Fidelity National Financial, Inc. (FNF) Q3 2026 Earnings Report, Transcript and Summary

Good morning. Welcome to FNF's Third Quarter 26 Earnings Conference Call. During today's presentation, all callers will be placed in a listen-only mode. Following management's prepared remarks, the conference will be open for questions with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy-Parker, Senior Vice President, Investor and External Relations. Please go ahead.

Thanks, operator, and welcome, everyone. I am joined today by Mike Nolan, CEO and Tony Park, CFO. We look forward to addressing your questions following our prepared remarks. F and G's management team, including Conor Murphy, CEO and President and Mike Bailey, CFO, will also be available for Q and A. 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 details on important factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non GAAP measures which management believes are relevant in assessing the financial performance of the business. Non GAAP measures have been reconciled to GAAP as required and in accordance with SEC rules within our earnings materials available on the company's investor website. Please note that today's call is being recorded and will be available for webcast replay. And with that, I will hand the call over to Mike Nolan.

Thank you, Lisa, and good morning. We delivered strong third quarter results across both our title business and F and G segment, demonstrating the power of our dual earnings engines and our ability to execute in dynamic market conditions. I would like to start by thanking our employees for their hard work and dedication. There is no doubt we are navigating a challenging real estate cycle. Yet our team continues to generate industry leading performance that is well ahead of the competition. Together, we are managing through this period with a disciplined operating strategy which generates a steady level of free cash flow. This allows us to continue to invest in recruiting talent, attractive acquisitions technology and innovation, as we manage the business for the long term while performing in the immediate term. Turning to our title segment, we delivered adjusted pre tax title earnings of $422 million for the third quarter, up 3% over the third quarter of 2025. This generated an industry leading adjusted pretax title margin of 17.1% for the third quarter as compared to 17.8% in both the sequential and prior year quarters. As we discussed on our second quarter call, we expected some modest sequential compression due to recent strategic investments in recruiting and attractive tuck in acquisitions in recent months, where expenses tend to come ahead of the associated revenue contribution. The compression compared to the third quarter of 25 was also expected, due to favorable onetime items in the prior year period and continued investment in technology. Overall, our third quarter results reflect strong performance across the business and disciplined expense management. Looking at our title results more closely, starting with purchase, U. S. Existing home sales continue to reflect a low transactional environment due to mortgage rates and housing market dynamics. Mortgage rates remain high, but have fallen from the recent peak following the Federal Reserve rate hike in September. This is the opposite of the trend we saw in 2025,, and has amplified the normal seasonal decline. Over the course of the year, purchase orders opened have held up well through August, with each month comparing favorably to the prior year, before falling behind by 2% for the month of September. Importantly, we continue to steadily outperform relative to our peers. For the quarter, our daily purchase orders opened were up 3% over the third quarter of 2025, down 9% from the second quarter of 2026 and down 6% for the month of October versus the prior year. Our residential refinance volumes continue to be responsive to 30 year mortgage rates, although accounting for only 6% of our direct revenue in the third quarter. Notably, we have demonstrated our ability to generate strong adjusted pretax title margins without a substantial refinance market over the past 5 years. Refinance orders opened were 1.4 thousand per day in the third quarter, as compared to 1.6 thousand in both the prior year and sequential quarters. Given mortgage rates in October, we saw refinance orders opened decreased to 1.2 thousand per day reflecting how refinance volumes can quickly change with moves in rates. Our refinance orders opened per day were down 11% from the third quarter of 2025, down 7% from the second quarter of 2026, and down 35% for the month of October versus the prior year. Our commercial business is on pace for a record year. Direct commercial revenue was $1.2 billion in the first 9 months, up 22% over $1 billion in the first 9 months of 2025. National and local market daily orders opened trended down 1% and up 6%, respectively, in the third quarter as compared to the prior year quarter. Total commercial orders opened were 876 per day, up 2% over the third quarter of 2025 down 5% from the second quarter of 2026 and down 6% for the month of October versus the prior year. We closed 24 transactions generating over $1 million each in premiums in the third quarter across multiple asset classes. In both our direct and agency businesses. This is reflected in our higher trending commercial fee per file. We view the current momentum in commercial as sustainable over the near term. Our commercial strength continues to be broad based, across both geographies and asset classes. The composition of our commercial pipeline remains healthy and includes a mix of industrial, data centers, multifamily, affordable housing, retail and energy transactions. At this time, we expect office to gradually recover with top tier properties leading the rebound. 