FNF Reports Fourth Quarter and Full Year 2022 Financial Results

JACKSONVILLE, Fla., Feb. 22, 2023 /PRNewswire/ -- Fidelity National Financial, Inc. (NYSE:FNF) ("FNF" or the "Company"), a leading provider of title insurance and transaction services to the real estate and mortgage industries and a leading provider of insurance solutions serving retail annuity and life customers and institutional clients through its majority-owned, publicly traded subsidiary F&G Annuities & Life, Inc. (NYSE:FG) ("F&G"), today reported financial results for the fourth quarter and twelve months (full year) ended December 31, 2022.

On December 1, 2022, FNF completed the distribution, on a pro rata basis, of approximately 15% of the common stock of its subsidiary, F&G. FNF retains control of F&G through an approximate 85% equity ownership stake and continues to consolidate the assets, liabilities, and results of operations of F&G in FNF's Consolidated Financial Statements. The portion of equity interest of F&G that FNF does not own, for the period of December 1 to December 31, 2022, is reflected as noncontrolling interest in FNF's Consolidated Financial Statements.

Net earnings attributable to common shareholders for the fourth quarter of $68 million, or $0.25 per diluted share (per share), compared to $533 million, or $1.87 per share, for the fourth quarter of 2021.  Full year net earnings attributable to common shareholders of $1.1 billion, or $4.10 per share, compared to $2.4 billion, or $8.44 per share, for the year ended December 31, 2021.  Net earnings attributable to common shareholders include mark-to-market effects, non-recurring items and discontinued operations; all of which are excluded from adjusted net earnings attributable to common shareholders. 

Adjusted net earnings attributable to common shareholders (adjusted net earnings) for the fourth quarter of $287 million, or $1.06 per share, compared to $668 million, or $2.34 per share, for the fourth quarter of 2021.  Full year adjusted net earnings of $1.5 billion, or $5.36 per share, compared to $2.5 billion, or $8.56 per share, for the year ended December 31, 2021.  The Title segment contributed $180 million and $1.2 billion for the fourth quarter and full year 2022, respectively, compared to $563 million and $2.0 billion for the fourth quarter and full year 2021, respectively.  The F&G Segment contributed $131 million and $338 million for the fourth quarter and full year 2022, respectively, compared to $142 million and $551 million for the fourth quarter and full year 2021, respectively.  The Corporate Segment had adjusted net losses of $24 million and $83 million for the fourth quarter and full year 2022, respectively, compared to adjusted net losses of $37 million and $99 million for the fourth quarter and full year 2021, respectively.  The decrease for both fourth quarter and full year results reflect Title's considerable decline in volumes as compared to the prior year record level given the precipitous increase in mortgage rates, partially offset by higher average fee per file.  In addition, F&G's results reflect alternatives investment portfolio short-term mark-to-market movement that differs from long-term return expectation.

Company Highlights

• Solid Title Revenue despite challenging environment, and as compared to record prior year: For the Title segment, total revenue of $1.9 billion and $9.1 billion for the quarter and full year, respectively. Total revenue, excluding recognized gains and losses, of $1.8 billion for the fourth quarter, a 42% decrease from fourth quarter 2021, and $9.5 billion for the full year, a 20% decrease from full year 2021
• Industry leading adjusted pre-tax Title margin of 16.7% for full year 2022, reflecting the third best since 2003
• Strong sales for F&G continue: Total gross sales of $2.7 billion for the fourth quarter, a 23% increase over fourth quarter 2021, and a record $11.3 billion for the full year, a nearly 18% increase over full year 2021
• F&G partial spinoff completed: F&G began trading on the New York Stock Exchange under the ticker symbol 'FG' on December 1, 2022, upon completion of the distribution of approximately 15% of its common stock to FNF shareholders; FNF retains control of F&G through an approximate 85% equity ownership stake
• Ample deployable capital supports shareholder value: FNF has repurchased 1 million shares for $38 million, at an average price of $37.87 per share, in the fourth quarter and paid common dividends at $0.45 per share for $124 million. For the full year, FNF has repurchased 13.4 million shares for a total $549 million, at an average price of $41.05 per share, and paid common dividends at $1.77 per share for a total $489 million reflecting 10% growth over full year 2021. FNF ended the fourth quarter with $939 million in cash and short-term liquid investments at the holding company. As announced last week, the board of directors has declared a quarterly cash dividend of $0.45 per share, payable March 31, 2023, to shareholders of record as of March 17, 2023.

