Fidelity National Financial, Inc. (NYSE:FNF) Q4 2016 Earnings Call February 2, 2017 11:30 AM ET
Executives
Daniel Kennedy Murphy - Fidelity National Financial, Inc.
William Patrick Foley - Fidelity National Financial, Inc.
Raymond R. Quirk - Fidelity National Financial, Inc.
Anthony J. Park - Fidelity National Financial, Inc.
Michael J. Nolan - Fidelity National Financial, Inc.
Brent Bannister Bickett - Fidelity National Financial, Inc.
Analysts
Jeremy Campbell - Barclays Capital, Inc.
Bose George - Keefe, Bruyette & Woods, Inc.
John Campbell - Stephens, Inc.
Jason S. Deleeuw - Piper Jaffray & Co.
Mark Douglas Hughes - SunTrust Robinson Humphrey, Inc.
Kevin Kaczmarek - Zelman & Associates
Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
Operator
Ladies and gentlemen, thank you for your patience and standing by, and welcome to the FNF 2016 Fourth Quarter Earnings Call. As a brief reminder, today's conference is being recorded.
And I'd now like to turn the conference over to our host, Dan Murphy.
Daniel Kennedy Murphy - Fidelity National Financial, Inc.
Thank you. Good morning, everyone, and thanks for joining us for our fourth quarter 2016 earnings conference call. Joining me today are our Chairman, Bill Foley; CEO, Randy Quirk; President, Mike Nolan; CFO, Tony Park; and EVP, Brent Bickett.
We'll begin with a brief strategic overview from Bill. Randy will then 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 Bill Foley.
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 1:30 PM Eastern Time today through next Thursday, February 9. The replay number is 800-475-6701 and the access code is 414865.
Let me now turn the call over to our Chairman, Bill Foley.
William Patrick Foley - Fidelity National Financial, Inc.
Thank you, Dan. This was a great finish to another strong year for our title insurance business, as we generated fourth quarter adjusted pre-tax title earnings of $292 million and a 15.8% adjusted pre-tax title margin. For the full year 2016, we produced more than $1 billion in adjusted pre-tax title earnings and a 14.7% adjusted pre-tax title margin. I will let Randy go into more details on the performance of our title insurance business.
Black Knight continues to perform very well, generating revenue of $261 million and adjusted EBITDA of $112 million for a 44.4% adjusted EBITDA margin. FNF's Black Knight ownership stake is currently worth approximately $3 billion or approximately $11 per FNF share.
In December, we announced our intention to distribute all 83.3 million shares of Black Knight common stock that we own to FNF Group shareholders in a tax-free distribution. We recently filed a private ruling letter request with the IRS and are working to drafting agreements and other legal steps necessary to meet a third quarter 2017 closing for the distribution. We look forward to a stand-alone Black Knight and the potential value creation that an independent, more liquid Black Knight common stock offers for both FNF and Black Knight shareholders.
At the same time, we also announced a tax-free plan, in which we intend to redeem all FNFV tracking stock shares in exchange for shares of common stock of FNFV. After completion of the exchange, FNFV will also be a stand-alone publicly-traded common stock. The private letter ruling request recently submitted included both the FNFV exchange and the Black Knight distribution, and we are working through the FNFV documentation to meet a third quarter 2017 closing. This FNFV exchange allows FNF to eliminate its tracking stock structure, making FNF index eligible again and potentially widening the demand for FNF common stock.
Finally, we repurchased 550,000 shares of FNF common stock for $18.5 million during the fourth quarter. For the full year 2016, we repurchased 6 million shares at a total cost of $206 million. We closed the repurchase program on December 2 in anticipation of the Black Knight spin-off announcement and have not repurchased any FNF shares since the announcement.
I'll now turn the call over to Randy to discuss the title insurance business.
Raymond R. Quirk - Fidelity National Financial, Inc.
Thank you, Bill. As Bill mentioned, this was another strong quarter for our title operations, as we generated a 15.8% adjusted pre-tax title margin. Our adjusted pre-tax title earnings of $292 million were a $67 million or 30% increase over the fourth quarter of 2015.
