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

Good morning, everyone, and welcome to the second session of KBW Title Day. Next up, we have the management team from Fidelity National Financial. Media attendees are Mike Nolan, the President; Tony Park, CFO; and Chris Blunt, CEO and President of F&G. So welcome.

Let me kick it off with a few questions on trends in the -- during the quarter. So can you just give us an update on residential order trends since the second quarter?

Sure, Bose, and great to be here. So thank you. We're still seeing a really strong residential market. This is a pretty typical year and that May, June looks like the peak for open residential purchase orders per day, and we're starting to see the normal seasonal fall off as we go through the back end of the year. But having said that, as we look at kind of July over July and August over August, July, we were a little over 4% on open orders on a resale versus last year and August was flat. And last year, because of the pandemic, the normal peak got pushed back, as you might remember. So August was actually our peak month last year for residential purchase. So being flat to that feels pretty good. And on the refinance side, give you a couple of numbers. In June, we are running about 5,000 open orders per day on the refinance side. July and August, we averaged about 5,400. So we saw actually an uptick in those 2 months, kind of remains to be seen kind of how the back end of the year will play out, but it still feels like a pretty good residential market.

Okay. Great. And then just on the fee per file side, can you talk about trends there? Clearly, HBA has been very strong. So we just can go over them.

Yes. Thanks, Bose. This is Tony. Yes, HBA, clearly driving fee per file strength. There could be some deal size as well, but it's hard to measure. When we talked in the second quarter, I think our purchase June to June was up about 16% fee per file and refi was -- that's on the purchase side. Refi was up about 4%. I took a look recently, I think that 16% might have been a little bit of an outlier. I think probably June 2020 was a little soft, and there's probably a lot of reasons why that might have been because I think we're more in the 8% to 10% increase when you look at August relative to the prior year August. That's on the purchase side. Refis are still up about 4%. And again, I think that's mostly -- I think most of that is driven by home price appreciation.

Okay. Great. And then just switching over to the commercial side. Can you just go over how trends are in this quarter?

Yes. I would say trends are fantastic. I mean through August, we've now had 7 consecutive months with over 1,000 commercial open orders per day. And to kind of put context on that, and 2019 was our best year for commercial open orders actually also closures in revenue, but we averaged, I think, 870 commercial open orders per day. So we're running whatever the math is close to 20% better than our best year ever in 7 months in a row. And it's just a very diverse market geographically, a very strong market geographically. And we're seeing a lot of strength in both local markets, national markets and even in a lot of different asset classes.

And then just on the commercial fee per file, how has that been trending?

I would say the trends here are positive. We had a fee per file growth first quarter to -- into the second quarter. And I would expect that to be moderately better as we go into the back end of the year. In July and August, it was interesting, I saw a real improvement in our local commercial fee per file, whether that's a trend that holds, I can't say that we have a nice uptick there. So we seem to be seeing maybe bigger deals, better deals in our local markets, and maybe that's just indicative of, again, the strength of the geographic commercial activity.

And then just in terms of mix, can you remind us how much of commercial is purchased versus refi.

Yes. We're running about 70%, I think it's 69% purchase to refi. I mean, remember, the average fee per file is generally the same, but we're definitely seeing a pretty strong purchase environment and it's up moderately from last year.

And then just in terms of the local versus national commercial, how much comes through the local side?

Yes. So you probably look at both volume and revenue. So on the volume side, this year, local is about 65% of our total open volume. But if you look at revenue, it's about 50%, 50-50. And that's -- just to add a little color on that. Traditionally, we saw be more like 60-40. Really '15 through '19, I would say it was more like 60% national, 40% local, even with that same transactional split. And that changed in '20, partly because of the pandemic. I think the national was affected more than the local. But it's interesting that this 50-50 number is holding up in '21 and probably just another data point around the strength of the commercial market and the broadness of it.

Okay. Great. And actually, one more on commercial. Just in terms of the agent channel, how much does commercial contribute to those revenues?

