Fidelity National Financial Inc

NYSE:FNF

Earnings Call Transcript 2020-Q4

[Operator]

Good morning, ladies and gentlemen, and welcome to the FNF 2020 Fourth Quarter Earnings Call. During today’s presentation all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions with instructions to follow at that time. As a reminder, this conference call is being recorded.

I would now like to turn the call over to Jamie Lillis, Investor Relations for FNF. Please go ahead, sir.

[Jamie Lillis, Investor Relations]

Thank you, operator. And good morning, everyone. Thank you for joining our fourth quarter 2020 earnings conference call. Joining me today is our CEO, Randy Quirk; President, Mike Nolan; CFO, Tony Park; and F&G's CEO, Chris Blunt.

We'll begin today with a brief strategic overview from Randy, Mike will review the title business, Chris will review F&G, and Tony will finish with a review of the financial highlights. We'll then open the call for your questions and finish with some concluding remarks from Randy.

But before we begin, I would like to remind you that this conference call may contain forward-looking statements that involve a number of risks and uncertainties, in particular, the COVID-19 pandemic. There is a significant uncertainty about the duration and extent of the impact of this pandemic. Statements that are not historical facts, including statements about our expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management at the time of this call. Such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. The risks and uncertainties, which forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release dated yesterday and in the statement regarding forward-looking information, risk factors and other sections of the company's Form 10-K and other filings with the SEC. This conference call will be available for replay via webcast at our website at fnf.com. It will also be available through phone replay beginning at 3:00 p.m. Eastern Time today until March 4. The replay number is [phone] and the access code is 13715589.

Let me now turn the call over to our CEO, Randy.

[Randy Quirk, Chief Executive Officer]

Thank you, Jamie. I would like to begin by thanking our entire team for their incredible efforts as we navigated through a challenging environment this past year, while delivering record results for both the fourth quarter and the full year 2020 in our title business.

Our primary focus has been and continues to be the health and well-being of our employees, while maintaining our business continuity and ensuring the needs of our customers are consistently met.

For the fourth quarter, we generated record adjusted pretax title earnings of $624 million compared with $355 million in the year ago quarter and a record 22.7% adjusted pretax title margin compared with 16.3% in the fourth quarter of 2019.

While we are very pleased with our strong financial results, we also made significant headway on our technology investments in our title business, having recently announced both the inHere platform and subsequently Close inHere. Mike will go into more detail on this, but as we continue to drive the innovation of the title industry, we believe our significant national footprint will prove to be a real plus as further adoption of our client-facing and title automation technology expands our competitive advantage.

Turning to our acquisition of FGL Holdings. F&G continues to execute on its growth strategy, generating retail sales growth of over 40% in the fourth quarter. The credit rating upgrade that F&G has enjoyed as a result of the acquisition by FNF has opened additional large market opportunities.

F&G is gaining momentum in the newly entered bank and broker-dealer channel, generating $500 million of channel sales since our launch on July 1. Additional distribution channels, including institutional products, will continue to be a strategic area of focus for F&G in 2021, including the pension risk transfer marketing. Chris will go into more detail on F&G's fourth quarter results shortly.

Looking forward, our priority continues to be focused on long-term value creation for our shareholders through our diligent capital allocation program, while also remaining focused on investing in our business to sustain growth.

Last week, we announced a quarterly cash dividend of $0.36 per share, reflecting the fourth quarter dividend increase of 9%. Additionally, in October, we announced a 12-month $500 million share repurchase target. And since that announcement, we have repurchased 3.8 million shares for approximately $140 million. And for 2020 in total, we repurchased 7.5 million shares for approximately $244 million.

Let me now turn the call over to Mike Nolan to discuss the title insurance business in more detail.

[Mike Nolan, President]

Thank you, Randy. As Randy mentioned, the fourth quarter was a record for adjusted pretax title earnings and adjusted pretax title margin, as we continue to benefit from low interest rates driving sustained momentum in refinance volumes, strong purchase demand and the continued rebound in commercial real estate activity.

