Fidelity National Financial , Inc. (NYSE: NYSE:FNF), a leading provider of title insurance and transaction services to the real estate and mortgage industries, has reported strong financial results for the second quarter of 2024. The company's adjusted pretax earnings in the Title segment reached $324 million with a title margin of 16.2%. FNF's technology investments have enhanced operational efficiency and customer service.
The real estate market shows signs of improvement, particularly in office, industrial, multifamily, and energy sectors. FNF's subsidiary, F&G, also reported substantial growth with record gross sales of $4.4 billion in the second quarter, driven by strong annuity sales. The company's consolidated adjusted net earnings stood at $365 million, maintaining a robust balance sheet and focusing on a balanced capital allocation strategy.
Key Takeaways
- FNF's Title segment achieved $324 million in adjusted pretax earnings with a 16.2% margin.
- Investments in technology have improved operational efficiency and customer experience.
- Real estate market expected to improve, notably in office, industrial, multifamily, and energy sectors.
- F&G, an FNF subsidiary, saw record gross sales of $4.4 billion due to strong annuity sales.
- Consolidated adjusted net earnings for FNF were $365 million.
- The company holds $696 million in cash and short-term liquid investments.
- FNF renewed its authorization for a 25 million share buyback program.
Company Outlook
- Quarterly interest and investment income expected to remain stable at $95-100 million for the remainder of the year.
- Anticipated Fed funds cuts could impact financial performance.
- Over $100 million of annual dividend income expected from F&G.
- Optimism about stronger performance in the second half of the year due to national improvements in orders and potential lower interest rates.
Bearish Highlights
- Title claims paid were $70 million, surpassing the provision of $61 million.
- Increase in dollar amount of paid claims is expected.
- Carried reserve for title claim losses stands at approximately $50 million.
- No share repurchases were conducted in the second quarter.
Bullish Highlights
- F&G's record gross sales and strong annuity sales indicate growth.
- Title plant costs were down year-over-year.
- Facility savings were almost 7% higher than the previous year.
- Commercial orders for the first seven months of the year were up 4% compared to the same period last year.
- The company has hedged out about two-thirds of its floating rate exposure.
Misses
- Lower income reported from the 1031 Exchange business.
- Consolidated debt outstanding increased to $4.2 billion.
- Debt to capitalization ratio remains within target range, but debt levels have risen.
Q&A Highlights
- The company has the capacity to reprice products, with most profits coming from the in-force block of $61 billion AUM.
- Purchase amortization add back increased significantly due to the acquisition of their own distribution.
- The amount may fluctuate depending on future acquisitions.
- The CEO expressed satisfaction with the company's performance and growth prospects in both the Title segment and F&G.
FNF's second quarter earnings call highlighted the company's strong financial health and strategic investments in technology that have positioned it well for future growth. With a solid balance sheet and a clear focus on a balanced capital allocation strategy, FNF is poised to capitalize on market improvements and continue its growth trajectory. The company's executives remain optimistic about the second half of the year, banking on the potential for lower interest rates to drive demand for their products and services.
InvestingPro Insights
Fidelity National Financial, Inc. (FNF) has demonstrated a strong commitment to shareholder returns, as evidenced by its consistent dividend increases over the years. According to InvestingPro Tips, FNF has not only raised its dividend for 12 consecutive years but has also maintained dividend payments for two decades. This consistency is a testament to the company's financial stability and dedication to providing value to its shareholders. The confidence in FNF's financial health is further bolstered by analysts' expectations of net income growth this year and recent upward revisions in earnings estimates for the upcoming period.
InvestingPro Data metrics provide a snapshot of FNF's current financial position. The company boasts a market capitalization of $14.62 billion and trades at a price-to-earnings (P/E) ratio of 15.85, which is considered low relative to the near-term earnings growth. This suggests that the stock may be undervalued, offering an attractive entry point for investors. Additionally, FNF's price-to-book ratio stands at 2.01, reflecting a potentially favorable valuation in terms of the company's assets.