Yes. It's probably -- it's running about 18% or so in the last 3 or 4 months. I think it was even a little lighter than that, if you go early in the year, and that compares against probably about 25% on the direct side. So we do get good commercial volume on the agent side, but it's not the same as what we see on the direct side.

Okay. Great. Let me just -- I was just looking at a question that just came in. Actually one more on the commercial just since the question came in. Just in terms of the strength in the -- or the expectations in the third quarter, should we expect growth in the third quarter relative to what we saw in the second quarter?

We could. We won't know until the month ends. But remember, the second quarter of this year was the best quarter we've ever had. And it's very unusual to say that about a quarter other than the fourth quarter. But the open trends are strong. We're seeing an increase in larger transactions. So I think matching or doing better's possible, but I can't say it for certain. But it's going to be a really strong back half for commercial.

Okay. Great. So just let me switch over to margins. Can you just remind us where things are running in terms of margins by channel?

Yes, happy to. So if you look at the direct channel, and remember, that's our 1,300 offices across the country, margins in 2020 were 29%, in the second quarter of this year were 32%, so up a little bit. Remember, direct -- in our direct channel, we do probably 75% of all of our refis. We do 100% of our purchase transactions and we do our local commercial, as Mike spoke to earlier. If you look at our national commercial units, these are 21 or 22 offices that focus on the largest of our commercial transactions in the major metropolitan areas. Margins in 2020 were 28%. These are all pretax margins before overhead. And margins in the second quarter of this year were 35%. So clearly, some dislocation in last year in commercial, as everyone knows. If you look at our centralized refinance channel, our ServiceLink business, margins last year in 2020 were 34%, in the second quarter of 2021, they were 40%. And then in our agent channel and keep in mind, this is a gross number, not a net number. So profit or pretax profit margin against gross premium, 10% in both all of 2020 and the second quarter of 2021. So that's been pretty consistent. But that is actually -- that 10% is our best margin we've ever done in agency. I remember, if you go back, you saw 7% or 7.5% or maybe 8%. So now we're running pretty consistently for the last few years at 10%.

Okay. Very helpful. And then if you can just remind us what percentage of refinances coming through ServiceLink? And there is some purchase coming through ServiceLink as well, right?

Yes, there is -- the number moves around a little bit, but I would say it's in the 25% to 30% range of our total open refinance orders come through ServiceLink. So another way to think about a lot of volume comes through our distributed channel on the refi side. On the purchase side, it's really a small number. I think it's less than -- it's running around 130 orders per day this year on average. That's a small number. And there's just -- there's been the foreclosure moratoriums and defaults are at kind of record low levels. So those business areas are down considerably. But having said that, it's actually up from last year. We're actually doing more than we were last year, but it's a small number.

Okay. Great. And then just in terms of your long-term margin, you've talked about the range historically, the 15% to 20%. Obviously, you're currently running above that. As the market normalizes and you -- like the MBA is right and the market is a $2.4 trillion market with about $1.8 trillion of purchase, I mean how do you think it'll be margin within that 15% to 20% range?

Again, I think we've said in years past when we talked about a normalized market that the purchase market needed to be kind of $1.6 trillion or above and if we have that environment with a good commercial market, maybe it doesn't have to be record every year, but a really good commercial market and on average, I guess, refinance market, we thought we could do the upper end of the range. And I think we're seeing that now and even better, obviously, we've got about a $1.6 trillion purchase market, record potential commercial market and a really strong refi market, and we're kind of in a couple of quarters, getting above the 20%. So as we look forward, if we're talking a $1.8 trillion purchase market and a solid commercial market, maybe not as big as it is now, but a solid market. I think the upper end is where we should be. And maybe some quarters, 20% plus.

Yes, I'd feel real good about $1.8 billion, plus another $800 billion on the refi side and solid commercial. I'd take that. Yes.

Okay. Great. That's very helpful. And then actually, one more just on margins. In terms of the expense base, what -- how would you characterize the fixed versus variable component of your operating expenses?