For the fourth quarter, we generated adjusted pretax title earnings of $624 million, a 76% increase over the fourth quarter of 2019. Our adjusted pretax title margin was 22.7%, a 640 basis point increase over the prior year quarter.

We had a 40% increase in direct orders closed - 48% increase in direct orders closed, driven by an 86% increase in daily refinance orders closed, an 18% increase in daily purchase orders closed and a 1% increase in total commercial orders closed.

Total commercial revenue was $322 million compared with the year ago quarter of $321 million due to the 1% increase in closed orders. Total commercial fee per file was flat compared to the year ago quarter.

For the fourth quarter, total orders opened averaged 11,600 per day, with October at 11,800 and November at 11,900 in December at 11,000. For January, total orders opened were over 13,400 per day and through the first three weeks of February were over 13,500 per day as we continue to see strong demand and purchase activity and continued strength in the refinance market.

Daily purchase orders opened were up 14% in the quarter versus the prior year. For January, daily purchase orders opened were up 15% and versus the prior year. And through the first three weeks of February were up 4% versus the prior year.

Refinance orders opened increased by 90% on a daily basis versus the fourth quarter of 2019. For January, daily refinance orders opened were up 96% versus the prior year and, through the first three weeks of February, were up 40% versus the prior year.

Lastly, total commercial orders opened increased by 3% over the fourth quarter of 2019. Commercial opened orders per day remained strong, with the fourth quarter flat sequentially from the third quarter. For January, total commercial orders opened per day were up 5% over January 2020 and were up 2% through the first three weeks of February versus the prior year.

We remain encouraged by the order volumes we have seen in the last two quarters as open orders have rebounded across multiple geographies to the levels we saw before the outbreak of the pandemic.

As Randy briefly touched on, we made significant progress on our technology investments. We have a long history of investing in and developing technology from title automation to data collection and order processing.

Our inHere Platform is focused on transforming the real estate transaction experience by improving the safety and simplicity needed to start and track the progress of a real estate transaction, as well as notarizing and signing the necessary documents.

inHere works with our network of local trusted escrow and settlement professionals nationwide, leveraging the industry's largest footprint and the latest cloud-based technology.

In January, we launched Close inHere, our guided digital closing experience for consumers finalizing their real estate transactions. For many, the closing of the transaction is the most overwhelming part of the process of buying or refinancing a home.

Close inHere based upon digital tools instead of the traditional paper allows our staff of closing professionals to deliver a truly digital intelligent and interactive guided approach to closing. Today, the entire suite of inHere solutions are currently undergoing deployment throughout FNS family of companies, and this will continue throughout 2021.

To conclude, we are committed to driving innovation in the title industry and to investing in technology for the benefit of all of our customers, employees and shareholders.

Let me now turn the call over to Chris Blunt, to review F&G's fourth quarter highlights.

[Chris Blunt, Chief Executive Officer, F&G]

Great. Thanks, Mike. The fourth quarter capped off another record year of growth at F&G. Building on the momentum we saw in the third quarter, we achieved record sales of fixed indexed annuities, or FIAs in the fourth quarter, while maintaining our pricing discipline.

Total retail annuity sales of $1.3 billion in the fourth quarter were up 42% from the prior year, and core FIA sales were $947 million, up 19% from the prior year. We continue to see significant growth ahead of us as we take further market share in our primary independent agent channel and gain traction in new channels.

As we previously shared, post the FNF acquisition, we successfully launched into the financial institutions channel in July. Since then, we've generated over $500 million in new annuity sales in the channel to date, including $322 million in the fourth quarter alone. These phenomenal sales results have surpassed our original expectations, and we continue to get very positive feedback from our new partners on our quality of service as well.

With these solid sales results, we grew average assets under management, or AAUM, to $28 billion, driven by approximately $900 million of net new business flows in the fourth quarter.

