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Edited Transcript of FNF earnings conference call or presentation 17-Jul-19 3:00pm GMT

Q2 2019 Fidelity National Financial Inc Earnings Call

JACKSONVILLE Jul 19, 2019 (Thomson StreetEvents) -- Edited Transcript of Fidelity National Financial Inc earnings conference call or presentation Wednesday, July 17, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Anthony John Park

Fidelity National Financial, Inc. - Executive VP & CFO

* Daniel Kennedy Murphy

Fidelity National Financial, Inc. - Senior VP & Treasurer

* Michael Joseph Nolan

Fidelity National Financial, Inc. - President

* Raymond Randall Quirk

Fidelity National Financial, Inc. - CEO & Director

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Conference Call Participants

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* Bose Thomas George

Keefe, Bruyette, & Woods, Inc., Research Division - MD

* Edward Christopher Gamaitoni

Compass Point Research & Trading, LLC, Research Division - MD & Head of Research

* Geoffrey Murray Dunn

Dowling & Partners Securities, LLC - Partner

* Jason Scott Deleeuw

Piper Jaffray Companies, Research Division - VP & Senior Research Analyst

* John Gregory Micenko

Susquehanna Financial Group, LLLP, Research Division - Deputy Director of Research

* John Robert Campbell

Stephens Inc., Research Division - MD

* Mackenzie Jean Aron

Zelman & Associates LLC - VP

* Mark C. DeVries

Barclays Bank PLC, Research Division - Director & Senior Research Analyst

* Mark Douglas Hughes

SunTrust Robinson Humphrey, Inc., Research Division - MD

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by and, welcome to the FNF 2019 Second Quarter Earnings Call. (Operator Instructions) As a reminder, your conference is being recorded. I would now like to turn the conference over to your host, Dan Murphy. Please go ahead.

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Daniel Kennedy Murphy, Fidelity National Financial, Inc. - Senior VP & Treasurer [2]

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Thank you. Good morning, everyone, and thank you for joining us for our Second Quarter 2019 Earnings Conference Call. Joining me today are our CEO, Randy Quirk; President, Mike Nolan; CFO, Tony Park; and EVP, Brent Bickett. We'll begin with a brief strategic overview from Randy. Mike will review the title business, 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.

This conference call may contain forward-looking statements that involve a number of risks and uncertainties. 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. Because 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 1:00 p.m. Eastern time today through July 24. The replay number is (800) 475-6701 and the access code is 469222. Let me now turn the call over to our CEO, Randy Quirk.

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Raymond Randall Quirk, Fidelity National Financial, Inc. - CEO & Director [3]

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Thank you, Dan. The second quarter was a very strong performance for our title business as we generated adjusted pretax title earnings of $363 million and a 17.7 adjusted pretax title margin, both of which were our best quarter performance since the third quarter of 2003, nearly 16 years ago. I will let Mike go into more detail on the title business.

With respect to the acquisition of Stewart Information Services, we recently exercised our second option to extend the closing date of the transaction an additional 3 months to September 18, 2019. We continue to work with the FTC and the New York State Department of Financial Services to seek approval of the proposed acquisition, and we have meetings scheduled with the FTC in both July and August. If the approvals are obtained, we remain confident that the Stewart acquisition can create meaningful long-term value for our shareholders. We are not able to further comment or take questions on Stewart.

In April, our Board declared a $0.31 per share second quarter 2019 cash dividend, which used $85 million in available cash from the holding company in June. We also repurchased 720,000 shares of stock during the second quarter for approximately $28 million. Cash inflows were $450 million primarily from the $323 million in underwriter and non-underwriter dividends that were paid up to the FNF holding company level in the second quarter, the $102 million in interest and full repayment of the Cannae line of credit that was originally drawn in February and $25 million in principal and interest on the intercompany ServiceLink note. The net result was that we ended the second quarter with approximately $862 million in available holding company cash. In the first week of July, Cannae again borrowed a full $100 million under the line of credit, which reduced our cash holding at the holding company by $100 million.