Yes. It's a good question. It's not something we track precisely. In other words, we don't have classifications that say this is fixed. This is variable, and this is a combination. But just looking at the different categories, salaries, bonus commission. I mean some of those you can pretty much lump into one or the other. And on the operating expense side, you can do the same. So having thrown out that caveat, I took a look at the second quarter and 58% of our personnel costs were fixed, at least the way I could classify it. And that was 66% in the second quarter a year ago. So we're a little higher variable costs, that might be due to revenue and profits on the rise, and you just have more variable costs. On the other operating expense side of things, 60% of our other operating expenses were fixed in Q2 of '21 up against 64% in the second quarter of 2020. So a small sample, but certainly feels like -- and it makes sense, it's logical that in a stronger environment where we have stronger volumes and stronger profitability, we're going to have a higher percentage of variable costs.

Okay. That's great. And then just switching -- I wanted to touch on losses briefly. Can you just give us your latest thoughts there? Just the biggest run rate now is 4.5% on the provision? Is that a good normalized number?

Yes. It's certainly been a good number for a while now. It's probably a conservative number. We've built up a little bit of a redundancy in our reserves, just short of $100 million. I think it's $90 million or $90-plus million in redundancy. But still, I feel like not a material difference as a wide range, like a $400 million range in our actuaries estimate between the high and the low estimate. And so we're, I guess, $90-plus million above the central estimate. I'm comfortable there at 4.5%, even though we've seen for 8 or 10 years now that our loss development is running a little below that. But we all remember not so long ago that we had double-digit loss ratios in the '05 through '08 policy years and nobody wants to revisit those. So we want to be a little bit conservative. We're also -- I don't expect much fallout or much of an increase in losses relative to forbearance lifting and foreclosures may be increasing a little bit. But it'd be nice to see a little of that play out just to prove that to be true. Ultimately, we may end up having to move the provision down below 4.5% if we continue to build on that redundancy. So I guess we'll see how it plays out. But right now, I'm comfortable.

Okay. Great. And then just one more on the losses. Just given the sort of the technological changes in the industry, I mean do you think there's a secular sort of downward pressure on losses?

I actually do. And I think it's more than technology. I think it's process and focus and efforts, at least we have concerted efforts toward not revisiting any kind of losses that we saw in the last downturn. So I think all of that combined, including technology, there ought to be better loss ratios even in a bad period. That doesn't mean we won't have losses above 4.5%. I do believe that at some point, when the economic cycle turns, I think we'll have higher losses. And I don't know what those will look like, but rather than the peak being 10% or 11% or 12%, maybe it's 8% or something along those lines. So yes, I would expect lower losses as we move forward, but probably not consistently at sub 4.5%.

Okay. Great. So let me just switch over to technology and competition a little bit, and then I'll jump over to FG. On the technology side, can you just talk about current initiatives you have going? Like what are the main areas of focus?

Sure, Bose. We have a number of technology initiatives at any given time. I think I'll just really focus on our in here platform, which is our really beginning to end digital transaction platform for all the participants in a real estate transaction. And we've made material progress with this initiative. We're doing it at scale. We're doing it across the enterprise. It's not in a market and then we'll go to the next market. I mean we're doing it across the enterprise. And it starts with our start in here opening package. We've -- we sent out over 1.9 million opening packages since we started the initiative, we're getting a 60-plus percent completion rate. We've added in the ability to do mobile earnest money deposit digitally. We're seeing kind of month-over-month growth in the number of consumers that want to give us the deposit digitally, adding additional signing tools, guided digital closing feature, which really helps explain the closing documents to the consumers and it ends with the ability to do a full digital signing process. So we're very excited about this. We think it improves the security and really transparency and efficiency for all the participants. We've also got a mobile app for real estate agents, where they can track all their open orders with us, regardless of what brand they've opened the order with. We have a multiple-brand strategy. We have a lot of customers that use our other brands or different brands, and they can get status updates, get milestone updates, see where the transactions at. And again, just another feature that we think brings a better experience for the participants.