Now despite the decline in interest rates this year, our spread results have remained in line with historical trends, demonstrating our continued pricing discipline and active in-force management.

Total product net investment spread was 255 basis points in the fourth quarter, and FIA net investment spread was 302 basis points. Adjusted net earnings for the fourth quarter were $128 million. Strong earnings were driven by steady spread results and a favorable tax benefit recognized following the FNF acquisition.

Net favorable items in the period were $68 million, primarily as a result of this tax benefit. Adjusted net earnings, excluding notable items, were $60 million, down from $64 million in the third quarter due to $4 million of higher strategic spend due to our faster-than-expected launch into new channels.

Next, I want to quickly touch on the topic of mortality, which many in the life and annuity industry are monitoring in the current pandemic. In contrast to many of our peers, F&G has minimal exposure to traditional life products at only 6% of GAAP reserves after reinsurance. In addition, mortality in our in-force life block has been within our pricing expectations despite the pandemic environment.

Most importantly, our investment portfolio continues to perform well, and credit impairments for the year were less than our product pricing assumptions. In addition, as of year-end, the portfolio's net unrealized gain position grew to $2 billion, a sharp reversal from the net unrealized loss position experienced early in 2020 due to the pandemic.

Moreover, we came into 2020 with a strong balance sheet, which allowed us to effectively weather the volatility and economic impacts of the pandemic, while still growing the business. As expected, we ended the year with an estimated RBC ratio of over 400% for our primary insurance operating subsidiary.

We also completed the sale of our offshore third-party reinsurance business, F&G Re, to Aspida Holdings in December. Proceeds from the sale will be used to fund future growth opportunities for F&G. And we also entered into a mutually beneficial flow reinsurance agreement with Aspida on our MYGA products beginning in the first quarter of 2021.

So in summary, our sales are growing nicely as we diversify into multiple channels following the FNF acquisition. We continue to consistently generate stable net investment spread and earnings, and we remain confident in our investment portfolio.

With that, I will now turn the call over to Tony Park to review FNF's fourth quarter financial highlights.

[Tony Park, Chief Financial Officer]

Thank you, Chris. We generated approximately $3.8 billion in total revenue in the fourth quarter, with the title segment producing approximately $3 billion, F&G producing $667 million and the corporate segment generating $60 million.

Fourth quarter net earnings were $801 million, which includes net recognized gains of $573 million versus net recognized gains of $131 million in the fourth quarter of 2019.

The net recognized gains in each period are primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether the securities were disposed of in the quarter or continued to be held in our investment portfolio. Excluding net recognized gains, our total revenue was $3.2 billion as compared with $2.2 billion in the fourth quarter of 2019.

Adjusted net earnings from continuing operations were $588 million or $2.01 per diluted share. The title segment contributed $498 million. F&G contributed $128 million, and the corporate and other segment had an adjusted net loss of $38 million.

Excluding net recognized gains of $290 million, our title segment generated $2.8 billion in total revenue for the fourth quarter compared with $2.2 billion in the fourth quarter of 2019.

Direct premiums increased by 29% versus the fourth quarter of 2019. Agency revenue grew by 33%, and escrow title-related and other fees increased by 21% versus the prior year. Personnel costs increased by 15%, and other operating expenses decreased by 7%. All in, the title business generated a 22.7% adjusted pretax title margin, representing a 640 basis point increase versus the fourth quarter of 2019.

Interest income in the title and corporate segments of $32 million declined $23 million as compared with the prior year quarter due to the reduction of short-term interest rates on our corporate cash balances and our 1031 exchange business.

FNF debt outstanding was $2.7 billion on December 31 for a debt-to-total capital ratio of 24.2%. Our title claims paid of $54 million were $33 million lower than our provision rate of $87 million for the fourth quarter. The carried title reserve for claim losses is currently $62 million or 4.1% above the actuary central estimate. We continued to provide for title claims at 4.5% of total title premiums.

