Fidelity National Financial Inc

NYSE:FNF

Earnings Call Transcript 2022-Q4

[Operator]

Ladies and gentlemen, greetings, and welcome to the Fidelity National Financial, Inc. Fourth Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce you to your host, Lisa Foxworthy-Parker, Investor Relations. Please go ahead.

[Lisa Foxworthy-Parker, Investor Relations]

Great. Thanks, operator and welcome, everyone. Joining me today are Mike Nolan, Chief Executive Officer; and Tony Park, Chief Financial Officer. We look forward to addressing your questions following our prepared remarks. And Chris Blunt, F&G's Chief Executive Officer; and Wendy Young, F&G's Chief Financial Officer, will join us for the Q&A portion of today's call.

Today's earnings call may include forward-looking statements and projections under the Private Securities Litigation Reform Act, which do not guarantee future events or performance. We do not undertake any duty to revise or update such statements to reflect new information, subsequent events or changes in strategy.

Please refer to our most recent quarterly and annual reports and other SEC filings for a discussion of the factors that could cause actual results to differ materially from those expressed or implied. This morning's discussion also includes non-GAAP financial measures that we believe may be meaningful to investors. Non-GAAP measures have been reconciled to GAAP where required in accordance with SEC rules within our earnings materials available on the company's website.

Yesterday, we issued a press release, which is also available on our website. Today's call is being recorded and will be available for webcast replay at fnf.com. It will also be available through telephone replay beginning today at 3:00 PM Eastern Time through March 2, 2023.

And now, I'll turn the call over to our CEO, Mike Nolan.

[Mike Nolan, Chief Executive Officer]

Thank you, Lisa, and good morning. Overall, we have delivered strong performance for the quarter and full year, while navigating a challenging landscape. During the quarter, we completed a dividend distribution of 15% ownership of F&G to FNF shareholders, and F&G held its first quarterly earnings call as a publicly traded company earlier this morning. F&G continues to deliver on its diversified growth strategy and reported record sales for the year and record assets under management of nearly $44 billion at year-end.

Looking forward, F&G has reached an inflection point where its strong capitalization supports both organic growth and the distribution of a portion of their earnings to shareholders in the form of common dividends, which FNF will benefit from as F&G's largest shareholder. Tony will provide more details on F&G's performance and its impact on FNF's consolidated results.

Our title business has continued to perform well despite the falloff in mortgage originations due to increasing mortgage rates and housing market headwinds. Volumes in 2022 were considerably less than the record setting 2021 levels, mainly due to the precipitous increase in mortgage rates in recent months.

We responded with disciplined cost actions as opened orders began to decrease, and delivered adjusted pre-tax earnings in our title segment of $1.6 billion and an industry-leading adjusted pre-tax title margin of 16.7% for the full year. We are proud of this result as this is our third best pre-tax title margin since 2003, despite the steep decline in mortgage volumes.

Looking at fourth quarter volumes more closely. Our total commercial orders opened were $724 per day, down 29% from the fourth quarter of 2021, and for January were 736 per day, lower by 30% versus the prior year.

Next, daily purchase orders opened were down 31% from the fourth quarter of 2021 and down 29% and for the month of January versus the prior year. And refinance orders opened per day were down 76% from the fourth quarter of 2021 and down 72% for the month of January versus the prior year.

Overall, total orders opened averaged 4,300 per day in the fourth quarter, with October at 4,800, November at 4,300, and December at 3,700. For the month of January, total orders opened were 4,700 per day, up 27% over December. Notably, purchase orders opened per day in January increased by 33% over December and refinance orders opened per day increased 17%.

Total revenue, excluding recognized gains and losses, was $1.8 billion, a 42% decrease compared with the fourth quarter of 2021. Commercial revenue proved resilient at $344 million, our second best fourth quarter, only trailing our record-setting fourth quarter of 2021. For the year, commercial revenue was $1.54 billion, an all-time high.

Adjusted pre-tax title earnings were $227 million and adjusted pretax title margin was 12.3% in the fourth quarter. While the volatile market environment challenged all industry participants, our management team is experienced in operating through varying economic cycles, and has a proven track record of reacting quickly to adjust to order volumes.

