About Chicago Title Insurance Company

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 around 35% of all title insurance policies in the US. The company operates through underwriters including Fidelity National Title Company, Commonwealth Land Title, Alamo Title, and National Title of New York. It sells its products both directly and through independent agents. Fidelity National has been divesting its holdings in casual restaurant chains.

Operations

FNF is organized into two segments: FNF Core Operations, which accounts for more than 85% of revenues and includes title insurance and related closing services; and Fidelity National Finance Ventures (FNFV), which includes its other investments.

Through Black Knight Financial and ServiceLink, FNF 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).

Title insurance premiums account for about three-fourths of Fidelity National Financial's revenues, but the company also maintains, through FNFV, a small handful of other operations completely outside of the title insurance industry. These holdings include a 33% stake in Ceridian, a payroll and HR services firm. It also has holdings in casual and upscale dining restaurants though its 55% ownership of American Blue Ribbon Holdings.

In late 2016, FNF announced plans to spin off Black Knight and FNFV to create three standalone public entities.

Geographic Reach

FNF's insurance businesses operate exclusively within the US. Naturally, the biggest markets are in states with the greatest populations: California, Texas, New York, and Florida combined account for some 45% of its title insurance premiums.

The company leases offices in more than 40 states and Washington, DC, as well as in Canada, India, and Puerto Rico.

Sales and Marketing

FNF 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 1,300 retail offices to provide residential title insurance. It markets its commercial title insurance through a network of 5,000 agents in major urban real estate markets.

Financial Performance

While the company is basically sound, FNF's revenues can be hampered by stiffness in the residential mortgage lending market. With the exception of 2014, revenue has been on the rise; it rose 5% to $9.6 billion in 2016 as closing volumes continued to rebound. Increased agent remittances and growth in the Black Knight and OneDigital units also led to higher revenue that year. All told, FNF saw 6% growth in escrow, title-related, and other fees; 15% growth in agency title insurance premiums; and 4% growth in direct title insurance premiums.

Net income, on the other hand, has been fluctuating for the past few years. Thanks largely to FNF's higher revenue, net income rose 23% to $650 million in 2016. However, higher agent commissions expenses and personnel costs did cut into profits that year.

Cash flow from operations continued its upward trend in 2016, increasing 26% to $1.2 billion. That increase was driven by the higher net income as well as positive changes in assets and liabilities such as accounts payable.

Strategy

Title insurance is typically one of the most stable types of insurance written. It is folded into the piles of paperwork home buyers sign during closings, with little or no fuss. Even when US home sales become sluggish, FNF stays active from refinancing of existing mortgages. However, when interest rates rise, refinancing activities tend to slow down. In the current economic cycle, FNF expects that mortgage originations will slow down through 2019, but lower unemployment rates and rising consumer confidence should help offset the impact of higher interest rates. Additionally, commercial real estate transactions tend to be less reliant on interest rates, which should help boost the company's sales.

To stay at the top of the title insurance game, FNF's core strategies include building on its various, well-known brand names; delivering superior customer service; and maintaining operations that can withstand the cyclical title insurance industry. For the latter, it monitors its corporate organization and office network (consolidating operations as necessary) and strikes a balance between residential and commercial transactions. The company also introduces new products and technologies to remain competitive.

FNF's Black Knight technology services arm aims to deepen its existing customer relationships by cross-selling its various offerings including data and analytics. The unit has its eye on the mid-tier origination and servicing market for new business. Although Black Knight primarily pursues organic growth, it is also open to making acquisitions to enter new geographic markets or add new products and services.

In a similar vein, transaction services unit ServiceLink entered the auction business when FNF acquired Hudson & Marshall in mid-2017. The new ServiceLink Auction offering will provide foreclosure and real estate owned auction services.

Historically, FNF and its operating subsidiaries have grown through numerous acquisitions in the title insurance space, as well as by adding new offerings to attract more customers. However, FNF is now so dominant within the 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 has made some moves to diversify by buying up non-insurance related businesses. In 2017 it acquired health care technology firm T-System for $200 million.

To raise cash for more diversification, the company sometimes sells its stakes in certain investments. For example, in 2015 it sold its 70% stake in Cascade Timberlands to Whitefish Cascade Forest Resources for $85 million. After a short stint investing in restaurants, the company spun off its stake in J. Alexander's in 2015; it also announced plans to spin off American Blue Ribbon Holdings. In 2017 the company agreed to sell its 96% stake in health insurance distribution and management firm OneDigital to New Mountain Capital for $560 million.

Mergers and Acquisitions

In 2017, FNF bought Hudson & Marshall, a leading property and real estate auction firm. FNF subsidiary ServiceLink entered the auction business through that transaction; Hudson & Marshall now powers the new ServiceLink Auction offering.

Also in 2017, the company acquired Real Geeks, which provides a customer relationship management (CRM) platform and other internet tools to the real estate industry. It then acquired control of Title Guaranty of Hawaii, the state's oldest title insurance company.

Further boosting its technology capabilities, in 2016 FNF acquired Georgia-based Commissions (which provides web-based real estate marketing and CRM software) for $229 million. Also that year, subsidiary Black Knight Financial Services acquired eLynx, which provides electronic capture and document management services to the financial and real estate sectors, for $115 million.

Company Background

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.

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Chicago Title Insurance Company

10 S Lasalle St Ste 2850
Chicago, IL 60603
Phone: 1 (312) 223-2402
Fax: 1 (312) 223-2942

Stats

  • Employer Type: Public
  • Ceo: Ed Burton
  • Human Resources Coordinator: Karen Graziano
  • Exec Vp: John A Wunderlich
  • Employees: 5,135

Major Office Locations

  • Chicago, IL

Other Locations

  • Campbell, CA
  • Stuart, FL
  • Houston, TX
  • Olympia, WA
  • Waukesha, WI