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

Good morning, everyone, and welcome to day one of the Stephens Investment Conference here in Nashville. I'm Oscar Nieves, a research analyst here at Stephens, where I cover real estate services, including the title insurance industry. We're excited to kick things off this morning with Fidelity National Financial, ticker FNF, the nation's largest title insurance and a key player in the U.S. housing and real estate ecosystem. Joining me are Mike Nolan, Chief Executive Officer; Tony Park, Chief Financial Officer; and Lisa Foxworthy-Parker, SVP of Investor and External Relations. FNF occupies a unique position across both housing and financial services through its leading title operations and its majority ownership of F&G, a growing life insurance and annuity business. We'll touch on both sides of that story today, starting with the housing and macro backdrop and then moving on into the title segment, capital allocation and finally, F&G.

So starting with the big picture, Mike, the housing market has been through quite a reset, higher rates, affordability challenges and limited supply, but there are some early signs of stabilization. How would you describe the current state of the U.S. housing and mortgage market right now? And are you seeing tangible improvement in purchase activity?

Well, I would start by saying we're kind of in year 4 of still a very low transactional environment for purchase and refinancing activity on the residential side. And I'll mention it in the middle, but there are a couple of signs that are encouraging. But when you look at existing home sales still forecasted to be around 4 million units a year, there's no way to describe that other than it's historically low. You can go back and look at 1995 when it was 4 million, and we probably have 40 million more working age population in the U.S. now. So it doesn't really make sense. But to your point about maybe some signs of improvement, there's more inventory. So that's good. Home prices have seemed to stabilize a bit or they're not going up as fast as they were for the past 3 or 4 years. And rates are modestly lower. I know they've been bouncing around a little bit, but let's say, [indiscernible] just 3, 4 months ago. Having said all of that, our activity on the purchase side is still very flat to last year. We're still in the seasonal part of the business where the fourth quarter on the open side is the historically weakest every year, and then it builds as you start the next year, which we would expect. And so stable, but maybe it's still low levels.

Yes. Yes, absolutely. And as you look ahead, how do you see the recovery unfolding? Do you think it's going to be gradual and uneven or something sharper once rates begin to ease more meaningfully?

Yes, it's a good question. There's a lot of assumptions that you have to make around this topic because it's more than about rates. As we've talked about before, affordability, consumer sentiment, the labor market, the overall economy, life events, all these things factor into purchase activity. I was looking at Fannie Mae's most recent forecast. And for '26, they're assuming rates are at 6% might be optimistic, we don't know, but 6% and existing home sales at about 4.5%. So 4.5% is a pretty nice increase over 4%.

About 10%.

Yes, about 10%. I think that would be pretty solid. And I think that's a reasonable forecast if you're assuming the other things are staying relatively the same. In other words, labor market is still good, home prices stay stable, inventory levels are good. I think we can see a nice improvement next year, a nice step up. But for -- I think a market -- and I still believe there's a lot of pent-up demand, but I think for -- to get back maybe to a $5 million number, that might take a little bit more time and probably need to see rates getting into somewhere in those 5s.

Yes. And to that point, precisely, what do you think would have to happen just lower rates? Because I don't think lower rates alone would unlock demand. What else? Deeper supply or prices easing?

Yes. I think the broader affordability problem is probably it and prices have just gone up so much in the last 4 or 5 years. Lower rates help the affordability issue, though. And I do think if they got into the 5s, we'd see some of that pent-up demand unlock. There is more inventory. And assuming the sort of, as I said before, other things are equal, not a worsening in sentiment, not some shock in the world. There's a lot of things going on that could get worse, right? But probably the base case for me is that we start to see this get better over the next period. If you look at what happened after the recession, depending on when you say it started, but let's say, '07 to the end of 2009, existing home sales basically went up from 2010, 2011 through -- up to 2021. So you kind of had this growth. There might have been a year it came down a little bit, but the line goes up. And then, of course, rates took off in March or April of '22, and it all changed. So I think my base case is that we see kind of a year-over-year improvement in existing home sales, other things being equal.