1 question that I often receive is around data centers. We have seen data center transactions in our pipeline over the past 4 years. And in some cases have already seen refinances of transactions that close between 2022 and 2024 which is an underappreciated demand driver. Similar to energy, data centers tend to be higher premium transactions although comprising a small portion of the overall order count. This shows up in our national fee per file which benefits from the larger energy and data center deals. To bring it all together, total orders opened averaged 5.8 thousand per day in the third quarter, with July at 5.9 thousand August at 5.8 thousand and September at 5.6 thousand. For the month of October, total orders opened were 4.7 thousand per day down 17% from the prior year. Looking to the fourth quarter, we remain optimistic about our commercial momentum although we recognize the impact on residential purchase and refinance volumes of elevated mortgage rates and the typical fourth quarter seasonality. All else equal, we would expect our adjusted pretax title margin to move toward the lower end of our 15%-20% normal range in the fourth quarter. Over time, as mortgage rates eventually improve, we believe residential purchase and refinance activity will accelerate and trend toward historical levels. This recovery represents additional earnings power given the operational leverage that we have built into our model. This operational leverage is also supported by the investments we continue to make in technology and AI. FNF provides essential services that extend well beyond the title insurance policy we also manage the settlement process from start to finish. We are the rails on which real estate transactions run. For years, we have invested with the vision of building a differentiated technology platform with 1 overarching objective, to make every real estate transaction faster safer, and simpler. That objective is showing up in what we are delivering today. Since we rolled out our partnership with Clear last year, we have run nearly 100 thousand enhanced identity verifications across our operations to counter impersonation and wire fraud in property sales. Since we launched property monitoring earlier this year, we have provided visibility and alerts as a complementary service to over 250 thousand homeowners after closing. We continue to receive positive feedback from our customers on this value add service. We are accelerating our property monitoring rollout and we expect it to become the largest footprint in the industry. We are also driving deeper digital engagement with nearly 88% adoption of inHere across eligible residential sale transactions. That is the foundation. AI is the next layer. We are already deploying AI driven agents into production workflows, to improve speed and execution across the Title I settlement process This is not a pilot. it is operational. AI is still early, but the direction is clear. A better experience for our customers and higher productivity for us. Combined with our broader technology investments, these capabilities strengthen our competitive position and our ability to consistently deliver industry leading adjusted pretax title margins over time. Turning now to our F and G segment. F and G's assets under management before reinsurance have surpassed the $75 billion milestone at September 30. Gross AUM of $76.2 billion was up 7% over the prior year quarter. F and G continues to expand its retail and institutional franchises and delivered its best core retail sales quarter in history. Opportunistic sales intentionally lower due to returns below threshold, as F and G continues to allocate capital to the highest return opportunities. On a stand alone basis, FNG reported GAAP equity excluding AOCI of $6.7 billion at quarter end. And has grown its book value per share excluding AOCI to $51.37, up 87% since the 2020 acquisition. We believe that the components of F and G's business the new business platform, profitable in force block and capital light fee based strategies each represent a distinct and measurable source of long term value that are not yet fully reflected in F and G's current market valuation. At recent levels, the FG stock has an especially attractive dividend yield of around 5%. Which is above average for the publicly traded life and annuity sector. We remain pleased with F and G's operating performance and foresee plenty of opportunities to grow AUM and increase the value of the business over time. With that, let me now turn the call over to Tony to review FNF's third quarter financial performance and provide additional insights.

