Fidelity National Financial(US:FNF)2019-04-25 20:33Financial Data and Key Metrics Changes - The company generated adjusted pretax title earnings of $172 million, an 8% decrease from Q1 2018 [11] - Adjusted net earnings were $118 million or $0.43 per diluted share, which was $0.01 better than Q1 2018 despite a 16% decline in direct orders closed [20] - Total revenue exceeded $1.7 billion in Q1, with the title segment contributing all but $59 million [19] - The company ended Q1 with approximately $535 million in available holding company cash [9] Business Line Data and Key Metrics Changes - The title business experienced a 16% decrease in direct orders closed, with purchase closings down 9%, refinance closings down 21%, and commercial closings down 5% [11] - Total commercial revenue was $228 million, reflecting a less than 1% decline compared to Q1 2018, driven by a 5% decrease in closed commercial orders [18] - The adjusted pretax title margin was 11.3%, a 40-basis point decline from the prior year [21] Market Data and Key Metrics Changes - The decline in mortgage rates led to a 16% increase in refinance open order accounts in March compared to March 2018, with a 42% increase in the first three weeks of April [12][17] - The softness in the residential purchase market continued, with purchase orders opened and closed declining by 6% and 9% respectively compared to the prior year [13][16] Company Strategy and Development Direction - The company is focused on the acquisition of Stewart Information Services, believing it will create long-term value for shareholders [6][7] - The company plans to manage personnel costs effectively, having reduced positions while also adding staff in response to increasing volumes [34] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the potential for a stronger residential purchase market due to a strong economy, stable or declining mortgage rates, and increased residential supply [15] - The company anticipates continued strong commercial activity and expects a good margin in the second quarter, despite tough comparisons from the previous year [37] Other Important Information - The board declared a $0.31 cash dividend for Q1 2019, a 3% increase from Q4 2018 [8] - The company has a robust pipeline for potential acquisitions in the title insurance space, although efforts have been toned down pending the Stewart transaction [41] Q&A Session Summary Question: Update on commercial order trends - Management noted that commercial orders are not reported monthly but indicated that the first quarter was the second-best in openings over the past five years, despite a 6% decline [28] Question: Thoughts on the Stewart deal timing and cash accumulation - Management confirmed that they have $535 million in cash available to cover the cash portion of the Stewart acquisition and expect subsidiary dividends to be around $950 million for the year [30] Question: Personnel costs and near-term expenses - Management reported a reduction of about 900 positions year-over-year, resulting in $28 million in savings, while also adding 50 positions in April [34] Question: Capital and acquisition landscape - Management indicated that if the Stewart deal does not happen, they could use the expected cash for share buybacks or dividends, given their low debt-to-cap ratio [39] Question: Claims and provisioning update - Management stated that claims remain low, with a current provision level of 4.5% of title premiums, and they are comfortable with the current reserve levels [56]