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Fidelity National (FNF) Q3 Earnings & Revenues Lag, Shares Up

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Shares of Fidelity National Financial, Inc. (FNF - Free Report) gained 2.9% in the last two trading sessions despite missing estimates. The bullish sentiment likely reflected investors’ confidence in the title insurer's inherent strength.

FNF reported third-quarter 2022 operating income per share of $1.07, which missed the Zacks Consensus Estimate by 30.5%.

The bottom line decreased 49.5% on a year-over-year basis due to Title’s significant decline in refinance volume, representing trough-level activity and moderating residential purchase volume. This was partially offset by a higher average fee per file, a healthy volume of commercial orders closed and lower earnings from F&G.

Behind the Headlines

Operating revenues decreased 17.5% year over year to $3.2 billion in the quarter, attributable to lower title and escrow revenues, F&G revenues as well as lower interest and investment income. The top line missed the Zacks Consensus Estimate by 0.3%.

Interest and investment income of $411 million decreased 19.1% year over year.

Total expenses decreased 5.7% year over year to $2.8 billion due to lower personnel costs, agent commissions, other operating expenses, depreciation and amortization, claims loss expense and interest expenses.

Segment Results

Total revenues at Title plunged 20.7% year over year to $2.3 billion. While direct title premiums fell 23.2% to $688 million in the quarter, agency title premiums decreased 26.7% year over year to $1 billion. Escrow, title-related and other fees of $623 million declined 26.6% in the quarter under review.

Adjusted pre-tax title margin came in at 17.1%, which contracted 460 basis points (bps) year over year due to a fall in refinance volumes.

Purchase orders opened decreased 22% on a daily basis, and purchase orders closed decreased 23%. Refinance orders opened fell 75% on a daily basis and refinance orders closed decreased 76%. Commercial orders opened declined 18% and commercial orders closed decreased 12% The total fee per file of $3,621 in the third quarter increased 40% year over year.

Total revenues at F&G were $2.9 billion during the quarter, down 6.6% year over year, as record retail sales were offset by lower institutional sales. Total retail sales of $2.3 million increased 45%. Institutional sales of $620 million were down 59% year over year.

Average assets under management (AUM) amounted to $42 billion at quarter-end, up 21.1% year over year, driven by net new business asset flow.

Financial Update

Fidelity National exited the third quarter of 2022 with a cash and investment portfolio of $45.3 billion, down 3.9% from the 2021-end level. As of Sep 30, 2022, notes payable of $2.7 billion declined 13.9% from the figure at 2021 end.

Stockholders’ equity of $5.7 billion decreased 39.3% from the figure as of Dec 31, 2021.

In the third quarter, Fidelity National bought back 5.3 million shares worth $205 million and paid out $120 million in dividends.

Zacks Rank

Fidelity National currently carries a Zacks Rank #5 (Strong Sell).

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 third-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) missed the mark.

Travelers’ third-quarter 2022 core income of $2.20 per share beat the Zacks Consensus Estimate by 24.3% but decreased 15.4% year over year.  Total revenues increased 6.8% from the year-ago quarter to $9.4 billion and beat the Zacks Consensus Estimate by 2.5%.

TRV’s net written premiums increased 110% year over year to $9.2 billion. Underwriting gain of $115 million increased 53.3% year over year in the reported quarter. The combined ratio improved 40 bps year over year to 98.2.

RLI’s third-quarter 2022 operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter. Operating revenues were $312.7 million, up 15.3% year over year but missed the Zacks Consensus Estimate by 1.3%.

RLI’s gross written premiums increased 13.3% year over year to $403.8 million. Underwriting income of $8.8 million decreased 35.8% while the combined ratio deteriorated 240 bps year over year to 97.

Progressive’s earnings per share of 49 cents missed the Zacks Consensus Estimate of $1.24 as well as our estimate of $1.38. The bottom line, however, improved more than threefold from 14 cents earned in the year-ago quarter.

PGR’s net written premiums were $13 billion in the quarter, up 5% from $11.7 billion a year ago but missed our estimate of $14.2 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 120 bps from the prior-year quarter’s level to 99.2.

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