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

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [4]

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Thanks, Randy. We generated adjusted pretax title earnings of $363 million, a $26 million or 8% increase over the very strong second quarter of 2018. Our adjusted pretax title margin was 17.7%, a 60 basis point or 4% increase over the prior year. Direct orders closed decreased 1% comprised of a 6% reduction in daily purchase orders closed, a 3% decrease in total commercial orders closed and a 25% increase in daily refinance orders closed.

Purchase orders opened declined by 2% versus the second quarter of 2018, a sequential improvement from the 6% decrease in the first quarter of 2019 versus the prior year. Refinance orders opened increased by 51% versus the second quarter of 2018 as the decline in mortgage rates appears to be more persistent than many originally expected.

Lastly, total commercial orders opened increased by 8% over the second quarter of 2018. With strong second quarter refinance orders opened and improving trend in purchase orders opened and continued strength in commercial orders opened, we are well positioned to continue to produce strong financial results in our title business as we enter the second half of 2019.

For the second quarter, total orders opened averaged 8,500 per day with April at 8,400, May at 8,100 and June increasing to 9,000. Purchase orders opened and closed were down 2% and 6%, respectively, on a daily basis in the second quarter. In both April and June, purchase orders opened were down by just 1% versus the prior year periods.

Refinance orders opened and closed increased by 51% and 25% respectively on a daily basis versus the second quarter of 2018. The best month of the quarter was June when refinance orders opened increased by 82% over June of 2018.

For the first 2 weeks of July, total orders opened were approximately 8,800 per day. Daily purchase orders opened declined by 2% versus the prior year and daily refinance orders opened increased by 83% over the prior year period.

Total commercial revenue of $286 million was a 2% increase over the second quarter of 2018, driven primarily by a 5% increase in the commercial fee per file, somewhat offset by a 3% decrease in closed commercial orders. Commercial orders opened increased by 8% in the second quarter versus the prior year, positioning us well for the back half of 2019.

Our first half 2019 total commercial revenue of $517 million was our strongest first half revenue performance since we began tracking total commercial revenue in 2015.

Let me now turn the call over to Tony Park to review the financial highlights.

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [5]

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Thank you, Mike. We generated more than $2.1 billion in total revenue in the second quarter with the title segment generating all but the $52 million of revenue in our corporate segment. Net earnings were $266 million, which included $41 million in realized gains primarily due to the mark-to-market accounting treatment of equity and preferred stock securities in our investment portfolio. Adjusted net earnings were $255 million or $0.92 per diluted share.

In our title segment, excluding realized gains of $46 million primarily due to the mark-to-market accounting treatment of the equity and preferred stock securities in our investment portfolio, we generated just over $2 billion in total revenue for the second quarter, a 4% increase from the second quarter of 2018. Direct premiums increased by 4% versus the second quarter of 2018. Agency revenue grew by 3%, and escrow title related and other fees increased by 2% versus the prior year. Personnel costs increased by 3% and other operating expenses grew by only 2%.

All in, the title business generated a 17.7% adjusted pretax title margin, a 60 basis point increase versus the second quarter of 2018. Interest income of $59 million was a $16 million increase over the prior year as we continued to see the positive impact of higher short-term interest rates on the interests we earned on the client exchange funds we hold in our 1031 exchange business, the reinvestment of proceeds from maturing fixed income securities and from cash and short-term investments.

FNF debt outstanding was $838 million on June 30 with debt-to-capital ratio of just under 14%. Our claims paid of $66 million were $4 million higher than our provision of $62 million for the second quarter. The carried reserve for claims losses is currently $28 million or 2% above the actuary central estimate. We continue to provide for claims at 4.5% of total title premiums.

Finally, our investment portfolio totaled more than $5.2 billion at June 30. From a regulated standpoint, we have $1.4 billion in statutory reserves, $90 million in deferred revenue in our home warranty company, $1.6 billion in regulated cash and investments and $900 million in secured trust deposits for a total of $4 billion in regulated cash and investments.

From an unregulated perspective, we have nearly $900 million of unregulated cash as of June 30. There's $200 million in cash and investments at ServiceLink and other subsidiaries, and $104 million in equity method investments, all of which are restricted primarily by minimum working capital or other regulatory requirements.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) And our first question will come from the line of Mark DeVries with Barclays.

