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

All right. We're going to get started. Thanks for joining us here today on day 1. I got our old friends at Fidelity National Financial, that's ticker FNF, kicking us off in Nashville. We're super excited about hosting these guys again. We're excited about this conference. This has been a couple of years in the running here in Nashville, and it's been a real success for us thus far. But I'm John Campbell, I'm the real estate services analyst here at Stephens. I have covered FNF for a long, long time. Out in the crowd, we have Brett Huff, who used to cover these guys many, many moons ago. So happy to have him in the audience. I think he's going to have some super insightful questions out there. But on the stage here representing FNF, we've got the CEO, Mike Nolan; CFO, Tony Park; in the crowd, we've got the IR Lisa Foxworthy-Parker. But for those of you guys who don't know, FNF's the kind of largest national title insurer. It is a kind of beta way to play U.S. housing. They get the benefit of home price appreciation. They get obviously resell. They get refi. They get commercial purchase and refi. So kind of a complete way to play U.S. housing. They also are an owner, 85% owner of a large insurer that kind of specializes in retail annuities, called F&G. So we'll talk about that a little bit today as well. But the way this works is the typical kind of back and forth fireside, and then we'll open up to you guys in the audience for plenty of time for Q&A.

But with that, guys, thanks for joining us. We're kicking off with kind of the tradition that we've had for the last several years, where we kind of pull all of our resi related companies on kind of the macro. So kind of quick hit answers here, and then we'll kind of start getting to the story. So first off, for next year U.S. housing is up sharply, up modestly, unchanged, down modestly, it's down sharply.

Can you tell me what mortgage rates are going to be first?

That would be easy...

I think our base case it is tough to kind of model or predict this. But I think our base case currently is probably up modestly. I think if you look at MBA and Fannie Mae, they're kind of projecting a modest increase in EHS, maybe to the mid-4s. We're running probably around $4 million now annualized. So I would say up modestly.

Okay. I kind of sets you up for that question because the next one is where do you think 30-year mortgage rates go next?

Well, it is pretty interesting. Back in August and September, it sure looked like rates were kind of on a downward path, I think the 10-year got down about 3.7%. And I think most expectations at that time was we'd be in a modestly downward trajectory. And then, of course, they went up 70 basis points, I think, in October. So having said that, I still think they'll moderate as we go through '25, but how quickly I don't know.

Okay. And then on home price appreciation. That one's kind of defied logic over all these years. I think from an academic standpoint, it's been defying logic. But any thoughts on the pace of home price appreciation? Do you...

I think it's a supply-demand thing. I think the reason it's defied logic is there's just not enough supply out there. And until that changes, I think they're going to be stubbornly high. Now I would expect probably that they do start to drift down. I think there is more home building, and I think there's -- I think people have maybe adjusted a little bit to a higher rate environment. So maybe they're more willing to be active in the buy-sell side of things. And so I could see them moderate a little bit. But who knows? Because they've stayed really high.

I think any question relating to politics is always polarizing. So taking feeling that -- taking that aside and just looking at the ripple effect of the impact of U.S. housing, the new political environment, is that good, bad or neutral to U.S. housing?

Again, I think it's hard to say. I think there's a question around how much the federal government can impact housing. And it probably relates more to the policies that influence where the tenure is at because that will ultimately impact mortgage rates. And so, yes, I don't think we know yet. And I don't think the Republicans as we led up to the election, talked a lot about what they wanted to do to support housing. The Democrats talked about it a bit more. So I think it remains to be seen.

Yes. Like from a federal budget deficit in a tariff situation, I just feel like it's going to be inflationary. But on the other hand, Trump has said multiple times, he wants to see rates below 3%. He wants to take over the Fed. We'll see how that transpires. But...

Well, I do remember what we did when rates were 3%. So yes, it's been pretty good for the business.

Yes, pretty good, pretty good. Okay. How would you characterize -- what would you characterize as a normalized market and your best guess on how long it takes to get there? That's a tough question.

