Executive Summary / Key Takeaways

• Fidelity National Financial (FNF) operates a dual-engine business model, combining a leading, technologically advanced Title insurance segment with a growing and stable Annuities & Life insurance segment (F&G), providing resilience and diversification.
• The Title segment demonstrated remarkable operational efficiency in Q1 2025, delivering an industry-leading adjusted pretax margin of 11.7% despite a challenging transaction environment, a testament to decades of investment in technology and process improvement.
• The F&G segment continues to be a significant contributor to FNF's adjusted net earnings (38% in Q1 2025) and is strategically positioned for growth, benefiting from favorable demographics and expanding distribution channels, complementing the cyclical Title business.
• FNF maintains a strong balance sheet and disciplined capital allocation strategy, supporting its dividend, investing in strategic growth initiatives (including technology and M&A), and opportunistically repurchasing shares, while managing liquidity effectively.
• While residential volumes remain sensitive to interest rates, FNF's strong commercial performance and technological edge position it to capture upside in a market recovery, while the F&G segment provides a stable earnings base and growth vector.

A Dual-Engine Powerhouse in Financial Services

Fidelity National Financial stands as a prominent force in the financial services landscape, primarily recognized as the nation's largest title insurance company through its esteemed underwriters including Fidelity National Title, Chicago Title, and Commonwealth Land Title. However, FNF's strategic evolution has forged a more diversified entity, operating a compelling dual-engine business model. Beyond its core Title segment, FNF holds a majority ownership in F&G Annuities & Life, Inc. (FG), a rapidly growing provider of insurance solutions. This structure positions FNF not merely as a participant in the cyclical real estate market, but as a diversified financial services provider with levers for both growth and stability.

The company's overarching strategy is rooted in operational excellence, leveraging technology to drive efficiency, pursuing strategic growth through targeted acquisitions and organic initiatives, and maintaining a disciplined approach to capital allocation. This strategy is particularly evident in its competitive positioning within the Title industry, where FNF consistently claims industry-leading margins, even when faced with market headwinds. This leadership is not accidental; it is built upon a foundation of decades of investment in data and technology, creating a differentiated operational platform that management asserts is ahead of the industry.

In a competitive landscape that includes major players like First American Financial (FAF), Stewart Information Services (STC), and Old Republic International (ORI), FNF differentiates itself through its sheer scale, its integrated technology ecosystem, and the unique diversification provided by the F&G segment. While competitors like FAF also invest heavily in technology and efficiency, FNF's combination of market dominance in Title and the complementary, less cyclical earnings from F&G provides a distinct advantage, offering a degree of earnings stability that pure-play title insurers may lack.

The Engine of Efficiency: FNF's Title Operations & Technological Moat

The Title segment remains the historical core and largest component of FNF's business. Its performance is intrinsically linked to the health of the real estate market, influenced by factors such as mortgage interest rates, housing inventory, and economic conditions. The business model encompasses both direct operations, where FNF handles the entire title and escrow process, and agency operations, where it underwrites policies issued by independent title agents. Revenue is generated primarily from title insurance premiums and escrow/title-related fees, typically recognized at the closing of a real estate transaction.

Despite facing a challenging market environment characterized by elevated interest rates and reduced transaction volumes, the Title segment demonstrated remarkable resilience in the first quarter of 2025. Total segment revenues increased by 7% to $1,774 million compared to $1,663 million in Q1 2024. This growth was driven by increases in both direct premiums (up 16% to $510 million) and agency premiums (up 15% to $681 million), as well as an 8% increase in escrow, title-related, and other fees to $525 million. The increase in direct premiums was attributed to a higher average fee per file ($3,761 in Q1 2025 vs $3,555 in Q1 2024), primarily due to home price appreciation, and an increase in closed order volume (201,000 in Q1 2025 vs 186,000 in Q1 2024).

Crucially, the segment delivered an adjusted pretax title margin of 11.7% in Q1 2025, a 100 basis point improvement over the 10.7% margin in Q1 2024. Management explicitly links this margin performance, which they state is above prior market troughs, to operational efficiencies achieved through decades of investment in technology. FNF's technological moat is built upon several pillars:

• Integrated SoftPro Platform: This operating platform is deployed across FNF's full footprint, standardizing processes and enabling efficiency.
• Automated Title Efforts: Utilizing patented and pioneering technology, FNF has automated aspects of title search and examination in both refinance and purchase transactions. Management notes this has reduced the cost and time lines of the process while preserving the quality of the insurance product.
• InHere Digital Transaction Platform: This platform, now in its fourth year, is deployed nationwide and integrated with SoftPro. It provides an end-to-end digital experience for customers and real estate professionals, aiming to enhance security, mitigate fraud, improve efficiency, and elevate the customer experience on a 24/7 basis. Over a million users reportedly utilized the platform in 2023.
• Robust Curated Data: Decades of data investment provide a powerful foundation for leveraging technology, including the integration of AI capabilities. FNF has appointed a Chief Artificial Intelligence Officer and is exploring generative AI tools to further enhance efficiency and productivity in operations.