William P. Foley, II, commented, "While the steep rise in interest rates pressured our results through the fourth quarter, we continued to take decisive steps to position FNF for the eventual turn in the housing cycle.  Central to our strategy is a focus on managing our cost structure to the trend in open orders to maximize our profitability and cash flow which can be seen, once again, in our industry leading adjusted pre-tax Title margin of 12.3% for the fourth quarter.  We also successfully listed F&G on the New York Stock Exchange on December 1st which we believe will unlock the growing value in the business as can be seen in F&G's robust fourth quarter and record full year sales where they ended 2022 with nearly $44 billion in assets under management.  F&G's spread based income delivers a steady and growing source of earnings which is countercyclical to our Title business as F&G benefits from the rising rate environment.  This provides a competitive advantage for our Company, and we remain committed to F&G's long-term success." 

Mr. Foley concluded, "We also returned more than $1 billion to our shareholders in 2022 through our quarterly dividend and share repurchases.  We ended the year with over $900 million of liquidity on our balance sheet which provides ample flexibility to take advantage of further opportunities as they arise while also providing security in an uncertain economic environment."

Summary Financial Results

Segment Financial Results

Title Segment
This segment consists of the operations of the Company's title insurance underwriters and related businesses, which provide core title insurance and escrow and other title-related services including loan sub-servicing, valuations, default services, and home warranty products.

Mike Nolan, Chief Executive Officer, said, "The housing market has been adjusting to the rapid rise in mortgage interest rates, which has resulted in a sharp slowdown in the residential purchase and refinance markets from the record levels experienced throughout 2020 and 2021.  While our open orders decelerated through the year, we continued to aggressively manage our expense structure much like we have done in previous cycles with a focus on reducing costs.  This has contributed to our strong full year results where we delivered adjusted pre-tax earnings in our Title segment of $1.6 billion and an industry leading adjusted pre-tax Title margin of 16.7%.  These strong results point to the disciplined management of our business in what has been a challenging environment combined with resiliency in the commercial market where a higher fee per file partially offset a moderation in volumes.  Looking forward, we will continue to manage our business to the trend in open orders while evaluating opportunities to strategically expand our operations given the strength of our balance sheet which puts us in an advantageous position."

Fourth Quarter 2022 Highlights

• Total revenue of $1.9 billion, compared with $3.1 billion in total revenue in the fourth quarter of 2021
• Total revenue, excluding recognized gains and losses, of $1.8 billion, a 42% decrease compared with the fourth quarter of 2021
• Direct title premiums of $544 million, a 47% decrease from fourth quarter of 2021
• Agency title premiums of $708 million, a 48% decrease from fourth quarter of 2021
• Commercial revenue of $344 million, a 37% decrease from fourth quarter of 2021
• Purchase orders opened decreased 31% on a daily basis and purchase orders closed decreased 36% on a daily basis from the fourth quarter of 2021
• Refinance orders opened decreased 76% on a daily basis and refinance orders closed decreased 79% on a daily basis from fourth quarter of 2021
• Commercial orders opened decreased 30% and commercial orders closed decreased 34% from fourth quarter of 2021
• Total fee per file of $3,649 for the fourth quarter, a 21% increase over fourth quarter of 2021

Fourth Quarter 2022 Financial Results

• Pre-tax title margin of 12.7% and industry leading adjusted pre-tax title margin of 12.3% for the fourth quarter of 2022, compared to 18.5% and 22.4%, respectively, in the fourth quarter of 2021
• Pre-tax earnings from continuing operations in Title for the fourth quarter of $239 million, compared with $567 million for the fourth quarter of 2021
• Adjusted pre-tax earnings in Title for the fourth quarter of $227 million compared with $717 million for the fourth quarter of 2021. The decrease from the prior year quarter was primarily a result of the considerable decline in residential and commercial volumes due to higher mortgage rates, partially offset by higher average fee per file

