Fidelity National Financial Inc (FNF) 2025 Q4 法說會逐字稿

Good morning and welcome to FNF's fourth quarter and full year 2025 earnings call. (Operator Instructions) 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'm joined today by Mike Nolan, CEO; and Tony Park, CFO. We look forward to addressing your questions following our prepared remarks. FNG's management team, including Chris Blunt, CEO; and Connor Murphy, President and CFO, will also be available for Q&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 where 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'll hand the call over to Mike Nolan.

Thank you, Lisa, and good morning. The fourth quarter results rounded out an excellent year for our title and FNG businesses, both in terms of results and execution. Our title business delivered outstanding results in the current environment.

We had adjusted pretext title earnings of $401 million in the fourth quarter and $1.4 billion for the full year. This generated industry-leading adjusted pretext title margins of 17.5% in the fourth quarter and 15.9% for the full year.

Our fourth quarter results reflect strong performance across the business, highlighted by exceptional strength in our direct commercial business. Additionally, our disciplined expense management drove strong incremental margins.

Our achievements are a testament to our employees, the best titled professionals in the industry. I'd like to extend a profound thanks for all that they do to consistently deliver industry leading results, provide innovative solutions to our customers, and ensure secure and efficient real estate transactions.

We have transformed our business through decades of pioneering technology solutions and investments in the business, driving efficiencies and helping FNF maintain a competitive edge.

As a result, we've expanded our margins over the last three years and significantly outperformed prior cyclical lows. 2025 was no exception, and we are excited to further enhance our industry-leading technology capabilities, which I'll speak to further in a few minutes.

Looking at our title results more closely on the purchase front, we are successfully navigating the low transactional environment with purchase orders open of 3,200 per day in the fourth quarter in line with the fourth quarter of 2024 and reflecting normal seasonality.

For the month of January, our daily purchase orders opened were up 1% versus the prior year and up 31% versus December. On the refinance front, volumes continue to be responsive as 30 year mortgage rates decrease during the fourth quarter.

This generated refinance orders opened of 1,700 per day in the fourth quarter, up from 1,600 in the sequential quarter. Our refinance orders open per day were up 38% over the fourth quarter of 2024. Up 75% for the month of January versus the prior year, and up 28% for the month of January versus December.

On the commercial front, we delivered direct commercial revenue of nearly $1.5 billion for the full year. Which was our third best year on record, trailing only the exceptional markets of 2021 and 2022.

For the fourth quarter, direct commercial revenue was $479 million a 27% increase over the fourth quarter of 2024. This was driven by a 33% increase in national revenues and a 20% increase in local revenues.

National daily orders opened were up 9% over the fourth quarter of 2024, and local market daily orders opened were up 8% over the fourth quarter of 2024.

Total commercial orders opened were 815 per day, up 8% over the fourth quarter of 2024, and up 11% for the month of January versus the prior year. We continue to see growth in commercial activity driven by a broad set of asset classes including industrial, multi-family, affordable housing, retail, and energy.

This year's performance is especially notable given minimal contribution from the office sector, which remains subdued but is showing signs of improvement.

We have also seen a strong inventory of commercial deals to close, and the office sector is a potential added element as we move throughout the year.

Overall, total orders opened averaged 5,300 per day in the fourth quarter, with October at 5,700, November at 5,600, and December at 4,600. For the month of January, total orders opened were 5,900 per day, up 29% over December.

Our title business is performing extremely well in what is still a low transactional environment. The National Association of Realtors or NAR has ranked 2025 home sales among the lowest levels since 1995 due to high mortgage rates and a housing shortage.

Notably, the US population has grown by over 70 million people over the last three decades. According to NAR, home sales have been close to 4 million per year since 2023, well short of the 5.1 million average over the last 30 years.

Over the next few years, we anticipate home sales will trend back toward the historical average. We are well positioned for the current market and poised to benefit from a potential turn in the housing market should mortgage rates drop further in 2026 and beyond.

We remain bullish on the long-term prospects for the title insurance business, even in the current environment. Our disciplined operating model is centered on managing our business to the trend in open orders to deliver industry leading results.

