Fidelity National Financial, Inc. (FNF)

FNF 
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Fidelity National Financial Inc. (FNF)

Q3 2009 Earnings Call

October 22, 2009; 09:00 am ET

Executives

Al Stinson - Chief Executive Officer

Tony Park - Chief Financial Officer

Randy Quirk - President

Bill Foley - Chairman

Dan Murphy - Senior Vice President & Treasurer

Analysts

Mark DeVries - Barclays Capital

Bob Napoli - Piper Jaffray

Nathaniel Otis - KBW

Nik Fisken - Stephens Inc

Doug Mewhirter - RBC Capital Markets

David West - Davenport & Company

Presentation

Operator

Ladies and gentlemen, we’d like to thank you for standing by. Welcome to the FNF third quarter earnings call teleconference. At this time, all participants are in a listen-only mode. (Operator Instructions)

I would now like to turn the conference over to your host Mr. Dan Murphy. Please go ahead, sir.

Dan Murphy

Thank you, good morning everyone and thanks for joining us for our third quarter 2009 earnings conference call. Joining me today are Bill Foley, our Chairman; Al Stinson, our CEO; Randy Quirk, President; and Tony Park, our CFO.

We’ll begin with a brief strategic overview from Bill Foley, Al Stinson will provide an update on the title business and our operating companies, and Tony Park will finish with a review of the financial highlights. We’ll then open it up for your questions and finish with some concludes remarks from Bill Foley.

This conference call may contain 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 the risks and other factors detailed in our press release dated yesterday and in the statement regarding forward-looking information, risk factors and other sections of the company’s Form 10-K and other filings with the SEC.

This conference call will be available for replay via webcast at our website at www.fnf.com. It will also be available through phone replay beginning at 11:00 AM Eastern time today, through next Thursday, the October 29. The replay number is 800-475-6701 and the access code is 117639.

Let me now turn the call over to our Chairman, Bill Foley.

Bill Foley

Thanks, Dan. This was another solid financial quarter for our company. Title order volumes increased nicely versus the prior year and so did modest overall sequential decline from the second quarter as refinance volumes slowed from their accelerated pace earlier in the year.

However, we were able to reduce cost throughout the quarter, and our title business produced an 8.9% pre tax margin, very close to our second quarter performance of a 9.2% per tax margin. We did see strength in open order accounts as the quarter progressed, as September showed the strongest open order volumes during the quarter. Additionally, open order volumes continued to accelerate in October reaching the highest levels in four months.

These elevated open order levels have us well positioned as we entered the normally seasonally slower fourth quarter and first quarter of next year. We announced the sale of our small leasing company Fidelity National Capital during the quarter for a total net proceeds of approximately $15 million.

Well, Fidelity National Capital is relatively small business for FNF, it’s strong growth had resulted in more than $200 million of primarily non recourse debt on our consolidate balance sheet and we believe that this sale was a great opportunity to continue to delever our balance sheet and to monetize an investment. Our debt to total capital ratio ended the quarter with 21%, as a result of the sale of this assets.

We are moving towards the completion of our price increase initiatives, we have now implemented price increases in 25 states averaging between 5% and 10% in those states in which we’ve accomplished increases. We are now seeing the full impact of the 10% price increase in California, our largest state.

Additionally, Texas has completed their rating review and we are optimistic for a mid to high single digit rate increase in that state. There are still only a few states with pending applications, but we’ve effectively completed the majority of the price increases.

Let me now turn the call over to our CEO, Al Stinson.

Al Stinson

Thank you Bill. In the title business, total open order volumes were very consistent in July and August. It actually showed a nice increase in September and a further increase in October. We opened 8,700 orders per day in July, more than 8,600 per day in August and nearly 9,400 orders per day in September.

Open order counts continue to accelerate in October, as we averaged nearly 10,000 open orders for the first two weeks of October. We focused on moderate head count reductions during much of the third quarter eliminating about 850 positions. Despite a 16% sequential drop in closed orders and $101 million or 7% reduction in total title revenue, we were still able to generate pretax title profits that only decline about $13 million and an 8.9% pretax margin that was only a 30 basis points or 3% sequential decline from the second quarter.

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