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Fidelity National Financial Inc (NYSE:FNF)
Q2 2020 Earnings Call
Aug 5, 2020, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, ladies and gentlemen, and welcome to the FNF 2020 Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Jamie Lillis, Investor Relations for FNF. Please go ahead, sir.

Jamie Lillis -- Investor Relations

Thank you, operator and good morning. Thank you for joining our second quarter 2020 earnings conference call. Joining me today is our CEO, Randy Quirk; President, Mike Nolan; CFO, Tony Park; and F&G's CEO, Chris Blunt.

We'll begin with a brief strategic overview from Randy. Mike will review the title business. Chris will review F&G 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.

But before we begin, I would like to remind you that this conference call may contain forward-looking statements that involve a number of risks and uncertainties, in particular the COVID-19 pandemic. There is significant uncertainty about the duration and extent of the impact of this pandemic. 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 at the time of this call. 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 are 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 3:00 PM Eastern Time today through August 12. The replay number is 844-512-2921 and the access code is 13706371.

Let me now turn the call over to our CEO, Randy.

Raymond R. Quirk -- Chief Executive Officer

Thank you, Jamie. I would like to start by thanking our employees for their hard work as they have continued to keep our operations running smoothly even as approximately 70% have continued to work remotely as a result of the COVID-19 pandemic. Our first priority remains the safety and health of our people during these challenging times. And I'm very proud of their efforts. I will let Mike go into more detail on the title business momentarily.

Touching on the highlights of our title business, in the second quarter, we generated adjusted pre-tax title earnings of $378 million compared to $363 million in the comparable year-ago quarter and an 18.4% adjusted pre-tax title margin compared with 17.7% in the second quarter of 2019. We are also pleased to announce that last week, we purchased the remaining 21% interest in ServiceLink for $90 million, which gives us full ownership in a leading provider of centralized, residential refinanced title and closing and default management services, as well as the second largest loan sub-servicer in the industry.

Turning to our acquisition of FGL Holdings. After three years as a minority holder in F&G, we closed our acquisition on June 1, 2020 in a cash and equity deal valued at approximately $2.7 billion at closing. We are excited to welcome the F&G employees and policyholders into the FNF family. F&G had strong sales for the quarter and as a result of the acquisition, F&G was recently upgraded by multiple rating agencies and achieved a major distribution milestone by successfully expanding into the financial institutions channel. We continue to expect the transaction to be more than 10% accretive on a pro forma basis to FNFs 2020 earnings per share and 20% accretive on a pro forma basis to FNFs 2021 earnings per share.

Looking forward, our commitment to creating meaningful long term value for our shareholders through our capital allocation strategy is unwavering. We announced, in late July, our quarterly cash dividend of $0.33 per share, which reflects the fourth quarter dividend increase of 6.5%. Our share buyback was previously suspended due to the F&G acquisition and the uncertain COVID-19 outlooks. We continue to watch the economy and the COVID-19 pandemic closely as we evaluate share buybacks.

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

Mike Nolan -- President

Thank you, Randy. We generated strong adjusted pre-tax title earnings of $378 million, a 4% increase over the second quarter of 2019. Our adjusted pre-tax title margin was 18.4%, a 70 basis point increase over the prior year. We had a 36% increase in direct orders closed, driven by a 158% increase in daily refinance orders closed, offset by a 24% decrease in daily purchase order closed and a 24% decrease in total commercial orders closed.

Total commercial revenue was $184 million compared with the year-ago quarter of $286 million due to the 24% decrease in closed orders and a 14% decline in total commercial fee per file. For the second quarter, total orders opened averaged 10,800 per day, with April at 9,500, May at 10,900, and June at 12,000. For July, total orders opened were over 13,200 per day as we continue to see a strong recovery in purchase activity and continued strength in the refinance market.

Daily purchase orders opened in April were down by 43% versus the prior year period, while May was down 16%, and June was down less than 1% versus the prior period. For July, daily purchase orders opened were up 10% versus the prior year.

Refinance orders opened increased by 111% on a daily basis versus the second quarter of 2019. For July, daily refinanced orders opened were up 116% versus the prior year.

Lastly, total commercial orders opened decreased by 25% over the second quarter of 2019. On a positive note, we experienced steady improvement in commercial opened orders per day during the quarter from April's low, with total commercial opened orders per day up 10% from April to May, and up 12% from May to June. For July, total commercial opened orders per day were up 16% over June, and up 10% over July of 2019.

