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spk02: Good morning, ladies and gentlemen, and welcome to the FNF 2021 Third 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 Jamie Lillis, Investor Relations for FNF. Please go ahead, sir.
spk05: Thank you, Operator, and good morning, everyone. Thank you for joining our Third Quarter 2021 Earnings Conference Call. Joining me today is our CEO, Randy Quirk, President Mike Nolan, CFO Tony Park, and F&G's CEO, Chris Blunt. We'll begin with a brief strategic overview from Randy, Mike will review the title business, Chris will review F&G, and Tony will finish the review of the financial highlights. We'll then open the call for your questions and finish with some concluding remarks from Randy. But before we begin, I would like to remind you that this conference call may contain forward-looking statements that involve a number of risks and uncertainties, in particular the COVID-19 pandemic. There is significant uncertainty about the duration and extent of the impact of this pandemic. Statements that are not historical facts, including statements about our expectations, hopes, intentions, or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management at the time of this call. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release dated yesterday, and in the statement regarding forward-looking information, risk factors, and other sections of the company's Form 10-K and other filings with the SEC. This conference call will be available for replay via webcast at our website at fnf.com. It will also be available through phone replay beginning at 3 p.m. Eastern Time today through Wednesday, November 10th. The replay number is 844-512-2921. and the access code is 137-236-39. Let me now turn the call over to our CEO, Randy.
spk10: Thank you, Jamie. We are very pleased with our record-setting third quarter results as we increased revenues 31% to $3.9 billion, which resulted in adjusted net earnings growth of 39% to $604 million, both as compared with the 2020 third quarter. Our title business continued to deliver record results while F&G expanded into new institutional channels which position us well for strong asset growth. Importantly, we grew our holding company cash balance by 25% to $1.5 billion as compared to $1.2 billion at the end of the second quarter of 2021. Cash on our balance sheet grew despite our continued activity returning capital to our shareholders through share buybacks and our quarterly dividend. As Tony will discuss in more detail, the cash growth was delivered primarily through organic business results. During the quarter, we took advantage of exceptional interest rates and issued $450 million of 3.2% senior notes with a 30-year maturity. We also funded a $400 million in a company loan with F&G to fund their growth. Overall, our results this quarter speaks to the dynamic business model that we have created, which we believe positions us for success through varying market cycles. Turning to our title results, we delivered adjusted pre-tax title earnings of $669 million, with an adjusted pre-tax title margin of 21.7% in the 2021 third quarter, compared with adjusted pre-tax title earnings of $528 million, and an adjusted pre-tax title margin of 21.2% in the 2020 comparable quarter. Our third quarter margins and earnings were the strongest third quarter results in our company's history, which speaks to our market-leading position combined with outstanding execution by our entire team. Turning to F&G, we continue to be very pleased with the results this quarter as we open new channels of distribution and accelerate our sales growth, driving assets under management at the end of the third quarter to nearly $35 billion, an increase of 9% in the quarter. This growth was driven by strong retail annuity sales and F&G's interest into institutional markets. Total assets under management have grown 31%, since we closed the acquisition. We are well on our way towards our goal of more than doubling assets under management in five years. As F&G's assets continue to grow, they provide an increasingly important component of our overall earnings. Looking forward, we will continue to evaluate our capital allocation strategy as we remain committed to long-term value creation for our shareholders, while also focusing on supporting the future growth of our businesses. Share buybacks are an important component of our strategy, and we were active once again having purchased 1.3 million shares for $61 million and an average price of $46.29 per share through the third quarter. In the first week of October, we reached our $500 million share buyback target, which we announced in the fourth quarter of 2020. Lastly, we announced yesterday a quarterly cash dividend of 44 cents per share, an increase of 10% from our previous quarterly dividend. This is the second consecutive quarter that we have increased our dividend given our strong earnings and cash flows through the first three quarters of the year. Let me now turn the call over to Mike Nolan to discuss the title insurance business in more detail.
