Q3 2021 Fidelity National Financial Inc Earnings Call
[music].
Good morning, ladies and gentlemen, and welcome to the F. N F. 2021 third quarter earnings call. During today's presentation, all parties will be in a listen only mode. Following the presentation. The conference will be opened for questions with instructions will follow at that time as a reminder, this conference call is being recorded I would now like to turn the call over to Jamie Lillis Investor Relations for FNF.
Please go ahead Sir.
Thank you operator, and good morning, everyone. Thank you for joining our third quarter 2021 earnings Conference call. Joining me today is our CEO, Randy Quirk, President, Mike Nolan CFO, Tony Park, and F N G CEO, Chris Blunt.
Begin with a brief strategic overview from Randy Mike will review the title business, Chris will review F N G and Tony will finish the review of the financial highlights.
And 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.
Involved a number of risks and uncertainties in particular of the COVID-19 pandemic. There is 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 assumptions made by and information currently available to management at the time of this call because such statements are based on.
Patients 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 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 at our website at FNF Dot com. It will also be available through phone replay beginning at three P. M. Eastern time today through <unk>.
They November 10th the replay number is 84451 to two nine to one and the access code is 137 to 3639, let me now I'll turn the call over to our CEO Randy.
Yeah.
Thank you Jamie.
We are very pleased with our record setting third quarter results as we increased revenues, 31% to $3.9 billion, which resulted in adjusted net earnings growth of 39% to $604 million Bose as compared with the 2023rd quarter.
Our title business continued to deliver record results, while <unk> expanded into new institutional channels, which position us well for strong asset growth.
Importantly, we grew our holding company cash balance by 25% to $1 $5 billion as compared to $1 2 billion at the end of the second quarter of 2021.
Cash on our balance sheet grew despite our continued activity returning capital to our shareholders through share buybacks.
Accordingly dividend.
As Tony will discuss in more detail the cash growth was delivered primarily through organic business results.
During the quarter, we took advantage of exceptional interest rates and issued $450 million of three 2% senior notes with a 30 year maturity.
We also funded at $400 million intercompany loan with F N G to fund their growth.
Overall, our results this quarter speaks to the gigantic dynamic business model that we have created and which we believe positions us for success through varying market cycles.
Yeah.
Turning to our title results, we delivered adjusted pre tax time learnings of $669 million with an adjusted pretax title margin of 21, 7% in the 2021 third quarter compared with adjusted pre tax title earnings of $528 million and adjusted pre tax time.
On a margin of 21, 2% in the 2020 comparable quarter.
Our third party or third quarter margins and earnings were the strongest third quarter results in our company's history.
Which speaks to our market leading position combined with outstanding execution by our entire team.
Turning to F and G. We continue to be very pleased with the results. This quarter as we open new channels of distribution and accelerate our sales growth driving assets under management at the end of the third quarter generally to nearly $35 billion, an increase of 9% in the quarter.
This growth was driven by strong retail annuity sales and <unk> interest into institutional markets.
Total assets under management have grown 31% since we closed the acquisition, we are well on our way towards our goal of more than doubling the assets under management in five years.
Hi, Jeff and Gs assets continue to grow they provide an increasingly important component of our overall earnings.
Looking forward, we will continue to evaluate our capital allocation strategy.
We remain committed to long term value creation for our shareholders. While also focusing on supporting the future growth of our businesses.
Buybacks are an important component of our strategy.
We were active once again, having purchased one 3 million shares for $61 million at an average price of $46 29 per share through the third quarter.
And the first week of October we reached our $500 million share buyback target, which we announced in the fourth quarter of 2020.
Lastly, we announced yesterday, a quarterly cash dividend of 44 cents per share an increase of 10% from our previous quarterly dividend.
This is the second consecutive quarter, we have increased our dividend given our strong earnings and cash flows through the first three quarters of the year.
Let me now let me now turn the call over to Mike Nolan to discuss the title insurance business in more detail.
Thank you Randy as Randy highlighted our third quarter results were the best third quarter in the company's history and I want to add my thanks, and congratulations to our employees for their dedication and focus on taking care of our customers and driving our industry leading performance.
