FIDELITY NATIONAL FINANCIAL, INC. – 10-Q – Management's Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Quarterly Report on Form 10-Q that are not
purely historical are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, including statements regarding our
expectations, hopes, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. It is important to note that our actual results
could vary materially from those forward-looking statements contained herein due
to many factors, including, but not limited to: the potential impact of the
consummation of the proposed F&G spin-off transaction on relationships,
including employees, suppliers, customers and competitors; our ability to
successfully realize the anticipated benefits of the proposed spin-off
transaction; the ability to satisfy any necessary conditions (including any
applicable regulatory approvals) to consummate the spin-off transaction within
the estimated timeframe or at all; changes in general economic, business and
political conditions, including changes in the financial markets; weakness or
adverse changes in the level of real estate activity, which may be caused by,
among other things, high or increasing interest rates, a limited supply of
mortgage funding, or a weak U.S. economy; our potential inability to find
suitable acquisition candidates, acquisitions in lines of business that will not
necessarily be limited to our traditional areas of focus, or difficulties in
consummating and integrating acquisitions; our dependence on distributions from
our title insurance underwriters as our main source of cash flow; significant
competition that our operating subsidiaries face; compliance with extensive
government regulation of our operating subsidiaries; and other risks detailed in
the "Statement Regarding Forward-Looking Information," "Risk Factors" and other
sections of our Annual Report on Form 10-K (our "Annual Report") for the year
ended December 31, 2021 and other filings with the SEC.

The following discussion should be read in conjunction with our Annual Report.

Overview

For a description of our business, including descriptions of segments and recent
business developments, see the discussion in Note A Basis of Financial
Statements in the accompanying unaudited Condensed Consolidated Financial
Statements included in Item 1 of Part I of this Report, which is incorporated by
reference into this Part I, Item 2.

Business Trends and Conditions

Title

Our Title segment revenue is closely related to the level of real estate
activity that includes sales, mortgage financing and mortgage refinancing.
Declines in the level of real estate activity or the average price of real
estate sales will adversely affect our title insurance revenues.

We have found that residential real estate activity is generally dependent on
the following factors:

•mortgage interest rates;
•mortgage funding supply;
•housing inventory and home prices;
•supply and demand for commercial real estate; and
•the strength of the United States economy, including employment levels.

The most recent forecast of the Mortgage Bankers Association ("MBA"), as of
October 23, 2022, estimates (actual for fiscal year 2021) the size of the U.S.
residential mortgage originations market as shown in the following table for
2021 - 2024 in its "Mortgage Finance Forecast" (in trillions):
                                                                2024       

2023 2022 2021

        Purchase transactions                                  $ 1.7      $ 

1.5 $ 1.6 $ 1.9

        Refinance transactions                                 $ 0.6      $ 

0.5 $ 0.7 $ 2.5

        Total U.S. mortgage originations forecast              $ 2.3      $ 

2.0 $ 2.3 $ 4.4

As of October 23, 2022, the MBA expects residential purchase transactions to
decrease in 2022 and 2023 before increasing in 2024. Additionally, the MBA
expects residential refinance transactions and overall mortgage originations to
decrease in 2022 and 2023 before increasing in 2024.

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The Federal Reserve raised the benchmark interest rate from near zero as of
March 2022 to a range between 3% and 3.25% as of September 2022, moving most
recently in 75 basis point increments in an effort to combat inflation. Average
interest rates for a 30-year fixed rate mortgage increased to 5.6% and 4.8% for
the three and nine months ended September 30, 2022, respectively, as compared to
2.9% and 2.9% for the corresponding periods of 2021. On November 3, 2022, the
Federal Reserve raised the benchmark interest rate by an additional 75 basis
points.

A shortage in the supply of homes for sale, increasing home prices, rising
mortgage interest rates, inflation and disrupted labor markets created some
volatility in the residential real estate market in 2021, which has continued
into 2022. Additionally, geopolitical uncertainties associated with the war in
Ukraine have created additional volatility in the global economy in 2022.
Existing-home sales decreased 24% in September 2022 as compared to the
corresponding period in 2021 while median existing-home sales prices rose to
$384,800 in September 2022, an 8% increase over the corresponding period in
2021.

Other economic indicators used to measure the health of the U.S. economy,
including the unemployment rate, have remained strong. The unemployment rate was
3.5% in September 2022, which equals the record low set in February 2020, as
compared to 4.7% in September 2021.

Because commercial real estate transactions tend to be generally driven by
supply and demand for commercial space and occupancy rates in a particular area
rather than by interest rate fluctuations, we believe that our commercial real
estate title insurance business is less dependent on the industry cycles
discussed above than our residential real estate title business. Commercial real
estate transaction volume is also often linked to the availability of financing.
Factors including U.S. tax reform and a shift in U.S. monetary policy have had,
or are expected to have, varying effects on availability of financing in the
U.S. Lower corporate and individual tax rates and corporate tax-deductibility of
capital expenditures have provided increased capacity and incentive for
investments in commercial real estate. In 2021 and the first nine months of
2022, we experienced strong demand in commercial real estate markets and,
therefore, experienced relatively high volumes and fee-per-file in our
commercial business when compared to historical results.

