FNF - Earnings call transcript Q1 2018 | Fidelity National Financial, Inc.

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Operator

Thank you for standing by and welcome to the FNF 2018 First Quarter Earnings Call. All participants are in a listen-only mode. Later, there'll be an opportunity for questions.

As a reminder, this call is being recorded and will be available for replay after 3:30 PM today through May 10.

You may access the replay by dialing 1-800-475-6701 or 320-365-3844 and enter access code 447137. turn to to Murphy. like now it Dan over I'd Please go ahead.

Daniel Kennedy Murphy

good and earnings for afternoon joining you, conference us XXXX thanks quarter and Thank first for call. our

for open President, and Bill conference me Tony Brent EVP, regarding will remarks may business review Randy begin statements. forward-looking strategic involve a CEO, questions Joining will call not our from brief including about We'll Bill and contain CFO, that historical concluding the of Chairman, finish with some are a statements highlights. from are risks Randy Park; with today our your finish Bickett. We'll statements Quirk; Statements future the of Foley. and call overview a strategies Mike with and expectations, the are review that facts, or Nolan; Tony uncertainties. title hopes, then This Foley; number financial Bill. the forward-looking intentions

the company's factors include, Forward-Looking of other information, sections are Information, assumptions management's other any limited based our Forward-looking but in and statements, XX-K and those to on forward-looking on not are other statements or the Regarding from and future and are whether statements to available are with otherwise. expectations events statements statements undertake The the press results information We operating obligation result in Risk based subject well no as beliefs, actual new yesterday the detailed a are filings differ future may made and management. such and of not update which risks of and and currently projected. materially financial release by SEC. to Because results to uncertainties as to, Statement fact, as as forward-looking dated Factors Form risks

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

William P. Foley, II

Thank Dan. you,

the first by start year improvement basis versus adjusted quarter point for title prior XX.X% XX The a and produced over business, title adjusted pre-tax earnings was our first XXXX we $XX the grew an and title the quarter pre-tax to a million solid as margin, of year.

$XX we of used quarter, $X.XX our the March During stock to million per dividend common share. pay

may you XXXX our increase the XXXX per which dividend X% raise XX% dividend of $X.XX quarter dividend an share, fourth quarter our cash itself from to was first $X.XX. increase quarter recall, third board to from As XXXX decided of $X.XX, our an

to seek continue return value to our We ways the shareholders. maximize of to

million convertible to face We million repurchase our of also value notes. $XX spent approximately in XX.X

the repurchases, diluted due declined $XX convertible Our count share million million $XXX notes August now XXXX and in the XXXX those by – million because of in outstanding. approximately shares X original of have

insurance part of locations hall country. with XXXX, for major Stewart two of reiterated and meetings, requests Stewart of the desire the turn the XX, over regulatory any to the initial their six received and uncertainty well of those announcing to states. over directly operating coming employee during a Additionally, their March from A around federal held multiple approved. necessary We customers filing XX, underwriters. the requests made the intent to we employees and long-term employee the HSR Form under the for brand. New we and filings style consistently will than we April XX, and HSR At Stewart to on back Stewart States weeks that are the meetings and more the the the the transaction shares Those the months. filing we not through I'll our information domicile process have prolonged March the have and our York Texas the York. did growing states first or Also, common or strategy filings heard title begun the with to excitement Randy get at preserve feedback Information the number Stewart discuss on the get needed, information were anticipated them repurchase wait and to filings so, town the and work The stock Stewart our call management We any Quirk Form last are we putting were a Antitrust behind There quarter. management and a title filed legacy on the state two XX for acquisition of focusing brands has business. major umbrella. FNF of the New on Since As of but over those existed as meetings XXXX insurance Texas at will now

Raymond R. Quirk

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

closed the Our first adjusted year. XXXX. prior quarter, orders residential markets the and pre-tax was as orders in XX point grew title the a purchase in performance The continued commercial and the purchase versus X.X% quarter X% day margin our increased first and by of per of basis over open improvement X% to drive XX.X% quarter, purchase commercial residential revenue total declined by

encouraged the refinance the closed pre-tax the closed purchase a reporting in refinance X.X% and X% XX% closed increase refinance open orders under – pre-tax side, both in declined just are and refinance we growth orders refinances earnings by by XX%. orders adjusted (XX:XX) orders, title margin. fell On by decline Despite in and

