Q3 2024 Earnings Summary
- F&G is experiencing robust sales growth, driven by strong demand for retirement savings products and favorable demographics. The company is optimistic in terms of sales growth, with new sales continuing to be quite robust, and spreads holding up nicely.
- FNF's commercial segment is showing strength, with national commercial orders up 10% through September and up 16% year-over-year in October, indicating potential growth, especially as the office market begins to transact.
- FNF is expanding its market presence through strategic acquisitions, such as First Nationwide, a well-established agency in the New York market with $10 million to $20 million in revenue. This positions FNF to benefit as the New York office market rebounds.
- Interest and investment income is expected to decline due to anticipated Federal Reserve rate cuts, which may negatively impact earnings. The company projects quarterly interest and investment income to decrease from $103 million in Q3 to around $95 million in Q4 and to $85 million in Q3 of 2025, assuming a 100 basis point reduction in the Fed funds rate over the next nine months. As a rule of thumb, every 25 basis point decrease in Fed funds is expected to result in an approximate $15 million annualized decline in interest and investment income.
- Continued market uncertainty has led the company to halt share repurchases, with no buybacks in the third quarter. The company stated it will monitor conditions and resume buybacks once the title market improves and cash generation builds above the level of annual dividend, interest expense, and acquisition spend. This cautious capital allocation suggests concerns about current market conditions.
- Potential decrease in transactional volumes for the remainder of 2024 if mortgage rates remain at current levels, as the company expects normal seasonal purchase falloff. This could negatively impact revenues from residential purchase and refinance transactions.
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Interest & Investment Income | Q3 2024 | $95M to $100M | $103M | raised |
Interest & Investment Income | Q4 2024 | $95M to $100M | $95M | no change |
Interest & Investment Income | Q3 2025 | no prior guidance | $85M | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
F&G Growth & Contribution | Prominent across prior calls with record AUM growth and rising share of earnings. | Maintained strong performance, reaching AUM of $62.9B, contributing $135M in adjusted net earnings. | Remains a key growth driver, share of earnings continues to expand. |
Title Margins & Efficiency | Consistently highlighted with adjusted pretax margins around 10%–16% and disciplined cost management. | Reported 15.9% pretax Title margin, emphasizing technology investment and operational discipline. | Steady margins despite market headwinds, focus on efficiency endures. |
Interest-Rate Environment & Investment Income | Previously noted as a major factor affecting volumes, margins, and investment income; generally stable at $95M–$100M per quarter, with each 25 bps Fed move altering income by ~$15M. | Projected to decline from $103M in Q3 to $95M in Q4 and $85M by Q3 2025, assuming 100 bps in Fed cuts. | More explicit guidance on lower investment income if rates drop. |
Commercial Real Estate & Office Market | Showed cautious optimism in earlier quarters, with strength in industrial, multifamily, and energy. | Indications of a stronger 2025 as office transactions pick up; open orders up ~10% year-over-year. | Sentiment shifted from moderate optimism to stronger confidence in future rebound. |
Share Repurchases | Paused early in 2023 due to market uncertainties; no activity in Q1 and Q2 2024. | No repurchases in Q3 2024, reflecting continued caution. | Still on hold, capital allocation remains conservative. |
inHere Platform | Mentioned in Q4 2023 with over 1 million users; brief updates in Q2 2024. | Referenced again in Q3 2024 with over 1 million users, integrated tech enhancements. | Consistent usage growth, but limited detail provided. |
Fraud Claims | Heightened claims expenses tied to fraud were flagged in Q2 2024; reserves adjusted to account for potential development. | No mention of fraud-related claims or expenses in Q3 2024. | Dropped from discussion, possibly stabilized or resolved. |
Cybersecurity Incident | One-time event in Q4 2023, reducing adjusted pretax Title earnings by ~$8–$10M; quickly mitigated. | No updates in Q3 2024. | No recent references, appears resolved. |
Strategic Acquisitions in NY | Not emphasized or mentioned in earlier quarters [N/A]. | Newly emphasized acquisition of First Nationwide to strengthen NY presence. | Emerging strategy for regional growth and market-share expansion. |
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Commercial Outlook and Office Market
Q: Is the office market starting to transact?
A: Management is seeing some office transactions, though not yet a trend. There's evidence of increasing activity, and discussions with clients suggest more transactions could occur as we move into 2025. This potential uptick in the office sector is viewed positively for future commercial performance. -
Growth in Commercial Orders and Fee per File
Q: What is driving commercial growth—orders or fee per file?
A: The company continues to see strength across various asset classes, generating around $1 billion to $1.1 billion in annual commercial direct revenues without significant office market activity. Open orders through September were up 4%, with national orders up 10%. In October, national orders increased 16% over last year. This growth is driven by larger transactions, with national fee per file exceeding 14.5% in the third quarter, which bodes well for the fourth quarter and into next year. -
F&G Sales Growth and Capital Position
Q: Can F&G support sales growth without additional capital?
A: F&G is comfortable managing its robust sales growth without needing an equity infusion from FNF. They completed about $800 million of Pension Risk Transfer transactions in October, bringing year-to-date PRT sales to over $2 billion. The business intends to remain capital self-sufficient. -
Adjusted EPS and Alt Portfolio Underperformance
Q: How did alternative investments impact adjusted EPS?
A: Adjusted earnings per share were $1.37, accounting for the alternative investments at F&G that were slightly below long-term expectations. Adding back the alt underperformance and reversing other significant items leads to this adjusted figure. -
Impact of Hurricanes on Q4 Closings
Q: Will hurricanes affect fourth-quarter closings?
A: There will be some impact, particularly in the Florida direct market, but it's not expected to be significant. The impact could be around $1 million in revenue per month for a couple of months, which isn't substantial for the quarter's overall performance. -
First Nationwide Acquisition
Q: How significant is the First Nationwide acquisition?
A: The acquisition is another strategic move in the agency space, similar to prior ones. While not major—agencies with generally $10 million to $20 million in revenue—it strengthens the company's presence in the New York market. As the market rebounds, this acquisition is expected to pay off by providing another brand to build upon. -
Post-Election Regulatory Landscape
Q: How might post-election changes affect regulatory efforts?
A: With a Republican administration, there may be a less aggressive regulatory environment, which could be beneficial for businesses. This might reduce the impetus behind initiatives like the GSE FHA pilot and CFPB efforts. However, the company remains proactive, working with stakeholders to highlight the value of title insurance and addressing potential regulatory changes.