Thank you, Mike. Starting with our consolidated results, we generated $3.6 billion in total revenue in the third quarter. Excluding net recognized gains and losses, our total revenue was $3.5 billion as compared with $3.9 billion in the third quarter of 2025. We reported third quarter net earnings of $633 million including net recognized gains of $29 million versus net earnings of $358 million including $176 million of net recognized gains in the third quarter of 2025. Adjusted net earnings were $352 million or $1.32 per diluted share compared with $439 million or $1.63 per share in the third quarter of 2025. The title segment contributed $315 million The F and G segment contributed $72 million and the Corporate segment had an adjusted net loss of $7 million before eliminating $28 million of dividend income from F and G in the consolidated financial statements. Turning to third quarter financial highlights specific to the Title segment. Our Title segment generated $2.5 billion in total revenue in the third quarter. Excluding net recognized loss of $19 million compared with $2.3 billion in the third quarter of 2025. Direct premiums increased 11% over the prior year Agency premiums increased 3%. And escrow, title related, and other fees increased 10%. Personnel costs increased 10%, and other operating expenses increased 13%. All in, the title business generated adjusted pretax title earnings of $422 million up 3% over $410 million in the third quarter of 2025. And a 17.1% adjusted pretax title margin in the quarter versus 17.8% in the prior year quarter. Our title and corporate investment portfolio totaled $5 billion at September 30, Interest and investment income in the Title and Corporate segments was $98 million down 10% from the prior year quarter and excluding income from F and G dividends to the holding company. The prior year period included a benefit from a legal settlement of $7 million. Looking ahead, we expect quarterly interest and investment income to trend up from $98 million in the third quarter to around $105 million in the fourth quarter and then increase around $5 million in each subsequent quarter through 2027. Assuming an additional 75 basis points of Fed rate hikes over the next 9 months. In addition, we expect $28 million per quarter of common and preferred dividend income from F and G to the corporate segment in the next 2 quarters. F and G's dividend income will decrease to a approximately $25 million per quarter thereafter. Following conversion, of the mandatory convertible preferred stock during the first quarter. Our title claims paid of $72 million were $3 million lower than our provision of $75 million for the third quarter. The carried reserve for title claim losses is $10 million or 1% above the actuary's central estimate. We continue to provide for title claims at 4.5% of total title premiums. Next, turning to financial highlights specific to the F and G segment. Since F and G hosted its earnings call earlier this morning, and provided a thorough update, I will provide a few key highlights. F and G's top line AUM before reinsurance increased to $76.2 billion at September 30. Up 7% over the prior year. This includes retained assets under management of $56.2 billion F and G reported gross sales of $3 billion for the third quarter. Gross sales were comprised of $2.3 billion of core sales including record core retail sales of $2.1 billion and nearly $700 million of opportunistic sales. This mix reflects pricing discipline and capital allocation to highest return opportunities. F and G's net sales were $1.4 billion in the third quarter. This reflects flow reinsurance in line with capital targets for multiyear guaranteed annuities and fixed indexed annuities. F and G's retained investment portfolio performed very well once again this quarter. The portfolio is high quality, with 97% of fixed maturities being investment grade. It is well matched to the liability profile and diversified across asset types. Credit related impairments have remained low and stable. Importantly, F and G has a clean governance model with Blackstone with no inherent conflict of interest. Adjusted net earnings for the F and G segment were $72 million for the third quarter, reflecting our approximate 72% ownership stake compared with $139 million in the third quarter of 2025, which reflected our approximate 82% ownership stake and included the F and G Life Free subsidiary which was sold on 03/01/2026. F and G's core spread remains consistent as the business maintained disciplined pricing and rate setting. F and G continues to provide an important complement to our title business. In the first 9 months, the F and G segment contributed 22% of F&F's adjusted net earnings. Down from 32% for the first 9 months of 2025. Turning to capital and liquidity. FNF continues to maintain a strong balance sheet and balanced capital allocation strategy. As Mike mentioned, we have consistently generated a steady level of free cash flow. Allowing us to continue to invest in our business and build for the long term. We also continue to return excess cash to shareholders. During the third quarter, FNF returned approximately $143 million of capital to shareholders. This brought capital return to shareholders during the first 9 months of the year to approximately $561 million Of note, we only completed $5 million of share repurchases during the third quarter given that we were in a closed trading window for much of the quarter. Due to the timing of material nonpublic information and our standard corporate governance policies. From a capital allocation perspective, we ended 2025 with $659 million in cash and short term liquid investments at the holding company. During the first 9 months, our cash position and cash generation funded $417 million of common dividends paid $61 million of holding company interest expense $144 million in opportunistic share repurchases, and approximately $60 million of investments in a handful of tuck in, and other title related acquisitions. The majority of which were in the third quarter. All while keeping pace with wage inflation and funding the continued higher spend in risk and technology required in today's landscape. We ended the third quarter with $545 million in cash and short term liquid investments at the holding company. Which is about 83% of the amount held at year-end 2025. This concludes our prepared remarks. And let me now turn the call back to our operator for questions.