Over the long-term, this discipline has generated a steady level of free cash flow, allowing us to continuously invest in our business through attractive acquisitions and technology initiatives. We had a number of accomplishments in 2025 advancing our technology and innovation.

To provide a few highlights, our in-here digital transaction platform has scaled to a fully deployed enterprise solution, engaging 80% of our residential sale transactions and reaching nearly 2.8 million unique users throughout 2025, demonstrating deep integration into daily workflows.

This foundational technology drives efficiency, transparency, and a superior customer experience in the escrow closing process with built-in compliance and enhanced fraud protection.

We also expanded our identity identity verification processes and technology to streamline and secure customer authentication, helping combat the rise in impersonation and wire fraud in property sales.

We rolled out AI tools enterprise-wide in 2025, deploying practical tools to enhance productivity and margin efficiency. We've made significant progress in building AI literacy across the company, and teams are using AI to streamline workflows, increase efficiency, and unlock new ways to better serve our customers.

Finally, our curated data and technology touched over 90% of our total volume. Supported by our proprietary title plants and patented title automation that is integrated into our centralized workflows.

Our approach of leveraging tidal automation tools and data at scale has led to significant productivity improvements and been an important driver of our technology strategy.

These successful investments in technology have played a critical role in our ability to maintain our industry leading position for adjusted pretext title margin.

Over time, we believe that our ongoing investments in technology, combined with our robust curated data will lead to increased efficiency and productivity in our operations that will continue to support our market leading pre-text title margin.

Turning now to our FNG segment. FNG's assets under management before flow reinsurance have grown to $73.1 billion at year-end, up 12% over the prior year. On a standalone basis, FNG reported GAAP equity excluding AOCI of $6 billion at year end.

And has grown its book value per share excluding AOCI to $44.43 up 62% since the 2020 acquisition. On December 31, FNF completed the distribution of approximately 12% of the outstanding shares of FNG's common stock to FNF shareholders, returning approximately $500 million of tangible value to FNF shareholders.

Following the distribution, FNF retains control and majority ownership with approximately 70% of the outstanding shares in FNG. This has increased FNG's public float from approximately 18% to approximately 30% after the distribution.

Strengthening FNG's positioning within the equity markets and facilitating greater institutional ownership. This distribution reflects our confidence in FNG's long-term prospects and is intended to unlock shareholder value by enhancing market liquidity and broadening investor access to FNG's shares.

FNG has increased its quarterly common stock dividend by 14% in the fourth quarter, supported by its strong and growing cash generation as it transitions to be more fee-based, higher margin, and less capital intensive.

Going forward, we expect FNG to be a meaningful source of capital to FNF. Through its $112 million annual common and preferred dividends at the 70% ownership level, which indirectly benefits FNF shareholders.

With that, let me now turn the call over to Tony to review FNF's fourth quarter and full year financial performance and provide additional insights.

Thank you, Mike. Starting with our consolidated results, we generated fourth quarter total revenue of $4.1 billion. Excluding net recognized gains and losses, our total revenue was $4.1 billion as compared with $4 billion in the fourth quarter of 2024.

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.

We reported fourth quarter net loss of $117 million including net recognized losses of $47 million compared with net earnings of $450 million including net recognized losses of $373 million in the fourth quarter of 2024.

Fourth quarter results include a $471 million non-cash deferred income tax charge resulting from our year-end distribution of FNG shares to FNF shareholders, which reduced our ownership of FNG below 80%.

This distribution triggered an accounting requirement to recognize a deferred tax liability on the accumulative difference between our book and tax basis in FNG.

This non-cash charge has no impact on our current cash position, operations, or liquidity and represents a potential future tax obligation that would arise only if we were to sell or distribute additional shares of FNG in the future.

This item is excluded from adjusted net earnings, along with other mark to market effects and non-recurring items. Adjusted net earnings were $382 million or $1.41 per diluted share compared with $366 million or $1.34 per share for the fourth quarter of 2024.

The title segment contributed $306 million. The FNG segment contributed $104 million and the corporate segment contributed $4 million before eliminating $32 million of dividend income from FNG in the consolidated financial statements.

