Fidelity National Financial, Inc.

Good morning and welcome to FNF's second quarter 2022 earnings call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions with instructions to follow at that time. As a reminder, this conference call is being recorded. I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President of Investor and External Relations. Please go ahead.

Great. Thanks, Operator, and welcome again, everyone. Before we begin, and as a reminder, today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events, or changes in strategy. Please refer to our most recent quarterly and annual reports and other SEC filings for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. We will be discussing certain non-GAAP measures on this call, which we believe are relevant in assessing the financial performance of the business, and you'll find reconciliations of these metrics within our earnings materials available on the company's website. Yesterday, we issued a press release, which is also available on our website. Today's conference call will be available for webcast replay at fnf.com. It will also be available through telephone replay beginning at 2 p.m. Eastern Time today through August 10, 2022. Joining me this morning to discuss our results in further detail are Mike Nolan, CEO, Tony Park, CFO, and Chris Blunt, F&G CEO. We look forward to addressing your questions following the conclusion of our prepared remarks. And with that, I'll now turn the call over to Mike.

Thank you, Lisa, and good morning. Overall, we have had another strong set of results for the second quarter. Our title business continues to perform well, despite slowing mortgage originations, having generated total revenue of $2.6 billion in the quarter. For a second quarter result, this reflects the second best in F&F history in terms of total revenue, adjusted pre-tax title earnings, and adjusted pre-tax title margin. Similarly, F&G continues to deliver on its diversified growth strategy, with assets under management crossing the $40 billion milestone at June 30th. And we are on track to complete the dividend distribution of 15 percent ownership of F&G to FNF shareholders early in the fourth quarter of this year. Turning to our title business, there is certainly much commentary focusing on slowing mortgage originations as mortgage rates have risen rapidly this year. We have seen this in our refinance volumes, which started to decline in the second quarter of last year and now appear to be bottoming through the second quarter of this year. Additionally, residential purchase volumes have moderated from the record levels that we experienced in the year-ago second quarter. As daily purchase orders closed, we're down 5% in April, 10% in May, and 17% in June, for an overall 11% decrease in the second quarter compared to the prior year. Given the daily commentary in the media, it is easy to lose perspective on the current state of the US housing market. While we expect residential purchase demand to continue to moderate in the second half of the year, as compared to the record levels seen last year, 2022 will still be one of the strongest residential purchase markets in the last 15 years. Additionally, we continue to benefit from strength in the commercial market and home price appreciation in the residential purchase market. Notably, our commercial fee profile has increased 34%, and residential purchase fee profile has increased 7%, both versus the prior year. This strength has provided an important buffer to moderating volumes combined with our disciplined approach to expense management, which I will touch on more in a moment. Turning to our title results in more detail, total orders opened averaged 6,900 per day in the second quarter. For the month of July, total orders opened were 6,000 per day. Looking at orders opened by type, Daily purchase orders opened were down 12% from the second quarter of 2021 and down 20% for the month of July versus the prior year. Refinance orders opened per day were down 67% from the second quarter of 2021 and down 74% for the month of July versus the prior year. Lastly, total commercial orders opened per day were down 8% from the second quarter of 2021 and lower by 11% for the month of July versus the prior year. For July, total commercial orders opened were over 900 per day, giving us positive momentum going into the third quarter. Overall, we have seen solid title revenue for the quarter. Total revenue, excluding recognized gains and losses, was $2.8 billion, a 7% decrease compared with the second quarter of 2021. For the quarter, we delivered adjusted pre-tax title earnings of $529 million and adjusted pre-tax title margin of 18.9%, which increased from 17.1% in the sequential quarter, although down from the record prior year. Of note, total commercial revenue was $436 million, a second quarter record, compared with the year-ago quarter of $347 million, driven by the 34% increase in total commercial fee per file, partially offset by a 6% decrease in closed orders. Importantly, we are managing the business the way we always have, by closely watching the real-time trend in opened and closed orders and adjusting our operations and expense base accordingly. We have a demonstrated track record of navigating economic cycles as we work to effectively manage margin. Overall, we began reducing title headcount in the fourth quarter of 2021 and have reduced title headcount by approximately 8% over the last three quarters. We will continue to watch our opened and closed orders carefully as we rapidly adapt to changing market needs. As the industry leader, our strong balance sheet positions us to take advantage of opportunities in the current market as we focus on growing our title business and market share. To that end, we continue to recruit revenue-attached talent and are also actively looking at title agency acquisitions. We believe that opportunities will increase to acquire good businesses and attractive multiples. We will also continue to make investments in technology to ensure we maintain and extend our market-leading position. Over the last decade, we have created an innovative and scalable technology platform in our title business with expansive offerings to service the broader real estate industry. We remain excited about our in-here experience platform and continue to develop and add new features to enhance the user experience. We have deployed the platform to approximately 90% of our residential operations, with the remainder slated to come on board in the third quarter. And our mobile app now has approximately 100,000 real estate agents actively using it to track their orders. Turning to F&G, and which Chris will discuss in more detail in a moment, second quarter sales rose by 15% year over year to $3.1 billion, with assets under management ending the quarter at $40.3 billion, which is significantly ahead of our original expectations when we completed the acquisition. At the time of the merger, we stated that we expected F&G to double assets to $50 billion over five years through organic growth. F&G's assets under management growing to $40 billion only two years following the acquisition demonstrates their ability to grow profitably by capturing market share while expanding in new distribution channels. Importantly, F&G contributed 24% to our adjusted earnings this quarter as compared to 16% in the year-ago second quarter. As F&G's assets under management continue to grow, so too will their earnings contributions to F&F. We view this as a competitive advantage as F&G's primarily spread-based businesses provides a steady and growing source of earnings that will benefit F&F over time, as well as a counter-cyclical business model to title. by retaining approximately 85% ownership of F&G following our dividend distribution. We will continue to benefit from their growth while also highlighting the substantial equity value that has been and will continue to be created. Finally, I would like to wrap up by thanking our employees. Our team has continued to perform extremely well and kept our operations running efficiently with a laser focus and commitment to providing customers with an exceptional customer experience. Let me now turn the call over to Chris Blount to review F&G's second quarter highlights.