While we are very encouraged by our second quarter volumes, it remains difficult to forecast the rise of COVID_19 cases and the resultant impact on the residential and commercial real estate markets. Fortunately, our team has significant experience operating through challenging times and through our investments in technology, we have been able to tactically keep our business operating as usual for our clients and partners, while maintaining a tight grasp on our expense structure.

To that end, we made the difficult decision to reduce staffing by approximately 3,100 employees at the end of the first quarter in the early part of April. We continue to monitor the market and have since added approximately 1,100 employees in June and July, as order volumes increased. We will continue to aggressively manage our expenses through the second half of 2020, given the uncertain market backdrop and we will remain focused on order volumes, looking forward, as we maintain our culture of expense discipline.

Let me now turn the call over to Chris Blunt to review F&G's second quarter highlights.

Chris Blunt -- President and Chief Executive Officer, F&G

Great. Thanks, Mike. F&G had a record level of Fixed Indexed Annuity sales of $866 million in the second quarter in a period when industry annuity sales declined materially, and several of our direct competitors chose to reduce volume. Our solid capital position and investment management capabilities through our partnership with Blackstone allowed us to outpace industry sales trends and continue to take market share, while maintaining our pricing discipline. We successfully expanded into the financial institutions channel in late June by partnering with one of the largest independent broker-dealers in the country. We are off to a strong start and are excited about the prospects for this new channel.

For the quarter, total product net investment spread was 350 basis points, up 124 basis points over the prior year. And net investment spread for Fixed Indexed Annuities or FIA was up 347 basis points, up 63 basis points over the prior year. Each was boosted by merger impacts on adjusted investment yield. The adjusted investment yield of 5.42% reflects merger and purchase accounting effects, primarily from changes to Average Assets Under Management or AAUM. Adjusted yield, excluding these effects was 4.55%, roughly in line with F&G's full year 2019 historical yield of approximately 4.50%. AAUM was reduced by $2.3 billion for discontinued operations and the recognition of a $500 million unrealized loss on the investment portfolio that was mark-to-market at the time of the merger. As of June 30, the portfolio was in a net unrealized gain position of $600 million.

Finally, as it relates to capital, F&G finished the second quarter with an estimated Risk-Based Capital or RBC ratio of about 400% for our primary operating subsidiary, compared to 425% at the end of the first quarter of 2020. The RBC decline in the current quarter reflects a planned return of capital to the holding company for normal course liquidity needs, as well as investment-related mark-to-market and credit drift.

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

Anthony J. Park -- Chief Financial Officer

Thank you, Chris. We generated $2.4 billion in total revenue in the second quarter with the title segment producing $2.2 billion, F&G producing $124 million, and the corporate segment generating $72 million. Second quarter net earnings were $309 million, which include net realized gains of $162 million versus net realized gains of $41 million in the second quarter of 2019, primarily due to mark-to-market accounting treatment of equity and preferred stock securities, whether those securities were disposed of in the quarter or continued to be held in our investment portfolio. Excluding net realized gains, our total revenue was $2.3 billion as compared with $2.1 billion in the second quarter of 2019.

Adjusted net earnings from continuing operations were $305 million or $1.09 per diluted share. The title segment contributed $276 million, F&G contributed $37 million and the corporate and other segment had an adjusted net loss of $8 million. Excluding net realized gains of $169 million, our title segment generated $2.1 billion in total revenue for the second quarter, a slight increase from the second quarter of 2019.

Direct premiums decreased by 8% versus the second quarter of 2019. Agency revenue grew by 4% and escrow title related and other fees increased by 7% versus the prior year. Personnel costs decreased by 4% and other operating expenses were relatively flat. All in, the title business generated an 18.4% adjusted pre-tax title margin, a 70 basis point increase versus a very strong second quarter of 2019.

Interest income in the title and corporate segments of $41 million declined $18 million as compared with the prior year quarter due to the reduction of short-term interest rates and the use of cash to fund the F&G acquisition. In late April, we signed a credit agreement for a $1 billion, 364-day delayed-draw term loan. This term loan allowed us to secure financing to close the acquisition of F&G in a challenging capital markets environment brought on by COVID-19.