spk09: Thank you, Randy. As Randy highlighted, our third quarter results were the best third quarter in the company's history, and I want to add my thanks and congratulations to our employees for their dedication and focus on taking care of our customers and driving our industry-leading performance. For the third quarter, we had generated adjusted pre-tax title earnings of $669 million, a 27% increase over the third quarter of 2020. Our adjusted pre-tax title margin was 21.7%, a 50 basis point increase over the prior year quarter. The results were driven by a 25% increase in average fee per file, a 9% increase in daily purchase orders closed, and a 31% increase in total commercial orders closed, partially offset by a 21% decrease in daily refinance orders closed. Total commercial revenue was a record $366 million, compared with the year-ago quarter of $216 million, due to the 31% increase in closed orders and a 28% increase in total commercial fee-for-file. For the third quarter, total orders opened average 10,800 per day, with July at 11,000, August at 11,000, and September at 10,300. For October, total orders opened were 9,300 per day, as we saw solid demand and purchase activity while the refinance market continues to moderate as compared with last year's robust levels. Daily purchase orders opened were up 1% in the quarter versus the prior year. And for October, daily purchase orders opened were up 4% versus the prior year. Refinance orders opened decreased by 33% on a daily basis, versus the third quarter of 2020. For October, daily refinance orders opened were down 38% versus the prior year. Lastly, total commercial orders opened per day increased by 15% over the third quarter of 2020. Commercial opened orders per day were just under the record levels we saw in the second quarter. For October, total commercial opened orders per day were up 15%, over October of 2020. Importantly, commercial opened orders per day have exceeded 1,000 orders each of the last nine months, having consistently been in record territory and will provide momentum as we close out 2021 and begin 2022, given the longer tail for closings in commercial as compared with residential. Our title business has performed very well through the third quarter, with commercial and purchase volumes more than offsetting the decline in refinance activity. Looking forward, while refinance volumes may continue to moderate, it is important to note that direct refinance revenue only contributed approximately 19% of total direct revenue in the third quarter, compared with 27% in the third quarter of last year. On a sequential basis, refinance revenue contributed 21% of total direct revenue in the second quarter and 33% in the first quarter of this year. Additionally, refinance fee per file in the third quarter was approximately $1,000 as compared with nearly $3,400 for purchase, providing a strong counterbalance to declines in refinance revenue. We will also continue to watch our expenses closely and react to changes in our opened and closed order volumes. Another critical aspect of our business has been our longer-term focus on integrating and leveraging automation, which has significantly improved our performance, as can be seen by our profitability this cycle. During the quarter, we reached a significant milestone, as more than 2 million consumers have now been invited to begin their transactions on our digital in-here experience platform through Start In Here, and more than 1.3 million have chosen to do so. As we have discussed, INHEAR transforms the real estate transaction by improving the safety and simplicity needed to start, track, notarize, and close real estate transactions. We are very pleased with our customers' adoption of our digital platform, as we believe it will not only improve their satisfaction with our service and product, but also improve our efficiency. Ultimately, we believe the in-here experience platform, combined with our scale and our history and expertise in building market-leading technology solutions, positions FNF to grow market share. Let me now turn the call over to Chris Blount to review FNG's third quarter highlights.