I don't know where we stand on the homebuilding front at this point, but it certainly seems like more homes would be better for affordability. Certainly, we went through a period of several years where we were very much underbuilding in this country. And yes, I don't know where we stand today, but that could also be an impetus to get more...

And are you seeing the increase in construction in the right geographic areas? Because that's a big problem because you can have a lot of construction where people are not looking to buy and that doesn't help much the problem.

Right. Yes, you read a lot about potential improvement in homebuilding. I'm not sure if it's happening yet.

Yes, it's certainly better than it was during the sort of recession years and the years that followed. We were probably building half or more less than we need to every single year, and we did that for a long time. But I've seen different reports that say we're short somewhere between 3 million and even 6 million homes in the U.S. under the need of homeownership, people needing homes. We are 3 million to 6 million short.

Where are those people standing?

Well, apartments.

FNF is in constant contact with lenders and real estate agents. What are you hearing from partners about transaction pipelines and just overall consumer sentiment?

Yes. I think if you talk with people on the purchase side, primarily real estate agents or brokers, they would, I think, for the most part, say there's still a lot of pent-up demand, but hit some of the same themes we've already touched on affordability, inventory, et cetera, and the need for lower rates. But I think they're generally optimistic that if prices stabilize and rates come down a little bit, that we'll definitely see more activity. On the origination side with the nonbank lenders and even the banks, I think they're optimistic about the refinance opportunity. And you even hear that in some of the public commentary that some of the public nonbanks make in the earnings calls and whatnot, that, again, they see the same things we see. Orders react very quickly to modest decreases in rates. And while we're still at historically low levels, to envision a doubling in activity, I don't think is we're far off from that and probably more with lower rates.

Yes. And to that point, maybe for you, Tony, as mortgage rates have fallen from around 7% to the low 6s. But like you said, they've been fluctuating of late. What impact have you seen on volume so far, both residential and refi?

Certainly, on the refinance side, very -- to Mike's point, very rate sensitive and I mean orders doubled in a matter of days. Less so on the purchase side because as we've talked about, there are more things that impact that process. Having said that, certainly, rates -- lower rates help affordability, which is, I think, the key part of unlocking that pent-up demand that we have on the purchase side. I don't know what the exact magnitude of the increase on the refi side, but...

Yes. So in July and then to September of this year, rates went down about 40 basis points from July to September and September volumes were 60% higher than July volumes on the refinance side. That's significant. Still at low levels, but it's significant. And that's what the...

And refi it's not subject to the same seasonality...?

No, it's much more of a financial event. It doesn't matter if it's cold out, you can still refi, but maybe I'm looking for homes as much...

Exactly.

It's important to know, and I think our audience does is that our fee per file on refinance is much lower than on a purchase transaction, probably about 1/3, $1,200 or $1,300 versus in the high $3,000s for purchase. Having said that, we still generate strong margins when we have volume. And when we don't, obviously, then it's pretty...

And to that point, we look at ICE reports, just the distribution of locked in mortgage rates. I think if it goes below 5%, I think it is, the numbers just explode. It like it goes into like more than 3 million people being in the money. How do you see a scenario where that could happen within the next 12 or 18 months? Or are you not seeing that happening anytime soon?

I mean it's hard to predict, but a 5 -- like 5.0 seems a little far off right now for sure. But we've had periods where rates have moved drastically in short periods of time. But...

But I would think -- even in the 5s, and I don't remember, I haven't looked at the report for a while, but I have to believe between 5 and 6, you still get a lot of refinance volume.

All right. Let's turn to the business mix now. And we keep touching on some of the same points. This is just recurring. So you've often said that refi volumes are rate driven, while purchase activity depends on broader fundamentals. What are the key factors you're watching most closely on that front, particularly on the purchase side? We've said affordability is the main determinant, but how -- what are indicators that point you in that direction? Because looking at home prices may not tell you the whole story.

