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Fidelity National Financial, Inc. Reports Third Quarter 2007 EPS of $0.03; Results Include an $81.5 Million Charge to Strengthen Reserve for Claim Losses; Third Quarter 2007 EPS of $0.28 Before Charge
JACKSONVILLE, Fla., Oct. 24 /PRNewswire-FirstCall/ -- Fidelity National Financial, Inc. (NYSE: FNF) , a leading provider of title insurance, specialty insurance and claims management services, today reported operating results for the three-month and nine-month periods ended September 30, 2007.
Three Months Three Months Pro Forma Three
Ended Ended Months Ended
September 30, September 30, September 30,
2007 2006** 2006***
Total revenue $1.36 billion $2.63 billion $1.62 billion
Pre-tax margin 0.2%* 11.2% 10.9%
Net earnings $6.5 million* $127.6 million $114.1 million
Net earnings per $0.03* $0.73 $0.51
diluted share
Cash flow from $74.8 million $265.7 million N/A
operations
*These reported results include the impact of an $81.5 million charge to strengthen the reserve for claim losses. ** The three-month and nine-month periods ended September 30, 2006, include the results of Fidelity National Information Services, Inc. ("FIS"), which was a majority-owned subsidiary of FNF during those periods in 2006. *** A complete pro forma summary of earnings excluding FIS and the minority interest expense related to Fidelity National Title Group, Inc. ("FNT") for the three-month and nine month periods ended September 30, 2006, is included later in this press release.
Three Months
Ended
September 30, 2007
Net earnings $6.5 million
After-tax impact from charge to strengthen
loss reserves $55.5 million
Net earnings, excluding the charge to strengthen
loss reserves $62.0 million
Net earnings per diluted share, excluding the charge
to strengthen loss reserves $0.28
Nine Months Nine Months Pro Forma Nine
Ended Ended Months Ended
September 30, September 30, September 30,
2007 2006** 2006***
Total revenue $4.23 billion $7.63 billion $4.79 billion
Pre-tax margin 6.0%* 10.6% 11.0%
Net earnings $174.7 million* $366.6 million $338.0 million
Net earnings per
diluted share $0.79* $2.11 $1.52
Cash flow from
operations $304.5 million $598.5 million N/A
The following are summary financial and operational results for the current operating segments of FNF for the three-month and nine-month periods ended September 30, 2007, and 2006:
Fidelity National Title Group ("FNT")
Three Months Three Months
Ended Ended
September 30, 2007 September 30, 2006
Total revenue $1.23 billion $1.51 billion
Pre-tax earnings $5.9 million* $170.5 million
Pre-tax margin 0.5%* 11.3 %
Pre-tax earnings before
reserve charge $87.4 million N/A
Pre-tax margin before 7.1% N/A
reserve charge
*These reported results include the impact of an $81.5 million charge to strengthen the reserve for claim losses.
Nine Months Nine Months
Ended Ended
September 30, 2007 September 30, 2006
Total revenue $3.84 billion $4.46 billion
Pre-tax earnings $251.8 million* $494.5 million
Pre-tax margin 6.6%* 11.1%
Pre-tax earnings before
reserve charge $333.3 million N/A
Pre-tax margin before
reserve charge 8.7% N/A
Direct Direct
Orders Orders
Month Opened Closed Closing %
July 2007 189,200 123,800 65%
August 2007 186,100 120,700 65%
September 2007 148,000 94,600 64%
Third Quarter 2007 523,300 339,100 65%
Direct Direct
Orders Orders
Month Opened Closed Closing %
July 2006 208,000 142,400 69%
August 2006 242,800 158,700 65%
September 2006 212,700 139,100 65%
Third Quarter 2006 663,500 440,200 66%
Open Closed Commercial
Commercial Commercial Revenue Commercial
Orders Orders (In thousands) Fee Per File
3rd Quarter 2007 13,700 8,200 $80,500 $9,800
3rd Quarter 2006 11,900 7,700 $66,300 $8,600
- The preceding table only includes commercial activity from FNF's commercial offices in the national commercial division and does not attempt to capture commercial activity in our local offices.
