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

Good morning, everyone. Welcome back. Next up, we have Fidelity National Financial, FNF. FNF is the largest title insurer in the country and has been one of our favorite names over the years. From FNF, we have Mike Nolan, the CEO; and Tony Park, the CFO. So welcome. Actually, let me just start on the F&G side. First of all, congratulations on the F&G partial spin-off which started trading regularly today.

Thank you.

Why don't I just kick it off with a couple of questions on that before I move to title, so can you guys just discuss the longer-term outlook for F&G as part of FNF?

Yes, Bose maybe I'll start, and Mike can chime in. I think at this point, we've been -- well, I know at this point, we've been very pleased with the growth, the earnings contribution, what Chris and team have done with that company and as a complement to F&F, I think it's been great. The only thing that we haven't been pleased with, and I think I share a lot of sentiments from a lot of investors is that we haven't really been recognized for the value that we see that we've bought and then created and added on to. So at this point, yes, we're live. We're a separate -- sort of separate. We still control and own 85% of F&G. And if we see the recognition that we're looking for, there may not be future plans other than to continue to grow that business. If we don't see it, then I'm sure the Board will take a look at where we stand and what else we might potentially do. But at this point, I think it's wait and see.

Okay. And then F&G has announced the initial $100 million annual dividend. Just in terms of capital, is it safe to assume going forward, F&G will remain a source of capital for FNF and growth there is going to be self-funded?

Yes, definitely, we believe that it will be a source of capital with a $100 million annual dividend that potentially grows over time, we get to keep 85% of those distributions. And I don't expect that we will be a capital source to F&G in the future. They have capital sources through reinsurance and other means. And so at this point, I don't expect that we're a source there. We just feel like it will be a dividend payer and we can take that dividend at the holding company and do with that what we will.

Okay. And actually just 1 more on F&G, so I mean you noted that if the market recognizes the value, there's nothing that potentially needs to be done. To the extent that it doesn't, is a full spinout in the future a possibility and in that scenario like are there things like they're maintaining the investment-grade rating at F&G that we need to sort of keep in mind?

Yes, certainly, I think a full spinout is a possibility. At this point, it's not something we're thinking about. We do have the ability. We're still owning more than 80% of the company. We have the ability to do that on a tax-free basis provided we've held the company for 5 years and so we're not there yet. We bought it in June of 2020. There might be ways to get around that. But at this point, we're not thinking about a full spin. But to your second question, yes, investment-grade ratings are important to F&G for their business. And I think it's helped them launch into multiple distribution channels when previously they only had one. They were on their way to investment-grade, whether or not FNF acquired them. So I believe, although it's not been tested, I believe that they could stand alone as an investment-grade credit today.

Okay, great. Let me switch over to title insurance. But first, actually, let me just remind people, if you want to ask questions, either submit them online or just e-mail them to me at [email protected]. So okay. Switching over to title, can we just get an update, just first start an update just on residential purchase trends that you guys are seeing?

Yes. Good morning, Bose, and thanks for having us today. We continue to see just the seasonal decline that we typically get, but I would say with added pressure from the higher mortgage rates, so to kind of put some numbers to it and these are through last Friday, we don't in the last couple of days this week yet. But our November purchase open orders are down about 36% to last year and down about 11% sequentially. And we've just kind of seen that number growing as we go through the year. For example, in September, we were off about 25%, October, 29% and now 36% on the open side. And the sequential number of 11% is probably a little stronger than typical. And if we didn't kind of have this rate environment, I think that number might have looked more like a 6% or a 7% decline that might be what you see typically. On the closing side, purchase closings were off 23% in the third quarter and were off 32% in October. We don't have really November numbers because the end of the month is usually our strongest closing part. But I would expect that November closings will be off at least what they were in October, if not more. So it's -- continues to be a much tougher environment given the level of rates we have.

Okay. And then just a similar question just on the commercial trends that you guys are seeing?

Sure. And typically, in the fourth quarter, we tend to see a little softer environment on the open side. That tends to be the corner with the lowest amount of opens and the highest amount of closing. So just to preface that, but having said that, October opens were at 760 a day, as we talked about on the call. And in the third quarter, we averaged, I think, 850 a day, which really lined up well with the volumes we had in 2019. November is running, I think, again, this is through Friday. I think that will settle out in the 725 to 730 a day range, so certainly on the open side, seeing that the closings coming down in the fourth quarter as well.

