Fidelity National Financial, Inc.

Good morning, and welcome to FNF's third 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, Investor and External Relations. Please go ahead.

Great, thanks, Operator, and welcome, everyone, to F&F's third quarter 2022 earnings call. Joining me today are Mike Nolan, Chief Executive Officer, and Tony Park, Chief Financial Officer, as well as Chris Blunt, F&G's Chief Executive Officer, and Wendy Young, F&G's Chief Financial Officer. We look forward to addressing your questions following our prepared remarks. 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. This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. Non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules within our earnings materials available on the company's website. Yesterday, we issued a press release, which is also available on our website. And today's call is being recorded and will be available for webcast replay at fnf.com. It will also be available through telephone replay beginning today at 2 p.m. Eastern Time through November 16, 2022. And with that, I'll now turn the call over to our CEO, Mike Nolan.

Thank you, Lisa, and good morning. Overall, we have had another strong quarter, despite housing market headwinds from ongoing concerns about inflation, surging interest rates, and a growing risk of recession. Our title business has continued to perform well, despite declining mortgage originations while F&G continued to deliver on its diversified growth strategy with assets under management climbing to $42 billion at September 30th. Looking forward, we are on track to complete the dividend distribution of 15% ownership of F&G to F&F shareholders in the coming weeks, and Chris will provide more details in a minute. Starting with our title business, Commercial revenue was $381 million, a third quarter record, compared with the year-ago quarter of $366 million. This was driven by a 19% increase in total commercial fee per file, partially offset by a 12% decrease in closed orders. On the residential side, the focus on rising mortgage rates continues to make headlines, as we have experienced one of the fastest moves in mortgage rates ever seen. The average 30-year mortgage rate has jumped from 3.1% for 2021 to 4.5% for the first half of 2022, and in just a matter of weeks is now over 7%, a level not seen since 2002. As expected, this dynamic environment and resulting market decline are impacting our order volumes as the rapid rise in mortgage rates and resulting decline in housing affordability are adding pressure to the normal second half seasonal fall off in purchase transactions. Looking at third quarter volumes more closely, daily residential purchase orders closed were down 23% in July, 24% in August, and 27% in September for an overall 25% decrease in the third quarter compared to the prior year. Daily purchase orders opened were down 22% from the third quarter of 2021 and down 29% for the month of October versus the prior year. Next, turning to refinance volumes, which are inherently more rate sensitive, we saw refinance orders begin to decline in the second quarter of 2021 and move quickly to right size our operations. We believe that current refinance volumes are at or near trough levels. and would not expect volumes to return in 2023 without a meaningful reduction in mortgage rates. For the third quarter, our refinance orders open per day were down 75% from the third quarter of 2021 and down 74% for the month of October versus the prior year. Over the last year, as refinance volumes have fallen, we have benefited from diversification across our market segments, as residential purchase and commercial revenue have helped to buffer lower refinance volumes. Refinance revenue was only 7% of title total direct revenue in the third quarter compared to 19% in the third quarter of 2021. As to commercial volumes, we have seen open order volumes fall from their historically high levels, though still running above the average seen over the last seven years. For the third quarter, our total commercial orders opened per day were down 18% from the third quarter of 2021 and lower by 30% for the month of October versus the prior year. For October, total commercial orders opened were 760 per day. For the quarter, we delivered solid title results despite a challenging market backdrop. Total orders opened averaged 5,700 per day in the third quarter, with July at 6,000, August at 5,700, and September at 5,300. For the month of October, total orders opened were 4,800 per day. Total revenue, excluding recognized gains and losses, was $2.3 billion, a 24% decrease compared with the third quarter of 2021. Adjusted pre-tax title earnings were $400 million, and adjusted pre-tax title margin was 17.1%. In this declining market environment, we remain confident in our ability to navigate the challenges of operating in a cyclical business. Our management team is experienced in operating through varying economic cycles and has a proven track record of reacting quickly to adjust to order volumes. Year-to-date net of acquisitions We have reduced title headcount by approximately 20% and will continue to manage the business based on market conditions. Our industry-leading position and strong balance sheet allow us to not only withstand periods of dislocation, but take advantage of opportunities to build our title business for the long term. We will continue to make investments in technology, data, automation, and people that enhance our security, productivity, and the overall customer experience. We will continue to recruit revenue-attached talent and look to acquire title agencies with strong management and people. Additionally, the growing utilization of our in-here digital transaction platform and mobile app, which allow real estate agents to track orders and better manage their businesses, creates both market growth and efficiency opportunities over the near and long term. We have approximately 120,000 real estate agents registered for the platform, reflecting an increase of 23,000 or 25% from the second quarter. Finally, the counter-cyclical nature of F&G's business, which benefits from rising interest rate environments, provides an important source of additional earnings as market dynamics put pressure on mortgage origination volumes. Since the merger over two years ago, F&G has far exceeded our original expectation for growth and contributed approximately $900 million of adjusted net earnings over the last nine quarters on a cumulative basis. By retaining an approximate 85% majority interest in F&G following the dividend distribution, we will continue to benefit from F&G's growth. Wrapping up, I would like to thank all of our employees for their hard work and contribution to our performance and ongoing commitment to providing our customers with exceptional service. Let me now turn the call over to Chris Blunt and Wendy Young to review F&G's third quarter highlights.