spk08: Thanks, Mike. At F&G, we're fully executing on our product and channel diversification strategy while leveraging our core capabilities and modernizing our operating platform. This year has demonstrated our transformation from a previously monoline business into a well-diversified and leading provider of solutions in both retail and institutional markets. We achieved record sales in the third quarter, surpassing $3 billion in total sales for the quarter, and $7 billion in total sales for the first nine months of the year, which in turn have boosted ending assets under management to nearly $35 billion as of September 30th, as Randy mentioned previously. In the third quarter, annuity sales in our retail channel were $1.5 billion, up 43% from the third quarter of 2020 and down slightly from the record sequential quarter. We see ongoing success with our independent agent distribution and continue to expand our bank and broker-dealer channels. We are now distributing through a dozen active bank and broker-dealer distribution partners. We are very pleased that our recent expansion into institutional markets has been exceptionally strong. Let me provide a few brief details. F&G has issued $1.2 billion of funding agreement back notes in September following our inaugural 750 million issuance in June. Both issuances saw extremely strong market demand and attractive pricing. F&G has also successfully entered the pension risk transfer market, closing 371 million of transactions in the third quarter and securing an additional 564 million of transactions in the fourth quarter. Based on transactions secured to date, F&G will assume approximately $900 million in pension liabilities and provide annuity benefits to over 22,000 retirees. Overall, institutional sales were $2.6 billion for the first nine-month period, and with the additional $500 million pension risk transfer volume secured in the fourth quarter, we're on track to achieve $3 billion of institutional sales in 2021. With these strong top-line results, average assets under management, or AAUM, has reached $32.7 billion, driven by approximately $2.3 billion of net new business flows in the third quarter. We are focused on generating scale benefits by increasing assets under management while continuing to leverage Blackstone's unique investment management capabilities to deliver consistent spread. Turning to spread, our results continue to be strong. Total product net investment spread was 285 basis points in the third quarter, and FIA net investment spread was 335 basis points. Adjusting for favorable notable items, total product spread was 248 basis points and FIA spread was 293 basis points, both in line with our historical trends and consistent with our disciplined approach to pricing. Let me wrap up with a few thoughts on earnings. First, F&G's net earnings attributable to common shareholders of $373 million for the third quarter included a $224 million one-time favorable adjustment from an actuarial system conversion, reflecting modeling enhancements and other refinements, and represents less than 1% of reserves. This conversion was a significant milestone in our multiyear effort to deliver a modern, scalable platform. which will provide operating leverage with scale over time. This one-time favorable adjustment was excluded from adjusted net earnings along with other standard items. Next, F&G's adjusted net earnings for the third quarter were 101 million. Strong earnings were driven by record AAUM and strong spread results from disciplined pricing actions on both new business as well as our in-force book. Net favorable items in the period were 27 million. Adjusted net earnings excluding notable items were $74 million, up from $70 million in the second quarter. In summary, during the third quarter, we've delivered record sales and strong earnings for F&G. Our profitable growth strategy is firing on all cylinders, and we have successfully diversified our sources of premiums. We remain excited about the opportunity to further contribute to the overall F&F strategy in the years ahead. With that, I'll now turn the call over to Tony Park to review FNF's third quarter financial highlights.
spk04: Thank you, Chris. We generated $3.9 billion in total revenue in the third quarter, with the title segment producing $2.9 billion, F&G producing $927 million, and the corporate segment generating $44 million. Third quarter net earnings were $732 million, which includes net recognized losses of $154 million versus net recognized gains of $73 million in the third quarter of 2020. The net recognized gains and losses in each period are primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether the securities were disposed of in the quarter or continue to be held in our investment portfolio. Excluding net recognized gains and losses, our total revenue was $4 billion as compared with $2.9 billion in the third quarter of 2020. Adjusted net earnings from continuing operations were $604 million, or $2.12 per diluted share. The title segment contributed $521 million, F&G contributed $101 million, and the corporate segment had an adjusted net loss of $18 million. Excluding net recognized losses of $169 million, our title segment generated $3.1 billion in total revenue for the third quarter, compared with $2.5 billion in the third quarter of 2020. Direct premiums increased by 22% versus the third quarter of 2020. Agency premiums grew by 34%, and escrow, title-related, and other fees increased by 14% versus the prior year. Personnel costs increased by 15% and other operating expenses increased by 17%. All in, the title business generated a 21.7% adjusted pre-tax title margin, representing a 50 basis point increase versus the third quarter of 2020. Interest in investment income in the title and corporate segments of $27 million declined $4 million as compared with the prior year quarter due to decreases in bond interest, dividends received on preferred stock, and a slight decrease in income from our 1031 exchange business. In September, we closed an issuance of $450 million of 3.2% senior notes due September of 2051. We're very pleased with the market's receptivity to our issuance, as well as the very attractive