Q4 2020 Fidelity National Financial Inc Earnings Call
Good morning, ladies and gentlemen, and welcome to the F and F 'twenty and 'twenty fourth quarter earnings call.
During todays presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions to follow at that time as the.
A reminder of this conference call is being recorded I would now like to turn the call over to Jamie Lillis Investor Relations for <unk>. Please go ahead, sir thank.
Thank you operator, and good morning, everyone. Thank you for joining our fourth quarter 2000, and 'twenty earnings Conference call. Joining me today is our CEO, Randy Quirk, President, Mike Nolan CFO, Tony Park, and F and G CEO, Chris Blunt.
I'll begin today with a brief strategic overview from Randy Mike will review of the title business and Chris will review F and G and Tony will finish with the review of the financial highlights. We'll then open the call for your questions and finish with some concluding remarks from Randy.
But before we begin I would like to remind you that this conference call may contain forward looking statements that involve a number of risks and uncertainties in particular of the COVID-19 pandemic. There is of significant uncertainty about the duration and extent of the impact of this pandemic.
Statements that are not historical facts, including statements about 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 the assumptions made by and information currently available to management at the time of this call.
And that's just such statements are based on expectations as the 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.
Risks and uncertainties, which forward looking statements are subject to include but are not limited to the risks and other factors detailed in our press release dated yesterday and in the statement regarding forward looking information risk factors and other sections of the company's form 10-K, and other filings with the SEC.
This conference call will be available for replay via webcast and or at our website at FNF dot com and it.
It will also be available through phone replay beginning at three P M Eastern time today and.
For the replay number is 84451 to two nine to one and the access code is 1371 and 558 and nine.
Let me now turn the call over to our CEO Randy.
Thank you Jamie.
And would like to begin by thanking all of our entire team for their incredible efforts as we navigated through a challenging environment. This past year, while delivering record results for both the fourth quarter and the full year, 'twenty and 'twenty and our title business.
Our primary focus has been and continues to be the health and wellbeing of our employees, while maintaining our business continuity and ensuring the needs of our customers are consistently met.
But the fourth quarter, we generated record adjusted pre tax title earnings of $624 million compared with $355 million in the year ago quarter, and a record 22, 7% adjusted pretax title margin compared with 16, 3% and the fourth quarter of 2019.
Well, we are very pleased with our strong financial results. We also made significant headway on our technology investments and our title business, having the recently announced book the inherent platform and subsequently closed in here Mike.
Mike will go into more detail on this but as we continue to drive the innovation of the title of industry. What do you believe are significant national footprint will prove to be a real plush as further adoption of our client facing and title automation technology expands our competitive advantage.
Turning to our acquisition of F. G of Holdings F and she continues to execute on its growth strategy.
Generating retail sales growth of over 40% of the fourth quarter.
The credit rating upgrade that F and G has enjoyed as a result of of the acquisition by FNF has opened the additional large market opportunities.
F and G is gaining momentum and the newly entered bank and broker dealer channel and channel generating $500 million of channel sales channel to our launch on July 1st.
Additional distribution channels, including institutional products will continue to be of strategic area of focus for F and G in 'twenty and 'twenty, one and <unk>.
And the pension risk transfer market Chris.
Chris will go into more detail on the F and G as fourth quarter results shortly.
Looking forward our priority continues to be focused on long term value creation for our shareholders through our diligent capital allocation program, while also remaining and focused on investing and our business just as true sustained growth.
Last week, we announced the quarterly cash dividend of 36 cents per share reflected and the fourth quarter dividend increase of 9%.
Additionally, in October we announced a 12 months $500 million share repurchase target.
And since that announcement, we have repurchased three 8 million shares for approximately $140 million and for 'twenty and 'twenty in total we repurchased seven 5 million shares for approximately $244 million.
Let me now turn the call over to Mike Nolan to discuss the title insurance business and more detail.
Thank you Randy as Randy mentioned, the fourth quarter was a record for adjusted pre tax title earnings and adjusted pretax title margin as we continued to benefit from low interest rates driving sustained momentum and refinance volumes strong purchase demand and the continued rebound and commercial real estate activity.
For the fourth quarter, we generated adjusted pretax title earnings of 624 million, a 76% increase over the fourth quarter of 2019.
Our adjusted pretax title margin was 22, 7%, a 640 basis point increase over the prior year quarter.