Yes. I think the first part is maybe a little easier. I think if you look at existing home sales, you'd have to think that some number above $5 million is a normalized number. And if you look at really 2013 through probably up to '22, maybe '21, we were $5 million plus through all those years. So I think that would imply to me a more normalized environment. And then you could think about a refi market. Obviously, there's more volatility in refis, but maybe north of $1 trillion in refi volume as an average and then a pretty solid commercial market like we've seen for the last 7 or 8 years. How long it takes to get there? I think commercial's been strong this year. We can talk about that. I think it's going to be good next year, modestly -- probably modestly better. Refi has got the potential to increase. And so it kind of gets back to EHS. And I think if -- well, you think about '22, rates in January and February, the annualized EHS number was over $6 million, over $6 million. By the end of the year, it was $4 million because rates went from 3% to 6%, and but it tells you how fast things can change. I think there's a lot of underlying demand. And with rate help, I think you could see it get into the mid-4s and higher 4s within a year on an annualized basis.

Yes. I tend to agree. It's been perplexing or it's been a bit of an eye opener that you've actually seen of late rates continue to rise and some shoots of demand, right? Like you've seen some pockets of growth, which we'll talk about in a second. But last question on the kind of the polling of the audience or polling of you guys. I know you aren't directly involved in the resi brokerage side of things. You once own Pacific Union, which gave you some insights. But I know, Mike, in particular, are reading up on this stuff a lot, so you've probably got some views on this. But how much of an impact do you think the NAR settlement changes are going to make? And where do you kind of expect just the commission rates to go in the industry over the next year or so?

Yes, I don't think it's going to have a major impact. I haven't seen anything that's changed commission rates since the event. I think a lot of the brokers were well prepared for it and had already been encouraging their agents to sign buyer representation agreements. I've been doing this a long time and for 20-plus years, people have talked about how consumer search was going to change buyer representation, how FSBOs were going to grow because people don't like paying the commissions, how discounters were going to get market share. None of those things have happened, none of them. And I just think that there's value that home buyers perceive real value that they get from buyers' agents, who help them find the right home to purchase in a given market. I think that's really the core issue. I think there's value and they're willing to pay for it. And so I really don't see a significant change occurring. It's sort of agnostic to us whether that occurs or not. But I'm not expecting a big change.

Yes. I tend to agree with you. Okay. So staying on the macro theme, current state of U.S. housing, it does feel like rates are obviously the key driver. Outside of rates, what do you think is the most influential one or two things that you typically keep track of?

Yes, I would probably say supply, right? You were talking about that. And the supply part is very, very important. The good news is it's up. I think, the latest numbers I saw September over last year, inventory is up about 20%. So that is helpful. And that's probably the second most important or equally important to mortgage rates. Would you add anything else to that?

No. I mean maybe the job market and the fact that people are employed, and I think that's been solid. And so yes, I think it's rates, one, supply, two, both of those impact affordability, and that's critical right now.

Yes. Makes sense. Let's start getting a little bit more into the business. So rates obviously dropped sharply in September, climbed right all over again in October. Talk about the influence that had on demand. You guys talked about your October numbers on your earnings call, so maybe recap what you said there. And then to what extent you've seen the first 2 weeks or so of November, what you're seeing thus far?

Well, I think what happened in August and September was a real window into what the business could look like because when rates came down, I think, roughly 70, 80 basis points over those 2 months, we saw our refi orders sequentially improved by about 40% -- 30% to 40% in August over July, and rates have moved about 40 basis points. And then they went up another X percent. So we went from around a little under 1,100 a day in July to over 1,800 a day in September. And so that -- and that was with 70, 80 basis points down. So it kind of tells you that you can unlock that transactional volume with not a major shift in rates. And on the purchase side, our September open orders per day exceeded August. And that just doesn't normally happen. In a typical year, once you hit the peak and usually about June on purchase, every month declines until you get to January. You can go back and look, and we've looked at 10, 15 years, and it's been the same pattern every time. So that was an unusual thing. And to me, it's a pointer around a little bit of rate help, demand got unlocked. Conversely, when rates went back up in October, the refi volume fell back down to about 1,400 a day in October from the roughly 1,800. And then purchase fell off just normal seasonality. We didn't see anything other than normal seasonal fall-off in October, and we'll kind of see how October plays out. But again, it just shows you that people react quickly to rate changes.