Okay. And then just actually switching over to margins, can you just talk about the pretax margin expectations in '23? I mean on the call, you guys noted 15% to 20% annual margins is the right range in kind of a normalized market, but also, obviously, you highlighted the uncertainty, just kind of updated thoughts there would be great?

Yes, I mean I think, again, the 15% to 20% holds in what we would consider a normalized market. You could look back over the last 5 or 6 years and see our performance and it's been close to that 15% annual number and even higher depending on the size of the market. But we're not in a normal market right now. There's -- these rates are putting a lot of pressure, I think, on industry margins and will put pressure on our margins in both the immediate term and I think in the near term as we go into next year. So it's a little tough to predict where margins are going to end up. I think we need to get into next year and kind of see if we get rates softening a little bit. We've seen the tenure come down recently, but I still feel like there's a lot of uncertainty over where that goes into '23. Just to kind of put some numbers to it in terms of the change year-over-year. This year, our purchase closings sequentially fell 15% in Q3 versus Q2. And last year, that number was 4%. So that's a big difference year-over-year. And in the fourth quarter of last year, our purchase closings fell 5%. And I would think -- obviously, we don't have the number yet for the fourth quarter, but I'd expect it to be every bit the 15% that we saw in the third. So we just have a lot less volume to close and that's going to be a headwind around margins again for the fourth quarter and I think into the early part of 2023.

Okay, that makes sense. And then can you also just remind us margins by segment and how that's kind of varied as volumes are slowing?

Yes, Bose, thanks. I'll take that one. I assume you mean kind of by business line.

Business line, yes.

Yes, we have segments that are different in our reporting segments. But anyway, if you look at the title business, which is what we're talking about, the third quarter just reported from our direct operations and I'll remind you that that includes residential purchase, residential refi and local commercial. Those margins were about 26%, we'll call it, a little less than 26% versus 31% in the third quarter of last year. Our agency operations just short of 8% in the third quarter versus 10% in the prior year quarter. Our national commercial business, which is probably about 55% to 60% of our total commercial activity about 31.5% margin on that business in the third quarter versus about 34% in the third quarter of last year. And then in our ServiceLink centralized refi business we're just short of 17% profit margin versus 36% in the record third quarter of 2021. So that gives you an idea of what happens when volumes come out, we take actions, as you know, aggressive actions, but still with volume coming out, you're going to suffer on the margin front.

Okay, that's definitely helpful. And just to get sort of on a related note, you noted on the call that year-to-date, net of acquisitions, head count is down around 20%. I think 5% of that was in October and early November. When you think about -- as there are potentially further volume declines, can you talk about sort of room for further headcount reductions?

Sure, so we took about another 3% out from that number. So we're about 23% down in the title head count kind of at the end of November. And just depending on the size of the market, we'll follow that. If you go back to the great financial crisis, from '06 through '08, so the beginning of '06 to the end of '08, we took about 42% of our field head count out. I don't envision that we're in that kind of environment today. But the 23% we've taken out this year equals what we did in '07, which was the biggest decline we had in 1 year previous. So just to kind of give some context to that. I do think we need to get into next year and really evaluate the market, see if we get the normal seasonal increase that we see typically in the first and second quarter and just see where we're at on head count. But as to whether we can do more, we can, depending on where the volumes are as we go into next year.

Okay, great. Actually, there's a question from the investors. Let me just switch to that briefly. Can you discuss your views on attorney opinion letters and the probability that they will replace some portion of title policies?

Sure, first of all, attorney opinion letters have been around a really long time, probably as long as I've been in the industry, which is going on 40 years and I've never seen them become a significant part of the market. And while there's been a couple of headlines recently, I guess, notably because Fannie Mae put out their announcement, there's been a lot of questions on it, but I haven't really seen much impact and I don't anticipate seeing much impact. It's a product from my view that is -- just doesn't have the same value proposition as the title product in so many ways and certainly can go into that if need be and to the idea that it's a cheaper alternative to title, I don't even know if that is an accurate statement or not. You would have to compare on an individual attorney to size to charge for an attorney opinion letter in markets all across the country, up against all the various rates that are charged by title companies for refi policies and owners policies to see if it even plays out, but it's certainly, in my view, a substandard product from a coverage standpoint to a title policy.

Okay, great, that's helpful. Okay. Let me just -- yes, I'll switch back over to just the discussion on margins. In terms of your expense base, how much of your expense base would you characterize as being variable in the sort of the near to midterm? And in 3Q, it looked like your expense reductions equated to kind of around 2/3 of the revenue reduction. Is that kind of a way to kind of think about it potentially?