Finally, our title and corporate investment portfolio totaled $5.7 billion at December 31. Included in the $5.7 billion are fixed maturity and preferred securities of $2.5 billion with an average duration of three years and an average rating of A2, equity securities of $900 million, short-term and other investments of $500 million and cash of $1.8 billion. We ended the quarter with just under $1 billion in cash and short-term liquid investments at the holding company level.

Let me now turn the call back to our operator to allow for any questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from the line of Jack Micenko with SIG. Please proceed with your question.

[Jack Micenko, SIG]

Good morning, everybody or good afternoon, actually, my apologies. The question of the day, looking at the market, looking at the 10 year yield, the refi numbers seem to be much more resilient than people thinking, looking at the January and February data you gave us. I mean, January, sort of a tough comp a year ago because rates kind of moved higher, but the February number is up 40%.

Can you just touch on how you feel about the resilience of refi? Is it - are the lenders finally getting to the backlog? Because it seems like there's just a lot more there than move-in rates would suggest just from your observations on the open order side?

[Mike Nolan, President]

Sure. Jack, it's Mike. And you're right, the year is starting out at very elevated levels. We're opening in January, over 8,000 refis a day, which are higher than pretty much any month we had last year.

Having said that, as rates move up, refis will be impacted, but it just really depends how much they move up. And if you look at data, for example, that comes out of Black Knight, they measure this pretty carefully. And in their December report, they had estimated the size of the refi market, the potential size at interest rates just below 2.9% was close to 17 million eligible people. And with the 50 basis point movement up, I'm not saying that will happen, but if it did, they say that drops down to just under 10 million.

So a pretty good fall off, but still a lot of people that can refi. So I think our view is that refis will still be strong in '21, maybe not as strong as '22 - as '20, but certainly stronger than we probably had in quite a number of years. So hopefully, that addresses the question.

[Jack Micenko, SIG]

Yeah. No, it does and it's hard to ultimately say, but just - it seems to hang in there much stronger than anybody had sort of thought even a year ago. The closed order side, you definitely seem to be taking some market share.

And I'm curious if you can - what do you think some of the drivers there are? If you can parse it out between sort of centralized refi versus purchase? Where are the - where do you think you're gaining more share and why?

[Mike Nolan, President]

I think it's - it's Mike. I think it's a little tough to nail that down because we don't get market share numbers specific to segments. You really just look at - the real market share numbers tend to be more at the national level on premium dollars. So I think it's a little tough to answer.

But I think ServiceLink has certainly seen a lot of growth in their centralized refi channel. We've seen a lot of it in our finance business on the agency side that works with title agents on refi. So - but I can't really say how it relates to the overall market.

[Randy Quirk, Chief Executive Officer]

Yeah. And Mike, this is Randy. I might just add also we have a very large network, very distributed network. And we also have the benefit in some of the major metropolitan areas, particularly - and also in the West, the benefit of our multiple brands. So we get with our sales teams, one, two, three, four, in some cases, five bites at the apple in given markets. And we're pretty aggressive in that regard.

So I think that somewhat plays into market share gain. Along with when we see an opportunity for acquisitions, agent acquisitions, we take advantage of that also. And year in and year out, we are - we had agency operations and acquire agency operations into our direct side, and that accounts also for kind of gradual but continual market share growth.

[Jack Micenko, SIG]

Yes, got it. Okay. And then if I could sneak one more and not to let Chris off the hook with an answerable question also. How do we think about revenue contribution in 2021? I mean, obviously, the bank channel is new and growing.

But you also mentioned some share take in independent. And you hadn't really thought about that as a real growth driver going forward. Any sense you can give us in terms of modeling around how big the F&G contribution could be in '21?

[Chris Blunt, Chief Executive Officer, F&G]

Yeah. To be really clear, the independent agent channel remains our largest channel, and I think will for quite some time, and we're quite optimistic there as well. We've seen some competitors pull back for different reasons. So we continue to add market share.