We had a 40% increase and direct orders closed, 48% increase and direct orders closed driven by and 86% increase and daily refinance orders closed and 18% increase and daily purchase order of closed and a 1% increase and total commercial orders closed.
Total commercial revenue was 322 million compared with the year ago quarter of $321 million due to the 1% increase and closed orders.
Total commercial fee per file was flat compared to the year ago quarter.
For the fourth quarter total orders opened averaged 11006 hundred per day.
With October and 11800 <unk>.
November and 11900 and December at 11000.
For January total orders opened were over 13004 hundred per day and through the first three weeks of February or over the 13005 hundred per day.
As we continue to see strong demand and purchase activity and continued strength and the refinance market.
Daily purchase orders opened were up 14% and the quarter versus the prior year.
For January daily purchase orders opened were up 15% versus the prior year and through the first three weeks of February were up 4% versus the prior year.
Refinance orders opened increased by 90% on a daily basis versus the fourth quarter of 2019.
For January daily refinance orders opened were up 96% versus the prior year and through the first three weeks of February were up 40% versus the prior year.
Lastly, total commercial orders opened increased by 3% over the fourth quarter of 2019.
Commercial open orders per day remained strong with the fourth quarter flat sequentially from the third quarter.
For January total commercial orders opened per day were up 5% over January of 'twenty, 'twenty and were up 2% through the first three weeks of February versus the prior year.
We remain encouraged by the order volumes, we have seen the last two quarters is open orders have rebounded across multiple geographies to the levels. We saw before the outbreak of the pandemic.
As Randy briefly touched on we made significant progress on our technology investments.
We have a long history of investing in and developing technology from title automation, the data collection and order processing.
And here platform is focused on transforming the real estate transaction experience.
By improving the safety and simple and simplicity needed to start interact the progress of of real estate transaction.
As well as node of rising and signing the necessary documents.
And here it works with our network of local trusted escrow and settlement of professionals nationwide.
Leveraging the industry's largest footprint and the latest cloud based technology.
In January we launched clothes and here are guided digital closing experience for consumers and finalizing their real estate transactions.
For many of the closing of the transaction is the most overwhelming part of the process of buying a refinancing of home.
Closing here based upon the digital tools instead of the traditional paper allows our staff of closing professionals to deliver of truly digital intelligent and interacted guided approach to closing.
Today, the entire suite of and here solutions are currently undergoing deployment throughout FNF family of companies and this will continue through out 2021.
To conclude we are committed to driving innovation and the title of industry and to investing in technology for the benefit of all of our customers employees and shareholders.
Let me now turn the call over to Chris Blunt to review <unk> fourth quarter highlights.
Great. Thanks, Mike the fourth quarter capped off another record year of growth that up and G building on the momentum we saw and the third quarter, we achieved record sales of fixed indexed annuities or F by A's and the fourth quarter, while maintaining our pricing discipline total retail annuity sales of $1 3 billion and the <unk>.
Fourth quarter were up 42% from the prior year and core FIA sales were $947 million up 19% from the prior year. We continue to see significant growth ahead of us as we take further market share and our primary independent agent channel and gain traction in new channels.
As we previously shared post the FNF acquisition, we successfully launched into the financial institutions Channel and July <unk>.
And then we've generated over $500 million and new annuity sales and the channel to date.
Including 322 million and the fourth quarter alone.
These phenomenal sales results of surpassed our original expectations and we continue to get very positive feedback from our new partners on our quality of service as well.
With the solid sales results, we grew average assets under management or AA U M 228 billion driven by approximately $900 million of net new business flows in the fourth quarter.
Now despite the decline in interest rates. This year are spread results of remained in line with historical trends demonstrating our continued pricing discipline and active in force management.
Total product and net investment spread was 255 basis points and the fourth quarter and FY, a net investment spread was 302 basis points.
Adjusted net earnings for the fourth quarter were $128 million strong earnings were driven by steady spread results and a favorable tax benefit recognized following the FNF acquisition.
Net favorable items in the period were $68 million, primarily as a result of this tax benefit adjusted net earnings. Excluding notable items were $60 million down from $64 million and the third quarter due to $4 million of higher strategic spend due to our faster than expected launch into new channels.
Annals.
Next I want to quickly touch on the topic of mortality, which many of the life and annuity industry of monitoring and the current pandemic.
