Exhibit 99.1
![]() | PRESS RELEASE |
Fidelity National Financial, Inc. Reports Third Quarter 2008 EPS of ($0.95); Results Include
a $261.6 Million Charge to Strengthen Reserve for Claim Losses
a $261.6 Million Charge to Strengthen Reserve for Claim Losses
Jacksonville, Fla. — (October 22, 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 nine-month periods ended September 30, 2008.
Three Months Ended | Three Months Ended | |||||||
September 30, 2008 | September 30, 2007 | |||||||
Total revenue | $989.7 million | $1.36 billion | ||||||
Net earnings (loss) | ($198.3 million) | $6.5 million | ||||||
Net earnings (loss) per diluted share | ($0.95 | ) | $ | 0.03 | ||||
Cash flow from operations | $6.2 million | $72.1 million |
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2007 | |||||||
Total revenue | $3.31 billion | $4.22 billion | ||||||
Net earnings (loss) | ($164.1 million) | $174.7 million | ||||||
Net earnings (loss) per diluted share | ($0.78 | ) | $ | 0.79 | ||||
Cash flow from (used in) operations | ($55.9 million) | $299.9 million |
The following are summary financial and operational results for the operating segments of FNF for the three-month and nine-month periods ended September 30, 2008 and 2007:
Fidelity National Title Group (“FNT”)
Three Months Ended | Three Months Ended | |||||||
September 30, 2008 | September 30, 2007 | |||||||
Total revenue | $872.6 million | $1.23 billion | ||||||
Pre-tax earnings (loss) | ($279.4 million) | $5.7 million | ||||||
Pre-tax margin | N/A | 0.5 | % |
Three Months Ended September 30, 2008 | ||
Pre-tax loss | ($279.4 million) | |
Charge to strengthen reserves | $261.6 million | |
Realized losses and impairments | $27.6 million | |
Accelerated lease expense | $12.5 million | |
Adjusted pre-tax earnings* | $22.3 million | |
Adjusted pre-tax margin* | 2.6% |
* | The adjusted pre-tax earnings and adjusted pre-tax margin are non-GAAP measures. The company has presented these measures because it believes they may be useful to investors as an additional measure of current operations. It is possible that the adjusting items have occurred in prior periods and may occur in future periods, as the company recorded a charge to strengthen reserves in the third quarter of 2007. These non-GAAP measures should not be considered in isolation or as a substitute for the comparable GAAP measures of pre-tax earnings and pre-tax margin. |
Nine Months Ended | Nine Months Ended | |||||||
September 30, 2008 | September 30, 2007 | |||||||
Total revenue | $2.92 billion | $3.83 billion | ||||||
Pre-tax earnings (loss) | ($221.3 million) | $249.9 million | ||||||
Pre-tax margin | N/A | 6.5 | % |
Month | Direct Orders Opened | Direct Orders Closed | Closing % | |||||
July 2008 | 135,500 | 90,600 | 67 | % | ||||
August 2008 | 128,900 | 87,300 | 68 | % | ||||
September 2008 | 143,000 | 82,700 | 58 | % | ||||
Third Quarter 2008 | 407,400 | 260,600 | 64 | % | ||||
Month | Direct Orders Opened | Direct Orders Closed | Closing % | |||||
July 2007 | 189,200 | 123,800 | 65 | % | ||||
August 2007 | 186,100 | 120,700 | 65 | % | ||||
September 2007 | 148,000 | 94,600 | 64 | % | ||||
Third Quarter 2007 | 523,300 | 339,100 | 65 | % | ||||
Open | Closed | Commercial | ||||||||||||||
Commercial | Commercial | Revenue | Commercial | |||||||||||||
Orders | Orders | (In thousands) | Fee Per File | |||||||||||||
3rd Quarter 2008 | 14,800 | 9,200 | $ | 60,200 | $ | 6,600 | ||||||||||
3rd Quarter 2007 | 18,200 | 11,600 | $ | 90,000 | $ | 7,800 |
- The preceding table only includes commercial activity from FNF’s commercial offices in the national commercial division and does not attempt to capture potential commercial activity in our local offices.