We had growth in that channel last year, which I think put us in a very small peer group. And then layered on top of that, pretty explosive growth in banks and broker-dealers. And then the next channel of opportunity for us is the pension risk transfer business.

So we're in a position now where we can be bidding on pension buyout cases as well. So yes, I definitely don't want to give the impression. It's still an absolute core channel, our relationships are as good as they've ever been, and we think we can continue to take share.

[Jack Micenko, SIG]

Thank you.

[Operator]

Our next question comes from the line of John Campbell with Stephens. Please proceed with your question.

[John Campbell, Stephens]

Hey. Guys, good morning. Congrats on a great quarter.

[Randy Quirk, Chief Executive Officer]

Thanks.

[John Campbell, Stephens]

So I think it's going to be difficult, obviously, for you guys to carry a 20% title pretax margin. I don't think anybody is really forecasting that at this point, but you guys have a - there's a lot of moving parts in the business. You don't have a crystal ball, obviously, on the macro side.

But any sense for how margins might fair in 2021. I guess at the macro outlook in your head at least is kind of plays out. I mean, is it more like a mid-teens type margin like 2018 and 2019? Or do you think you've got enough sustainable things in place to keep it closer to high teens?

[Mike Nolan, President]

John, it's Mike. Maybe I'll take that in two chunks. I think first, as we think about the first quarter, we are very positive on how margins will play out. We did a 14.4 [ph] in the first quarter of last year. I think we've got a good shot to outperform that. Just given what we're seeing currently with resale and refi activity, we talked about some of the numbers.

If there's any a wildcard, and that's probably too strong of a word. You never know how commercial is going to play out quarter-to-quarter. The open orders are extremely good, but you don't know always when the transaction will close. So good chance to outperform the first quarter of last year.

Full year, it's a pretty tough comp, 19.6, I think it was. And again, I think that will come down to a couple of things. We kind of think purchase will outperform for the full year. That seems to be a pretty consensus view at this point.

Commercial has got a good opportunity, I think, to come out better than '20. And then the wildcard there, John, is what happens with refis, particularly in the back half of the year. If rates move up, I think there'll be some impact on refis. And so that could be the thing that pushes back on margins just a little bit.

[Tony Park, Chief Financial Officer]

And John, maybe just - this is Tony, just chiming in for a moment. As a reminder, and I think you know this and probably all the listeners do, but we're talking about the resiliency of refi, but it's important to keep in mind that the fee per file on refi is probably a third or so of what we get on a purchase transaction. And so clearly, a fall-off in refi that's offset by even 1/3 offset by an increase in purchase is equal revenue dollars. And so I think that's important to consider as well.

[John Campbell, Stephens]

Yeah. I think that makes sense. And on the F&G business, I guess, I'll just say this first. I mean, I think that those guys have done a phenomenal job since you guys picked it up and congrats to Chris and the team.

For whatever reason, investors just sort of refusing to give any credit for it. If that remains the case for you guys, how do you insert yourself there to create more value? I know you guys kind of mentioned something last call, but are there things that you're exploring or something that you might be looking to do to kind of insert yourself there?

[Tony Park, Chief Financial Officer]

Yeah, this is Tony. I did mention on the last call, and all I said, and it was a hypothetical, and some people read more into those than others. But what I said was our board has a long history of taking action when we aren't fully appreciated. But at the same time, their patient, and we're very pleased or they're very pleased. I won't speak for them, but they're very pleased with the progress that we have at F&G, the sales growth and the momentum and the opportunities that are there.

And I think that as long as those continue to play out, we'll just see how things go. We've owned it since I guess, June 1, and so it's only been seven months to this point. And so I think they're willing to be patient and to see how this goes. And ultimately, it will either benefit us and all of our shareholders or it won't. But I think it's pretty early to tell.

And in the meantime, we'll continue to allocate capital, whether it's in buybacks, if the stock is under pressure or increasing our dividend or whatever else we might do, the title company is generating a lot of cash.