For the fourth quarter, total open orders averaged approximately 7,600 per day with October at 8,600, November at 8,000 and December much seasonably lower at 6,400. FNTG purchase orders opened and closed on a daily basis in the fourth quarter increased by 7% and 12%, respectively.
The mix of open orders shifted more towards purchase transactions with 53% of open orders being purchase transactions. But the mix of closed orders shifted more towards refinancing with both purchase and refi being 50% of closed orders in the fourth quarter.
January total open orders per day were 7,200. While the first two weeks of the year averaged approximately 6,600 open orders per day, the most recent two weeks averaged approximately 7,600 open orders per day. Additionally, FNTG purchase orders opened increased by more than 10% on a daily basis versus 2016.
It was a very strong finish for our agency operations. As you may recall, a few years ago, we began to make a concerted effort to increase our agency market share. With a focus on organic growth and signing new quality agents, our agency premiums grew by 17% in the fourth quarter and 15% for all of 2016, both of which were stronger than our direct premium growth.
Additionally, in the fourth quarter, $86 million or 12% of our agency premiums were generated by agents signed since January of 2015. Finally, in 2016, our agency market share has grown by nearly 1.5 percentage points through the third quarter.
We experienced another strong commercial quarter to end 2016. Total commercial revenue of $285 million was our second highest quarterly figure ever and a 6% decline from the record fourth quarter of 2015, driven by a 4% decrease in closed commercial orders and a 1% decline in the fee per file.
National commercial revenue of $167 million declined by 9%, as closed orders declined by 4% and the fee per file also fell by 4%. For full year 2016, total commercial revenue of approximately $973 million declined by 5% from the record 2015 performance. We remain confident that 2017 should be another good year for our commercial operations.
The total fee per file of $2,091 decreased by 8% versus the fourth quarter of 2015, as the mix shifted to more refinance closings in the fourth quarter of this year and the commercial fee per file was lower than the prior year.
Let me now turn the call over to Tony Park to review the financial highlights.
Anthony J. Park - Fidelity National Financial, Inc.
Thank you, Randy. We generated $2.2 billion in total revenue in the fourth quarter, with title generating more than $1.8 billion in total revenue, Black Knight contributing $261 million in total revenue and our corporate and other segment generating $63 million, which is predominantly our real estate brokerage and Commissions, Inc. revenue.
Adjusted pre-tax title earnings were $292 million, a $67 million or 30% increase over the fourth quarter of 2015. The fourth quarter adjusted pre-tax title margin was 15.8%, a 200 basis point increase over the fourth quarter of 2015. Adjusted net earnings were $198 million or $0.71 per diluted share.
The title segment generated more than $1.8 billion in total revenue for the fourth quarter, a 12% increase over the fourth quarter of 2015. Direct title premiums increased 11%, while agency premiums grew 17%. Direct title premiums benefited from the 47% increase in refinance closed orders in the quarter, but were negatively impacted by the 6% decline in total commercial revenue. Agency premiums continue to benefit, both from our focus on adding high quality agent relationships and organic growth opportunities with our existing agents. Personnel costs increased by 9% and other operating expenses grew 8%, both lower than the 12% increase in title revenue.
FNF Group debt outstanding was $2.5 billion, with nearly $1.6 billion of that debt at Black Knight. Our debt to total capital on a consolidated basis was approximately 28% at December 31. On an FNF-only basis, the debt to cap ratio was approximately 17%, and 22% when the guarantee on the $400 million of Black Knight debt is included.
Total title claims paid were $76 million during the fourth quarter, a decrease of $8 million or 10% from the fourth quarter of 2015. For the full year 2016, total title claims paid were $245 million, a 14% reduction from full year 2015. Given the recent favorable trends in claims payments, lower loss ratios and policy year since 2009 and a reduction in adverse development in pre-2009 policy years, we recorded a $97 million pre-tax credit to claim loss expense in the fourth quarter, reducing a redundancy in the reserve for title claim losses balanced and making the reserve consistent with the actuarial central estimate.
