FNF Fidelity National Financial Inc

JACKSONVILLE, Fla., Oct. 24 /PRNewswire-FirstCall/ -- Fidelity National Financial, Inc. (NYSE:FNF), a leading provider of title insurance, specialty insurance and claims management services, today reported operating results for the three-month and nine-month periods ended September 30, 2007. Three Months Three Months Pro Forma Three Ended Ended Months Ended September 30, September 30, September 30, 2007 2006** 2006*** Total revenue $1.36 billion $2.63 billion $1.62 billion Pre-tax margin 0.2%* 11.2% 10.9% Net earnings $6.5 million* $127.6 million $114.1 million Net earnings per $0.03* $0.73 $0.51 diluted share Cash flow from $74.8 million $265.7 million N/A operations *These reported results include the impact of an $81.5 million charge to strengthen the reserve for claim losses. ** The three-month and nine-month periods ended September 30, 2006, include the results of Fidelity National Information Services, Inc. ("FIS"), which was a majority-owned subsidiary of FNF during those periods in 2006. *** A complete pro forma summary of earnings excluding FIS and the minority interest expense related to Fidelity National Title Group, Inc. ("FNT") for the three-month and nine month periods ended September 30, 2006, is included later in this press release. Three Months Ended September 30, 2007 Net earnings $6.5 million After-tax impact from charge to strengthen loss reserves $55.5 million Net earnings, excluding the charge to strengthen loss reserves $62.0 million Net earnings per diluted share, excluding the charge to strengthen loss reserves $0.28 Nine Months Nine Months Pro Forma Nine Ended Ended Months Ended September 30, September 30, September 30, 2007 2006** 2006*** Total revenue $4.23 billion $7.63 billion $4.79 billion Pre-tax margin 6.0%* 10.6% 11.0% Net earnings $174.7 million* $366.6 million $338.0 million Net earnings per diluted share $0.79* $2.11 $1.52 Cash flow from operations $304.5 million $598.5 million N/A The following are summary financial and operational results for the current operating segments of FNF for the three-month and nine-month periods ended September 30, 2007, and 2006: Fidelity National Title Group ("FNT") Three Months Three Months Ended Ended September 30, 2007 September 30, 2006 Total revenue $1.23 billion $1.51 billion Pre-tax earnings $5.9 million* $170.5 million Pre-tax margin 0.5%* 11.3 % Pre-tax earnings before reserve charge $87.4 million N/A Pre-tax margin before 7.1% N/A reserve charge *These reported results include the impact of an $81.5 million charge to strengthen the reserve for claim losses. Nine Months Nine Months Ended Ended September 30, 2007 September 30, 2006 Total revenue $3.84 billion $4.46 billion Pre-tax earnings $251.8 million* $494.5 million Pre-tax margin 6.6%* 11.1% Pre-tax earnings before reserve charge $333.3 million N/A Pre-tax margin before reserve charge 8.7% N/A Direct Direct Orders Orders Month Opened 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% Direct Direct Orders Orders Month Opened Closed Closing % July 2006 208,000 142,400 69% August 2006 242,800 158,700 65% September 2006 212,700 139,100 65% Third Quarter 2006 663,500 440,200 66% Open Closed Commercial Commercial Commercial Revenue Commercial Orders Orders (In thousands) Fee Per File 3rd Quarter 2007 13,700 8,200 $80,500 $9,800 3rd Quarter 2006 11,900 7,700 $66,300 $8,600 - The preceding table only includes commercial activity from FNF's commercial offices in the national commercial division and does not attempt to capture commercial activity in our local offices. Specialty Insurance Three Months Three Months Ended Ended September 30, 2007 September 30, 2006 Total revenue $107.0 million $103.6 million Pre-tax earnings $10.3 million $19.1 million Pre-tax margin 9.6% 18.4% Nine Months Nine Months Ended Ended September 30, 2007 September 30, 2006 Total revenue $309.8 million $315.5 million Pre-tax earnings $49.6 million $67.0 million Pre-tax margin 16.0% 21.2% "This quarter presented challenging operating environments for several of our businesses," said Chairman of the Board William P. Foley, II. "Obviously, the mortgage and real estate markets have impacted volumes in our title insurance business and we have responded with significant staffing reductions, eliminating more than 1,700 positions, or 14% of our field staff, during the third quarter. While personnel costs in the title business