For the full year 2022, net of acquisitions, we have reduced title headcount by approximately 26% and we'll continue to manage the business based on market conditions. At the same time, we continue to look for opportunities to strengthen our business through acquisitions and recruiting industry talent.

Our industry-leading position and strong balance sheet puts us in an advantageous position to not only withstand periods of dislocation, but take advantage of opportunities to strategically build and expand our title business for the long-term.

Over the past year, we have invested over $200 million in 11 acquisitions. And we completed the previously announced acquisition of TitlePoint in January 2023 for $225 million as we expand our footprint into attractive markets and enhanced our title capabilities.

We have also continued to invest in our inHere experience platform that enhances the transaction experience of agents, transaction coordinators, and consumers. Adoption of the inHere platform has been strong this year with real estate agents and transaction coordinators registered for the platform growing to approximately 135,000 in the fourth quarter, an increase of 220% over the fourth quarter of 2021. We believe this growth demonstrates the value customers are receiving from the inHere platform and creates both market growth and efficiency opportunities over the near and long term.

Finally, we have confidence in F&G following its partial spin-off and public listing. F&G's spread-based income delivers a steady and growing source of earnings, which is countercyclical to our title business, as F&G benefits from the rising rate environment.

Since the merger of over two years ago, F&G has far exceeded our original expectation for growth and contributed approximately $1.1 billion of adjusted net earnings over the last 10 quarters on a cumulative basis.

By retaining our majority interest in F&G following the dividend distribution, we will continue to benefit from F&G's growth while also receiving approximately 85% of F&G's cash dividends.

F&G's Board of Directors has approved initiation of a dividend program at an initial aggregate amount of approximately $100 million per year, commencing in 2023, and FNF will receive approximately 85% of F&G's quarterly cash dividend in proportion to our majority ownership. This provides a competitive advantage for our company, and we remain committed to F&G's long-term success.

Wrapping up, I would also like to thank our employees for their hard work and commitment over the last year. We could not have delivered our industry-leading performance without their incredible effort.

Let me now turn the call over to Tony Park to review FNF's fourth quarter financial highlights.

[Tony Park, Chief Financial Officer]

Thank you, Mike. Before I turn to our consolidated results, as Mike mentioned, on December 1, FNF completed the distribution on a pro rata basis of approximately 15% of the common stock of F&G to FNF shareholders. The purpose of the distribution is to highlight the substantial equity value of F&G that has been and will continue to be created, and allow investors to invest directly in F&G.

For reporting purposes, since FNF retains control of F&G through its approximate 85% equity ownership stake, we continue to consolidate the assets, liabilities and results of operations of F&G in FNF's consolidated financial statement. The portion of equity interest of F&G that FNF does not own, for the period of December 1 to December 31, is reflected as non-controlling interest in FNF's consolidated financial statements.

Now, turning to our consolidated results. We generated $2.6 billion in total revenue in the fourth quarter. Fourth quarter net earnings were $68 million, including net recognized losses of $118 million, versus net earnings of $533 million, including $213 million of net recognized gains in the fourth quarter of 2021.

The net recognized gains and losses 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 continue to be held in our investment portfolio.

Excluding net recognized gains and losses, our total revenue was $2.7 billion as compared with $4.6 billion in the fourth quarter of 2021.

Adjusted net earnings from continuing operations was $287 million or $1.06 per share compared with $668 million or $2.34 per share for the fourth quarter of 2021. The Title segment contributed $180 million. The F&G segment contributed $131 million. And the Corporate segment had an adjusted net loss of $24 million.

For the full year 2022, we saw strong performance for the Title segment despite a difficult environment as well as strong growth for the F&G segment, which together generated solid profitability.

Total revenue, excluding gains and losses, was $13 billion in full year 2022 despite the decline in title order volumes and reflects a 15% decrease from the record set in full year 2021. This generated $1.5 billion in adjusted net earnings, a decrease of 40% from $2.5 billion in full year 2021. The Title segment contributed $1.2 billion. The F&G segment contributed $338 million, and the Corporate segment had an adjusted net loss of $83 million.

Turning to Q4 financial highlights specific to the Title segment. Our Title segment generated $1.8 billion in total revenue in the fourth quarter, excluding net recognized gains of $29 million, compared with $3.2 billion in the fourth quarter of 2021. Direct premiums decreased by 47% versus the fourth quarter of 2021, agency premiums decreased by 48%, and escrow title-related and other fees decreased by 36% versus the prior year.