We also reduced the claim loss provision to 5%, driven by significantly lower title loss development related to policy years since 2009. Finally, our FNF Group investment portfolio totaled nearly $5 billion at December 31. From a regulated standpoint, we have approximately $1.8 billion in statutory reserves, $1.4 billion in regulated cash and investments and $900 million in secured trust deposits for a total of $4.1 billion in regulated cash and investments.
From an unregulated perspective, we have approximately $300 million of unregulated cash at FNF Group as of December 31, 2016. There's also approximately $300 million in consolidated cash and investments at Black Knight and ServiceLink and approximately $100 million in cash at subsidiaries, both of which are restricted by minimum working capital, other regulatory requirements or to let those businesses run themselves autonomously.
Let me now turn the call back to our operator to allow for any questions.
Question-and-Answer Session
Operator
Certainly, thank you. It looks as if our first question comes from the line of Jeremy Campbell of Barclays. Your line is open.
Jeremy Campbell - Barclays Capital, Inc.
Yeah, thanks. Hey, Bill, I think, on the Black Knight call yesterday, you had mentioned that the BKFS spin could potentially occur in 2Q rather than 3Q. Just wondering, is the primary gating issue at this point the IRS letter? And I think you guys previously mentioned something to the effect of like three months on the short end or six months on the longer end, is that right?
William Patrick Foley - Fidelity National Financial, Inc.
Well, you're exactly right. It's really now gating through the IRS. The internal documentation is well underway. We've established an independent committee at Black Knight to ensure that everything is done in conformity with the proper spinout rules. And so, really, the gating item is the IRS. And we believe, the FNF, the spinout or restructure will occur sometime after the Black Knight spinout. So, they're not – the timing is not dependent on each on the other. We're going to do each one as soon as they're approved.
And on FNFV, we do have an accounting scenario that we need to get audits for the last three years that are independent audits for FNFV. And you kind of know the story there that it just takes time now to get all these things pull together. But everything is on track and on pace. And potentially, it could be mid-June to mid-July is kind of the target timeframe that we have for Black Night.
Jeremy Campbell - Barclays Capital, Inc.
Got you. And then, I think you said you recently filed the paperwork. Was that recent as in like yesterday or like January 1?
William Patrick Foley - Fidelity National Financial, Inc.
Boy, it's about 10 days ago or so. 10 days ago, we have – we finally got it all in.
Jeremy Campbell - Barclays Capital, Inc.
Great, great. And then, now that you guys have kind of frozen the buyback, hit the pause button there until the spin is complete, I was just hoping you guys could help us think about future use of the capital. And post spin, is an accelerated stock purchase program potentially on the table? Or alternatively, what kind of daily buyback pace would you guys expect to pursue?
William Patrick Foley - Fidelity National Financial, Inc.
I mean, as you know, at the present time, when we buy back a share of FNF, we really – it's got the Black Knight embedded in it, which is $11 a share. So, once the spin happens, if the FNF share price goes – is reduced by $11 a share, we're going to be more aggressive in terms of our buyback and it may be in block trades, it maybe just a more aggressive daily buyback program. And frankly, I prefer the daily buyback program happens every day unless we're blacked out. And instead of perhaps being 25,000 shares a day it'd be 50,000 shares or 75,000 shares a day because we're going to have a significant amount of cash at the end of this transaction.
Our debt structure will be completely changed, our cap structure will be completely changed and we have a redomestication underway that's going to create quite a bit of cash at the title insurance company that will be then dividended to the holding company.
Jeremy Campbell - Barclays Capital, Inc.
And then, as you kind of look ahead outside of a buyback program or potential use for dividends, what's the landscape look like for kind of a strategic M&A inside the real estate kind of market that would play well with the – with FNF's title company?
William Patrick Foley - Fidelity National Financial, Inc.