Full year 2022 Financial Results

• Total revenue, excluding recognized gains and losses, of $9.5 billion for the full year, a 20% decrease from $11.9 billion for the full year 2021
• Industry leading pre-tax title margin of 12.0% and adjusted pre-tax title margin of 16.7% for the full year, compared to 18.6% and 21.7% for the full year 2021, respectively; reflects the Company's noteworthy execution to manage the business based on market conditions in the current economic cycle
• Pre-tax earnings from continuing operations in Title for the full year of $1.1 billion compared to $2.1 billion for the full year 2021
• Adjusted pre-tax earnings in Title for the full year of $1.6 billion compared to $2.6 billion for the full year 2021. The decrease from the prior year was primarily a result of the considerable decline in refinance volume representing trough level activity and moderating residential purchase volume; due to higher mortgage rates, partially offset by higher average fee per file and healthy volume of commercial orders closed for the full year

F&G Segment
This segment consists of operations of FNF's majority-owned subsidiary F&G, a leading provider of insurance solutions serving retail annuity and life customers and funding agreement and pension risk transfer institutional clients.

Chris Blunt, President and Chief Executive Officer of F&G, commented, "We are proud to have reached a milestone in the quarter by becoming a publicly listed company and I would like to thank our team, our parent Fidelity National Financial, and our partners for all of their contributions to achieve F&G's December 1st listing on the New York Stock Exchange.   We believe that our public listing will provide recognition of F&G's value creation as a standalone public company and, in turn, unlock the value of the 85% majority ownership in F&G held by our parent, FNF."

Mr. Blunt continued, "Central to achieving the fair value of our company in the public markets is delivering strong results and I am very proud of our team's performance this past year.  For the fourth quarter, we delivered total gross sales of $2.7 billion, a 23 percent increase over the prior year quarter.  On a full year basis, F&G reported record total gross sales of $11.3 billion, an 18 percent increase over full year 2021, boosting our ending assets under management to nearly $44 billion as of December 31.  The continued growth has us well ahead of the goal of doubling assets under management to $50 billion over five years, as outlined at the time of our acquisition by FNF in 2020.   We are on target to achieve that goal this year."

Fourth Quarter 2022

• Total gross sales of $2.7 billion for the fourth quarter, an increase of 23% over the fourth quarter 2021; reflects record retail sales, partially offset by lower institutional sales which we expect to be lumpier and more opportunistic than in our retail channels
• Record Retail sales of $2.5 billion for the fourth quarter, a 79% increase over fourth quarter of 2021; reflects execution of diversified growth strategy
• Institutional sales of $0.2 billion of pension risk transfer transactions, compared to $0.8 billion of pension risk transfer transactions in the fourth quarter 2021. There were no funding agreement issuances in the current quarter, compared with $35 million for the fourth quarter 2021
• Net retained sales of $1.9 billion for the fourth quarter, a decrease of 7% from the fourth quarter 2021, reflecting increase from 50% to 75% of multiyear guaranteed annuity sales to Aspida Re effective September 1, 2022
• Average assets under management (AAUM) of $42.6 billion for the fourth quarter, an increase of 19% from $35.7 billion in the fourth quarter 2021 driven by net new business flows. Ending assets under management (AUM) were $43.6 billion as of December 31, 2022
• Net loss attributable to common shareholders for F&G Segment of $100 million for the fourth quarter due to unfavorable mark-to-market and related economic assumption review updates, compared to net earnings attributable to common shareholders for F&G Segment of $121 million for the fourth quarter of 2021
• Adjusted net earnings for F&G Segment of $131 million for the fourth quarter, compared to $142 million for the fourth quarter of 2021; F&G's adjusted net earnings reflect alternatives investment portfolio short-term mark-to-market movement that differs from long-term return expectation.

Full Year 2022

• Record total gross sales of $11.3 billion for the full year, an increase of nearly 18% over the full year 2021, reflecting execution of the Company's diversified growth strategy with a disciplined approach to pricing
• Record Retail sales of $8.5 billion for the full year, an increase of 37% over the full year 2021, driven by ongoing growth in independent agent distribution and continued expansion in bank and broker dealer channels
• Institutional sales of $2.8 billion for the full year, including funding agreement issuances of $1.4 billion and pension risk transfer transactions of $1.4 billion, compared to funding agreement issuances of $2.3 billion and pension risk transfer transactions of $1.2 billion in full year 2021
• Net retained sales of $9.0 billion for the full year, an increase of 3% over the full year 2021, reflecting third party flow reinsurance
• Average assets under management (AAUM) of $40.1 billion for the full year, an increase of 25% over $31.9 billion in the prior year driven by net new business flows. Ending assets under management (AUM) of $43.6 billion at December 31, 2022
• Net earnings for F&G Segment for the full year of $481 million, compared to $865 million for the full year 2021
• Adjusted net earnings for F&G Segment for the full year of $338 million, compared to $551 million for the full year 2021; F&G's adjusted net earnings reflect alternatives investment portfolio short-term mark-to-market movement that differs from long-term return expectation.