In June, when the capital markets improved, we closed on an issuance of $650 million of 3.4% senior notes due June 15, 2030. The net proceeds of the issuance of the notes have been used to repay approximately $640 million of principal amount borrowed under the term loan credit agreement.

Total FNF debt outstanding was $2.4 billion on June 30 for a debt-to-capital ratio of 27%. Our title claims paid of $51 million were $10 million lower than our provision of $61 million for the second quarter. Carried title reserve for claim losses is currently $52 million or 3.5% above the actuary central estimate. We continue to provide for title claims at 4.5% of total title premiums.

Finally, our title investment portfolio totaled $4.4 billion at June 30. Included in the $4.4 billion are fixed maturity and preferred securities of $2.4 billion with an average duration of 3.5 years and an average rating of A2, equity securities of $700 million, short-term and other investments of $300 million, and cash of $1 billion. We ended the quarter with over $500 million in cash and short-term liquid investments at the holding company level.

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

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question today is from Mark DeVries of Barclays. Please proceed with your question.

Mark DeVries -- Barclays Capital, Inc -- Analyst

Yeah. Thank you. Mike, could you repeat what the commercial trends were year-over-year in July? And also just talk about what you're seeing in terms of closing rate on opened orders in commercial and the mix, whether it's kind of local or national and larger transactions versus smaller.

Mike Nolan -- President

Yeah, sure, Mark. Great question. So the July number was 10% up over July of 2019, and also in the opening remarks, just really referenced the sequential improvement that we've seen off of April lows with July being up 16% from June, and really just that sequential growth has gotten better, May over April, June over May, July over June. In terms of the mix, kind of when it fell, when we talked about this before, the fall off was stronger when national fell than local, but less. And then as the sequential improvement was coming back in May and June, it was kind of stronger in local and a little bit less in national.

But that really turned around in July and one of the most encouraging things I think that we can report is the July opens were up 27% on the national side over June and local was up 11%. So we just saw really big comeback, if you will, in our national opens in July. And for both national orders and our overall orders in July, we're now back to pre-pandemic levels and that's very positive, because remember that pre-pandemic levels were really record levels in this now, six year of enhanced commercial performance.

You also asked about mix. The other thing we've seen -- when the the pandemic hit, we saw a pretty big shift on the open side from resales at about 68%, 69% of the opens falling down to about 59%. And as we've gotten into June and July, it's really reverted back to where we were. We're opening 67%, 68% on the resale side versus refi.

Mark DeVries -- Barclays Capital, Inc -- Analyst

Okay. That's really helpful. And then the second question, I think you guys indicated you still expect 10% accretion from F&G in 2020 and 20% in 2021. Maybe Tony, could you give us a little more context around that, though, in light of probably the stronger outlook for FNF than you had when you first provided that maybe improving outlook at F&G and also just the financing of that term loan at a lower cost that I think you initially assumed?

Anthony J. Park -- Chief Financial Officer

Yeah. Thanks, Mark. Yeah, the numbers still hold. I think the 10% probably got -- probably went from somewhere in the teens and dropping a little bit because of FNFs performance, as you mentioned. It's just been much stronger than we -- than maybe we thought 90 days -- certainly than we saw 90 days ago. And looking out for the balance of the year with strength in all markets, we feel very good about FNFs performance. And so obviously that's a good thing, but it puts a little pressure on the accretion number for 2020. Having said that, I still feel good about the 10% accretion. As you know, F&G's results are very consistent and continue to be so and we expect that through the balance of the year. In terms of financing, 3.4% 10-year bond, we were very pleased to be able to secure that and that is a little lower than the 4% we had anticipated when we did the calculations back in February.

In terms of the outlook for 2021, obviously, we don't have a crystal ball, but just assuming that FNF outperforms in 2020 and comes back down a little bit in 2021, I don't think anyone would be too surprised by that, I would anticipate the 20% target for accretion in 2021 to be higher. I would -- I could see that definitely drifting up into the mid-20s or beyond, assuming consistent performance at F&G with growth in their asset balance and maybe FNF coming off a little bit.

Mark DeVries -- Barclays Capital, Inc -- Analyst

Great, that's very helpful. Thank you.

Operator

The next question comes from Jack Micenko of SIG. Please proceed with your question.

Jack Micenko -- Susquehanna International Group -- Analyst

Hi, thanks for taking the questions. I guess, to start off, the FNF business is having a monster year, commercial seems to be coming back, it sounds like F&G is outperforming a bit. I guess, in that context, what's going to get you guys more constructive on share repurchase going forward? What are you looking for to sort of change your mind and get back into the share repurchase side of things?