The third quarter, we generated adjusted pre tax title earnings of $669 million, a 27% increase over the third quarter of 2020.
Our adjusted pretax title margin was 21, 7%, a 50 basis point increase over the prior year quarter.
The results were driven by a 25% increase in average fee per file a 9% increase in daily purchase orders closed and a 31% increase in total commercial orders closed.
Partially offset by a 21% decrease in daily refinance orders closed.
Total commercial revenue was a record $366 million compared with the year ago quarter, a $216 million.
Due to the 31% increase in closed orders and a 28% increase in total commercial fee for file.
For the third quarter total orders opened averaged 10800 per day with July at 11000 August at 11000 in September at 10300.
For October total orders opened were 9300 per day as we saw solid demand in purchase activity, while the refinance market continues to moderate as compared with last year's robust levels.
Daily purchase orders opened were up 1% in the quarter versus the prior year.
And for October Daily purchase orders opened were up 4% versus the prior year.
Refinance orders opened decreased by 33% on a daily basis versus the third quarter of 2020.
For October daily refinance orders opened were down 38% versus the prior year.
Lastly, total commercial orders opened per day increased by 15% over the third quarter of 2020.
Commercial opened orders per day were just under the record levels, we saw in the second quarter.
For October total commercial open orders per day were up 15% over October of 2020.
Importantly, commercial open orders per day have exceeded 1000 orders each of the last nine months.
Having consistently been in record territory, and we will provide momentum as we close out 2021 and begin 2022, given the longer tail for closings in commercial as compared with residential.
Our title business has performed very well through the third quarter.
With commercial and purchase volumes more than offsetting the decline in refinance activity.
Looking forward, while refinance volumes may continue to moderate it is important to note that direct refinance revenue only contributed approximately 19% of total direct revenue in the third quarter compared with 27% in the third quarter of last year.
On a sequential basis refinance revenue contributed 21% of total direct revenue in the second quarter and 33% in the first quarter of this year.
Additionally, refinance fee per file in the third quarter was approximately $1 as compared with nearly $3400 per purchase.
Providing a strong counterbalance to declines in refinance revenue.
We will also continue to watch our expenses closely and react to changes in our opened and closed order volumes.
Another critical aspect of our business has been our longer term focus on integrating and leveraging automation.
Which has significantly improved our performance as can be seen by our profitability. This cycle.
During the quarter, we reached a significant milestone as more than 2 million consumers have now been invited to begin their transactions on our digital inherent experienced platform through start in here.
And more than $1 3 million have chosen to do so.
As we have discussed in here transforms the real estate transaction by improving the safety and simplicity needed to start track Notarize and close real estate transactions.
We are very pleased with our customers' adoption of our digital platform.
As we believe it will not only improve their satisfaction with our service and product, but also improve our efficiency.
Ultimately, we believe the inherent experience platform combined with our scale and our history and expertise in building market, leading technology solutions positions FNF to grow market share.
Let me now turn the call over to Chris Blunt to review <unk> third quarter highlights.
Thanks, Mike and F&B were fully executing on our product and channel diversification strategy, while leveraging our core capabilities and modernizing our operating platform.
This year has demonstrated our transformation from a previously mono line business into a well diversified and leading provider of solutions in both retail and institutional markets.
We achieved record sales in the third quarter, surpassing $3 billion in total sales for the quarter and $7 billion in total sales for the first nine months of the year, which in turn have boosted ending assets under management to nearly 35 billion as of September 30th as Randy mentioned previously.
In the third quarter annuity sales in our retail channel were one 5 billion up 43% from the third quarter of 2020 and down slightly from the record sequential quarter.
We see ongoing success with our independent agent distribution and continue to expand our bank and broker dealer channels. We're now distributing through a dozen active bank and broker dealer distribution partners.
We are very pleased that our recent expansion into institutional markets has been exceptionally strong. Let me provide a few brief details F&B has issued $1 2 billion of funding agreement backed notes in September following our inaugural $750 million issuance in June both issuances saw extremely <unk>.
Market demand and attractive pricing.
<unk> is also successfully entered the pension risk transfer market closing $371 million of transactions in the third quarter and securing an additional $564 million of transactions in the fourth quarter.