Specialty Insurance
Three Months Ended | Three Months Ended | |||
September 30, 2008 | September 30, 2007 | |||
Total revenue | $100.4 million | $107.0 million | ||
Pre-tax earnings (loss) | ($5.8 million) | $10.3 million | ||
Pre-tax margin | N/A | 9.6% |
Nine Months Ended | Nine Months Ended | |||
September 30, 2008 | September 30, 2007 | |||
Total revenue | $286.0 million | $309.8 million | ||
Pre-tax earnings | $16.8 million | $49.6 million | ||
Pre-tax margin | 5.9% | 16.0% |
“We continue to operate our businesses in an extremely difficult economic environment,” said Chairman William P. Foley, II. “Order counts in the title business continued to be weak in July and August, with a short-lived increase in early September that lasted only a few weeks. We remain focused on cost and expense management throughout the company, as we eliminated approximately 1,000 additional positions in the third quarter. The majority of those eliminations came later in the quarter, so our reported results do not reflect any significant benefit from those late quarter staffing reductions. Additionally, on October 1, we instituted a 10% company-wide pay reduction that will most likely remain in place through the first quarter of 2009. We also continued to close title and escrow offices during the third quarter, closing more than 115 offices at a total accelerated lease expense of $12.5 million. The significant
weakness in the capital markets also required us to record $42 million in realized losses during the quarter, with $7 million in actual realized losses from securities sold and $35 million in impairments from corporate bonds and equity securities. We continue to manage our investment portfolio in a conservative fashion, as the average rating remains Aa1/AA+ and the duration remains approximately three years. The $35 million in impairments are other than temporary accounting impairments, not actual cash losses. The final material event during the quarter was the $261.6 million reserve strengthening charge. Based on continued adverse reported and paid claims trends over the last six quarters, we made the decision in the third quarter to more heavily weight the three most recent full year’s data on loss experience in the actuarial model and incorporate that data into the assumptions and factors that determine ultimate expected loss experience for all prior calendar years. This particular change was the primary driver in requiring a significant increase in the level of our balance sheet reserve position. We believe this update to the actuarial model better reflects the expected loss experience that we will ultimately record because of this very difficult market.
“Our specialty insurance business earnings were negatively impacted by the numerous hurricanes that hit during this summer, as we incurred homeowner’s losses during the quarter, but we won’t see the benefit of the increased flood claim processing revenue until the fourth quarter. Finally, our two major minority-owned investments, Sedgwick and Ceridian, both continue to generate consistent EBITDA margins, despite the tough operating environment. Overall, we are focused on continuing to navigate our way through these challenging times, maintaining profitability in our title insurance operation, providing significant liquidity and ensuring the strength of our balance sheet.”
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 27 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; continued weakness or 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 and Treasurer, 904-854-8120, dkmurphy@fnf.com