Yes. I mean we've said this a lot. Our best indicator of anything is our open orders. And that's how we manage the business. And we don't think a lot about forecast. We don't think a lot about assumptions or what ifs because they're just that, right? So we look at our open order activity every day, every week, and we manage the business to that activity because we know that's where our revenue is going to be in 45 to 60 days because that's when the closings occur. And right now, what we see is, again, like I said at the beginning, a low historical transaction environment. But inside of that, a very normalized pattern of purchase activity. We're in the seasonal part but the fourth quarter is the weakest. We expect it to build back up as we go into next year, and we're basically flat to last year on our purchase orders. So that's just kind of how we think about running the business.

Yes. And turning to the commercial side, which has been a standout, 7 straight quarters of double-digit growth, including more than 20% year-over-year recently. What's driving that strength? And how sustainable do you think that is?

Well, I think a number of things are driving it, and I do think it's sustainable, and I'll give a little more on that in a second. What we're seeing is a lot of activity across multiple asset classes. and a lot of activity across multiple geographies. So it's not one place. It's really across the country on a commercial standpoint. Our open orders have been running in the mid-800s all through this year. And that's a real step up from where we have been absent what happened in '21 and the first half of '22 when we averaged about 1,000 orders a day, full year '21 and the first part of '22. So it seems like activity stepped up. And it's things like industrial transactions, which is a broad category, but includes things like data centers, which everybody is talking about, and those are -- tend to be very large deals, higher premiums. Multifamily has been one of the strongest segments across the last 4 years. Affordable housing, another really good segment and continues to be a very strong segment. And then areas like energy kind of fill in. They're really good deals. They're not necessarily there all the time. If you think of things like solar and wind and liquefied gas and all different kinds of energy transactions. Retail has been pretty good and hospitality. So all these segments have been pretty stable. The only ones that really haven't are -- if you think of office as 2 segments, suburban and then downtown, those have been the weakest segments for the last 4 years. And -- but what we're starting to see is anecdotal signs that office transactions are coming back a little bit. We do a quarterly survey of our 19 national commercial offices. So they're dispersed across the country. All they really do is commercial work. So they've got good beat on the ground of what's going on. And every quarter, they rank how the segments are doing in that particular quarter. And this past quarter, office for the first time wasn't 11 and 12. We rent 12 segments. So it's anecdotal, but it's still interesting because they're right there. They're seeing it in real time. And they say, "Hey, it's 7 and 8 now." We're also seeing in October, our open orders per day did not fall off from where they had been for the previous 9 months. And typically, when you get to the fourth quarter, if you go back and look at the last -- you can probably go back and look at the last 10 years, commercial opens fall off in the fourth quarter. And closings is usually the best closing quarter, but people kind of turn their attention more to get the deals closed. And at least for October, that held up at a really, really nice number. So we're going into '26 with a lot of inventory and a lot of strength. And if office starts to transact more, it's a really additive element to '26. So that makes us bullish. One last point on that. We're projected to do and we've said this, maybe $1.4 billion in direct commercial revenue, maybe modestly better. And other than '21 and '22, that's a significant step-up from all the other intervening years where we were around $1 billion, give or take. And then of course, we did $1.5 billion in '21 and '22. So we're almost back to those levels, record levels. And we're just coming off our third -- our first -- our best third quarter ever for commercial revenue.

Maybe taking a step back because I think it's clear what -- on the residential side, what a transaction entails. Purchase is pretty straightforward. People are buying a home, whether it's new construction or an existing home or they're just refinancing their existing mortgage. But in the case of commercial, is that usually new construction? Is a transaction between investment funds and REITs?