Personnel costs decreased by 24% and other operating expenses decreased by 24%. All in, the title business generated a 12.3% adjusted pre-tax title margin for the quarter versus the record 22.4% in the prior year quarter. Adjusted pre-tax title margin decreased to 16.7% for the full year compared with 21.7% in full year 2021.

Our title and corporate investment portfolio totaled $5.3 billion at December 31. Interest and investment income in the Title and Corporate segments of $100 million increased $74 million as compared with the prior year quarter, primarily due to increases in income from our 1031 exchange business and short-term investments.

Given the rising rate environment, we would anticipate potential for higher investment income through reinvestment of our short three-year duration portfolio maturities. Looking to 2023, we expect quarterly interest and investment income to moderate in the $75 million to $80 million range with declining 1031 exchange balances and spreads and potentially declining cash and short-term investment balances.

Our title claims paid of $79 million were $22 million higher than our provision of $57 million for the fourth quarter. The carried reserve for title claim losses is approximately $90 million or 5.2% above the actuary central estimate. We continue to provide for title claims at 4.5% of total title premiums. Next, turning to Q4 financial highlights specific to the F&G segment. F&G hosted its earnings call earlier this morning and provided a thorough update, so I will focus on the key highlights of its quarterly performance.

Total gross sales were $2.7 billion in the fourth quarter, an increase of 23% over the fourth quarter 2021. This reflects record retail sales, partially offset by lower institutional sales, which are expected to be lumpier and more opportunistic than in the retail channels.

Net retained sales were $1.9 billion for the fourth quarter, a decrease of 7% from the fourth quarter of 2021, reflecting the increase in flow reinsurance to a [indiscernible] effective September 1. Ending assets under management were $43.6 billion as of December 31, 2022. Adjusted net earnings for the F&G segment were $131 million for the fourth quarter compared with $142 million for the fourth quarter of 2021.

F&G's adjusted net earnings reflect volatility from the alternatives investment portfolio, short-term mark-to-market movement that differ from long-term expectation. As Mike mentioned, F&G continues to generate consistent economics over time and FNF will continue to benefit from the F&G segment's growth and countercyclical performance to the title business as well as receiving cash dividends as the largest shareholder of F&G, which we anticipate will grow with earnings.

Let me wrap up with a few thoughts on capital and liquidity. We remain focused on ensuring a balanced capital allocation strategy as we navigate the current environment. This encompasses making investments in title technology and other strategic initiatives to support innovation and organic growth in the business, continuing to evaluate sensible strategic M&A opportunities in real estate-related businesses, title agencies and technology acquisitions, paying a generous quarterly dividend to our shareholders, and repurchasing shares.

We ended the quarter with $939 million in cash and short-term liquid investments at the holding company level. Importantly, this balance does not reflect FNF's acquisition of the TitlePoint line of business from Black Knight for $225 million, which funded on January 1, 2023, from a combination of $150 million of operating cash and $75 million of holding company cash.

FNF's consolidated debt was $3.2 billion on December 31, up approximately $550 million from the preceding quarter due to F&G's draw on its new third-party senior unsecured revolving credit facility that closed in November. As a result, our debt-to-capitalization ratio, excluding AOCI, was 26.8% as of December 31.

As planned, F&G also successfully completed their first debt issuance as a public company on January 13, 2023, issuing $500 million of senior unsecured notes due in 2028. F&G intends to use the net proceeds from the revolver draw and senior notes to support growth of the business and for future liquidity needs.

On a pro forma basis, including F&G's new notes and a $35 million partial paydown on its revolver in January 2023, FNF's debt-to-capitalization ratio, excluding AOCI, is estimated at approximately 29.5%. This is in line with our long-term target range of 20% to 30%, and we expect that our balance sheet will naturally delever as a result of growth in shareholders' equity excluding AOCI.

Going forward, our consolidated annual interest expense on debt outstanding is approximately $175 million, comprised of approximately $80 million for FNF's Holdco debt and $95 million for F&G debt outstanding at this time.

During the fourth quarter, we paid common dividends of $0.45 per share for a total of $124 million. We view our current annual common dividend of approximately $500 million as sustainable. The dividend is reviewed quarterly and expected to increase over time, subject to cash flows, alternative uses of capital and market conditions.