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY OF EARNINGS
(In thousands, except per share amounts and order information)
SUMMARY OF EARNINGS
(In thousands, except per share amounts and order information)
Three months ended | Nine months ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2008 | 2007 | 2008 | 2007 | |||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||
Direct title premiums | $ | 286,551 | $ | 391,065 | $ | 912,370 | $ | 1,258,166 | ||||||||
Agency title premiums | 323,769 | 537,598 | 1,171,120 | 1,677,606 | ||||||||||||
Total title premiums | 610,320 | 928,663 | 2,083,490 | 2,935,772 | ||||||||||||
Escrow, title-related and other fees | 290,613 | 280,024 | 857,072 | 836,480 | ||||||||||||
Total title and escrow | 900,933 | 1,208,687 | 2,940,562 | 3,772,252 | ||||||||||||
Specialty insurance | 99,902 | 102,844 | 278,890 | 297,573 | ||||||||||||
Interest and investment income | 30,878 | 47,709 | 102,951 | 141,014 | ||||||||||||
Realized gains and losses | (42,030 | ) | 2,168 | (15,762 | ) | 12,449 | ||||||||||
Total revenue | 989,683 | 1,361,408 | 3,306,641 | 4,223,288 | ||||||||||||
Personnel costs | 337,809 | 427,683 | 1,065,941 | 1,315,695 | ||||||||||||
Other operating expenses | 309,052 | 283,928 | 896,778 | 814,590 | ||||||||||||
Agent commissions | 254,883 | 415,307 | 911,692 | 1,298,340 | ||||||||||||
Depreciation and amortization | 35,068 | 32,348 | 106,679 | 92,894 | ||||||||||||
Claim loss expense | 359,664 | 189,426 | 547,596 | 413,495 | ||||||||||||
Interest expense | 16,081 | 12,782 | 50,935 | 37,194 | ||||||||||||
Total expenses | 1,312,557 | 1,361,474 | 3,579,621 | 3,972,208 | ||||||||||||
Earnings before income taxes | (322,874 | ) | (66 | ) | (272,980 | ) | 251,080 | |||||||||
Income tax expense | (125,488 | ) | (4,075 | ) | (112,146 | ) | 81,441 | |||||||||
Earnings (loss) before equity investments and minority interest | (197,386 | ) | 4,009 | (160,834 | ) | 169,639 | ||||||||||
Earnings (losses) from equity investments | (2,717 | ) | 2,761 | (7,385 | ) | 4,620 | ||||||||||
Minority interest | (1,801 | ) | 298 | (4,087 | ) | (447 | ) | |||||||||
Net earnings (loss) | $ | (198,302 | ) | $ | 6,472 | $ | (164,132 | ) | $ | 174,706 | ||||||
Net earnings (loss) per share — basic | $ | (0.95 | ) | $ | 0.03 | $ | (0.78 | ) | $ | 0.80 | ||||||
Net (loss) earnings per share — diluted | $ | (0.95 | ) | $ | 0.03 | $ | (0.78 | ) | $ | 0.79 | ||||||
Weighted average shares — basic | 208,710 | 216,325 | 210,206 | 218,006 | ||||||||||||
Weighted average shares — diluted | 208,710 | 219,548 | 210,206 | 221,797 | ||||||||||||
Direct operations orders opened | 407,400 | 523,300 | 1,432,200 | 1,797,800 | ||||||||||||
Direct operations orders closed | 260,600 | 339,100 | 875,900 | 1,138,200 | ||||||||||||
Fee per file | $ | 1,636 | $ | 1,683 | $ | 1,516 | $ | 1,620 | ||||||||
Actual title claims paid | $ | 84,668 | $ | 79,398 | $ | 227,831 | $ | 207,611 |
FIDELITY NATIONAL FINANCIAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Three Months Ended | Specialty | Corporate | |||||||||||||||
September 30, 2008 | Consolidated | FNT | Insurance | and Other | |||||||||||||
Gross operating revenue | $ | 1,000,835 | $ | 872,855 | $ | 99,901 | $ | 28,079 | |||||||||
Interest and investment income | 30,878 | 27,354 | 3,263 | 261 | |||||||||||||
Realized gains and losses | (42,030 | ) | (27,562 | ) | (2,750 | ) | (11,718 | ) | |||||||||