We continually monitor mortgage origination trends and believe that, based on
our ability to produce industry leading operating margins through all economic
cycles, we are well positioned to adjust our operations for adverse changes in
real estate activity and to take advantage of increased volume when demand
increases.

Seasonality. Historically, real estate transactions have produced seasonal
revenue fluctuations in the real estate industry. The first calendar quarter is
typically the weakest quarter in terms of revenue due to the generally low
volume of home sales during January and February. The second and third calendar
quarters are typically the strongest quarters in terms of revenue, primarily due
to a higher volume of residential transactions in the spring and summer months.
The fourth quarter is typically strong due to the desire of commercial entities
to complete transactions by year-end. We have noted short-term fluctuations
through recent years in resale and refinance transactions as a result of changes
in interest rates. Due to COVID-19 and the Federal Reserve's actions in 2020 in
response to the pandemic, seasonality deviated from historical patterns in 2021.
In 2022, the rapid rise in mortgage rates and resulting decline in housing
affordability are adding pressure to the normal second half seasonal decline in
purchase transactions.

F&G

The following factors represent some of the key trends and uncertainties that
have influenced the development of our F&G segment and its historical financial
performance, and we believe these key trends and uncertainties will continue to
influence the business and financial performance of our F&G segment in the
future.

COVID-19 Pandemic

While still evolving, the COVID-19 pandemic has caused significant economic and
financial turmoil in the U.S. and around the world. At this time, it is still
not possible to estimate the longer term-effects the COVID-19 pandemic could
have on our F&G segment or our consolidated financial statements. Increased
economic uncertainty and increased unemployment that could potentially result
from the spread of COVID-19 and its variants may result in F&G policyholders
seeking sources of liquidity and withdrawing at rates greater than was
previously expected. Additionally, adverse events or conditions resulting from
COVID-19 could also have a negative effect on its sales of new policies and
could result in more volatility from the impact of mortality experience. As of
September 30, 2022, F&G has not seen a sustained elevated level of adverse
policyholder experience from the impact of COVID-19 on the overall business. The
full extent to which the COVID-19

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pandemic impacts our F&G segment's financial condition, results of operations,
liquidity or prospects will depend on future developments, which cannot be
predicted at this time.

Market Conditions

Market volatility has affected, and may continue to affect, our business and
financial performance in varying ways. Volatility can pressure sales and reduce
demand as consumers hesitate to make financial decisions. To enhance the
attractiveness and profitability of our products and services, we continually
monitor the behavior of our customers, as evidenced by annuitization rates and
lapse rates, which vary in response to changes in market conditions. See Item 1A
of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021
for further discussion of risk factors that could affect market conditions.

Interest Rate Environment

Some of our F&G products include guaranteed minimum crediting rates, most
notably our fixed rate annuities. As of September 30, 2022, our reserves, net of
reinsurance, and average crediting rate on our fixed rate annuities were $6.0
billion and 3%, respectively. We are required to pay the guaranteed minimum
crediting rates even if earnings on our investment portfolio decline, which
would negatively impact earnings. In addition, we expect more policyholders to
hold policies with comparatively high guaranteed rates for a longer period in a
low interest rate environment. Conversely, a rise in average yield on our
investment portfolio would increase earnings if the average interest rate we pay
on our products does not rise correspondingly. Similarly, we expect that
policyholders would be less likely to hold policies with existing guarantees as
interest rates rise and the relative value of other new business offerings are
increased, which would negatively impact our earnings and cash flows.

See Item 7A of Part II of our Annual Report on Form 10-K for the year ended
December 31, 2021 for a more detailed discussion of interest rate risk.

Aging of the U.S. Population

We believe that the aging of the U.S. population will increase the demand for
our FIA and IUL products. As the "baby boomer" generation prepares for
retirement, we believe that demand for retirement savings, growth, and income
products will grow. Over 10,000 people will turn 65 each day in the United
States over the next 15 years, and according to the U.S. Census Bureau, the
proportion of the U.S. population over the age of 65 is expected to grow from
17% in 2021 to 21% in 2035. The impact of this growth may be offset to some
extent by asset outflows as an increasing percentage of the population begins
withdrawing assets to convert their savings into income.

Industry Factors and Trends Affecting Our Results of Operations

We operate in the sector of the insurance industry that focuses on the needs of
middle-income Americans. The underserved middle-income market represents a major
growth opportunity for us. As a tool for addressing the unmet need for
retirement planning, we believe that many middle-income Americans have grown to
appreciate the financial certainty that we believe annuities such as our FIA
products afford. Accordingly, the FIA market grew from nearly $12 billion of
sales in 2002 to $66 billion of sales in 2021. Additionally, this market demand
has positively impacted the IUL market as it has expanded from $100 million of
annual premiums in 2002 to $2 billion of annual premiums in 2021.

See Item 7 of Part II of our Annual Report on Form 10-K for the year ended
December 31, 2021 for a more detailed discussion of industry factors and trends
affecting our Results of Operations.

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