Thank you. And for a participant using speaker equipment, it may be necessary to pick up your handset 1 moment while we poll for questions. Our first question is from Bose George with KBW. Please proceed.

Hey, guys. Good morning. In terms of margins, I know you guys do not like to sort of forecast margins, but just trying to think through the puts and takes looking out into next year. Like, if the Mortgage Bankers Association is right and we have a smaller mortgage market, and the comps obviously getting tougher on commercial. Do you think like, the margins prospectively could be flat? Or could there be pressure with the smaller mortgage market? Or. Yeah. Just curious how you are thinking about Yeah.

Bose, good question. You know, we delivered a 17.1% margin in a in a pretty tough environment in the third quarter. And we are optimistic really as we look to next year, that we could have a better rate environment. The 10-year has come down 50 basis points this month. And the daily rates following And while we do not manage the business outlooks, we are optimistic about next year. What we control at the end of the day is our operating discipline, our focus on our customers, and employees and the technology investments that allow us to continue to outperform regardless of the volume environment.

Yep. Okay. Gregg. Thanks for that. And then, actually, just on the executive order that, you know, came out, it is obviously kind of broad in terms of what it says on the pilot. Expanding the pilot and LLP potential reductions, etcetera. But have you had any conversations with FHFA in terms of what that might look like in practice? Because it-- yeah, it seems like it is could be a lot of different things.

Yeah. I think it is too early to say. Bose, because really, all the executive order did was direct the director to think about things. So what comes out of that? We just do not know yet. So.

Okay. Makes sense. Thanks a lot.

Our next question is from Terry Ma with Barclays. Please proceed.

Hi, thank you. Good morning. Can you maybe just update us good morning. Can you maybe just update us on the recruiting outlook and how we should think about personnel costs for title going forward? And then on the step down for the fourth quarter margin, like any color on how much of that is seasonality in market versus just incremental costs for recruiting and tech in the run rate?

The way to think about recruiting is that it is really a margin enhancer. In the short term, you can have margin compression from it. But both recruiting and acquisitions ultimately drive higher margins as the people ramp up to full productivity. As for the fourth quarter, it is both seasonality as we have seen orders come down, particularly refi with higher rates. And the strong recruiting and acquisitions we have had, really this year, but particularly in the third quarter, we did add a 200-plus person agency add more than 70 revenue recruits. So that was 300 adds in the third quarter. We are recruiting at a level that is probably 25% stronger than we had last year, but we fully expect those to be really margin enhancers as we go into 2027.

Got it. Okay. And then you called out data center refi. Any way to kind of size what you have seen thus far and, you know, what the outlook is over the next year or 2 Well, you know, there is a lot of conversations in the media about data centers.

cannot predict what happens with data centers. I fully expect data centers to continue Whether there is more or less, I do not know. The call out really had to do with that these are not 1 and done things. Like any commercial property or really any piece of property. They transact again over time. So we see that as an underappreciated demand driver going forward. But really expect overall for commercial that 2027 will be another strong year. Our pipeline is good. and the strength continues to be broad based. Across geographies and asset classes. Gregg. Thank you. Thanks.

As a reminder, this Our next question is from Mark Hughes with Truist Securities.