FNF continues to return excess cash to shareholders over time through share repurchases and, subject to blackout periods has remained active throughout the fourth quarter and into the first quarter. During the fourth quarter, we repurchased one million shares for a total of $38 million at an average price of $37.87 per share.

We also closed on two title acquisitions in the fourth quarter and TitlePoint in early January. And we'll continue to evaluate M&A opportunities as we navigate the current business environment. For the fourth quarter, we have returned approximately $162 million of capital to our shareholders through common dividends and share repurchases. For the full year, we have returned over $1 billion through common dividends and share repurchases.

This concludes our prepared remarks, and let me now turn the call back to our operator for questions.

[Operator]

Thank you. Ladies and gentlemen, at this time we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Bose George from KBW. Please go ahead.

[Bose George, KBW]

Hi, guys, good morning. Actually, could I get an update on just margins by segment? And just curious if the trend in the margin was reflected across all segments, or just how that trended?

[Tony Park, Chief Financial Officer]

Sure, Bose. This is Tony. Yeah, I'll highlight some of the margins by segment as we've done in the past. Just looking at the fourth quarter of 2022 up against the fourth quarter of 2021. Keep in mind that, the fourth quarter of 2021 was our best quarter ever.

Our direct operations generated a 21% pre-tax margin, up against over 30% in the prior year quarter. Agency was 6% up against 10% in the prior year quarter. Some of that agency margin in the prior year quarter was driven by a centralized business we have that generates tremendous margins on refinance business. And, obviously, we've all seen what's happened to refinance orders over the course of 2022. So that's why agency is down as much as it is.

National commercial operations held up at 31%, but last year, with that record fourth quarter, they were at almost 43%. And then ServiceLink, which has, like, the combination of centralized refinance, but also some default businesses and loan sub-servicing and others, was roughly 10% in the quarter versus about 25% in the fourth quarter of 2021.

[Bose George, KBW]

Okay. Great. Thanks a lot for that detail. And then, actually on -- in terms of the non-controlling interest, can you just remind us, apart from the F&G piece, what else flows through that line item?

[Tony Park, Chief Financial Officer]

Yes. Not a lot, to be honest. We own 100% of most of our investments. But in the Title segment, you'll find some joint venture type businesses that we have in certain markets, but they don't really move the needle a whole lot. And then the F&G piece will show up.

We only have a month's worth in there, and I don't even think -- I think it's probably going to show up in the corporate segment. And you'll see, I don't think there's much or anything there. And so, you really won't see it until we make our way into 2023. But that's going to be 15% of the net earnings of F&G going forward.

[Bose George, KBW]

Okay. Perfect. Thank you.

[Operator]

Thank you. Our next question comes from the line of Mark DeVries from Barclays. Please, go ahead.

[Mark DeVries, Barclays]

Thank you. I was hoping to get some color on what we should expect on buybacks in 2023. You had a pretty big step down in the pace in 4Q. Was that kind of subject to maybe extended blackouts around the FG distribution? And should we expect the cadence to go back to closer to the $150 million a quarter that you had in 2022, prior to the fourth quarter?

[Tony Park, Chief Financial Officer]

Yes, Mark, this is Tony. You're right about the step back in Q4, we were blacked out for most of the quarter, with the dependency of the F&G spin. So we weren't very active during the quarter until after the December 1 spin.

In terms of going forward, it's hard for me to speak for the Board. We typically don't pre-announce where we're headed in terms of buyback activity. I can say, and I think we -- management and the Board would agree, we think our shares are undervalued.

And certainly F&G with the mark that we've set in terms of that spin-off, we don't think -- first of all, we think that's light and there might be reasons for that, including limited float. But we also don't believe FNF share price got any benefit from that to this point. And so we do think that our shares are attractive at these prices. But we weigh the capital allocation on all fronts. We've got our dividend M&A, internal investment, and of course, buybacks. And the Board -- I mean we returned over $1 billion last year in terms of dividends and buybacks. And I think buybacks were more than half of that, probably $550 million or so. And I think we'll just see how the business environment plays out over the course of the year. But I'm sure that we will be in the market during the year.

