Yahoo Finance

Anthony Park

Thank you, Mike. Starting with our consolidated results, we generated $2.7 billion in total revenue in the first quarter. Excluding net recognized gains and losses, our total revenue was $3 billion as compared with $3 billion in the first quarter of 2024. The net recognized gains and losses in each period are primarily due to mark 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.
We reported first quarter net earnings of $83 million, including net recognized losses of $287 million versus net earnings of $248 million, including $275 million of net recognized gains in the first quarter of 2024. Adjusted net earnings were $213 million or $0.78 per diluted share compared with $206 million or $0.76 per share for the first quarter of 2024. The Title segment contributed $158 million, the F&G segment contributed $80 million, and the Corporate segment contributed $3 million before eliminating $28 million of dividend income from F&G in the consolidated financial statements.
Turning to first quarter financial highlights specific to the Title segment. Our title segment generated $1.8 billion in total revenue in the first quarter, excluding net recognized losses of $25 million compared with $1.6 billion in the first quarter of 2024. Direct premiums increased 16% over the prior year. Agency premiums increased 15%, and escrow title related and other fees increased 8%.
Personnel costs increased 9% and other operating expenses increased 10%. All in, the Title business generated adjusted pretax title earnings of $211 million compared with $171 million for the first quarter of 2024 and an 11.7% adjusted pretax title margin for the quarter versus 10.7% in the prior year quarter.
Our title and corporate investment portfolio totaled $4.6 billion at March 31. Interest and investment income in the Title and Corporate segments was $94 million, in line with the prior year quarter and excluding income from F&G dividend to the holding company. For the remainder of 2025, we expect to generate interest and investment income of $85 million to $90 million in each quarter, assuming two Fed funds rate cuts during the year.
In addition, we expect approximately $29 million per quarter of common and preferred dividend income from F&G to the Corporate segment. Our title claims paid of $65 million were $11 million higher than our provision of $50 million for the first quarter. The carried reserve for title claim losses is approximately $60 million or 3.5% above the actuary central estimate.
We continue to provide for title claims at 4.5% of total title premiums. Next, turning to financial highlights specific to the F&G segment. Since F&G hosted its earnings call earlier this morning and provided a thorough update, I will provide a few key highlights. F&G's AUM before flow reinsurance increased to $67.4 billion at March 31, driven by strong indexed annuity sales. This includes retained assets under management of $54.5 billion.
F&G's gross sales were $2.9 billion, down 17% compared with $3.5 billion in the first quarter of 2024, primarily due to lower MYGA sales.
F&G continues to prioritize allocating capital to the highest returning business, specifically indexed annuity sales and pension risk transfer sales, resulting in the reduction in MYGA sales. Excluding MYGA, gross sales were up 5% over the first quarter of 2024. Net sales retained were $2.2 billion compared to $2.3 billion in the first quarter of 2024.
Adjusted net earnings for the F&G segment were $80 million in the first quarter compared with $9 million for the first quarter of 2024. As compared to the prior year quarter, F&G segment adjusted net earnings reflect margin compression due to near-term headwinds, lower owned distribution margin, higher interest expense in line with capital markets activity and lower investment income from alternative investments.
These were partially offset by benefits from asset growth, higher flow reinsurance fee income, disciplined expense management and more favorable significant income items. Although F&G gave up some spread in the first quarter, much of that is believed to be short term in nature and not indicative of any longer-term challenge to the business model.
F&G's operating performance continues to be strong and their underlying spread-based and fee-based businesses are stable with predictable earnings over time. As Mike mentioned, F&G continues to provide a complement to the Title business. In the first quarter, the F&G segment contributed 38% of FNF's adjusted net earnings, down from 46% for the first quarter of 2024.
From a capital and liquidity perspective, we are maintaining a strong balance sheet and ensuring a balanced capital allocation strategy. Our consolidated debt outstanding was $4.4 billion at March 31 as compared to $4.3 billion at December 31. The $73 million net increase reflects F&G's debt issuance and redemption activity in the quarter. Our consolidated debt to capitalization ratio, excluding AOCI, remains in line with our long-term target range of 20% to 30%, and we expect that our balance sheet will naturally de-lever as shareholders' equity grows.
Turning to share repurchases, following stable and sustained cash generation in 2024, FNF has resumed its share repurchases. We remained active throughout the latter part of the first quarter and into the second quarter. During the first quarter, we repurchased 390,000 shares at an average price of $63.42 per share for a total of $25 million. We view repurchases as opportunistic and actively evaluate that decision relative to our cash position, M&A opportunities and the market backdrop.
From a capital allocation perspective, we entered 2025 with $786 million in cash and short-term liquid investments at the holding company. During the first quarter, the business generated cash to fund our $136 million quarterly common dividend paid, $25 million of holding company interest expense, $150 million investment in the F&G common equity raise and the $25 million in share repurchases, all while keeping pace with wage inflation, and funding the continued higher spend in risk and technology required in today's landscape. We ended the first quarter with $687 million in cash and short-term liquid investments at the holding company.
This concludes our prepared remarks, and let me now turn the call back to our operator for questions.

