Fidelity National Financial, Inc. (FNF)

FNF 
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Fidelity National Financial, Inc. (FNF)

Q1 2010 Earnings Call Transcript

April 22, 2010 9:00 am ET

Executives

Dan Murphy – SVP and Treasurer

Al Stinson – CEO

Tony Park – CFO

Randy Quirk – President

Bill Foley – Chairman

Analysts

Mark Dwelle – Barclays Capital

Doug Mewhirter – RBC Capital Markets

Brett Huff – Stephens

Bob Napoli – Piper Jaffray

Nathaniel Otis – KBW

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Fidelity National Financial first quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session. Instructions will be given at that time. (Operator Instructions) And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Dan Murphy. Please go ahead, sir.

Dan Murphy

Thank you. Good morning, everyone, and thanks for joining us for our first quarter 2010 earnings conference call. Joining me today are Al Stinson, Chief Executive Officer; Raymond Quirk, President; and, Tony Park, CFO. Our Chairman, Bill Foley, will join us later for the question-and-answer session.

We'll begin with the brief strategic overview from Al Stinson. Al will also provide an update on the title business and our other operating companies. And then Tony will finish with the review of the financials. We'll then open to questions – open for your questions, and then finish with some concluding remarks.

This 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 facts, 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 risk 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 a 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 Web site at fnf.com. It will also be available through phone replay beginning at 11:00 am Eastern Time today through May 22nd, 2010. The replay number is 800-475-6701. And the access code is 152826.

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

Al Stinson

Thank you, Dan. This quarter was a typical seasonally-impacted beginning to the year as we started slow in January coming out of the holiday season and built momentum as we made our way into the month of March. Open order counts were relatively stable during the quarter after the first two weeks of January as we averaged between 8,500 and 8,800 from the second half of January through March. Close order accounts were seasonally soft during the first quarter and were further impacted by the new RESPA closing requirements.

We also continued to aggressively manage our cost structure in the first quarter, eliminating nearly 600 additional positions during those three months. The two-and-a-half months of consistent open order activity, the first quarter seasonal delay in order closings, and the continued cost reductions should allow us to produce stronger results in the title business during the second quarter.

Previously, we announced the signing of a definitive agreement, under which we will sell our 32% equity ownership stake in Sedgwick to two private equity firms, including one which was a 40% owner of Sedgwick when we made our initial investment in January 2006. Under the terms of the definitive agreement, the total cash purchase price for Sedgwick, including the repayment of debt, will be about $1.1 billion. We expect to receive net proceeds of about $220 million for a 32% equity ownership stake resulting in a pre-tax gain of about $95 million. Closing is expected during the second quarter of 2010 subject to customary closing conditions and the receipt of any necessary regulatory approvals.

The sale of Sedgwick clearly achieves our ongoing goal of creating significant value for our shareholders and is the culmination of a very successful four-year investment for FNF. We are very proud of the growth that Sedgwick experienced during our mutually beneficial partnership with the company. And we wish them future success with their new investment partners.

We realized a significant gain from one distressed debt investment in our portfolio, MSX International. We originally purchased the bonds during the first half of 2009 for a total purchase price of about $22 million. In early March, we sold these bonds for total net proceeds of about $48 million, a pre-tax gain of $26 million.

Yesterday, our Board of Directors declared an increase quarterly cash dividend of $0.18 per share. The $0.18 per share cash dividend represents a 20% increase over the most recent quarterly cash dividend of $0.15 per share. We are confident in the future prospects of FNF. And we hope that this significant increase in the dividend could face that confidence to our shareholders.

During March, we amended and extended our existing credit facility, decreasing the total size of the facility from $1.1 billion to about $951 million and pushing the maturity date on a $925 million tranche out to March 2013. We had one lender who declined to extend. And thus, we still have a $26.25 million tranche that matures in October 2011. Pricing on the $925 million tranche was increased to LIBOR plus 150 basis points at our current ratings, while the $26.25 million tranche pricing remained at LIBOR plus 47.5 basis points.

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