Yes. Makes sense. And then anything on November? Is it too early?

Too early, yes. We don't typically give out partial months because it's just -- you can get too many variables in the...

Yes. I think we saw that with -- so First American, #2 player, your competitor gave the first 3 weeks of October, and it was down and then it ended up a bit better, down modestly, I think, so that last week actually mattered.

That's pretty common in the industry. The last week matters a lot.

Yes. People rush to get the orders done. Yes.

Makes sense. Okay. Yes. I think we were talking about this earlier, up here. And I think the webcast might have called us on a hot mic, so we'll have to go back and read and see what was said. But we talked a little bit about investor expectations. And you look at consensus numbers, everybody is kind of grouped in 2025. I think some people look at these stocks and say, well, the multiples have expanded to the point where it feels like we're kind of normalized and there's not a lot of maybe upside in numbers. But as we've established existing home sales now at 3.7%, 3.8%, right? And it was at 6%. Who knows where we go. If it goes to 5%, that's still gravy, that's great. But on the refi side, I mean, there are -- I think ICE came out, and that's formally Black Knight, who's providing this data, but I mean there's 6 million eligible refi candidates if rates were to get to 5 75, right? last year -- if you take the last 2 years combined, that would be 2.5x what we've done, the last 2 years combined. So maybe talk to us about your position in refi. I think you guys do have the leading -- industry-leading position. But maybe talk to us a little bit about refi and how you might be able to benefit from that.

Yes. I mean I wouldn't be surprised again with rate help that we could see a doubling of refi activity in '25. I think what happened in August and September is indicative of that. I also was looking back at some data, and I went back to 2018, it was a sub-$500 billion refinance origination market in 2018. Rates were 4.5%. In 2019, rates went down 60 basis points to 3.9%, and we had a $1 trillion refinance market. It wasn't that long ago. And there were other reports in addition to ICE that there is about $2.5 trillion of mortgages made in the last 3 years above 6.5%, with half of that above 7%. And so as rates get down, if they can get down in the lower 6 number, it's going to unlock all the -- a lot of the people that bought mortgages above 6.5. So that's possible. We're very well positioned for refi. We -- if we get a lot of surge of refis, we typically don't need to have a lot of staff. We've got a lot of automation, particularly on the front end. We've got the leverage we get out of our India operation in terms of processing. And as a point on that, when we had the increases from $1,100 to 1,800, we didn't -- we're not having anybody to deal with that volume.

It is important to understand the difference in terms of our revenue per order. It's a lot less on a refinance as we know. Our third quarter purchase fee per file was $3,500 roughly, and that was up about 3% year-over-year. Our third quarter refinance fee per file was $1,200, down about 2%. Different coverages for owners policy versus lenders policy and the fact that we issue both in a purchase transaction that kind of explains why you see that significant difference. And trends on the purchase side, what we've seen over the last 3 or 4 months really throughout Q3 was down -- fee per file was down about 1% sequentially from June to July, July to August, August to September and actually bumped up another 1% from September to October. So it's still pretty flat, relatively speaking. One other note on refi. Refi revenue as a percentage of our direct revenue in the third quarter was 6%. That's been pretty consistent since rates started going up in 2022, I guess.

And I guess, during the peak, what was that peak for refi, maybe '21?

I think it got to...

Maybe 30.

I was going to say high 20s to maybe 30%, means a lot of refi volume, although we had a lot of -- in '21, but we had a lot of volume overall in '21.

And the incremental margin on that refi because you're running it more digital, the centralized refi channel, that's typically super high...

It's really strong. Our centralized refi company, ServiceLink had close to 40% total margin. That's not incremental. That's total margin on that business and they do...

In '21.

In '21. And ServiceLink does maybe 25% of all of our refis.

25 to 30, depending on the year.

You've had some investors in the past asking you to spin that out. So that's good, you kept that in. Kudos to you...

They always want something.

One more on the macro on the commercial side. Office has obviously been super difficult. Parts of the market continue to be weighed down by price discovery issues. Maybe talk to us and just to frame this up for those newer to the space, when you put these guys, the #2 player, a #4 player in Stewart, that's over probably 90% of the market share and almost every -- and I think almost -- I don't think it's almost every commercial transaction has to have a refi tied to it. Is that right?