Based on transactions secured to date <unk> will assume approximately $900 million in pension liabilities and provide annuity benefits to over 22000 retirees.
Overall institutional sales were $2 6 billion for the first nine months period and with the additional $500 million pension risk transfer volume secured in the fourth quarter. We're on track to achieve $3 billion of institutional sales in 2021.
With these strong topline results average assets under management or <unk>.
Has reached $32 7 billion driven by approximately $2 3 billion of net new business flows in the third quarter.
We are focused on generating scale benefits by increasing assets under management, while continuing to leverage blackstone's unique investment management capabilities to deliver consistent spread.
Turning to spread our results continue to be strong total product net investment spread was 285 basis points in the third quarter and FIA net investment spread was 335 basis points adjusting.
Adjusting for favorable notable items total product spread was 248 basis points in FIA spread was 293 basis points. Both in line with our historical trends and consistent with our disciplined approach to pricing.
Let me wrap up with a few thoughts on earnings first <unk> net earnings attributable to common shareholders of $373 million for the third quarter included a 224 million onetime favorable adjustment from an actuarial system conversion, reflecting modeling enhancements and other refinements.
And represents less than 1% of reserves.
This conversion was a significant milestone in our multiyear effort to deliver a modern scalable platform.
Which will provide operating leverage with scale over time.
This one time favorable adjustment was excluded from adjusted net earnings along with other standard items.
Next <unk> adjusted net earnings for the third quarter were $101 million.
Strong earnings were driven by record.
AUM and strong spread results from disciplined pricing actions on both new business as well as our in force book.
Net favorable items in the period were $27 million.
Adjusted net earnings excluding notable items were <unk> $74 million up from $70 million in the second quarter.
In summary, during the third quarter, we delivered record sales and strong earnings for apogee, our profitable growth strategy is firing on all cylinders and we have successfully diversified our sources of premiums we remain excited about the opportunity to further contribute to the overall FNF strategy in the years ahead.
With that I'll now turn the call over to Tony Park to review <unk> third quarter financial highlights.
Thank you, Chris we generated $3 $9 billion in total revenue in the third quarter with the title segment, producing $2 9 billion.
F N G producing $927 million and the corporate segment generating $44 million third quarter net earnings were $732 million, which.
Which includes net recognized losses of $154 million.
Versus net recognized gains of $73 million in the third quarter of 2020.
The net recognized gains and losses 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 or continue to be held in our investment portfolio.
Excluding net recognized gains and losses, our total revenue was $4 billion as compared with $2 9 billion.
In the third quarter of 2020.
Adjusted net earnings from continuing operations were $604 million or $2 12 per diluted share.
The title segment contributed $521 million F&D contributed $101 million and the corporate segment had an adjusted net loss of $18 million.
Excluding net recognized losses of $169 million, our title segment generated $3 $1 billion in total revenue for the third quarter compared with $2 5 billion.
In the third quarter of 2020.
Direct premiums increased by 22% versus the third quarter of 2020.
Agency premiums grew by 34% and escrow title related and other fees increased by 14% versus the prior year.
Personnel costs increased by 15% and other operating expenses increased by 17%.
All in the title business generated a 21, 7% adjusted pretax title margin, representing a 50 basis point increase versus the third quarter of 2020.
Interest and investment income in the title and corporate segments of $27 million declined $4 million as compared with the prior year quarter due to decreases in bond interest dividends received on preferred stock and a slight decrease in income from our 10 31 exchange business.
In September we closed an issuance of $450 million of three 2% senior notes due September of 2051.
We're very pleased with the market's receptivity to our issuance as well as the very attractive rate that we were able to secure.
We also put in place a $400 million intercompany loan.
The fund <unk> growth and to better optimize their capital structure.
<unk> debt outstanding was $3 1 billion on September 30 for a debt to total capital ratio of 24, 9%.
Our title claims paid of $55 million were $45 million lower than our provision of $100 million for the third quarter.
The carried reserve for title claim losses is currently $95 million or five 9% above the actuary central estimate.
We continue to provide for title claims at four 5% of total title premiums.
