Fidelity National Financial, Inc. (FNF)

FNF 
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Fidelity National Financial (FNF)

Q4 2012 Earnings Call

February 20, 2013 11:00 am ET

Executives

Daniel Kennedy Murphy - Senior Vice President of Finance and Investor Relations of Fidelity National Financial

George P. Scanlon - Chief Executive Officer

Anthony J. Park - Chief Financial Officer, Principal Accounting Officer and Executive Vice President

Raymond R. Quirk - President

Analysts

Bose T. George - Keefe, Bruyette, & Woods, Inc., Research Division

Mark C. DeVries - Barclays Capital, Research Division

Brett Huff - Stephens Inc., Research Division

DeForest R. Hinman - Walthausen & Co., LLC

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the FNF 2012 Fourth Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. And I'd now like to turn the conference over to your host, Mr. Dan Murphy. Please go ahead.

Daniel Kennedy Murphy

Thanks and good morning, everyone, and thanks for joining us for our Fourth Quarter 2012 Earnings Conference Call.

Joining me today are George Scanlon, our CEO; Randy Quirk, President; and Tony Park, our CFO. We will begin with a brief strategic and business overview from George, and Tony will finish with a review of the financial highlights. We'll then open the call for your questions, and finish with some concluding remarks from George.

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 expectations, hopes, intentions or strategies regarding the future 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 financial and operating results and are not statements effects, 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 fnf.com. It will be available through phone replay beginning at 1:00 P.M. Eastern Time today through next Wednesday, February 27. The replay number is (800) 475-6701 and the access code is 278625.

Let me now turn the call over to our CEO, George Scanlon.

George P. Scanlon

Thank you, Dan, and good morning, everybody.

2012 was a successful year for our company on a number of fronts. Our Title business performed extremely well, generating a 14.1% pretax margin. For the full year 2012, we are particularly proud of the 16% pretax margin our Title business generated this quarter. That margin is nearly equal to the peak Title margin we earned in 2003, a year that saw total mortgage originations of $3.8 trillion, more than double the projection of total mortgage originations for 2012.

Our employees have worked hard to position the company for this level of success in what remains an improving, but sluggish market, and I congratulate them all for this achievement.

Refinanced transactions remain strong. We also saw acceleration in the level of purchase transactions as we experienced an 11% increase in open resale orders during the fourth quarter versus the prior year quarter.

For the full year, resale orders grew more than 7% versus 2011 giving us a sense of optimism as we look to 2013. Our Commercial Title business had a record-setting fourth quarter generating nearly $143 million in revenue, by far the strongest commercial quarter in the history of our company. Open orders of 18,300 increased 5%. Closed orders of 13,500 improved by 8% over the prior year quarter. Revenue growth was driven by a combination of the 8% increase in closed orders and a particularly strong 28% increase in the commercial fee per file.

For the full year 2012, commercial title revenue nearly $412 million, an increase of 13% versus 2011. We expect the Commercial business to continue to perform well for us throughout 2013. Open order accounts were strong during the quarter growing 25% over the prior year quarter. Overall, open orders averaged more than 10,800 per day for the fourth quarter with October averaging 11,700; November, 10,800; and December, 9,700.

First 2 weeks of December actually showed an increase from November, averaging 11,600 open orders per day.

Two weeks around Christmas and New Year's showed a normal seasonal slowdown averaging 8,100 open orders for those 2 weeks.

As expected open orders bounced back in January averaging 10,400 open orders per day with the last 2 weeks of the month averaging 11,100 open orders per day.

Not surprisingly, the mix of fourth quarter business continued to be weighted toward refinance orders. 68% of open orders and 67% of closed orders were refinance related.

As I mentioned earlier, we continue to see steady improvement in the purchase market as evidenced by the 11% increase in purchase orders opened in the fourth quarter versus the prior year, which is an accelerating trend that we saw throughout 2012.

2012 was also year of milestones for our 2 major nontitle businesses. Our Restaurant group expanded significantly with the acquisitions of O'Charley's and J. Alexander's growing from a revenue base of approximately $400 million entering 2012 to more than $1.4 billion entering 2013.

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