Okay. Great. And then just last week, a competitor announced a blockchain-backed title insurance offering. Can you just talk a little bit about blockchain, how you think it could impact the industry, what you guys have been doing there as well?

It's been a long time since we got a blockchain question. I remember when it...

No, it's a couple of years ago.

Well, we first got the question back in, I don't know, 2015, 2016, it was kind of like, what are you guys going to do about blockchain? It's going to white you out. And then it got kind of quiet. So I don't know what happened in the blockchain. I guess it's still out there, but I did see the announcement really small competitor. We don't come across them a lot. But I think for us, we view blockchain, I guess, as a database. And so you at least now analyze that on from the lens of, is it better than what you have? And is it cheaper? And I think the answer for us is no today. I think for maybe a smaller company kind of starting up, something new, maybe it makes more sense. The way we see it is kind of a go-forward idea as opposed to a go-back idea. And so I guess that's the lens we look at it right now. So what impact it might have, I just can't say today, but we don't see it as a database that's advantageous for us today.

Okay. No, that's definitely helpful. And then actually, just sticking to the theme of competitors. There's another competitor who has talked about Instant close and AI-driven changes to the industry that could make it a little more P&C-like. I mean just curious about your thoughts about potential changes that could happen that way.

Well, I guess a couple of thoughts. I mean, I think the industry, the broader industry, everyone is interested in more efficiencies. For the transaction, not just for themselves, but we all want to be more efficient. We wanted to be a better experience. And I think there's a lot of effort underway to do that. Whether that results in closing times from an average of 45 days to use at instant, but 5 days or 6 days, I don't know if that's a result anybody really wants. I know personally, if I signed a contract to sell my home and I was told by head to be out in 5 days, I'd probably go into a state of panic, but that's just me. But I do think creating an environment where everybody spends less time inside a transaction is actually a great outcome, and that's what we're really focused on. And if the days go down, that's great. To your P&C question, if the idea is the industry would benefit from being a casualty model, I think my answer is no. I think it would be a terrible outcome. It's just my opinion. But this is an industry that's really been developed and built on a risk elimination model and priced accordingly. And if you're talking about shifting to a risk assumption model, there's all kinds of outcomes that might not be good that could come from that. I think it certainly implies more losses. And I don't know that anyone wants to sign up for that. We saw what that looked like in the Great Recession, and it wasn't a good couple of years. I think we -- it's not that we are in a casualty environment, but I think we might all agree that the diligence provided by the broader industry in that period was not maybe what it could have been. And I think a lot of people have tightened up since then, including the title industry. But we had 2 years, when we wrote $1 billion in checks.

Yes. 2-year period, we wrote $1 billion in claims, In a 4-year period, we wrote $2 billion in claims. I don't think anyone wants to go through that. That will put a lot of companies out of business.

I don't know what that would look like if the whole industry went to casualty. I think there's another aspect to it that's very concerning to me. This country has really built in many ways an idea of private property ownership that's really protected by the integrity of the land records at our county recording offices and that's further back stuff by the title industry who improves those records year and year out to the curative work they do. And if you go to a casualty model, I think you run the risk that you lose the integrity, you degrade the integrity of those land records that really from the beginning of the United States, in many respects. It goes back to that time frame. And I just -- I don't know why anybody wants to sign up for that. And the trade-off, if I understand the pitch correctly, is, hey, don't worry about the losses, we're going to have less people. So don't worry about it. Well, I just don't know that, that's the proper trade.

It's very interesting. And then just one more on the competitive side. You see a lot of entrants in the market that are largely coming in as title agents. And so sort of shifting the market a little bit to the title side. Just curious your thoughts there in terms of working with the new entrants, et cetera.