Yeah, we're very interested in the business of controlling the real estate transaction from the point of time that the listing is opened with the realtor and then managing that transaction on behalf of the realtors and lenders all the way through the title, all the way through the close. And that was part of the rationale behind the CINC acquisition last summer. And now, it's a matter of rolling CINC out to our sales base and integrating CINC into our title and escrow business and then the software development program probably in conjunction with Black Knight because they have ELINCS. And so, you've got a piece of the puzzle already in place.
The other thing we're doing, we're making periodic acquisitions in the title insurance – in the title agent area to attempt to grow our market share and grow our business base in various states, and they're – we made about 12 or 13 of them last year. Only a couple were in excess of $20 million. This year, we anticipate the same sort of pace of acquisitions.
Operator
Great. Thanks. Our next question comes from the line of Bose George with KBW. Your line is open.
Bose George - Keefe, Bruyette & Woods, Inc.
Yeah. Good morning. Actually, first, just a follow-up on the redomiciling comment. Just can you remind us how much capital will be freed up by that action?
Anthony J. Park - Fidelity National Financial, Inc.
Sure, Bose. This is Tony. We've been in that process – we – I think we mentioned it in the call last quarter. We met with the departments of insurance that are involved in early December and filed the application soon thereafter. We've been in contact with the three departments that we're working with and gone through a series of questions and kind of working through that. So, the expectation is sometime in Q1 possibly by the end of February. And the thinking now and the numbers could adjust with year-end statutory closings, but the expectation now is somewhere around $250 million in cash that would upstream to parent.
Bose George - Keefe, Bruyette & Woods, Inc.
Okay. Great. Thanks. That's helpful. And then, actually, just switching over to the commercial segment. Can you just talk about your outlook for that market this year versus 2016? And then, just specifically on the local commercial, can you give us a little color on the typical transactions that flow through that segment?
Michael J. Nolan - Fidelity National Financial, Inc.
Bose, it's Mike. Our look is confident that we're going to have another good commercial year, really fairly consistent with the last two years. And our order trends would be kind of what supports that. In 2016, as you know, we opened virtually the same number of orders as we did in 2015 and actually closed the same number of orders. The only difference being we didn't have as many of the large transactions.
In the fourth quarter of 2016, our national open orders were only 1% below the fourth quarter of 2015. And as we sit here in the early part of February and look at January, our national commercial orders were up 6.5% over January of last year. So, all that tells me we have a very consistent commercial market. If I had to call it between the two years, maybe it looks more like 2016 than 2015. But again, just a very good year.
On the local side, we do those deals primarily through our – obviously through our distributed offices and they're more the $10 million sale of an apartment building or complex or smaller retail deals, refinancing of local commercial properties and communities. So, definitely smaller, but a lot more volume.
Bose George - Keefe, Bruyette & Woods, Inc.
Okay. Great. Thanks.
Operator
And our next question comes from the line of John Campbell of Stephens. Your line is open.
John Campbell - Stephens, Inc.
Hey, guys. Good morning, and congrats on a solid quarter.
Unknown Speaker
Thank you.
John Campbell - Stephens, Inc.
Just first question here, thinking about agency versus direct, obviously, it sounds like some of that was by intention this past year, growing agency as fast as you did. But just curious about this year, do you expect agency to kind of outpace direct?
Raymond R. Quirk - Fidelity National Financial, Inc.
Yeah. This is Randy. Yeah, we did really make a concerted effort here to build our agency revenue. And actually, our agency market share, we've been into that program for the last couple of years, and we do expect it to grow as we go forward. We signed up well over 300 agents as we moved through 2016. Now, we do – we still have a cancellation program for agents, if we come into any concerns about claims. But we'll continue to add to that network, signing quality agents and pushing it out in the field. We're looking to improve our products, our services. We're recruiting people into the organization that are quite adept on the sales side. And we're going to protect ourselves as we go forward, but we're going to continue to grow the agency market share. It's very important to us.
John Campbell - Stephens, Inc.
Okay. And then, just back to M&A. So, the $250 million, sounds like you have excess cash from the redomestication and then you've got, I guess, post spin, 17% debt to cap, so that leaves the doors open for leverage. I mean, it seems like there's a lot of dry powder that's going to be building. And, Bill, it sounds like that you guys have a couple of things you're looking at. But I know you've talked about the real estate brokerage business. You seem like you're starting to get a little bit of a foothold there on the West Coast.
