Thank you, operator. And good morning, everyone.

Thank you for joining our first 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.

Thank you, Jamie. I would like to start by thanking our employees for their efforts in helping FNF achieve industry-leading results to start the year.

Our team continued to perform at a high level despite the challenging environment that we have all endured as they kept our operations running smoothly, while maintaining a steadfast-focus on our customers. In our Title segment, we achieved record first quarter results generating adjusted pre tax title earnings of $512 million, compared to $279 million in the year ago quarter, an a 19.9% adjusted pre tax title margin, compared with 14.4% in the first quarter of 2020.

Thank you, Randy. Randy touched upon our record first quarter results as we continue to benefit from low interest rates, driving strong origination demand and the continued rebound in commercial real estate activity.

For the first quarter we generated adjusted pre tax Title earnings of $512 million, an 84% increase over the first quarter of 2020. Our adjusted pre tax Title margin was 19.9%, a 550 basis point increase over the prior year quarter.

With a 58% increase in direct orders closed, driven by a 103% increase in daily refinance orders closed, a 21% increase in daily purchase orders closed and a 12% increase in total commercial orders closed.

Thanks, Mike. The first quarter picked up a great start to 2021 with record sales levels.

Our fixed indexed annuity or FIA sales in the first quarter were $1 billion, up 11% from the sequential quarter. Total annuity sales of $1.6 billion in the first quarter were up 16% from the sequential quarter.

We continue to see significant growth ahead, driven by strong momentum in our primary independent agent channel and traction in new channels. We're now three quarters into our financial institutions channel launch and continue to be thrilled with the results.

The first quarter total annuity results include $410 million from our newest channel, and we expect to comfortably exceed our $1 billion goal for 2021.

Thank you, Chris. We generated $3.1 billion in total revenue in the first quarter, with the Title segment producing $2.5 billion, F&G producing $539 million and the corporate segment generating $42 million.

First quarter net earnings were $605 million, which includes net recognized gains of $43 million versus net recognized loss of the $320 million in the first 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 $3.1 billion as compared with $1.9 billion in the first quarter of 2020.

Adjusted net earnings from continuing operations were $455 million, or $1.56 per diluted share. The Title segment contributed $395 million.

F&G contributed $78 million and the corporate and other segment had an adjusted net loss of $18 million. Excluding net recognized losses of $59 million, our Title segment generated $2.6 billion in total revenue for the first quarter, compared with $1.9 billion in the first quarter of 2020.

Hey. Guys, good morning.

Congrats on a great quarter.

Hey, thanks, John. Good morning.

On the centralized refi channel, I just want to touch on that real fast. If you guys can maybe just talk to, you know, maybe the percent of refi orders running through that channel now and then just to kind of directionally how the margins have looked in the channel over the last couple quarters?

Sure, John, it's Mike. Generally, ServiceLink has about you know, 25% to 30% of our open refi volume, it can move around depending on the month.

But that's a pretty good number over time. And the first quarter margins were 36%, which is really strong margin, obviously, in the centralized refi.

channel, I think that was up against 33% or so, yeah, 30% in the prior year, and you know, we've had nice revenue growth there, I think the revenues up 81%, quarter-over-quarter. So pleased with what we've seen on the ServiceLink side.

And 34% in the fourth quarter of 2020. So pretty consistent.

Yeah, thanks.

Okay, that's helpful. And then as we think about, you know, the prospects of refi, maybe lightening up a little bit here, next couple quarters.

How easy is it to protect that type of margin on the way down?

Well, you know, John, we'll do what we always do, as we see those volumes come out, particularly in refi, we'll have to adjust our expenses accordingly, you know, whether you can maintain a 36% margin is really a function of just how far it's falling off. But we're pretty confident that we can manage the expenses as those orders fall off, if they do.

Okay, it makes sense. And then the $1.1 billion of cash at the holding company level, that seems like that's way above what you guys typically carry.

Any particular reason that's such a high level and any thoughts about what you might do with that over the next couple of quarters?

Yeah, John, this is, Tony. It's a good question.

And you're right, when you're generating the kind of cash flow that we are, it does accumulate. We started the quarter at about a $1 billion.

We upstream from both regulated and unregulated subs about $400 million. We spent $107 million on our common dividend, about $30 million in interest expense.