Well, not necessarily refi tied to. It's much like...

Excuse me, a policy...

Yes, correct. A policy tied to it, yes.

Okay. So establishing that, you guys are a fantastic proxy for the health of the commercial market. Talk to us about the difference in your open order. So just framing this up, your difference in your open order and closed order, how that gives you kind of insights, how long that visibility is and what you're seeing in your pipeline and overall, kind of your views on the health of the market at this stage?

Let me I'll start with the last part. I think it's a healthy market other than office. We're going to do, and we said this before, we're going to do somewhere around $1.5 billion, maybe a little better than that in direct commercial revenue in '24. And that will be our third or fourth best year ever. That's not a bad place to be. And the 2 years that are on the top, '21 and '22 when rates were 3% and '22 is really a tale of 2 years. The first half was better than the second half, 2 different years. So we've really had a very strong market, and we're trending above on the open order side to last year modestly, seeing strength in national, which I'll talk on in a second. But to your question about open to close, the tail can be long. You can have some commercial orders that close right away, 30 days, 2 weeks. Some could take 6 months or a year. So it's really, really hard to tell. But if you look at it on a calendar year basis, we typically close about 60% of the orders we open in a calendar year. So the math is pretty straightforward. If we're opening 800 orders a day or 750 a day, you can calculate the open orders, you can use the 60% number, add a fee per file and you got our revenue. And it's pretty straightforward, and it's been pretty consistent. We've seen through October, our open orders are up about 2% for the year with our national orders. These are the higher fee per file orders. So for example, in the third quarter, I think our national fee was 14.5% and our local fee, which isn't in the numbers, but you could find it was probably around 9%, if you just backed out the math. So 14.5% to 9%. Our national orders through October, I think, up about 10% over last year and our local is off about 2%. Fee per files up in both areas, which is good. And we've really seen, since about the middle of the year, our national orders are outpacing the prior year month by double digits. We were up 16% in October, national. So to your question, kind of around pipeline, the pipeline looks pretty good. And there's a lot of strong asset classes in commercial. I do want to talk about office. But we're doing $1.1 billion, like we did 2015 through 2020, without much of an office market, and we did $1 billion to $1.1 billion in 2015 through 2020, where office -- not in all those years, but particularly in 2015, '16 and '17, office was probably the leading asset class. So it's been replaced by things like multifamily and energy deals and industrial deals and logistics and all this other stuff, affordable housing. And so the net plus for us is office will start to come back. It's going to be slow, but it's going to start to come back. We've seen anecdotal signs of some price discovery and some transactional volume. And I think that will just be a net add. And we're optimistic about commercial in '25.

Sounds good. All right. Let's start getting a little bit more in the business. You guys have talked about a kind of normalized pretax margin of about 15% to 20%. You guys are awfully close to that or kind of in -- near that range right now. So talk to us about when you expect to be consistently in that range, what kind of -- I think you kind of talked to the normalized market, but just any kind of insights on that.

You want me to maybe just peak the trough. Peak margin, 21.7% back in 2021. We all know how good of a market we saw there with all 3 components performing extremely well. our trough over the last decade was back in 2014 at 12.5%. I bet if we looked at -- and I haven't done this, but I bet if we looked at that market, relative to the market we have now, we would take it. Our current margin through 9 months is 14.5%. So part of that is efficiency, part of that is fee per file growth, but very weak market. And like I said, if you compare that to anything over the last decade, this is the weakest market we've seen in terms of actual orders and that, but 14.5% through this. And I still think we "guide" or give a range of 15% to 20%, and I know it's a big range. And we've used to be aspirational and now I don't think it is. Now, I think, yes, give us a normal market, whatever that looks like, and we've talked a little bit about that. And we could be solidly in the middle of that 15% to 20% and maybe even a little bit better depending on which pieces of that normal market are maybe a little bit better.

