Fidelity National Financial(FNF) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's discussion and analysis Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements and related notes for the period Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity Condensed Consolidated Balance Sheet Highlights (in millions) | Account | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $62,164 | $60,690 | | Total Investments | $42,820 | $42,775 | | Cash and cash equivalents | $2,474 | $4,360 | | Goodwill | $4,609 | $4,539 | | Total Liabilities | $56,365 | $51,233 | | Contractholder funds | $39,127 | $35,525 | | Notes payable | $2,693 | $3,096 | | Total Equity | $5,799 | $9,457 | - Total assets increased to $62.2 billion from $60.7 billion at year-end 2021, primarily driven by an increase in contractholder funds liabilities, which rose to $39.1 billion from $35.5 billion[11] - Total equity decreased significantly to $5.8 billion from $9.5 billion, largely due to a swing in Accumulated other comprehensive earnings from a gain of $779 million to a loss of $(3,186) million[11] Condensed Consolidated Statements of Earnings This section outlines the company's financial performance, including revenues, expenses, net earnings, and diluted EPS Consolidated Earnings Summary (in millions, except per share data) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $3,207 | $3,892 | $9,003 | $10,846 | | Total Expenses | $2,798 | $2,966 | $7,504 | $8,450 | | Net Earnings | $294 | $737 | $1,081 | $1,903 | | Diluted EPS | $1.05 | $2.57 | $3.83 | $6.56 | - Total revenues for Q3 2022 decreased to $3.2 billion from $3.9 billion in Q3 2021, primarily due to lower title insurance premiums and net recognized investment losses[13] - Net earnings attributable to common shareholders fell to $289 million in Q3 2022 from $732 million in Q3 2021 For the nine months ended September 30, net earnings decreased to $1.07 billion in 2022 from $1.89 billion in 2021[13] Condensed Consolidated Statements of Cash Flows This section details the company's cash inflows and outflows from operating, investing, and financing activities Consolidated Cash Flow Summary (in millions) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,977 | $2,600 | | Net cash used in investing activities | $(7,890) | $(4,863) | | Net cash provided by financing activities | $3,027 | $4,692 | | Net (decrease) increase in cash | $(1,886) | $2,429 | - Cash from operations increased to $3.0 billion for the first nine months of 2022, up from $2.6 billion in the prior-year period[21] - Cash used in investing activities increased significantly to $7.9 billion, primarily due to higher net purchases of investment securities compared to the same period in 2021[21] - Cash provided by financing activities decreased to $3.0 billion from $4.7 billion, mainly due to debt repayments in 2022 versus a debt offering in 2021 and lower net change in secured trust deposits[21] Notes to Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of accounting policies, financial components, and recent business developments - On August 9, 2022, FNF acquired approximately 74% of AllFirst Title Insurance Agency for about $127 million in cash[26] - The company plans a taxable dividend to shareholders of 15% of F&G's common stock, targeted for completion in Q4 2022, while intending to retain an approximate 85% ownership stake[30] - The company repaid the remaining $400 million principal of its 5.50% Senior Notes on September 1, 2022[25] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses key business trends, segment operating results, liquidity, capital resources, and share repurchase activities Business Trends and Conditions This section analyzes business trends, including rising mortgage rates impacting Title and market volatility affecting F&G - The Mortgage Bankers Association (MBA) forecasts total U.S. mortgage originations to fall from $4.4 trillion in 2021 to $2.3 trillion in 2022, driven by a sharp decline in refinance transactions from $2.5 trillion to $0.7 trillion[211] - The Federal Reserve's aggressive interest rate hikes to combat inflation have pushed the average 30-year fixed mortgage rate to 5.6% in Q3 2022, compared to 2.9% in Q3 2021[212] - The aging U.S. population is a key long-term driver for the F&G segment, with the proportion of the population over 65 expected to grow from 17% in 2021 to 21% in 2035, increasing demand for retirement products[224] Results of Operations Consolidated revenues and net earnings declined, with detailed segment performance for Title, F&G, and Corporate and Other Title Segment Key Metrics | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues (in millions) | $2,291 | $2,921 | $7,228 | $8,436 | | Pre-tax Earnings (in millions) | $335 | $486 | $851 | $1,569 | | Direct Orders Closed (thousands) | 278 | 527 | 1,006 | 1,692 | | Fee per File | $3,621 | $2,581 | $3,323 | $2,310 | F&G Segment Key Metrics (in millions) | Metric | Q3 2022 | Q3 2021 | YTD 2022 | YTD 2021 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $902 | $927 | $1,717 | $2,268 | | Net Earnings | $115 | $373 | $581 | $744 | | Total Gross Sales | $2,873 | $3,076 | $8,535 | $7,397 | - The Title segment's direct closed orders fell 47% YoY in Q3 2022, with refinance orders declining more sharply than purchase orders However, the average fee per file increased by 40% due to a higher mix of commercial and purchase transactions[239][244][246] Liquidity and Capital Resources The company maintained strong liquidity, increased cash from operations, and continued its capital return program - The company had $2.47 billion in cash and cash equivalents and $800 million available under its Revolving Credit Facility as of September 30, 2022[354] - During the nine months ended September 30, 2022, FNF repurchased 12.4 million shares of its common stock for approximately $511 million, at an average price of $41.31 per share[365] - A cash dividend of $0.45 per share was declared on November 3, 2022, payable on December 30, 2022[353] Item 3. Quantitative and Qualitative Disclosures about Market Risk No material changes in market risks were reported compared to the prior annual report - No material changes in market risks were reported compared to the 2021 Annual Report on Form 10-K[370] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The principal executive and financial officers concluded that disclosure controls and procedures are effective[371] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[372] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, equity sales, and required exhibits Item 1. Legal Proceedings This section refers to Note F for details on ongoing legal proceedings and litigation matters - For details on legal proceedings, the report refers to Note F in Part I, Item 1 of the financial statements[375] Item 1A. Risk Factors New risk factors are identified related to the proposed F&G distribution, including potential adverse impacts on earnings - The planned 15% distribution of F&G common stock introduces new risks, including the inability to complete the transaction and potential adverse effects on business relationships and future earnings[376][377] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details on common stock repurchases made under the authorized share repurchase program during the quarter Share Repurchases (Q3 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Jul 2022 | 631,945 | $37.24 | | Aug 2022 | 2,000,000 | $39.93 | | Sep 2022 | 2,662,620 | $38.21 | | Total | 5,294,565 | $38.74 | Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including agreements, certifications, and XBRL data files - The report includes several exhibits, such as management agreements, CEO/CFO certifications, and XBRL interactive data files[380][382]