Specialty Insurance
Three Months Three Months
Ended Ended
September 30, 2007 September 30, 2006
Total revenue $107.0 million $103.6 million
Pre-tax earnings $10.3 million $19.1 million
Pre-tax margin 9.6% 18.4%
Nine Months Nine Months
Ended Ended
September 30, 2007 September 30, 2006
Total revenue $309.8 million $315.5 million
Pre-tax earnings $49.6 million $67.0 million
Pre-tax margin 16.0% 21.2%
"This quarter presented challenging operating environments for several of our businesses," said Chairman of the Board William P. Foley, II. "Obviously, the mortgage and real estate markets have impacted volumes in our title insurance business and we have responded with significant staffing reductions, eliminating more than 1,700 positions, or 14% of our field staff, during the third quarter. While personnel costs in the title business have been reduced by more than $36 million versus the prior year quarter, many of those positions were eliminated very late in the third quarter, so we won't see the full impact of those additional cost savings until the fourth quarter and into 2008. We also found it necessary to bolster our reserve for claim losses, as the higher claims activity the entire title industry has experienced continued in the third quarter. Our specialty insurance segment also had some operating challenges during the quarter. The personal lines business suffered through higher losses in the third quarter due to increased fire losses in California, particularly in July and August, while the home warranty business suffered from the significant slowdown in the real estate markets, particularly in the west. In summary, the third quarter was a difficult period as several of our companies, particularly the title business, faced tough market conditions. Despite the very difficult environment, our title business was able to generate a 7.1% pre-tax margin before the reserve charge. We manage all of our businesses with a goal to maximize profitability for our shareholders in all environments and will continue to do so in the fourth quarter and into 2008." Fidelity National Financial, Inc. (NYSE: FNF) , is a leading provider of title insurance, specialty insurance and claims management services. FNF is one of the nation's largest title insurance companies through its title insurance underwriters - Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title - that issue approximately 28 percent of all title insurance policies in the United States. FNF also provides flood insurance, personal lines insurance and home warranty insurance through its specialty insurance business. FNF also is a leading provider of outsourced claims management services to large corporate and public sector entities through its minority-owned subsidiary, Sedgwick CMS. More information about FNF can be found at www.fnf.com. This press release contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, 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 economic performance 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: changes in general economic, business and political conditions, including changes in the financial markets; 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 integrating acquisitions; our dependence on operating subsidiaries as a 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 the Company's Form 10-K and other filings with the Securities and Exchange Commission.
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY OF EARNINGS
(In thousands, except per share amounts and order information)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
(Unaudited) (Unaudited)
Direct title premiums $391,065 $485,043 $1,258,166 $1,479,415
