Fidelity National Financial, Inc. (FNF) Earnings Call Transcript & Summary

Okay. Thank you very much for joining us. I'm Mark DeVries. I cover consumer finance side at Barclays. I'm joined by my colleague, Carter Smith. I have the pleasure of introducing the team representing Fidelity National Financial. We're joined by Mike Nolan, President; Tony Park, CFO; and Chris Blunt, the CEO of FGL Holdings, which FNF is scheduled to acquire by the end of 2Q or early 3Q. Mike and Tony have built long careers with FNF and have been regular participants at this conference and are likely familiar faces. Chris has been the CEO of FGL Holdings since 2019. He's previously served as the Senior Managing Director and CEO of Blackstone Insurance Solutions as well as the President of New York Life's $500 billion investment group. This session is structured as a fireside chat. Listener lines are not open, but there is -- this is being done live. So if you have any questions, you can e-mail them in, and we can do our best to accommodate them in the time we have today.

So with that, let's just kick it off with a question on kind of your latest title trends. On the 1Q call, you mentioned that it appeared purchase orders have plateaued down about 40%. Have you seen that trend continue in recent weeks, Mike? And what, if any, types of variation are you seeing between various markets?

Sure, Mark. Yes, you're correct. I think at the time of the call, we had about 13 business days in, in April. And at that time, we were down 48% on our open purchase orders to the prior full month year. And -- but they had kind of bottomed out. And since that point, we've really seen some modest improvement week to week. So we've had really 4 weeks in a row with some modest increases in purchase open orders and probably saw our strongest week-to-week increase in this first week of May versus the end of April. I think we're up about 16% week over week. And it -- we don't have perfect visibility into it, but it could be with some of the shelter in places getting lifted that we're starting to see a bit more activity. As the improvements occurred, it's really kind of improving across the country, but a couple of markets that seem to be running a little bit stronger than maybe others is, we've seen a nice pickup recently in orders in California. Colorado is another market where there's been a nice increase in pickup in orders. Florida has been very solid. One of our smaller markets but a good market that we've seen some really good increases on is in Indiana, and it could be that some of the ones that are maybe a little sooner on the shelter in place are getting more activity quicker.

Okay. Is that something that you're actually seeing on the ground of those markets that have lifted the shelter in place earlier are being quicker to recover here?

I don't know that we have great data to support that. But it's probably a bit more anecdotal. But at least in a couple of cases, it does feel like that's helping. You can also look at things like the Showing Time Index that gets reported on and certainly seeing that improving in the past few weeks in Texas and Colorado and somewhat in Florida as well. So that might support some of that thinking as well.

Okay. Got it. Are refis maintaining the growth mentioned in the 1Q call through the last few weeks?

Refis are very, very consistent. Really, for the last 6 weeks, we've been running about 6,500 open refis a day. That's a bit more than double of where we were last year and higher than they were in February. I think in February, we're running about 5,800, 5,900. In March, we had about a 3- or 4-week -- it was about 3 weeks where the orders really spiked. We're running over 8,000 refinances a day, and then we kind of settled into the 6,500 number. So still feels very, very consistent at that level.

Okay. And how have commercial orders trended since quarter end?

Probably not a lot of data that -- we've only got really 6 business days of information. The -- well, no, I'm talking about May. But in April, our commercial opens were off 32% for the year-over-year. And not a lot to report on May yet, but certainly, a big fall off in commercial on the open side. We've still got a pretty good pipeline of orders, and we're not seeing orders canceling out. And we haven't seen a lot of delayed impact yet, but would anticipate that, that market to probably be the most challenged as we go through the quarter.

Okay. And are the local commercial markets still holding up better than national as you talked about on the earnings call?

They are. They're not off as much as the national orders. In terms of our total orders, the local is a bigger number. It's a bigger percentage of orders. And they tend to be smaller, and that is holding up a little bit better, but also down pretty significantly over where they were last year.

Okay. How do the margins on the more local commercial business compare to what you see on national transactions?