[Mark DeVries, Barclays]

Okay, that's helpful. And then just a question on expenses. Is there more to do here on head count, or alternatively, was the action that you took kind of later in the fourth quarter that's not yet flowed through the results that we should expect to see in 1Q?

[Mike Nolan, Chief Executive Officer]

Sure, Mark. It's Mike. I would say there's always more to do in a market that's declining. And yes, some of the work done in the fourth quarter probably doesn't fully show up in the fourth quarter. I mean, we took out 12% of our head count in the fourth quarter, net of acquisitions, which is a pretty sizable number.

So, I think some of that will flow through to the next quarter. probably reduced -- will reduce in the first quarter about another 3%. And I think further actions will really be order dependent. So, as we've always done, Mark, and you know this, we'll will kind of follow those orders. We've done some work on our infrastructure as well relative to branch locations. I wouldn't say anything significant, but we've had some movement there.

And part of what we have to evaluate is as quickly as this market turned down, with some help from rates, I think it could as quickly turn up. And so you don't want to do too much in the short term that can kind of hurt you in the midterm and long-term, but we're certainly going to continue to manage the cost.

We're really very pleased with the work we did really in the course of the year to finish with a full year margin of 16.7%, which is really close to the midpoint of our 15% to 20% normalized margin that we talk about. So, a lot of good work done, but certainly, there could be more to do.

[Mark DeVries, Barclays]

Okay, great. Thank you.

[Operator]

Thank you. Our next question comes from the line of Andrew Kligerman from Credit Suisse. Please go ahead.

[Andrew Kligerman, Credit Suisse]

Great. Thank you. So, just kind of following up on the prior question about expenses. And looking at the numbers, it looks like you did a lot with other operating expenses sequentially from $437 million to $392 million. your title margin was about 12.3%. So, very low relative to that 16 plus that you cite for the year. So, does it look like that number is kind of stabilizing in the 12%, 13% zone? Maybe you do some stuff around the edges you mentioned a potential 3% reduction in staff in the first quarter. But maybe that title margin is kind of stabilizing in the low double-digits. Does that make sense?

[Mike Nolan, Chief Executive Officer]

Well, I think it would depend on the context. Are you talking about a full year comparison or a quarterly comparison?

[Andrew Kligerman, Credit Suisse]

Whatever makes more sense. I mean, if you think next year, where do you think the title margin will level out in 2023, assuming the same kind of environment, being now?

[Mike Nolan, Chief Executive Officer]

Yeah, I think it would be helpful in responding to that. As we think about 2022, and we had the – as you pointed out, the full year at 16.7%, our really third best in almost 20 years, but a 12.3% in the fourth quarter, so we kind of had a declination in that regard. But as you look at the year, it was really a tale of two halves, if you will. And if you think about the now existing home sale numbers and in January of 2022, their annualized number was over 6 million existing home sales, which if we had, had that would have been one of the best existing home sale markets in the last 20 years.

And by the fourth quarter of the same year, that number was down closer to 4 million, which if annualized, would be one of the worst home sale markets in the last 20 years, and that happened in the same year. So I think that volatility definitely makes it more challenging as you kind of manage your margins in a downward environment.

And then we had by the time we got to the fourth quarter of we had of the weakest refinance markets since 2000. So when you think about the environment that we ended up in the fourth quarter with very low refinance activity and very soft existing home sale activity. It doesn't create a lot of inventory for the industry as we go into the first quarter. And I think that inventory issue also was an impact on the industry in the fourth quarter, but it's really going to show up in the first quarter.

So margins will definitely be pressured and lower than we've seen in the last few years, particularly in Q1. And then we'll just have to see how they progress over the course of the year. I mean, I think we'll get some help from commercial. It doesn't look like it's going to be as strong as in 2022, but I think we still have a solid commercial market. And then I would say that, we're very confident that as the market returns that will drive margins in a positive direction, particularly because of our current cost structure. And also encouraged by the increase in purchase orders that we saw in January being up 33% sequentially to December is certainly encouraging.

And I think it really points to the underlying demand and really tailwinds around housing, particularly if we get an environment where rates are easing and maybe prices moderate a little bit. And I – I wouldn't be surprised at all with some help from rates that we see a rebound in those annualized existing home sales numbers that could move really quickly, I think maybe similar to how it fell off. So – I'll pause there.