Agency title premiums 537,598 701,533 1,677,606 1,998,117
Total title premiums 928,663 1,186,576 2,935,772 3,477,532
Escrow and other
title-related fees 262,222 267,744 790,336 808,468
Total title
and escrow 1,190,885 1,454,320 3,726,108 4,286,000
Transaction processing
services -- 1,013,372 -- 2,832,638
Specialty insurance 102,844 99,619 297,573 304,070
Interest and investment
income 50,470 54,744 145,634 154,259
Realized gains and
losses 2,168 (1,810) 12,449 15,745
Other 17,802 14,577 46,144 41,378
Total revenue 1,364,169 2,634,822 4,227,908 7,634,090
Personnel costs 427,683 863,163 1,315,695 2,632,935
Other operating
expenses 283,928 610,732 814,590 1,706,137
Agent commissions 415,307 538,700 1,298,340 1,537,489
Depreciation and
amortization 32,348 142,170 92,894 404,770
Claim loss expense 189,426 118,643 413,495 357,210
Interest expense 12,782 65,931 37,194 183,536
Total expenses 1,361,474 2,339,339 3,972,208 6,822,077
Earnings before
income taxes 2,695 295,483 255,700 812,013
Income tax expense (4,075) 109,920 81,441 302,069
Minority interest 298 57,992 (447) 143,381
Net earnings $6,472 $127,571 $174,706 $366,563
Net earnings per
share - basic $0.03 $0.74 $0.80 $2.11
Net earnings per
share - diluted $0.03 $0.73 $0.79 $2.11
Weighted average
shares - basic 216,325 173,475 218,860 173,475
Weighted average
shares - diluted 219,548 173,643 221,797 173,648
Direct operations
orders opened 523,300 811,400 1,797,800 2,490,700
Direct operations
orders closed 339,100 521,900 1,138,200 1,602,700
Fee per file $1,683 $1,582 $1,620 $1,571
Actual title
claims paid $82,413 $73,172 $223,157 $179,167
FIDELITY NATIONAL FINANCIAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended Specialty Corporate
September 30, 2007 Consolidated FNT Insurance and Other
Gross operating revenue $1,311,531 $1,184,291 $102,844 $24,396
Interest and investment
income 50,470 42,662 4,178 3,630
Realized gains and losses 2,168 (1,152) 25 3,295
Total revenue 1,364,169 1,225,801 107,047 31,321
Personnel costs 427,683 400,020 10,834 16,829
Other operating expenses 283,928 217,640 45,891 20,397
Agent commissions 415,307 415,307 -- --
Depreciation and
amortization 32,348 31,589 1,353 (594)
Claim loss expense 189,426 151,128 38,299 (1)
Interest expense 12,782 4,183 343 8,256
Total expenses 1,361,474 1,219,867 96,720 44,887
Pretax earnings 2,695 5,934 10,327 (13,566)
Pretax margin 0.2% 0.5% 9.6% --
Open orders 523,300 523,300 -- --
Closed orders 339,100 339,100 -- --
Nine Months Ended Specialty Corporate
September 30, 2007 Consolidated FNT Insurance and Other
Gross operating revenue $4,069,825 $3,705,968 $297,573 $66,284
Interest and investment
income 145,634 127,130 12,252 6,252
Realized gains and losses 12,449 2,146 (3) 10,306
Total revenue 4,227,908 3,835,244 309,822 82,842
Personnel costs 1,315,695 1,236,300 34,247 45,148
Other operating expenses 814,590 649,372 108,508 56,710
Agent commissions 1,298,340 1,298,210 -- 130
Depreciation and
amortization 92,894 86,678 4,423 1,793
Claim loss expense 413,495 301,662 111,834 (1)
Interest expense 37,194 11,215 1,197 24,782
Total expenses 3,972,208 3,583,437 260,209 128,562
Pretax earnings 255,700 251,807 49,613 (45,720)
Pretax margin 6.0% 6.6% 16.0% --
Open orders 1,797,800 1,797,800 -- --
Closed orders 1,138,200 1,138,200 -- --
FIDELITY NATIONAL FINANCIAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended
September 30, 2006
Specialty Corporate
Consolidated Eliminations FNT FIS Insurance and Other
Gross
operating
revenue $2,581,888 ($67,489) $1,464,293 $1,080,651 $99,619 $4,814
Interest and
investment
income 54,744 -- 44,161 361 4,011 6,211
Realized gains
and losses (1,810) -- (1,422) 1,292 6 (1,686)
Total