Our title in corporate investment portfolio totaled $6 7 billion at September 30 <unk>.
Included in the $6 7 billion are fixed maturity and preferred securities of $2 2 billion.
With an average duration of two eight years and an average rating of <unk>.
Equity Securities of $1 2 billion.
Short term and other investments of $500 million.
And cash of $2 8 billion.
We ended the quarter with $1 5 billion in cash and short term liquid investments at the holding company level.
Let me end with a few thoughts on capital allocation.
Our capital allocation strategy remains a key focus of the board we're focused on returning capital to shareholders, while making strategic investments in our businesses.
Our current level of cash generation supports the following.
First FNF $500 million annual common dividend.
Next our $100 million annual interest expense on FNF debt.
Third our $400 million five 5% senior notes, which are due in September of 2026.
And finally, our share repurchases, we've continued to make share repurchases throughout the third quarter and into the fourth.
During the quarter, we purchased one 3 million shares at an average purchase price of $46 29 per share.
And in the first week of October we completed our previously announced $500 million share repurchase plan.
In total we repurchased 12 million shares.
At an average price of $41 62.
Since announcing the plan in October of last year.
With regard to <unk> at the time of the merger last year, we stated that we expected <unk> to double assets and earnings over five years through organic growth given current momentum we foresee that <unk> growth is running about one year ahead of schedule.
For 2021, <unk> is on a trajectory to double its annual sales and has materially diversified its business with channel expansion in new retail and institutional markets.
Capital funding for this growth includes $400 million in debt capital from FNF in the third quarter.
As well as third party financial reinsurance with an existing partner in the fourth quarter.
Just on current forecast, we expect to contribute $200 million to $300 million of new equity capital in 2022.
And with <unk>, 25% debt to capital target, we believe LNG has ample financial flexibility to execute on our growth strategy and capture market opportunities.
Beyond that horizon and subject to ongoing sales momentum there may be an additional capital investment required in 2023, which could take the form of converting our existing $400 million term loan to equity capital.
But we believe at that point, we will be reaching a level, where <unk> is self funding.
Given the compelling growth prospects. It is more attractive to defer any immediate return of capital from F F and G. In order to support its growing and stable source of earnings and target a return of capital a few years down the line.
FNF has enough capital generation to do all of the above and we view the marginal return on capital into <unk> as attractive and strategically important to our dynamic business model to achieve long term value creation and attractive shareholder returns.
Let me now turn the call back to our operator to allow for any questions.
Thank you.
At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
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One moment, please while we poll for questions.
And our first question is from the line of Mark Devries with Barclays. Please proceed with your question.
Yes. Thank you my first question is for Chris.
Chris was interested in more detailed thoughts about what you think is driving the strength in the sales growth in retail.
Much of that is kind of in the channels. You have opened how much of that is is kind of just the attractiveness of the product in this environment and how much maybe no further penetrating the agent channel.
Sure Great questions Mark So yeah, I would say, we're seeing strength in all of the above so our core independent agent business is up.
Comfortable double digit pace.
We've had rapid expansion in bank in BD, and so thats added to the.
The growth in retail and then institutional has been with a blank sheet of paper a year ago. So thats all incremental so I would say all three are contributing right now.
Okay great.
And then last question for Tony.
And then it sounds like there's a lot of great growth to fund there and you may commit up to $700 million I think of equity capital over the next couple of years.
Can you just talk about how the returns of that.
Compare to buying back FNF stock here, which is trading at.
Pretty material discount to where it historically has traded.
I think you know.
We believe that all of the above are important allocation strategies, yes.
Yes. It is.
Up to $700 million and equity capital toward F and G, but keep in mind, we've already funded $400 million of that in the form of a note which is easily convertible so from a parent company cash standpoint, the $400 million.
He has already gone but the.
Board is.
We talked about completing the $500 million.
Plan.
Over a course of 12 months in terms of buyback, but we have a 24 million share authorization or 25, but $24 million still existing in the board.
It is very excited about continuing to deploy some of that capital towards buybacks.
And I would expect that as soon as the window. The blackout window opens we will be back in the market buying back shares.