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Mark C. DeVries, Barclays Bank PLC, Research Division - Director & Senior Research Analyst [2]

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Tony, a question for you. Could you help us think through what the impact could be on investment income if the Fed does, in fact, ease in the back half of this year as is widely expected?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [3]

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Sure, Mark. No problem. $59 million we generated in the second quarter of 2019, that's up against $43 million in the second quarter of 2018. Included within the $59 million is about $5 million that we received every second quarter from some title plant ownership interest we'd carry in the state of Texas. So that's kind of an annual event, but it's always in the second quarter. So you can expect that the third quarter interest and investment income comes down by that $5 million at a minimum. And then our expectation is really Q3, we're looking at about $54 million, so not a lot of change in interest and investment income, but for the $5 million decline. But then as you work your way through the next few quarters, we do expect some erosion based on at least 1 or 2 Fed rate reductions, some erosion in our short-term interest and investment income. So I'm thinking somewhere in the $50-ish million in the fourth quarter of 2019, maybe a little lower than that in the first quarter of 2020, maybe $48 million, and then bump back up in Q2 with the Texas title plant dividends to maybe around $54 million or so in the second quarter of 2020.

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Mark C. DeVries, Barclays Bank PLC, Research Division - Director & Senior Research Analyst [4]

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Okay. That's helpful. And is that assuming basically 50 basis points of Fed funds easing, which I believe is consensus now?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [5]

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Yes. It is.

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Mark C. DeVries, Barclays Bank PLC, Research Division - Director & Senior Research Analyst [6]

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Okay. Great. That's helpful. And then interested in getting some color on particularly the commercial pipeline and how that's looking. And for the back half of the year, I know you're optimistic, but just any color you can give us on kind of geographic diversity, transaction sizes, anything else would be helpful.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [7]

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Sure, Mark. It's Mike. Yes, we had a very good quarter with opens up 8%, and again it's very broad-based. Our national commercial orders were up 10% for the quarter and our local were up 7%, so good strength in both. We had some nice larger deals that closed in the quarter. You probably noticed that our national commercial fee per file is up quite a bit, I think maybe 8%, and we're seeing transactions -- larger transactions in a variety of segments from energy to gaming, office. We had a couple of nice multi-sites that closed in the quarter, and the pipeline looks pretty good as we go into the second quarter. Geographically, Texas is doing very, very well. It's one of our stronger markets, but other mid-tier markets like Pittsburgh, D.C., Virginia, the Midwest, Ohio, Minnesota, Chicago are all performing well. And then we're still seeing some nice transactions that get exported out of New York. A lot of the larger deals that occur around the country still get sourced in New York and we're seeing some good strength there as well.

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Operator [8]

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And next, we will go to the line of George Bose (sic) [Bose George] with KBW.

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Bose Thomas George, Keefe, Bruyette, & Woods, Inc., Research Division - MD [9]

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This is Bose. The first question, just in terms of the -- I wanted to ask about your margin expectation for the back half of the year. And also, the headcount was up, I guess, I'd say relatively modestly given the increase in orders. Just thoughts there. Could we see a little catch-up in the head count?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [10]

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Sure, Bose, it's Mike. On the head count, we did add 290 people on our field operations and really just dealing with the increase in volume. And if you look at our open orders per day in the second quarter kind of versus the first, we're up about 1,300 per day on the open side and I think maybe a similar number on the close side or maybe a little bit lower on the close side. But that's a lot of volume and you do have to staff into that and we've done that in the second quarter.

I think as we move into the third, we're going to need to add some additional staff, and we'll really use our productivity metrics to guide us on both the kind of open per employee and close per employee side, and we may need to add another maybe 150 to 200 people in the third quarter, but we're going to be very careful with it. And if we see order trends going in a different direction, then we'll react accordingly.

On margin expectations, we would expect the third quarter to be another very good quarter, and I think as you know, the second quarter tends to be our highest margin quarter of the year. And typically, what we see is that in the third quarter, commercial comes off a bit historically to the second quarter. Usually, the second and fourth are your best quarters. So commercial could be down a bit, but it'll still be a very good quarter. And then purchase tends to fall off slightly in the third quarter as well, just historical trends. And then on the plus side, we'll have more refi closing. So it'll be a very good quarter, but hard to call what the exact margin will be.

