Fidelity National Financial Inc (NYSE: FNF) (the Company) a leading provider of title insurance and transaction services to the real estate and mortgage industries and a leading provider of insurance solutions serving retail annuity and life customers and institutional clients through FNF's wholly-owned subsidiary F&G today reported financial results for the third quarter ended September 30 2022

Net earnings attributable to common shareholders for the third quarter of $289 million or $105 per diluted share (per share) compared to $732 million or $257 per share for the third quarter of 2021  Net earnings attributable to common shareholders for the third quarter of 2022 includes $42 million of net favorable mark-to-market effects and $48 million of other unfavorable items; all of which are excluded from adjusted net earnings attributable to common shareholders  Net earnings attributable to common shareholders for the third quarter of 2021 included $224 million of one-time favorable adjustment from an actuarial system conversion $130 million of net unfavorable mark-to-market effects and $25 million of other unfavorable items; all of which are excluded from adjusted net earnings attributable to common shareholders

Adjusted net earnings attributable to common shareholders (adjusted net earnings) for the third quarter of $295 million or $107 per share compared to $663 million or $233 per share for the third quarter of 2021  For the third quarter of 2022 the Title segment contributed $298 million F&G contributed $12 million and the Corporate segment had an adjusted net loss of $15 million  For the third quarter of 2021 the Title segment contributed $521 million F&G contributed $160 million and the Corporate segment had an adjusted net loss of $18 million  The decrease from the prior year quarter was primarily a result of Title's considerable decline in refinance volume representing trough level activity and moderating residential purchase volume; partially offset by higher average fee per file and healthy volume of commercial orders closed and lower earnings from F&G driven by a new reporting presentation for alternatives investment portfolio mark-to-market 

Effective this quarter presentations of adjusted net earnings for F&G will no longer include the alternative investment yield adjustment to normalize alternative investment portfolio returns  Prior periods are presented on a comparable basis to reflect the new definition of adjusted net earnings  Please see Segment Financial Results for F&G for further explanation and Non-GAAP Measures and Other Information for a comparison of adjusted net earnings under the former and new definition

Company Highlights

• Solid Title Revenue despite challenging environment: For the Title segment total revenue of $23 billion compared with $29 billion in total revenue in the third quarter of 2021 Total revenue excluding recognized gains and losses of $23 billion compared with $31 billion in the third quarter of 2021
• Strong sales for F&G continue: Total gross sales of $29 billion for the third quarter a 7% decrease from third quarter 2021 and second quarter 2022; reflects record retail sales partially offset by lower institutional sales which we expect to be lumpier and more opportunistic than in our retail channels
• Partial spin-off of F&G remains on track: The previously announced transaction to distribute 15% ownership of F&G to FNF shareholders on a pro rata basis remains on track to close in the fourth quarter of 2022 subject to the satisfaction of certain conditions including that a Registration Statement on Form 10 filed by F&G with the US Securities and Exchange Commission is declared effective
• Ample deployable capital supports shareholder value: FNF has repurchased 53 million shares for $205 million at an average price of $3874 per share in the third quarter and paid common dividends at $044 per share for $120 million On September 1 2022 FNF retired all of the $400 million aggregate principal amount of its outstanding 550% Senior Notes upon maturity FNF ended the third quarter with $11 billion in cash and short-term liquid investments at the holding company As announced last week the board of directors has increased the quarterly cash dividend to $045 per share payable December 30 2022 to shareholders of record as of December 16 2022

William P Foley II commented Our Title results for the third quarter moderated from the prior year's record performance as higher mortgage rates pressured title volumes across the industry  That said our management team continued to deliver solid results having achieved total revenue of $32 billion while aggressively reducing expenses to protect FNF's margins in a more challenging environment  While rising rates are pressuring the housing sector they are proving to be a tailwind to F&G's results as assets under management grew to $42 billion at September 30 2022  Looking forward we remain on track to dividend 15% of F&G to FNF shareholders over the coming weeks which we believe will begin to unlock the significant value that Chris and his team have created over the last two years