In contrast of many of our peers F and G has minimal exposure to traditional life products that only 6% of GAAP reserves after reinsurance.
In addition, mortality and our in force life block has been within our pricing expectations. Despite the pandemic environment.
Most importantly, our investment portfolio continues to perform well and credit impairments for the year were less than our product pricing assumptions.
In addition, as of year end and the portfolio's net unrealized gain position grew to $2 billion, a sharp reversal from the net unrealized loss position experienced early in 2020 due to the pandemic.
Moreover, we came into 'twenty and 'twenty with the strong balance sheet, which allowed us to effectively weather the volatility and economic impacts of the pandemic, while still growing the business and.
And as expected we ended the year with an estimated RBC ratio of over 400% for our primary insurance operating subsidiary.
We also completed the sale of our offshore of third party reinsurance business <unk> two of speed of holdings in December proceeds from the sale will be used to fund future growth opportunities for F and G. And we also entered into a mutually beneficial flow reinsurance agreement with the speed of our Maiga products.
Beginning in the first quarter of 2021.
So in summary, our sales are growing nicely as we diversify into multiple channels. Following the FNF acquisition, we continue to consistently generate stable net investment spread and earnings and we remain confident and our investment portfolio with that I will now turn the call over to Tony Park to review <unk> fourth quarter financial Hi.
Life.
Thank you, Chris we generated approximately $3 8 billion and total revenue and the fourth quarter with the title segment, producing approximately $3 billion F&D, producing $667 million and the corporate segment generating $60 million.
Fourth quarter net earnings were $801 million, which includes net recognized gains of $573 million versus net recognized gains of $131 million and the fourth quarter of 2019.
The net recognized gains in each period are primarily due to mark to market accounting treatment of equity and preferred stock securities whether the securities were disposed of in the quarter were continued to be held and our investment portfolio.
Excluding net recognized gains of our total revenue was $3 2 billion as compared with $2 $2 billion and the fourth quarter of 2019.
Adjusted net earnings from continuing operations were $588 million or $2.01 per diluted share.
The title segment contributed $498 million F and G contributed $128 million and the corporate and other segment had an adjusted net loss of $38 million.
Excluding net recognized gains of $290 million, our title segment generated $2 8 billion and total revenue for the fourth quarter compared with $2 $2 billion and the fourth quarter of 2019.
Direct premiums increased by 29% versus the fourth quarter of 2019 agents.
Agency revenue grew by 33% and escrow title related and other fees increased by 21% versus the prior year per.
Personnel costs increased by 15% and other operating expenses decreased by 7%.
All and the title business generated a 22, 7% adjusted pretax title margin representing.
Representing a 640 basis point increase versus the fourth quarter of 2019.
Interest income and the title and corporate segments of $32 million declined $23 million as compared with the prior year quarter due to the reduction of short term interest rates on our corporate cash balances and our 10 31 exchange business.
FNF debt outstanding was $2 7 billion on December 31.
Four of debt to total capital ratio of 24, 2%.
Our title claims paid of $54 million were $33 million lower than our provision rate of $87 million for the fourth quarter.
The carried title reserve for claim losses is currently $62 million or four 1% above the actuary central estimate.
We continue to provide for title claims at four five per cent of total title premiums.
Finally, our title and corporate investment portfolio totaled $5 7 billion at December 31.
Included in the $5 7 billion are fixed maturity and preferred securities of $2 $5 billion with an average duration of three years and and average rating of a two.
Equity securities of $900 million.
Short term and other investments of $500 million and cash of $1 $8 billion.
We ended the quarter with just under $1 billion and cash and short term liquid investments at the holding company level.
Let me now turn the call back to our operator to allow for any questions.
Thank you we will now be conducting a question and answer session. If you'd like to ask you. A question you May press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment and may be necessary to pick up of your handset.
Before pressing the Star T.
Our first question comes from the line of Jack and I. Thank all with S. G. Please proceed with your question.
Hi, good morning, everybody or good afternoon, actually and my apologies.
The question of the day and looking at the market looking at the looking at the 10 year yield.
The refi numbers.
It would seem to be.
Much more resilient and when people think and looking at the January and February of data you gave us the January sort of the tough comp a year ago, because of where it's kind of moved higher but the February number of up 40.
Can you just touch on how you feel about the resiliency of refi is it is it are the windows and finally getting to the backlog as it seems like there's just a lot more there than.