We paused a little bit during the quarter only because we were in a blackout period, while we were working on the bond offering otherwise, we probably would have bought back more shares in the quarter.
Okay got it thank you.
And our next question comes from the line of Bose George George We can't VW. Please proceed with your question.
Hey, guys. Good afternoon actually one more on <unk>.
In terms of modeling.
Operating income growth can we just essentially can attract that with AUM growth and is that kind of the best way to do it now.
Yes.
Yes, Yes. This is Chris I think that's right I think as you model out AUM growth, we've talked about kind of a rule of thumb, 1%.
On assets net of everything including tax and I think thats still a good number with the potential for a little bit of <unk>.
Spread expansion beyond that.
Okay, great. Thanks, and then actually just sort of touching on against the subject from the last question as well.
In terms of.
He said the market does not really sort of appreciate what's being done at <unk> and the valuation there.
Sort of.
Something drastic like spinning it out et cetera are there other alternatives that.
That you can consider in terms of.
Showing the value you have got tracking stocks in the back in the past.
Are there things.
That could be done in the interim.
That could help.
Yes, Tony This is Chris you want me to start I would say probably the easiest lever would be to just utilize more reinsurance whether thats re insuring a piece.
Of the block or doing some sort of flow deal on some of our new sales that would free up some capital pretty quickly I'll, let Tony opine on other options.
Yes, I mean, I think Thats right I think our view is that we're building a great asset here I mean look at the earnings growth the portfolio growth the opportunities in the sales channel to to grow this thing as I mentioned earlier, we're a year ahead of schedule in terms of.
Of doubling earnings and.
And the portfolio and I think we're excited about that and so I get that.
People have different perceptions of how much value. We're getting currently in our share price and I don't disagree with any of that but but we do believe that even if it's not currently recognized the value is there and we think that.
In some form or fashion, it will be recognized and and for the time being we will continue to create that value and and and then kind of deal with that second part a little later down the road.
Okay that makes sense thanks, guys.
Earnings call.
Question comes from the line of Andrew Quail, German with Credit Suisse. Please proceed with your line.
Great. Thank you.
Good afternoon.
Kind of follow up on the <unk>.
Title margins at.
21, 7% pretax.
I think it's the fifth consecutive quarter.
You were at 20% or better yet your guidance is 15% to 20%.
Maybe you could help just.
Give some scenarios where where it might.
Fall into your guidance range or.
Are we in a new normal.
Yeah.
Yes, Andrew it's Mike.
Talked about the 15% to 20% for a number of years and for.
Pretty decent amount of time, we werent, even get into the 15% number and we always said to get to the higher end of that range, we would need a very strong purchase market.
Along with our solid commercial and a moderately good refinance market.
And we're really seeing just.
A potentially record level commercial market strong strong purchase and probably better than refi market itself.
I think that that margin performance.
Certainly dependent on just where volumes are and we can't necessarily expect.
Our refinance volumes for example to be.
This year it will be maybe the second or third best refinance market in history.
Of the country and last year was probably the best so.
I think it's a function of that having said all of that we expect our margins to be very strong as we go into the fourth quarter and.
We expect margins to be very solid next year, but I don't think we're ready to.
To change that sort of 15% to 20% range at this time.
Okay. Thank you.
For Chris.
The sales are.
Really robust and I get that you've got a new new channels there.
As we look towards 2022.
Particularly in the retail areas EFI as Mike is.
Do you see that growth kind of tapering off could it be flattish what are you thinking as we go into 2022 in terms of.
Sales volumes given that Youll have had these new channels.
For a while and with that also what types of returns on capital are you.
Are you targeting as you write new FIA in my business.
Sure yes so.
I would say a couple of things one obviously.
We can't keep doubling every year, although that would be nice, but I think well continue to see good double digit growth out of our core.
Agent business, and I would expect better than that and banking BD, we're still not fully penetrated in the banks and broker dealers that were selling through today and we're continuing to add so we will probably add another half a dozen relationships next year. For example, if I had to gas so I think you'll see.
Good growth core out of agents continued growth out of bank.
And BD on the institutional side, we like the end market that market's been growing.
Pretty dramatically as you know we can't write an unlimited amount of that but we certainly have capacity to write more business there and I think we've been really pleased with our early success.