[Andrew Kligerman, Credit Suisse]

That was very helpful. And I guess I feel like I have to take a negative very skeptical view of the environment. If the environment stays as is, probably Fidelity – Mike, you wouldn't want to cut too much more on other op expenses and staff, right? Because as you were saying earlier, things could go the other way very quickly. So should I not expect too much of a cut in either staff or other operating expenses?

[Mike Nolan, Chief Executive Officer]

Well, I think I'll start with staff. I think, as I said earlier, it really will be order dependent. If orders continue to fall and we see pressure from rates, then we'll have to do more work on the staffing side and look at our infrastructure more deeply. but you also do that with the caveat with an eye towards this could turnaround and you don't want to hurt yourself in the mid-term by doing something in the short-term that's just not helpful in the mid and long-term.

And we're still very bullish long-term. Even with the reductions we've done in the cost moves we've made, we're continuing to recruit talented people into the industry, particularly revenue attached continue to make acquisitions, and we're going to continue to do that in 2023. We're not shying away from the market and again, are optimistic kind of the mid- and long-term prospects for the industry. And we'll just have to see what the current environment does for us in the next few months.

[Tony Park, Chief Financial Officer]

And Andrew, this is Tony. Maybe I'll just weigh in on the actual line items, just as a refresher. Probably one-third of our personnel costs are variable with revenue and with profits. And so some of that just falls off naturally with movements declines in revenue. And on the other operating side of things, that line item, probably about 40% of those costs are variable with volume. That would be things like premium taxes and the like.

But we clearly have fixed costs in both. Mike's referring to fixed costs when we're talking about headcount reductions. And on the other operating side of things, it's more like facilities are fairly fixed in the short run. Technology costs are fairly fixed in the short run, insurance, that sort of thing.

[Andrew Kligerman, Credit Suisse]

Very, very helpful. Thanks.

[Operator]

Thank you. Our next question comes from the line of John Campbell from Stephens Inc. Please go ahead.

[John Campbell, Stephens Inc.]

Hey, guys. Good morning.

[Mike Nolan, Chief Executive Officer]

Hey, John.

[Tony Park, Chief Financial Officer]

Hey, John.

[John Campbell, Stephens Inc.]

Thanks for the January order count update. That was helpful. It sounds like the trends rebounded a little bit sequentially beyond what we've seen historically, I guess, on historical average. Where -- from where we sit, it does look like February might reverse some of that momentum with the pickup in rates. I'm hoping you guys might be able to provide some color on that. And then if you've got it on hand, it'd be great to get the month-to-date February order count trends in resi and commercial?

[Mike Nolan, Chief Executive Officer]

Yes. So maybe to the first part, the 33% increase on purchase order sequentially might be a little better than historical but I don't think it's off that much. But I certainly was pleased to see it to have that kind of a rebound. We generally don't give out personal month order counts, John. So we got kind of a partial month in February just because it could potentially mislead one way or the other if trends change as the month goes on. I think that particularly show up in commercial order count. So I would just say that as we've gone through the month, the trends haven't caused any concerns. And -- but when you look at mortgage rates, they've certainly moved up in the past three weeks. And so we still have to see how that may impact current trends for purchase and even commercial activity.

[John Campbell, Stephens Inc.]

Okay. That's helpful. And then Mike, just from your experience, how much of a lead time do you typically see between mortgage rate movements and then the virtual closings?

[Mike Nolan, Chief Executive Officer]

Yeah, it's a great question. I would have probably answered it differently in the past than in this environment. But -- we've never -- I don't think we've ever seen, and you guys would know better than me, but we've never seen rates move this fast in such a short period of time. I mean, in the fourth quarter of 2021, I think average rates were like at 3.25%. And by the fourth quarter of 2022, they were maybe 6.75% or something like that.

So when they're moving that rapidly, it definitely impacted purchase orders very, very quickly. We normally see the -- and then the closings follow 45 days later. So in a more normalized environment with more gradual rate increases in that kind of environment, your purchase orders hold up way better. You don't see a dramatic fall off if rates are moving up incrementally, refi will shut off fairly quickly with a 50, 75 or 100 basis point change in rates.

But in this environment, those purchase orders got choked fast. And I think just pointing out that annualized EHS number, I mean it's kind of remarkable, going from $6 million to $4 million in one year. And again, those closings are 45 days after those fall off and purchase opens.