Moving rates would suggest just from your from your observations on the on the open order side.
Sure Jack it's Mike and you're right the year starting out at very elevated levels. We're opening in January and over 8000, Refis of day, which are higher than pretty.
Pretty much every month, we had last year.
<unk> said that as rates move up.
The refis will be impacted.
But it just really depends how much they move up and if you look at data for example that comes out of Black Knight. They measure of this pretty carefully and and their December report they had estimated the.
The size of the refi market the potential size of interest rates just below two 9% was close to 17 million eligible people and when.
The 50 basis point movement up and not saying that will happen, but if it did they say that drops down to just under $10 million, so pretty good falloff, but still a lot of people that can refi. So I think our view is that the refis will still be pretty strong in 'twenty, one maybe not as strong as is true.
Two is the 'twenty, but certainly stronger than we probably had in quite a number of years. So hopefully that addresses the question, yes, and all it does and it's hard it's hard ultimately save it's just.
It seems to be hanging in the hanging there are much stronger than anybody and sort of thought even a year ago.
And you know the close of order side, you definitely shouldn't you be taking some market share and.
And I'm curious if you can.
What do you think some of the drivers there are if you can parse it out between sort of centralized refi versus purchase.
Where do you think youre, gaining more share and why.
I think it's it's Mike I think it's a little tough to to to nail that down.
Because we don't get market share numbers specific to segments.
So you really just look at the.
The real market share numbers tend to be more of the national level and on premium dollars. So I think it's a little a little tough to answer but.
I think I think service link has certainly seen a lot of growth and their centralized refi channel.
We've seen a lot of it and our.
Our finance business on the agency side that works with title agents on Refis, So, but I can't really say, how it relates to the overall market, yes and Mike.
This is Randy I might just add also we are of very a very large network very distributed network and we also have the benefit and some of their major metropolitan areas, particularly.
And also in the west the <unk>.
<unk> of our multiple brands. So we get we get with our sales teams, one two or three or four and some cases five.
Bites at the at the Apple and given markets and were pretty aggressive in that regard. So I think that's somewhat plays into a market share gain along with the when do we see an opportunity for acquisitions.
And acquisitions and we take advantage of that also in the.
Year in and year out we are we add.
Agency operations, and and acquire agency operations into our direct.
The direct side and that accounts also for.
Kind of a gradual but continue and market share growth.
Got it Okay, and then if I could sneak one more and not so much Christophe book with them.
Several question and also.
How do we think about revenue contribution and 2021 I mean, obviously.
And the bank channel is new and growing but you also mentioned some.
And some share take in the independent and I hadn't really thought about and that is a real growth driver.
Going forward you didn't see.
Any sense you can give us in terms of modeling around the how big the F and G contribution can be and 'twenty one.
Yes to be really clear the independent agent channel remains our largest channel and I think we'll for quite some time and we're quite optimistic there as well we've seen some competitors pull back for different reasons. So we continue.
To add market share we had growth in that channel last year, which I think put us in a very small peer group and then layered on top of that pretty explosive growth in banks and broker dealers and then the next channel of opportunity for US is the pension risk transfer business. So we're in a position now where we can be.
Bidding on.
Pension buyout the cases as well so yeah definitely don't want to give the impression it's still absolute core channel our relationships are as good as they've ever been and we think we can continue to take share.
Thank you.
Our next question comes from the line of John Campbell with Stephens. Please proceed with your question.
Hey, guys. Good morning, Congrats on a great quarter.
Thanks.
Hello.
I think of it can be difficult obviously for you guys security of 20% title pretax margin I don't think anybody is really forecasting that at this point, but.
You guys have you know theres a lot of moving parts of the business you don't have a crystal ball, obviously on the macro side, but any sense for how margins might fair and 2021.
I guess, if the macro outlook and your head at least is kind of plays out I mean is it more like a mid teens type margin like 2018, and 2019 or do you think you have got enough sustainable things in place to keep it closer to high teens.
John It's Mike maybe I'll take that and two chunks I think first as we think about the first quarter.
We are very positive on how margins will play out we did of 14 four and the first quarter of last year I think we've got a good shot to <unk>.
The outperform that just given what.
What we're seeing currently with the resale and refi activity, we talked about some of the numbers.
Theres any any wildcard and that's probably too strong of a word you never know how commercial is going to play out quarter to quarter. The open orders are extremely good.