Anthony J. Park -- Chief Financial Officer

Yeah, Jack, this is Tony. Maybe I'll jump on that. I don't know that we need our minds changed about share repurchase. I think we're -- we do feel like we're undervalued at the current levels. But we also are a bit capital constrained. I mean, if you look at the parent company cash levels, and I'll update you through where we are today versus quarter end, we started the quarter with $1.1 billion [Phonetic] -- started Q2 with a $1.1 billion in cash and we upstreamed about $300 million from our subsidiaries. We spent about a $100 million in our common dividend. These were all fully expected. We borrowed a net $1 billion, fully expected, and we funded the FG acquisition of $1.8 billion and change in cash. So we ended the quarter about $500 million.

But we do have other uses of cash and we mentioned in the call a few moments ago, we bought the 21% minority interest in ServiceLink for $90 million. We're very pleased with that -- with a willing buyer, willing transaction there. We've always felt like that belonged in our portfolio at 100%, but didn't have a deal and then we were able to close on a deal just last week. So we spent close to $100 million on that transaction. We also have a dissenting shareholder, very large one out there, that we haven't paid yet. And our expectation is, assuming we pay them what everyone else got, we owe them roughly $100 million in cash and 1 million shares of stock. But that's all been accounted for, except for the cash piece. We, obviously, haven't paid that. So that's the $100 million that we have to set aside, so call that a couple of hundred million dollars spoken for, of the $500 million we have at the holding company at quarter end.

And then we have $360 million in debt outstanding. We left some of that pre-payable because we really like to whittle that debt down. We didn't want to keep a $1 billion of long term debt. That's why we floated the $650 million bond. And so we have, like I said, $360 million of pre-payable debt and we really like to whittle away at that over the course of the year or through next April, when that one-year term loan expires. So those are some of the needs, if you will, that we have on the cash front, as well as buybacks, and it's going to depend on cash flow generation, as we make our way through the second half of the year. I think it'll be very strong and I think we'll probably have an opportunity to get back into the market and buy back shares and I think we'd like to do that, but those are -- hopefully that helps with understanding, kind of, the cash needs we have.

Jack Micenko -- Susquehanna International Group -- Analyst

No, yeah, that was helpful on the sources and uses. I guess, one for Chris. You did a 13% trailing FIA growth number year-to-year, but you're up 4% Q-to-Q and I think you spoke about some share take. So I'm wondering if you could talk about the trajectory for growth in -- particularly in light of this new -- and you talked about a pre-deal through the marketing of the deal and everything else with the -- this broker-dealer relationships coming on board. In that context of a 13%, trailing 16% growth rate annualized, how do we size that opportunity with the recent agreement that you just signed last month or I guess in June now?

Chris Blunt -- President and Chief Executive Officer, F&G

Yeah. Great question. So I would say, first to explain the 13%, because market again was down dramatically, we did have a couple of our most immediate competitors really cut back pretty dramatically or pulled back, I should say. So we were the immediate beneficiary of that. We also had really, really strong outperformance heading into the COVID environment. So sales have slowed, but they've slowed to kind of paces that we saw in 2019. So, not nearly as dramatically as we thought they might. So I think I had signaled on the last call that we are probably going to come in against our total sales number of probably flat to maybe down 8% or so. I think things are more optimistic right now. So I would say we're probably coming in to the higher end of that -- our range of outcome.

We're off to a great start in the broker-dealer sales. I think we always knew we could compete but it's nice to see it happen. So I would say that has well exceeded our expectations as to how quickly we've been able to get business through the door. So I would say, at this point, probably a little more upside to the sales outlook for the year.

And then to the, over time, how do you scale it? Probably the quick way of thinking about it is we have been doing $4 billion of sales, playing in probably 40% of the total market and we just opened up the other 60%.

Jack Micenko -- Susquehanna International Group -- Analyst

Okay and then just as a sort of follow-on, that last point, is there seasonality -- is there meaningful seasonality in the business around the sales cycle or is it just market volatility higher or lower that then drives a quarter versus quarter performance in growth?