Conference Call
We will host a call with investors and analysts to discuss FNF's fourth quarter and full year 2022 results on Thursday, February 23, 2023, beginning at 11:00 a.m. Eastern Time.  A live webcast of the conference call will be available on the Events and Multimedia page of the FNF Investor Relations website at fnf.com.  The conference call replay will be available via webcast through the FNF Investor Relations website at fnf.com. The telephone replay will be available from 3:00 p.m. Eastern Time on February 23, 2023, through March 2, 2023, by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International). The access code will be 13735001.

About Fidelity National Financial, Inc.
Fidelity National Financial, Inc. (NYSE: FNF) is a leading provider of title insurance and transaction services to the real estate and mortgage industries.  FNF is the nation's largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title company in the United States.  More information about FNF can be found at fnf.com. 

About F&G
F&G is part of the FNF family of companies. F&G is committed to helping Americans turn their aspirations into reality. F&G is a leading provider of insurance solutions serving retail annuity and life customers and institutional clients and is headquartered in Des Moines, Iowa. For more information, please visit fglife.com.

Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with GAAP, this earnings release includes non-GAAP financial measures, which the Company believes are useful to help investors better understand its financial performance, competitive position and prospects for the future. These non-GAAP measures include adjusted net earnings per share, adjusted pre-tax title earnings, adjusted pre-tax title earnings as a percentage of adjusted title revenue (adjusted pre-tax title margin), adjusted net earnings attributable to common shareholders (adjusted net earnings), assets under management (AUM), average assets under management (AAUM) and sales. 

Management believes these non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods.  Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do.

The presentation of this financial information is not intended to be considered in isolation of or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.  By disclosing these non-GAAP financial measures, FNF believes it offers investors a greater understanding of, and an enhanced level of transparency into, the means by which the Company's management operates the Company.

Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings, net earnings attributable to common shareholders, net earnings per share, or any other measures derived in accordance with GAAP as measures of operating performance or liquidity. Further, FNF's non-GAAP measures may be calculated differently from similarly titled measures of other companies. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are provided below.

Forward-Looking Statements and Risk Factors
This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements regarding our expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to: changes in general economic, business, political and COVID-19 conditions, including changes in the financial markets; weakness or adverse changes in the level of real estate activity, which may be caused by, among other things, high or increasing interest rates, a limited supply of mortgage funding or a weak U. S. economy; our potential inability to find suitable acquisition candidates; our dependence on distributions from our title insurance underwriters as a main source of cash flow; significant competition that F&G and our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the "Statement Regarding Forward-Looking Information," "Risk Factors" and other sections of FNF's Form 10-K and other filings with the Securities and Exchange Commission (SEC).

FNF-E

Non-GAAP Measures and Other Information

Title Segment

The table below reconciles pre-tax title earnings to adjusted pre-tax title earnings.

Title Segment (continued)

F&G Segment

The table below reconciles net earnings attributable to common shareholders to adjusted net earnings attributable to common shareholders.

The table below provides a summary of sales highlights.

DEFINITIONS  

The following represents the definitions of non-GAAP measures used by the Company.

Adjusted Net Earnings Attributable to Common Shareholders (Adjusted Net Earnings)

Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period. Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations attributable to common shareholders to eliminate:

While these adjustments are an integral part of the overall performance of F&G, market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business. Accordingly, management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations. Adjusted net earnings should not be used as a substitute for net earnings (loss). However, we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations.

Assets Under Management (AUM)

AUM uses the following components:

Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.

Average Assets Under Management (AAUM) (Quarterly and YTD)

AAUM is calculated as AUM at the beginning of the period and the end of each month in the period, divided by the total number of months in the period plus one.  Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment.

Sales 

Annuity, IUL, funding agreement and non-life contingent PRT sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP.  Sales from these products are recorded as deposit liabilities (i.e. contractholder funds) within the Company's consolidated financial statements in accordance with GAAP. Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements. Management believes that presentation of sales, as measured for management purposes, enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition.

SOURCE Fidelity National Financial, Inc.