Sure. So maybe I'll start with national. We've got 21 national offices. They do about 60% of our total revenue. So in 2019, we had $1 billion in commercial revenue, give or take, and about 60% of that was captured inside those 21 national offices. On a pretax basis, they generally run about 30% pretax margin. Does that sound about right?

Yes. In the first quarter, it was 25%, but first quarter is always a little light.

Yes. But for 2019, about 30%, yes. And then on local commercial, we don't cost account at that level on local commercial. Our local commercial orders are being processed by the same people that do residential and refi, et cetera. But when we look at the local offices, their pretax margins generally run in the low 20s to mid-20 margin. So less than the national commercial, but it's not a significantly different number.

Okay. And in that margin you said, that's the blended, right? So that's going to factor in the residential that you're doing for those same offices as well, both purchase and refi?

Yes, both purchase and refi in our distributed footprint, so we've got about 1,300 local offices doing some local commercial purchase, refi, and their margins will run in the low 20s to mid-20s.

Right.

Okay. Got it. Are you seeing any kind of volume yet on the commercial side from more distressed situations, whether it's a sale, releveraging or loan modification?

I don't think we've seen any significant activity there yet, Mark. I think it's too early to know that. I will say that we are seeing as a mix of business more refi transactions than purchase than we were just even 4 or 5 months ago. Our mix now is getting closer to 60% purchase on the commercial side on the open and 40% refi. And I think it was closer to 70-30 as we kind of got in the back end of '19 and the early part of '20.

Okay. Are there any kind of margin differences between resale and refinance in the commercial business?

Not really. The rates are generally the same. The only difference would be that the policy liability amount might be lower in the refinance than the purchase because you've got the equity difference in what's being insured. But you don't have the big discrepancy in rates like you do on the residential side.

Okay. Got it. But what type of revenue opportunities do you see from future loan modifications as forbearance programs end?

Well, we certainly could see, particularly our ServiceLink business, we've got a loan modification group. And I would anticipate more activity there as we get through the forbearance to kind of project what that might look like. I couldn't do, but you would expect more loan modifications as these forbearances end. I mean I think Black Knight recently reported that 7% or 8% of all mortgages are now in forbearance, and that number could increase as we go into the next -- through the rest of this quarter. So a lot of those will probably need the loan modifications.

Okay. Got it. How have refi margins trended in this recent wave? Has there been any kind of noticeable savings from automation investments that you've made in recent years?

Well, we can probably answer that through just looking at our centralized refinance business and ServiceLink because, again, that's where we've got our purest look at refi. And to give you a few numbers, year-to-date in our centralized refinance business and ServiceLink, we're running about a 35% pretax margin, up against about 22% last year. So that's a pretty big lift in margins. So the incremental profitability of that business is very, very high, probably close to 50%. And I think that's an indication of kind of the benefits of automation. Close to 70% of the title production is done in a very highly automated way with very little touch. The other thing I would point to is that while our open orders have more than doubled inside ServiceLink since the end of the year, we've only had to add about 15% more staff in the U.S. So we're just able to handle more volume without the same level of having to add staff in that business.

Okay. Historically, you've mentioned that there's not much of a margin difference between purchase and refi transactions. Has that automation that's been occurring really kind of changed that relationship where you can now actually get more margin out of refi just because of the higher level of automation?

I mean I'll let Tony weigh in, too. I would say inside ServiceLink, I would say yes. I think we're seeing that we can do better margins over time because of the impact of automation. It's a little tougher, the distributed model, again, because we're -- they're doing this blended work.

Yes. No. We have 1,400 offices throughout the country doing purchase, refi and local commercial. And again, they're not cost accounting their time for each product. And so it would be guesswork to figure out, hey, what's the incremental margin on the purchase transaction versus the refinance transaction versus the commercial transaction. So it's hard to know. You do get a much higher fee per file on your residential purchase than you do on your residential refinance, but it also takes more time and costs more expense, headcount to process those. So it's really hard to know. But certainly, the centralized refi is when it's clicking on all cylinders like it is now, it's probably the most efficient process we have, and that's why we have 35% margins.