total X,XXX, day open than For with X,XXX. over at X,XXX just at January averaged quarter, and X,XXX more orders than at per nearly March more February first the

the increased As by for I quarter. first mentioned, open purchase orders day per X%

and total over day X% XXXX. of the orders by orders April grew X,XXX day per opened nearly per For purchase April, open were

year. decreased per versus April of day prior Additionally, the orders XX% refinance open

head than which entered lower count fourth with of we quarter second positions second first first XXXX. we this the quarter, slower positions in the for During field the a the the XXX quarter the us in seasonal eliminated operations quarter. XXXX our We of field operations, XXX eliminated of in positioned combined well quarter enter year with when

direct X% closed fee a offset of X% agency the the in X% file. increase X.X% somewhat X% per generated revenue in a fee driven XX% driven a growth direct title a primarily versus agency million the and the revenue in in the by XXXX, increase the driven premiums. in file, X% Direct first XXXX, in versus X% a a decrease commercial decline of title closings Total orders premiums a closed was by by by in X% percentage higher over increase quarter total Our benefited XXXX. orders business closed per of first commercial the increase offset from while the first of commercial refinance quarter orders, commercial quarter purchase business primarily experienced in of $XXX a revenue, decline decline by

the a first increased file and increase the over orders versus by commercial well X% fee quarter were of opened the XX% quarter closed next Additionally, related total of for business commercial X% The of XXXX, XXXX. $X,XXX bodes XX% of several in per in the first over quarters. purchase orders

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

Anthony J. Park

than $XXX billion $X.XX XXXX. $XXX title estate first earnings The quarter grew $XXX escrow We our segment revenue XXXX. revenue and the revenue an quarter staffing first with Adjusted XXXX. Adjusted and higher February generated generated Total $X.X revenue. had million employees and we in nearly total field the of Personnel quarter, you, increase versus Thank and March $XX before as by earnings with or real ending of levels diluted a in billion the segment X% X%, in XX pre-tax total title billion over X% increased title corporate million in per were the first revenue fewer contributing year. versus $X.X March in other prior the Salaries end or quarter, $X.X million million, generating net total primarily year by the the for increase were from X.X%. prior title January brokerage approximately over share. technology of and increased in first the Randy. costs X.X% at

earn small increased as million over prior short-term basis interest from exchange pass-through margin, title the generated income XXXX, and on Other our expenses pre-tax prior a title bonuses of the increase fixed in the ServiceLink expenses quarter we QX of see year, funds was plant non-recurring flat escrow interest included first of higher versus declined the reinvest the the transaction. XXXX. title securities adjusted $XX XXXX maturing year quarter major million by from with the business variable in the and versus $X the businesses of to the of Interest a commissions X.X%, All-in, and also business. was XX the impact earnings FGL quarter. as over with operating fourth XX.X% funds we sequentially in income declined million title from continued of higher orders rates, $XX but improvement decrease Interest fees income higher positive as first closed point XXXX. a quarter an Additionally,

our actually outstanding income of ratio interest the $X for FNF was $XXX in the up debt million total was capital quarter quarter. debt over a XX%. fourth to So, million

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

in million investments, billion revenue we subsidiaries of other and an million nearly regulated cash deposits we in $X.X billion a $X.X approximately reserves, as our at requirements. of and home $XX in $XXX Finally, at statutory There's by in of in $X.X investments $X.X and total investments, working unregulated deferred in in trust our regulated March March totaled ServiceLink restricted and equity for From are investment company perspective, other or From have have of portfolio billion at billion which minimum XX. XX. standpoint, regulated cash and a million and million unregulated cash capital secured warranty investments. million regulatory cash all primarily $XXX $XXX $XXX

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

Operator

with Please And line the of go is from our ahead. first Mark DeVries Barclays. question

Mark C. DeVries

improvement have much a might can margins. of to that attributable shift, purchase operating I much the been pre-tax some was residential commercial better year-over-year thank get other that factors growth like little XX continue you. drove interest leverage Yeah, hoping of out? basis mix of point and you kind more call title to the of in and just sense income, as that you see a how was How any to on what

Raymond R. Quirk

the side of we quarter. start on into business answer. quarter strong we versus continued with I'll first good went had moved towards the for and the as of the the year. up be very purchase purchase moving us is market Yeah. in quarter moving the over part second A was more XX% again Randy. XXXX. very XX% We through the it Also, business to prior the in commercial in first – (XX:XX) very fact This the to mix than

that, reductions eliminated we addition (XX:XX) staff did quarter, in quarter. XXX positions in eliminated and January – first February the We In collect we another make the the to and over late significant in positions. quarter, fourth XXX fourth in then really December,

