Even though revenue is down and open title orders are down from last year, there’s a silver lining for Big Four title insurance firm Fidelity National Financial: it’s still in line with business in 2019, one of the best years on record.
Despite some headwinds created by a slower housing market, Fidelity performed well in the third quarter. Fidelity generated $3.2 billion in total revenue, down from $3.8 billion a year ago. In addition, the title firm recorded adjusted net earnings of $295 million, compared to $663 million in the third quarter of 2021.
Fidelity’s title segment recorded revenue of $2.3 billion, down from $2.9 billion a year prior, with adjusted pre-tax earnings of $400 million, compared to $669 million a year ago. Most of this revenue came from agency title premiums, which generated $1 billion in total revenue, a 27% year-over-year decrease. Also worth noting is the $381 million in revenue generated by the commercial sector, which is up 4% year over year and represents a record high for a third quarter.
“I think you look at the third quarter, a record third quarter, so that’s evidence of a still healthy market. And the pipeline is still good,” Mike Nolan, Fidelity’s CEO, told investors. “If you look at the opened orders for the third quarter, they were just under 860 a day, which is down from the highs of ’21 and the early part of ’22. But for context, that lines up kind of really well with the volumes we saw in 2019, which was the best year we ever had before 2021. So I feel like there’s good activity.”
The record commercial revenue is even more impressive considering the number of commercial orders closed on a daily basis was down 12% year over year, however this drop is small compared to the 23% decrease in purchase orders closed and a 76% drop in refinance orders closed. In addition, a year ago refinance revenue made up 19% of total title direct revenue, but that fell to 7% in the third quarter of 2022, as mortgage rates reached some of their highest levels in over a decade.
“We saw refinance orders begin to decline in the second quarter of 2021 and move quickly to rightsize our operations. We believe that current refinance volumes are at or near trough levels and would not expect volumes to return in 2023 without a meaningful reduction in mortgage rates,” Nolan said. “Over the last year, as refinance volumes have fallen, we have benefited from diversification across our market segments as residential purchase and commercial revenue have helped to buffer lower refinance volumes.”
In a preview of Q4, the total number of title orders opened per day averaged 4,800 in October, compared to 5,700 orders per day in Q3.
“We remain confident in our ability to navigate the challenges of operating in a cyclical business and our strong balance sheet allows us to not only withstand periods of dislocation but take advantage of opportunities to build our title business for the long term,” Nolan said.
In addition to reporting earnings, Fidelity also announced last week that it was acquiring St. Louis Title, Security Title Insurance Agency, Accurate Disbursing and Benchmark Title.