And as we mentioned earlier, $112 million in buybacks, so we landed a little over $1.1 billion at the end of Q1. You know, we'll look for various uses as we work our way through the year.

Obviously, our dividend is very important to us. And that'll run us little over $400 million for the course of 2021, we have about $80 million in interest expense obligations throughout the year.

We have another roughly - we're about halfway through our commitment of $500 million in buybacks. So we have about $250 million left over the course of really into the third quarter to exhaust that commitment.

And then the board will have to take a look at where we stand in terms of the authorization, but my expectation would, would be that they would strongly consider re-upping on the buyback if we continue to sit on large volume of cash. As I would expect, we do, I mean, we're going to have a strong cash flow year, I believe, again, similar to what we did last year and the year before, probably well north of a $1 billion in cash flowing up to parent.

So we'll see where we stand. I think you heard in Randy's comments, thoughts around F&G, we believe now it won't start until 2022.

But we do believe that we'll be getting a return of capital from F&G based on our expectations and strategies there. So that'll just add to the corporate coffers in terms of cash flowing up to the parent.

Now we may provide some leverage, they have room to borrow on F&Gs balance sheet, so we may provide some intercompany leverage to them to the tune of maybe $350 million. So that can be a use and of course, M&A opportunities that show up on the Title side, we're always looking some of those show up where we buy them within the Title subs.

And some of them use parent company cash. So I know kind of a long-winded explanation.

But that's where we stand. And of course, it's a good problem to have a $1 billion plus in parent company cash.

Yeah, undoubtedly. That’s rich man's problem.

So that's a good place to be for sure. If I could squeeze in maybe one more here.

And I'm guessing this has fallen off probably a pretty good bit over the last call it, two years. But how big is that 1031 exchange business now, how much you guys generating out of that now?

I don't have that number right in front of me.

Yeah. I do have on the interest side, which is, I would say the biggest part of it, it's fallen off substantially.

We were running, call it, almost $19 million a quarter in interest income in our 1031 exchange business. And now it's running $4 million on a quarterly basis.

So we've already seen that. In fact, we've seen that over the last several quarters, I think our net spread there is something like, you know, 33 basis points, which is better than short term money right now.

But it's well off the almost 200 basis points that we were earning, you know, back up, you know, before the Fed made those adjustments. In terms of falling off from a business standpoint, that hasn't happened at all.

I mean, we're between what $4 million and $5 billion in balance…

Yeah, we're actually a little over $5 billion, actually at record balance levels, John and record transactional levels. But I did pull up a number while – while Tony was speaking and, you know, because of the change in rates, even though we have record transaction levels, as I've said and balances, our revenue, first quarter over first quarter last year is down $9 million from 22, last year to 13 this year.

And if you went back one more year, you know, there'll be another substantial fall off because this has been kind of a two year falling knife, if you will, around the rates.

Yeah, makes sense. And I guess, we'll have to wait and see what the Biden administration does with 1031 exchange, but $4 million a quarter seems like it's pretty bearable either way it goes.

Okay. Thanks, guys

Yeah, I had a question about the implications of you know, the really robust home price appreciation we've been seeing for kind of average revenue per order. Is it still right to assume that roughly 50% of that gets kind of passed on.

So if we've had, you know, 12% HPA over the last year that you've got a nice, let's call it 6% kind of tailwind to average revenue per order, kind of just ignoring the impact of mix?

Yeah, I think that's fair, Mark, I mean, and 50% or 60% that is kind of a staggered scale. So it's, you know, it's a little, I guess you earn more on a $200,000 home as a percentage than you do on a $300,000.

So it's kind of a gradual increase. But yeah, we certainly benefit from home price appreciation.

I did some rough numbers and on the purchase - the refi side, has been fairly consistent for a long period of time at roughly $1,000 in order, title and closing. On the purchase side, though, I did some rough numbers, I think it was March to March or April to April.

And it looked to me like we've seen about a 14% increase in average fee per file. Now, some of that may be geography and deal size.

But some of that certainly is going to be just home price appreciation.

Okay, that's helpful. And then can you just give us some color on what you're seeing in your commercial pipeline, kind of, you know, deal size, kind of diversity of transactions we're seeing and how that shaping up?

Sure, Mark, it's Mike. And you know, as I said, in the opener, we're very optimistic on commercial, a couple of data points in the first quarter, our average open orders per day were over 1000, you know, total commercial orders.