rate that we were able to secure. We also put in place a $400 million intercompany loan to fund F&G's growth and to better optimize their capital structure. F&F debt outstanding was $3.1 billion on September 30th for a debt to total capital ratio of 24.9%. Our title claims paid of $55 million were $45 million lower than our provision of $100 million for the third quarter. The carried reserve for title claim losses is currently $95 million or 5.9% above the actuary central estimate. We continue to provide for title claims at 4.5% of total title premiums. Our title and corporate investment portfolio totaled $6.7 billion at September 30th. Included in the $6.7 billion are fixed maturity and preferred securities of $2.2 billion. With an average duration of 2.8 years and an average rating of A2, equity securities of $1.2 billion, short-term and other investments of $500 million, and cash of $2.8 billion. We ended the quarter with $1.5 billion in cash and short-term liquid investments at the holding company level. Let me end with a few thoughts on capital allocation. Our capital allocation strategy remains a key focus of the board. We're focused on returning capital to shareholders while making strategic investments in our businesses. Our current level of cash generation supports the following. First, FNF's $500 million annual common dividend. Next, our $100 million annual interest expense on FNF debt. Third, our $400 million 5.5% senior notes, which are due in September of 2022. And finally, our share repurchases. We've continued to make share repurchases throughout the third quarter and into the fourth. During the quarter, we purchased 1.3 million shares at an average purchase price of $46.29 per share. And in the first week of October, we completed our previously announced $500 million share repurchase plan. In total, we repurchased 12 million shares at an average price of $41.62 since announcing the plan in October of last year. With regard to FNG, at the time of the merger last year, we stated that we expected FNG to double assets and earnings over five years through organic growth. Given current momentum, we foresee that FNG's growth is running about one year ahead of schedule. For 2021, FNG is on a trajectory to double its annual sales and has materially diversified its business with channel expansion in new retail and institutional markets. Capital funding for this growth includes $400 million in debt capital from F&F in the third quarter, as well as third-party financial reinsurance with an existing partner in the fourth quarter. Based on current forecasts, we expect to contribute $200 to $300 million of new equity capital in 2022, And with F&G's 25% debt-to-capital target, we believe F&G has ample financial flexibility to execute on our growth strategy and capture market opportunities. Beyond that horizon and subject to ongoing sales momentum, there may be an additional capital investment required in 2023, which could take the form of converting our existing $400 million term loan to equity capital. but we believe at that point we will be reaching a level where F&G is self-funding. Given the compelling growth prospects, it is more attractive to defer any immediate return of capital from F&G in order to support its growing and stable source of earnings and target a return of capital a few years down the line. F&F has enough capital generation to do all of the above, and we view the marginal return on capital into F&G as attractive and strategically important to our dynamic business model to achieve long-term value creation and attractive shareholder returns. Let me now turn the call back to our operator to allow for any questions.
spk02: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. And our first question is from the line of Mark Deverys with Barclays. Please proceed with your question.
spk07: Yeah, thank you. My first question is for Chris. Chris, I was interested in more detailed thoughts about what you think is driving, you know, the strength in the sales growth and retail. You know, how much of that is kind of the channels you've opened? How much of that is kind of just the attractiveness of the product in this environment? And how much may be, you know, further penetrating the agent channel?
spk08: Sure. Great questions, Mark. So, yeah, I would say we're seeing strength in all of the above. So our core independent agent business is up. you know, comfortable double-digit pace. We've had rapid expansion in bank and BD, and so that's added to the growth in retail. And then institutional has been, you know, it was a blank sheet of paper a year ago. So that's all incremental. So I would say all three are contributing right now.
spk07: Okay, great. And then next question for Tony. I mean, it sounds like there's a lot of great growth to fund there and you may commit up to 700 million, I think of equity capital over the next couple of years. Can you just talk about, you know, how the returns of that, you know, compare to buying back F and F stock here, which is trading at a, you know, a pretty material discount to where it historically is traded.
spk04: I think, you know, we believe that all of the above are important allocation strategies. Yes, it's up to $700 million in equity capital toward F&G. But keep in mind, we've already funded $400 million of that in the form of a note, which is easily convertible. So from a parent company cash standpoint, the $400 million is already gone. But the board is... We talked about completing the $500 million plan over a course of 12 months in terms of buyback, but we have a 24 million share authorization or 25, but 24 million still existing. And the board is very excited about continuing to deploy some of that capital toward buybacks. And I would expect that as soon as the window, the blackout window opens, we will be back in the market buying back shares We paused a little bit during the quarter only because we were in a blackout period while we were working on the bond offering. Otherwise, we probably would have bought back more shares in the quarter.
spk07: Okay. Got it. Thank you.
spk02: And our next question comes from the line of Boze George with KBW. Please proceed with your question.