Mr Foley concluded While the Federal Reserve continues on their aggressive interest rate tightening cycle to combat persistently high inflation investors have become increasingly concerned that the risks of a recession are rising which has led to significant market volatility through the third quarter  During challenging environments such as these I have always stressed the importance of maintaining a fortress like balance sheet with ample liquidity to take advantage of market dislocations  To that end we paid off all of our $400 million Senior Notes which matured on September 1^st leaving FNF with a debt to capitalization ratio excluding accumulated other comprehensive income of 23%  We also accelerated the pace of our share buyback having repurchased $205 million shares as compared to $172 million in the second quarter  Year to date we have returned $876 million of capital to our shareholders through $511 million of shares repurchase and $365 million of common dividends while ending the third quarter with $11 billion of cash and short-term liquid investments  We remain in a strong liquidity position and ready to capitalize on strategically aligned opportunities as they present themselves

Summary Financial Results

Segment Financial Results

Title

This segment consists of the operations of the Company's title insurance underwriters and related businesses which provide core title insurance and escrow and other title-related services including loan sub-servicing valuations default services and home warranty products

Third Quarter 2022 Highlights

Mike Nolan Chief Executive Officer said While mortgage rates have experienced one of the fastest increases ever we continued to manage our business to react quickly to adjust to order volumes and have delivered adjusted pre-tax Title earnings of $400 million and an adjusted pre-tax margin of 171%  Strength in the commercial market where we delivered record revenue of $381 million for a third quarter helped to buffer declines in the residential purchase and refinance markets  Importantly we believe refinance volumes are at or near trough levels while commercial volumes remain healthy though slowing  We remain confident in our ability to navigate the challenges of operating in a cyclical business and our strong balance sheet allows us to not only withstand periods of dislocation but take advantage of opportunities to build our Title business for the long term

• Total revenue of $23 billion compared with $29 billion in total revenue in the third quarter of 2021
• Total revenue excluding recognized gains and losses of $23 billion a 24% decrease compared with the third quarter of 2021
• Direct title premiums of $688 million a 23% decrease from third quarter of 2021
• Agency title premiums of $10 billion a 27% decrease from third quarter of 2021
• Commercial revenue of $381 million a 4% increase from third quarter of 2021
• Purchase orders opened decreased 22% on a daily basis and purchase orders closed decreased 23% on a daily basis from the third quarter of 2021
• Refinance orders opened decreased 75% on a daily basis and refinance orders closed decreased 76% on a daily basis from third quarter of 2021
• Commercial orders opened decreased 18% and commercial orders closed decreased 12% from third quarter of 2021
• Total fee per file of $3621 for the third quarter a 40% increase over third quarter of 2021

Third Quarter 2022 Financial Results

• Pre-tax title margin of 146% and industry leading adjusted pre-tax title margin of 171% for the third quarter of 2022 compared to 166% and 217% respectively in the third quarter of 2021
• Pre-tax earnings from continuing operations in Title for the third quarter of $335 million compared with $486 million for the third quarter of 2021
• Adjusted pre-tax earnings in Title for the third quarter of $400 million compared with $669 million for the third quarter of 2021 The decrease from the prior year quarter was primarily a result of the considerable decline in refinance volume representing trough level activity and moderating residential purchase volume; partially offset by higher average fee per file and healthy volume of commercial orders closed

F&G

This segment consists of operations of FNF's wholly-owned subsidiary F&G a leading provider of insurance solutions serving retail annuity and life customers and funding agreement and pension risk transfer institutional clients

Third Quarter 2022

Chris Blunt President and Chief Executive Officer of F&G commented F&G had another solid quarter  We generated total gross sales of $29 billion which in turn drove our assets under management to $42 billion  In the retail channels we generated a record $23 billion of sales up 45% from the prior year  In addition to increased demand from rising interest rates our Retail sales volume reflects expanding relationships with new and existing distribution partners in the agent bank and broker dealer channels while maintaining a disciplined approach to pricing  Momentum continues in our institutional channels as we placed over $06 billion in pension risk transfer transactions including our first repeat transaction