For the full year 2025, we saw strong performance for both the title segment and the FNG segment, which together generated solid profitability. Total revenue, excluding gains and losses was $14.5 billion in the full year 2025 and reflects a 7% increase over the full year 2024.

We delivered $1.4 billion in adjusted net earnings, an increase of 7% over $1.3 billion in full year 2024. The title segment contributed over $1 billion.

The FNG segment contributed $412 million and the corporate segment contributed $3 million before eliminating $117 million of dividend income from FNG in the consolidated financial statements. Turning to fourth quarter financial highlights specific to the title segment.

The title segment generated $2.3 billion in total revenue in the fourth quarter, excluding net recognized losses of $58 million compared with $2.1 billion in the fourth quarter of 2024. Direct premiums increased 21% over the prior year.

Agency premiums increased 7%, and escrow, title related, and other fees increased 9%. Personnel costs increased 12% and other operating expenses increased 9%.

All in, the title business generated adjusted pre-tax title earnings of $401 million compared with $343 million for the fourth quarter of 2024 and a 17.5% adjusted pre-tax title margin for the quarter versus 16.6% in the prior year quarter.

As Mike said earlier, these results were driven by strong performance across the business, as well as disciplined expense management. Our title and corporate investment portfolio totaled $4.9 billion at December 30.

Interest and investment income in the title and corporate segments was $102 million excluding income from FNG dividends to the holding company. This was down 6% from the prior year quarter due to the impact of the Fed funds rate cuts throughout 2024 and 2025.

Looking ahead, we expect a range of $95 million to $100 million in interest and investment income per quarter during 2026, assuming 225 basis point Fed rate cuts during the year.

In addition, we expect approximately $112 million of annual common and preferred dividend income from FNG to the corporate segment. Our title claims paid of $80 million were $8 million higher than our provision of $72 million for the fourth quarter.

The carried reserve for title claim losses is approximately $34 million or 2% 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 FNG segment. Since FNG hosted its earnings call earlier this morning and provided a thorough update, I will provide a few key highlights.

FNG's AUM before flow reinsurance increased to $73.1 billion at December 30, up 12% over the prior year. This includes retained assets under management of $57.6 billion up 7% over the prior year.

FNG reported gross sales of $14.6 billion for the full year, including $3.4 billion in the fourth quarter. This marks one of our best sales years in history, driven by favorable market conditions and strong demand for retirement savings products.

FNG generated core sales of $9 billion for the full year, which includes indexed annuities, indexed life and pension risk transfer, and had $5.6 billion of funding agreements and multi-year guaranteed annuities, two products we view as opportunistic depending on economics and market opportunity.

FNG's net sales were $10 billion for the full year, including $2.3 billion in the fourth quarter. This reflects flow reinsurance at varying seeded amounts in line with capital targets for multi-year guaranteed annuities and fixed indexed annuities.

Adjusted net earnings for the FNG segment were $412 million for the full year. This included $104 million of adjusted net earnings for the fourth quarter of 2025.

FNG’s operating performance from their underlying spread-based and fee-based businesses continues to be strong. FNG continues to provide an important complement to our title business.

The FNG segment contributed 30% of FNF's adjusted net earnings for the full year 2025 as compared to 38% in 2024, 30% in 2023, and 23% in 2022. From a capital and liquidity perspective, FNF continues to maintain a strong balance sheet and balanced capital allocation strategy.

FNF has returned approximately $800 million of capital to shareholders during the full year 2025. This reflects common dividends of $546 million for the full year, including $140 million in the fourth quarter.

As well as share repurchases of $251 million for the full year, including $30 million in the fourth quarter. In November, our board of directors approved a 4% increase in the quarterly cash dividend to $0.52 per common share.

From a capital allocation perspective, we ended 2024 with $786 million in cash and short-term liquid investments at the holding company. During 2025, the business generated cash to fund our $550 million common dividend paid.