Okay. That's helpful. So turning to expense management. How has that trended since quarter end? Has there been any additional reductions to headcount in the recent weeks?

No. If there has been, it's been really on the margins, just nothing to report. But we did take out close to, I think it was 18% of our field staff and about 11% of our corporate staff and estimated that to be about a $200 million run rate savings in personnel.

About 3,000 people.

About 3,000 people. But no significant additional cuts at this point.

Those all -- I mean a lot of those actions took place in April.

Yes.

So we really -- we wouldn't have seen any of that at this point, but we'll see it kind of going forward.

Okay. How do you balance expense savings now versus positioning for a possible V-shaped recovery where originations pick up quickly?

Our approach has always been to kind of operate in real-time and to not think so much about forecasts and other people's projections, but about what's happening to our order volumes right now. And when you have a falloff of 47% of your purchase volume happening overnight and you can see also your commercial volumes coming down like they did, in our view, you need to take action. And that was paramount versus what we might be thinking about 6 months from now. We also have a lot of experience in managing the cyclicality of this business. We're good at it, and we know how to do it going up and going down. So we don't really have any concerns about handling additional volume. We'd be thrilled if we get a V-shaped recovery and we get additional, particularly, purchase volume, and we'll add back staff as we need to, to support that business. So we don't have any concerns about that.

Got it. I know you guys don't provide guidance around margins, but could you just speak at a high level to kind of what we should expect for margins going into the next couple of quarters, just given kind of the majority of the pain will probably be felt in 2Q?

Yes. That's a tough one. You're right. We don't provide guidance. And if we did, we wouldn't in this scenario because it's just too hard to predict. I think that the tough quarter is going to be Q2. After that, it depends on the recovery. Is it V-shaped? Is it U-shaped? Is it saucer-shaped? I've heard all of the above, and we'll have to react accordingly. But the second quarter is going to be a challenge, and it's hard to really guess that. I would say this. I mean our -- we've always said in a "normal market" where you have decent volumes in all 3 areas of the business, we believe that we can do 15% to 20%. We've proven that. We have had a very strong 2019 with good markets in all 3. And as soon as we get back to that, certainly, we will do that again. But it's hard to know when that happens. We do feel like, at some point, whether it's the second half of this year or the first part of next year, but at some point, there are a lot of signs that would indicate that we ought to return to some sort of normal market, in which case, we think we'll do very well. It's just hard to make the call as to when that might happen.

Okay. Got it. Turning to investment income. Tony, could you just kind of remind us what we should expect from investment income for the balance of the year?

Sure. Yes. We had a good first quarter because we had really seen the actions that the Fed took, the 150 basis point cut. So we had $53 million in interest investment income in Q1, but that will dramatically fall off for the balance of the year, primarily because we have our 1031 exchange business and our cash and short-term investments that are both short-term rates. And even though long-term rates really haven't moved, the short-term rates have moved dramatically, as everyone knows. So I would anticipate the full year 2020 to be somewhere in the neighborhood of $150 million in investment income as opposed to $225 million in 2019. So again, we'll use a significant portion of our cash to close on the FG deal and then the 1031 exchange business, which is short-term rates are the 2 biggest drivers of that falloff into the mid- to low-30s on a quarterly basis.

Okay. Could you next discuss kind of your latest provision and claim expectations?