Question and Answer Session

Operator

(Operator Instructions) John Campbell, Stephen Inc.

John Campbell

I just want to touch on two questions on the orders. I guess, first on the April purchase orders, I think you mentioned down 3% year over year. Just curious about the week-to-week phasing kind of how that looked relative to interest rates throughout the month.

Michael Nolan

Yes. Good question, John. I think it got a bit better as we got near the end of the month. But I would say for most part, there wasn't a lot of variation in how the week played out. I mean how the month played out.

John Campbell

Okay. And that's helpful. And then apologies if I missed this, but I didn't -- I don't think I heard the commercial open order activity in April. Any kind of call-outs there?

Michael Nolan

Sure. Yes. So April over April in commercial, total commercial was up 4%. And I don't know if we said it in the open app, notably the national opens April over April, up 15%, and local was down 3% April over April.

John Campbell

Okay. That's helpful. And then one more quick one, maybe for you, Tony, on the expectations for quarterly investment income. I think you had mentioned in the past 95 to 100 and now it's 85-95. What drove that expected step down?

Anthony Park

Yes. Thanks, John. 85 to 90 is my best estimate at this point. It's really driven by an expectation that we get two Fed funds cut. I know that the market may be anticipating more than two. We just assumed to later in the year. I don't remember when exactly, but maybe even the next meeting or the meeting after that. And so really driven by that, more than anything else, I think volumes are pretty stable or balance is rather pretty stable.

Operator

Bose George, KBW.

Bose George

Actually first, just on the buybacks, given what you said about buybacks being opportunistic, is there a way to think about the cadence of buybacks for the remainder of the year?

Anthony Park

Thanks, Bose. This is Tony. I would say we typically are just on a regular occurrence when we're not blacked out. We got started late. Our year-end call was pretty late in the quarter, and so we started after that and just kind of modest daily activity, I think that's the way we'll do it.
We don't guide in terms of actual expectation of shares bought back. But I think what you'll see is a regular cadence to that and probably a stronger number than what we saw in the first quarter just because we got started so late.

Bose George

Okay. Great. That's helpful. And then just switching over to FG. The issue of the lower spreads there. Can you guys just talk about the headwinds, when that's likely to debate. Just more color there.

Christopher Blunt

Yes, sure. This is Chris. So on the FG call this morning, we actually talked about all of those pressures starting to abate. So starting with the top line, we had a very strong sales quarter in April. The spread pressures were a fair amount of cash that had built up because of some prepayments of securities. We are in the process of getting that put to work at attractive rates and spreads. So we feel good about that.
There was a little bit of a decline in our own distribution income. Some of that was one of our own distribution partners made an acquisition of their own, which we were supportive of. So that was a bit of a temporary depressing impact. So yes, we would expect that to improve and the trends are looking pretty good right now.

Operator

Mark DeVries, Deutsche Bank.

Mark DeVries

Hoping you could provide a little more color on the decision to invest in FG capital raise and how you size that investment kind of how you expect to return to stack up to alternatives that you might have had?

Anthony Park

Yes, Mark, this is Tony. Maybe I'll start and others could add in. But I think it was just -- it was twofold. One, we believe in FG's growth opportunities and want to grow that asset base and grow that earnings base. And so that was part of it.
The other part, as we've said in the past, we want to maintain an ownership stake over 80% just to preserve the optionality should we decide at some point to spin it off to our shareholders tax-free, we need to own more than 80% of F&G. And so that's kind of a combination of those two. But again, we feel -- first of all, for us, it was $150 million, so didn't really put too much of a dent in our strong cash position, and we believe that F&G can return strong returns with that equity capital.

Mark DeVries

Okay, great. A related question. I was hoping to get a better sense of kind of the opportunities in M&A. I think Mike commented on being well positioned to take advantage of opportunities created by market volatility. Are you actually seeing good opportunities? Could we expect maybe a little more M&A activity than last year, which was kind of a relatively an active year for FNF.