revenue 2,634,822 (67,489) 1,507,032 1,082,304 103,636 9,339
Personnel
costs 863,163 (5,863) 436,064 416,733 11,409 4,820
Other
operating
expenses 610,732 (40,053) 223,359 383,120 41,358 2,948
Agent
commissions 538,700 (21,573) 555,010 -- -- 5,263
Depreciation
and
amortization 142,170 -- 29,881 111,135 1,706 (552)
Claim loss
expense 118,643 -- 88,706 240 29,695 2
Interest
expense 65,931 -- 3,481 49,629 398 12,423
Total
expenses 2,339,339 (67,489) 1,336,501 960,857 84,566 24,904
Pretax
earnings 295,483 -- 170,531 121,447 19,070 (15,565)
Pretax
margin 11.2% -- 11.3% 11.2% 18.4% --
Open orders 811,400 -- 663,500 147,900 -- --
Closed orders 521,900 -- 440,200 81,700 -- --
Nine Months Ended
September 30, 2006
Specialty Corporate
Consolidated Eliminations FNT FIS Insurance and Other
Gross
operating
revenue $7,464,086 ($170,653)$4,317,814 $3,003,533 $304,070 $9,322
Interest and
investment
income 154,259 -- 122,006 3,500 11,460 17,293
Realized gains
and losses 15,745 -- 15,765 3,331 (50) (3,301)
Total
revenue 7,634,090 (170,653) 4,455,585 3,010,364 315,480 23,314
Personnel
costs 2,632,935 (17,795) 1,354,720 1,245,945 33,791 16,274
Other
operating
expenses 1,706,137 (94,417) 666,587 1,011,725 112,385 9,857
Agent
commissions 1,537,489 (58,441) 1,587,547 -- -- 8,383
Depreciation
and
amortization 404,770 -- 83,312 318,304 4,678 (1,524)
Claim loss
expense 357,210 -- 260,444 425 96,646 (305)
Interest
expense 183,536 -- 8,435 141,930 979 32,192
Total
expenses 6,822,077 (170,653) 3,961,045 2,718,329 248,479 64,877
Pretax
earnings 812,013 -- 494,540 292,035 67,001 (41,563)
Pretax
margin 10.6% -- 11.1% 9.7% 21.2% --
Open orders 2,490,700 -- 2,044,500 446,200 -- --
Closed
orders 1,602,700 -- 1,350,300 252,400 -- --
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In thousands, except per share amounts)
September 30, December 31,
2007 2006
(Unaudited)
Cash and investment portfolio $4,334,264 $4,798,195
Goodwill 1,360,565 1,154,298
Title Plant 331,688 324,155
Total assets 7,226,471 7,259,559
Notes payable 643,837 491,167
Reserve for claim losses 1,296,691 1,220,636
Secured trust deposits 711,430 905,461
Total stockholders' equity 3,424,059 3,474,368
Book value per share 15.87 15.75
FIDELITY NATIONAL FINANCIAL, INC.
UNAUDITED PRO FORMA SUMMARY OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands except per share amounts)
FNF Capital
pro forma Other Pro
Historical FIS pro forma adjustments forma
FNF adjustments(1) (2) Adjustments Notes Pro Forma
Total title
and escrow $1,454,320 ($21,580) -- $21,573 (3) $1,454,313
Transaction
processing 1,013,372 (1,059,071) -- 45,699 (3) --
Specialty
insurance 99,619 -- -- -- 99,619
Interest and
investments
income 54,744 (361) (31) -- 54,352
Realized gains
and losses (1,810) (1,292) -- -- (3,102)
Other income 14,577 -- (2,613) -- 11,964
Total
revenue $2,634,822 ($1,082,304) (2,644) $67,272 $1,617,146
Personnel
costs 863,163 (416,733) (462) 5,863 (4) 451,831
Other operating
expenses 610,732 (383,120) (306) 39,836 (4) 265,227
(1,915) (5)
Agent
commissions 538,700 -- -- 21,573 (6) 560,273
Depreciation
and
amortization 142,170 (111,135) (7) -- 31,028
Provision for
claim losses 118,643 (240) -- -- 118,403
Interest
expense 65,931 (49,629) (1,751) 243 (7) 14,794
Total
expenses 2,339,339 (960,857) (2,526) 65,600 1,441,556
Earnings before
income taxes 295,483 (121,447) (118) 1,672 175,590
Income tax
expense 109,920 (42,902) (502) (4,182) 62,334
Minority
interest 57,992 35 (211) (58,666) (8) (850)
Net income $127,571 ($78,580) 595 $64,520 $114,106
Net income per
share-basic $0.52
Pro forma
weighted
average
shares-basic 219,000(9)
Net income
per
share-diluted $0.51
Pro forma
weighted
average
shares-diluted 222,000 (9)
FIDELITY NATIONAL FINANCIAL, INC.