Regarding the recently announced transaction to distribute 15% ownership of F&G to FNF shareholders Mr Blunt said We are on track for a targeted closing in the fourth quarter of 2022 subject to the satisfaction of certain conditions and our board of directors has approved the initiation of a dividend program under which F&G intends to pay quarterly cash dividends on our common stock at an initial aggregate amount of approximately $100 million per year commencing in early 2023  Overall we are well positioned for future growth opportunities and view the transition to being a publicly traded company as a vote of confidence for our business

• Total gross sales of $29 billion for the third quarter a decrease of 7% from the third quarter 2021 and second quarter 2022; reflects record retail sales partially offset by lower institutional sales which we expect to be lumpier and more opportunistic than in our retail channels
• Record Retail sales of $23 billion for the third quarter a 45% increase over third quarter of 2021 and 1% increase over second quarter 2022; reflects execution of diversified growth strategy
• Institutional sales of $620 million of pension risk transfer transactions compared to $371 million of pension risk transfer transactions in the third quarter 2021 There were no funding agreement issuances in the current quarter compared with $12 billion for the third quarter 2021
• Average assets under management (AAUM) of $411 billion for the third quarter an increase of 26% from $326 billion in the third quarter 2021 driven by net new business flows Ending assets under management were $420 billion as of September 30 2022
• Net earnings attributable to common shareholders for F&G of $115 million for the third quarter compared to $230 million for the second quarter of 2022
• Adjusted net earnings for F&G of $12 million for the third quarter compared to $112 million for the second quarter of 2022
• Beginning in the third quarter presentations of adjusted net earnings for F&G will no longer include the alternative investment yield adjustment for the current period yield impact of market volatility that differs from management's expectation of long-term returns Adjusted net earnings for F&G over the past 9 quarters have been adjusted to reflect this updated presentation Please see Non-GAAP Measures and Other Information for a comparison of adjusted net earnings under the former and new definition
• Adjusted net earnings for the third quarter of 2022 included a $10 million unrealized loss from alternative investments and $5 million of other net expense items Alternative investments net investment income based on management's long-term expected return of approximately 10% was $83 million
• Adjusted net earnings for the second quarter of 2022 included $30 million income from actuarial assumption updates and $6 million of CLO redemption gains and other income as well as a $38 million unrealized gain from alternative investments Alternative investments net investment income based on management's long-term expected return of approximately 10% was $54 million

Conference Call

We will host a call with investors and analysts to discuss FNF's third quarter 2022 results on Wednesday November 9 2022 beginning at 11:00 am Eastern Time  A live webcast of the conference call will be available on the Events and Multimedia page of the FNF Investor Relations website at fnfcom  The conference call replay will be available via webcast through the FNF Investor Relations website at fnfcom The telephone replay will be available from 2:00 pm Eastern Time on November 9 2022 through November 16 2022 by dialing 1-844-512-2921 (USA) or 1-412-317-6671 (International) The access code will be 13730097 An expanded quarterly financial supplement providing F&G segment results is available on the FNF Investor Relations website

About Fidelity National Financial Inc

Fidelity National Financial Inc (NYSE: FNF) is a leading provider of title insurance and transaction services to the real estate and mortgage industries  FNF is the nation's largest title insurance company through its title insurance underwriters - Fidelity National Title Chicago Title Commonwealth Land Title Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title company in the United States  More information about FNF can be found at fnfcom 

About F&G

F&G is part of the FNF family of companies F&G is committed to helping Americans turn their aspirations into reality F&G is a leading provider of insurance solutions serving retail annuity and life customers and institutional clients and is headquartered in Des Moines Iowa For more information please visit fglifecom