[John Campbell, Stephens]

Yeah, makes sense. If I could squeeze in one more for Chris. The $60 million you called out as a favorable tax impact post transaction, were you calling that out as a onetime event? Or is that a go-forward benefit for you guys?

[Tony Park, Chief Financial Officer]

Yes. Maybe I'll take that. Chris, do you want it?

[Chris Blunt, Chief Executive Officer, F&G]

No. Go ahead, Tony.

[Tony Park, Chief Financial Officer]

Yes, John, it's basically a one-time, but it wasn't carved out of AOI as a one-timer, even though it's sort of is because it's tax planning and valuation allowance adjustments and those have typically, or I guess, historically in the life space, not been carved out of AOI. So we didn't want to be inconsistent with that.

But the reality is there was a $37 million tax benefit related to the sale of F&G Re which had a tax loss, even though it wasn't a GAAP loss and another roughly $40 million of benefits from an F&G restructuring, so about $77 million in total that benefited our adjusted operating earnings, and that's really a onetime deal. I would expect the tax rate in 2021 to go back to historical numbers of somewhere around 24% on a consolidated basis.

[Chris Blunt, Chief Executive Officer, F&G]

And the only thing I would add to that is we did try to call out. We had some core expenses, but extraordinary as we've had an opportunity to expand our distribution faster than we thought, and that obviously has some set-up costs in both the bank, broker-dealer as well as setup of our PRT business so that we would consider more onetime as we go forward.

So if you're kind of foot to shore, it's probably that $64 million. And then we expect growing throughout the year as the asset base is higher as some of the pricing actions we took last year feed into the portfolio.

[John Campbell, Stephens]

Okay. Makes sense. Thanks, guys.

[Chris Blunt, Chief Executive Officer, F&G]

Thanks, John.

[Operator]

Our next question comes from the line of Mark DeVries with Barclays. Please proceed with your question .

[Mark DeVries, Barclays]

Yeah, thanks. Tony, the implied payout from the combination of the dividend and the repurchase authorization is not that far off from kind of what earnings power had been a few years ago, but you guys earned almost that much this quarter and even on kind of a more continuing operating basis, covered almost two third to that.

Should we think that if you are able to sustain this kind of level of robust earnings power that either there could be upside later in the year to the repurchase authorization? Or are you thinking about just accumulating dry powder? Or are you actually seeing some opportunities to deploy that, whether it's an F&G or through M&A?

[Tony Park, Chief Financial Officer]

Yeah. It's a good question, Mark. And to your point, yeah, we generated a lot of cash in 2020. And in fact, 2019 was a strong cash flow generation as well through our title company.

In the fourth quarter, we upstreamed about $400 million in cash to the parent holding company. We spent about $350 million of that was the combination of stockholder dividend of about $110 million, about $10 million in interest expense, $140 million in share buybacks and roughly $100 million, mostly in taxes because it was a big tax quarter. So we ended the quarter pretty close to where we started at $1 billion.

As we look ahead, I wouldn't be at all surprised if we generated another $1 billion or so that we could upstream to the parent. Some of that's clearly spoken for. The dividend will cost us a little over $400 million, and there's still $360 million left on the $500 million buyback we announced in the fourth quarter of last year. We bought back $140 million. We have $360 million remaining. I fully would intend to execute upon that and then like $80 million in interest expense.

And so we'll probably gain a little bit on our cash position, but mostly spend what we make. So your question is a good one, what might we do with roughly $1 billion or $1.2 billion in dry powder, so to speak. The Board does like to look at the dividend annually and likes to increase that, I'll call it, modestly over time.

But from there, I wouldn't be surprised, especially if our shares are under pressure to see us increase the buyback. We still have an authorization available to buy more shares or the Board could always revisit that and increase that.

