The slower housing market at the start of the year was not enough to prevent Fidelity National Financial from turning a profit.
During the first quarter of 2023, the Big Four title insurer reported revenue of $2.474 billion, down from $3.167 billion in Q1 2022, and a net income of $59 million compared to $400 million a year prior. Fidelity’s title segment reported revenue of $1.6 billion for the quarter, down from $2.4 billion a year ago, and a net income of $128 million, a decline compared to $191 million in the first quarter of 2022.
“We are pleased with our solid performance in the quarter as we continue to navigate a volatile and challenging environment,” Mike Nolan, the CEO of Fidelity, told investors and analysts on the firm’s first-quarter earnings call Thursday morning. “Starting with our title business, the focus remains on providing our customers exceptional service, protecting our policyholders and building our business for the long term.”
However, as Nolan acknowledged, these strong financial results came at a cost. In 2022, Fidelity laid off 26% of its field staff net of acquisitions, one of the largest cuts in the company’s over 175 year history. The headcount reductions continued into 2023, as Nolan reported that Fidelity laid off an additional 2% of its staff in Q1.
Thanks to these cuts, however, personnel costs for the quarter were down 23% year over year in the firm’s title segment alone.
This was good news for a segment that recorded sizable annual decreases in the number of purchase orders opened per day (29%), the number of refinance orders opened per day (67%), and the number of commercial orders opened per day (27%).
In addition to the drop in order count, direct title premiums fell 44% from a year ago to $428 million, agency title premiums were down 50% year over year to $550 million, and commercial revenue posted a 36% annual decline to $241 million.
Among all of these yearly decreases, however, there was some positive news. The number of purchase orders opened during the quarter was up 20% compared to the fourth quarter of 2022, and the average total fee per file was up 19% year over year to $3,446.
Executives also noted that in April, despite being down 23% year over year, purchase order volume was the best Fidelity has seen since August 2022.
“We expect the volatile market environment will continue to provide both headwinds and tailwinds for market participants,” Nolan said. “On the residential side, although there is not yet firm footing for rates in home affordability, there are solid fundamentals, such as pent-up demand, a growing working age and first time buyer population, that are expected to support a rebound once rates move downward and sellers and buyers more fully return to the market.”
One interesting item of note during Fidelity’s call came in response to a question on executives’ thoughts on the rumored Fannie Mae pilot program and the attorney opinion letters.
“We have talked with Fannie Mae and FHFA through ALTA [American Land Title Association] and even ourselves, and in regards to the rumor on the potential pilot with some kind of title waiver, we have not seen a proposal or anything that we could evaluate and respond to. But we have been really trying to impress upon the agencies that those kind of programs are untested and could lead to more uncertainty,” Nolan said. “At this time, we don’t know if there is a proposal that will come out or not. And then, with the acceptance of AOLs, there has been very little uptick on that, as they have indicated, and we don’t think that it is a lower cost alternative. It may even be more expensive — and we certainly think it is a lesser value product.”