These technological investments provide tangible benefits. While specific, comprehensive quantitative comparisons across all competitors are not detailed, FNF's consistent claim of "industry-leading margins" suggests these efficiencies translate directly to profitability advantages. The operational discipline of managing headcount and footprint in response to open order trends, combined with this technological foundation, allows FNF to adapt effectively to volume fluctuations and positions it to potentially achieve higher margins at the peak of the next market cycle compared to prior peaks.

The provision for title claim losses remained consistent at 4.5% of total title premiums in Q1 2025, reflecting the company's ongoing estimation of future claims.

The Growth Accelerator: The F&G Segment

The F&G segment, primarily operating through the majority-owned FG Annuities & Life, Inc., provides a vital counterpoint to the cyclicality of the Title business. Acquired by FNF around June 2020, FG has undergone a significant transformation, evolving from a monoline business to one diversified across products (indexed annuities, fixed rate annuities, IUL, immediate annuities, funding agreements, PRT) and distribution channels (IMOs, banks, broker dealers, institutional).

F&G's strategic importance to FNF is underscored by its growing contribution to consolidated earnings, accounting for 38% of FNF's adjusted net earnings in Q1 2025. The segment has profitably grown its assets under management (AUM) before flow reinsurance to $67.4 billion as of March 31, 2025, an increase of 16% year-over-year. This growth is fueled by strong sales, particularly in indexed annuities, benefiting from favorable demographics like the aging U.S. population and increasing demand for retirement savings products that offer guaranteed growth and principal protection.

In Q1 2025, FG reported total segment revenues of $908 million, down from $1,569 million in Q1 2024. This decrease was primarily driven by a decline in Life insurance premiums and other fees ($489 million vs $718 million), specifically lower life-contingent pension risk transfer (PRT) premiums, which are subject to period-to-period fluctuations based on transaction timing. However, interest and investment income increased by 8.1% to $666 million, and recognized gains and losses, net, increased to $263 million. Despite these revenue dynamics, adjusted net earnings for the segment decreased to $80 million from $95 million in Q1 2024. Management attributed this to near-term margin compression, lower owned distribution margin, higher interest expense, and lower alternative investment income, partially offset by asset growth, higher flow reinsurance fee income, and disciplined expense management. They characterized the margin pressure as short-term and not indicative of a long-term challenge to the business model, emphasizing the stability and predictability of FG's underlying spread-based and fee-based businesses.

FG's investment portfolio strategy is focused on generating stable earnings while managing risk, primarily investing in high-grade fixed-income assets. The segment utilizes derivatives, such as equity options and futures, to hedge product-related equity market risk for indexed annuities and IUL, and interest rate swaps to manage risks on floating rate investments. FG also manages credit risk associated with its investment portfolio and reinsurance recoverables, employing models to estimate expected credit losses and mitigating counterparty risk through relationships with creditworthy institutions and collateral arrangements.

FNF's commitment to FG's growth was demonstrated by its participation in FG's public offering of 8 million common shares on March 24, 2025, purchasing 4.5 million shares to maintain its ownership stake above 80%. This investment supports FG's organic growth opportunities and preserves FNF's optionality for a potential future tax-free spin-off.

Financial Health and Capital Allocation Discipline

FNF's consolidated financial performance in Q1 2025 reflected the dynamics of its two core segments, with total revenues decreasing to $2,729 million from $3,299 million in Q1 2024, primarily due to lower revenues in the FG segment. Net earnings attributable to FNF common shareholders were $83 million ($0.30 per diluted share) compared to $248 million ($0.91 per diluted share) in Q1 2024. However, adjusted net earnings, which exclude certain non-recurring or non-cash items, were $213 million ($0.78 per diluted share) compared to $206 million ($0.76 per diluted share) in Q1 2024, highlighting the underlying operational profitability.

The company maintains a robust liquidity position to support its operations, strategic initiatives, and shareholder returns. As of March 31, 2025, FNF held $4,484 million in cash and cash equivalents and $1,161 million in short-term investments. It also has significant borrowing capacity available under its revolving credit facilities ($800 million for FNF, $385 million for FG).

