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Fidelity National Financial Inc. Reports Operating Results (10-Q)

July 28, 2010 | About:
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10qk

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Fidelity National Financial Inc. (FNF) filed Quarterly Report for the period ended 2010-06-30.

Fidelity National Financial Inc. has a market cap of $3.44 billion; its shares were traded at around $14.97 with a P/E ratio of 12.3 and P/S ratio of 0.6. The dividend yield of Fidelity National Financial Inc. stocks is 4.8%.FNF is in the portfolios of Tom Gayner of Markel Gayner Asset Management Corp, Richard Pzena of Pzena Investment Management LLC, Arnold Schneider of Schneider Capital Management, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Charles Brandes of Brandes Investment, Jim Simons of Renaissance Technologies LLC, Murray Stahl of Horizon Asset Management, John Keeley of Keeley Fund Management, Jeremy Grantham of GMO LLC.

Highlight of Business Operations:

On March 18, 2009, the Federal Reserve announced plans to provide greater support to mortgage lending and housing markets by buying up to $750 billion in mortgage-backed securities issued by agencies like Fannie Mae and Freddie Mac, bringing its total proposed purchases of these securities to a total of up to $1.25 trillion in 2009, and to increase its purchases of other agency debt in 2009 by up to $100 billion to a total of up to $200 billion. Since then, the Federal Reserve gradually slowed the pace of its purchases of both agency debt and agency mortgage-backed securities, ending these transactions on March 31, 2010. Moreover, to help improve conditions in private credit markets, the Federal Reserve decided to purchase up to $300 billion of longer-term Treasury securities, which purchases were completed in October 2009. According to the U.S. Department of the Treasury, historically low interest rates and the actions taken by the U.S. government described in the preceding paragraphs to support market stability and access to affordable mortgage credit have helped more than four million American homeowners to refinance.

Total revenues decreased $64.0 million in the three months ended June 30, 2010, compared to the 2009 period. The decrease consisted of a decrease of $182.9 million in the Fidelity National Title Group segment, offset by increases of $6.1 million in the specialty insurance segment and $112.8 million in the corporate and other segment. Total revenues decreased $197.1 million in the six months ended June 30, 2010, compared to the 2009 period. The decrease was made up of a decrease of $373.8 million in the Fidelity National Title Group segment, offset by increases of $8.6 million in the specialty insurance segment and $168.1 million in the corporate and other segments.

Escrow, title-related and other fees decreased $32.5 million, or 9%, in the three months ended June 30, 2010, from the 2009 period, and decreased $60.8 million, or 9% in the six months ended June 30, 2010, from the 2009 period. In the Fidelity National Title Group segment, escrow fees, which are more directly related to our direct operations, decreased $6.4 million, or 5%, in the three months ended June 30, 2010 compared to the 2009 period, and decreased $41.0 million, or 14%, in the six months ended June 30, 2010 compared to the 2009 period, in each case due to the decrease in residential transactions. Other fees in the Fidelity National Title Group segment, excluding escrow fees, decreased $38.8 million, or 18%, in the three months ended June 30, 2010 compared to the 2009 period, and decreased $58.6 million, or 15%, in the six months ended June 30, 2010 compared to the 2009 period, primarily due to a decrease in revenues from a division of our business that manages real estate owned by financial institutions. In the corporate and other segment, other fees increased $12.7 million in the three months ended June 30, 2010 compared to the 2009 period and increased $38.8 million in the six months ended June 30, 2010 compared to the 2009 period, primarily due to an increase in revenues related to our mortgage servicing subsidiary, LoanCare, acquired in June 2009.

Net realized gains totaled $124.2 million and $13.2 million in the three-month periods ended June 30, 2010 and 2009, respectively, and $152.8 million and $7.5 million in the six-month periods ended June 30, 2010 and 2009, respectively. The increase in the three month period is primarily composed of a $98.4 million gain on the sale of our 32% interest in Sedgwick in May 2010 as well as $23 million in gains on the sale of various fixed maturity securities. The increase in the six month period also included a $26 million gain on the sale of a fixed maturity bond during the first quarter of 2010. In addition, net realized gains for each period included a number of gains and losses on various transactions, none of which were individually significant.

Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and are one of our most significant operating expenses. Personnel costs decreased $31.0 million, or 7%, in the three months ended June 30, 2010, from the 2009 period, with a decrease of $37.1 million in the Fidelity National Title Group segment offset by increases of $5.5 million in the corporate and other segment and $0.6 million in the specialty insurance segment. Personnel costs decreased $81.5 million, or 10%, in the six months ended June 30, 2010, from the 2009 period, with decreases of $97.2 million in the Fidelity National Title Group segment offset by increases of $0.5 million in the specialty insurance segment and $15.2 million in the corporate and other segment. The decreases in the title segment in both periods is due mainly to decreases in title premiums from direct operations and decreases in opened and closed order counts. The increases in the corporate and other segment in both periods are due to the

Other operating expenses consist primarily of facilities expenses, title plant maintenance, premium taxes (which insurance underwriters are required to pay on title premiums in lieu of franchise and other state taxes), postage and courier services, computer services, professional services, travel expenses, general insurance, and trade and notes receivable allowances. Other operating expenses decreased $36.7 million in the three months ended June 30, 2010, from the 2009 period, reflecting decreases of $47.1 million in the Fidelity National Title Group segment, partially offset by increases of $2.7 million in the specialty insurance segment and $7.7 million in the corporate and other segment. Other operating expenses decreased $64.2 million in the six months ended June 30, 2010, from the 2009 period, reflecting decreases of $91.7 million in the Fidelity National Title Group segment, partially offset by increases of $5.7 million in the specialty insurance segment and $21.8 million in the corporate and other segment. The decreases in other operating expenses in both periods in the Fidelity National Title Group segment were due mainly to decreases in cost of sales and several other expense categories mainly relating to the declines in business levels. The increases in the corporate and other segment in both periods are due mainly to the acquisition of LoanCare in June 2009.

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