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 accounts for more than 80% of revenues and 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 about 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 32% stake 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 41 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 had trended upward until 2014, when revenue declined 6% to $8 billion (versus $8.6 billion in 2013). The decline was primarily due to lower title insurance earnings, which fell as closing volumes decreased -- especially refinance transactions.
Despite the decline in revenue, net income rose 48% to $583 million in 2014 due to equity in earnings of unconsolidated affiliates such as Ceridian and FleetCor.
Cash flow from operations grew 17% to $567 million that year, due to such factors as increased earnings from operations, lower claims payments, and a tax refund on the acquisition of LPS.
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 cash for more diversification, the company sometimes sells its stakes in its investments. For example, in 2014 it spun off its stake in auto parts manufacturer Remy International. In 2015 it sold its 70% stake in Cascade Timberlands to Whitefish Cascade Forest Resources for $85 million.
Mergers and Acquisitions
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.