Total revenue | 989,683 | 872,647 | 100,414 | 16,622 | |||||||||||||
Personnel costs | 337,809 | 311,856 | 11,766 | 14,187 | |||||||||||||
Other operating expenses | 309,052 | 242,993 | 46,952 | 19,107 | |||||||||||||
Agent commissions | 254,883 | 254,883 | — | — | |||||||||||||
Depreciation and amortization | 35,068 | 27,523 | 1,207 | 6,338 | |||||||||||||
Claim loss expense | 359,664 | 313,483 | 46,181 | — | |||||||||||||
Interest expense | 16,081 | 1,321 | 124 | 14,636 | |||||||||||||
Total expenses | 1,312,557 | 1,152,059 | 106,230 | 54,268 | |||||||||||||
Earnings (loss) before income taxes | (322,874 | ) | (279,412 | ) | (5,816 | ) | (37,646 | ) | |||||||||
Income tax expense | (125,488 | ) | (104,888 | ) | 297 | (20,897 | ) | ||||||||||
Earnings (loss) before equity investments and minority interest | (197,386 | ) | (174,524 | ) | (6,113 | ) | (16,749 | ) | |||||||||
Earnings (loss) from equity investments | (2,717 | ) | 1,548 | — | (4,265 | ) | |||||||||||
Minority interest | (1,801 | ) | 159 | — | (1,960 | ) | |||||||||||
Net earnings (loss) | $ | (198,302 | ) | $ | (173,135 | ) | $ | (6,113 | ) | $ | (19,054 | ) | |||||
Open orders | 407,400 | 407,400 | — | — | |||||||||||||
Closed orders | 260,600 | 260,600 | — | — |
Three Months Ended | Specialty | Corporate | |||||||||||||||
September 30, 2007 | Consolidated | FNT | Insurance | and Other | |||||||||||||
Gross operating revenue | $ | 1,311,531 | $ | 1,184,291 | $ | 102,844 | $ | 24,396 | |||||||||
Interest and investment income | 47,709 | 42,414 | 4,178 | 1,117 | |||||||||||||
Realized gains and losses | 2,168 | (1,152 | ) | 25 | 3,295 | ||||||||||||
Total revenue | 1,361,408 | 1,225,553 | 107,047 | 28,808 | |||||||||||||
Personnel costs | 427,683 | 400,020 | 10,834 | 16,829 | |||||||||||||
Other operating expenses | 283,928 | 217,640 | 45,891 | 20,397 | |||||||||||||
Agent commissions | 415,307 | 415,307 | — | — | |||||||||||||
Depreciation and amortization | 32,348 | 31,589 | 1,353 | (594 | ) | ||||||||||||
Claim loss expense | 189,426 | 151,128 | 38,299 | (1 | ) | ||||||||||||
Interest expense | 12,782 | 4,183 | 343 | 8,256 | |||||||||||||
Total expenses | 1,361,474 | 1,219,867 | 96,720 | 44,887 | |||||||||||||
Earnings (loss) before income taxes | (66 | ) | 5,686 | 10,327 | (16,079 | ) | |||||||||||
Income tax expense | (4,075 | ) | (2,905 | ) | 3,197 | (4,367 | ) | ||||||||||
Earnings (loss) before equity investments and minority interest | 4,009 | 8,591 | 7,130 | (11,712 | ) | ||||||||||||
Earnings from equity investments | 2,761 | 248 | — | 2,513 | |||||||||||||
Minority interest | 298 | 423 | — | (125 | ) | ||||||||||||
Net earnings (loss) | $ | 6,472 | $ | 8,416 | $ | 7,130 | $ | (9,074 | ) | ||||||||
Open orders | 523,300 | 523,300 | — | — | |||||||||||||
Closed orders | 339,100 | 339,100 | — | — |
FIDELITY NATIONAL FINANCIAL, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
SEGMENT INFORMATION
(In thousands)
(Unaudited)
Nine Months Ended | Specialty | Corporate | |||||||||||||||
September 30, 2008 | Consolidated | FNT | Insurance | and Other | |||||||||||||
Gross operating revenue | $ | 3,219,452 | $ | 2,856,645 | $ | 278,889 | $ | 83,918 | |||||||||
Interest and investment income | 102,951 | 91,179 | 10,267 | 1,505 | |||||||||||||
Realized gains and losses | (15,762 | ) | (27,523 | ) | (3,109 | ) | 14,870 | ||||||||||
Total revenue | 3,306,641 | 2,920,301 | 286,047 | 100,293 | |||||||||||||