Moreover, the company's revenue growth over the last twelve months as of Q2 2024 is impressive at 11.94%, indicating a solid upward trajectory in its business operations. This aligns with the article's mention of strong financial results and investments in technology that have improved operational efficiency.
For readers interested in further insights and metrics, InvestingPro offers additional tips on FNF, which can be explored at https://www.investing.com/pro/FNF. These additional tips and data points can provide a deeper understanding of FNF's financial outlook and potential investment opportunities.
Full transcript - Fidelity National Financial Inc (FNF) Q2 2024:
Operator: Good morning, and welcome to FNF Second Quarter Earnings Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions with instructions to follow at that time. I would now like to turn the call over to Lisa Foxworthy-Parker, SVP, Investor and External Relations. Please go ahead.
Lisa Foxworthy-Parker: Great. Thanks, operator, and welcome, everyone. Joining me today are Mike Nolan, Chief Executive Officer; and Tony Park, Chief Financial Officer. We look forward to addressing your questions following our prepared remarks. Chris Blunt, F&G's CEO; and Wendy Young, F&G's CFO, will join us for the Q&A portion of today's call. 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 financial measures that we believe may be meaningful to investors. Non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules within our earnings materials available on our website at fnf.com. Today's call is being recorded and will be available at 3:00 p.m. Eastern Time today through webcast replay on our website and also telephone replay through August 13, 2024. And now I'll turn the call over to our CEO, Mike Nolan.
Mike Nolan: Thank you, Lisa, and good morning. We are pleased to report a strong set of results for the second quarter. Our title business continues to perform very well in this low transactional environment as elevated mortgage rates and housing affordability continue to hamper U.S. home sales. We delivered adjusted pretax earnings in our Title segment of $324 million and achieved an industry-leading adjusted pretax title margin of 16.2% for the quarter as compared to 15.8% in the second quarter of 2023. This strong result reflects our disciplined operating strategy and our investments in innovative technologies and data. Our operational discipline focuses on actively managing our business to the trend in opened orders and adjusting our headcount and footprint accordingly. Our technology investments focus on leveraging data and digital tools to increase operational efficiency and improve the overall experience of our clients and customers. To that end, I'd like to thank our employees as we have worked together to effectively navigate and adapt to the historically low volumes and deliver industry-leading performance to the trough of this cycle. We are optimistic that the industry is getting closer to more favorable market conditions and that mortgage rates may have hit their peak given current market expectations for an initial Fed rate cut in September. In the second quarter, we continue to see a pattern of normal seasonality with daily purchase opened orders showing a 9% sequential improvement over the first quarter. We would expect the normal seasonal falloff for the remainder of the year if mortgage rates remain at current levels, although it could be better if mortgage rates move lower and generate an uplift in purchase volumes. Refinance volumes remained stable at the current floor. We continue to average about 1,000 opened orders per day, which has been relatively consistent over the past two years. A rebound in refinance volumes is also largely dependent on lower mortgage rates. Commercial volumes continue to be steady and resilient. We generated direct commercial revenue of $511 million in the first six months, trending in line with the $1 billion in annual revenue that we delivered in 2015 through 2020 and in 2023. Asset classes have remained very consistent as well. Looking ahead, we see the potential for higher commercial volumes as the office sector begins to transact and continue to see strength in the industrial, multifamily and energy sectors, among others. Looking at second quarter volumes more closely, daily purchase orders opened were up 2% over the second quarter of 2023 up 9% over the first quarter of 2024 and down 4% for the