Use of Non-GAAP Financial Information

Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for financial accounting GAAP includes the standards conventions and rules accountants follow in recording and summarizing transactions and in the preparation of financial statements In addition to reporting financial results in accordance with GAAP this earnings release includes non-GAAP financial measures which the Company believes are useful to help investors better understand its financial performance competitive position and prospects for the future These non-GAAP measures include adjusted net earnings per share adjusted pre-tax title earnings adjusted pre-tax title earnings as a percentage of adjusted title revenue (adjusted pre-tax title margin) adjusted net earnings attributable to common shareholders (adjusted net earnings) assets under management (AUM) average assets under management (AAUM) and sales 

Management believes these non-GAAP financial measures may be useful in certain instances to provide additional meaningful comparisons between current results and results in prior operating periods  Our non-GAAP measures may not be comparable to similarly titled measures of other organizations because other organizations may not calculate such non-GAAP measures in the same manner as we do

The presentation of this financial information is not intended to be considered in isolation of or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP  By disclosing these non-GAAP financial measures FNF believes it offers investors a greater understanding of and an enhanced level of transparency into the means by which the Company's management operates the Company

Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be considered in isolation or as a substitute for GAAP net earnings net earnings attributable to common shareholders net earnings per share or any other measures derived in accordance with GAAP as measures of operating performance or liquidity Further FNF's non-GAAP measures may be calculated differently from similarly titled measures of other companies Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures are provided below

Forward-Looking Statements and Risk Factors

This press release contains forward-looking statements that involve a number of risks and uncertainties Statements that are not historical facts including statements regarding our expectations hopes intentions or strategies regarding the future are forward-looking statements Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management Because such statements are based on expectations as to future financial and operating results and are not statements of fact actual results may differ materially from those projected We undertake no obligation to update any forward-looking statements whether as a result of new information future events or otherwise The risks and uncertainties which forward-looking statements are subject to include but are not limited to: the potential impact of the consummation of the F&G transaction on relationships including with employees suppliers customers and competitors; changes in general economic business political and COVID-19 conditions including changes in the financial markets; weakness or adverse changes in the level of real estate activity which may be caused by among other things high or increasing interest rates a limited supply of mortgage funding or a weak U S economy; our potential inability to find suitable acquisition candidates; our dependence on distributions from our title insurance underwriters as a main source of cash flow; significant competition that F&G and our operating subsidiaries face; compliance with extensive government regulation of our operating subsidiaries; and other risks detailed in the Statement Regarding Forward-Looking Information Risk Factors and other sections of FNF's Form 10-K and other filings with the Securities and Exchange Commission (SEC)

FNF-E

Non-GAAP Measures and Other Information

Title

The table below reconciles pre-tax title earnings to adjusted pre-tax title earnings

Title (continued)

F&G

The table below reconciles net earnings attributable to common shareholders to adjusted net earnings attributable to common shareholders

Adjusted net earnings for the third quarter of 2022 included a $10 million unrealized loss from alternative investments and $5 million of other net expense items  Alternative investments net investment income based on management's long-term expected return of approximately 10% was $83 million

Adjusted net earnings for the third quarter of 2021 included a $108 million unrealized gain from alternative investments and $27 million of CLO redemption gains and other income  Alternative investments net investment income based on management's long-term expected return of approximately 10% was $49 million

Adjusted net earnings for the nine months ended September 30 2022 included a $66 million unrealized gain from alternative investments $42 million income from actuarial assumption updates and other changes in reserves and $20 million of CLO redemption gains and other income; partially offset by ($47) million income tax valuation allowance and other expense items  Alternative investments net investment income based on management's long-term expected return of approximately 10% was $174 million

Adjusted net earnings for the nine months ended September 30 2021 included a $241 million unrealized gain from alternative investments $36 million of CLO redemption gains and other income $17 million income from net favorable mortality experience and other reserve changes and $8 million income from actuarial intangibles unlocking  Alternative investments net investment income based on management's long-term expected return of approximately 10% was $103 million

F&G (continued)

