Fidelity National Financial, Inc. (FNF)

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Fidelity National Financial Inc. (FNF)

Q4 2009 Earnings Call

February 4, 2010 9:00 am ET


Bill Foley - Chairman

Al Stinson - Chief Executive Officer

Randy Quirk - President

Tony Park - Chief Financial Officer

Dan Murphy - Senior Vice President & Treasurer


Doug Mewhirter - RBC Capital Markets

Brett Huff - Stephens

Jason Deleeuw - Piper Jaffray

Bill Clark - KBW

[Doug Mewhirter - RBC Capital Markets]



Ladies and gentlemen thank you for standing by, and welcome to the FNF 2009 fourth quarter earnings call. At this time, all participants are in a listen-only mode. Later there will be an opportunity for questions and instructions will be given at that time. (Operator Instructions)

I would now like to turn the conference over to your host Mr. Dan Murphy; please go ahead.

Dan Murphy

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

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 take your questions and finish with some concluding 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 It will also be available through phone replay beginning at 11:00 am Eastern Time today, through next March 4, 2010. The replay number is 800-475-6701 and the access code is 141910.

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

Bill Foley

Thanks, Dan. Despite operating against the difficult economic backdrop, 2009 was a year of difficult accomplishments that has Fidelity National Financial well positioned as we enter 2010. We generated revenue of $5.8 billion, pretax profits of $345 million, net earnings of $222 million, and cash flow from operations of $380 million. All of these were significant increases and improvements over our 2008 results.

The December ‘08 acquisition of Lawyers Title and Commonwealth Title was fully integrated during the first half of 2009. From January through March, we aggressively removed costs from these operations and were able to return them to operational profitability by the month of March. The integration of Lawyers and Commonwealth was completed during the second quarter, with an overall cost reduction of nearly $265 million.

We eliminated approximately 2,300 positions, more than 40% of the employees transferred at closing, and more than 240 offices as part of the aggressive integration. These underwriters are fully integrated into the FNF family and we look forward to their continued significant contribution to our market-leading title insurance business in 2010 and beyond.

In April, we were successful in issuing 18.2 million shares of our common stock for approximately $331 million in proceeds in order to produce strengthen our balance sheet. These proceeds were primarily used to reduce the outstanding balance on our credit facility, repurchase our existing public debt and to make a capital infusion into Lawyers Title to bolster that underwriter’s balance sheet.

Throughout 2009, we reduced our outstanding debt by nearly $490 million, while growing our equity by almost $460 million. As a result, our debt-to-capital ratio ended the year at approximately 21%, after beginning 2009 at more than 32% and book value per share increased by more than $1.10, or 8%, from the beginning of 2009, ending at $14.41 on December 31, 2009.

The summer in fall brought very consistent order accounts in our title business as we averaged nearly 9,000 open orders per day for much of the period for the month of June through the middle of December. We also generated solid financial results in that timeframe. Yet, the stock price continued to languish. As a result, we repurchased approximately 6.5 million shares of our own stock through June of ‘09 through January of ‘10, spending approximately $86.5 million or about $13.30 per share. We continued to believe that our stock offers compelling value, particularly with the trading below book value.

2009 also brought many successes in our portfolio companies. Sedgwick continued to perform well, generating $700 million in revenue and more than $110 million in EBITDA during 2009. Sedgwick is an attractive asset and we look forward unlocking more of its value in 2010. Ceridian spent much of 2009 focused on cost reduction and control initiatives. That cost focused allowed the company to produce EBITDA of approximately $300 million on revenues of $1.5 million and EBITDA margin of 20%.

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