Michael Nolan

Yes, Mark, it's Mike. I would think that we would have more activity as we go through this year than we did last year on the title M&A. There are definitely opportunities out there. But given the environment, it's still a matter of being expectations around value of these businesses. But I think I would definitely expect more activity as we go through the year than last year.

Mark DeVries

Okay. Got it. I wouldn't expect for you to comment on anything specifically, but any kind of bigger transactions that are at least in contemplation here? Or are you going to be more focused on title M&A?

Michael Nolan

Yes. I think the title M&A is definitely smaller than the bigger transactions. But I wouldn't discount a bigger transaction if something interesting showed up in any of our ancillary businesses or technology businesses, et cetera. But the title M&A would be more of what we've done for the past few years, kind of the tuck-in agent acquisitions.

Operator

Terry Ma, Barclays.

Terry Ma

Maybe just starting with the title margin. It was up about 100 basis points year over year, kind of any puts and takes on the margin you want to kind of highlight for the quarter. And then I appreciate there's uncertainty out there. But as we kind of think about the rest of the year across the range of kind of scenarios you kind of noted, like any way to think about how sustainable that margin is for the rest of the year -- the margin expansion.

Michael Nolan

Sure, Jerry. This is -- yes. I got it. Yes. This is Mike. So first to the quarter, we were very pleased with the margin expansion of 100 basis points over last year, and we had outperformance really across the board between direct agency commercial and the ancillary businesses all had better margins than they did last year. So that's very, very encouraging. As we think about the rest of the year, and to your point, certainly, market uncertainty, rates did go up in April, I think, about 20 basis points.
So when we think about the full year, our outlook really hasn't changed. We still believe that we -- the base case is modestly better purchase and we've seen that certainly in the first quarter. I think getting a bit more positive and bullish than in the past on commercial upside, particularly with what we're seeing on the national side.
I mean, four consecutive quarters with double-digit growth in national opens. And as a reminder, these are our highest fee per file orders is really building a nice pipeline for us as we go through the year. And as we said, up 19% this past quarter, another 15, April over April, and we're running open orders now at a level that really has outperformed 2015 through 2020 and '23 and '24.
So I think maybe more upside in commercial. And then refi, it's going to be about rates. And it's interesting that refis were as strong as they were in April, up 41% over last year, even with rates moving up. And I feel that it shows the demand, I think, that's out there. If we get some lower rates, I think refi also can become an upside.
But at the end of the day, we're well positioned to drive strong margins given our scale. As we look at the second quarter, we expect margins to expand relative to the first quarter like you would typically expect. But given the current markets drop, it's not clear if we'll see growth at the same rate as we experienced in the second quarter last year.

Terry Ma

Got it. Okay. That's helpful. Maybe just a follow-up on commercial. It sounds like continues to be strong despite all the volatility. You gave some color on both national and local, but maybe just talk about kind of what you're seeing in the pipeline across the different kind of commercial sectors, like what's kind of the strongest versus the weakness?

Michael Nolan

Yes. Good question, Terry. It's Mike again. It's very consistent with what we've been seeing for the last couple of years. I mean it continues -- we continue to see strength in multifamily, industrial affordable housing, retail was good in the second quarter. It's -- I mean, the first quarter, rather, we had some nice transactions there. Energy kind of comes in and out. The -- and I'm sure others are talking about this in the industry, the sort of data center deals as well.
With the softest still being office, although we are seeing more of a I'll say anecdotal information that, that's starting to transact. And as I said on the quarter last -- our last quarter call, we really see offices additive to everything else we already got going on as that starts to come back and -- and I don't know that we'll see that in waves in '25 or not, but I do believe office will come back, and we're starting to see anecdotal evidence of that.

Operator

(Operator Instructions) Mark Hughes, Truist Securities.

Mark Hughes

Anything you see emerging positive or negative on the regulatory front with the changes in Washington, does that mean anything for the Title business. And anything from a rate perspective, state-by-state that's emerging. I know Texas has been up for some discussion. Just curious if you've seen anything more broadly there.