month of July versus the prior year. Our refinance orders opened per day were down 1% from the second quarter of 2023, up 5% over the first quarter of 2024, and up 7% for the month of July versus the prior year. Our total commercial orders opened were 805 per day, up 3% over the second quarter of 2023, up 3% over the first quarter of 2024, and down 4% for the month of July versus the prior year. Overall total orders opened averaged 5500 per day in the second quarter, with April at 5400, May at 5400, and June at 5600. For the month of July, total orders opened were 5200 per day, down 7% versus June. Looking forward at the current level of mortgage rates, we continue to view our performance in the second half of 2023 as a good proxy for the second half of 2024 all else being equal. During 2023, our adjusted pre-tax title margin remained in the mid-teens in the third quarter, declining in the fourth quarter, giving the typical seasonal pattern to residential purchase volumes. If we see lower mortgage rates in the second half of the year and into next year, we are poised to capture the upside from higher transaction volumes given the scale and efficiencies that our diversified national footprint provides. On an annual basis, we continue to view the range for normalized adjusted pre-tax title margin of 15% to 20% as a good rule of thumb. Over the long-term, we remain bullish on the real estate market and will continue to develop and invest in technology, recruit top talent, and make strategic acquisitions, all while maintaining industry leading margins. We have been investing in data and technology for decades, having developed best-in-class capabilities. We will continue to innovate and lead the industry in this area by constantly developing and investing in technology that enhances our business operations and customer experiences. We are especially proud of our inHere Digital Platform that was launched three years ago. inHere is unique in the industry in providing an end-to-end digital transaction experience at scale that is fully integrated and rolled out across our direct residential footprint. We are especially pleased with the enhanced security and fraud mitigation, improved efficiency and elevated customer experience that inHere offers on a 24/7 basis. We had over one million real estate professionals and consumers use inHere in full year 2023 and nearly 700,000 in the first half of this year. The inHere platform continues to be an integral part of our business. Additionally, we have named our Chief Artificial Intelligence Officer role this quarter, recognizing its importance for the future. We are committed to responsibly harnessing the new capabilities that AI can bring to drive greater efficiencies and productivity over time. Turning to our F&G business, F&G has profitably grown assets under management before flow reinsurance to a record $61.4 billion at June 30. Over the past four years since the 2020 merger, F&G has grown diversified and modernized its business, while more than tripling its top line sales and doubling gross AUM before flow reinsurance. F&G has achieved record gross sales of $4.4 billion for the second quarter, an increase of 47% over the second quarter of 2023. As the business is seeing strength across all of its sales channels, F&G is benefiting from strong demand for its products, its prior investments in building out its multichannel sales platform, and continued strong investment performance. The F&G segment contributed 40% of FNF’s adjusted net earnings for the first half of 2024, up from 28% for the first half of 2023, providing an important complement to our title business. Looking ahead, F&G has compelling growth opportunities through its diversified, new business platform and benefits from its profitable in-force book that has scaled considerably. F&G has also successfully executed on its accretive flow reinsurance and owned distribution strategies, which are contributing to margin expansion and improved returns. FNF benefits from its majority ownership of F&G through its share of F&G’s durable and growing earnings, cash dividend streams and recognition of the value of F&G's market capitalization which has increased from $2.9 billion at the time of the partial spin-off in December of 2022 to $5.4 billion at July 31 on a stand-alone basis. With that, let me now turn the call over to Tony to review FNF's second quarter financial performance and provide additional highlights.