Yes, Bose, we don't track variable and fixed precisely. It's not coded that way, but I've looked at it over time and my general rule of thumb is about 65% of our personnel cost line item is fixed, 35% variable. That's in the short run. Obviously, with actions that we are taking, we're converting some of those fixed costs like salaries and payroll taxes and that sort of thing to more variable by reducing that. But just as a snapshot, 65%, 35%. If you look at our other operating expense line item, there's a lot of things in there. There's a title plant. There's facilities, there's IT costs, all kinds of different things. That runs -- including some cost of sales on some of our ServiceLink businesses, but that runs about 60% fixed, 40% variable. And then other line items, obviously, with agent commission, it's 100% variable with the agent premium line item title loss provision 100% variable with the total title premium line item, interest expense, primarily fixed in the short run.

Okay. Great. And then actually just switching over to investment income, can you just remind us what your guidance is for investment income? And what could sort of drive differences in where that ends up next year?

Yes, sure we talked about it on the third quarter call. I'm expecting based on the rate increases that we've seen from the Fed, expecting $15 million to $20 million more in fourth quarter investment income. This is just title and corporate, $15 million to $20 million more in Q4 versus Q3. And then looking to next year, I was looking at maybe about an $85 million quarterly run rate in interest and investment income, assuming that rate increases slow down and maybe stop based on what the projections out there are. And there's some estimates in here clearly, our 1031 exchange business, for example, which drives meaningful investment income. I mean those balances vary and so we have to consider what that generates. And then our short-term investments also, basically the cash on hand that we have is now earning a lot more than it was over the past few years. And so sitting on $1.1 billion in holding company cash, that's earning more so as those balances change and as rates change, those obviously impact what our investment income is.

Okay. And can you remind us the 1031 exchange is that mostly commercial, residential, kind of the mix of 2?

It is a mix of the 2 for sure. Probably from a numbers standpoint, it might be more residential than commercial, but from a dollar standpoint, probably more commercial. The idea here is we're an intermediary, a qualified intermediary. We hold money while an investor -- it needs to be investment property, but the investor searches for a replacement property, they have 180 days in which to do that. And so we earn interest on those balances, and those balances fluctuate anywhere from $3 billion or $4 billion up to $10 billion or $11 billion. It's off balance sheet. You won't find it on our balance sheet because they're not our funds. But the customer participates to some extent in those earnings. But we earn a pretty good return on that as well. And so they have driven some of the recent changes you've seen in 2022. They've driven a considerable amount of our interest and investment income.

Okay. Great. And actually, let me switch over to M&A. Can you discuss the TitlePoint acquisition? Was that just -- it's a business you'd like, so you just kind of buying it back ahead of your right to exercise that option ahead of that transaction closing?

Yes, maybe just for some context, when we spun out for [ FNF ], we had a business that we call Property Insight that was the data and technology to manage that data for all of our title plants around the country. And as part of the transaction at that time, we moved or sold the technology component of that. We kept the data, so we still owned that all the time, but moved the technology over to Black Knight along with the rights to sell product to third parties. And at the time that made sense to us. But as we -- as the years went by, we started thinking that it kind of be nice to have that brought back in. We thought having better control of that would lead us to maybe further opportunities to automate title processes as well as maybe get to some new revenue opportunities. So we kind of have that in our mind over the course of time. And then when the Black Knight announcement with ICE came out, that led us to the opportunity to repurchase the business because we had built that into the contract that if they had a transaction, we could do that. So we approached them and successfully negotiated a transaction that we announced a couple of weeks ago. So it's really just about our desire to kind of marry again the technology with the data.

And maybe, Bose, I'll just chime in. We've had some questions about valuation. So I might as well just answer the question. But it's roughly, call it, 10x EBITDA, which is a little more than what we paid for a title acquisition. But given the high margins of this particular component of that business and the technology that we're acquiring, we think it's a fair price. And this business can generate anywhere from $15 million to $25 million annually in cash flows or in EBITDA and potentially some synergies down the road for us. And so that, combined with the strategic value that Mike talked about, we thought it was a fair deal.

Okay. Great. And then actually, just sticking on the theme of M&A, can you just talk about the AllFirst Title acquisition? I mean you didn't disclose the price, but can you just help us think about the scale and [indiscernible]?