We've never done that before. So that's a record.

April was also over 1000. So that just gives you an idea that sort of the transactional velocity we're seeing.

We've also seen a good growth in our national orders in the first quarter up, you know, high single digits, both to the fourth quarter last year and the first quarter last year. So that's very encouraging.

And I would say our national commercial managers are reporting an optimistic that we're seeing some bigger transactions coming back into play, some multi sites. So I think that'll bode well as we get into the second and third quarters.

Kind of from an asset class standpoint, it's pretty similar to what we've talked about before, still seeing strength and, you know, multifamily and industrial. Those are probably, you know, the consistent, strong asset classes across, you know, the past quarters.

Energy, gaming, you know, kind of in and out, but very good when we have it. And I think, you know, health and medical is another area that that's a good segment.

And I think people are optimistic that, you know, we might see some, some improvement in some of the segments that have lagged more like retail and hospitality as we move into the year, and kind of on a geographic basis, all markets are improving, and we're even seeing, you know, in New York, where we've kind of had that that is one of the tougher markets given the shutdowns there and other things, seen a nice rebound there. And I think as the economy further opens up, it bodes very well for commercial.

Okay. And how are those commercial margins coming in relative to your average total margins?

First quarter, it looks like commercial margins were for a national operation, so not our total commercial, because that's kind of embedded. We were at 26% and our direct operations, which include mobile commercial, we're just under 29%.

So pretty similar. I think those national margins will kind of come up as we go through the year and we close more, you know, hopefully larger transactions and just more transactions overall.

Okay, great. Thank you.

Hey, good afternoon. So just following up on the earlier question about capital deployment, I think in the past, we've talked about fidelity national being able to roll - run one hold – at holdco and unencumbered with up to, you know, as low as $150 million of cash.

So the question is, where is a good place for it to be I mean, you know, what you were talking about being at billion on e with a lot of cash flow coming up to the holdco. You know, what's kind of a comfortable area where you'd like to be.

And perhaps you could talk about some of the specific M&A opportunities that you might be seeing out there right now.

Just on the comfort level, and in cash, $150 million, is probably adequate only because we do expect, you know, recurring regular dividends up from our subs. Now, if we entered a period of time where you know, the market were a little more challenging, then you'd probably want to be sitting on little more of that.

You know, we have to be cognizant of that, as it comes due most of our debts been extended out and is frankly, pretty cheap. But we do have I think, $400 million of debt coming due in September of 2022.

So that's something that's - it's in the back of the mind a little bit. But yeah, I mean, it is a good problem to have to be flush with cash at this point.

I think, though, the buyback is you know, is second only maybe to the dividend the buyback is very prominent. If your guys comment a little bit on…

I would just say, this is this is Randy, we probably have 1520 potential acquisitions around the country on the board that we're looking at relative to the agent - agency side of our business, some small, maybe some escrow companies, and then some medium to larger opportunities. But we always have those in the flow and work those pretty regularly.

We don't know which ones are going to come to fruition yet. But we stay and play with that on a regular basis to kind of fill out our footprint, which is pretty extensive, but there's still more opportunities.

We got two or three that are on the board that looked like that they might get to conclusion. We have our real estate technology companies.

We're always looking at maybe adding to our menu of services. In the lead generation business, the CRM business.

So we were staying in play, we just need to get to the - to the right deals, that makes sense, and then will execute.

I see. So it sounds like there are some fields that could absorb the bulk of that - that cash at the holdco no?

Well, I would say that these are not large, large deals, and they take some time. And, you know, we pass on many, and then we move on others.

But I know if Tony might talk about how that all adds up. But, they are there- for the most part, midsize acquisitions.

I can say $100 to $300 million, maybe on Title company acquisitions, I don't think it would be anything more than that.

Got it. And then just a quick follow up on that, you know, really solid answer to the commercial questions.

So, I mean, with closed orders up 12% in the quarter, open orders of 10%. It kind of - the read through would be that, it could be that or even better as we go through the year, was that the right read on your earlier response?

Well, in terms of that being the trend for future quarters…

Yeah…

Open - and I don't know that I'm saying that, Andrew, because you know, you have more volatility really in commercial order flow quarter to quarter. But we are seeing record levels of commercial orders right now.