$75 million of holding company interest expense, $150 million investment in the FNG common equity raise, and $250 million in share repurchases, 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 year with $659 million in cash and short-term liquid investments at the holding company, which is about 85% of the amount held at year in 2024.

This concludes our prepared remarks, and let me now turn the call back to our operator for questions.

(Operator Instructions) Bose George with KBW.

Hey guys, good morning. The first question is just on the margin. Obviously, you guys did a great 15.9%, margin this year.

As you look into 2026, how do you see the margin trending, it looks like for your guidance on interest income suggests that won't be really much of a headwind in this, given what you're seeing in commercial and residential, just, thoughts on the margin as we enter '26.

Sure, Bose. It's Mike, and good morning. I think our outlook on' 26 is certainly more optimistic, than when we came into '25. The base case coming into '25 was pretty much like '24, and then we got outperformance in commercial and a little bit in refi and good expense management to drive a nice beat over the prior year.

The positive here is we're entering a year now where rates are in the low six's or even six. I think I saw a headline today that said we're at the lowest rates we've had in the last three or four years.

And I think that should drive more volume and purchase, which was flattened '25 over '24, so we'd expect to see an uptick there. I think NBA and Fannie Mae are estimating about 10% more existing home sales in '26.

And then the refi opportunity should be much better in '26 as well, and commercial should be as good or better. I think we have a lot of momentum, still in commercial with orders up in the fourth quarter up in January and a nice pipeline as we go through the year.

Okay. Perfect, thanks. And then actually on the agent split, it looks like it, went up a little bit, this quarter or just declined in or in favor of the agents. So did that just reflect like a geographic mix or was there something else to call out there?

Yeah, I don't think it moved too much. It was probably just, geography there. We've been, we watched that pretty closely and actually have been very consistent for several years now.

You might note, that our agency premiums weren't up as much as our direct premiums, and that's really more a function.

Of the mix of business, the fact that we have a very strong commercial, presence on the direct side and we do on the agency side as well. But that delta, if you will, between, I don't know, a 21% increase in direct premiums and a 7% increase in agency, is primarily related to commercial.

Great, that's helpful.

Oscar Nieves with Stephens.

Good morning and thank you for taking my questions. So sticking with commercial, you previously outlined towards the end of last year, about a 1.5 billion of commercial revenue for 2026, but you effectively exited 2025 at that level already.

How should we think about commercial revenue growth in '26 versus '25, and if you could provide a specific growth range.

Hey Oscar. It's Mike. I don't recall that we specifically had talked about '26, as we went through '25. I know we had said, as we're going through '25 that we thought, it could be 1.5 billion in direct commercial revenue which we essentially hit.

I don't know that I could give you a range for '26. I think there's a couple factors to think about. Our trends now would point to more order volume because in the fourth quarter our commercial opens were up, 8% and then they're up 11% in January so more activity should lead to more closings and more revenue.

The other factor there is the fee per file, and that's really difficult to estimate. We had pretty strong fee per file growth in commercial in '25 and really a big number in the fourth quarter.

Some of which was driven by you know just larger transactions that the, I think all participants in the industry have talked about, data centers, energy deals, things like that.

And it's just a little tougher to estimate the impact of that as you go through the year but again I would expect, '26 to be. Certainly as good if not better than '25 in direct commercial.

Yeah, that's super helpful. And one follow-up this time on the residential side, you alluded to NBA and Fannie Mae's forecasts which are effectively calling for existing home sales to be between basically $4.3 million to 44.4 million in '26 and around $4.5 million and $4.7 million in '27.

And obviously that's against a historical range closer to $5 million to $5.2 million. What's your take on that? Do you think that's conservative, too aggressive, and specifically on the path?

Yeah, it's Mike again, Oscar. I would say it's. I think it seems to be a fair estimate, again, it's based on where rates are going to be, and I think NBA and Fannie may be a little different in the rate assumption for '26.

But let's assume rates hold around 6%, to see a 10% lift in in existing home sales I think would be a good number, it could be better. I still believe there's a lot of pent up demand and, you got to build your assumptions around sort of other things being equal, right?

Probably the area that's just got the better lift even though it's lower fee per file is just a refinance activity.