Chris Blunt -- President and Chief Executive Officer, F&G

Yeah, there's a little bit of seasonality, but not -- nothing material. Like, you sometimes see a little slowdown in July and August as clients are on vacation and advisors might be taking some time off, but barring that, no, we don't feel a lot of the variability there.

Jack Micenko -- Susquehanna International Group -- Analyst

Okay, thanks. Thanks for taking the questions, guys.

Operator

The next question comes from Bose George of KBW. Please proceed with your question.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Hey, guys, good afternoon. First, just wanted to ask about the margin outlook for the third quarter. But it looks like purchase is stronger, commercial is stronger and then refi is at least as strong. So given what you guys did north of 18% [Phonetic], should the margin in the third quarter -- could it be just as good or potentially even better? Just any color there would be great.

Mike Nolan -- President

Yeah, Bose, it's Mike. I mean, I think you're right, given when you look at the puts and takes, we should have pretty consistent refinance closings in the third quarter compared to the second. Resale closing should be better, and commercial may be moderately better in terms of revenues. So those were all the pluses. We will have additional personnel expense but putting it all together, we would expect a very, very strong margin, kind of, on par or maybe the opportunity to be plus to the second quarter.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Okay, great, thanks. And then, actually, just can you remind us what the margin is that ServiceLink in the centralized refi side?

Mike Nolan -- President

Yeah. We ran for the second quarter right around 36%, which is just a tremendous margin in a refinance business, really higher than our commercial margins and I think it's just probably below that year-to-date, maybe 35%.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Okay, thanks. And then just a quick one on FG. I don't want to be simplistic about it, but just the operating income that was generated in this one month, is that a good run rate and you're sort of prospectively leaving aside growth, anything else on credit, but as all things equal, is that kind of a good run rate?

Anthony J. Park -- Chief Financial Officer

Bose, this is Tony. I'll touch on that and Chris you're certainly welcome to join in. But I do want to caution people a little bit. We're looking at one month and it happens to be a month that ends a quarter, so you get a little bit stronger preferred dividends in the third month of every quarter. And I also want to back you down from the $37 million of adjusted after-tax earnings for $8 million of notable items that I think we've called out. And there is a supplement available -- a very extensive supplement available that you guys can see, kind of, how this looks. But the $8 million, I think that's a spill [Phonetic] mortality and bond prepay. So those are always backed out of what we would call core earnings. So that gets you to $29 million and you may be tempted to multiply that by 3 to get to $87 million and that's probably a little high too, as I mentioned with the preferred dividends.

I think maybe a better way to look at it is, I think three or four quarters in a row, F&G has had about $65 million in core after-tax earnings on a quarterly basis. If you add back $8 million of preferred dividends that they've been paying, that no longer apply since we retired that, that gets you to $73 million. And then, roughly, call it, $10 million of net positive purchase accounting activity. So you basically have purchase accounting bond accretion. We mentioned a $0.5 billion unrealized loss at closing, that's going to accrete over the life of that portfolio into earnings and that's going to be offset by amortization of VOBA, Value Of Business Acquired, as well as income taxes. And so, let's call it a net $10 million there gets you to roughly 80, 80, low-80s, probably a better run rate on a quarterly basis going forward. Hopefully that helps.

Bose George -- Keefe, Bruyette & Woods -- Analyst

Yeah, that's great, very helpful. Thanks very much.

Operator

[Operator Instructions] The next question comes from John Campbell of Stephens. Please proceed with your question.

John Campbell -- Stephens, Inc. -- Analyst

Hey guys, good morning and congrats on a great quarter.

Raymond R. Quirk -- Chief Executive Officer

Thanks, John.

John Campbell -- Stephens, Inc. -- Analyst

Tony, back to the F&G, that was really good rundown you just provided as far as kind of run rate income coming out of F&G. But I don't know if you want to get into the details, but as you think about next year, you've been talking about percent kind of growth out of accretion, is there a way to just simplify that or provide a dollar amount? Because it just seems like, obviously a lot of that percent is going to depend or a lot of the accretion potentially is going to depend on what you're forecasting for 2021 for the core.

Anthony J. Park -- Chief Financial Officer

Chris, I may let you talk about what typically the portfolio would grow from one year to the next. Maybe you can help me out with that one.

Chris Blunt -- President and Chief Executive Officer, F&G

Yeah, I think for us, what we've typically seen is like net asset growth in the 6%, 7% per year range and then spreads fairly consistent. We're usually able to outperform our pricing targets a bit on our spread assumptions. So we've had pretty consistent double-digit earnings growth rate. In terms of growth and accretion or how that translates into dollar-based accretion, I'd have to leave that to Tony.