spk00: Hey, guys. Good afternoon. Actually, one more on – In terms of modeling the operating income growth, can we just essentially kind of track that with AUM growth, and is that kind of the best way to do it now?
spk08: Yeah, this is Chris. I think that's right. I think as you model out AUM growth, we've talked about kind of a rule of thumb of 1% on assets, net of everything, including tax, and I think that's still a good number with the potential for a little bit of spread expansion beyond that.
spk00: Okay. Great. Thanks. And then actually just sort of touching on, I guess, the subject from the last question as well, in terms of to the extent the market does not really sort of appreciate what's being done at FG and the valuation there, short of doing something drastic like spinning it out, et cetera, are there other alternatives that you can consider in terms of you know, showing the value, like you've done tracking stocks in the back in the past or, you know, there are other things, you know, that could be done in the interim, you know, that could help.
spk08: Yeah, Tony, this is Chris. You want me to start? I would say probably the easiest lever would be to just utilize more reinsurance, you know, whether that's reinsuring a piece of the block or doing some sort of flow deal on some of our new sales that would free up some capital pretty quickly. I'll let Tony opine on other options.
spk04: Yeah. I mean, I think that's right. I think our view is that we're building a great asset here. I mean, look at the earnings growth, the portfolio growth, the opportunities in the, in the sales channel to, to grow this thing. As I mentioned earlier, we're a year ahead of schedule in terms of doubling earnings and and the portfolio. And I think we're excited about that. And so I get that different people have different perceptions of how much value we're getting currently in our share price. And I don't disagree with any of that. But we do believe that even if it's not currently recognized, the value is there. And we think that in some form or fashion, it will be recognized And for the time being, we'll continue to create that value and then kind of deal with that second part a little later down the road. Okay.
spk00: That makes sense. Thanks, guys.
spk02: Our next question comes from the line of Andrew Klejerman with Credit Suisse. Please proceed with your question.
spk01: Great. Thank you and just good afternoon. Kind of follow up on the title margins at 21.7% pre-tax. I think it's the fifth consecutive quarter where you are at 20% or better, yet your guidance is 15 to 20%. Maybe you could help just give some scenarios where it might fall into your guidance range or You know, are we in a new normal?
spk09: Andrew, it's Mike. You know, we've talked about the 15% to 20% for a number of years. And, you know, for a pretty decent amount of time, we weren't even getting to the 15% number. And we always said to get to the higher end of that range, we would need, you know, a very strong purchase market along with a, you know, solid commercial and a moderately good refinance market. And, you know, we're really seeing just a potentially record-level commercial market, strong purchase, and probably better than refi markets. So, you know, I think that margin performance, you know, is certainly dependent on just where volumes are. And we can't necessarily expect, you know, refinance volumes, for example, to be, You know, this year will be, you know, maybe the second or third best refinance market in the history, you know, of the country. And last year was probably the best. So, I mean, I think it's a function of that. Having said all of that, we expect our margins to be very strong as we go into the fourth quarter. And, you know, we expect margins to be very solid next year. But I don't think we're ready to change that sort of 15 to 20 percent range at this time.
spk01: Okay, thank you. And for Chris, you know, the sales are, you know, really robust, and I get that you've got new chattels there. As we look toward 2022, particularly in the retail areas, the FIAs, the MIGAs, do you see that growth kind of tapering off? Could it be flattish? You know, what are you thinking as we go into 2022 in terms of sales volumes, given that you'll have had these new channels for a while. And with that also, what types of returns on capital are you targeting as you write this new FIA in like a business?
spk08: Sure. Yeah. So I would say a couple of things. One, obviously, you know, We can't keep doubling every year, although that would be nice. But I think we'll continue to see good double-digit growth out of our core agent business. And I would expect better than that in bank and BD. You know, we're still not fully penetrated in the banks and broker-dealers that we're selling through today, and we're continuing to add. So we'll probably add another half a dozen relationships next year, for example, if I had to guess. So I think you'll see, you know, good growth core out of agents, continued growth out of banks, And BD, on the institutional side, we like the FABN market. That market's been growing pretty dramatically. As you know, we can't write an unlimited amount of that, but we certainly have capacity to write more business there. And I think we've been really pleased with our early success in the PRT space. So I wouldn't want to give an actual total percentage number, but I would say I think we're we would envision pretty decent growth coming from all those channels next year. You know, in terms of returns, obviously, we don't quote individual product pricing, but I'd just say we're getting attractive ROEs, particularly relative to some of the company's other alternatives.