So, three really I'll for and let Tony some those again, then a the is what shift control in comment. business. combination expense allowed of improvement,

Anthony J. Park

as Yeah, way function $XX of line and year. you a through short-term higher Mark, prior rates, stronger expect work in income million up And $XX the interest we and million to did we our we a pointed year continue item, as quarter. against that the out, have that's

basis Our year last of million. a earning billion $X.X above points did on XX IPEX we average business about rough is what

portfolio, as on to that we the course, million more $XX up. rates would an to expect we basis So, annual to bond continue with earn of moving about line. bottom reinvest the drops And

monitor difference had the in were quarter. the We trends current a also prior year but We'll in are year We to very the that, level. X.X% continue quarter. favorable provision there. in loss small X% at

the And number. – our see good right feel to on X.X% we'll we also so, built that. cushion about our We've But now, that relative if pretty holds. actuary's

Mark C. DeVries

lift the seen of full-year, far it think you've so the being about, north given to your us XX%? for in this reasonable margin pre-tax year, And Okay. margin the somewhere is for title

Raymond R. Quirk

The will stronger. side right now we get is commercial building we somewhat year, it through market similar. and the the to continues purchase think at the Well, holding be way commercial with look

through we continue we moved and March as the terms side. of volume Even more to open up April, on in purchase

expenses And So, the at as we'll stay our on mentioned level. I our to control, and going focused fee we're on get file. staffing per time, same a the expense better

and So, those play looking year out. things again, better a similar if at we're potentially

get to a Our going a target we'll We're through market been good hard always will has but need commercial push XX%. us. help to there, –

Operator

And Aron next line to Associates. Mackenzie with ahead. & the Please of Zelman go

Mackenzie Aron

expect requirements bit little forward? the can can that of us milestones the a Thanks. are this Thinking that roadmap point you regulatory about for and and the just Stewart we to-do list of still give a from the acquisition, kind timelines on

William P. Foley, II

this government the We all really or had Texas, York, had we with filed more As. across we've the learning and roadblocks early really It's pretty transaction preclude things areas be New as meetings the yesterday have discussion with of HSR – a about it's California, states mentioned, we the about. no We've in good trying be the process, board our a the of good that with in more meeting, had of possibly probably first to interested to or fourth – all transaction. We may would quarter with we've we've a date. as submitted seen the good at areas submitted quarter we're meetings as filing, terms complete I can late anticipating and and close Form that country particular had

look a process And it's to it's while. so, but positive, going things just look a good, and take they

Mackenzie Aron

interested the heard And helpful. you've with a what then, that's Okay, lot town has also announced. halls know deal Stewart employees. in you done been I just of you've since mentioned

in So, you've from own team, so from reaction similarly, heard how and just kind customers their field then you've heard what curious those your of what of and far. kind on went and any the

William P. Foley, II

Yeah.

had frankly, all a customers, there's commercial with transaction. had number to their contact We have of no and at the with concern – regard we've

basically law primarily transactions developer-oriented for whereas investor-oriented. Our they commercial Stewart's customers customers commercial are or firms, are originate us, and focused the with more

more what a a customer of different a little has meetings, Stewart the involved it in for mode was for and several getting occurred their employees the and doing terms they been were in that of kind in different bit business. more focus distracting a transition years a with of getting base. Then, hall – the job is it's of has of sort basic that town on hedge funds couldn't company, customers, So, the

over meeting, meetings the I that by and Roger usually suffered and really have Stewart's apprehensive, last and the the when out the the And being several years. they hall so, with employees time and Mike in And Randy town would say go meetings are the employees the a and they're are be expanded, reassured really going of going about happy not being happy. and acquisition, the of operated independently. to happy employees family the Stewart that we've those contracted, to is They're about is Fidelity over, companies, part brand be start

So, we the good have and way it. plan a responding to game Stewart are well know with field into be regard integrated the will we company, our employees in to the

Operator

line the Please to next And ahead. George Bose with go KBW. of

Unknown Speaker

Hey, guys. is on (XX:XX) This Tommy Bose. for

pre-tax looking seasonality just the at just corporate revenue like Union be the decline run or you us of in good what the can corporate a segment, reflecting in with the rate Just would Pacific normal the income was segment? remind the