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Bose Thomas George, Keefe, Bruyette, & Woods, Inc., Research Division - MD [11]

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Okay. Great. That's helpful. Thanks. And then actually just switching over to capital, and if the Stewart deal falls through, could you just remind us how much capital you feel could be available for buybacks and just how much capital you'd like to keep at the holding company?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [12]

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Sure, Bose, it's Tony. So we started the quarter at, call it, $530 million or so in cash on hand at the parent company, so pretty close to a position where we could fully fund the cash portion of the Stewart transaction. We did upstream a total from subsidiaries of about $350 million. During the second quarter, we paid our common dividend of $85 million, modest buyback, 15,000 shares a day. 720,000 total shares we bought back in Q2 for about $30 million. And then as we mentioned, Cannae repaid $100 million on the revolver. So we ended the quarter at a very strong $862 million in cash on hand at the parent company.

And then if we kind of fast-forward through the balance of the year, we expect another, call it, $500 million or so from dividends from our subsidiaries. And then from an outflow perspective, $170 million in dividends to shareholders. We've anticipated about $90 million in buybacks. That would keep us at 15,000 a day through Q3 and bumping that to about 30,000 a day in Q4. And then Cannae did reborrow $100 million. But that still gets us at about $1 billion of cash on hand at year-end and that's absent a Stewart transaction. So with Stewart, obviously, $550 million or $600 million obligation, plenty of money on hand to fund that with still more money in the coffers. If we weren't able to close on Stewart, we've got $1 billion. We'd probably want comfortably $200 million of cash on hand at the holdco, which would leave us about $800 million of capital. And then of course, your question, what do you do with that, and certainly, the Board will take a good hard look at a number of things including our dividend policy, as we typically do in our October Board meeting, where we typically weigh the dividend. I'm sure they'd look at that.

We'll continue to look at M&A, agents, underwriters, maybe technology, maybe something in the ServiceLink space and then stock buybacks. We have 23 million shares under our current authorization, so I'm sure they'll take a strong look at the potential for more aggressive buybacks as well. So all things are on the table with $1 billion of cash at holdco.

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Bose Thomas George, Keefe, Bruyette, & Woods, Inc., Research Division - MD [13]

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Okay. And then I have one quick follow-up. Is an accelerated stock repurchase one of the options?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [14]

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I guess I would say there's nothing that we would take off the table at this point. We have not done within FNF an accelerated buyback in the past, but that doesn't mean we would not do that, so I wouldn't say that. We've also typically not borrowed money to buy back shares in the past. But again, with where we stand from a leverage standpoint at 14% or sub-14% debt to cap, I suppose all things would be on the table.

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Operator [15]

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Next, we'll go to the line of Jason Deleeuw with Piper Jaffray.

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Jason Scott Deleeuw, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [16]

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Just a little bit more color on commercial. Were there any specific large deals that may have moved into the quarter or moved out or anything kind of shifting quarter to quarter that we should be aware of? And then the strength that you saw on commercial, is it just kind of broad-based for the whole industry or do you think there were some share gains? Just looking for a little bit of color on that.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [17]

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Jason, it's Mike. In terms of the quarter, I don't know that things really shifted, and we actually had some transactions that we thought were going to close in the quarter that moved into the third quarter. But we did have a number of large transactions. As I mentioned, we had a couple of big multi-sites that closed in the quarter and I mentioned a couple of energy deals, those tend to be bigger, and a gaming deal. So you get larger transactions there.

One of the other things we're seeing that's kind of affecting fee per file is that our mix has shifted on the close side, where we're closing more resale transactions commercially than in the prior year. And the fee per file tends to be a bit bigger with the resale transaction, as you know, because with the refi, you're not ensuring the full value of the property. You're ensuring the debt. And so we're getting a benefit from that. But I wouldn't say there was a big shift of pulling transactions forward into the quarter. Actually, maybe it'd be the opposite. And the second question again, remind me, Jason?

