To make sure that buying a dream home doesn't become a nightmare, Fidelity National Financial (also known as FNF) provides title insurance, escrow, home warranties, and other services related to real estate transactions. It is now the biggest dog in the residential and commercial title insurance sectors, (the next largest player is First American) and accounts for 35% of all title insurance policies in the US. The company operates through underwriters including Fidelity National Title Company, Chicago Title, Commonwealth Land Title, Alamo Title, and National Title of New York. It sells its products both directly and through independent agents. Fidelity National has also grown its holdings in casual restaurant chains.
The company is organized into two segments: FNF Core Operations, which includes title insurance and related closing services; and FNF Ventures, which includes its other investments.
Title insurance is typically one of the most stable types of insurance written. It is folded into the piles of paperwork homebuyers sign during closings, with little or no fuss. Even when US home sales become sluggish, the company stays busy from the brisk pace of refinancing of existing mortgages. Through Black Knight Financial and ServiceLink, Fidelity National Financial provides mortgage technology and transaction services, utilizing subsidiary Lender Processing Services', or LPS', MSP system (the largest residential mortgage servicing technology platform in the country). Fidelity National Financial acquired LPS in early 2014 and it plans to make similar acquisitions going forward.
Title insurance premiums account for more than three-fourths of Fidelity National Financial's revenues, but the company also maintains a small handful of other operations completely outside of the title insurance industry. These include a 51% stake in auto parts manufacturer Remy International and a minority interest in Ceridian, a payroll and HR services firm. It has also committed to expanding its holdings in casual and upscale dining restaurants though its 55% ownership of American Blue Ribbon Holdings and its 87% stake in J. Alexander's.
Fidelity National Financial's insurance businesses operate exclusively within the US. Naturally, the biggest markets are in states with the greatest populations: California, Texas, and Florida account for more than a third of its title insurance premiums. The company has international operations in the Asia/Pacific, Europe, and the Americas through its minority interest in an auto parts manufacturing business.
The company primarily leases offices in 42 states and Washington, DC, as well as in Canada, India, Mexico, and Puerto Rico.
Sales and Marketing
Fidelity National Financial uses direct sales representatives and independent agents to market its title and escrow products to residential and commercial real estate customers. The company maintains some 1,200 retail offices to provide residential title insurance. It markets its commercial title insurance though a network of 5,000 agents in major urban real estate markets.
While the company is basically sound, Fidelity National Financial's revenues can be hampered by stiffness in the residential mortgage lending market. Recent earnings have trended upward: In 2013 the company reported a 19% spike in revenues to $8.6 billion, after earning $7.2 billion in 2012 and $4.8 billion in 2011. Rising sales in 2013 reflected gains by both the group's title operations -- fees per file increased that year -- and FNF's investments in auto parts and restaurants.
Profits, on the other hand, have fluctuated over the past five years. In 2013 net income dropped 34% to $402 million as a result of rising operating costs (personnel, commissions, and restaurant expenses). Losses from discontinued operations and equity in loss of unconsolidated affiliates also contributed to the decline.
Cash flow from operations saw a huge bump in 2012, but has been declining for most of the past five years. In 2013 operating cash flow fell 22% to $484 million as Fidelity National Financial spent funds on prepaid expenses, accrued liabilities, deferred revenue, and other areas.
Fidelity National Financial is now so dominant within the title insurance industry that any attempt to grow larger there would draw the scrutiny of regulators. While keeping its eye on strengthening its existing title insurance operations, the company is focused on diversifying by buying up non-insurance related businesses. After bulking up on restaurant operations through recent acquisitions, Fidelity National Financial aims to increase same-store sales and guest counts and reach long-term profit growth within its restaurant operations. The company is conducting some consolidation efforts within the division to assist with these goals.
To raise a bit of cash for diversification, the company sold its profitable flood insurance business to WRM America Holdings for $210 million in late 2011. It then sold all but 15% of Fidelity National Property Casualty Insurance, its personal lines business, to WT Holdings for some $119 million in 2012.
Mergers and Acquisitions
In late 2012 Fidelity National Financial acquired the Nashville-based J. Alexander's chain of 33 restaurants. Then, in 2013 it transferred the Stoney River steak restaurants (previously operated by its majority owned American Blue Ribbon Holdings unit) to the J. Alexander entity, transferring a minority stake in J. Alexander's to American Blue Ribbon Holdings through the deal. J. Alexander's, which now operates 30 restaurants, filed to go public again in late 2014. Other restaurant growth and consolidation efforts include the $304 million purchase of O'Charley's in 2012; following the transaction O'Charley's was merged into American Blue Ribbon Holdings. Through the deal, Fidelity National Financial increased its stake in American Blue Ribbon Holdings from 45% to 55%.
In addition, Fidelity National Financial increased its stake in Remy from 47% to 51% during 2012 to take advantage of growth opportunities within that operating segment.
Within the core insurance segment, the company added administrative service capabilities by purchasing Digital Insurance, an electronic platform for health plan distribution and benefits management for small and midsized businesses, for some $98 million in 2012.
In a move to further expand its presence in the real estate world, in 2014 the company acquired Lender Processing Services for $3.4 billion. The company's MPS real estate services platform is the leading such system in the US. Later that year, FNF acquired a majority stake in LandCastle Title, which had suffered from substantial escrow account violations. The bailout allowed Fidelity National Financial to further grow its title operations while preventing LandCastle's collapse.
Like all title insurers, Fidelity National Financial shivered when the big chill hit the real estate market in 2008. But, while the company slowed, it remained quick enough to take advantage of opportunities. When its ailing rival LandAmerica Financial Group filed Chapter 11 in 2008, the company bought up the choicer bits for $235 million. This purchase helped make it into the largest title insurer in the US and caught the attention of the FTC, prompting the company to divest a few holdings to soothe the agency's nerves. The 2009 sale of Fidelity National Capital only brought in $50 million, but took $214 million of debt off company ledgers. The 2010 sale of its 32% stake in Sedgwick Claims Management brought in some $225 million.
The current company arose in 2006 when a previous company, also named Fidelity National Financial, split apart its title insurance operations from its information services business. What had been Fidelity National Title Group took on its former parent's name, while Fidelity National Information Services took on the former parent's remaining operations. The two companies share a history and some stray holdings, but are otherwise separate.