Fidelity National Financial Stock

Fidelity National Financial, Inc. provides title insurance, escrow and other title-related services, including trust activities, trustee sales guarantees, recordings and reconveyances and home warranty products; and transaction services to the real estate and mortgage industries.

The company is one of the nation’s largest title insurance companies operating through its title insurance underwriters - Fidelity National Title Insurance Company (FNTIC), Chicago Title Insurance Company (Chicago Title), Commonwealth Land Title Insurance Company (Commonwealth Land Title), Alamo Title Insurance and National Title Insurance of New York Inc. - which collectively issue more title insurance policies than any other title company in the United States.

Through the company’s subsidiary, ServiceLink Holdings, LLC (ServiceLink), it provides mortgage transaction services, including title-related services and facilitation of production and management of mortgage loans. The company is also a leading provider of insurance solutions serving retail annuity and life customers and institutional clients through its majority-owned subsidiary, F&G Annuities & Life, Inc. (F&G).

Segments

The company operates through Title, F&G, and Corporate and Other segments.

Title segment

This segment consists of the operations of the company’s title insurance underwriters and related businesses, which provide title insurance and escrow and other title-related services, including trust activities, trustee sales guarantees, and home warranty products. This segment also includes the company’s transaction services business, which includes other title-related services used in the production and management of mortgage loans, including mortgage loans that experience default.

This segment’s revenue is closely related to the level of real estate activity that includes sales, mortgage financing and mortgage refinancing. Title insurance companies typically issue title insurance policies directly through branch offices or through affiliated title agencies, or indirectly through independent third-party agencies unaffiliated with the title insurance company.

Direct and Agency Operations

The company provides title insurance services through its direct operations and independent title insurance agents who issue title policies on behalf of its title insurance companies. The company’s title insurance companies determine the terms and conditions upon which they will insure title to the real property according to its underwriting standards, policies, and procedures.

Direct Operations

The company’s direct operations include both the operations of its underwriters and those of affiliated agencies. In the company’s direct operations, the title insurer issues the title insurance policy and retains the entire premium paid in connection with the transaction.

The company has approximately 1,400 offices throughout the U.S. primarily providing residential real estate title insurance. The company monitors the number of direct offices to ensure that it remains in line with its strategy and the economic environment. The company’s commercial real estate title insurance business is operated primarily through its direct operations. The company maintains direct operations for its commercial title insurance business in all the major real estate markets, including Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, New York, Philadelphia, Phoenix, Seattle, and Washington D.C.

Agency Operations

In the company’s agency operations, the search and examination function is performed by an independent agent or the agent may purchase the search product from it. The company’s relationship with each agent is governed by an agency agreement defining how the agent issues a title insurance policy on its behalf. The agency agreement also sets forth the agent’s liability to the company for policy losses attributable to the agent’s errors. For each agent with whom the company enters into an agency agreement, it maintains financial and loss experience records. As of December 31, 2022, the company transacted business with approximately 5,300 agents.

Fees and Premiums

The company recognizes title insurance premium revenues from direct operations upon the closing of the transaction.

Escrow, Title-Related and Other Fees

In addition to fees for underwriting title insurance policies, the company derives a significant amount of its revenues from escrow and other title-related services, including closing and trust activities, trustee sales guarantees, recordings and reconveyances, and home warranty products.

Sales and Marketing

The company markets and distributes its title and escrow products and services to customers in the residential and commercial market sectors of the real estate industry through customer solicitation by sales personnel. The company actively encourages its sales personnel to develop new business relationships with persons in the real estate community, such as real estate sales agents and brokers, financial institutions, independent escrow companies and title agents, real estate developers, mortgage brokers and attorneys who order title insurance policies for their clients. While its smaller, local clients remain important, large customers, such as national residential mortgage lenders, real estate investment trusts and developers are an important part of the company’s business.

Competition

In the company’s principal markets, competitors include other major title underwriters, such as First American Financial Corporation, Old Republic International Corporation, Stewart Information Services Corporation, Westcor Land Title Insurance Company, and WFG National Title Insurance Company.

Regulation

In addition to state-level regulation, the company’s title insurance and certain other real estate businesses are subject to regulation by federal agencies, including the Consumer Financial Protection Bureau (CFPB). The CFPB was established under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank), which also included regulation over financial services and other lending related businesses. The CFPB has broad authority to regulate, among other areas, the mortgage and real estate markets in matters pertaining to consumers. This authority includes the enforcement of the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA) formerly placed with the Department of Housing and Urban Development.

