Fidelity National Financial, Inc. Reports Fourth Quarter 2007 EPS of ($0.21); Results Include a $135.7 Million Charge to Strengthen Reserve for Claim Losses; Fourth Quarter 2007 EPS of $0.28 Before Charge
Jacksonville, Fla. -- (January 30, 2008) -- Fidelity National Financial, Inc. (NYSE:FNF), a leading provider of title insurance, specialty insurance, claims management services and information services, today reported operating results for the three-month and twelve-month periods ended December 31, 2007.
*These reported results include the impact of a $135.7 million charge to strengthen the reserve for claim losses.
** The three-month and twelve-month periods ended December 31, 2006, include the results of Fidelity National Information Services, Inc. ("FIS") through October 23, 2006, as FIS was a majority-owned subsidiary of FNF for that portion of those periods. The three-month and twelve-month periods ended December 31, 2006, also include all transaction costs related to the reorganization completed in the fourth quarter of 2006.
*** A complete pro forma summary of earnings for the three-month and twelve-month periods ended December 31, 2006, excluding the results of FIS, the minority interest expense related to Fidelity National Title Group, Inc. ("FNT") and all transaction costs related to the reorganization completed in the fourth quarter of 2006, is included later in this press release.
**** The net earnings per diluted share figure was calculated using a 26.5% annual tax rate
The following are summary financial and operational results for the current operating segments of FNF for the three-month and twelve-month periods ended December 31, 2007, and 2006:
Fidelity National Title Group ("FNT")
*These reported results include the impact of a $135.7 million charge to strengthen the reserve for claim losses.
**These reported results include the impact of $217.2 million in charges to strengthen the reserve for claim losses.
- 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
"2007 turned out to be a very challenging year for some of our businesses and yet, a positive year for others," said Chairman of the Board William P. Foley, II. "On the challenging side, our title insurance business clearly faced the most adversity, but we remained true to our operating strategy and continued to focus on operating metrics in our efforts to maximize the profitability of our title insurance operations. While we aspire to produce higher pre-tax margins than we achieved in the second half of the year, those results were commendable given the extremely challenging macroeconomic environment and still make FNF the clear leader in profitability in the title insurance industry. We did find it necessary to strengthen our reserve for claim losses as we continued to experience adverse loss development in the fourth quarter, particularly for policy years 2005-2007, as the expected ultimate loss ratio for those policy years worsened to approximately 7.5% during the fourth quarter."
"The specialty insurance business achieved solid results as the consistent streams of revenue and earnings from the flood insurance operation were offset by higher losses in the homeowners' business, primarily due to the southern California wildfires. Despite these loss difficulties, the homeowners' operation remained profitable throughout 2007 and the entire specialty insurance operation generated greater than a 13% pre-tax margin."
"Our two minority-owned investments benefited from the long-term, contractual nature of their revenue streams from outside of the mortgage and real estate industries. Sedgwick grew to a more than $660 million annual revenue business, the largest third party administrator in the country, with annual revenue growth of 34%, annual organic revenue growth of 8%, solid EBITDA margins of approximately 15% and client retention rates of greater than 98%. Additionally, we closed our minority investment in Ceridian in November and we are excited about the implementation of a four point cost reduction plan. The successful execution of this cost reduction plan will lead to material margin improvement and we look forward to Ceridian capitalizing on that opportunity during 2008. While we experienced some difficult operating environments in 2007, we are excited about the long-term prospects of all of our businesses and remain committed to our underlying goal of continually maximizing the value of all of the assets of FNF for the ultimate benefit of our shareholders."
Fidelity National Financial, Inc. (NYSE:FNF), is a leading provider of title insurance, specialty insurance, claims management services and information 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. FNF is also a leading information services company in the human resource, retail and transportation markets through another minority-owned subsidiary, Ceridian Corporation. 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.
SOURCE: Fidelity National Financial, Inc.
CONTACT:
Daniel Kennedy Murphy
Senior Vice President
Finance and Investor Relations
904-854-8120
dkmurphy@fnf.com
NOTES TO UNAUDITED PRO FORMA SUMMARY OF EARNINGS
Notes to Unaudited Pro Forma Summary of Earnings for the Three-Month and Twelve-Month Periods Ended December 31, 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 and all transaction costs related to the reorganization completed in the fourth quarter of 2006, 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 $15.1 million and $185.8 million, respectively, for the three-month and twelve-month periods ended December 31, 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 $8.8 million and $121.0 million, respectively, for the three-month and twelve-month periods ended December 31, 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 $38.7 million and $47.3 million, respectively, for the three-month and twelve-month periods ended December 31, 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 $6.3 million and $64.7 million, respectively, for the three-month and twelve-month periods ended December 31, 2006.
(7) This represents intercompany interest expense that is a third-party expense subsequent to the reorganization transaction. These expenses amounted to $0.1 million and $0.7 million, respectively, for the three-month and twelve-month periods ended December 31, 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 $8.3 million and $96.2 million, respectively, for the three-month and twelve-month periods ended December 31, 2006. Minority interest relating to FNT was $3.7 million and $56.9 million, respectively, for the three-month and twelve-month periods ended December 31, 2006.
(9) Amounts presented approximate the actual number of basic and diluted weighted average shares outstanding subsequent to the reorganization transaction.