Anthony J. Park

Sure. This is Tony.

in to isn't of QX, technology seasonality the up were brokerage I lot referencing So, is the QX in seasonality revenue business, year-over-year about $XX and you're a assume million. that side.

annually, about but in roughly brokerage a fourth We like was the revenue is around. in $XX million I million. $XX run million-plus $XX does rate had quarter, So, in bounce $XXX think and million or more QX, the million technology $XX quarter

typically the of challenging In earnings and fourth sometimes that's or pre-tax pre-tax the we summer a were the adjusted first again, on typically are we terms whereas where basis, an – business, at loss. and stronger. months loss have brokerage And quarter is $XX summer seasonal the with million quarter, spring

in expense makes give of the And $XX of So, mid-XXs that low course, to I about sense that segment segment, includes in corporate would to some direction million. interest say, to you probably somewhere the on loss model.

Unknown Speaker

what just the remind on count us share Thank And there. impact the once to And then, you. it. timeline going is diluted what is redeemed? can the us convert remind be that what just you is Got –

you think opening remarks. I it in mentioned your

Anthony J. Park

Yeah, August. Sure. it's

shares share We about X have retire diluted million Xx that, there's outstanding, left count probably our today. about over And about just million. million $XX cost $XXX roughly to impacting

think million it's X the retired, about point think As get share total I we for diluted that it'll by shares averaged annual to the impact when year. out, where count gets the I

Operator

Next to Please with line of the Deleeuw Piper ahead. go Jaffray. Jason

Jason S. Deleeuw

and coming on you. of cost expense, of but is work revenue million A the $XXX question to that there the that the to try and synergies interest the as Yes, be thank those deal net deal synergies. kind dis-synergies keeps up are of Stewart concerns you of kind going through cost realize

there kind of bit little net the benefit on synergies Should So, the look or at you've time that? we getting deal, can now the more update had side? we the of revenue count just concerned is that through be a about on any cost dis-synergies to

William P. Foley, II

you cost not that be some getting on defined the side. Well, Those divestitures yet. FTC. are be There will required count the believe on the can net we benefit by may

our have upon purchase we achieve, and of It But efficient well, of some of things might lot feel be customer-facing. in suppliers. price already production. Stewart more a adjustment actually plant it lot markets, are We any a with size little is. corporate we level We're can probably not suppliers different about have of the an the terms divestitures. based and dealing locations confident pretty different number and that the in title we a of duplicative overhead various synergy what of very in of that It FTC feel than – stock is is with of kinds contracts different revenue various Stewart because we of

this the honest about to just We acquisition. like feel it's completes Fidelity good of story be feel you. kind really with we So, – it

Jason S. Deleeuw

helping might having you're with and helpful. be update now you. on more it us estate cross-sell on Thank those it And investments, real give initiatives? right tech I then, And That's the business to help Thank turn it Is but to earnings, little – title success us drive transactions? growth dilutive Great. any a rates? be accretive you can can think you. can you can

Raymond R. Quirk

Randy. very added platform it's title or the successful. referral XX% in clients XXX the been of business, came the group. Commissions, cross-selling the to platforms – from that and Sure. is from Yeah, quarter. Inc. from The another we This the referrals and been excellent has About of the first

XXXX and as seeing XXXX our estate with association was was quarter-over-quarter that. year-over-year Revenue teams XX%. our up increase was QX real QX are XX%, sales We a – of up and platform customers a of result of at close the overall over

up close having teams platform. the elite on pushing we're XXX to pretty So, (XX:XX) Inc. Commissions,

So, it's going well. very

We companies technology with between of continue development Digi-Sign integration electronic the our which is an the solution. document our and systems, operating (XX:XX)

So, play. I that past in the there's in take this said a Bill time. to is going some know lot has

We have good to maybe But and a it's going well enthusiasm to there's few product platform. end-to-end lot a more it. for very this add and it's very ingredients far, so a of

Operator

Please Stephens. Now line ahead. John with to of the go Campbell

John Campbell

Hey, guys. morning. Good

William P. Foley, II

morning. Good

Raymond R. Quirk

Good morning.