[John Campbell, Stephens Inc.]

Yeah, makes sense. I mean, just to degree of volatility. I mean, I know it makes that -- you guys historically have been able to manage costs the best of the bunch, but I feel like with the uncertainty, it does create some -- a little bit of, I guess, lag time on the expense recognition and whatnot. But I wanted to touch on F&G real fast. Obviously, you guys got pushed back when you originally announced that deal, the pushback has been steady since then. I think this quarter showed why you did it in the first place. I mean, in the year ago period, it looks like F&G, by my math, was I think it's about 20% of total title and F&G earnings combined. It looks like that contribution doubled up this period. I think it was 43% of earnings, just roughly for this year, I know a lot can change around the title side, but do you envision that F&G might rise to over half of total earnings this year?

[Tony Park, Chief Financial Officer]

Yeah, John, this is Tony. Yeah, it's hard to know because we'd have to know the other side. I think F&G, earnings are a lot more predictable, which is also a reason like made that acquisition. But they talk about -- and Chris and Wendy are on the phone as well, but they talk about a 1% return on assets and assets are growing at almost $44 billion, I think, at year-end. And so it's pretty easy to do the math.

And so as that piece increases, we feel very good about their contribution to the whole in 2023. As you know, just trying to model the title business, it's going to be order dependent, and we don't know where that heads. But I guess the good news is, it's kind of playing out like in a tough market, and we just saw a tough market in Q4, you can see that it's a counterbalance and a growth story against something that's just more cyclical in the short term on the real estate side. And so, we were happy with that. I don't know if we get much credit for it right now, but we're pleased with the balance.

[John Campbell, Stephens Inc.]

Yes. Makes sense. Thank you, guys.

[Mike Nolan, Chief Executive Officer]

Thanks.

[Operator]

Thank you. [Operator Instructions] Our next question comes from the line of Mark Hughes from Truist. Please, go ahead. Mark, your line is unmuted. You could please unmute yourself from your end and begin with our question.

[Mark Hughes, Truist]

Okay. Yes. Thank you. I was on mute. Sorry about that. The national commercial fee per file was down. You had a very tough comp. How do you see that trending in 2023 or at least early on here?

[Mike Nolan, Chief Executive Officer]

Yes, Mark, it's Mike. And of course, the comp was very difficult, at 17,000, I think it was in the fourth quarter of 2021. I would think the national fee per file will stay relatively the same. I mean, it could fall off some. It tends to be a little bit of a lumpier number, because it can be influenced by big deals that drop in and out.

But for the full year, our national commercial fee per file is right around $14,000. And in 2021, it was, let's call it, $13,500. I would -- my best guess at this point is, it's in a band between those two numbers.

[Mark Hughes, Truist]

Okay. Good. Thank you. And then, any update on the attorney opinion letters?

[Mike Nolan, Chief Executive Officer]

I wouldn't say a major update. I don't think we've seen much impact in our order volumes due to it. There's some promotion around that that it lowers cost for consumers. I don't know that it does that. I haven't seen anybody that's shown that. I think it could actually raise costs for people. It's a bit of an unknown.

But what we do know about it is a lesser product compared to the coverage and defense costs afforded under title policies and doesn't cover hidden risk, doesn't cover fraud and forgery, doesn't cover mistakes in the public records, doesn't defend insureds like a title policy does.

So, I think, there's a lot of questions about the product -- and it's not regulated like the title industry is regulated. We have to post claims reserves. We're heavily regulated at the state level and ALLs aren't. So -- but again, just haven't seen much of an impact to-date.

[Mark Hughes, Truist]

Appreciate that. Thank you.

[Operator]

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would now like to turn the conference over to Mike Nolan for closing comments.

[Mike Nolan, Chief Executive Officer]

Well, thank you. We are pleased with our overall results despite the uncertainty and volatility in the current macro environment. FNF is well positioned to execute through this higher mortgage rate environment due to our disciplined operating strategy and long history of navigating market cycles.

Likewise, F&G is poised to benefit from the rising rate environment and is off to a strong start as a publicly traded company. Thanks for your time this morning. We appreciate your interest in FNF and look forward to updating you on our first quarter earnings call.

[Operator]

Thank you. The conference of Fidelity National Financial, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.