Please proceed. Yes. Thank you. Just Mike, I know you have not been able to get any clarity on the title waiver program, but could you refresh us on as to when it was a waiver program, what classification, what proportion of the refis were subject to the waiver just to kind of. Your latest understanding on how to dimension it.

Sure. there is not a lot of transparency on it, but the. I think both Fannie Mae and Freddie Mac commented a national. I think it was National Housing News article or something like that. That they had handled 22 thousand waiver transactions to date. So I assume that means over the past 2 years. 22 thousand there were over 3 million residential refinances over those 2 year periods. So that is about the best information we have seen publicly on it. I would also just say anecdotally, I still do not have anyone in our world here at the FNF family of companies really telling me they are losing orders. To the waiver program.

Yeah. Yeah. Very good. And then October down 6% in terms of purchase orders. What was your commentary? The interest rates have been so volatile. I am just sort of curious if you have any sense of kind of recent weeks, any kind of granularity on that? I know it is probably not worth pursuing. But Well, first very curious.

Sequential drop-off of 9% is just a little beyond our normal seasonal number. We have seen that running about 7.5% for the last 5 years. And so 9 is not is not way outside of that number. But my instinct is that we are seeing a little bit more than the seasonal effect because of the rate movement that we saw particularly in, you know, in September, but it can change quickly. And as I said, you know, pay. The 10-year has come down 50 basis points. In the last 30 days, let's say. The daily rate is down to I think, 7. Under 2. It was at 7.6. On September 30. So these things can change quickly. And we still believe there is a lot of underlying demand for housing And as rates ease, transactions, sales, and refinances will follow. So we will just have to manage as we always do based on the environment that we are in at the moment. Yeah.

And then if I could question, just very high level on F and G, and I did listen to the call this morning. Their assets under management are pretty stable year over year. They have been pretty active using reinsurance. The gross sales have been quite strong, but you know, but they have been focusing more on capital efficiency. When we think over the next year, if gross sales continue to be strong is that as you see the business, is that the approach that will continue that the assets under management reasonably stable, use refi, return capital is that the kind of the broader strategy? Yeah.

Thanks, Mark. This is Tony. I may turn part of this over to the F and G team. They are in the room and are better equipped than I to handle it. But yes, the focus has been on selling into the channels that make the most sense from a capital and an earnings perspective. And at this point, reinsurance has been very opportune area especially on the MIGA side, and with the focus on capital light and earning--, our own distribution and maximizing our earnings results, I think that you know, growing that gross number and that net number more modestly, I think, is where we intend to go. I mean, in terms of F and G, and if you listen to the call this morning, you heard they had a very strong quarter. I think it was the strongest core retail sales that we have ever seen. For a particular quarter at $2.1 billion. That part has been very, very welcome, and really, the performance overall from F and G has been very strong over the 6 years under our ownership. And the challenge, the elephant in the room, so to speak, that we all to that we all see is valuation. The fact that we have a have an asset here that, you know, with $6.7 billion in GAAP book value, that is performing very well, and yet we just do not see that valued in F and G share price. Or, frankly, in FNF share price. And so that is a continued frustration that we are dealing with and working to improve, but that is kind of where that stands. Do not know, guys, if you wanted to add anything to that.

This is Mike Bailey. I will just state that, you know, just I think everything that Tony said is accurate. We certainly do rely on full reinsurance as part of our capital light fee based strategy. We do expect to see high single digit growth in gross AUM, and we see. We expect to see low single digit growth on a net AUM basis it is important to note when comparing to the year ago period that the year ago period includes FG Life Re. Which was our Bermuda entity, and that entity was sold earlier this year. That was $1.8 billion of assets under management that kind of came out of that number. So normalizing for that sale and the monetization of that property,, certainly puts us back within those trends that we have. That we are targeting. Yeah.

And this is Conor. Let me add as well. Like, from the FG perspective, we are not satisfied, and we recognize that we are being undervalued. But there is a lot of ways that we can unlock that value. Within the 4 walls, if you will, and we are focused on the optimal ways to do that in the coming quarters.

Appreciate that. Thank you. Thanks.

Our next question is from Oscar Nieves Santana with Stephens Inc. Please proceed.