John Campbell

On lapping count you've the It title looks the grown comp, you title about that going last mentioned it personnel rev be into that like, than the commentary last up this looks four lower versus you the for, costs, head and like year may year. faster guys quarters. then straight XQ

guys reversal of a guess, are trend? expecting, versus growth revenue personnel So, expense I you that

Raymond R. Quirk

more some that QX then, a think as we in few had some QX. Yeah. you since John, growth mentioned, and out We took pointed I – then there. some in we out head count items out

little claims – costs items had level the off least side. down the health point relative a a come I for the But in that's a higher one We've that that a couple usual take trend. to would quarters expect item bit. that revenue there. or the that's than been expect to we'll don't And had movements few at to plan. comes little bit. mind would larger so, this that even I unusual is expect last at we if one trending insurance. as look so, a to off, We've level a little impacted So, We've at some personnel

very at had employees. you're Of a the about looking quarter, acquisition, large first if added acquisition, Guaranty quarter course, first over Title we XXX

you you're looking the know, moving at So, then, end fourth payroll the restart quarter year. every And beginning of at it. versus obviously taxes if first quarter, that's at of as –

segment about payroll think So, costs versus in But QX were QX. the down we factor were in about X%. we I in down if taxes, personnel title in maybe you X%

expect forward. that So, are those help facts might we level you Yeah, to move off that of kind some do as out. we

John Campbell

Okay, And guys I that. assume deal, to gun. to back if jumping great. revenue. concede Any then, little you a Thanks maybe Stewart might of But for the the that we that rev? be closes, bit idea that I the or rev XX% I or basically the loss? Is is agency might guess, loss guess detrimental what on be margin the going versus potential it to on direct of, XX%, have incremental depend it

William P. Foley, II

obviously, the three the direct margins loss did be same line with net on the it top going that take margins. done direct We But their up – we thing up. don't to or the We We the Alamo. a line. in the and believe margins did really us and be times Lawyers agency Commonwealth revenue, it with past. it Stewart with got on four did Chicago. less business revenue may we've little It's or while Fidelity and to on Yeah. the get there's much revenue to The would It more required. divestitures

why is in – this strike our just is it. very zone, kind That's this we're done we've of just So, right confident. – this We transaction. right up

Operator

Please next question the from with line of the And ahead. Mark go SunTrust. Hughes

Mark Douglas Hughes

Yeah, afternoon. thank you. Good

on this far that side. commercial you you confidence kind the on good commercial a have of momentum? to seem have do You sustain ahead visibility How could

Michael J. Nolan

it's Mark, couple about quarters. say of I usually a would have Mike. we

and year at really XX% our If X% up over orders you they in open first the a were sequentially. also strong quarter, last look

and we have performance confident feel the through think look of deals, still on some at So, third we'll and second pipeline that commercial the that have we good national see really pretty our when we also I quarters.

but national we also see operations seeing activity, our are only broad-based us The in good good – is it's other our multiple segments. Not that and activity business, local pretty thing in market makes strength. confident commercial a

it's like So, feels be to it another commercial strong just year. going

Mark Douglas Hughes

Any X%? trending? it per in preview on revenue that How is order

Michael J. Nolan

commercial more tell really – have I read Well, that that order report with too we at of deals. much can But year. fee national pipeline had slightly quarter overall we what of first activity that, in that. to should lumpy file really have. It us down say hospitality all into per the was we the I I quarter-over-quarter versus wouldn't look next think the strong and some kind quarter-to-quarter be do very up market show we both do will over that transactions the I energy couple of last quarters.

Operator

There Campbell is John ahead. Stephens. with a from go follow-up Please

John Campbell

Hey, there? guys. we in or acquired the there the lapping are is Back on some orders M&A April all orders,

William P. Foley, II

The first that and August. last was Guaranty, acquisition (XX:XX) of was in acquisition year in was the – main quarter Title

Raymond R. Quirk

Right.

Anthony J. Park

Right.

Raymond R. Quirk

Right.

William P. Foley, II

(XX:XX) were so. They included,

Anthony J. Park

we acquisitions, Without Yeah. increase X.X%. see about the

that considered our numbers. we've So, in

John Campbell

All great. guys. right, Thanks,

Operator

are there questions for closing in no turn further And queue. it remarks. I'll back over

William P. Foley, II

Thank you.

business. title start quarter our for first year the to was a solid The

transaction processes create the We this the also long-term regulatory for joining our Thanks value Title acquisition shareholders. working believe us for today. through Stewart began meaningful and will that for

Operator

your for Thank your Ladies for and you does conclude today. that gentlemen, participation. conference

You may now disconnect.

Fidelity National Financial (FNF) 3 May 182018 Q1 Earnings call transcript