have been reduced by more than $36 million versus the prior year quarter, many of those positions were eliminated very late in the third quarter, so we won't see the full impact of those additional cost savings until the fourth quarter and into 2008. We also found it necessary to bolster our reserve for claim losses, as the higher claims activity the entire title industry has experienced continued in the third quarter. Our specialty insurance segment also had some operating challenges during the quarter. The personal lines business suffered through higher losses in the third quarter due to increased fire losses in California, particularly in July and August, while the home warranty business suffered from the significant slowdown in the real estate markets, particularly in the west. In summary, the third quarter was a difficult period as several of our companies, particularly the title business, faced tough market conditions. Despite the very difficult environment, our title business was able to generate a 7.1% pre-tax margin before the reserve charge. We manage all of our businesses with a goal to maximize profitability for our shareholders in all environments and will continue to do so in the fourth quarter and into 2008." Fidelity National Financial, Inc. (NYSE:FNF), is a leading provider of title insurance, specialty insurance and claims management 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 28 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. More information about FNF can be found at http://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; 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. FIDELITY NATIONAL FINANCIAL, INC. SUMMARY OF EARNINGS (In thousands, except per share amounts and order information) Three months ended Nine months ended September 30, September 30, 2007 2006 2007 2006 (Unaudited) (Unaudited) Direct title premiums $391,065 $485,043 $1,258,166 $1,479,415 Agency title premiums 537,598 701,533 1,677,606 1,998,117 Total title premiums 928,663 1,186,576 2,935,772 3,477,532 Escrow and other title-related fees 262,222 267,744 790,336 808,468 Total title and escrow 1,190,885 1,454,320 3,726,108 4,286,000 Transaction processing services -- 1,013,372 -- 2,832,638 Specialty insurance 102,844 99,619 297,573 304,070 Interest and investment income 50,470 54,744 145,634 154,259 Realized gains and losses 2,168 (1,810) 12,449 15,745 Other 17,802 14,577 46,144 41,378 Total revenue 1,364,169 2,634,822 4,227,908 7,634,090 Personnel costs 427,683 863,163 1,315,695 2,632,935 Other operating expenses 283,928 610,732 814,590 1,706,137 Agent commissions 415,307 538,700 1,298,340 1,537,489 Depreciation and amortization 32,348 142,170 92,894 404,770 Claim loss expense 189,426 118,643 413,495 357,210 Interest expense 12,782 65,931 37,194 183,536 Total expenses 1,361,474 2,339,339 3,972,208 6,822,077 Earnings before income taxes 2,695 295,483 255,700 812,013 Income tax expense (4,075) 109,920 81,441 302,069 Minority interest 298 57,992 (447) 143,381 Net earnings $6,472 $127,571 $174,706 $366,563 Net earnings per share - basic $0.03 $0.74 $0.80 $2.11 Net earnings per share - diluted $0.03 $0.73 $0.79 $2.11 Weighted average shares - basic 216,325 173,475 218,860 173,475 Weighted average shares - diluted 219,548 173,643 221,797 173,648 Direct operations orders opened 523,300 811,400 1,797,800 2,490,700 Direct operations orders closed 339,100 521,900 1,138,200 1,602,700 Fee per file $1,683 $1,582 $1,620 $1,571 Actual title claims paid $82,413 $73,172 $223,157 $179,167 FIDELITY NATIONAL FINANCIAL, INC. SEGMENT INFORMATION (In thousands) (Unaudited) 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 50,470 42,662 4,178 3,630 Realized gains and losses 2,168 (1,152) 25 3,295 Total revenue 1,364,169 1,225,801 107,047 31,321 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 Pretax earnings 2,695 5,934 10,327 (13,566) Pretax margin 0.2% 0.5% 9.6% -- Open orders 523,300 523,300 -- -- Closed orders 339,100 339,100 -- -- 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 145,634 127,130 12,252 6,252 Realized gains and losses 12,449 2,146 (3) 10,306 Total revenue 4,227,908 3,835,244 309,822 82,842 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 Pretax earnings 255,700 251,807 49,613 (45,720) Pretax margin 6.0% 6.6% 16.0% -- Open orders 1,797,800 1,797,800 -- -- Closed orders 1,138,200 1,138,200 -- -- FIDELITY NATIONAL FINANCIAL, INC. SEGMENT