In the PRT space so.
I wouldn't want to give an actual total percentage number but I would I would say I think we're we would envision pretty decent growth coming from all of those channels next year.
In terms of returns obviously, we don't we don't.
Yes, we don't quote individual.
Product pricing, but I'd, just say, we're getting attractive.
Ro.
Particularly relative to some of the companies other alternatives.
Thank you.
And as a reminder, if you have any questions you May press star one on your telephone keypad to join the question and answer queue.
Our next question is from the line of John Campbell with Stephens. Please proceed with your question.
Yeah.
Hey, guys. Good morning, Congrats on the continued success.
Thanks, John It sounds like you guys do have some capital earmarked for F&B, but still I mean, I think you've got $101 5 billion in the holding company cash I think obviously you guys generated a ton of free cash from here, you've also got over 600 million across the light and pay safe investments.
Obviously, those will be more liquid and approaching kind of lockup expirations.
So honestly, you're going be flushed with cash over time.
Talk to the buybacks, but beyond that just talk to us about your appetite for the dividend.
Our pegging.
Pegging, a potential payout ratio over time, and then on M&A, obviously, it's tough to get.
Kind of Chunkier.
Title acquisitions from here, but talk to us about maybe non title.
M&A, what might make sense and level of appetite there.
Yes, Thanks, John It's Tony I'll start maybe Mike can fill in on the title acquisitions.
Yes, you're right, we've got a lot of cash and continuing to generate good cash it's important.
To know that with a light and pay say if those are actually insurance company money, so that isn't money.
Even if we were to liquidate those at some point that is in cash.
Those to the parent company, that's part of the insurance company portfolio, having said that it's.
Strong cash generation, we talked about.
Our $500 million annual commitment of the dividend you saw that we raised that now two times in a row and 11% increase last quarter. Another 10% increase this quarter, we're very comfortable with that not necessarily targeting a payout ratio but.
Hey, with this kind of money, we think it is important to give back to shareholders in the form of cash dividend and we will continue to revisit that and see if we want to increase it.
We talked about the bonds that come due in September of next year. So we do have a $400 million obligation there that.
We will use cash and we talked about buybacks and I think that is going to be an important part of our strategy going forward as well.
Well its funding F&B growth. So yes are we going to have we earmarked all of our cash.
The spend over the next year or 18 months, probably not there is still quite a bit left but we will continue to update you as we as we go forward and Mike I don't know if you want to sure I'd add a few things you know John we're always on the lookout for acquisitions that can add value to the company, whether it's on the title side.
And there is a number of opportunities to continue to add agent acquisitions. We've we're doing those we know a lot of them are smaller we don't always announce them, but on the non title side, we have a number of businesses that could be potential.
Beneficiaries of acquisitions, if it makes sense, we've got a real estate tech businesses. So we've got just our overall technology.
Strategies with digital and soft pro and title automation and then there could be things in our servicing businesses that could be additive but.
We're not going to do acquisitions just for acquisition sake.
And we also know that.
You don't always know when something shows up that you want to you want to act on them. So it can be good to have some cash to be able to move quickly.
When those opportunities show up.
Yes, it makes sense. Thanks for all that color and then Chris.
Just two quick questions here, obviously, the doubling of AUM.
Moving out to four years, that's great great results for you guys. So far I'm just curious first about the mix of kind of the growth by channel. How you kind of foresee that bridging that out over the next couple of years and then obviously the net investment spread has picked up a good bit last two quarters relative to last several quarters.
So just curious about what's driving that strength and the sustainability of it.
Sure, Yes, and I think maybe in reverse order is the best way to think about it so our partners at Blackstone did a great job continuing to source.
Really attractive private investment great opportunities for us and so that's kind of the fuel in our engine, particularly relative to our balance sheet, which is smaller relative to a number of our competitors. So that's kind of where the crediting edge has come from obviously over time that will diminish somewhat as we as we scale, but I think thats.
Years in the future.
We're also getting some offset in terms of scale benefits, adding.
<unk> 10 billion.
<unk> is significant in terms of helping to drive down.