But would you ever look at doing anything potentially sizable? I know someone like a Realogy has kind of started off with its real estate brokerage business and then built out a title business. Could you do something like the reverse effect and build out a larger kind of nationwide brokerage business?
William Patrick Foley - Fidelity National Financial, Inc.
We are actually looking at various real estate brokerage companies. We've focused on the West Coast because we have a pretty good operation in the Bay Area and we've recently expanded that into Southern California. We're looking at opportunities up in the Northwest. What we'd like to do is expand that real estate brokerage network where we have strong direct operations. And so, that's going to be primarily in states such as Arizona, Colorado, California, Oregon, Washington, Texas, Illinois, Florida. But it is an area of focus for us. And the companies can be bought with earn-outs at a fairly – actually a lesser multiple than our own stock trades for.
So, it is an area that we want to focus on as we supplement our title insurance or title agency operations, direct operations in various states. So, you kind of hit on the – that's the one area that we didn't really say much about but we're very interested in it and we're taking – we're looking at a lot of different opportunities.
John Campbell - Stephens, Inc.
Okay. That's helpful. And then, last one, if I can squeeze in one more. The ServiceLink, I saw maybe 100 heads or so reduction. Are you guys kind of where you need to be from a staffing standpoint?
Michael J. Nolan - Fidelity National Financial, Inc.
Yeah, it's Mike again, John. Well, that's always something you're looking at in real time, but we made those reductions because we know origination volumes are going to be coming out as we go into 2017 on the refi side. And so, we did the corrections we thought we needed to do in that quarter, and we'll just continue to monitor that depending on volumes as we go through 2017.
John Campbell - Stephens, Inc.
Okay. Great. Thanks, again, guys.
Operator
Our next question comes from the line of Jason Deleeuw of Piper Jaffray. The line is open.
Jason S. Deleeuw - Piper Jaffray & Co.
Thanks. A question on the margins. They were pretty impressive this quarter. And just – the closing ratio was also elevated versus what we've seen historically for the fourth quarter. So, maybe – I'm just thinking maybe there's some pull-forward, just kind of what rates have done. But when we're just thinking about the margins that we saw here in this fourth quarter, I mean, was there a noticeable benefit from just a higher closing ratio at all? Or is this fourth quarter kind of like a – kind of the right way to think about the margin profile of the business?
Raymond R. Quirk - Fidelity National Financial, Inc.
Yeah. This is Randy. I think what we did see is a pretty typical fourth quarter. And certainly, a December where there is some pull-forward, we – with the purchase side, we saw really a stronger purchase closing in the fourth quarter. It might be the influence of rates. We're not really sure. And then, being ahead of you on the refinance closings, that's a shorter closing cycle. So, it's maybe a little bit of a combination of both. We closed a lot of refis that we opened up in the third – second quarter and third quarter. So, a combination of that pushed out a pretty nice margin for us along with the commercial impact.
Jason S. Deleeuw - Piper Jaffray & Co.
Got it. Thanks. And then, just to be clear, what will – the debt to capital ratio for FNF-only, what will that be after the spin? Because there's the guaranteed debt – and what are the plans there? What is going be the debt to capital ratio? And what are you – what's the targeted range when it's just FNF standalone?
Anthony J. Park - Fidelity National Financial, Inc.
Yeah. Its Tony, Jason. Now, the debt to cap ratio on an FNF standalone basis is just under 17. I think it's about 16.9%. And with earnings, of course, that comes down a little bit. It's about 22% currently with the guaranteed, but the guarantee will not be in place post spin.
Jason S. Deleeuw - Piper Jaffray & Co.
Okay. So, you'll be roughly at that 17% or whatever tenure capital build is between now and the spin. Is that the right way to think about it?
Anthony J. Park - Fidelity National Financial, Inc.
That's right, probably the lowest point we've ever been in a long, long time.
Jason S. Deleeuw - Piper Jaffray & Co.