All of the above. I mean it's really everything from just straight refinances and refinances are up in commercial, about 20% this year, a little bit more, maybe 22% like that. So people are getting financing, but just to refinance, someone owns a commercial building somewhere and they refi, just like they do a home. You've got sale transactions, whether it's offices or medical centers or hotels or things like that, even foreclosures in commercial. That's a transaction for us. New construction transaction. And then there's deals where maybe it's a merger of companies and the real estate is sort of secondary in the transaction. But because of the sale, there could be a portfolio of properties that have to be title insured as that the company is selling to another company. So there's lots of ways that these transactions occur. And the good news for us is we get to participate in all of them.

There was a time, I think, when people thought that commercial real estate transactions were just office buildings and usually in big cities. Fortunately, for us, it's not that at all. And maybe it was -- I'm sure it was overweight that at one point. I remember 2015, it was a huge part of what we did. But now there are so many different segments and so many different types of transactions.

I'll give you an idea of a more sophisticated one, like let's say, a solar deal. Well, the first thing they got to do is compile and acquire a bunch of land. And many times, those are owned by multiple people. And so we're involved in all of that, researching all those properties, making sure it's transferred properly and then they assemble it all, and then they're going to put on the solar panels and do what they do there, if it's wind, whatever it is, and then that also all gets title insured. So some of these transactions can play out over long periods of time on these larger transactions.

And on the multifamily side, does the level of activity on multifamily give you an indication of what's to come on the residential side? Because one would think that if investors are buying more multifamily properties, maybe they're anticipating that affordability is not going to improve significantly. Am I reading too much into that?

I think you're probably think of it the right way. I just don't know that we have insight.

Yes, it would be hard to know that. And sometimes they're speculating as well. They're guessing that this is the way it's going to turn out and ultimately, it might not. And you have cities that overbuild in a particular sector like a multifamily because they don't have the demand. But yes, I mean, you could ask them and they're making a bet one way. But it's filling a need right now because people need housing, they need shelter, and we talked about the underbuilding of single-family residences. And so I think they're at least providing some level. And of course, we -- I mean, we participate even if that's not a home purchase, we get that on the commercial side.

Maybe we touched on this a little bit, but as we look towards 2026, how are you thinking about the commercial outlook? You mentioned earlier that you think it's sustainable, but how do you see that momentum continuing? And do you expect it to normalize in 2026 or maybe 2027 or beyond?

Again, as I said, we're running in the high -- mid- to high 800s a day in orders, which is a nice step up from where we've been for the past few years. And if that continues through the fourth quarter, that's going to really carry us into '26. And a lot of these deals take time to close. So you can open transactions third quarter, fourth quarter that don't close until the end of next year or the middle of next year. So you've got this inventory that adds to confidence. And there doesn't appear to be slowdowns in some of these other areas like industrial and affordable housing and areas like that. Relative to the rest of the segments or the rest of the outlook, I would just say our base case is modestly improving purchase. And refi up more than that as long as rates don't go back up. And if rates come down another 40, 50 basis points, refi could be 2 to 3x where we've been. '27, it's a little hard for us to look out that far. I pretty much focused on local orders and so to think about '27.

I was thinking more of the commercial since you mentioned that those are long cycles. So now we can turn to the core title business. FNF remains the market leader when it comes to margins, which over the last 10 years have exceeded peers by around 600 basis points on average. So how -- what's helped you maintain or grow that margin, especially now that volumes are depressed?

Yes. It's a lot of things, but we've been investing in automation and technology for decades. And we've been focusing on how to make our title operations, our title production more efficient and leverage our data, our automation, our offshore ability, centralization initiatives. And that's just been a 20-year kind of a journey as we go along. And we're at a point now where a little over 90% of our volume has the ability to touch our proprietary title plants, our starter repository, which is the largest in the industry by far, our title automation technologies. We've got a company called NextDays that we purchased...

20 years ago.