UNAUDITED PRO FORMA SUMMARY OF EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006
(In thousands except per share amounts)
FNF Capital
pro forma Other Pro
Historical FIS pro forma adjustments forma
FNF adjustments(1) (2) Adjustments Notes Pro Forma
Total title
and
escrow $4,286,000 ($58,683) -- $58,441 (3) $4,285,758
Transaction
processing 2,832,638 (2,944,850) -- 112,212 (3) --
Specialty
insurance 304,070 -- -- -- 304,070
Interest and
investments
income 154,259 (3,500) (89) -- 150,670
Realized gains
and losses 15,745 (3,331) -- -- 12,414
Other income 41,378 -- (6,984) -- 34,394
Total
revenue $7,634,090 ($3,010,364) (7,073) $170,653 $4,787,306
Personnel
costs 2,632,935 (1,245,945) (1,998) 17,795 (4) 1,402,787
Other operating
expenses 1,706,137 (1,011,725) (703) 94,417 (4) 779,511
(8,615) (5)
Agent
commissions1,537,489 -- -- 58,441 (6) 1,595,930
Depreciation
and
amortization 404,770 (318,304) (20) -- 86,446
Provision for
claim losses 357,210 (425) -- -- 356,785
Interest
expense 183,536 (141,930) (3,509) 600 (7) 38,697
Total
expenses 6,822,077 (2,718,329) (6,230) 162,638 4,260,156
Earnings before
income taxes 812,013 (292,035) (843) 8,015 527,150
Income tax
expense 302,069 (108,109) (296) (6,526) 187,138
Minority
interest 143,381 41 (211) (141,184) (8) 2,027
Net income $366,563 ($183,967) (336) $155,725 $337,985
Net income
per share-basic $1.54
Pro forma
weighted average
shares-basic 219,000(9)
Net income
per
share-diluted $1.52
Pro forma
weighted
average
shares-diluted 222,000(9)
FIDELITY NATIONAL FINANCIAL, INC.
NOTES TO UNAUDITED PRO FORMA SUMMARY OF EARNINGS
Notes to Unaudited Pro Forma Summary of Earnings for the Three-Month and
Nine-Month Periods Ended September 30, 2006
This pro forma summary of earnings includes the historical statements of continuing operations of FNF and removes the results of operations of FIS, FNF Capital and FNF minority interest expense relating to FIS and FNT, as though the reorganization transaction that occurred on October 24, 2006, had occurred on January 1, 2006. (1) This column represents the historical results of operations of FIS as included in FNF's consolidated results of operations for the periods presented. (2) This column represents the historical results of operations of FNF Capital as included in FNF's consolidated results of operations for the periods presented. (3) This represents the intercompany revenues relating to various agreements recorded on FIS' income statement that had already been eliminated from the consolidated results of operations of FNF. These revenues amounted to $67.3 million and $170.7 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (4) This represents the intercompany expenses related to various agreements that were eliminated in the consolidated results of operations of FNF, but are third-party expenses subsequent to the reorganization transaction. These expenses amounted to $45.7 million and $112.2 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (5) This represents transaction costs related to the reorganization, all of which have been excluded from the pro forma summary of earnings. These costs amounted to $1.9 million and $8.6 million, respectively, for the three- month and nine-month periods ended September 30, 2006. (6) This represents the additional agent commissions paid by FNF to FIS that were previously eliminated in the consolidated results of FNF, but are a third-party expense subsequent to the reorganization transaction. These commissions amounted to $21.6 million and $58.4 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (7) This represents intercompany interest expense that is a third-party expense subsequent to the reorganization transaction. These expenses amounted to $0.2 million and $0.6 million, respectively, for the three-month and nine- month periods ended September 30, 2006. (8) This represents the elimination of the minority interest expense recorded by FNF relating to its earnings in FIS and FNT. Minority interest expense relating to FIS was $39.7 million and $88.0 million, respectively, for the three-month and nine-month periods ended September 30, 2006. Minority interest relating to FNT was $19.0 million and $53.2 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (9) Amounts presented approximate the actual number of basic and diluted weighted average shares outstanding subsequent to the reorganization transaction. Website: http://www.fnf.com// |
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