And that really bodes well for I think closings as we go through the next the next few quarters. And also encouraged by the improvement in orders in the National operations, which, you know, probably a little bit more of the brunt of the fall off in the pandemic last year.

And just as a maybe a reminder, we have 21 National commercial offices, and they generate about 60% of the total revenue in commercial in the company. So they're very, very important.

And then, you know, by 40% is done through our local distributed footprint. That's also handling residential refinance and purchase transactions.

Got it. And just one, one last one for Chris, the MYGA business at, you know, $460 million in retail value, I think that was fourfold versus last year in the same quarter.

And it sounds like it's these new channels. But maybe Chris could give a little color on, you know, has that number kind of leveled out?

Do you think it could grow a lot? And what's the competitive landscape?

Are you getting good returns in that business?

Yeah. All great questions.

So yeah, the business has been quite steady. As you know, as its core product for banks in particular, unlike the independent agent channel, where we are always quite competitive, but it was, you know, much more of an opportunistic are secondary product for that channel.

So I do think we're going to continue to see growth there. We do like the returns that we're getting, obviously, it's not the same margin that we get on FIA sales, but what we're really pleased with is where we're selling fixed annuities we are getting the flow through and also selling indexed annuity.

So it is a bit of a door opener, it's a very easy thing. It's an excuse for new producers to get licensed with your company learn the F&G stories.

So what we're most pleased with is that is then translating into the cross sale and getting them interested in our FIA products. So we feel really, really good about the direction of the channel right now.

And the other is just banks are drowning in deposits. I mean, you probably read this everywhere, but it's the numbers are just astronomical, and they don't have any place to put the money.

And you know, annuity revenues have become a meaningful source of revenue for the banks. So they're not only not fighting it, they're quite supportive of us selling fixed annuities through their channels.

Thanks, Chris.

Good afternoon…

Hey, Borse…

So first, on the margin side, what was the margin on the agents channel in the quarter?

The agency margin for the quarter was 10%, which is what might be the best quarter we've ever had or right there with the best quarter we've added in terms of terms of agency that compares up against 7.9% in the year. Actually, the fourth quarter was 10.4%.

So we're just down from the fourth quarter, but still a really strong, really strong margin.

And I think fourth quarter was a record at 10

Switching to In terms of the operating earnings this quarter, should we just sort of pull out that this $12 million of you have one time items and is that kind of a reasonable run rate?

Yeah, I probably say maybe pull out half of it. And the reason I say that is, we've had very consistent mortality gains in our SPIA book or immediate annuity book.

It's a very, you say it in a polite way, it's an old group of policies, so average ages in the 80s. So there's more upside than downside there, so that that's core.

Clearly we saw some elevated mortality gains, and I suspect we're doing the analysis, I suspect it's sadly COVID related. So I think if you look back over time, we've averaged probably $6 million a quarter last year of positive gain there.

This one was 16. So, you know, if you said the 66 versus the 78, it's probably somewhere in between the two.

That's helpful. Thanks.

And then let's see, just one follow up on the question about the 1031. In terms of transactions, commercial transaction, you guys, like if it's a 1031 transaction that's happened, do you know what percentage that is of your transactions or when it takes place you don't necessarily know if it's a 1031 or not, or they're just any color put, put the percentage of that volume as a total commercial volume?

I don't think we have that number. Tony, I just don't think we have that, I don't either.

I mean, not every 1031 exchange is a commercial. No, there's a lot of residential actually 1031s.

I think we've also learned just looking at the, you know, the proposed tax policy, which certainly isn't policy yet. At least I learned that a lot of our transactions are actually well below $500,000 in proceeds not - I mean, I don't know how much of the gain is included in that.

But the fact that 500,000 is proceeds, you know, the gain is lower than that. And so there's really a lot that I guess would be un-impacted by policy change, right.

Okay, that's helpful. Okay, great.

Thanks a lot, guys.

Thanks, Bose.

Thank you. We are very pleased with our first quarter Title results.

As the year is off to a great start, our team continues to execute delivering industry leading performance. In addition to our title results, F&Gs strong results, solid investment portfolio and growth initiatives remain on track.

And we look forward to their further execution on these initiatives in 2021. Lastly, our capital allocation priorities remain focused on deploying capital in a way that best maximize shareholder value through our quarterly dividend, share repurchases and continued investment in our business.

We look forward to speaking with you and updating you on our second quarter earnings call. Thank you.