20 years ago, first company to get a patent in automated title. We're the first company to do instant decisioning and refi. I did that a long time ago. Doma never got the message, but we did it a long time ago. And we're the first company to build and distribute a digital transaction platform across the industry. So we've been doing this a long time. And I think it really shows up in the margins. And I would point to, in particular, years like '21, which had record volumes, and we did a 21.7% and really expanded out our margins on our peers in those high-volume markets. And I think it's because of the efficiencies we've built. We're more productive. We didn't have to hire as many people. Our offshore ability is tightly woven into that 90% of orders that are touched. I told you that are touched centrally. So we've just done a lot of different things, I think, over time that have really helped the margins. And then certainly, our strength in commercial doesn't hurt either because it's probably the highest margin business.

Yes. I mean I think the #1 driver for FNF over a long period of time, we've both been here a long time, and it's never not been first which is maximized margin in whatever environment we're given. And our operators know that and they focus on that, they get paid on that. And so it's -- before technology, it was staff management and being right on that. And to some extent, it still is, but it's always been a focus on how do we get the most out of that next dollar, even when COVID hit and nobody knew what was going to happen, but we know that our orders fell to -- fell by 50% in the day or whatever it was, we weren't going to sit around and figure out how this played out because we knew that it wasn't our money, so to speak, that belongs to the shareholders, and we're going to maximize margin. And so we got very aggressive. As it turned out, it was actually a good year, and we ended up hiring a lot of people back that we couldn't keep during that period of time. But we would do it again the same way because it's about maximizing.

And to that point, I think you reported that in 2020, you reduced your staff by 13% in 1 quarter. And then as orders came back up, you increased by another 13%. So how -- can you walk us through how can FNF be so nimble and so...

Well, it was [indiscernible] challenge. I think we went down over 20%...

Yes, it was like 18% or 20%...

2 weeks.

And then we probably hired them all back in 3 weeks. But when you think about -- one, it's just sort of how we think about the business. We're very aggressive in managing staffing. And it goes back to that we run it to the open orders. And as Tony mentioned, open orders fell like 45% to 50% in a day. And so we were very aggressive. But we have 1,300 locations across the country that do direct title work. And that's where all those employees sit. And so when you think about it from that standpoint, it's a more manageable -- I'm not diminishing doing these things because no one wants to let go a staff. But when you distribute that across a wide footprint, it's a more manageable exercise in both directions.

Yes, sure. And going back to the technology, now that volumes are relatively low, how do you balance your cost discipline to maintain margins with the continued investment in automation to maintain your leadership position, especially in the age of AI and data analytics, how is FNF incorporating AI and managing costs?

I would say that expense discipline and investing in technology and automation kind of go hand in hand. And you need expense discipline so you have the money to invest. Tony talked about our focus on getting the next incremental dollar and getting incremental margins. Our discipline around that allows us to invest. And in our view, we'll invest in every market regardless of the size because we know how critical it is to the future. And I talked about it a minute ago, all the things we did for 10, 20 years relative to title automation and data and different things like that have really reaped the benefits as we're in the position we're in now. So they kind of go together. I think it's not one or the other. It's both.

Yes. We even called out in the second quarter that our incremental spend on tech and risk was, I think, up $10 million over the second quarter of the prior year. And it's kind of the new run rate. And -- I mean, we have been able to maintain that level. So the third was the same as the second. And I think we're at a good run rate. But yes, we -- to Mike's point, we continue to spend.

Yes. And then I'll touch on it, if you'd like. So the way we think about it is the first thing you have to do is diffuse it in your organization. You got to -- this is our view and many others, I think. You've got to build literacy. We have 24,000 employees. We need them all using AI in their daily lives, so they start to understand it better. They start to find better ways to gain personal productivity with it. Just think if we get -- just pick a number, 15% lift in personal productivity over 24,000 people. That's going to have an impact. And so that's where a big part of our focus is. And we've rolled out -- it happens to be Microsoft's Copilot tool across the organization. We're seeing usage go up every month, people regularly doing things. We have all kinds of seminars and different training events, and we promote it. And we can see the usage going up significantly every month. We've rolled out the development tool, the GitHub tool to all of our developers. We're starting to see that activity increase. And we've got a number of work streams in place that we're evaluating its impact. We're also very focused on doing it responsibly. And I think you've got to be really careful with AI that you have the proper governance in place and the proper checks and balances that you're not introducing risk, particularly into an insurance business. We underwrite to 0. We don't underwrite to 2%. We don't underwrite to 5%. We have claims, but we underwrite to 0. And so it's really important that you don't introduce AI tools that could change the dynamic of that core tenet in the title industry of underwriting to 0.