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Jason Scott Deleeuw, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [18]

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Share. Market share trends?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [19]

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Sure. It's hard to know that. We don't have great transparency in the market share. All we can rely on is probably what the other companies report in terms of their overall commercial performance quarter-to-quarter. I don't think -- I think we're the first ones out. So we'll see what the other companies report and then we might know if we had a little bit of a gain.

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Jason Scott Deleeuw, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [20]

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All right. That's very helpful. And then another question on kind of I want to switch gears here on the iBuyers or instant buyers and that emerging trend in residential real estate. It seems like it's -- continues to pick up a strong head of steam here and there's a lot of interest. And I'm just -- I mean it seems like it would be a net positive for title insurance, but I would just like to kind of get FNF's thoughts on how you're thinking about the iBuyers in terms of market opportunity or any challenges there, just general thoughts on that trend.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [21]

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Sure, Jason. It's an absolute opportunity. They're going to control and they are controlling transactional volume just like other customers control, whether they are realtors or lenders and attorneys and so on, and we're pursuing them just like we pursue other customers. And it's an opportunity both for our directs, and we're working with many of these entities today as we speak. And it could also be an opportunity on the agency side. Some of these iBuyers are really thinking about forming title agencies or have formed title agencies, and we can talk to them about that as well and we are. So it's really a very good opportunity, and whether it continues to grow at the same pace, it's hard to know. I think there are certain markets where it plays stronger than other markets. It seems like Arizona is one of those, for example. But we just see this as an opportunity and we're pursuing it as such.

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Operator [22]

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Our next question is from Jack Micenko from SIG.

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John Gregory Micenko, Susquehanna Financial Group, LLLP, Research Division - Deputy Director of Research [23]

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First question was, talk through your thoughts on fee per file. Obviously, you've got some nice commercial [momentum] going and I think there's some mix benefit too. Just looking at 3Q and 4Q, you've got a little more refi on the resi side, so that's a lower-fee business. I guess the question is sort of setting aside that it's all revenue and that's all good, does fee per file growth overall continue the positive trajectory in 3Q and 4Q or do we see some moderation because of the mix?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [24]

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Jack, it's Mike. A little hard to predict. It's interesting, if you look at the second quarter, our residential fee per file is up 1% over the second quarter of 2018, yet we had a stronger mix of refinance closings in that quarter. So other things being equal, you would expect that the fee per file would have come down and it didn't. So I think we're still seeing a bit of a benefit from a home price appreciation. And it's just hard to predict how that plays out the next 2 quarters. I would expect that we'll have a higher percentage of refinanced closings in the third quarter than we have in the second, and that could certainly put pressure on the residential fee per file. And then commercial, you tend to see that just bouncing around more, but it's been consistently up really over the past couple of years, really.

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John Gregory Micenko, Susquehanna Financial Group, LLLP, Research Division - Deputy Director of Research [25]

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Okay. And then a lot of the driver of the positive operating leverage this quarter was in the other operating expense. Anything in there onetime? Or can you speak to some of the sustainability of the lower -- a potentially lower run rate? And you talked about adding people on the personnel side to address volumes, but just curious on the OpEx side.

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [26]

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Jack, it's Tony. Nothing that comes to mind as unusual or onetime in the other operating expenses. But as you probably know, the major buckets in that category are facilities cost and that's been pretty stable, and that's our largest expense. Then, we have cost of sales that's typically variable with business, and so that ought to fluctuate with some of our businesses. We have had growth at some of our businesses like LoanCare which is our subservicer. And so we've seen a little bit of an increase there. But we are enjoying some pretty strong operating leverage, to your point, on not only other operating expenses, but in personnel costs as well, but again, no onetimer. So I would expect that the third quarter looks pretty similar to what we saw in Q2.

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John Gregory Micenko, Susquehanna Financial Group, LLLP, Research Division - Deputy Director of Research [27]

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Okay. Appreciate that. One more, just to sneak in on the heels of Bose's question around accelerated buyback. Is it -- could we add maybe a potential special dividend or something that would also be considered on the table per your earlier answer to his questions?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [28]

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I think I would give the same answer, which is everything would be on the table. Our Board is very sophisticated and we've been around a long time returning strong returns to our shareholders in a number of different ways. And in a prior iteration of our companies, we owned a company that you might know now as FIS, and we recapitalized that after 2005 and paid a special dividend there. So it's -- again, everything is on the table and we'll just see how things play out.