Well, we're very excited about this acquisition. We think it's a great brand with great leadership and people. It has a strong footprint in Texas and Oklahoma, 2 markets we think highly of. There are 2 states that continue to see growth and migration of those states. So we think the future is really, really good there. They also have footprint in New Mexico and Arkansas, and I think there's a lot of growth opportunities. Obviously, right now we're in a different market. So the numbers will be a little bit different. But I think as we get back to a normalized market and with the growth opportunities, we would look that to be in business with revenues north of $75 million annually, even really, I think there's an opportunity to grow it beyond $100 million. So from a scale standpoint, I think that's how we view it.

Okay. Great. Actually, there are a few questions from the audience. Let me just -- can you give us your thoughts on the risk to the fee per file given signs of weakness in the residential housing market? Secondly, could you comment on thoughts on commercial fee per file and if there are any particular commercial segments that your fees could be correlated with?

Maybe on the residential, I'll do that. Maybe Mike, you can touch on commercial. But yes, I would anticipate some pressure on fee per file. We've already -- I mean, we've seen positive trends in fee per file, not just from home price appreciation, but also the fact that our mix has shifted considerably toward purchase as refi has fallen off. And so that's grown steadily. But I think we're pretty close to trough levels, I think, in refi just because it's gone so low. And if home prices come down, which I think we all expect that they will, to some extent that will put pressure on fee per file trends. I think we're seeing roughly a 1% sequential monthly decline in fee per file, 1% to 2% to 3%. I don't remember the exact number, but it's somewhere in that ballpark as we move through just the last 6 months or so. I mean I view it almost as a good thing because if home prices come down, I think affordability increases and we might see more volume from that. And so I don't necessarily view it as a bad thing, but I do anticipate residential fee per file to be under some pressure.

And the commercial, I'll touch on that. It's just a lot tougher to sort of predict commercial fee per file, given the lumpiness of transactions, you get really big deals that can skew it, et cetera. So I would expect in the near term commercial fee per file to be pretty consistent with what we saw kind of in the third quarter, I guess, and it's tougher to predict what '23 will be like. I will say that we did see in, I guess, maybe the back half of '21 and into '22, that the local commercial fee for file was growing. And I could see that softening a bit, maybe in line with trends on the residential side, but as I said, very tough to predict.

Okay. And I don't know if this is one you guys want to answer. But the question is, do you think the Black Knight and ICE deal ends up closing?

Yes, you probably ask somebody else that question. We're...

Yes, we don't know.

Sorry to that.

Yes, fair enough. Actually, just switching back to the M&A discussion, can you just talk about the -- just sort of the broader landscape for acquisitions? Are you -- things you're looking at either in the title agent side or ancillary businesses, like where do you kind of see attractive opportunities?

I would say -- and I'll start, Tony might weigh in here, too, but we still see a lot of opportunities on the title agent side. We announced one in St. Louis a few weeks ago as an example of that. We're having regular discussions with people on that front as we always do. I would say right now that maybe sellers are still thinking about '21 multiples versus the market we may be in now or next year. But we do think there'll be continued opportunities with title agencies and we'll continue to do those. On the sort of ancillary front, yes, there's always things we're thinking about and looking at. Nothing to call out at the moment, but we're always interested in bringing talented companies into the FNF world and people that really see a strong future with being part of our company in the long-term and then also drive profitability and strategic value to the company.

Okay. And then can you just discuss your investments in technology, just in terms of some of the competitive advantages that provides in areas that you're focused on?

Well, sure. And I think, I mean, the TitlePoint is a great example of how we view technology and what we need to invest in. I mean that's a significant investment. We think it's very important for our future. We continue to invest in and develop and enhance our SoftPro system, which is what really powers our title and closing business, and also powers a significant number of independent title agencies business. So we really need to make ongoing investments in that. And I think a great example of that is what we've done with our digital transaction platform inHere, the inHere Experience platform, which really runs with SoftPro, and the thinking there is really all about how do you make the experience for buyers and sellers and real estate agents and lenders more transparent, more efficient, more secure. And we think we have the ability to do that and we're very encouraged by the growth and use of our mobile app where we now have over 120,000 real estate agents using that platform to track and manage their open orders with us. And we think that goes a long way towards improving experience and transparency. And we think ultimately, efficiency because if we can eliminate a lot of the e-mail and voicemail traffic that goes into a transaction. Because both consumers and agents can, in real-time, get what's going on in the transaction through a mobile app, 24/7, we think there's long-term value in that and we're going to continue to invest in those things. And we think it ultimately gives us the ability to differentiate ourselves from the industry.