Tony Park: Thank you, Mike. Starting with our consolidated results, we generated $3.2 billion in total revenue in the second quarter. Excluding net recognized gains and losses, our total revenue was $3.2 billion as compared with $3.1 billion in the second quarter of 2023. 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 second quarter net earnings of $306 million, including net recognized losses of $88 million versus $219 million, including $16 million of net recognized losses in the second quarter of 2023. Adjusted net earnings were $338 million or $1.24 per diluted share compared with $274 million or $1.01 per share for the second quarter of 2023. The Title segment contributed $241 million. The F&G segment contributed $122 million and the Corporate segment contributed $2 million before eliminating $27 million of dividend income from F&G in the consolidated financial statements. Turning to Q2 financial highlights specific to the Title segment. Our Title segment generated $2 billion in total revenue in the second quarter, excluding net recognized losses of $75 million compared with $1.9 billion in the second quarter of 2023. Direct premiums increased 4% versus the prior year. Agency premiums increased 10% and escrow title-related and other fees decreased 2%. Personnel costs increased 4% and other operating expenses decreased 6%. All in, Title business generated adjusted pretax title earnings of $324 million compared with $302 million for the second quarter of 2023, and a 16.2% adjusted pretax title margin for the quarter versus 15.8% in the prior year quarter. Our Title and Corporate investment portfolio totaled $4.9 billion at June 30. Interest and investment income in the Title and Corporate segments was $99 million, an increase of $6 million over the prior year quarter, primarily due to higher income from cash, short-term and fixed income investments partially offset by lower income from our 1031 Exchange business resulting from declining balances. For the remainder of 2024, we expect quarterly interest and investment income to be stable at $95 million to $100 million, with anticipated Fed funds cuts of 25 to 50 basis points through the second half of the year. As a rule of thumb and all else being equal, every 25 basis point decrease in Fed funds is expected to result in approximate $15 million annualized decline in interest and investment income. In addition, we expect over $100 million of annual dividend income from F&G to the Corporate segment. This cash return reflects 85% of F&G's common dividend given our majority ownership stake, and 100% of F&G's preferred dividend on the mandatory convertible preferred stock issued to FNF in January 2024. In our earnings release, both the common and preferred dividends are reported in the Corporate and Other segment and then eliminated in the eliminations column, such that the bottom line impact to FNF consolidated results is neutral to earnings. Our title claims paid of $70 million were $9 million higher than our provision of $61 million for the second quarter. Historically, about 60% of our claims are paid within five years of the policy being written. Therefore, we expect the dollar amount of paid claims to increase, representing the cyclically high level of policies issued in 2021 and 2022. The carried reserve for title claim losses is approximately $50 million or 3% above the actuary 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&G segment. F&G hosted its earnings call this morning and provided a thorough update, so I will focus on the key highlights for the quarter. F&G reported record gross sales of $4.4 billion in the second quarter, up 47% over the prior year quarter. Record retail sales were $3.2 billion, up 39% over the prior year quarter, driven by strong annuity sales. F&G’s retail products are seeing strong demand as consumers want to secure relatively higher rates, guaranteed tax deferred growth and principal protection, which is particularly attractive to baby boomers who are approaching retirement, a significant demographic trend with a long tail. Robust institutional market sales, which are lumpy in nature were $1.2 billion, up from $700 million in the prior year quarter. This included $300 million of pension risk transfer sales, and $900 million of funding agreements as F&G returned to the FABN market for the first time in two years, given more favorable market conditions. F&G’s retained sales were $3.4 billion in the second quarter, up 55% over the prior year quarter. F&G has profitably grown its retained assets under management to a record $52.2 billion at June 30. AUM before flow reinsurance was $61.4 billion. Adjusted net earnings for the F&G segment were $122 million in the second quarter. This includes alternative investment returns below our long-term expectations by $17 million or $0.06 per share, and significant expense items of $10 million or $0.04 per share. To bring it all together, FNF’s consolidated adjusted net earnings, excluding significant items in the F&G segment were $365 million or $1.34 per diluted share in the second quarter. From a capital and liquidity perspective, we are maintaining a strong balance sheet and remain focused on ensuring a balanced capital allocation strategy as we navigate the current environment. We held $696 million in cash and short-term liquid investments at the holding company level at June 30. This is up nearly $80 million compared with the sequential quarter despite the historic low volumes in the title business. Our consolidated debt outstanding increased to $4.2 billion at June 30, reflecting a $300 million net increase in F&G segment debt for the successful refinance and partial tender offer of its upcoming 2025 senior note maturity. Our consolidated debt to capitalization ratio, excluding AOCI, remains in line with our long-term target range of 20% to 30%. Primary capital allocation priorities support our $525 million annual dividend commitment, modest $80 million annual interest expense at the holding company level and $200 million to $300 million average annual strategic title acquisition spend in support of the long-term growth of the business. In terms of share repurchases, we were very active in 2020 through 2022, but paused our activity in early 2023 due to the uncertainty in one of the weakest years in industry history. Given the continued uncertainty in the market, there were no share repurchases in the second quarter. We will continue to monitor and expect to resume buybacks once the title market picks up and we see our cash generation building above the level of our annual dividend, interest expense and acquisition spend. This concludes our prepared remarks, and let me now turn the call back to our operator for questions.