Yes. We're still providing at 4.5%. We don't have really any indications that would suggest otherwise. But at the same time, we're going to keep an eye on trends. If forbearances lead to foreclosures, that might happen 18 months or 2 years from now and it's something that could trigger an increase in losses. We don't know how much, and we don't even know if that would happen for sure. We know in the last downturn, there were a lot of things that triggered losses. And foreclosures was a piece of it, but there were a lot of other things. There was fraud and forgery and volume-related errors that spiked and mechanics' liens on commercial projects, and a lot of things that drove losses to the 10%, 11%, 12% in our worst 2 years of '06 and '07. I don't anticipate anything like that showing up this time around. But at the same time, we want to make sure and stay vigilant and monitor what we can to figure out if anything is changing. So right now, we're actually building on our redundancy and wouldn't feel justified in adjusting that reserve provisioning upwards because it would just add to the redundancy because we're actually seeing lower claims in older years that had been really eroding as newer years have gotten better. So it's kind of been a balance. But lately, the older years are improving, and the newer years are improving. And so our trend over the last 7 or 8 years is somewhere in the 3.5% to 3.8%, we're providing at 4.5%. So I feel like we're fine, but we will -- as I mentioned, we will monitor it. And if there are any signs that we could see a new type of claim or a spike in an old type of claim, we'll adjust accordingly.

Okay. Shifting gears, spend some time on FG now. Could you just update us on kind of what the latest expectations are for closing of that transaction?

Yes. I think the closing process has gone very well. Certainly, a lot better than the Stewart Title deal where there was a lot of uncertainty and really no information forthcoming from the regulators. This has gone smoothly, and we anticipated that it would. At this point, probably the biggest item in terms of timing is the FGL shareholder meeting, which is scheduled and happens at the end of the month. And so I would not be at all surprised if we close this in the second quarter. I know we've still said publicly that second or early third. But conceivably, this thing could close by early June.

Okay. That's helpful. Clearly, the market reaction to the deal is not -- has not been particularly favorable. Based on conversations you've been having with investors, what kind of pushback are you getting? And what in your view is the market overlooking here?

Yes. I'll start there and maybe let Chris weigh in a little bit on the portfolio. So a couple of things. One is I think just surprise factor, I think, impacted some out of the gates. They knew we were sitting on $1 billion and a very low debt to cap and were hopeful that we might use the money to buy back a ton of shares or to pay a big dividend or something along those lines. And rather than go down a path of a title company acquisition, maybe a large one like a Stewart, obviously, we exhausted that, and there really wasn't anything left to do in that area. And so I think the announcement of FG, I think, surprised some people. And so that was kind of the initial reaction. And then I think they -- some folks tried to get up to speed a little bit, but they're still trying, and I don't think they have all the information to get up to speed in that world because it's a very different business. And so I think risks -- we have risks in our business, but they are known risks that people who have followed us for many years understand and appreciate. Whereas when it's a balance sheet risk, it's a portfolio risk, I think that is a new world for a lot of people. And so when the pandemic hit and the market started melting down, I think it just exacerbated the concern over the portfolio and what that might do to FNF. And right now, there's -- I think it's just the unknown. Chris, do you want to touch a little bit on the portfolio and maybe give some color? Because Chris is the CEO of FGL, and he's had to tell this story a lot more than we have and also tell the story about the multiple that his business gets versus the multiple that our business gets.