Okay. Great. Actually, there's another question here. In this doom and gloom environment, what aspect of your business do you think investors are undervaluing -- or is it an area that sets you up to be bargained for the discerning investor?

Well, first of all, I wouldn't use the words doom and gloom. We're in an industry where we do have some volatility in transactional volumes. We've been through it before. We've proven that we can manage through it. And we really take a longer-term view to this industry. We think it's a longer-term growth business given population trends, the number of people and the prime age group to buy homes is probably the largest it's ever been. Commercial has been growth over time. So we're very bullish on the business. So we don't think doom and gloom. We know to manage the environment that we're in and that's what we've done and that's why we've had to take 23% of our staff out this year. So I think investors should think about the longer-term view and the power of this franchise, which we've demonstrated over the past couple of years in higher volumes, the power of this franchise to perform really through any environment and outperform the industry.

Okay. Great. I see there's 1 more from the investors. Does management have interest in pursuing acquisitions outside of the core title business again, similar to the F&G transaction a few years ago?

Well, I think our view is that we focus on the title and related industries. And Tony can weigh in here, too. I mean you never say never. We've always been an opportunistic company, but I think the view is to be more, core to this -- the title and related companies.

Yes, that's my expectation as well. If you look back over time in periods of dislocation like we saw in '08 and other times in our history, we've actually been very opportunistic in acquisitions that have built the title company franchise to what it is today. So we're in a strong position from a balance sheet perspective to take advantage, especially sometimes when things get tough, that's when maybe we would shine the most.

Okay. Great. Actually and then just sticking on the balance sheet. Can you just discuss current liquidity and just priorities for excess cash?

Sure. We ended the quarter with $1.1 billion in holding company cash. If you're keeping track, that's down from where we were in the second quarter, primarily driven by the retirement of the $400 million senior notes that came due in September. Just to give you an idea of holding company cash flows in the third quarter, we upstreamed from our subsidiaries about $350 million of cash. And then, we did with that various things. I mentioned the $400 million. Our shareholder dividend, which we just raised to $0.45 a share, but our shareholder dividend of $125 million, we had interest expense of about $35 million -- we bought back over $200 million in FNF stock during the quarter and acquisitions were just over $100 million. That's why we dropped down to $1.1 billion. In terms of priorities, it's kind of more of the same. The dividend is, #1, runs about $500 million annually. We're very comfortable with that level, and you've seen that grows over time. We're also active in the market buying back our shares. We think that's good value. We talk about M&A and we're always active there to some extent. And then from a debt standpoint, we're very well-positioned. We don't have anything coming due anytime in the near future. So we're -- and I think, yes, we're sitting now excluding AOCI, sitting at about 23% debt to cap.

Okay. Great. And just actually, in terms of the leverage, when you look at leverage, how do you think about the AOCI? Do you kind of -- do you sort of look through that or is that sort of a factor in terms of your target level of leverage?

We really look through it because we -- first of all, our portfolio is pretty short. Secondly, we don't have liquidity demands that exceed what we can handle with day-to-day operations. And so we're not forced to sell those fixed income securities until maturity and -- or until recovery. And so we look through it. Our credit agreement allows us to look through it. And so I'm very comfortable with these short-term noneconomic adjustments based solely on interest rates.

Okay. And then actually, just can you address expectations on claims? Like what do you think is a good run rate for that any concern that things could change if we go into a meaningful downturn?

Yes, no real concerns at this point. I think that -- I mean we're a little conservative at 4.5% of title premiums. We've built a little bit of a redundancy of about $90 million, possibly more, but our actuaries would say $90 million. We monitor it closely, as you would imagine, absent a major default environment, which we're just not anticipating and I'm not sure many are, I don't feel like there's going to be a whole lot of change in our claims picture.

Okay, great. Actually switching to a couple of other topics, just the questions on market disruption have [ roughly ] kind of gone down lately. But can you just give us your thoughts on market disruption, why it's been challenging for some of the companies that have made that their goal in the past to really gain traction?