Operator: Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of John Campbell with Stephens, Inc. Please go ahead.
John Campbell: Hey, thanks, guys. Good morning.
Mike Nolan: Good morning, John.
John Campbell: Hey, good morning. Tony, on your commentary related to the higher cash paid claims moving forward? I know you guys typically reserve in a pretty broad range. I know your competitors are a little bit more fluid. It seems like they tie their reserves to the actuary estimates each quarter. But I'm curious how you're thinking about the 4.5% loss provision rate. I think you've booked at pretty steady since 2018. I feel like that's still a pretty good range over the near-term and what – maybe what you have to see to revise that higher?
Tony Park: Yes. I think at this point, the 4.5% feels comfortable. It's probably a little conservative. If you look at our last 10 years, I think our run rate for developed claims is closer to 4%, but 4.5%, I don't know, we like to be conservative in this area. We also – we had a couple fraud claims in 2023 that the actuaries saw and those come in early. And so when an actuary develops those, they make an expectation that those are going to develop longer term and they don't. And so we're sitting on a 2024 or rather a 2023 year that's a little higher than what we've seen in the past. I don't think it's going to end up there. I think it's going to end up exactly where we've been. But for now, we're roughly $50 million above the central estimate, feel good about that. If you compare us to our competitors, sometimes we use a different basis for the percentage. So we do 4.5% of title premiums, but that equates to 3.9% of title and escrow fees. And so some of our competitors look at it that way, but at any rate, yes, feel good about it at this point.
John Campbell: Okay. That's helpful. And then on the title field staff, I mean, I think that was up 3% sequentially. That's just normal seasonality, I believe. But year-over-year, that's down 3%. That's down a little bit faster than both open and closed orders. So as you guys look ahead, I'm just curious how you're thinking about the staffing levels and maybe how much excess capacity you have? And then if you get a sharper increase in volumes and you're expecting just maybe your ability to flex with more overtime pay?
Mike Nolan: Yes. Sure, John. It's Mike. Thank the question. We feel like we're in a good position on staffing. And as we thought about this year, we really wanted to be a little lighter than we were last year, and we've achieved that, as you pointed out. And that 3% reduction includes us adding about 250 people through recruiting and acquisitions over that time frame. So we've actually adjusted more staff out, but we're adding staff at the same time if that makes sense. As we go into the back half, we'll just follow the direction of the orders. And with rates may be coming off as we've seen in the last couple of days, there could be an opportunity for more volumes in the back half of the year. I think we would, of course, always go to overtime first. But just depending on the magnitude of any potential increases, we've always got the ability to go back and add staff on a kind of as-needed basis as market basis.
John Campbell: Okay. That's helpful. If I can maybe squeeze in one quick one here. On the July orders, maybe if you could talk to the cadence, kind of how that looked week to week. And then I don't know how much insight you have in August, but especially the last couple of days with rates feeling back a bit here. If you can maybe give us some commentary on what that’s looked like over the last couple of days.
Mike Nolan: Yes. Really no commentary on August, John. I would say in July, it was fairly consistent, although I would note that it was interesting that our refi orders were up 7% over the prior July. And as you looked at rates in July, they traded down through the month, about 30-plus basis points. So you can't always tell if your orders are up in direct relation to that. But it's interesting that rates fell off and we saw a little bump in our refi open orders.