Yes. I would just add to that real quick that maybe the way to think about it is other things being equal, we should outperform prior cycles, given the same levels of bias because of automation and the things we're doing to be more efficient. The things that push a little bit on that are you have wage inflation over time. And all businesses are dealing with that. And so that's -- that can be a bit of a headwind. And then just the spend that all businesses have to make in risk and security. It's just more than it was before, and it will continue to be more than what it was before. But other things being equal, we should outperform past cycles.

Yes. That's a good point. I mean, the 12.5% trough margin in a better unit -- or order environment, right? Just I think it speaks volumes to what you guys have done with the rest of the business. All right. Think about this a little bit more near, maybe medium term. I'm curious about the level of capacity because I feel like a lot of the resi players were thinking that there was a somewhat artificial rate cycle, rates too high, like -- and you didn't -- you talked about inflationary issues with labor and whatnot. You don't want to cut that labor and feel like you could be confident bringing them right back 6 months from now when things do improve. So talk to us about the capacity you feel like you've built in, maybe how much orders would need to accelerate from here before you start -- more meaningfully adding staff at this point?

Yes, it's hard to -- it's not an exact science. But I would say if you look at this year compared to where we were in the fourth quarter to where we are now, our staffing is up about 5%. About 3% of that is really recruiting revenue essentially. So it's not really production capacity, if you think of it that way. So maybe 2% more is a production add, and our orders are up about 12%. So that's one way to think about it. So we've been able to take on from that point to the third quarter point, an increase in volume per day of about 12% with maybe a 2% production capacity. And if we get a year in '25, that's more refi growth than purchase growth, we'll add less people because we just don't need to on the refi side as much. So I don't know the exact percentage when you got to really start to fill it in, but we added 12% and didn't have to fill in a lot. So hopefully, that helps you think about the question.

So I know we're transcripting this today. So I know people are going to be coming through this looking for some of these questions. I got to ask, so we'll turn it up a little bit here. Turning back to the capital allocation. I mean, the buybacks was a hallmark of the FNF story forever. You guys were really aggressive on buybacks, put up some really big numbers as far as total buyback last couple of years. You've turned off that engine, I think, basically halted activity since 1Q '23. What was the decision behind that? How influenced was the housing backdrop into that decision? And then when do you expect to maybe turn those engines back on?

Yes. So we did buy back $1 billion in stock in '21 and '22. To your point, we had a lot of excess cash, and it was an opportunistic buy. In early '23, when rates started going up, we just didn't have a feel for what this market was going to look like. And frankly, it's still weak. We've talked about that, and I think it still holds that it's a weak market. We want to make sure we're generating enough cash to pay the bills, so to speak, before we're in the market buying back stock. It's really -- dividend is probably at the top of the list. Obviously, we have to service the debt. Acquisitions are part of what we do. And buybacks are right there with acquisitions depending on what the opportunity is. But I've said we're looking to generate $800 million to $900 million just to pay the bills, the dividend is $550 million, interest expense is another $80 million, acquisitions, $200 million to $300 million. So that's a comfort level. Now we have built a little holding company cash. We're over $800 million. So it's nice to have a little bit of a cushion. I like that. I think the Board made the decision to pause when the market was uncertain, I would argue it's still a little bit uncertain. But if we see a little more activity in 2025, if rates come down and the volume picks up like we saw that little blip 6 weeks or whatever it was, I would expect that we would be right back in the market kind of on a regular basis on buybacks.

Yes. Makes sense. So you mentioned the $800 million, $900 million of free cash now and you got to reserve it to pay the bills and that bill is not billed fully. You don't have to pay bills. Maybe talk about allocating how much -- where each of the allocation points go? So you got the dividend, there's probably not minimum debt service payments, but walk through kind of like where you're -- what that's positioned out for across the board and then the excess that could come from better housing, framing up maybe just take your best guess of what that could be for the dividend -- I mean for the buybacks.