And you didn't ask this directly, but if you look at the IC mortgage monitor report, if you're familiar with that, they show the sensitivity around mortgages in the money at different rate scenarios, and at 6% they estimate there are [$5.8] million mortgages in the money (technical difficulty).

(technical difficulty) think about the lock-in effect and people with low rates that are kind of built in as you see rates if we see them, creep into the fives, not only do you have a refi opportunity that's pretty staggering.

But you also have, plenty of people who have probably put off, selling homes, and you know moving up and moving out, because of that lock in effect and that would diminish obviously with lower rates.

Yeah, and if I can ask a quick follow-up since you just mentioned home price growth. Looking again at the forecast from NBA and Fannie Mae, they are quite different with NBA roughly at 50 basis points and Fannie Mae closer to 2%. What's your outlook on that? You think that 2% is way too high?

Yeah, I don't know. We don't really have anyone who studies that and tries to figure out. We try to rely on others, it's more anecdotal what you read, what you see. I mean, if you look at our fee for file trends, they're pretty modest over the course of the year.

I think, if I'm looking at it here. Our purchase fee pro file is up about 3% versus the fourth quarter of 2024. Our refi (inaudible) file is up about 4%. And so that tells me that that home prices have been pretty stable over the course of the last year and, I would think that's going to be pretty stable over the course of the next year as well.

Thank you. I'll get back in the queue.

Mark Hughes with Truist Securities.

Yeah, thank you, good morning. In the commercial, fee for file in '26 that you've described, do you think it's, as good or better overall for the coming year? Anything about the deal size that you're seeing in the pipeline that gives you some indication about fee per file?

Yeah Mark, it's Mike. I would say that certainly in the fourth quarter we saw, bigger transactions that closed maybe vis a vis, the fourth quarter of last year and our national commercial fee per file was up significantly as you know.

I would say we still have nice deals in the pipeline that you generate strong fee for files. I don't think I said that I expect. The commercial fee for file in '26 to be as good or better.

I think I said that, that's a bit more of the wild card because you don't really know the mix but there are a lot of good deals in the pipeline.

Yeah, understood. I was, referring to, I think your overall guidance was for as good or better in terms of the commercial volume. In your platform you talked about I think 80% engagement that's been, I think last quarter you might have said 85% but you know assuming kind of relatively stable.

Do you think the engagement has kind of stabilized anything structural around those engagement numbers we should look for those to hold steady or increasers.

Yeah, good question. I would expect them to increase. The engagement's been great. The goal is really to be over 90% and, the reason the numbers change around a bit.

We were still migrating operations to the soft pro platform as we went through the year even through into the fourth quarter and so as new operations get on their engagement levels are lower and then they build up over time.

So in the operations that are a bit more mature on the platform we're getting engagement plus 90%.

Yeah, very good. And then finally, anything new on the regulatory front, on pilot program or anything from the FHFA that you throw out?

I would say it's been quiet. The pilot still exists. I haven't heard a lot about, what the plans are. It's my understanding it's set to expire in May, maybe gets extended. I don't think we know, but it just doesn't really seem to have impacted our deal flow, I would say on the refi side.

Thank you very much.

Michael Dunleavy with Deutsche Bank. Please state your question.

Hi guys, how you doing? I just wanted to follow-up on Bose's question. Hey, on the title margin, just given it end of the year so strong, do you still feel like that 15% to 20% normalized range is the right range, even with the AI efficiencies and so in the technology piece.

And then sounds like just given the recent trends, you still think that '26 should continue moving closer toward the midpoint of that range, if we assume Fannie and MBA forecasts, is that right?

Yeah, Mike. It's Mike, so I would say long-term as we see, you know the impacts of more efficiencies and AI and things like that, that we might consider maybe not even long-term but we might consider changing the range right now it still seems appropriate because even though we expect the year to be better, it's still a very volatile environment.

I think as we all know and so and we're still at existing home sales at 30 year lows for the last three years so you know you've got that as a backdrop. With improvement in volumes like the Fannie Mae and NBA forecast and more refi, I do think we could move into that more into that middle range of margin.