John Campbell: Okay, that’s very helpful. Thank you guys.
Operator: Thank you. Our next question is from the line of Mark Hughes with Truist Securities. Please go ahead.
Mark Hughes: Yes. Thank you very much. Other operating costs down year-over-year, if you look at the last couple of years, those costs have stepped down sequentially from Q2 to Q3. How should we think about those costs this year in the third quarter? How are they shaping up?
Tony Park: Yes. Thanks, Mark. Yes, a couple of the items in that decline. Facilities, we've worked hard, as we've said in the past, over the years to reduce our footprint when the market came down, I think we're down about 1.3 million square feet and about 100 leases if you go back a few years, so part of it was that. I can't remember the exact number, but part of the decline is there. We also had some cost of sales declines in our ServiceLink business and the valuations area because that business is off year-over-year. And I think our title plant costs were down a little bit as well. And so yes, that trend has been nice to see. If you look at other operating roughly – and this is rough, but about 50%, we consider variable and 50% of those costs we consider fixed. Did you want to add anything, Mike?
Mike Nolan: Yes. Just to add, I think that the facility savings that we've seen, and it was almost 7% over the second quarter of last year. Those are a bit more durable. We don't really see adding back the need to add back new leases in any significant way as we go into the third quarter. So I think we continue to see some savings there. I don't know if it will be 7%, but that should hold up. And we've also had some savings in the title plant area.
Mark Hughes: Understood. What's the thinking in terms of the tempo of buybacks, how active do you plan on being in the near term here?
Tony Park: Yes, good question. I said earlier in my commentary that we're looking to – at our cash flow generation in and first need to cover the $525 million dividend. And then maybe the $80 million to $100 million – I think its $80 million of interest expense at the holdco level, that gets us to six [ph] and then maybe $200 million to $300 million in acquisition capital. And so once we're in the $800 million to $900 million range or exceeding that in terms of cash flow generation to a holding company I think that's when the Board is going to feel comfortable about, okay, let's set aside some money for buybacks. I don't know exactly when that is, it could be soon. But that's kind of what we're looking at. We did renew our authorization, as you probably saw, 25 million share buyback authorization from the Board. That was more just a timing thing. We – the prior authorization expired at the end of July. And so we put that news out there following that.
Mark Hughes: And then on commercial, what was the July experience in commercial in terms of open orders? And then I think you talked about kind of stability in the first half relative to some earlier years. Is that a good way to think about the back half? Or obviously, it depends on interest rates, but do you think that, that picks up a bit?
Mike Nolan: Yes, Mark, it's Mike. So the July number it was down 4% over last July. I wouldn't read too much into a monthly number, particularly in commercial. As you know, it can be a little lumpy. What I really look to is through July, our open orders are up 4% over the seven months of last year. And I think what's important, we've seen national performing stronger. That's up 8% through July, and it was – national was also up 11% over the second quarter of 2023. And I think that points to potential even stronger second half. We've kind of said all along that we thought 2024 would look a lot like 2023. We did just under $1.1 billion in commercial direct revenue in 2023. And I think there's always a range of outcomes, but I would think we do that with the potential to do more based on the national improvement in orders based on potentially lower rates and based on potential uptick in office transactions. And we’ve seen a little bit of that. I wouldn’t say it’s significant yet, but we definitely see some markets where either through distressed sales or just sales, we’re starting to see a little bit more office activity.
Mark Hughes: Thank you.
Operator: Thank you. Our next question is from Terry Ma with Barclays (LON:BARC). Please go ahead.
Terry Ma: Hi. Thank you. Good morning. So do you guys feel pretty comfortable about the mid-teens margin guide for the full year? You guys put up some pretty decent margin expansion in the first half for closed orders that were kind of flat to modestly down. So should we expect kind of a better normal seasonality if volumes were to pick up in the back half of the year, any way to think about that?