Yes. I think -- I've been doing this a long time and as many others have. I think there's always been new entrants kind of coming in and out. And there's certainly some newer ones over the past number of years. We've seen more nonbanks grows originators of mortgages and the nonbanks have been more likely to create captive title agencies, then banks, for example, some banks have, but it's more likely on the nonbank side. so they might be considered newer entrants. And they become for us and other underwriters an underwriting opportunity. We can underwrite them as an agent. And many times, in addition to underwriting our agents, we sell other services like title production, for example, and might sell signing services or whatever they need. Some of these agents, if they're operating in larger jurisdictions like the nonbanks in particular, many times, they need additional market coverage. And so they'll come to underwriters like ourselves and others to get help in certain geographies. And so there's -- and sometimes that's on a direct basis. We do a fair amount of direct work with some nonbanks that have captive title agencies, depending on volume and they're managing their own processes. IBuyers are another example. They're probably a much newer entrant because that's a newer sort of phenomenon in the industry, and they are creating captive title agencies as well, at least some of them. And again, it becomes an underwriting opportunity and an opportunity to get title production. We do actually quite a bit of title production where we're sending search packages to agents.

Okay. Great. Thanks for that. Actually, let me just bring Chris and switch over to FG. So Chris, can you remind us the growth expectations that were laid out at the time of the acquisition, and how you're doing relative to those goals?

Yes, I think we said at that time that we felt we could double the business, double the earnings in a 5-year period of time. And I would say now a little over a year into it. We're probably running a full year ahead of schedule.

Okay. Great. And then you started out just in the independent channel, now you're distributing through banks and brokers. On a run rate basis, how much of the volume is coming now from the new channels? And how do you expect that to trend?

It's about 1/4 of our new sales right now are coming from these new channels. We've got right now, call it roughly a dozen distributors that we're selling through in banks and broker dealers. And I would expect by the middle of next year, that will probably be up to about 20%. So I'd say over time, they should be closer to 50-50. Keep in mind, about 40% of fixed annuity sales come through independent agents, but 60% come through banks and broker-dealers.

Okay. Great. And then just switching, you've entered the institutional market. Can you talk a little bit about the volumes there? I saw the release that you guys I think put out this morning on the run rate volumes. So can you just go over that?

Yes, really pleased. I mean that is well ahead of schedule. We hired Scott Cochran about a year ago. He has staffed up really just an incredible team. So we launched our first funding agreement note that was $750 million, well oversubscribed. We're really pleased with the terms. And then last week, we did our second, which was a little over $1.1 billion. So that's a huge accomplishment. In addition, we've onboarded a really experienced PRT team, and they're off to just a fantastic start. So we've closed our first few deals, brought in about $375 million. And that's a business that's really unconstrained. So I would see that being multiple billions per year over time for us. So we're really excited about that.

Okay. And that's the PRT business.

Direct pension buyouts.

Okay. Great. And then just in terms of the -- is the ability to find assets a constraint on growth? Or how would you see that in a balance with the -- it seems like the strong growth you have now?

Yes. So far it hasn't. Our partners at Blackstone have just done an exceptional job of finding interesting new investment-grade debt -- private debt opportunities for us. So as we've ramped up and as we've increased our projections on what we think we can do from a new sales perspective, they've really been with us step-for-step in terms of origination. So clearly, at some point, but I think we are years away from getting to that point where that would be a constraint.

Okay. Great. And then just from a capital standpoint, is there enough internally generated capital to fund the expected growth? Or are you guys looking at other sources?

Yes. I mean, clearly, with the sales trajectory that we're seeing, we're going to still need some additional capital. And I would say right now, we're going through a pretty detailed analysis of looking at all the different sources for that. Obviously, FNF could be a source of additional growth capital. We could also look at reinsurance or third-party arrangement. So we're undergoing that analysis right now.

And just longer term, is there a point at which the FG portfolio gets to a level where it doesn't need capital where there could be a capital return side of it at some point? Or is that pretty far out in the future?