But but you don't know always won the the transaction will close so good chance outperformed the first quarter of last year full year.
It's a pretty tough comp.
1919, six I think it was.
And again, I think that'll come down too.
A couple of things, we kind of think purchase will outperform for the full year that seems to be of pretty consensus view at this point Commercial's got a got a good opportunity I think to come out better than 20, and then the wildcard there John as you know.
And what happens with Refis, particularly in the back half of the year if rates move up I think there'll be some impact on refis and so that that could be the thing that pushes back on margins just a little bit.
And John maybe just this is Tony just chime in and for a moment.
As a reminder, and I think you know this and probably all of the listeners do but we're talking about the resiliency of refi, but it's important to keep in mind that the fee per file and refi is probably a third or so of what we get on a purchase transaction and so you know clearly a falloff and refi that's offset by.
Even a third offset by an.
And increase in purchases is equal revenue dollars and so I think that's important to consider as well.
Yes, I think that makes sense.
And all of the F&B business I guess I'll just say this first I mean, I think that those guys have done a phenomenal job.
Since you guys picked it up and congrats the Chris and the team.
And for whatever reason investors, you're sort of refusing to give kind of any credit for it.
And that remains the case for you guys. How do you insert yourself there to create more value I know you guys kind of mentioned something last call, but are the things that youre exploring or something that you might be looking to do the kind of insert yourself there.
Yes. This is Tony I did mentioned on the last call and all I said and it was the hypothetical and some people read more into those and then.
And then others, but what I said was you know our board has a long history of taking action. When we you know arent fully appreciated but at the same time their patient.
And we're very pleased or they're very pleased I won't speak for them, but theyre very pleased.
With the progress that we have at F and G of the sales growth and the the momentum and the opportunities that are there and and I think that as.
And as long as those continue to play out we'll just see how things go we we've owned it since I guess and June June 1st and so it's you know it's only been <unk>.
Seven months.
To this point and so I think they're willing to be patient and to see how see how this goes and ultimately it'll either you know it'll either benefit us and all of our shareholders or it won't but I think it's.
Pretty early to tell and in the meantime, we will continue to allocate capital, whether it's whether it's and buybacks if the stock's under pressure or increasing our dividend or whatever else. We might do the the title company is generating a lot of cash.
Yes, it makes sense, if I could squeeze and one more for Chris.
The $60 million you called out as a favorable tax impact post transaction.
And where you're calling that out as of one time event or is that a is that of go forward benefits for you guys. Yes.
Maybe I'll take that Chris you want it.
Oh, the bad good Tony.
Yes.
John It's basically a one time, but.
It wasn't carved out of a O I as of one time or even though it sort of is because its tax planning and a valuation allowance adjustments and those of typically or I guess historically in the in the life space not been carved out of AOR. So we didn't want wanna be inconsistent with that.
But the reality is there was of $37 million tax benefit related to the sale of F and G re which had a tax loss, even though it wasn't a GAAP loss and another of roughly $40 million of benefits from an F and G restructuring so about $77 million in total the benefits.
Our adjusted operating earnings.
And and Thats really a one time deal I would expect the tax rate.
And 2021 to go back to historical numbers of somewhere around 24% on a consolidated basis.
Okay.
The thing I would add to that is we did try to call out we had some core expenses, but extraordinary as we've had an opportunity to expand our distribution and faster than we thought and that obviously has some setup costs and both the bank broker dealer as well as set up of our PRT business that we would consider more one time as we go forward.
So you know the.
And if you kind of foot to shore is probably of that 64 million and then.
Expect growing throughout the year as the asset base is higher and some of the pricing actions, we took last year.
The feed into the portfolio.
Okay makes sense, thanks, guys. Thanks Shar.
Our next question comes from the line of Mark Devries with Barclays. Please proceed with your question.
Yeah. Thanks, Tony.
The the implied payout from the combination of the dividend and and the repurchase authorization is not that far off from kind of what earnings power of them and a few years ago, but you guys earned almost that much this quarter and even out and kind of a more continuing operating basis covered almost two thirds of that.
Should we think that if you are able to sustain this kind of level of robust earnings power of that either there could be upside later in the year to the repurchase authorization are you thinking about.
And just accumulating and dry powder or the or you're actually seeing some opportunities to deploy the whether its the F and G or or through M&A.