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Operator [29]

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The next question is from Mackenzie Aron from Zelman & Associates.

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Mackenzie Jean Aron, Zelman & Associates LLC - VP [30]

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Congrats on the quarter. Just one question. With the Stewart deal lingering, just curious if there's been any impact that you've noticed on the ground, thinking kind of from an agent perspective? Are you seeing anything from a competitive dynamic? Or kind of any update you can give us on how the deal's uncertainty is potentially impacting the business, if at all.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [31]

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Mackenzie, it's Mike. Are you asking if we think it's impacting Stewart's business?

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Mackenzie Jean Aron, Zelman & Associates LLC - VP [32]

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No, more just competitive dynamics, if agents are moving away from Stewart and maybe you all are picking that up in any way or from a talent perspective.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [33]

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Okay. Thanks for the clarification. I would say that it's been pretty consistent and that we've not seen a lot of that. I think Stewart has done a very good job really, from our view, of kind of maintaining their -- and retaining their people and their agents. So we really haven't noticed a lot of disruption, if you will, or dislocation inside their business.

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Mackenzie Jean Aron, Zelman & Associates LLC - VP [34]

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Okay. Great. And then just lastly, in terms of the tax rate through the end of the year, should it be right around 24% [or just] on the tax rate guidance?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [35]

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Yes. Mackenzie. It's Tony. I think probably I would model 25% for the balance of the year. That's what I guided toward. In Q2, we came in a little lower than that at about 24.5%, but I think 25% is a pretty good number.

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Operator [36]

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Our next question is from Mark Hughes from SunTrust.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [37]

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I'm wondering if you might reflect on the times in the past where you've seen this kind of interest rate trajectory. Obviously, the interest rates have come down, and you've really seen a nice spike in refi, potential is for further rate cuts. Do you -- would you think that you'd see steady volume of refis? Is there usually, just kind of an initial rush and then it tapers off? I know you don't forecast, but I wonder if there's any historical parallels you could point to that might give some perspective on volume as we think about the coming quarters.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [38]

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Yes, Mark. It's an interesting question. I don't know that we've really gone back and looked at that. All these cycles have a life to them, and at some point, they do slow down. What we're seeing right now is that the refi activity continues to accelerate. We were up 82% June over June on refi opens, and sitting in July, we're still running at about that number, even slightly ahead. And when we look at our ServiceLink business, they were up 100% second quarter over second quarter and 124% in June and kind of holding at that number. So at least for now, we're seeing a pretty accelerated environment and we think it's got a little bit of legs to it probably, certainly in July and maybe into August, but it's just hard to know predict it beyond that.

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Mark Douglas Hughes, SunTrust Robinson Humphrey, Inc., Research Division - MD [39]

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Understood. And then the agency commissions were fractionally higher this quarter. Anything to that?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [40]

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I think the agency trends are just very similar to what we see on the direct side and they benefit from the refinance activity just like we do, and I don't think there's anything there that we've noticed.

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [41]

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And spread-wise, it could depend on geography because depending on where we're getting a little bit more revenue, that'll influence the split. We typically run somewhere in that 76% to 77%, and I think we're still within that range.

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Operator [42]

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Your next question is from the line of John Campbell from Stevens.

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John Robert Campbell, Stephens Inc., Research Division - MD [43]

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Congrats on a great quarter.

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [44]

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Thanks, John.

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John Robert Campbell, Stephens Inc., Research Division - MD [45]

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On the title margin, on the lift, I just want to maybe unpack that a little bit. So clearly, the investment income helps you guys, but could you talk to the headwind from ServiceLink and then maybe how much of a positive impact you saw from the centralized refi business?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [46]

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Yes. I think ServiceLink does, because it operates a number of different businesses, there is a little bit of a headwind total margin, and that business runs maybe somewhere in the 12% range. Whereas, if you took our title business on a stand-alone basis without ServiceLink, we're somewhere in the low to mid-18% for the quarter. So we do have that. And that's because -- I mean, if you look at just the refi business, the title refi business at ServiceLink, it's over 30% margin in that business. But then if you look at some of the other lower-margin businesses, you have appraisal, which runs somewhere in the 12% range; and you have field services, which is a property preservation business, which is a single-digit-margin business. And then you have LoanCare, which is in growth mode and there's been a little bit of headwind, if you will, on the margin as we take on more loans and sort of assimilate that. And so that's been in the roughly 12% range. And so that's why maybe you have a little bit of headwind currently there. I think looking forward to the extent that we continue on a refi run, you'll see a continued strong performance out of ServiceLink on the title and close side. And I could see us even expanding on that 30%, 31% margin there.