Yes. Sure. So let me maybe take them in reverse order. So I think I'd agree with the -- probably the biggest issue was just the surprise one, and folks obviously didn't see this coming. We heard a lot of, hey, I need to get up the curve. I've never followed this industry before, so there's been just some basic education there. Probably to the what's the market missing, I think the biggest issue is we're not a classic life insurance company. We've said this over and over again, we look much more like a spread lender than anything else because we don't have big legacy liabilities. If you think of a classic life insurance company where they're writing guaranteed universal life, they make a set of assumptions around interest rates, portfolio returns, mortality and then time plays out. They hope they get it right. And if they get it wrong, you could have some pretty big reserve adjustments, right? So we, on the other hand, really, our primary products are fixed index annuities and fixed deferred annuities. Those are sticky liabilities. They're pretty much locked in for a long period of time. We've been able to show that. And then through our partnership with Blackstone where they're able to not just manage fixed income but source very attractive investment-grade private debt deals for us, it gives us an edge. And we're in a space where a 10 basis point crediting rate edge is the difference between being at the top of the sheet from a competitive standpoint and being at the bottom of the sheet. So that's our story. It's actually really simple. We've proven over time despite huge movements of interest rates that we can earn an attractive net spread. The first quarter is probably our best example of that. We actually increased our spread by 50 bps over a year ago to a little over 300 basis points of spread during a period when the 10-year just absolutely collapsed to a level we've never seen before. And so I think that's -- probably the biggest misnomer is what are we and why aren't we having disastrous results when the treasury rate is plummeting. So that's one. I would agree with Mike. I think when the crisis hit, it then became, gee, what's in your portfolio? We need to now understand the balance sheet. What is Blackstone doing with the CLO portfolio, the CMBS portfolio? So you probably saw, Mark, in the first quarter, we did our best to do a severe stress test, something that we believe is more severe than what we saw in the great financial crisis to try to get people comfortable that actual defaults and losses, we think, will be modest and manageable. Our results are consistent with what a number of our competitors have put together. But we will see some mark-to-market movement. I mean that just is what it is. But we're a buy-and-hold investors. We've got sticky liabilities. We have a ton of liquidity. So even in the last financial crisis, the company never had to sell a security at a loss to meet a liability. Right now, we continue to be in strong positive net inflows. So really, the issue for us is just constant dialogue with Blackstone. But I would say right now we feel really good about the makeup of the portfolio. There are some small changes we might make, maybe, if we really think there's a risk of not getting paid back, but we're not going to make changes just because of interim mark-to-market movements.

Okay. Great. I guess maybe another question for you, Tony, on the deal. Are you hearing any pushback on the accretion math that you put out there? I mean the market seems to almost be implying a drag on earnings from FG given your multiple now kind of trades inside of your closest peer.

Yes. Really no pushback on the math. I think that -- I mean, certainly, if you take mark-to-market adjustments and somehow factor those into the analysis, then maybe you could anticipate that there could be an impact. But I wouldn't view accretion that way, and I don't think anyone would. We would look at adjusted earnings for FNF and adjusted earnings for F&G. And those numbers, I think everyone would agree, would expect to play out. And the numbers that we put out initially and then reiterated, I think, in our Q1 call was that 10% in 2020 and 20% in 2021. And I think we've said a couple of times that those are conservative numbers because the math actually ends up higher than that. And so I would say, yes, nobody is really arguing the math. I think it's the uncertainty about the portfolio. And so we're working to better educate, and this is a good example. This meeting is a good example of educating people on the F&G business. And we're going to do more of that in the next couple of months so that people can better understand it.

Okay. Tony, could you remind us what some of the key assumptions are behind that accretion math? And also what impact, if any, does the kind of severe stress analysis that Chris and the team laid out in the recent investor deck have on those numbers?

I guess the severe stress was more, again, mark-to-market, which I wouldn't really count against the accretion, but the numbers there were roughly $140 million of true credit loss where, yes, that's kind of a loss you're not going to get back. But the other $300 million -- so the total is $440 million, but the other $300 million was mark-to-market through the income statement for things like preferreds and alternatives. And so to me, that is just -- those are marks that, again -- you hold those assets to maturity to match your liabilities and you don't realize those. And so I don't think anything changes there. In terms of assumptions that we made back when, I mean, we had roughly a 4% cost of financing. I don't think that's going to change. I mean we just recently borrowed $1 billion to secure financing to close on the deal, that was a 1-year loan at LIBOR plus 200. We'll likely refinance that longer term. But I definitely think we get within or around that 4% long-term rate. And one of the factors that have affected a little bit is just FNF stock price, the fact that 40% of the consideration is going to be paid in FNF stock price. That certainly reduces the equity piece, just the math because the shares were locked in. So the $2.7 billion equity valuation comes down to a number lower than that. I don't know what the exact number is, but maybe it's [ $2.3 billion ] or somewhere in that range today. We took FGL's management expectations and haircut them by about 25% to come up with our own projections in terms of doing the math on the accretion. And if FNF has a challenging year because of COVID-19 and the impact that at least Q2 will experience as a result of that, then maybe FNF's results are a little more depressed in 2020 relative to FGL's results. So maybe the accretion is a little stronger in 2020, but that probably all balances out when you get into 2021. So I don't know that there's really anything more that we haven't already talked about in terms of assumptions.