F&G segment

This segment primarily consists of operations of the company’s annuities and life insurance related businesses. This segment issues a broad portfolio of annuity and life insurance products, including deferred annuities (fixed indexed and fixed rate annuities), immediate annuities, and indexed universal life (IUL) insurance, through its retail distribution channels. This segment also provides funding agreements and pension risk transfer (PRT) solutions through its institutional channels.

Through F&G, and its wholly owned insurance subsidiaries, the company markets a broad portfolio of deferred annuities (fixed indexed and fixed rate annuities), immediate annuities, indexed universal life insurance, funding agreements, and pension risk transfer solutions.

F&G has helped middle-income Americans prepare for retirement and for their loved ones' financial security. The company partners with leading independent marketing organizations (IMOs) and their agents to serve the needs of the middle-income market and develop competitive products to align with their evolving needs. During 2020, F&G entered into the bank and broker dealer distribution channels to connect with even more customers. As of December 31, 2022, F&G had approximately 623,000 policyholders who count on the safety and protection features the company’s fixed annuity and life insurance products provide.

The company, through a network of approximately 271 IMOs and 20 leading banks and independent broker dealers, representing approximately 82,000 independent agents and advisers, it offers various types of fixed annuities and life insurance products. The company’s fixed annuities serve as a retirement and savings tool for which its customers rely on principal protection and predictable income streams. In addition, the company’s IUL insurance products provide its customers with a complementary product that allows them to build on their savings and provide a payment to their designated beneficiaries upon the policyholder’s death. The company’s most popular products are fixed indexed annuities (FIAs) that tie contractual returns to specific market indices, such as the S&P 500 Index. The company’s customers value its FIAs, which provide a portion of the gains of an underlying market index, while also providing principal protection.

The company invests the proceeds primarily in fixed income securities. The company also uses options and futures that hedge the index credit of its FIA and IUL liabilities by replicating the market index returns to its policyholders. The company invests predominantly in options on the S&P 500 Index. The majority of the company’s products allow for active management to achieve targeted lifetime returns.

Annuities

Through F&G’s insurance subsidiaries, the company issues a broad portfolio of deferred annuities (FIA and fixed rate annuities), immediate annuities, and PRT solutions.

Deferred Annuities – FIAs

The company’s FIAs allow contract owners the possibility of earning returns linked to the performance of a specified market index, predominantly the S&P 500 Index, while providing principal protection. The contract owners typically make a single deposit into the company’s deferred annuities. The contracts include a provision for a minimum guaranteed surrender value calculated in accordance with applicable law.

Deferred Annuities – Fixed Rate Annuities

Fixed rate annual reset annuities issued by the company has an annual interest rate (the crediting rate) that is guaranteed for the first policy year. After the first policy year, the company has the discretionary ability to change the crediting rate once annually to any rate at or above a guaranteed minimum rate.

Single Premium Immediate Annuities

The company has previously sold single premium immediate annuities (SPIAs), which provide a series of periodic payments for a fixed period of time or for the life of the policyholder, according to the policyholder’s choice at the time of issue.

Life Insurance

The company offers IUL insurance policies and has previously sold universal life, term and whole life insurance products.

Pension Risk Transfer (PRT)

In July 2021, the company entered the pension risk transfer market. The company is active in plan buy-outs, where it has a direct, irrevocable commitment to each covered participant to make the specified annuity payments based upon the terms of the pension plan.

The company’s PRT products are comparable to income annuities, as it receives a single, upfront premium in exchange for paying a guaranteed stream of future income payments which are typically fixed in nature, but may vary in duration based on participant mortality experience. These products primarily create earnings through spread income. In each transaction FGL Insurance and/or FGL NY Insurance issues a group annuity contract to discharge pension plan liabilities from a pension plan sponsor, either through a separate account or through a general account guarantee. The company entered the PRT solutions business by building a team of experienced professionals, then working with brokers and institutional consultants for distribution.

Distribution

The company distributes its annuity and life insurance products through three main channels of distribution: independent agents, banks, and broker dealers.

In the company’s independent agent channel, the sale of its products typically occurs as part of a four-party, three stage sales process between FGL Insurance, an independent marketing organization (IMO), the agent and the customer. FGL Insurance designs, manufactures, issues, and services the product. The IMOs will typically sign contracts with multiple insurance carriers to provide their agents with a broad and competitive product portfolio.