John Campbell -- Stephens, Inc. -- Analyst

Okay. We can follow back up offline. But just one other question, just a little bit out of left field for you guys, but any sense for the index inclusion that you're closing on F&G? I think you guys at one point were S&P 500. Is there a potential to get back -- add it back to that?

Anthony J. Park -- Chief Financial Officer

Yeah, I think, I mean, it's one of those things where you don't know until you know and then it happens on a Tuesday or something like that. Certainly, we're --we've seen a write-up that shows that we're very close, if not at the top of the list, for the S&P 500. And I think it just -- when you are acquisitive like we are, they probably like to wait until things settle down a little bit, but given where we are now and going forward, I could definitely see them taking a strong look. Obviously, I think somebody needs to depart before they can replace. And so some of it could depend on that, but I definitely think we're on the shortlist.

John Campbell -- Stephens, Inc. -- Analyst

Okay. If I can squeeze in one more here actually, on ServiceLink, nice job picking up the rest of the interest there. Could you guys maybe run us back through, just at a high level, the ServiceLink capabilities around default and foreclosure, kind of what that revenue looks like today? It seems like with the moratorium and forbearance, like, some of that's probably being pulled. I think we've seen that on the Black Knight side, but just curious what you guys are seeing today and kind of how that revenue might trend kind of getting out of forbearance and foreclosure.

Mike Nolan -- President

Yeah, maybe I'll start. It's Mike, John. And then, Tony can weigh in. I don't have the dollar numbers right in front of me, but with the forbearance -- with the -- actually the foreclosure moratorium, it certainly impacted a couple of our businesses, including our auction business and our pre-foreclosure title business. But we have other default businesses that are still running strong and we're by far the leader in default title services. So as those moratoriums get lifted eventually, we should see improvement in those business lines. But Tony, I don't have the revenue numbers right in front of me. I don't know if you do.

Anthony J. Park -- Chief Financial Officer

I don't. My recollection is that, I mean, we're pretty much in trough default markets currently just because of the strength in the economy and obviously the forbearances. So the number that we have now, it might be a $150 million in revenue -- $150 million annualized revenue or something along those lines.

Mike Nolan -- President

Tony, let me jump in, because I actually just found it and you're kind of right on the number. Through June, our default revenue was $87 million. So annualized it's what Tony just said and last year, at this point, we were at a $104 million.

John Campbell -- Stephens, Inc. -- Analyst

Okay. Any sense on the margin? I mean, obviously, it's not going to be as high as centralized refi, but it seems to be pretty accretive to title. Is that right?

Mike Nolan -- President

Yeah, it's different by business. But overall, we have about five or six different default businesses that we lump together. Margins are running about 14% this year on the $87 million. Last year, at this time, we were at 18% on the $104 million.

John Campbell -- Stephens, Inc. -- Analyst

Very good. Thank you, guys.

Operator

There are no additional questions at this time. I would like to turn the call back to Mr. Quirk for closing comments.

Raymond R. Quirk -- Chief Executive Officer

While the quarter was off to a challenging start, we are very pleased with our second quarter results and the execution of our teams. Due to the ongoing pandemic, which has impacted us all, we will continue to diligently watch our expense structure as we manage through the second half of the year. We remain optimistic on the recovery of the housing market, as well as F&G's ratings upgrades, which will allow them to further penetrate the bank and broker channels. This is a significant opportunity, which greatly expands their total addressable market. Additionally, we are confident in the capital and liquidity position of F&G, who remains well positioned to execute on its growth strategy. We look forward to updating you on the third quarter call and hope everyone is able to stay healthy and safe.

Operator

[Operator Closing Remarks]

Duration: 39 minutes

Call participants:

Jamie Lillis -- Investor Relations

Raymond R. Quirk -- Chief Executive Officer

Mike Nolan -- President

Chris Blunt -- President and Chief Executive Officer, F&G

Anthony J. Park -- Chief Financial Officer

Mark DeVries -- Barclays Capital, Inc -- Analyst

Jack Micenko -- Susquehanna International Group -- Analyst

Bose George -- Keefe, Bruyette & Woods -- Analyst

John Campbell -- Stephens, Inc. -- Analyst

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