Randy mentioned title agent acquisitions. I think those are always on the table, and we'll continue to buy those. We don't announce every single deal we do. But we like to spend $100 million, $200 million, $300 million on agency acquisitions over the course of the year.

And then maybe the real question is, what kind of growth does F&G experience organically in 2021 and beyond. And how much capital is FNF and the Board willing to put in that? F&G does have some ability to borrow locally under their current rating situation. There's 16% debt-to-cap now, they can go to 25%.

And so there's certainly capacity to borrow either externally or even from FNF. And then FNF could certainly contribute to capital at F&G, if the growth prospects continue the way they look, or F&G could look to third-party equity or maybe even reinsurance arrangements. I know it was a long answer. But hopefully, it got to your question.

[Mark DeVries, Barclays]

Yeah, it did, Tony. And then a question for Chris. Clearly, there's a view that low rates is bad for your business, although it's kind of hard to see that, as you alluded to, your spreads have kind of held up near historic levels.

But could you just talk us through at a high level, what impact you believe low rates have had on your business? And what impacts you might see if rates continue kind of they're steady March higher here?

[Chris Blunt, Chief Executive Officer, F&G]

Sure. So I think we have to differentiate between short-term and long-term rates. So about 15% of our portfolio is sitting in floating rate securities. So it's a little over $4 billion of assets. When LIBOR dropped from -- I think it was 118 basis points overnight, we just feel that instantly. So similarly, we would feel it instantly on the upside in terms of earnings.

Now I don't think anyone is projecting short-term rates to move up higher in the near term here, but that's clearly a tailwind for us as rates rise. I would say, unless LIBOR goes negative, we've probably felt that pain, and it's much more upside than downside from here. With longer term rates, it just takes time to move into the portfolio.

So yes, to your point, it's frustrating. I hear that, and I think it comes from good historical reasons as you've seen companies that are life insurers put up reserves, have a tough time with low rate environment, but that's not who we are. We've shown that with the tenure at 40 basis points, we were making our spread targets.

So we just need a steep yield curve. We need a yield advantage over CDs, which is generally not hard to do in most environments. And we can continue to grow sales and earn a healthy spread.

What you're seeing right now is while treasuries have gone up, spreads have come in, but net-net were up on corporate [Technical Difficulty]

[Mark DeVries, Barclays]

Very good. Thank you.

[Chris Blunt, Chief Executive Officer, F&G]

Reinvestment overtime. I hope that helps.

[Mark DeVries, Barclays]

Yeah. It does. Thank you.

[Operator]

[Operator Instructions] Our next question comes from the line of Bose George with KBW. Please proceed with your question.

[Bose George, KBW]

Hey. Guys, good afternoon. Actually, the first one is just on F&G. And I think this was sort of asked earlier. But just can you just remind us what the good way to think about sort of the operating run rate for earnings, the $72 million pretax this quarter, a good run rate and then add the growth to that. And then any changes to the tax? Or should we just use a normalized tax rate for that also going forward?

[Tony Park, Chief Financial Officer]

Yeah, Bose, this is Tony. Maybe I'll start. Chris can certainly chime in. We had $60 million in what I would call, core earnings in the fourth quarter, which was impacted by some unusual spend on really growing or building out the broker dealer channel and really the growth prospects on the sales side. So that was impacted $4 million or $5 million.

So really, I would expect, as we look to 2021, we're starting in the mid-60s and then would expect that, that grows each quarter as assets under management grow. As I think we've told you in the past that a general rule of thumb is somewhere around 100 basis points of earnings, after-tax earnings on total assets under management. So that gives you an indication of really what we would expect to see going forward. Hopefully, that helps.

And then on the tax rate, I think the overall tax rate guidance is probably somewhere in the 23.5%, 24% on a consolidated basis, maybe a little higher than that in title and a little lower than that in the F&G business.

[Bose George, KBW]

Okay. Perfect, thanks. And then actually just switching to the commercial. The revenues there were pretty much back to 4Q '19. You noted 1Q looks good. I mean, do you think there - is there some - a little bit of catch-up in there? Or do you feel like commercial is getting fairly normalized?