INFORMATION (In thousands) (Unaudited) Three Months Ended September 30, 2006 Specialty Corporate Consolidated Eliminations FNT FIS Insurance and Other Gross operating revenue $2,581,888 ($67,489) $1,464,293 $1,080,651 $99,619 $4,814 Interest and investment income 54,744 -- 44,161 361 4,011 6,211 Realized gains and losses (1,810) -- (1,422) 1,292 6 (1,686) Total revenue 2,634,822 (67,489) 1,507,032 1,082,304 103,636 9,339 Personnel costs 863,163 (5,863) 436,064 416,733 11,409 4,820 Other operating expenses 610,732 (40,053) 223,359 383,120 41,358 2,948 Agent commissions 538,700 (21,573) 555,010 -- -- 5,263 Depreciation and amortization 142,170 -- 29,881 111,135 1,706 (552) Claim loss expense 118,643 -- 88,706 240 29,695 2 Interest expense 65,931 -- 3,481 49,629 398 12,423 Total expenses 2,339,339 (67,489) 1,336,501 960,857 84,566 24,904 Pretax earnings 295,483 -- 170,531 121,447 19,070 (15,565) Pretax margin 11.2% -- 11.3% 11.2% 18.4% -- Open orders 811,400 -- 663,500 147,900 -- -- Closed orders 521,900 -- 440,200 81,700 -- -- Nine Months Ended September 30, 2006 Specialty Corporate Consolidated Eliminations FNT FIS Insurance and Other Gross operating revenue $7,464,086 ($170,653)$4,317,814 $3,003,533 $304,070 $9,322 Interest and investment income 154,259 -- 122,006 3,500 11,460 17,293 Realized gains and losses 15,745 -- 15,765 3,331 (50) (3,301) Total revenue 7,634,090 (170,653) 4,455,585 3,010,364 315,480 23,314 Personnel costs 2,632,935 (17,795) 1,354,720 1,245,945 33,791 16,274 Other operating expenses 1,706,137 (94,417) 666,587 1,011,725 112,385 9,857 Agent commissions 1,537,489 (58,441) 1,587,547 -- -- 8,383 Depreciation and amortization 404,770 -- 83,312 318,304 4,678 (1,524) Claim loss expense 357,210 -- 260,444 425 96,646 (305) Interest expense 183,536 -- 8,435 141,930 979 32,192 Total expenses 6,822,077 (170,653) 3,961,045 2,718,329 248,479 64,877 Pretax earnings 812,013 -- 494,540 292,035 67,001 (41,563) Pretax margin 10.6% -- 11.1% 9.7% 21.2% -- Open orders 2,490,700 -- 2,044,500 446,200 -- -- Closed orders 1,602,700 -- 1,350,300 252,400 -- -- FIDELITY NATIONAL FINANCIAL, INC. SUMMARY BALANCE SHEET INFORMATION (In thousands, except per share amounts) September 30, December 31, 2007 2006 (Unaudited) Cash and investment portfolio $4,334,264 $4,798,195 Goodwill 1,360,565 1,154,298 Title Plant 331,688 324,155 Total assets 7,226,471 7,259,559 Notes payable 643,837 491,167 Reserve for claim losses 1,296,691 1,220,636 Secured trust deposits 711,430 905,461 Total stockholders' equity 3,424,059 3,474,368 Book value per share 15.87 15.75 FIDELITY NATIONAL FINANCIAL, INC. UNAUDITED PRO FORMA SUMMARY OF EARNINGS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2006 (In thousands except per share amounts) FNF Capital pro forma Other Pro Historical FIS pro forma adjustments forma FNF adjustments(1) (2) Adjustments Notes Pro Forma Total title and escrow $1,454,320 ($21,580) -- $21,573 (3) $1,454,313 Transaction processing 1,013,372 (1,059,071) -- 45,699 (3) -- Specialty insurance 99,619 -- -- -- 99,619 Interest and investments income 54,744 (361) (31) -- 54,352 Realized gains and losses (1,810) (1,292) -- -- (3,102) Other income 14,577 -- (2,613) -- 11,964 Total revenue $2,634,822 ($1,082,304) (2,644) $67,272 $1,617,146 Personnel costs 863,163 (416,733) (462) 5,863 (4) 451,831 Other operating expenses 610,732 (383,120) (306) 39,836 (4) 265,227 (1,915) (5) Agent commissions 538,700 -- -- 21,573 (6) 560,273 Depreciation and amortization 142,170 (111,135) (7) -- 31,028 Provision for claim losses 118,643 (240) -- -- 118,403 Interest expense 65,931 (49,629) (1,751) 243 (7) 14,794 Total expenses 2,339,339 (960,857) (2,526) 65,600 1,441,556 Earnings before income taxes 295,483 (121,447) (118) 1,672 175,590 Income tax expense 109,920 (42,902) (502) (4,182) 62,334 Minority interest 57,992 35 (211) (58,666) (8) (850) Net income $127,571 ($78,580) 595 $64,520 $114,106 Net income per share-basic $0.52 Pro forma weighted average shares-basic 219,000(9) Net income per share-diluted $0.51 Pro forma weighted average shares-diluted 222,000 (9) FIDELITY NATIONAL FINANCIAL, INC. UNAUDITED PRO FORMA SUMMARY OF EARNINGS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2006 (In thousands except per share amounts) FNF Capital pro forma Other Pro Historical FIS pro forma adjustments forma FNF adjustments(1) (2) Adjustments Notes Pro Forma Total title and escrow $4,286,000 ($58,683) -- $58,441 (3) $4,285,758 Transaction processing 2,832,638 (2,944,850) -- 112,212 (3) -- Specialty insurance 304,070 -- -- -- 304,070 Interest and investments income 154,259 (3,500) (89) -- 150,670 Realized gains and losses 15,745 (3,331) -- -- 12,414 Other income 41,378 -- (6,984) -- 34,394 Total revenue $7,634,090 ($3,010,364) (7,073) $170,653 $4,787,306 Personnel costs 2,632,935 (1,245,945) (1,998) 17,795 (4) 1,402,787 Other operating expenses 1,706,137 (1,011,725) (703) 94,417 (4) 779,511 (8,615) (5) Agent commissions1,537,489 -- -- 58,441 (6) 1,595,930 Depreciation and amortization 404,770 (318,304) (20) -- 86,446 Provision for claim losses 357,210 (425) -- -- 356,785 Interest expense 183,536 (141,930) (3,509) 600 (7) 38,697 Total expenses 6,822,077 (2,718,329) (6,230) 162,638 4,260,156 Earnings before income taxes 812,013 (292,035) (843) 8,015 527,150 Income tax expense 302,069 (108,109) (296) (6,526) 187,138 Minority interest 143,381 41 (211) (141,184) (8) 2,027 Net income $366,563 ($183,967) (336) $155,725 $337,985 Net income per share-basic $1.54 Pro forma weighted average shares-basic 219,000(9) Net income per share-diluted $1.52 Pro forma weighted average shares-diluted 222,000(9) FIDELITY NATIONAL FINANCIAL, INC. NOTES TO UNAUDITED PRO FORMA SUMMARY OF EARNINGS Notes to Unaudited Pro Forma Summary of Earnings for the Three-Month and Nine-Month Periods Ended September 30, 2006 This pro forma summary of earnings includes the historical statements of continuing operations of FNF and removes the results of operations of FIS, FNF Capital and FNF minority interest expense relating to FIS and FNT, as though the reorganization transaction that occurred on October 24, 2006, had occurred on January 1, 2006. (1) This column represents the historical results of operations of FIS as included in FNF's consolidated results of operations for the periods presented. (2) This column represents the historical results of operations of FNF Capital as included in FNF's consolidated results of operations for the periods presented. (3) This represents the intercompany revenues relating to various agreements recorded on FIS' income statement that had already been eliminated from the consolidated results of operations of FNF. These revenues amounted to $67.3 million and $170.7 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (4) This represents the intercompany expenses related to various agreements that were eliminated in the consolidated results of operations of FNF, but are third-party expenses subsequent to the reorganization transaction. These expenses amounted to $45.7 million and $112.2 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (5) This represents transaction costs related to the reorganization, all of which have been excluded from the pro forma summary of earnings. These costs amounted to $1.9 million and $8.6 million, respectively, for the three- month and nine-month periods ended September 30, 2006. (6) This represents the additional agent commissions paid by FNF to FIS that were previously eliminated in the consolidated results of FNF, but are a third-party expense subsequent to the reorganization transaction. These commissions amounted to $21.6 million and $58.4 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (7) This represents intercompany interest expense that is a third-party expense subsequent to the reorganization transaction. These expenses amounted to $0.2 million and $0.6 million, respectively, for the three-month and nine- month periods ended September 30, 2006. (8) This represents the elimination of the minority interest expense recorded by FNF relating to its earnings in FIS and FNT. Minority interest expense relating to FIS was $39.7 million and $88.0 million, respectively, for the three-month and nine-month periods ended September 30, 2006. Minority interest relating to FNT was $19.0 million and $53.2 million, respectively, for the three-month and nine-month periods ended September 30, 2006. (9) Amounts presented approximate the actual number of basic and diluted weighted average shares outstanding subsequent to the reorganization transaction. DATASOURCE: Fidelity National Financial, Inc. CONTACT: Daniel Kennedy Murphy, Senior Vice President, Finance and Investor Relations of Fidelity National Financial, Inc., +1-904-854-8120, Web site: http://www.fnf.com/

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