spk01: Thank you.
spk02: And as a reminder, if you have any questions, you may press star 1 on your telephone keypad to join the question and answer queue. Our next question is from the line of John Campbell with Stevens. Please proceed with your question.
spk06: Hey, guys. Good morning. Congrats on the continued success. Thanks, John. Sure. It sounds like you guys do have some capital earmark for F&G, but still, I mean, I think you've got $1.5 billion in the holding company cash. I think obviously you're going to generate a ton of free cash from here. You've also got over $600 million across the light in pay-safe investments. Obviously, those will be more liquid and approaching kind of lock-up expirations. So, obviously, you're going to be flush with cash over time. You've talked to the buybacks. But beyond that, just talk to us about your appetite for the dividend, where you are pegging a potential payout ratio over time. And then on M&A, obviously, it's tough to get kind of chunkier investments title acquisitions from here, but talk to us about maybe non-title M&A, what might make sense and the level of appetite there.
spk04: Yeah, thanks, John. As Tony, I'll start. Maybe Mike can fill in on the title acquisitions. Yeah, you're right. We've got a lot of cash and continuing to generate good cash. It's important to know that with the light and pay safe, those are actually insurance company money. So that isn't money, even if we were to liquidate those at some point. Uh, that isn't cash that flows, you know, to the parent company. That's part of the insurance company portfolio. Having said that, you know, it's strong cash generation. We talked about, um, our $500 million annual commitment of the dividend. You saw that we raised that now two times in a row and 11% increase last quarter, another 10% increase this quarter. We're very comfortable with that, not necessarily targeting a payout ratio, but, uh, hey, with this kind of money, we think it's important to give back to shareholders in the form of a cash dividend. And we'll continue to revisit that and see if we want to increase it. We talked about the bonds that come due in September of next year. So we do have a $400 million obligation there that will use cash. And we talked about buybacks. And I think that is going to be an important part of our strategy going forward, as well as funding F&G growth. So Yeah. Have we earmarked all of our cash to spend over the next year or 18 months? Probably not. There's still quite a bit left. But we'll continue to update you as we go forward. And Mike, I don't know if you want to lay in.
spk09: Sure. I'd add a few things. You know, John, we're always on the lookout for acquisitions that can add value to the company, whether it's on the title side. And there's a number of opportunities to continue to add agent acquisitions. We've We're doing those. A lot of them are smaller. We don't always announce them. But on the non-title side, we have a number of businesses that could be potential beneficiaries of acquisitions, if it makes sense. We've got our real estate tech businesses. We've got just our overall technology strategies with digital and soft pro and title automation companies. And then there could be things in our service link businesses that could be additive. But, you know, we're not going to do acquisitions just for acquisition's sake. And we also know that you don't always know when something shows up that you want to act on. So it can be good to have some cash to be able to move quickly when those opportunities show up.
spk06: Yeah, it makes sense. Thanks for all that color. And then, Chris. Just two quick questions here. Obviously, the doubling of AUM, moving that up to four years, that's great. Great results for you guys so far. I'm just curious first about the mix or kind of the growth by channel, how you kind of foresee that, you know, bridging that out over the next couple of years. And then obviously the net investment spread has picked up a good bit last two quarters, you know, relative to the last several quarters. So just curious about what's driving that strength and the sustainability of it.