Good morning, and thanks for taking my questions. I wanted to start with next year. You have said you do not manage to an outlook. But if we think about 2027, can you help us frame revenue and the title margin? And where does the operating leverage show up if the market is flat? And, also, how personal tech and recruiting costs could potentially offset that.

Well, I would say in terms of expectations, we expect commercial to remain very strong. As I said before, we are optimistic that we could get a better rate environment. Which will add transactions to the mix. And we are layering AI and technology that will enhance productivity over time. So those are all drivers of better outcomes for the business. If we get a weaker environment, and there is less transactions, there is always levers that we can use to make sure we are protecting our margins as we have always done. And that includes, having to make the company smaller, And we have shown that you know, over time. Also grow market share, which is why we are focused on things like recruiting and acquisition. So there is never 1 thing, Oscar, and we are looking at all of these things all the time. And continue to deliver as we have said before, regardless of the environment, the best margins in the industry. Thank you.

And following up on that point of recruiting and M&A, you share how many people you have added? I know you guys, include the field operations staff numbers, in the release. But if you can give us a sense of overall hiring at the company level.

Yeah. I would say in the third quarter, we had about 300. From the acquisition and the recruiting If you look at the release that we showed on that 100 edition in title direct staffing, So we have already begun some staff reductions and we will evaluate those in the fourth quarter.

For the year, we have-- I do not know how many we have had with acquisitions for the year.

Tony, I do not know if you have that number.

Felt like what I heard was the number of 600 that was equally offset, but was-- Yeah.

Just recruited, or was that a copy? Yeah. Thanks for that reminder.

Yeah. I was gonna think it was I think we have added about 600 this year just from recruiting and acquisitions. And really, it makes up the ads we have made in the title direct footprint for the year. We are not really adding people for productivity We are we are really going after revenue and building not only for now, but for the longer term. Okay. Helpful.

And on the M&A point, can you share, anything incremental on the prices that you are paying on those deals that you that you just alluded to? Yeah. it is really, Oscar. it is in the same ballpark. that we have always done for tuck in title acquisitions, which is somewhere between 4 and 6x pretax earnings. And that is been consistent. Okay. Thank you. My last 1 is you and.

it is on capital. Holding company cash is down since year end. And you, mentioned earlier that buybacks were limited because of, the closed window, and you just raised a dividend. I am curious. Like, what is. Do you guys have a minimum, level of cash that you target and how do you set buybacks against the dividend the tuck ins, and debt given all that? You know, the outlook and all these moving parts. Yeah. Thanks for the question. Thanks for the question. Yeah. We did grow cash during the quarter, but we are at about 83% of the balance that we started the year with. So we added about $100 million or so in cash in the quarter. We were closed to buybacks in the quarter. Because of a blackout. But we have plenty of cash, you know, $550 million We generate strong cash flow. So we balance certainly the dividend, and we did raise the dividend. Thank you for calling that out. But, you know, the dividend is part of our use, but we still have you know, a lot of cash. Beyond that, we look at buybacks and M&A opportunistically. We certainly believe that, with our shares trading where they are, that a great use of capital And when our blackout is lifted, I would expect us to be aggressive in that area. In terms of your initial question, do we have a minimum number? I do not know that we have a minimum number. I would say $100 million to $200 million is probably a comfortable just to have holding company level. But, again, keep in mind that we generate you know, at the low end in a particular year, $800 million that gets up to holdco And in a strong year, it might be $1.3 billion or $1.4 billion, in that range. And so we do have a lot of cash generation to fund the regular needs, which would be primarily the dividend and then to a much smaller extent, the interest expense. Thank you so much.

Have a good 1.

Thank you. There are no further questions at this time. This will conclude our question and answer session. I will now turn the conference back over to CEO, Mike Nolan, for closing remarks.

Thanks for joining our call this morning. We delivered strong third quarter results with our complementary businesses executing well in that dynamic environment. We appreciate your interest in FNF and look forward to updating you on our fourth quarter earnings call.

Thank you for attending today's presentation. The conference call has concluded. You may now disconnect.