Yes. No, I would say some time, it depends on sales volumes, obviously, but sometime in the next 2 or 3 years, those lines do cross where the capital generation coming off the in-force can sustain a pretty high level of new sales. Obviously, at some point, we can plateau our sales levels and just look to optimize capital usage and mental health as well and that I just want to remind folks that the capital sitting in our in-force is something that can be harvested. It's not a money-market account. Obviously, there needs to be some lead time, but there's pretty voracious demand right now for in-force block transactions. So at the moment, the marginal return on capital into FG given where we are in the inflection point is really, really attractive. But the Board is aware that if we were needed to be a source of capital down the road, that's something that we could deliver on.

Okay. Great. And actually, just sticking to capital. Let me just ask more broadly, just Tony, can you just walk through the current excess capital and then just potential uses of capital?

Yes, absolutely. So at the end of the quarter, last quarter, we had $1.2 billion of parent company cash and generating a lot of cash flow out of the title business and the F&G business, but of course, that's -- that gets eaten up by new sales, as Chris discussed. The uses are the list of uses we really always have our common dividend, we raised that last quarter by 11% to $0.40 per quarter per share. That cost us about $400 million annually. We also have about $100 million of interest expense annually. We're completing our $500 million share buyback commitment, almost finished with that as we speak. F&G, we talked a little bit about their sales growth and their need for capital. We also talked in the last couple of quarters about being a funding source, at least on the debt side. And so we're going to be the initial lender, maybe not a permanent lender, but the initial lender of about $400 million to F&G to help fund their growth that will be in terms of a term loan at market rates. And so that will be -- that will come together in the third quarter. M&A, always a possibility. We've been acquisitive over our history. I think agent acquisitions are always on the table. Sometimes we spend a little, sometimes we spend more than a little on that front. I would budget somewhere between $50 million and $300 million, maybe depending on the year that we could go out and buy high-quality agents to kind of infill into our footprint. On the debt front, we're in great position there. We do have some debt coming due September of next year. But as you probably know, just last week, we did a senior debt offering $450 million, 30-year bonds at 3.2%, really to prefund that debt that comes due a year from now. So we're really in a good, solid capital position.

Okay. Great. Actually, I just wanted to look I think there's a question. Actually, this is sort of going back to the competitive issue. This question is, do you think banks and regulators fully understand the risk that people who approach this from a P&C perspective? Or is this something you and your peers can help educate them on?

Well, I don't know that I could answer where the banks and the regulators are at. It might be the sort of a newer concept and maybe hasn't reached the radars, if you will. I think certainly, the industry should have a dialogue around it and could certainly help educate people of the potential risks. When I think about this whole idea of speed and shorter times and things like that, I mean I get it. But I think what people lose a little sight of is that there's really important due diligence that's conducted by a lot of different participants in the standard purchase transaction that is there to protect buyers and sellers and the other participants. It's not just the work the title company does and the settlement agent does, but you've got loan review, you've got loan underwriting, you've got appraisal. You've got appraisal underwriting, you have inspections and then the fact that there might be a punch list of things that have to be corrected in a home, you have lawyers involved in certain markets, adding their review, realtors. So you have all these participants that are working to protect the people in the transaction, and that's really important. And so what's the trade-off between that appropriate due diligence and speed and to arbitrarily say what we need is a 5-day closing or 6-day closing and an instant title. And the way to get there is just not to do the work, if that's the premise. I just don't think that's the right way to think about it. And I do think the industry can do a better job. And I think we need to do a better job. And deal with the questions that all the participants might have to make sure we keep the protections in place that people need.

Okay. Great. And then actually just going back to capital, just your debt to capital is, I think, now at 23%. Anything to do there? Or are you pretty comfortable just where that is now?

No, I think it's a good spot, somewhere in the 20% to 30% range. We're very comfortable. The agencies are very comfortable. It will bump up a little bit with this new issuance probably in the mid-20s. But that comes down with the earnings we're generating, that will just come down over time and probably will land not -- in not too distant future will land in the low 20s.