Yes, it's a good question Mark and to your point, Yeah, we generated a lot of cash and 2020 and in fact 2019 was the strong cash flow generation as well through our title company.
In the fourth quarter, we upstream to about $400 million in cash to the parent holding company. We spent about $350 million of that with the combination of stockholder dividend of about 110 million and about $10 million and interest expense of $140 million and share buybacks.
And roughly $100 million, mostly and taxes because it was a big tax quarter. So we ended the quarter pretty close to where we started at $1 billion.
As we look ahead I wouldn't be at all surprised if we generated another $1 billion or so that we could upstream to the parent.
Some of Thats clearly spoken for the dividend will cost us a little over $400 million and there is still.
$360 million left on the $500 million buyback, we announced and the fourth quarter of last year, we bought back $143 60 remaining I fully would intend to execute upon that and then like $80 million and interest expense and so we probably will probably gain a little bit of.
And our cash position, but you know mostly spend what we make.
So your question's a good one what might we do with roughly a billion or of $1 two and dry powder. So to speak the the board does like to look at the dividend annually and and likes to increase that.
Call it and modestly.
Over time, but from there I wouldn't be surprised, especially if our shares are under pressure to see us increase the buyback, we still have and authorization available to buy more shares or the board could always revisit that and and increase that Randy mentioned title agent acquisitions I think those are.
We're always on the table and we'll continue to buy those we don't announce every single deal we do but we like to spend of 100 200 $300 million on agency acquisitions over the course of the year.
And then maybe the real question is what kind of.
Growth.
Does F and G experience organically in 2021, and beyond and and how much capital is F and App and the board willing to put in that F and G does have.
Some of some ability to borrow locally under there.
Under their current rating situation there are 16% debt to cap now they can go to 25%. So there's certainly capacity to borrow either externally or even from FNF and.
And then you know FNF could certainly.
Contribute to capital.
F and G. If.
If the growth prospects continue to look the the way they look or F and G could look to third party equity or maybe even reinsurance arrangements I know it was a long answer but.
But hopefully it got to your question.
Yes, it does thanks Tony.
And then a question for Chris.
Clearly, there's a view that low rates is bad for your business. Although it's it's kind of hard to see that as you'd alluded to your spreads of kind of held up near historic levels, but could you just talk us through at a high level you know what impact you believe low rates have had on your business and and what impact you might see if rates continue.
And you kind of their study and March higher here.
Sure. So I think we have to differentiate between short term and long term rates. So about 15% of our portfolio is sitting and floating rate.
Securities. So it's a little over $4 billion of assets when LIBOR dropped from you know of.
I think it was 118 basis points overnight, we just feel that instantly.
Similarly, we would feel it instantly on the upside in terms of earnings now I don't think anyone is projecting short term rates to move up higher in the near term here, but that's clearly a tailwind for us as rates rise I would say unless the LIBOR goes negative.
We've probably felt that pain and it's much more upside than downside from here with longer term rates. It just takes time to move into the portfolio. So yeah to your point, it's frustrating I hear that and I think it comes from good historical reason as you've seen of companies that are life insurers put up reserves have a tough time with low rate.
Environment, that's not who we are we've shown that with the tenure at 40 basis points, we were making our our spread targets. So we just need of steep yield curve we need to.
Yield advantage over Cds, which is generally no.
Hard to do and most environments and we can continue to grow sales and earn a healthy spread what youre seeing right now.
While the treasuries of and up.
Spreads have come in.
The net net for us.
And corporate.
Half of them.
Okay.
Okay, great. Thank you.
The investment overtime and I hope that helps yes. It does thank you.
As a reminder, it is star one.
To ask the question. Our next question comes from the line of Bose George with K BW. Please proceed with your question.
Hey, guys good afternoon.
And actually the first one is just on F and G and I think this is sort.
The asked earlier, but just can you just remind us what the.
The good way to think about sort of the operating run rate for earnings.
Of the $2 million pretax this quarter of good run rate and then add the growth of that.
And then any true.
And so the tax so should we just use the normalized tax rate for that also going forward.
Bose. This is Tony maybe I will start Chris can certainly chime in.
We had $60 million and what I would call core earnings and the fourth quarter, which was impacted by some.
Unusual spend on and really growing or building out the broker dealer channel and and really the growth prospects on the sales side. So that was impacted four of $5 million. So really I would expect as we look to 2021, we're starting and the mid Sixty's and then what.