Okay. Got it. And if I remember correctly, when you announced the deal, one of the assumptions that you thought was a little more conservative was that funding cost. Is your commentary about funding inside of 4%, that's just kind of consistent with the current environment? And maybe if things improve, you could get meaningfully lower than that?

Yes. I think probably if we had done something in January or February, we would have gotten well inside that 4%. And then the market's dislocated where it became challenging to do a long-term deal. And so we went down the path of a term loan for basically a 1-year bridge loan, if you will. And kind of as we worked through that process, we actually got to a point where the longer-term debt markets did open up, and we could do a deal today. But we secured that. And my guess is it probably won't take too long before we look at the markets and say, hey, let's term this out for 7 or 10 years or whatever it might be at, at attractive rates. So I definitely feel like we can get to 4% or under.

Okay. Given your free cash flow generation, is -- what do you think the need is to term that out?

Yes. I don't know. Probably just more conservatism. I mean, yes, you could -- I mean you have to pay that $1 billion back in a year. Could we do that with cash flow generation? Probably, but we don't know exactly how the market is going to play out. We have other commitments. We have a $350 million, $360 million annual dividend commitment, and we like to do other things with cash, including M&A and buybacks and building -- maybe building on F&G. So yes, maybe we wouldn't have to. Maybe we could just take that $1 billion out. But I also think that a 26% debt-to-cap is very comfortable for us. And so I think terming that out would be just fine.

Okay. Makes sense. Could you tell us a little bit how you are reviewing the contribution of F&G to earnings longer term? What do you view is the ideal mix of earnings given this acquisition was kind of a strategic hedge of sorts against the cyclicality of the title earnings?

I think it's probably the math was somewhere around 75-25 title to F&G. I don't know if there's an ideal mix. I mean, ideally, we would grow FNF as much as we can and F&G as much as we can and see how it plays out. I think that F&G is certainly more stable, and so you would expect kind of a more consistent growth over time. FNF is going to have peaks and troughs where some years, we outperform and some years, maybe it scales back because real estate market falls off, in which case the contribution from F&G becomes much stronger. But I don't know that I have a feel for an ideal mix.

I think that's right. And you can envision years to Tony's point where if you have a big drop in the cyclical title business, well, then FG is just going to be a bigger part of the earnings mix. To Tony's point, more consistent growth. But ideally, we're going to have years where both are growing, and we're not going to be thinking so much about the mix of earnings.

Okay. I think I remember when the deal was announced, Bill kind of emphasized in that title is just more of a mature business at this point and FG offers kind of greater growth potential longer term. Should we expect, though, kind of ignoring some of the cyclicality that, that contribution grows over time from FG?

I think potentially, it will. I think Bill recognizes that it's hard to do a transformative title acquisition right now, but that doesn't mean that we can't buy title agents. There's 20-plus thousand title agents that are in the marketplace, plus 25 or 30 regional underwriters. And we've always been acquisitive in the title space and will be as long as we can be, and these opportunities show up. So again, I don't know what we'll do in the annuity space because I think there's opportunities there as well. So it'll -- we'll just see how that plays out.

Okay. Just turning back to your debt-to-cap ratio. I mean I think, Tony, you indicated you're quite comfortable being at those levels now, but it's certainly higher than where you've been of late. How should we think about that trending over time?

I think we're comfortable 20% to 30%, and I know that's a wide range. We're at 12% or 13% today prior to doing the FG deal. We've been -- we were at 37%. We had to get a waiver in our credit facility to go to 37% for a moment in time when we bought LPS back in 2014 and brought that down to about 28% before spinning out Black Knight and dropping to 12% or 13%. But I think we're comfortable in the mid-20s and probably could go a little higher, especially with the consistency of earnings that we expect from FGL.

Okay. Got it. Turning back to FGL. Maybe, Chris, could you just talk about what you're seeing in terms of kind of the latest sales outlook? And any impact that COVID-19 may have on that?