Okay. And then just switching to M&A. You see that you did speak about it earlier briefly. But just curious on, is there anything in the pipeline that's outside the title space, I mean, there was a period when you spoke about being very focused on the mortgage ecosystem. Obviously, since the FG has been a part of the picture. Just are there -- is it broader? Or is your M&A kind of profile back to being narrower?

Yes, I'll comment, maybe the others can weigh in. My view is that -- and I realize we did an acquisition completely outside of the title space. But my view is it's real estate related. It's probably not a transformative title insurance company like a Stewart Title, which we couldn't get done through the regulators. But I think there's a lot of work we can do, a lot of M&A activity we can do on the title front. They're also probably in the mortgage and technology-related service link side of things. And frankly, there might be something on the F&G side, which is obviously unrelated to the Title space. But if the question is, would you see going into maybe a third type of business back when we had FNFV, we would branch out into auto parts, restaurants and payroll processing and a number of different things. I just wouldn't see us go down a path like that in the future.

I agree with that also.

Okay. Great. And then just in terms of capital, just a couple more. On the dividend, is there a payout ratio? Or how do you kind of look at it when you set that number?

Not really a payout ratio. We don't want to be in a position where we have a cyclical downturn in earnings and have to lower the dividend. So we try to be methodical about a consistent growing dividend over time, which usually means somewhere during the year, we look at the dividend and increase the dividend modestly as we move through cycles. So that's how I would envision it happening in the future.

Okay. Great. And then just on the buybacks, can you just remind us of sort of the cadence you're targeting there?

Yes. So we're really not public about our daily buyback activity, but we did commit to $500 million back in the fourth quarter of last year, and we're almost through that commitment. I think we're very close. I haven't checked the latest numbers, but we're almost through the commitment period. We're almost through the $500 million. And I expect that will continue on. I don't know if there'll be a formalized commitment from the Board, but I expect to be in the market every day when we're not blacked out buying back our shares. We think there's a lot of value there right now.

Okay. Great. If we've got a couple more minutes. Let me just switch over to regulatory and a couple of other topics. Anything that you're keeping an eye on the regulatory front?

Not really. It's been pretty quiet on that front. I think that's a good thing. We have 50 state regulators and of course, loan care and some of our other businesses might have some on top of that. But it's pretty quiet at this point other than just normal activity.

Okay. Great. And then just on taxes. To the extent the federal tax rate goes up. How do you think it potentially impacts premiums, do you think we could see any change in the industry?

I don't think so. We got the question. I don't know when it was 3 or 4 years ago when they went down. Are you going to see any activity there? Are you going to have regulatory pressure to lower your prices and we really didn't have much. But I would say it works the same way on the other way. If we pay more taxes than we're going to pay more taxes, and we're going to earn a little less money. But I just don't see that driving what we do from a business standpoint.

Okay. Great.

Bose, I was going to say you should buy F&G tax-deferred annuity when rates go up.

Well, that's a good that's a better answer than mine.

That makes sense. Okay. A couple more actually just on the 1031, there was, I guess, a few months ago, there was some discussion about 1031 being part of the tax reform do you guys have any update on the 1031? Is that still on the table?

Yes. Right now, we think it's not on the pay for list. So we'll see where things end up, but we're, I guess, modestly optimistic that it stays off the table.

Okay. Great. Actually, let me just sneak in one more. Actually agent splits, any changes that you guys have seen recently? Or is it pretty stable there?

I think they're stable. I think they've been stable for a long time. We did see in the second quarter that the percentage that we keep went from 24% to 23% rounded. I don't think it was a full percentage point. And we dug into that a little bit. It looks to be just the markets and the markets vary widely from you might have a 12% split in one market and a 40% split in another market, and these are real numbers. And so what we saw was that we saw stronger growth in areas where the market was just a little tighter in terms of what we retain. But other than that, I really don't see any agent -- material agent split that we expect.

Okay. Great. Okay. Our time is up. So thanks very much for joining us today. And thank you Blunt for joining us as well. Have a good day.

Thank you.

Appreciate it.

Thanks, Bose.