Michael Nolan

Sure, Mark. And it's Mike again. On the sort of the federal front, certainly, the things we were talking about last year around the Consumer Financial Protection Bureau, that seems to have abated quite a bit. We haven't really seen much coming out of there. Relative to the waiver pilot, that's still out there.
I think it's a very de minimis program with few lenders participating as far as I know, we are talking with the federal regulators on that and sharing why we think it's -- it's not good policy, not a good idea and don't expect really much impact to our business from that program, really, if any.
On the state front, really nothing happening on rates that we haven't already talked about. I think it has been reported. Texas went through their five-year process and came out with a 10% rate reduction, I believe that's been in advance as the industry has pressed against that and go through an administrative procedure. So there's really impact today of that. And then I think New Mexico came out. And I forgot what the number was very, very modest. Maybe rates were not even changed, but they changed the split and it was 1% or something.

Anthony Park

Small state, two.

Michael Nolan

So not really seeing any other impacts from the rate side at the state level.

Anthony Park

Maybe I'll comment just on the Texas. If the 10% rate reduction had been in place last year, it would have impacted our gross revenue by about $70 million and our profits by about $14 million or $15 million before any cost actions we might have taken. So in the grand scheme of things, not a major impact to us, assuming that ultimately does go through at 10%.

Mark Hughes

And when you talk about cost actions, are those things that you could contemplate what would be the offset as you think about it. So.

Michael Nolan

Mark, it's Mike. I would just say, and you know how we manage the business. If revenues are going down, we focus on reducing our expenses and whether revenues are driven down by just overall transactional levels or they're driven down by changes to what we can charge, we have to adapt to that. And so that might mean becoming more efficient how do we take cost out or look at other things that we do to grow market share, enhance revenue, et cetera. So nothing different really than what we do every day as we manage a business that goes up and down with transactional levels.

Mark Hughes

Very good. And then any updates on the in-year platform, any kind of progress penetration financial impact any latest thoughts here?

Michael Nolan

Yes. We're just -- we're really proud of what we've accomplished. We've now got it rolled out on the entire footprint of the company, which really was a multiyear process of getting all of our operations on SoftPro, so we have one operational platform and that's been a really nice achievement for us. And 1 million people used it last year, including consumers and real estate agents and transaction coordinators and others.
And it's poised to grow with more transactional volume. As purchase transactions go up and other transactions go up, we'll have more and more users. We think combined with all the other things we're doing with technology, and we've talked about it in the past, we'll create the opportunity just to improve our margins. And as we said, we expect in like-to-like environments in the future, our margins should be better. And inhere's, we think a component of that.

Operator

Geoffrey Dunn, Dowling & Partners.

Geoffrey Dunn

Tony, last quarter, you went through the holding company cash flow math, just like you did this morning for Q1. And it seems as maybe $250 million of true excess cash that effectively went to the FG preferred investment. Will this year looking similar from a macro environment, is there any reason to say that, that true excess opportunity is any different? And if that's the case, you've already kind of $175 million into that.

Anthony Park

Ted, Jeff, I'm not sure I followed it entirely. We did invest $150 million in FG in the equity offering. I think it was $250 million in the prior year preferred offering. In terms of cash flow, and it's a little hard to predict. We know what the underwriters can upstream over the course of the year. Obviously, we get a lot of cash flow, as you've heard us say, from our non- or less-regulated hubs. And of course, F&G contributes to about $115 million or $120 million.
My expectation is that we'll upstream somewhere to the tune of $900 million to $1 billion of cash flow from our subs over the course of this year, including what we did in Q3, which was about $300 million. And from that, we'll have our common dividend, which is about 550, our interest expense, which is about 75, the buyback that we've talked about and the F&G investment, which we've already made of $150 million. So yes, we should probably have -- we'll probably maintain or grow that holding company cash number of $700-ish million over the course of the year unless we have some major M&A activity.

Geoffrey Dunn

Okay. So just looking at that map, it seems like, well, there's an appetite for share repurchase. The resources are not necessarily overly abundant of that. It seems like a good area.

Anthony Park

I think it's more than that. Certainly, there's a possibility to do more, and the Board hasn't determined how active will be throughout the year. But yes, so we really haven't guided towards that. But again, we have $700-ish million holding company as approval.

Operator

And this will conclude our question-and-answer session. I will now turn the conference back over to CEO, Mike Nolan, for closing remarks.

Michael Nolan

Thank you. Together, the combined business delivered strong financial results through the first quarter. The Title segment is delivering industry-leading margins and remains poised for a rebound in transactional levels as we continue to invest in the business for the long term. Likewise, F&G's business is resilient and has many opportunities ahead to continue to drive asset growth and make progress on its Investor Day targets. Thanks for your time this morning. We appreciate your interest in FNF and look forward to updating you on our second quarter earnings call.

Operator

Thank for attending today's presentation and the conference call has concluded. You may now disconnect. Goodbye.