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John Robert Campbell, Stephens Inc., Research Division - MD [47]

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Okay. That's helpful. And then on escrow, it looks like -- I guess within escrow, another line, it looks like escrow might have bounced back a bit. But is that mostly driven by the just better -- just the improving purchase market? Or have you been able to take price there with your new products or offerings? Anything to call out there?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [48]

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Yes. Nothing really new in there and there's a lot of different pieces that comprise that line item. In fact now, there's a new disclosure requirement that you'll see in our SEC filings that breaks down our revenue into a number of different components. And so you can really see what drives that. You have the purchase market drive the escrow side of things. But if you look at title related and other fees, you see, we've got home warranty, we've got LoanCare, we've got valuations, we've got some default business, we have field services, so a number of different businesses in there. And year-over-year, Q2, we had a 4.3% increase in direct premium versus just the 2.2% increase in escrow and other fees, and that's really because you have different dynamics in some of those other businesses.

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Operator [49]

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Next question is from Chris Gamaitoni from Compass Point.

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Edward Christopher Gamaitoni, Compass Point Research & Trading, LLC, Research Division - MD & Head of Research [50]

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Is there any color on the real estate technology business for the quarter, revenue side trajectory?

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Raymond Randall Quirk, Fidelity National Financial, Inc. - CEO & Director [51]

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Yes. This is Randy. On the technology side, we're -- year-over-year, we had a revenue growth of 5%. Sold platforms to the lead teams of realtors, we're up 10%. Client growth overall, we're up 9%. So it's progressing halfway through the year. It was a little bit of a slow start to the year based on the -- at the back half of '18, some slowdown on the purchase side, on the real estate side. But we're coming out well in the first half, and we believe that we'll accelerate further in the second half of the year.

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Edward Christopher Gamaitoni, Compass Point Research & Trading, LLC, Research Division - MD & Head of Research [52]

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All right. And just getting back to the capital structure. I think you historically said around 20% debt to capital is your target range. Obviously, we're well below that. If Stewart doesn't close, even with the buyback, still have you 4 to 5 percentage points below where that target range is. Is that just a nice buffer to have? Or is it something you'd actually manage through? How do you think about your debt to cap or capital levels in the future?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [53]

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Yes, Chris. It's Tony. I think right now it's a nice buffer to have. It's allows flexibility. We've been an acquisitive company over the course of our 30-plus years, and I wouldn't be surprised to see an acquisition or multiple acquisitions come along that would have us flex that. We've ranged anywhere from a high of a 42% debt to capital when we bought Chicago Title to 13.7%, which is where we sit today. I don't think we would borrow just to borrow. But in fact, I'm sure we wouldn't. But certainly, if a deal came along or if we decided on some sort of shareholder return, then 20% to 25% is a very comfortable range for us.

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Edward Christopher Gamaitoni, Compass Point Research & Trading, LLC, Research Division - MD & Head of Research [54]

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Okay. And on the deal, I think you had previously communicated that all the nationals focused in real estate moving forward and in the real estate market industry, that can be broad. But is that still holding? That will be something tangentially related to residential or related to real estate?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [55]

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Yes.

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Operator [56]

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Our final question is from Geoffrey Dunn from Dowling & Partners.

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Geoffrey Murray Dunn, Dowling & Partners Securities, LLC - Partner [57]

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Just first, a number revisit. Mike, I missed the details on the purchase and refi per day in early July. I think you said purchase was either -- was it down 2% and refi up over 80%?

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Michael Joseph Nolan, Fidelity National Financial, Inc. - President [58]

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Sure, Geoff. The purchase was down 2% in the first couple of weeks of July and then the refi was up 83% over last July.