The company offers its products through a network of approximately 271 IMOs, representing approximately 73,000 agents. It has 41 Power Partners, consisted of 19 annuity IMOs and 22 life insurance IMOs.

In 2020, F&G launched a set of fixed rate annuity and FIA products to banks and broker dealers, and gained selling agreements with some of the largest banks and broker dealers in the United States. The company offers its products through a network of approximately 20 banks and broker dealers, representing approximately 9,000 financial advisers. The financial advisers at the company’s bank and broker dealer partners are able to offer their clients guaranteed rates of return, protected growth, and income for life through its Secure series of annuity products. The company employs a hybrid distribution model in this channel, whereby some financial institutions partner directly with F&G and its sales team, and others work with an intermediary.

The top five states for the distribution of Fidelity & Guaranty Life Insurance Company (FGL Insurance)’s products in the year ended December 31, 2022, were Florida, California, Texas, Pennsylvania and New Jersey.

In addition, beginning in 2021, the company’s institutional business offers funding agreement products to institutional clients by means of capital markets transactions through investment banks. Funding agreements are also executed through the Federal Home Loan Bank of Atlanta (FHLB).

Investments

The company’s investment portfolio consists of high-quality fixed maturities, including publicly issued and privately issued corporate bonds, municipal and other government bonds, asset-backed securities (ABS), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), commercial mortgage loans (CMLs), residential mortgage loans (RMLs), limited partnership investments, and other investments. The company also maintains holdings in floating rate, and less rate-sensitive investments, including senior tranches of collateralized loan obligations (CLOs), non-agency RMBS, and various types of ABS. The company also has a small amount of equity holdings required as part of its funding arrangements with the FHLB.

Regulation

FGL Insurance, Fidelity & Guaranty Life Insurance Company of New York (FGL NY Insurance) and Raven Re are subject to comprehensive regulation and supervision in their domiciles, Iowa, New York and Vermont, respectively, and in each state in which they do business. FGL Insurance does business throughout the United States, except for New York. FGL NY Insurance only does business in New York. Raven Re is a special purpose captive reinsurance company that only provides reinsurance to FGL Insurance under the Commissioners Annuity Reserve Valuation Method (CARVM) Treaty.

FGL Insurance’s principal insurance regulatory authority is the Iowa Insurance Division (IID); however, state insurance departments throughout the United States also monitor FGL Insurance’s insurance operations as a licensed insurer. The New York State Department of Financial Services (NYDFS) regulates the operations of FGL NY Insurance. Certain provisions of the Dodd-Frank Act are applicable to the company.

F&G Life Re Ltd. is a Bermuda exempted company incorporated under the Companies Act 1981, as amended (the Companies Act) and registered as a Class C insurer under the Insurance Act 1978, as amended, and its related regulations (the Insurance Act). F&G Life Re Ltd. is regulated by the Bermuda Monetary Authority (BMA).

F&G Cayman Re Ltd. (F&G Cayman Re) is licensed as a class D insurer in the Cayman Islands by the Cayman Islands Monetary Authority (CIMA). As a regulated insurance company, F&G Cayman Re is subject to the supervision of CIMA and CIMA may at any time direct F&G Cayman Re, in relation to a policy, a line of business or the entire business, to cease or refrain from committing an act or pursing a course of conduct and to perform such acts as in the opinion of CIMA are necessary to remedy or ameliorate the situation.

Corporate and Other segment

This segment consists of the operations of the parent holding company, the company’s real estate technology subsidiaries, and other smaller, and non-title businesses.

Strategy

Title: The company’s strategy in the Title segment is to increase its market share throughout the real estate business cycle.

F&G: The company’s strategic focus areas include targeting large and growing markets; superior ecosystem; and consistent track record of success.

Acquisitions

In January 2023, the company completed its previously announced acquisition of TitlePoint. TitlePoint enables searches for detailed property information, images of documents and maps from hundreds of counties across the U.S. and is a leader in the science of real estate property research technology.

In August 2022, the company acquired approximately 74% of the outstanding equity of AllFirst Title Insurance Agency (AllFirst). In December 2022, the company purchased an additional 6% of the outstanding equity of AllFirst. AllFirst and its portfolio brands, FirsTitle, Excel Title Group, Allegiance Title Company, Guaranty Title, Smith Brothers Abstract, Aggieland Title Company, and Guaranty Title New Mexico provide title examination, title plant, abstract, and settlement services for residential, commercial, farm and ranch sales, and energy projects in 121 counties throughout Texas, Oklahoma, New Mexico, and Arkansas.