Sure. Yes. And I would say impact is probably more muted than I thought it would be, but it's also early. So we had a huge backlog of submitted business coming off kind of a record first quarter. So that has continued to process through the system. So in terms of actual business that we're booking right now, it's continuing to run ahead of plan. We're just now starting to see a bit of a slowdown in submitted applications. In talking to our independent agent distribution channels, it's a mix. There are some who are very reliant on public seminars. Obviously, their business is off quite a bit, but I would say they're adapting rapidly to new ways of engaging with clients. Some of our IMOs are frankly seeing very little slowdown in business, some that have wealth management as well as annuity parts of their practice, and that's a growing trend. Some of the offset has been, frankly, people [ bailing ] for mutual funds to go into products like ours. And so from a long-term perspective, I hate to say it because I'm a patriot, but markets collapsing every 5 or 7 years is kind of a nice reminder of the value prop of our core product. And so while we're seeing probably a little bit slow-up of prospecting activity and we'll start feeling that in the next month or 2, so what we are planning on is a bit of a dropoff, probably feeling it more in the third quarter sales with a rebound in the fourth quarter. So we've tried to say that the range for us is probably, frankly, hitting plan to perhaps we could be down 10% or 15% in sales. But it's pretty early. I think in the next few weeks, we'll have a much better read. But so far, it's been holding up a lot better than we would have thought. And again, part of it is the $17 trillion in mutual funds. So the slowdown of prospecting activity, I think, is probably in the long run going to get swamped by just the core value proposition of the product.

Okay. I think one of the benefits of the transaction that was cited was the potential upgrade and the business channels that would open up to you. Is that all pending just the closing of the transaction? And if so, could you just talk about kind of the outlook there to grow the business?

Sure. So I would say 2 things. One, the core business, even at an A- rating, is kind of humming along. So I don't -- I wouldn't say we're dependent on the upgrade. That was more of kind of a nice bonus of the transaction. I'd say certain markets like pension risk transfer, which are quite lucrative businesses, that's opening up, too, as much faster, even in anticipation, probably more because we're going to be owned now by a much larger public company as it will be the actual achievement of an A rating. We have met with the majority of the rating agencies post-COVID. And as of now, they've indicated we're still on positive outlook, and we expect to get upgraded at close. So that's good news. Obviously, that -- as you know, with the rating agencies, that could change in a moment's notice depending on the environment. So I would say it'll be a lift for us in the bank channel. It'll be a lift for us in the independent broker-dealer channel, both of which we're rolling out probably end of June, early July, depending on when you're able to do rollout meetings in the various systems. But I would say we've probably already felt the benefit of -- just in anticipation of being part of FNF.

Okay. Great. I think we have time for maybe one more question. Chris, could you just give us an update on what you're seeing in terms of just liquidity in the CLO market and how that's trended in recent weeks?

Yes. So I think things have obviously gotten much better. We mentioned in the first quarter that probably 1/3 of the negative mark-to-market on our investment portfolio, at least on the fixed income part of the portfolio, has already recovered. Liquidity has clearly gotten better. The Fed is stabilizing the top of the stack pretty much everywhere, whether it's loans or CMBS, corporate bonds, et cetera, et cetera. So that's obviously had a great impact, and that's translated throughout the credit stack. I'd say liquidity is better. Having said that, since we're buy-and-hold investors, that's not our primary focus. It's really how do we feel about the underlying fundamentals in the first quarter. In addition to the stress test, we also released a lot more statistics on the underlying makeup of our CMBS portfolio, most of which is 2015 vintage and earlier average LTVs, why we feel good about our investment-grade CLO positions, et cetera. So we tended to be much more focused on how do we feel about the underlying credit economics and fundamentals as opposed to what price could we get for it if we were to sell it today because, again, we're still in heavy net inflows, so there's really no reason for us to be a seller in this kind of market.

Okay. Great. Well, I believe we're out of time. I just want to thank you all for joining us, a very informative session.

Thanks. Bye, Mark.

Thank you.