Expect that that grows each quarter as assets under management grow.
I think we've told you in the past of general rule of thumb is somewhere around 100 basis points of earnings after tax earnings on.
Total assets under management. So that gives you an indication of really what we would expect.
To see going forward hopefully that helps and then on the tax rate I think the overall tax rate guidance is probably somewhere in the 23 and a half 24% on a consolidated basis, maybe a little higher than that of title and a little lower than that and in the F&B business.
Okay perfect. Thanks.
And then actually the switching to the commercial you know the.
Revenues that were pretty much back of 14 19, you noted <unk> looks good.
Do you think there is there some little bit of catch up and there or do you feel like commercial is getting fairly normal lives.
Yes Bose. This is Mike I don't I don't think it's catch up when you look at the performance, particularly on the open side and the in the third and fourth quarters had been sustained at such a high level I think we averaged over 900.
Orders per day on the open side and both quarters, which are.
Really high levels I think prior to 'twenty, we only had one quarter that wherever over 900.
And that tells me, it's not catch up and now we're seeing it really continue into.
And the 2020, I mentioned and the opener that February was running a little bit ahead of last February and the commercial open side and last February as our best opening month ever.
It just it feels it feels just very sustained and we're seeing it again as I said earlier across multiple geographic areas.
Okay, great. Thanks very much.
Thanks.
Our next question is a follow up question from the line of John Campbell with Stephens. Please proceed with your question Hey.
Hey, guys. Thanks, and thanks for squeezing in one more and here I wanted to ask on on DFT and WPS on the two specs really like those investments there obviously were pretty big fans of kanai and.
And so a lot of value and those but I'm curious about some of the moving parts of their obviously there is class a class b shares and there are warrants and whatnot and you could just run us through.
Exactly how many shares are getting with those investments per each.
Yes, John This is Tony I don't know, how many shares although I guess it would be real easy.
To do the math our investment.
And I don't want to get these wrong the pace safe whatever whichever ticker of that is is our 500 million dollar investment and.
And.
And the other one.
Right.
Yes, I'm pretty sure it's public, but I'm not going to say the name of the other one of the $150 million commitment.
And we're in at $10 per share. So you can do the math pretty easily I think it may even come with.
Some warrants.
You will see or what you do see and our earnings not and our adjusted earnings because we call. It we carve it out but in our GAAP earnings and a recognized gains and losses, we have about $175 million gain related to the.
The first one of the Pes safe investment, even though we don't own it yet it's a forward purchase contract, but we had the mark that the market and that the.
And those shares are trading well ahead of our $10 by and and so that's why we have that obviously, that's going to bounce around as the that the share price bounces around but we're obviously very pleased with.
With the expectations of.
Of that.
And and the other one as well and hopefully that helps.
Absolutely I think the WPS is the other one day a light investment.
The.
I guess the follow up to that is how should we be thinking about the liquidity there and I guess the potential time horizon you guys have there I mean are you long term holders and that's something that's more of a short term type of investment.
Yes, I think probably to realize the true value, we're probably in it or at least the expectation going in as it were in it.
As long as the as the.
The other investors are and of course that can change.
The good news is it's liquid.
But it's really for us it's swapping.
One investment for another.
And it's pretty hard to make a lot of yield on our corporate fixed income.
Security right now and.
And these investments historically have been very very.
Good and and so so really it's just taking a and invest amount of 500 million dollar of investment in our insurance subsidiaries and and exchanging that out if you will for and investment like this that could double or triple over time versus you know yield $10 million annually or something like that.
And so I guess the the short answer is we'll we'll wait and see but my expectation is we would probably hold it for a while.
Okay makes sense thanks, guys.
There are no further questions and the queue I'd like to hand, the call back to management for closing remarks.
Thank you we are extremely pleased with our record fourth quarter and full year of title results fueled by our team's ongoing efforts through such unprecedented times, we were able to execute our strategy and deliver superior industry leading performance.
<unk> continues to deliver strong results, while maintaining a solid investment portfolio and we are excited at the prospect of entering and additional distribution channels with new products and the coming year.
Lastly, we will continue to deploy a thoughtful capital allocation plan that is focused on delivering value to our shareholders. We look forward to updating you on our progress during our first quarter call. Thank you.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
Yes.
Okay.