[Mike Nolan, President]

Yeah, Bose, it's Mike. I don't think it's catch up. When you look at the performance, particularly on the open side in the third and fourth quarters had been sustained at such a high level. I think we averaged over 900 orders per day on the open side in both quarters, which are really high levels. I think prior to '20, we only had one quarter that were over 900.

That tells me it's not catch up. And now we're seeing it really continue into 2020, I mentioned in the opener that February was running a little bit ahead of last February on the commercial open side. And last February is our best opening month ever. So just - it feels just very sustained, and we're seeing it, again, as I said earlier, across multiple geographic areas.

[Bose George, KBW]

Okay, great. Thanks very much.

[Mike Nolan, President]

Thanks.

[Operator]

Our next question is a follow-up question from the line of John Campbell with Stephens. Please proceed with your question.

[John Campbell, Stephens]

Hey. Guys, thanks. Thanks for squeezing one more in here. I wanted to ask on BFT and WPF on the two stocks. Really like those investments there. Obviously, we're pretty big fans of Cannae and see a lot of value in those.

But I'm curious about some of the moving parts there. Obviously, there's Class A, Class B shares, there are warrants and whatnot. If you could just run us through exactly how many shares you're getting with those investments for each?

[Tony Park, Chief Financial Officer]

Yes, John, this is Tony. I don't know how many shares, although, I guess, it'd be really easy to do the math. Our investment, I don't want to get these wrong, the Paysafe, whichever ticker that is, is our $500 million investment and the other one, that's public right? Yes. I'm pretty sure it's public, but I'm not going to say the name. The other one is a $150 million commitment, and we're in at $10 per share. So you can do the math pretty easily. I think it may even come with some warrants.

What you will see or what you do see in our earnings, not in our adjusted earnings because we carve it out, but in our GAAP earnings in our recognized gains and losses, we have about $175 million gain related to the first one, the Paysafe investment. Even though we don't own it yet, it's a forward purchase contract, but we had to mark that to market, and that - those shares are trading well ahead of our $10 buy-in. And so that's why we have that.

Obviously, that's going to bounce around as the share price bounces around. But we're obviously very pleased with the expectations of that and the other one as well. Hopefully, that helps.

[John Campbell, Stephens]

Yeah. Absolutely. And I think the WPF is the other one, the light investment. So the - I guess, the follow-up to that is, how should we be thinking about the liquidity there? I guess, the potential time horizon you guys have there. I mean are you long-term holders? Is that something that's more of a short-term type of investment?

[Tony Park, Chief Financial Officer]

Yeah. I think probably to realize the true value, we're probably in it or at least the expectation going in is that we're in it as long as the other investors are, and of course, that can change. The good news is it's liquid. But it's really, for us, it's swapping one investment for another. It's pretty hard to make a lot of yield on corporate fixed income security right now. And these investments historically have been very, very good.

And so really, it's just taking an investment of $500 million investment in our insurance subsidiaries and exchanging that out, if you will, for an investment like this, that could double or triple over time versus yield $10 million annually or something like that. And so I guess the short answer is we'll wait and see, but my expectation is we would probably hold it for a while.

[John Campbell, Stephens]

Okay. Makes sense. Thanks, guys.

[Operator]

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

[Randy Quirk, Chief Executive Officer]

Thank you. We are extremely pleased with our record fourth quarter and full year title results, fueled by our team's ongoing efforts through such unprecedented times we were able to execute our strategy and deliver superior industry-leading performance.

F&G continues to deliver strong results while maintaining a solid investment portfolio, and we are excited at the prospect of entering additional distribution channels with new products in the coming year.

Lastly, we will continue to deploy a thoughtful capital allocation plan that is focused on delivering value to our shareholders. We look forward to updating you on our progress during our first quarter call. Thank you.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time. And have a wonderful day.