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Fidelity National (FNF) Rises After Q2 Earnings Top Estimates

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Shares of Fidelity National Financial, Inc. (FNF - Free Report) gained 1.5% in the last two trading sessions as the title insurer reported second-quarter 2022 operating income per share of $1.90, which outpaced the Zacks Consensus Estimate by 16.6%.

The bottom line however decreased 7.8% on a year-over-year basis due to Title’s significant decrease in refinance volume, partially offset by higher average fee per file, a steady volume of commercial orders closed and higher earnings from F&G.

Fidelity National Financial, Inc. Price, Consensus and EPS Surprise


Behind the Headlines

Operating revenues decreased 31.7% year over year to $2.6 billion in the quarter, attributable to lower title and escrow revenues, F&G revenues coupled with higher interest and investment income. The top line missed the Zacks Consensus Estimate by 20.2%.

Interest and investment income of $463 million decreased 9.9% year over year.

Total expenses decreased 33.4% year over year to $2.1 billion due to lower personnel costs, agent commissions, other operating expenses, depreciation and amortization, claims loss expense and interest expense.

Segment Results

Total revenues at Title dropped 13.3% year over year to $2.6 billion. While direct title premiums dropped 5% year over year to $859 million in the quarter, agency title premiums decreased 4.2% year over year to $1.2 billion. Escrow, title-related and other fees of $706 million dropped 15.9% year over year in the quarter under review.

This segment benefited from a decline in refinance volume, partially offset by a higher average fee per file and steady volume of commercial orders closed.

Adjusted pre-tax title margin came in at 18.9%, which contracted 380 basis points (bps) year over year due to a contraction in refinance volumes.

On a daily basis, purchase orders opened decreased 12% and purchase orders closed decreased 11%. Refinance orders opened decreased 67% and refinance orders closed decreased 68%. Commercial orders opened decreased 7% and commercial orders closed decreased 6% year over year. The total fee per file of $3,557 for the second quarter increased 46% year over year.

Total revenues at F&G were $3.1 million during the quarter, up 15% year over year, reflecting the execution of F&G's diversified growth strategy and a disciplined approach to pricing. Total retail annuity sales of $2.2 million increased 34% year over year. Institutional sales of $0.9 billion were down 10% year over year.

Average assets under management (AUM) amounted to $39.3 billion at quarter-end, up 29% year over year, driven by net new business asset flow.

Financial Update

Fidelity National exited the second quarter of 2022 with a cash and investment portfolio of $45.4 billion, down 3.7% from the 2021-end level. As of Jun 30, 2022, notes payable of $3.1 billion declined 0.6% from the figure at 2021 end.

Stockholders’ equity of $6.7 billion decreased 28.8% from the figure as of Dec 31, 2021.

In the second quarter of 2022, Fidelity National bought back 4.3 shares worth $172 million and paid out $122 million in dividends.

Partial Spin-off of F&G

On Mar 16, 2022, FNF announced a planned transaction to distribute 15% ownership of F&G to FNF shareholders. The transaction is expected to close early in the fourth quarter of 2022, subject to customary approvals. FNF executed on the conversion of the $400 million intercompany term loan into F&G equity during the reported quarter.

Zacks Rank

Fidelity National currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Property & Casualty Insurers

Of the insurance industry players that have reported second-quarter results so far, The Travelers Companies (TRV - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) met the mark.

Travelers’ core income of $2.57 per share beat the Zacks Consensus Estimate by 28.5% but decreased 26% year over year. Total revenues increased 7% year over year, primarily due to higher premiums, and beat the consensus estimate by 1.8%. Net written premiums increased 11%, driven by strong retention rates and positive renewal premium changes across all the segments. Underwriting gain of $113 million decreased 65% year over year in the reported quarter.  

Travelers’ combined ratio deteriorated 300 bps year over year to 98.3 due to higher catastrophe losses and a higher underlying combined ratio.

RLI’s operating earnings of $1.49 per share beat the Zacks Consensus Estimate by 6.1% and improved 36.7% from the prior-year quarter. Operating revenues were $301.3 million, up 16.9% year over year, driven by 17.3% higher net premiums earned and 10.5% higher net investment income. The top line beat the Zacks Consensus Estimate of $276 million by 0.9%.

RLI’s underwriting income of $56 million increased 53%, primarily due to the strong performance of the Property and Surety segments. The combined ratio improved 460 bps year over year to 80.2.

Progressive’s earnings per share of 95 cents came in line with the Zacks Consensus Estimate. The bottom line declined 37.1% year over year. Progressive’s net premiums written were $12.4 billion in the quarter, up 8% from $11.7 billion a year ago.

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