Got it. And then, the last question on the share repurchase. It was frozen on December 2. Does that going to have to stay frozen then until the spin actually occurs?
Anthony J. Park - Fidelity National Financial, Inc.
At current prices, the answer is yes. As Bill said, implicitly, we're buying back Black Knight shares in every dollar that we repurchase and we would look to be more aggressive on a post spin basis, if our stock does drop by the full $11-plus dollars that Black Knight represents at – per FNF share. We could be 40% more efficient for every dollar spent.
Jason S. Deleeuw - Piper Jaffray & Co.
Understood. Thanks, and a great work on the quarter.
Unknown Speaker
Thank you.
Unknown Speaker
Thanks.
Operator
The next question comes from the line of Mark Hughes with SunTrust. Your line is open.
Mark Douglas Hughes - SunTrust Robinson Humphrey, Inc.
Yeah. Thank you. In talking about the order trends in January, you hit – given a statistic that it was up 10%. Could you repeat what that was? And this is – I think you're talking about open orders around the January start of the year.
Raymond R. Quirk - Fidelity National Financial, Inc.
Right. The 10% reference...
Anthony J. Park - Fidelity National Financial, Inc.
Daily.
Raymond R. Quirk - Fidelity National Financial, Inc.
Was – yeah. Was – our daily purchase orders came up 7%. I'm not sure where you're getting the 10%.
Anthony J. Park - Fidelity National Financial, Inc.
Actually, Randy, on a daily basis, purchase orders were up 10% for FNTG. 7% was full month to get a one day difference.
Raymond R. Quirk - Fidelity National Financial, Inc.
But in any event what we did see through January was a nice pickup in orders and certainly a nice pickup on purchase. We came out faster on the purchase side this January versus January a year ago with a – with really a 60% mix in our total order volume. So, a little heavier than what the MBA would be projecting for the first quarter.
Mark Douglas Hughes - SunTrust Robinson Humphrey, Inc.
And then, any range you might provide where kind of refi is settled out at this point on a daily basis?
Raymond R. Quirk - Fidelity National Financial, Inc.
Well, again, the MBA is projecting really for the year – and it really starts in the first quarter with a pretty severe falloff in refinance volume. They're talking 40%, 45%. We are thinking – right now, we're running at about a 62% mix, 62% purchase, 38% on the refinance. And we think that's probably where it will settle down as we run through the first quarter and then move into the second quarter. It's going to depend obviously if rates move significantly, but that's the way we see it today.
Mark Douglas Hughes - SunTrust Robinson Humphrey, Inc.
And then, the final question. If losses continue to trend very favorably, does that put any pressure on your pricing on premium rates or is that pretty well locked in?
Raymond R. Quirk - Fidelity National Financial, Inc.
Yeah. As you know, losses are a pretty small part of our overall cost structure, currently running about 5% operating cost, personnel and other are a much bigger piece. So, when we do rate applications, the regulators look at the entire cost structure, not just losses. So, I don't think a 50 basis point reduction in loss expenses impacts our rates. And in fact, we've had some nice rate increases in certain parts of the country over the last year and even into the first quarter of 2017.
Mark Douglas Hughes - SunTrust Robinson Humphrey, Inc.
Thank you very much.
Operator
And the next question comes from the line of Kevin Kaczmarek of Zelman & Associates. Your line is open.
Kevin Kaczmarek - Zelman & Associates
Hey, guys. Thanks for taking my questions. I guess, on the – sorry, the debt to capital, post spin, do you have a target in mind that you'll be migrating towards maybe 20% or something like that?
Anthony J. Park - Fidelity National Financial, Inc.
I mean, traditionally, we have been – we have kind of targeted between 20% and 25%. But if there's not a particular need to – or use of the funds, we probably wouldn't get up there right away. We'd wait until we get some sort of opportunity that makes sense for us to either hit the line of credit or to do additional bond offering. So, historically, we're kind of in that somewhere between 20% and 25% is more what we felt as reasonable over the years.