Mike Nolan: Terry, it’s Mike, I’ll start. Tony may want to weigh in too. But yes, as we said with margins, there’s always kind of this range of outcomes, and it is tough to predict and as we’ve talked about before, at these lower revenue net levels, it doesn’t take a lot to move margins around and you got to look at the mix of direct and agency, et cetera. But if we – and I think we might have said in the opening remarks, if we see better volumes in the second half, if these rates that went down in the last couple of days kind of hold and we’ll just have to see. I think there’s an opportunity to outperform the margins we had in the back half of last year. I think we did 15 something in the third quarter, but maybe…
Tony Park: Yes. Was it like 15 something and then 11 or 12.
Mike Nolan: Yes, 11 or 12. So I think there’s the opportunity certainly to outperform that with better volumes and maybe a little pickup in commercial. And that could get us full year maybe the lower end of that range, the 15 to 20. But I’m really excited about as well, just what that might hold for 2025 and the potential for just getting back to a more normal bet [ph] market. And then you’ll see us I think getting into the midpoint or the moving up in that 15% to 20% range.
Terry Ma: Got it. That’s helpful. And then just a follow-up on commercial. The commercial fee per file was better than what we were expecting and also higher year-over-year. Any color on what kind of drove that and how we should think about that in the back half?
Mike Nolan: Yes. Terry, that was really – we had some really big deals that closed that kind of pushed that up a handful of transactions. You don’t always know that you’re going to get those and they kind of could come in and out. I think that sort of 10,000 number for total commercial fee per file is still a pretty good number to think about. You can always get upside to it. And on the national side, 13,500 to 14,000 range is probably a good way to think about it. But as I pointed out to Mark’s question, we are seeing more strength in the national open orders, so that could be a little helpful on the fee per file.
Terry Ma: Okay. Great. Thank you.
Mike Nolan: Thanks.
Operator: Thank you. Our next question is from the line of Bose George with KBW. Please go ahead.
Bose George: Hey and good afternoon. You’re about one year at from potentially being able to spin out F&G. So just any updated thoughts on what you guys might do?
Tony Park: Yes, Bose. Thanks. This is Tony and Mike might weigh in as well. But as we’ve said in prior quarters, the Board has been very pleased with F&G’s performance and the validation of the thesis behind the acquisition, which has been a real complement to the Title business, as you probably heard us say, 40% of our adjusted net earnings in the first half were generated by F&G. With a strong leadership team, a strong company there. And frankly, it's outperformed even probably our best or highest expectations. And so at this point, I think, I mean there's optionality out there. You've seen us do deals in the past. But at this point, like I said, the Board is very pleased about F&G's performance. And I would say it's been other than the last few days, I think it's been recognized in the share price in both of our share prices and it's been a positive experience so far.
Mike Nolan: Yes. And I would just add that it's a valuable growing business led by a fantastic team. We're very focused on the current market opportunity to continue to grow AUM. When you think about Bose when we bought the business, the sales or – and Chris and you can correct me if I get the wrong number, running around $3 billion annually and we're probably 4 to 5x that now on an annual basis. It's just an unbelievable growth story.
Bose George: Okay. Makes sense. Thanks. And actually, just one more on F&G. Is there a scenario where the dividend coming out of F&G could increase over the next couple of years? Or is the earnings there really supporting the strong growth that we're seeing over there?
Tony Park: Yes. That's a good question, Bose. Maybe I'll let Chris or Wendy weigh in. I mean my thoughts are that F&G will probably raise their common dividend over time, which generates for us about, I don't know, $22 million a quarter or something along those lines. And then we get another $5-ish million from the preferred convertible stock that we invested in. I don't know, Chris or Wendy, if you want to weigh in on what you think the dividend policy might be at F&G.
Chris Blunt: Yes. No, I think you nailed it, Tony. I think there's capacity to periodically grow the dividend and fund growth.
Bose George: Okay. Great. Thanks.
Tony Park: Thanks.