And what you're seeing, what are the typical use cases of AI across your workforce?

We've seen some nice use cases. We were standing up a title plant in a county, and you basically have to go back and get -- you decide how far you want to go back. But let's say you get 20 years of documents to take your plant back 20 years, you've got to assemble a lot of documents and get the right information keyed into a database. We had a nice use case with AI, helping us with that, making it much more efficient. I think one of the places that everybody sees with AI is its ability to analyze documents and distill them very quickly. And you think about the amount of documents we touch in the title industry, I mean, you guys might not know, but it's a lot. I mean it's just a lot of documents. And so we're looking at use cases across legal, escrow, searching, really to help our employees just be able to do their jobs faster and serve customers better and more efficiently. And really with that human in the loop kind of an idea kind of behind it.

Okay. Now let's turn to capital allocation and capital priorities. Tony, FNF has been consistent in returning capital through cycles, since 2020, more than $4 billion returned to shareholders. How are you balancing dividends, buybacks and reinvesting into the business with -- in the current environment that we've been in for the past 4 years?

Yes. I mean the great thing about it is we're a cash generator. And it's probably one of the -- maybe the single greatest strength of FNF is our ability to generate cash to the holding company level. Even in a trough year, it might be $900 million or $1 billion of cash flow that comes up to Holdco, which is important because we pay a very generous dividend. It costs us about -- with the new dividend increase, it's about $560 million, $565 million annually. So we need to start there and make sure that we have enough cash that pays that dividend. After that, it's easier because our debt service, our interest expense is about $75 million a year, very manageable, nothing coming due for until at least '28, I think. And so from that standpoint, we're in very good shape. After that, it becomes more opportunistic between buybacks and M&A. We've been very acquisitive over 40 years, but we pick our spots. And the last few years has been pretty quiet. We still buy title agents and we still look at a lot of title agents, and there are some great ones out there, and we'll buy those or buy some of those over time. But it's been pretty quiet as the dust has settled on a trough market and people try to figure out what the right price is to transact. So that's been pretty slow the last couple of years. Buybacks are opportunistic as well. We look at our cash flow. We look at our share price. We like to be in the market regularly at kind of modest levels. We were aggressive in Q2. We felt like the stock had gotten beaten up a little bit, and we had the cash. And so we were aggressive. And then we dialed it back a little bit in Q3. But we do like to be an active participant in the buyback. I can't remember the total. Yes, one other thing I wanted to say, we ended the third quarter with $733 million of holding company cash. So we still have quite a lot there, and that's up $150 million from the second quarter. So it was a very strong quarter.

And FNF authorized the repurchase program, I think, over 20 million shares.

We renewed that. I think it might have even been this year. But yes, we have over 20 million share authorization still available. And I mean, if that -- if for whatever reason we use that, it's pretty easy to go to the Board and have that re-upped.

All right. There's been a lot of regulatory focus on title fees, maybe not lack of information there and how things are being interpreted. But how is FNF preparing for potential changes? And do you see any major policy shifts ahead? And we've heard also about portable mortgages and 50-year mortgages. What do you have to say to all of that?