Yes. So $550 million is the dividend. We just raised our dividend. We typically do that once a year in our fourth quarter meeting. And so we've done that following our third quarter release. And so we raised it to $0.50 per quarter, so that's $2 annually. So $550 million there, $80 million on debt service, which is nominal. And frankly, we have -- our debt is so far extended that we don't really have to think about debt for a long time and it's a really low rates, which is wonderful. And then the M&A activity, which is probably $200 million to $300 million annually. We do a lot of smaller deals, title agents mostly. And depending on the market and what's available, we could do larger deals, but typically, they're pretty small. And then beyond that, I think that's where we'd look to buy back our shares. We do get over $100 million annually from F&G through a common dividend payment and our 85% ownership of their common shares as well as the preferred investment that we made in January of this year. And so combined. So that's contributes, call it, 1/5 of at least the dividend that we paid to our shareholders.

Yes, makes sense. All right. So from an M&A standpoint, you guys obviously tried to buy the #4 player Stewart that was blocked. It doesn't seem like from a large transformational opportunity, there's not a whole lot out there you can do entitle. Maybe I'm wrong in that view. But I would love your opinion on that, where you might be able to go? And I think that will kind of segue us into the last little section here on F&G.

Well, I think you're right. It would appear that doing a large title transaction would be difficult. There's not that many, many targets, if you will, in that space either. I think we can do title agent acquisitions kind of all day long if we choose to. And then you never know what's going to show up in the non-title space. I mean we have nontitle businesses inside ServiceLink. We've got a subservicing company. We've got a home warranty business. And those -- you just don't know what might come along inside those businesses. But I think the focus is still real estate related. I mean, obviously, we did the FG deal. But I would say we still look inside the real estate related world.

So F&G, when you guys announced that, there was obviously a lot of pushback. People didn't fully understand the model. You guys, I think, have proven out the effectiveness like what you sought out to do you have done thus far. So maybe talk to us about the original vision behind that acquisition, what exactly it is and then kind of the goals or outcomes you guys expected and what you've seen thus far?

Do you want to take the lead?

Yes, I'll start, and we can both weigh in here. But the original premise really was, hey, let's find something that can counterbalance the title earnings. We know that they're cyclical or can be depending on the rate environment. Let's get something that's more consistent and grows over time. And it's been more than that, frankly. It's been a validation of the thesis behind the acquisition and a real complement. It's now 40% of our adjusted net earnings. When we bought the company, it had $3 billion in sales, we expanded into products and channels and, of course, got the rating upgrade, which was very helpful for F&G's business and grew the asset base from $26 billion back in 2020 to over $50 billion now and over $60 billion, if you include the third party, the kind of the flow reinsurance piece, which we earn a spread on that growth number as well. And when we bought the company and did due diligence, they told us it was 100 -- it was real simple. You take your assets under management, and it's 100 basis points. And we thought, okay, that's pretty good, and that's consistent. And let's just grow the asset base. Well, now it's 126 basis points. So that has expanded considerably as has the asset base. And so all of that has been -- it's been wonderful. And you're right, the reception for the acquisition wasn't strong when we bought the company. But gradually, it became stronger, especially when we took it public and now 15% of it is out there as a public company. And as of 9/30, that company separately valued at $5.6 billion. And we paid $2.7 billion or 100% of it. So yes, we've seen -- now is that all reflected in our share price. I don't know. It's hard to figure that one out, but we've gotten a lot more recognition than we did initially.

Yes. That's a good point. I mean, yes, if you strip out and that was smart, obviously, doing the 15% distribution because you got a public market value on that, right? At one point, it was buried within FNF valuation and didn't get any credit at all one, right. And so I think you've seen that now, you're starting to get credit for it, but you strip that out, you're still probably trading a turn or so below periods. And so you're close, but not always fully there at this point. But one thing investors, despite you guys doing really well with FG, you're still getting that conversation, the debate happening around a full spend, right, getting rid of the whole thing, simplifying the model. What are your thoughts on that? I know that this is more probably of a board discussion. So maybe what's their thought on that. But talk to us about the options you see, how you handle those answers or how you handle that debate bit with investors?