FNF's capital allocation strategy is balanced and disciplined. Key priorities include:

• Common Stock Dividends: FNF declared and paid a quarterly cash dividend of $0.50 per share in Q1 2025, totaling $136 million. The Board declared another $0.50 per share dividend payable in June 2025.
• Share Repurchases: Following a pause, FNF resumed share repurchases under its 2024 program (authorized up to 25 million shares through July 2027), repurchasing 390,000 shares for $25 million in Q1 2025 and an additional 60,000 shares for $4 million through May 8, 2025. Repurchases are viewed as opportunistic.
• Strategic Investments & M&A: FNF continues to invest in its businesses, including technology and strategic acquisitions, such as tuck-in agency deals in the Title segment. It also invested $150 million in FG's recent common stock offering.
• Debt Management: FNF manages its debt profile, with FG recently issuing $375 million in junior subordinated notes and redeeming $300 million in senior notes in Q1 2025. Consolidated debt outstanding was $4,394 million at March 31, 2025.

Cash flow from operations decreased in Q1 2025 compared to Q1 2024, primarily influenced by changes in derivative collateral liabilities and movements in future policy benefits and funds withheld by reinsurers, reflecting the dynamics of the FG segment. Investing activities included significant purchases and sales of investment securities, as well as additional investments in unconsolidated affiliates. Financing activities were impacted by the FG debt and equity transactions, as well as contractholder account movements.

Outlook and Forward Trajectory

Management's outlook for 2025 reflects a cautious but optimistic view, acknowledging the continued uncertainty in the market while highlighting areas of potential strength and the benefits of their operational model.

For the Title segment, they anticipate normal seasonal patterns but note that residential volumes remain sensitive to mortgage rate movements. They are encouraged by the resilience and expected continued strength in commercial volumes, particularly in industrial, multifamily, and energy sectors, and see potential for higher volumes as the office sector begins to transact more actively. MBA forecasts (as of April 11, 2025) project an increase in total U.S. mortgage originations in 2025 ($2.1 trillion), 2026 ($2.4 trillion), and 2027 ($2.5 trillion), with both purchase and refinance volumes expected to rise in the near term. FNF is positioned to capitalize on this potential recovery, leveraging its scale and efficiencies.

Interest and investment income in the Title and Corporate segments is expected to be $85 million to $90 million per quarter for the remainder of 2025, based on an assumption of two Fed funds rate cuts during the year. This is a decrease from prior expectations, directly linked to anticipated lower interest rates.

The F&G segment is expected to continue its growth trajectory, driven by strong demand for its products and execution on its strategic initiatives. FNF anticipates receiving approximately $29 million per quarter in common and preferred dividend income from FG.

Overall, FNF's outlook is grounded in managing the business based on actual order trends, maintaining operational discipline, and leveraging its technological advantages to sustain strong margins even in challenging periods. The complementary nature of the F&G business provides a stable earnings base and a significant growth vector independent of the real estate cycle.

Risks and Considerations

While FNF's diversified model and operational strengths provide resilience, several risks warrant investor consideration:

• Real Estate Market Cyclicality: Despite diversification, the Title segment remains sensitive to interest rate fluctuations, economic conditions, and housing inventory, which can impact transaction volumes and revenues.
• Interest Rate Risk (FG Segment): While FG has hedged a portion of its exposure, changes in interest rates can still impact investment income, crediting rates, and policyholder behavior (e.g., surrenders), affecting profitability.
• Regulatory and Legal Challenges: The company faces ongoing litigation related to title and escrow claims, as well as specific lawsuits stemming from cybersecurity incidents (MOVEit, LoanCare), prior transactions (Roofers lawsuit), and business practices (FGL Insurance commission lawsuit). Regulatory scrutiny of the title insurance industry and potential legislative changes could also impact operations and profitability.
• Reinsurance Counterparty Risk: FG has significant reinsurance concentrations, and while mitigated by collateral arrangements, the failure of a reinsurer to perform its obligations could materially impact FNF's financial position.
• Mortgage Loan Credit Risk: FNF holds commercial and residential mortgage loans, which are subject to credit risk and potential losses, although allowances for expected credit losses are maintained.
• Derivative Counterparty Risk: While managed through relationships and collateral, there is exposure to credit loss if derivative counterparties fail to perform.

Conclusion

Fidelity National Financial's investment thesis is compelling, centered on a resilient, technologically advanced core Title business complemented by a high-growth, stable F&G insurance segment. The company's decades of investment in operational efficiency and technology have resulted in industry-leading margins in its Title segment, enabling it to navigate challenging market cycles effectively and positioning it for enhanced profitability in a recovery. The strategic acquisition and subsequent growth of F&G have successfully diversified FNF's earnings streams, providing a valuable source of stable and growing income that acts as a buffer against real estate volatility.

While the cyclical nature of the Title market and potential regulatory/legal headwinds present inherent risks, FNF's disciplined capital allocation, strong liquidity, and management's focus on leveraging technology and strategic growth opportunities underscore its potential. The combination of operational excellence in Title and the growth trajectory of F&G creates a dual-engine model well-equipped to deliver value to shareholders, making FNF a noteworthy consideration for investors seeking exposure to both a recovering real estate market and a growing insurance platform.