Fidelity National Financial(US:FNF)2023-05-08 16:00Real Estate and Mortgage Activity - Title segment revenue is closely related to real estate activity, with a forecasted total U.S. mortgage originations of $2.2 trillion in 2023, down from $2.2 trillion in 2022[289]. - Existing-home sales decreased by 22% in March 2023 compared to March 2022, while median existing-home sales prices fell by 1% from $379,500 to $375,700[292]. - Commercial real estate transaction volume is linked to financing availability, with a noted decrease in order volumes and fee per file in Q1 2023 compared to the prior year[294]. - Closed title insurance order volume decreased by 51%, from 380,000 in Q1 2022 to 188,000 in Q1 2023, primarily due to higher average mortgage interest rates[340]. Financial Performance - Total revenues decreased by $693 million to $2,474 million for the three months ended March 31, 2023, compared to $3,167 million in the same period of 2022[326]. - Net earnings from continuing operations fell by $490 million to a loss of $88 million for the three months ended March 31, 2023, compared to earnings of $402 million in the same period of 2022[326]. - Total revenues for the Title segment decreased by $831 million, or 35%, in the three months ended March 31, 2023, compared to the same period in 2022, totaling $1,552 million[336]. - Interest and investment income increased to $611 million, up from $478 million year-over-year[325]. - Total expenses decreased slightly to $2,548 million from $2,611 million year-over-year[325]. Insurance and Annuities - The F&G segment's reserves, net of reinsurance, for fixed rate annuities were $11.0 billion with an average crediting rate of 3% as of March 31, 2023[299]. - The FIA market grew from nearly $12 billion in sales in 2002 to $79 billion in sales in 2022, indicating significant demand for retirement savings products[302]. - The aging U.S. population is expected to increase demand for fixed indexed annuities and indexed universal life products as more individuals prepare for retirement[301]. - Life insurance premiums and other fees decreased to $365 million for the three months ended March 31, 2023, down from $596 million in the same period of 2022, reflecting lower PRT premiums[359]. Tax and Regulatory Changes - The Inflation Reduction Act of 2022 introduced a 15% corporate alternative minimum tax effective January 1, 2023, but the company does not anticipate a material effect on its financial condition[334]. - The income tax expense was $14 million for the three months ended March 31, 2023, compared to $156 million in the same period of 2022[333]. - The income tax benefit for Q1 2023 was $8 million, a significant decrease from an income tax expense of $106 million in Q1 2022, resulting in an effective tax rate of 4% compared to 31% in the prior year[377]. Investment Portfolio - The fair value of the investment portfolio increased to approximately $44 billion as of March 31, 2023, up from $41 billion at the end of 2022[380]. - Fixed maturity securities accounted for 77% of the total investments as of March 31, 2023, with a fair value of $34.2 billion, compared to $31.2 billion at the end of 2022[380]. - The gross unrealized loss on fixed maturity securities and equity portfolio was $4,301 million as of March 31, 2023, down from $4,744 million as of December 31, 2022[404]. - The total amortized cost of all securities in an unrealized loss position was $34,550 million as of March 31, 2023, compared to $34,164 million as of December 31, 2022[404]. Cash Flow and Capital Management - Operating cash flow for the three months ended March 31, 2023, was $1,418 million, an increase of $751 million compared to $667 million for the same period in 2022[430]. - Cash flows used in investing activities decreased to $2,285 million for the three months ended March 31, 2023, from $3,414 million in the same period in 2022[432]. - Cash flows from financing activities increased by $222 million to $1,402 million for the three months ended March 31, 2023, compared to $1,180 million in 2022, primarily due to the issuance of $500 million in 7.40% F&G Notes[434]. - The company paid dividends of $0.45 per share in the first quarter of 2023, totaling approximately $122 million to common shareholders[424]. Personnel and Operating Costs - Personnel costs decreased by $178 million, or 23%, in Q1 2023, due to a lower average headcount, with personnel costs as a percentage of total revenues rising to 67%[347]. - Other operating expenses increased to $36 million in Q1 2023 from $18 million in Q1 2022, leading to total personnel and operating costs of $89 million compared to $48 million year-over-year[376]. - Personnel costs for the three months ended March 31, 2023, were $53 million, up from $30 million for the same period in 2022, reflecting headcount growth to support higher volumes[376]. Market Risks and Future Outlook - The company anticipates future operating results to be subject to significant volatility due to changes in fair value of equity and preferred security investments[437]. - No material changes in market risks have been reported since the Annual Report for the year ended December 31, 2022[440]. - There have been no significant changes to off-balance sheet arrangements since the Annual Report for the year ended December 31, 2022[438].