Well, maybe we'll just start with the title waiver because that's kind of what you're referring to or the title acceptance pilot. And periodically, there's noise around it or what have you. But the reality is it's a very small program. It was intended to be a very small program, and it continues to be a very small program. So we've seen very little impact on any volumes really related to that. You've got some companies out promoting alternatives like attorney opinion letters, and we've seen almost no impact from that. It's really a product that just doesn't stand up to the value of title insurance in really any way even from a pricing standpoint. In some cases, it's significantly more expensive than title insurance. So we'll see where this goes when this pilot ends. But right now, it's kind of a small impact. And other than that, what was the second part of the question, I'm sorry?

Those things that we keep hearing about 50-year mortgage...

50-year...

Affordable mortgages.

Well, we got already. I think it's good in the sense that people are trying to come up with ideas to help. Whether those are the right ones, though, I think creates questions. The portability issue, I think, is not easily implemented. Changes would need to be made in order for that to even be possible. So I don't know that, that's going to really do anything. And kind of similarly with the 50-year mortgage, it's -- I mean, what's the rate going to be on a 50-year mortgage? Is it going to be lower than a 30-year mortgage?

I don't think so.

Maybe not. I mean a 15-year mortgage is less than a 30-year mortgage. So should a 50-year mortgage? I don't know. So the whole claim around savings might not be there if rates -- and I don't know what the rates would be on a 50-year mortgage. And then you've got the issue of can people build any equity with a 50-year mortgage. Do lenders want to offer...

And on the portability side, do you think that opens the potential for just a bubble from a credit quality perspective? Because I'm transferring my mortgage to someone who I don't know has the same creditworthiness.

Yes, it could. I think there's probably a lot of things that would have to be flushed out. There have been assumable mortgages in the past under certain conditions, but it's not the rule. It's much more the exception.

All right. Let's touch a little bit on F&G. You recently announced the distribution of 12% of F&G's common stock to FNF shareholders. If you can walk us through the rationale for that decision and why 12% instead of the full spin and how that positions both companies going forward?

Do you want to start or?

Yes, I can start. Yes. I mean, really, the bottom line, the Board loves the asset. They love the contributions. We've grown F&G from a $26 billion portfolio to over $70 billion portfolio. It contributes 32% of our adjusted earnings this year. So it's been a nice complement in a trough title market. We've expanded our sales channels from independent agents, which was just one channel to broker-dealers and own distribution and sales have gone from $3 billion to $15 billion annually. And so all that's been very positive. We recently transformed or at least adjusted to a more capital-light strategy where instead of selling as much as we can, it's more opportunistic about, okay, let's sell our core products because we know the return we can generate on those core products. And the other ones, we have to -- let's look at it and make sure that we're getting the right return right now. Otherwise, we don't have to sell that. We don't have to grow sales, every single quarter. And with the reinsurance sidecar, that's also capital-light, we earn fees on that, and we can move some of that obligation off our balance sheet. We have an own distribution investment where we buy portions or majority ownership of these distributors, and that's also fee income. That's all been very positive. The challenge we've had, and we unlocked a little of it when we spun off 15% of it, we wanted to highlight the value of F&G because it seemed to get lost in a wholly owned -- being wholly owned by FNF. And so a few years back, we spun off 15%. And we got some recognition. So I think that worked. But lately, we're hearing and it feels like there just wasn't enough shares in the marketplace for people to own. We had interested buyers who said, yes, we really can't accumulate what we'd like to or need to under our rules own. And if we could, I'm not sure we could sell it if we wanted to. And that's a challenge. And so the Board looked at that, obviously, weighed the idea of a full spin because you give up that if you drop below an 80% ownership stake. But the Board has been very happy with the asset. They love the asset. They're not intending a full spin. So it was really about how do we unlock F&G's share price and landed on 16 million shares, drops FNF to about a 70% ownership stake. It doubles the float opportunity to $1 billion or thereabouts. And so people will now be able to buy F&G shares.

And has the distribution been effective? Or when is that scheduled?

So that's scheduled. I think it's shareholders of record in mid-December, and the distribution will happen on December 31.