Expense ratio. So that's kind of the competitive dynamic I think from a channel perspective, we're up to number two or number three in the independent channel for FIA sales. So we've got a good healthy share there I think there's some more share that we can take and don't see any reason why we couldnt be the number one player in that channel over.
Time, but probably a little more limited just given the amount of business, we write today and our position there.
Green Bank and broker dealer, we're just getting started as a huge market. We've got about a dozen distribution partners now so I think theres a lot of capacity to add.
Partners and go deeper with the ones that we already have so I think that's got significant.
Upside for us.
And as I mentioned before funding agreement backed notes is limited so much of that you can put on your balance sheet, but I think near term there is capacity and then the PRT business, particularly if we get an uptick in interest rates I think youre going to see that market.
Continue to grow so I would if you said rank order them I think we'll get we'll get growth in our core agent channel get faster growth.
In banking BD I think we can get some very strong growth in PRT, although we're going to pick our spots and make sure we're hitting our return our return hurdles.
Makes sense thanks, guys.
Yeah.
And our next question.
From the line of Mark Hughes with Truest. Please proceed with your question.
Yes. Thank you good morning, good afternoon.
On the commercial or is there any sign that some of that volume is being pulled forward from next year, maybe around tax considerations.
Is that a thing.
Sure Mark this is Mike.
We don't have any evidence that that's happening I have not heard that.
It would be anecdotal probably at best and when you look at the length of the performance in our orders nine months now of 1000 orders per day.
<unk> opened commercial orders, we only did that once before 2021 that was in February of 2020.
That's quite a bit of pull forward shelf.
I don't I don't really see it but there might be a small amount of it but just hard to know.
Yeah.
Then you had mentioned that I think are in here $1 3 million had accepted your offer.
Does that mean anything material to either revenue or profitability. If you get the more mix shift in that direction.
I would say not not initially it's really the way to think about this kind of the the doorway to really creating.
End to end digital transaction for the participants, including the buyers and the sellers.
And it does give us some.
Efficiencies on the front end because they provide information in a secure environment not email directly into our production system. So for $1 3 million.
Transactions over the since the inception, we're gaining a little bit of efficiency just in terms of getting that information and then also providing better security.
With the acknowledgement in the wire safe form et cetera, but that will that will lead us down the path of just doing more and more digitally.
Leading up to the final moment, which is the execution of the documents for the closing and we're just very excited about the fact that we're seeing that adoption rate close to 65% I think.
And it tells us that.
There is a pretty large.
A group of consumers that are looking for a different way to transact and we feel like we've built the platform that will we will.
Really be a differentiator for us overtime.
And then one for Greg.
We do see in history.
Moving up you gave them.
1% return.
Number, but should we look for spread.
Spreads widened if the interest rates started to.
Sure. It can move up here wouldn't been your experience in times past when you are.
You're going to increase in interest rate.
Sure Yes.
Obvious point, but some of it depends on.
How that rate increase happens so any increase in LIBOR, we would get a one for one benefit more.
So we've got about 15% of our portfolio in floating rate securities.
The longer end of the curve takes a little longer to get into the portfolio because we're pretty tightly.
AUM match, but you would see some benefit there and generally a little easier to capture a bit higher spread.
In a rising rate environment and then the third component is just demand for the core products. Obviously, if you are offering 3% on our fixed deferred annuity versus 2% Theres just going to be greater.
Greater demand for that so I think those are the three that would benefit. So yes, you would see some impact pretty quickly and then I think over time some incremental impact.
Thank you.
And we have reached the end of the question and answer session I'll now turn the call over to Mr. Randy Quirk for closing remarks.
Okay.
Thank you we continue to be very pleased with our team's execution as our title business delivered the strongest margins and earnings for the third quarter in our company's history.
Our <unk> team also continues to execute at an extremely high level as we open new market opportunities, which is driving accelerated asset growth and improved earnings.
Taken together, we are building a company that has a financial model designed to deliver strong earnings as market conditions change.
It is very exciting to see our vision for the acquisition of LNG begin to come to fruition as well as the transformation of our business model. We look forward to speaking with you and updating you on our fourth quarter earnings call.
And this concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.
Goodbye.
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