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Geoffrey Murray Dunn, Dowling & Partners Securities, LLC - Partner [59]

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Okay. And then Tony, I wanted to come back to something you said about buyback. I think you've indicated an expectation for about 30,000 per day in Q4. Did I hit that right?

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [60]

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Yes, you heard it right, and again, that's not really a forecast as much as -- and that's kind of what I'd modeled and at this point to end the year at about $1 billion. But again, we're really waiting for a resolution on Stewart. And once we get to that point, then we'll see how things play out.

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Geoffrey Murray Dunn, Dowling & Partners Securities, LLC - Partner [61]

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Okay. I guess I wanted to ask you on that because I think Bill had indicated before the idea of wanting to repurchase the amount of shares that you would issue in the Stewart deal over the course of a 1-year period. And it seems to me that you'd be in an even better position to buy back stock if the Stewart deal didn't close. And to buy back the 15-plus-odd-million shares, you're probably looking at more of 75,000 per day. So I'm just wondering why your forecast going in the year-end isn't at least at that level given previous comments and your cash resources.

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Anthony John Park, Fidelity National Financial, Inc. - Executive VP & CFO [62]

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Yes. Again, it was almost a placeholder. I think that once we have a resolution on Stewart, which will happen pretty soon, we'll know -- pretty sure we'll know. Absent some change in the contract, we'll know by the start of the fourth quarter where we stand. And at that point, my expectation would be the Board looks at our capital of roughly $1 billion and decides, okay, what are we going to do here, how are we going to handle our dividend policy, how aggressive do we want to be on our buyback. And so I wouldn't read too much into the 30,000 a day other than it was just sort of a number I put in there not knowing at this point whether Stewart happens or Stewart doesn't happen.

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Geoffrey Murray Dunn, Dowling & Partners Securities, LLC - Partner [63]

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Got you. Okay. And then either for Randy or Mike. If you look at the metrics of order counts per head count, the [leverage] this quarter was one of the highest levels we've seen in some time. Is that just because you ran things so tightly? Or has the extent of the refi activity surprised you on the upside?

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Raymond Randall Quirk, Fidelity National Financial, Inc. - CEO & Director [64]

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Sure. I'll take that. This is Randy. As you know, the order count accelerated that quickly through the second quarter, and you're correct on our metrics, on our productivity standards. In the second quarter, we're reopening 16 orders per employee, closing 10. In June, we're opening up 18 and closing 12. So that we end up pretty quickly. What we know about the third quarter is that we'll have increased closings, so we'll have to -- as Mike said earlier, we'll have to add staff so that we can bring that -- really that productivity number on the closing side from 12 maybe down to the 11 range or 10.5. You can run it hot as it comes up quickly, but you can't really sustain it through a number of months. So we will -- and again, that just leads to the staffing levels, not that we've been holding back, but we always operate conservatively. But we do want to be able to close the deal, service the customers and take care of our employees.

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Geoffrey Murray Dunn, Dowling & Partners Securities, LLC - Partner [65]

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So as you think about Q3 versus Q2, it seemed that you kind of have a bit of an expense lag that makes keeping the margins flat. And I think this is directionally in line with what you have been suggesting, but keeping the margins flat seems like a high order until Q3.

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Raymond Randall Quirk, Fidelity National Financial, Inc. - CEO & Director [66]

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There will be some expense, right, you're correct. If you went through the second quarter, I believe we -- of the 291 that we brought on board, it was roughly 100 employees per month. So at that time, it just slipped into the third quarter that just starts to stack up on the [event].

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Operator [67]

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And at this time, there are no further questions on queue. Please go ahead with closing remarks.

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Raymond Randall Quirk, Fidelity National Financial, Inc. - CEO & Director [68]

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The second quarter was the strongest quarterly performance in nearly 16 years for our title business. With strong second quarter refinance opened orders and improving trend in purchase orders opened and continued strength in commercial orders opened, we are well positioned to continue to produce strong financial results in our title business as we enter the second half of 2019. Thank you for joining us today.

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Operator [69]

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Thank you, and that does conclude our conference for today. Thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.