Kevin Kaczmarek - Zelman & Associates
Okay. And I guess, in the event that there is a cut in the corporate tax rate with the new administration in the White House, is there – have you guys analyzed this? Is there any structural reason to expect that you wouldn't benefit like other companies? I realize you might have a municipal bond portfolio that might matter. But could you guys give us some like directional color on where that might hit?
Raymond R. Quirk - Fidelity National Financial, Inc.
Yeah. Kevin, I think it's pretty hard to know because – it's hard to know with the rate cut what happens in terms of deductions. But I don't think there's any question at all that, if you have a rate, especially a significant rate cut, that it's very beneficial to us. You can see that the taxes that we pay, they are significant and there is no question that it would be a very, very large benefit to FNF.
Anthony J. Park - Fidelity National Financial, Inc.
Yeah. We're – I mean, we're a 35%-plus tax payer. And so, if it goes to 20% even with elimination of deductions, I mean we really don't have deductions that would be impacted. So, this is a – we're very excited about the drop in – potential drop in corporate taxes.
Kevin Kaczmarek - Zelman & Associates
Okay. Great. I guess, one more. Black Knight articulated a reclassification of the property insight business. Is this – how is this business going to affect your financial? Should we be expecting like a $31 million increase in revenue and expenses somewhere going forward?
Raymond R. Quirk - Fidelity National Financial, Inc.
No, no. To us, it's really neutral. Instead of us paying Black Knight for those services of $31 million, we have the head count that we brought back over to FNF and we'll pay that head count and it's roughly the same dollars. And then, going forward, we'll manage that head count and possibly pick up some synergies by managing it internally versus outsourcing it at a small mark-up. So, I think it works out – it's basically a win-win. It's neutral to us, but with the potential to gain some synergies.
Kevin Kaczmarek - Zelman & Associates
All right. Great. Thanks a lot. That's all I had.
Operator
And the next question comes from the line of Alex Veytsman of Monness, Crespi, and Hardt (sic) [Monness, Crespi, Hardt]. Your line is open.
Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc.
Hi, guys. How are you? So, just to follow up on the originations topic. So, MBA projects a 17% decline in 2017 and that's entirely refi driven, of course. Now, is that estimate in line with your own internal company estimate? And really, how much of a revenue impact are you anticipating with the decline?
Raymond R. Quirk - Fidelity National Financial, Inc.
Well, I think MBA is projecting approximately a 45% decline on the refinances and what we're seeing – now, it's very early in the year. But as we moved out of the fourth quarter into the first quarter here, we're seeing that we're running a 60-40 mix, which is – really puts us about 10% better than what the MBA is projecting. Now again, it depends on what takes place with interest rates, but we don't really see today that the refis are going to fall off that significantly.
Anthony J. Park - Fidelity National Financial, Inc.
And it is important to note also with the – with an increase on the purchase side, and I think MBA is projecting maybe a 10% increase, and the fee per file we get from the purchase versus refinance. and sometimes it's 2 to 1, sometimes it's 3 or 4 to 1 on the purchase side. We think that those sort of offset each other and maybe even helps revenue a little bit. It's obviously hard, and these are projections and it's early in the year. But we don't expect, based on those projections, that revenue would fall off.
Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc.
Makes sense, makes sense. But assuming that there are some pressures to the top line, are you anticipating some cost saves? I mean, obviously, the margin in 4Q was excellent. So, I mean, are you anticipating some tailwinds for the bottom line as well, maybe around personnel costs during the year?
Raymond R. Quirk - Fidelity National Financial, Inc.
Yes, absolutely correct. To get prepared for the fourth quarter, we eliminated 400 positions in the company just in anticipation of the falloff in refi. So, we are very metrics driven and I think everybody has heard that before, and we'll watch the order count very closely in that falloff. And again, as Tony said, when we get more to the purchase side, which we fully expect, it's a little bit more labor intensive. So, our productivity numbers change slightly, but we will control and manage our expenses in the event that the refis do make this move.
Alexander Veytsman - Monness, Crespi, Hardt & Co., Inc.