spk08: Sure, yeah, and I think maybe a reverse order is the best way to think about it. So our partners at Blackstone have done a great job continuing to source really attractive private investment-grade opportunities for us, and so that's kind of the fuel in our engine, particularly relative to our balance sheet, which is smaller relative to a number of our competitors. So that's kind of where the crediting edge has come from. Obviously, over time, that will diminish somewhat as we scale, but I think that's years in the future And we're also getting some offset in terms of scale benefits, you know, adding, you know, 10 billion of assets is significant in terms of helping to drive down expense ratios. So that's kind of the competitive dynamic. I think from a channel perspective, you know, we're up to number two or number three in the independent channel for FIA sales. So we've got a good, healthy share there. I think there's some more share that we can take and, you know, don't see any reason why we couldn't be the number one player in that channel. Over time but probably a little more limited just given the amount of business we write today in our position there I'd say in bank and broker-dealer. We're just getting started. It's a huge market. We've got about a dozen Distribution partners now, so I think there's a lot of capacity to add Partners and go deeper with the ones that we already have so I think that's got significant upside for us FABN as I mentioned before funding agreement back notes is limited. There's only so much of that you can put on your balance sheet, but I think near term there's capacity. And then the PRT business, particularly if we get an uptick in interest rates, I think you're going to see that market continue to grow. So I would, you know, if you said rank order them, I think we'll get growth in our core agent channel, get faster growth in bank and BD. I think we can get very strong growth in PRT, although we're going to pick our spots and make sure we're hitting our return our return hurdles.
spk06: Makes sense. Thanks, guys.
spk02: And our next question is from the line of Mark Hughes with Truist. Please proceed with your question.
spk03: Yeah, thank you. Good morning. Good afternoon. On the commercial, is there any sign that some of that volume is being pulled forward from next year, maybe around tax considerations? Is that a thing?
spk09: Sure, Mark. This is Mike. You know, we don't have any evidence that that's happening. I have not heard that. It would, you know, be anecdotal probably at best. And, you know, when you look at the length of the performance in our orders, you know, nine months now of 1,000 orders per day, open commercial orders, we only did that once before 2021. That was in February of 2020. You know, that's quite a bit of pull forward. So, I don't really see it, but, you know, there might be a small amount of it, but it's just hard to know.
spk03: Yeah. Then you had mentioned that I think for in here, $1.3 million had accepted your offer. Does that mean anything material to either revenue or profitability if you get more of a mixed shift in that direction?
spk09: I would say not initially. It's really the way to think about it. It's kind of the doorway to really creating an end-to-end digital transaction for the participants, including the buyers and the sellers. And it does give us some efficiencies on the front end because they provide information in a secure environment, not email, directly into our production system. So for $1.3 million, transactions over the, since the inception, we're gaining a little bit of efficiency just in terms of getting that information and then also providing better security with the acknowledgement and the wire safe form, et cetera. But that will lead us down the path of just doing more and more digitally leading up to the final moment, which is the execution of the documents for the closings. And we're just very excited about the fact that we're seeing that adoption rate, you know, close to 65%, I think. And it tells us that there's a pretty large, you know, group of consumers that are looking for a different way to transact. And we feel like we've built a platform that will really be a differentiator for us over time.
spk03: And then there's one for Chris. If we do see interest rates start moving up, you gave us the 1% return number, but should we look for spreads to widen if the interest rates start to move up here? What has been your experience in times past when you got the increase in interest rates?
spk08: Sure. Yeah. you know, obvious point, but some of it depends on, you know, how that rate increase happens. So any increase in LIBOR, we would get a one-for-one benefit for. So we get about 15% of our portfolio in floating rate securities. The longer end of the curve takes a little longer to get into the portfolio because we're pretty tightly ALM matched, but you would see some benefit there. And generally, a little easier to capture a bit higher spread in a rising rate environment. And then the third component is just demand for the core products. Obviously, if you're offering 3% on a fixed-spread annuity versus 2%, there's just going to be greater demand for that. So I think those are the three that would benefit. So, yeah, you would see some impact pretty quickly, and then I think over time some incremental impact.
spk02: Thank you. And we have reached the end of the question and answer session. I'll now turn the call over to Mr. Randy Quirk for close remarks.
spk10: Thank you. We continue to be very pleased with our team's execution as our title business delivered the strongest margins and earnings for the third quarter in our company's history. Our F&G team also continues to execute at an extremely high level. as they open new market opportunities, which is driving accelerated asset growth and improved earnings. Taken together, we are building a company that has a financial model designed to deliver strong earnings as market conditions change. It is very exciting to see our vision for the acquisition of F&G begin to come to fruition, as well as a transformation of our business model. We look forward to speaking with you and updating you on our fourth quarter earnings call.
spk02: And this concludes today's conference, and you may disconnect your line at this time.
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