequential it's think increase seasonally maybe that obviously, And

Just year? seems to maybe about you're as much staffing back about incremental capacity margin you throughout could if curious how to thinking how like the the it move levels the I the or It of you should least you feel in bit would think talk And just commentary but built a maybe going last year at a you've mean commentary, signaling order not that. you maybe you're with of like not some maybe and around big lift better growth year, capacity. incremental little you're be -- seems there, last but I what do off like so.

Yes. Well, the first staffing.

to isn't increase put head mainly the in hours John. also year We're same into well. relates think that some fairly in time, as was at unusual And I and coming existing -- fourth. It space we by on the modest. get the the adds head off which additional staff, a have still, new very recruiting acquisition count but on focused weakness had as the

So staffing environment. positioned to I the we're think well current with

back took revenue, question. partly And positioned back margin first better due we the for and quarter. purchase rates margins. position year how drive the to to well we have. one quickly accordingly go see through on It other. the of better if in that in in could year, -- into we like certainly that. an impact always expense to an to we advantage in came We're first the as more on the in very mortgage a And more standpoint the in I that or we'll particular, pickup is that from get the outperformance the the the and just I fact have of balance If think we think direction margin volatility continue just I staffing mean we'll quarter manage the gets

the we U.S. lot if Obviously, a Is I'm sense. reading from about in sounds buybacks of activity potentially return of you XXXX, And after know the too assumption? Makes fair recovery. Okay. don't XXXX. years commentary maybe -- a thinking in you, allocation record the it framework. the then kind aligning the be guys with much that have but buyback housing capital should just just like on flatline in I Tony,

I Yes, took XXXX we first paused in think quarter. the probably in it is. We --

to we I'm my cash a in I towards a flow. dividend positive think, million see goes acquisition $XXX some couple from cash looking $XXX but million positive standpoint, and a flow, I of to activity. million mean, have lot it $XXX commitment

And do realizing on guess, cushion have million million balance a we that, than in for something looking so sitting the I'm $XXX $XXX that sheet. I more fund to a

which We QX in generated operating of the unusual. isn't positive cash flow $XX about and title segments, million corporate in

challenging. where cash we The first think to think calling timing to always headed, are on us all is believe is your point, a relative we that year challenging. trends could revisiting see most get and depends I I it flow quarter to But But better. are of the that. we the upside lot to just this I most feel like just see that if last going It's probably things

rates. it the wanting sense. if maybe that I And back. bounce market hinges That here. Obviously, you. Okay. squeeze to agree a I one mean could is like with more I makes feels on in Mike, lot

related that, just you the gave to kind And April numbers. of guys so

of trends week-to-week So you've orders market how then And the May, into don't saw could of the the much quarter of if talk you turned influence if week got talk I from first know kind for movements. but the maybe to you the maybe maybe progression if to for May? rate the an throughout

we -- have think back And up, quarter. but they And don't first the -- first rates went I reacted a to at And fourth the could the were still to Yes. look comment, into pickup down the refis April, that. think but refinance to we I was report I refi rates they to on anything to XX% think down when levels, I got that, you over prior -- your May, let up. reacted the in in if that's did come period. in business your back I me low little point, -- then as then bit at quarter,

even open one On I they was like though side, in not were point, up purchase April, X.X% orders. the up purchase I moving at actually got rates impacting and that to said, showing it pleased was our

don't May then they -- before, stay fact, and X% up more into play were higher. June have kind a elevated outcome, to you go obviously. going is it's rates said we What they out how if In as how if of lower, could I sequentially. or move positive And know

is with of Securities. Truist Our from question Fritscher next the line Maxwell

Calling relation equilibrium F&G, Mark investment I Kind are have best the would to best for the question, headed equilibrium -- is be if between wondering for this showing for net internal that in income Hughes. optimal earnings? the in and was models what where regards to any just last to rates rates, the the be in of title business, would -- and

yes, Chris the even always know trumps FG and we've said before that always have for on. that. title and side. Wendy touch But Wow, We don't to specific said -- I'll income. let handle volume try a we've investment more to speaking all title, I model on just we I

from into the certainly, a a if want volume additional the so normalized better. of certainly bit and And a did take and it's investment get rates of hundred get but maybe said get that, Having dollars portfolio, million lower we you any over hedge, couple is a is in $XXX of enjoying or we'll over market, income. and home more we're a I interest And quarter income existing million that to... investment number can where and rate we environment think whatever day even to million that sales

years rates income like lot XXXX Mike, at an without it's guess -- the low, you were look those business and title that XX% I Yes. have and didn't And investment XX% back XXXX, we almost and very because margins hitting We was I would I years of, just of in think, investment the the Maxwell. drove but was exploded. little a in look high add, at 'XX. all-time it just profitability 'XX, income. can in

probably So I question. can answers And think this. that your Chris confirm certainly

well interest of The on the the their interest assets part there, rates of a regardless rate performs business cycle. floating but are story. it's FG's But small

and -- confirm But let So I'll take Chris we rates for that. think I sure. lower

I and Yes, in charts that's of basis because most those points it ground invested proud of when we're we one where ASAP, we're net up from the you premiums spreads sits again, Mike, is right. XX the in mean that in, spread. see was the up getting consistent pretty the treasury we're now to locking XX-year get once

So largely environment us, indifferent. spread we're to to but matters matters us, credit

Now should it's rates our in more that are more be But folks demand environment, a up There's to yes, out as a rate surprised rising for fall, to eke little well. earnings spread. easier hold going think I product. quite the

question-and-answer will back this conclude will now CEO, his Nolan over Mike Mike? session. remarks. Ladies closing I gentlemen, and for conference our to the turn

you. Thank

pleased many to the term. solid long to opportunities Likewise, expand generate well compelling the market and expansion our to business are for and margin We ahead title start prospects our to continuing deliver positioned with build asset with remain and growth, are navigate drive cycle We year. returns. are accretive F&G's the

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

concluded. of Thank you for now your The FNF conference has participation. you. Thank

You may lines. now disconnect your