Maybe I'll start. I think the Board is very pleased with the performance of F&G and you mentioned at the beginning that investors were maybe not particularly happy when we announced the acquisition, but that was before people have the lens of how well we've executed on the growth of this company. You have a company that had $3 billion in annualized sales, $26 billion in AUM when we bought it, and now we have up to $13 billion in annualized sales and growing, approaching $60 billion in assets under management. ROA was maybe 100 when we bought it, Investor Day targets 130 to 150. I mean the growth has been absolutely tremendous. A big piece of it was our acquisition because FG got a ratings upgrade. And that led us into the bank and broker-dealer channel and ultimately, the PRT channel and these different channels, and we've just continued to grow this company. So I think investors have seen how well we've executed on the premise of owning this company. And the Board's view is it's performing very well. We want to continue to grow it. It's up to the Board to decide what to ultimately do with it. We have options, but ultimately, it's a Board decision. And for now, the view is we're going to continue to grow the company. So anything to add to that?

I don't think so. That's...

So thinking about the other potential options from the other investor talking points, I mean you've got $60 million -- or $60 billion, excuse me, AUM, but Blackstone is the manager, right, the asset manager or investment manager. Talk to us about, are you seeing other comps in the space, who have been -- you had Apollo take out Athene. There's been others that have kind of done that similar playbook. Is there anything technically -- without having your view anything technically that prohibits Blackstone from acquiring FG?

Well, I don't think there's anything technically that would prohibit Blackstone from acquiring FG. I think, and I may be out of my depth a little bit, but I think Blackstone has what they need without owning FG. They have the fee business of managing a very big asset base, and they've done a wonderful job, and you can tell by our results and a lot of that is Blackstone is doing. But sure, if they wanted to own business outright, nothing prohibits it. Frankly, I don't think anything prohibits somebody else from buying FG as well, but they would have to deal with the Blackstone contract, and that could get complicated depending on where you go. I think new assets you could do with what you choose, but existing assets are locked into that Blackstone arrangement, and they would manage those assets until they run out, which is average life of 6 to 7 years.

Yes. So technically, you could separate -- sell off the back book and then sell off the growth engine as a separate entity.

Yes, that's right, too.

Okay. Makes sense. As far as the regulatory environment, there's always something. There's always some guy. I think when Brett was covering this back in the day, there's always something, right? You could have the AG in California spending on the platform, and that's his whole agenda, right? So talk to us about AOLs, exactly what is an attorney opinion letter. Why has that got more buzz lately and your overall view on whether that's disruptive or not?

Well, AOLs have been around for a really long time. I've been in the industry for 40-plus years. They've been around longer than that. They've never been a major part of the industry. I think part of title's growth has been because it's just a superior product and offering to an AOL. What an AOL is, is exactly what it says. It's an attorney opinion letter. It's literally a letter that an attorney would prepare giving someone the status of title. It's not an insurance policy. It's an unregulated product. You don't know what it's -- you can't really say what it costs because it's whatever the individual attorney charges, and there's lots of those people around the U.S. So there's no real easy model to make a comparison to cost. It doesn't cover many of the risks that the title covers. There's no regulatory oversight. There's no reserving. There's no licensing from a title standpoint. There's no regulatory auditing of this. So it's kind of an interesting thing. The reason it's got more attention is Fannie Mae added it to their selling guidance, maybe in '22, basically that they would accept that in lieu of a title policy in markets, which is still in the selling guidance where AOLs are common, which are very few. Now that's the current selling guidance. I think from what's Fannie and Freddie report, there's been very little activity. So I don't see it as a disruptor. I think in many cases, it's -- from what I can gather more expensive product, particularly relative to centralized refinance rates, which are widely available in the industry, I think you'd find that you'd be paying an attorney a lot more for an attorney opinion letter than you pay for a centralized rate. So yes, that's kind of my view.

That's like from Fannie and Freddie's standpoint, there's always something going on there, too, right? You have programs, 5 programs waiting refi title policies altogether. And it's -- I think I sit back and think like them taking on more risk, it seems like I've seen that moving in the past, and it didn't quite end well. So...

Well, I know they recently filed in their -- I guess it was their 10-Q that they're concerned about mortgage fraud risk. You guys can go look at that. And the waiver has gotten -- I'm sure you're all aware of this proposed waiver pilot idea. I mean it's gotten very quiet, has been quiet now for months and with the administrative change, we'll see if it even ever sees a live today, I don't know.

