Fidelity National Financial, Inc., a provider of title insurance, specialty insurance, claims management services and information services, reports operating results for the three-month period ended 31 March 2009.
“As we discussed during our recent equity offering, operating performance in our title business began the quarter slowly, but picked up as we got into the month of March,” says William P. Foley, II, chairman.
“In January, we recorded a pre-tax loss of approximately USD11 million, as the legacy FNF business was profitable, but the Lawyers and Commonwealth operations lost more than USD17 million on a pre-tax basis. In February we recorded a pre-tax loss of approximately USD5 million, as legacy FNF was again slightly profitable and the Lawyers and Commonwealth operations improved to a pre-tax loss of only USD5 million.”
“In March, we recorded USD15 million in pre-tax earnings, but those results included a USD20 million synergy bonus and approximately $6 million in other than temporary impairments related to several equity securities. Before those two items, we generated approximately USD41 million in pre-tax earnings, which we believe to be a more meaningful representation of our operating performance in March, as legacy FNF generated a high single digit margin for the month and the Lawyers and Commonwealth operations recorded a mid-single digit margin.”
“Finally, on April 20, 2009, we closed on a public offering of our common stock for net proceeds of approximately USD331 million. There were two primary reasons for the issuance of stock. First, we will repay USD135 million under our existing credit facility on 30 April 2009. We are also examining the option of repurchasing a meaningful amount of our existing bonds, both of which will reduce our debt to total capital ratio from approximately 32% to somewhere near 25%, a level more in-line with our historic debt to cap targets.”
“This reduction in leverage will provide increased financial flexibility for FNF. Second, as the leading title insurance company in the country, we believe the strength of our balance sheet, including unrivaled claims reserves, shareholders’ equity, investment portfolio and modest financial leverage, will allow us to differentiate ourselves in the marketplace, particularly in the commercial area.”
“We also made significant strides on the integration of the Lawyers and Commonwealth operations during the quarter, realizing run-rate cost savings of more than USD231 million as of 31 March 2009, versus our original synergy estimate of USD150 million and our revised synergy estimate of USD225 million. Most importantly, the Lawyers and Commonwealth operations returned to profitability for the month of March, before the impact of the synergy bonus, and these underwriters are positioned to generate increasing profit margins as we enter the second quarter and beyond.”
L.D.