But remember, we've got to get through the first quarter, and that's the historically soft quarter for the industry, and that always presents a little bit of a challenge around, just where you can get on your full year margin.

Got it, thanks. And then, I just wanted to check in on capital real quick as to, so I know you and FNG both raised the dividend towards the end of the year.

Could you just check back in on how you're thinking about capital allocation going forward and the types of businesses you might regularly be looking at from an M&A perspective?

Sure Mike, this is Tony. I'll start, Mike can pitch in. I mean capital is pretty consistent in terms of what our normal capital allocation would be, which is the dividend which, to your point, we raised it in the fourth quarter as we typically do.

And we expect to spend probably $560 million or so, in cash to pay our common dividend. Our interest expense runs about $75 million so very modest there.

Our, obviously we're reinvesting in the business, on a regular basis and continue to do that on the technology side and the efficiency side, and that really occurs before we even upstream anything, to the holding company.

And then beyond that it becomes more opportunistic, we look at acquisitions, to your question, we look at stock buybacks. I expect us to be active in both of those areas. I think you'll see more acquisition activity in '26 versus what we've seen the last few years.

I think that our cash flows been strong. I think there's probably more opportunities in the title agent space and possibly some other areas as well. And then on the buyback front we like to be, we like to have a consistent cadence of buybacks as we work our way through the year when we're not blacked out.

But we're also opportunistic and to the extent we see a weakness in the share price, I expect us to be more aggressive like we were back in the second quarter. Overall I think I mentioned earlier we spent, we returned about $800 million to shareholders in the form of dividends and buybacks in 2025.

And I would expect another very strong cash flow generation year in 2026. Mike, I don't know if you wanted to touch on M&A at all. Are you, are we good?

I would just agree. I think there'll be more opportunities in the M&A space as we go into '26 and beyond. Because it's been fairly quiet, for the past few years, so we're excited about, some opportunities there.

Great, thanks a lot.

Geoffrey Dunn with Dowling and Partners.

Thanks, morning guys. Tony, what are your expectations for dividends up from operations in '26, both from regulated and unregulated?

The regulated number is probably in the $400 million to $450 million dollar range. That one because it's related to the prior year results on a statutory basis, that one's certainly easier to estimate.

The other operations is much more difficult, I think last year it was somewhere in the $6 million or $650 million range, and, I wouldn't be surprised to see that number or better in 2026. But again that's on real time results which obviously we would have to project that out.

Got it. And then just following up on M&A. Curious if there's any tech initiatives in the market that stand out as a neater opportunity and more attractive to buy than build.

A good question, Geoff. I would say from a tech stack standpoint we feel comfortable about where we're at, we will be investing more in our soft pro platform as we go forward and obviously we've got the in here really rolled out well.

But if we saw things certainly in the tech space that would be helpful, we would buy it.

Does anything in particular stand out on the back end?

In terms of?

Any need, I mean, for example, I think you've been renting your not your online notary, services, anything like that, that make more and more sense to bring in house.

I don't really think so on the notary side you, you've got various plug-ins there that we can take advantage of and to own a notary company, I don't think adds a lot of value, and then you're in some notary businesses typically that aren't title related as well, and you got to think about whether you want to do that. So, no, I think we're good in that space.

Okay, thanks.

Thank you and 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 have delivered outstanding performance in 2025, with our complimentary businesses executing well in the current market. The title segment is performing well in what is still a low transactional environment and is capitalizing on stronger commercial activity.

We are well positioned for the current market and remain poised to benefit from a potential turn in the housing market should mortgage rates drop further in 2026 and beyond. We remain bullish and continue to invest in the business for the long-term while delivering industry leading margins.

Likewise, FNG is executing on its strategy that is focused on balancing continued growth in its spread-based business alongside the fee-based flow reinsurance, middle market life insurance, and owned distribution strategies as they focus on delivering long-term shareholder value.

Thanks for your time this morning. We appreciate your interest in FNF and look forward to updating you on our first quarter earnings call.

Thank you for attending today's presentation. And the conference call has concluded, you may now disconnect.