Sounds good. Thank you, guys, and congrats on a strong quarter.
Unknown Speaker
Thanks.
Operator
And the last question here in queue comes from the line of Geoffrey Dunn of Dowling & Partners. Your line is open.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
Thanks. Good morning.
Unknown Speaker
Good morning, Geoff. How are you doing?
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
A couple of questions. First, Bill, can you update us on the cross-selling efforts for ServiceLink and how that might proceed post BKFS spin?
William Patrick Foley - Fidelity National Financial, Inc.
Yeah. So, we have actually modified our sales approach for ServiceLink and developed an independent sales organization led by a former Black Knight employee, Dan Sogorka, who's got terrific contacts with all of the major lenders and all of the midline lenders. And we're – as part of our disposition of Black Knight, we're going to be entering into a cooperation agreement and a cross-sell agreement. So that we'll continue to cross-sell products, they will continue to send opportunities to us.
And frankly, the cross-selling, we're just starting to see – make some pretty good progress with the cross-selling with this new sales organization or sales structure we put in place. So, we are anticipating positive results, aren't we, Mike? It reports up to Mike.
Michael J. Nolan - Fidelity National Financial, Inc.
Yeah. I would add to that, Geoff, that, as an example, in the fourth quarter, we added 100,000 loans into LoanCare that really came through some of the cross-sell activities we had earlier in the year. And LoanCare's portfolio has grown about 40% for the year and a lot of that is attributed to the cross-sell. So, we've had some pretty good results in that business, also in our field services, some smaller wins in title and close and valuation.
So, like Bill said, that will continue. I think it evolves a little bit as we go through the year to be more dependent upon that the leadership, as Bill said, of our new sales manager – independent sales manager. But it will continue as we go through the year and even post spin.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
Okay. And then, Tony, I know it's a few months out, but you have a maturity coming up in May. I was curious if you could talk to any initial thoughts on that, both considering the 250 div (37:33) that you could be getting soon, as well as you think ahead to the 2018 convert and what you might be able to do on that front ahead of time?
Brent Bannister Bickett - Fidelity National Financial, Inc.
Sure. This is Brent. I'll address that.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
All right.
Brent Bannister Bickett - Fidelity National Financial, Inc.
As you know, we have about $1 billion of debt at the FNF Group level, excluding Black Knight and excluding the guaranteed debt at Black Knight. That feels to us like a very comparable level of debt for us to maintain for the foreseeable future. You pointed out that, in May, one of our bond tranches come due would be our intention. We can't do anything with it today. But as it gets closer to May that we likely would look to the market and put a – and slot in a new bond tranche.
We do have an undrawn line of credit of $800 million. We would – we could use that temporarily to deal with the May maturity, if we need to. But it's our intention to keep kind of three tranches of bonds in the $300 million to $400 million range, aggregating about $1 billion for the foreseeable future.
The convert, clearly, as we effect the spinoff of Black Knight, it will be something that we're looking at because it will get a little bit more complicated for FNF, add maturity for that instrument. So, we're mindful of it and are looking at it and thinking of different things we could do.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
But I would imagine, given the focus on buyback, that that's another effectively buyback tool that you'd be trying to address ahead of maturity?
Brent Bannister Bickett - Fidelity National Financial, Inc.
That's correct, that's correct, Geoff.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
Okay.
Brent Bannister Bickett - Fidelity National Financial, Inc.
You've done a good catch there.
Geoffrey Murray Dunn - Dowling & Partners Securities LLC
Great. Thanks.
Operator
And at this point, we have no further questions in queue, and I'm happy to turn it right back to William Foley.
William Patrick Foley - Fidelity National Financial, Inc.
Thank you. This was another strong quarter and year for our title insurance business. As we enter 2017, we will continue to strive to maximize earnings from our operations and remain the most profitable title insurance company in the country. Thanks for joining us today.
Operator
And, ladies and gentlemen, that does conclude the conference for today. We do thank you very much for your participation and using our Executive Teleconference Service. You may now disconnect.
- Read more current FNF analysis and news
- View all earnings call transcripts