All right. And looking ahead, speaking of F&G, how do you see F&G fitting strategically within the broader FNF platform? And what does the long-term relationship between the 2 look like? You touched on that. The Board likes the asset. So there -- it seems like there's no intention of divesting anytime soon.

I think the foreseeable future is assuming this works and that float gets enough shares out there that matter because that could be a variable, right? What if we find out, well, that wasn't enough shares. But the expectation or at least mine would be right now, business as usual, capital-light strategy, F&G generating strong cash flow like FNF and FNF participates in dividends that F&G would pay. And so continue business as usual as we grow both of the businesses...

And I would add -- I agree with Tony. I would add also, when you think about like own distribution strategy and with the sidecar with Blackstone, I don't know if you mentioned that or not, but that's more of a fee-based model with that piece of the business. F&G starts to feel a little bit more like FNF in terms of how it's structured and the business that's running. It still has the balance sheet, of course, but we like that aspect of it.

Right. And so before we turn it over to the audience in case anyone has any questions, one last one is, what do you think is the most misunderstood aspect of FNF's business or strategy right now? I think I have a clue, but I'll let you answer that.

And maybe I'll start, and then you can jump in. I don't feel that really misunderstood. I think investors know us pretty well that follow us. Probably just the biggest overhang is just the market itself. It's a volatile, uncertain market. We're in year 4 of a downturn. When does that end? And no one really knows. And so I think that just creates questions around the business a little bit. And then probably with any business, it's what does technology do? Is it disruptive and things like that. But I don't know that we're fundamentally misunderstood. But you may think differently.

No, I would agree with that. I think there are a couple of points we like to emphasize, and I mentioned it earlier, our cash flow generation ability I think that probably gets underappreciated or overlooked from time to time. Our investment in F&G, I think we probably don't get full value or even close to full value for that. This could change with more float out there. And then kind of to Mike's point, the incremental margin that we can generate on an upside or an uptick in direct volume is significant. I mean it's 40% plus. And we're in a trough market, generating a very strong margin, but it can be a lot better with more volume.

So there's been a tremendous amount of talk about blockchain, [indiscernible] how do you guys view that? I mean, we've looked at that internally when we see the impact in the industry. Can you talk about the blockchain?

Yes. We -- I mean, we've looked at blockchain from when it first came out 10 years ago, I think, when we first started hearing about it back in 2016. And the initial thesis with blockchain was it was going to sort of replace all the title plants and all the data that the industry uses to sort of process the title production and title commitments. And that turned out to not really be a real opportunity, more expensive than the data banks that were already there. And a number of counties even looked at it, and I don't think you saw anybody really adopt blockchain at that level. This idea of smart contracts could play out, I think, in the title industry. I think it's very early stage. But potentially could get used on the closing side. And I don't know that we've seen really an impact from things like cryptocurrency as an acceptable form of cash for transactions. Could that change? I suppose it could, but that has not happened at this time. And there's not really a lot we could do about it. We would really just adapt if that changed in the overall ecosystem.

So what I'm hearing is you have no...

Other than looking at it and seeing what the developments are, we do not.

All right. Maybe just to close, what gives you most confidence in FNF's positioning as we move into the next phase of the housing cycle?

Well, I would say it's a number of things. Our go-to-market strategy is a multi-brand company. No one else has that. We have a significant multi-brand go-to-market strategy. It's very impactful. It allows us to have the market share we have to pull more transactions out of individual key markets. Our scale is a significant competitive advantage. This is a community-based business where you kind of win or lose based on your position in local communities across the U.S. We have more of that than anyone else by a lot. And that scale really comes into play in a rising market. Tony kind of touched on the leverage we have and our ability to drive incremental margins, and that's really where that scale comes into play.

Anything you'd add to that?

No. I think that's good.

All right. I just want to say thank you again to Mike, Tony and Lisa for joining us today and helping us start the day. And thanks for everyone for being part of the discussion and enjoy the rest of the conference.

Thanks, Oscar.

Thank you.

Thank you.