The tables below provide a comparison of adjusted net earnings by quarter per the new definition which no longer includes the alternative investment yield adjustment to normalize alternative investment portfolio returns versus results previously reported for the F&G segment in the 9 quarters subsequent to the acquisition by FNF on June 1 2020:

F&G (continued)

The table below provides a summary of sales highlights

Footnotes:

1. Non-GAAP financial measure See the Non-GAAP Measures section below for additional information
2. Institutional sales include funding agreements (FABN/FHLB) and pension risk transfer

DEFINITIONS  

The following represents the definitions of non-GAAP measures used by the Company

Adjusted Net Earnings Attributable to Common Shareholders (Adjusted Net Earnings)

Adjusted net earnings is a non-GAAP economic measure we use to evaluate financial performance each period Adjusted net earnings is calculated by adjusting net earnings (loss) from continuing operations attributable to common shareholders to eliminate:

1.  
1. Recognized (gains) and losses net: the impact of net investment gains/losses including changes in allowance for expected credit losses and other than temporary impairment (OTTI) losses recognized in operations; and the effect of changes in fair value of the reinsurance related embedded derivative;
2. Indexed product related derivatives: the impacts related to changes in the fair value including both realized and unrealized gains and losses of index product related derivatives and embedded derivatives net of hedging cost;
3. Purchase price amortization: the impacts related to the amortization of certain intangibles (internally developed software trademarks and value of distribution asset (VODA)) recognized as a result of acquisition activities;
4. Transaction costs: the impacts related to acquisition integration and merger related items; 
5. Certain income tax adjustments: the impacts related to unusual tax items that do not reflect our core operating performance such as the establishment or reversal of significant deferred tax asset valuation allowances in our Title and Corporate and Other segments;
6. Other non-recurring infrequent or unusual items:  Management excludes certain items determined to be non-recurring infrequent or unusual from adjusted net earnings when incurred if it is determined these expenses are not a reflection of the core business and when the nature of the item is such that it is not reasonably likely to recur within two years and/or there was not a similar item in the preceding two years;
7. Amortization of actuarial intangibles and SOP 03-1 reserve offset: The intangibles amortization and SOP 03-1 change offsets related to the above mentioned adjustments; and
8. Income taxes: the income tax impact related to the above mentioned adjustments is measured using an effective tax rate as appropriate by tax jurisdiction

While these adjustments are an integral part of the overall performance of F&G market conditions and/or the non-operating nature of these items can overshadow the underlying performance of the core business Accordingly management considers this to be a useful measure internally and to investors and analysts in analyzing the trends of our operations Adjusted net earnings should not be used as a substitute for net earnings (loss) However we believe the adjustments made to net earnings (loss) in order to derive adjusted net earnings provide an understanding of our overall results of operations

Assets Under Management (AUM)

AUM is calculated as the sum of:

1.  
1. total invested assets at amortized cost excluding derivatives net of reinsurance qualifying for risk transfer in accordance with GAAP;
2. related party loans and investments;
3. accrued investment income;
4. the net payable/receivable for the purchase/sale of investments and
5. cash and cash equivalents excluding derivative collateral at the beginning of the period and the end of each month in the period divided by the total number of months in the period plus one

Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment

Average Assets Under Management (AAUM)

AAUM is calculated as AUM at the beginning of the period and the end of each month in the period divided by the total number of months in the period plus one

Management considers this non-GAAP financial measure to be useful internally and to investors and analysts when assessing the rate of return on assets available for reinvestment

Sales 

Annuity IUL funding agreement and non-life contingent PRT sales are not derived from any specific GAAP income statement accounts or line items and should not be viewed as a substitute for any financial measure determined in accordance with GAAP  Sales from these products are recorded as deposit liabilities (ie contractholder funds) within the Company's consolidated financial statements in accordance with GAAP Life contingent PRT sales are recorded as premiums in revenues within the consolidated financial statements Management believes that presentation of sales as measured for management purposes enhances the understanding of our business and helps depict longer term trends that may not be apparent in the results of operations due to the timing of sales and revenue recognition