Personnel costs | 1,065,941 | 986,698 | 34,453 | 44,790 | |||||||||||||
Other operating expenses | 896,778 | 711,727 | 121,181 | 63,870 | |||||||||||||
Agent commissions | 911,692 | 911,692 | — | — | |||||||||||||
Depreciation and amortization | 106,679 | 87,670 | 4,225 | 14,784 | |||||||||||||
Claim loss expense | 547,596 | 438,701 | 108,895 | — | |||||||||||||
Interest expense | 50,935 | 5,076 | 463 | 45,396 | |||||||||||||
Total expenses | 3,579,621 | 3,141,564 | 269,217 | 168,840 | |||||||||||||
Earnings (loss) before income taxes | (272,980 | ) | (221,263 | ) | 16,830 | (68,547 | ) | ||||||||||
Income tax expense | (112,146 | ) | (87,311 | ) | 7,743 | (32,578 | ) | ||||||||||
Earnings (loss) before equity investments and minority interest | (160,834 | ) | (133,952 | ) | 9,087 | (35,969 | ) | ||||||||||
Earnings (loss) from equity investments | (7,385 | ) | 2,983 | — | (10,368 | ) | |||||||||||
Minority interest | (4,087 | ) | 559 | — | (4,646 | ) | |||||||||||
Net earnings (loss) | $ | (164,132 | ) | $ | (131,528 | ) | $ | 9,087 | $ | (41,691 | ) | ||||||
Open orders | 1,432,200 | 1,432,200 | — | — | |||||||||||||
Closed orders | 875,900 | 875,900 | — | — |
Nine Months Ended | Specialty | Corporate | |||||||||||||||
September 30, 2007 | Consolidated | FNT | Insurance | and Other | |||||||||||||
Gross operating revenue | $ | 4,069,825 | $ | 3,705,968 | $ | 297,573 | $ | 66,284 | |||||||||
Interest and investment income | 141,014 | 125,183 | 12,252 | 3,579 | |||||||||||||
Realized gains and losses | 12,449 | 2,146 | (3 | ) | 10,306 | ||||||||||||
Total revenue | 4,223,288 | 3,833,297 | 309,822 | 80,169 | |||||||||||||
Personnel costs | 1,315,695 | 1,236,300 | 34,247 | 45,148 | |||||||||||||
Other operating expenses | 814,590 | 649,372 | 108,508 | 56,710 | |||||||||||||
Agent commissions | 1,298,340 | 1,298,210 | — | 130 | |||||||||||||
Depreciation and amortization | 92,894 | 86,678 | 4,423 | 1,793 | |||||||||||||
Claim loss expense | 413,495 | 301,662 | 111,834 | (1 | ) | ||||||||||||
Interest expense | 37,194 | 11,215 | 1,197 | 24,782 | |||||||||||||
Total expenses | 3,972,208 | 3,583,437 | 260,209 | 128,562 | |||||||||||||
Earnings (loss) before income taxes | 251,080 | 249,860 | 49,613 | (48,393 | ) | ||||||||||||
Income tax expense | 81,441 | 80,200 | 18,106 | (16,865 | ) | ||||||||||||
Earnings (loss) before equity investments and minority interest | 169,639 | 169,660 | 31,507 | (31,528 | ) | ||||||||||||
Earnings from equity investments | 4,620 | 1,947 | — | 2,673 | |||||||||||||
Minority interest | (447 | ) | 1,355 | — | (1,802 | ) | |||||||||||
Net earnings (loss) | $ | 174,706 | $ | 170,252 | $ | 31,507 | $ | (27,053 | ) | ||||||||
Open orders | 1,797,800 | 1,797,800 | — | — | |||||||||||||
Closed orders | 1,138,200 | 1,138,200 | — | — |
FIDELITY NATIONAL FINANCIAL, INC.
SUMMARY BALANCE SHEET INFORMATION
(In thousands, except per share amounts)
SUMMARY BALANCE SHEET INFORMATION
(In thousands, except per share amounts)
September 30, | December 31, | |||||||
2008 | 2007 | |||||||
(Unaudited) | ||||||||
Cash and investment portfolio | $ | 4,196,274 | $ | 4,671,383 | ||||
Goodwill | 1,351,106 | 1,339,705 | ||||||
Title Plant | 342,599 | 331,888 | ||||||
Total assets | 7,313,864 | 7,587,853 | ||||||
Notes payable | 1,356,023 | 1,167,739 | ||||||
Reserve for claim losses | 1,634,557 | 1,419,910 | ||||||
Secured trust deposits | 589,476 | 689,935 | ||||||
Total stockholders’ equity | 2,820,748 | 3,244,088 | ||||||
Book value per share | 13.36 | 15.23 |
###