Yes. Makes sense. I think we've got a couple of more minutes here if there's any questions from you guys in the audience, feel free to fire away. I'll pass here for a second. Okay. I'll keep moving here. Maybe one or two more. The promulgated states, like Texas. So without getting all into the weeds, promulgated is basically the rates are established by the states. And so Texas is obviously the biggest one. Talk to us about the last time you got rate there. Has there ever been a period where you had rates reduced, kind of how that conversation is going thus far?

There are 3 states that have promulgated rates, Texas, Florida and New Mexico. Texas, they review the rates, no -- I think the statute says no earlier than every 5 years. So in 2019, there was a review and rates were reduced 4.9%. We're in the process now of another review, and there'll be -- at some point in '25, they'll make a decision, and we don't know what that will be. Rates could go down a little bit more. They could stay the same. They could go up a little bit. So that was the last review there Mexico, their last review -- their statutes, no earlier than every 3 years, I believe. And in '22, they had a rate review, and there was a 6% decrease in New Mexico. So we've had 2 states now that have reduced rates. And I think that's next up again next year, and we'll see what comes out in New Mexico. Florida, I'm not exactly sure what the statute says about how often, but they haven't changed rates in some time. So it's been flat in Florida. And then other states have some level of approval, or there's states called deemer states, where if you submit your rate filings and they don't take action, they're deemed approved. And then you have a couple of states that really have very little rate regulation, like Illinois, for example, I think Massachusetts is another one so...

Roughly what percent of the business is Texas? I don't know if maybe if you want to isolate it to director [indiscernible] agency, if you can.

Yes, that's a good question. I don't remember off the top of my head, but if you go to our SEC filing, I don't know if it's in the -- it's in the K, for sure, whether it's in the queue or not. It shows our top 3 or 5 states. I mean, California is #1 and Texas is #2, although Texas, depending on the year, could be #1 and California, #2, and I think it might be 12%...

Yes, I was going to say low single, low double digit...

Low double digit. Now that does include agency as well. And so we're talking about gross premium. So if you net the agency number down to less commissions that you pay to the agent, it becomes a much smaller number.

Yes. And then in Texas, the split's probably 85-15. So...

Okay. Last question before we wrap up. Technology. You guys have, obviously, the internal production technology within title. You've got consumer-facing technology a little bit within here. So talk to us about what the latest is on the technology front, how impactful and maybe should -- investors should be thinking of in here as a share gain potential? Is it an efficiency gain potential? Like kind of outline exactly what you're doing there?

I think in here there is definitely a share gain potential and an efficiency potential. We're seeing great adoption from both consumers and real estate agents in terms of use. What this is, is a digital transactional platform, where one can do a transaction from start to finish on the technology on the platform. And really, what it gives, I think, the biggest advantage is it gives real estate agents and transaction coordinators and consumers a 24/7 window on a mobile app or the portal to every transaction they have with us, exactly where it stands in the process. So think about a real estate agent who only gets paid when it closes, think about the value of having great visibility into the -- where this transaction stands and when it's going to close without having to pick up the telephone or send an email. So we think that has a lot of potential. We'll probably have 1.4 million users on that platform this year. That's double what we had last year, and we started this, I think, in '21, and it was 0. So that's great adoption. We've rolled it out across entire footprint of the company residentially. It's tied to our SoftPro system, and we just think it's going to continue to build and value. We also have other consumer and real estate facing technology business, like our lead gen businesses and our SkySlope business. And we're inside those businesses, touching hundreds of thousands of real estate agents and millions of consumers in those businesses. And we're -- we think that ultimately has value and power and we're thinking about how that develops over time. So we're very excited about where we are on technology. And then we -- and we've been doing this for a long time. We just continue to focus on how do you lower the marginal cost of title production. And that's where we get into the way we centralized title. We have about 90% of our entire volume in the company, has the ability to leverage our proprietary data sets, our automated title technologies, through NextDays and ValueCheck companies that we own, that automate the process, India and our centralized environment. And we're just going to continue to focus on how do we improve that marginal cost. That's how we think about it.

Makes sense. Any last questions you guys? Yes. I think we're right on time. I rarely do that. So starting off the day well. Thanks, guys. Appreciate the time.

Thank you.

Thank you.