Operator: Thank you. Our next question is from the line of Mark DeVries with Deutsche Bank (ETR:DBKGn). Please go ahead.
Mark DeVries: Yes. Thanks. I had another question for you on F&G. I wanted to get your thoughts, Chris, on kind of what your expectations are for how the move in rates that we've already seen will impact sales going forward? And also maybe more mechanically, how we should think about kind of the normal lag between a move in rates and a change to your crediting rates and ultimately to having that impact demand?
Chris Blunt: Yes, great question. So I would say a couple of things. One, we talked about on the F&G call this morning. We've hedged out about two-thirds of our floating rate exposure. So right now, it's about – I think, about 6.5% of our portfolios in floaters. So we got the huge benefit when rates rose because that number was closer to 20%, and we bought a lot of those securities when short-term rates were near zero, frankly. So I think you'll see a lot less exposure to rates coming down. There's a ton of cash on the sidelines. So I think the near-term impact of rates coming down will probably be even more demand for our products. That's my prediction there. And so yes, as to repricing the products, it technically happens monthly, but in a really volatile environment like this, I mean, we can do it pretty much on any day. You want to give a handful of days heads up to your distribution partners. So you don't want to be whipping rates around too quickly. But we've gotten a capacity to reprice. And remember, bulk of the profits are in the in-force block, $61 billion of AUM, and that's really locked in other than the small percentage in floaters. So hopefully, that helps.
Mark DeVries: Yes. That's great. Thank you.
Operator: Thank you. [Operator Instructions] Our next question is from the line of John Campbell with Stephens Inc. Please go ahead.
John Campbell: Hey, guys. Thanks for the follow up. Just a little bit of in-the-weeds type question. So we can circle back later if you guys don't have this on hand. But on the adjusted EPS add back, it looks like purchase amortizations still up a good bit year-over-year. I know you've got some M&A in the mix, but it seems like more like tuck-in bills. If I look at the F&G add backs, they had a big jump in purchase amortization, something that's probably the primary driver. So I'm hoping if you could provide some clarity there? And then also how we should be thinking about purchase amortization for your add back going forward?
Tony Park: Yes, John, this is Tony. On the title side, in the corporate side, there was very little in terms of purchase price amortization add back. So I'm thinking that a big chunk of that, yes, $19 million I'm looking at now is at F&G. I don't know specifically what that represents. So we might have to do a follow-up to give you an idea of what that looks like unless Wendy has anything, because in the prior year second quarter, to your point, it was only $6 million. So it went from $6 million to $19 million.
Wendy Young: Yes. Tony, it has to do with the acquisition of our own distribution that we've done in the first – in the second quarter.
Tony Park: And that $19 million – is that then that you would expect that to be the run rate?
Wendy Young: I think it will fluctuate. So when we do a big acquisition as we did in the second quarter, that bumped up. So it will depend on future acquisitions.
Tony Park: Yes.
John Campbell: So absent future acquisitions, somewhere near that $19 million coming from F&G is a good number to go with.
Wendy Young: Correct.
John Campbell: Okay. That’s helpful. Thank you guys.
Tony Park: Thanks.
Operator: Thank you. Ladies and gentlemen, this will conclude our question-and-answer session. I will now turn the conference back over to CEO, Mike Nolan, for closing remarks.
Mike Nolan: Thank you. We are very pleased with our performance through the first half of the year for both the Title segment and F&G. The Title segment is outperforming in the current market. Poised for a rebound in transactional levels, and we are continuing to build and expand the business for the long term. Likewise, F&G's opportunities are compelling with many prospects ahead to drive asset growth, deliver margin expansion and generate accretive returns. As you can see, both businesses are well positioned for the current market as well as for longer-term growth. Thank you for your time this morning. We appreciate your interest in FNF and look forward to updating you on our third quarter earnings call.
Operator: Thank you. The conference of FNF has now concluded. Thank you for your participation. You may now disconnect your lines.
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