I think it's a really interesting question. I'll just give my personal view. I think there's a fundamental misreading of how the broader real estate market works, the participants in it and how those various participants interact. It is not ordering a car service. It's not ordering a pizza. We've all seen plenty of Picstacks from companies and Uber should probably get a royalty for how often they're mentioned in a Picstack. But it's a complex financial transaction for most people, when you think about residential transactions it might be the most important financial transaction they ever undertake. And there's a lot of critical and important due diligence that's built into the system and provided by multiple participants to mitigate risk. And that's really important. It's important to the individuals. It's important to the economy, it's ultimately important to the country. And it's really the title industry that really brings it all together. We're the ones that bring all those participants together and in a smooth manner, bring it to a safe conclusion. And I think that's what's really missed by some of these companies that prefer to want to disrupt the industry. The average purchase resale transaction takes about 40 to 45 days. And I bought and sold the homes, I know we've all done that. I don't know that that should be a shorter timeframe or not. I think it can be more efficient in terms of the amount of time you spend inside a transaction. That's what we're trying to accomplish with the inHere platform. But I've been happy to have the 40 to 45 days to organize all the things you've got to do in life to buy or sell a home. So I guess that's my take on it, Bose.

Great. Actually, just switching back to the question earlier, just on the attorney opinion letters, can you just talk about briefly sort of the differences, like what does that kind of provide -- what does title provide that that does not provide?

Well, a couple things. One, a title policy protects against fraud and forgery. It protects against things missing in the public record. It very importantly provides in the event of a claim, the cost of defense, which attorney opinion letters don't provides coverage of the gap between -- when you close a transaction and file the documents, sometimes you can get claims inside that gap. I don't believe attorney opinion letters cover that. And their basic coverages, if there's negligence on the part of the attorney. So if you had a claim, as I understand that you'd have to demonstrate that the attorney was negligent in its review of the public records and that's the extent of the protection. And if you had a claim it didn't and couldn't come to an agreement on how that would be settled, you ultimately have to sue to go after your rights. So think about that. You don't have the defense of the title company. You're kind of on your own. So those are some of the differences that I think are important to remember.

Great. That's definitely helpful. And then just on the regulatory front is there anything -- I mean, anything out there that you guys are keeping an eye on?

Not really, I mean I can weigh in. I don't know if Mike has thoughts as well. But yes, we have very strong -- obviously, we have a lot of regulators, 50 states regulate us. But in terms of relationships, they're strong. We have various audits that are routine that are conducted market conduct exams from time-to-time. But it's -- knock on wood, it's been quiet. I haven't heard anything from regulators and not something that we're really -- there's no one area that we're really monitoring.

And this is actually a related question. Can you just talk about the splits, how that varies between states and whether there's any -- I mean any changes that you guys have seen?

Yes, I mean, I'll start maybe. I mean, it can vary -- you're talking about agent splits and agent splits can vary widely from state to state. There's a few states that regulate or probate splits, states like Florida at 70%-30%, 30% to the insurance company, 70% to the agent. South Carolina, I think is 60%-40%. Texas is 85%-15%. New Mexico might be 81%-19%. But most of the others are more driven by the business really and that can vary as well. I mean you see some splits, especially out West, that can approach the single-digits for the insurance company. We don't do a lot of agency business out West because, first of all, we have a really strong direct footprint. And secondly, you can't make a whole lot of money when you're getting 10% of a title premium amount, especially if you're setting aside 4.5% for -- 4.5% of that 10% or 4.5 points of that 10 on claims and you've got some premium taxes and some oversight and that sort of thing, the margins just get really thin. But yes, I mean, I think it runs anywhere from 40% to the underwriter to less than 10% depending on the state.

And I would add to that that there's always market pressure on a case-by-case basis on splits. But if you look at our overall splits, they've been very consistent for years, what, Tony, about 23% to us, 77% agent. We have the best, most favorable division of premium in the industry. And with that, #1 market share in agency. So we're the #1 agent provider in the industry and we get a better division of premium. And I think that really speaks partly to the quality of people we have and the value proposition we offer agents and that they're, in some cases, willing to give us a little higher division of premium because they want to work with us.

Great. Actually there's 1 more question here from the audience. Does the current market volatility provide an opportunity to gain market share? How are you positioning for the recovery in the next up cycle?

I mean we view every downturn as an opportunity and that's why even though we're reducing the size of the company, we're still looking for opportunities to acquire good companies and recruit. And we've been adding revenue attach recruits throughout the year because we see good opportunities to add people for the long-term, and it's the same thinking with some of these acquisitions. We could decide not to do any of that, and we'd be down even more in terms of the size, but we're bullish on the long-term and we want to continue to add companies. So yes, we think there's opportunities to grow and to continue to build the company.

Okay. Great. Well, I think our time is up. So thanks very much, Mike and Tony, for joining us and thanks for all the investors as well for joining. Have a good day.

Thanks, Bose.