Fidelity Ends 2012 on a High Note

Zacks

Fidelity National Financial Inc.’s (FNF) fourth quarter earnings of 66 cents breezed past the Zacks Consensus Estimate by 17.9%. Results also increased 15.4% year over year from 78 cents reported in the year-ago quarter.

Fidelity reported a net income of $153.3 million in the fourth quarter, down 12.5% year over year.

Quarterly Operational Update

Total revenues increased 75.6% year over year to $2.2 billion in the fourth quarter. The improvement came on the back of solid contribution from total title premiums (up 27.9% year over year) and total title and escrow (up 26.4% year over year). It surpassed the Zacks Consensus Estimate of $2.1 billion.

Actual title claims paid decreased 14.3% year over year to $131.1 million.

Total expenses in the quarter increased 74.8% year over year to $2.0 billion. This was driven by increase in personnel costs (up 32.9% year over year), other operating expenses (up 30.2% year over year), agent commissions (up 20.5% year over year), depreciation and amortization costs (up 88.3% year over year), title claims loss expense (up 31% year over year) and interest expense (up 60.3% year over year).

Direct operations orders opened in the quarter were $0.7 million, up 25% year over year. Direct operations orders closed were $0.5 million, up 25.8% year over year.

Quarterly Segment Update

The Fidelity National Title Group reported total revenue of $1.6 billion, up 26% year over year. Adjusted pre-tax earnings were $254.5 million, up 71.1% year over year. Adjusted pre-tax margin increased 430 basis points year-over-year to 16.0%.

The Restaurant Group reported total revenue of $356.6 million. Adjusted earnings before interest, taxes, depreciation and amortization (:EBITDA) were $18.2 million.  Adjusted EBITDA margin was 5.1%. The segment incurred pre-tax loss of $4.7 million in the quarter.
    
The Remy segment reported total revenue of $274.9 million. Adjusted EBITDA was $40.1 million. Adjusted EBITDA margin was 14.6%. Pre-tax earnings in the segment were $9.0 million.

Full Year Highlights

Net earnings of $2.68 per share improved 61.4% year over year. Results also surpassed the Zacks Consensus Estimate of $2.43 per share.

Fidelity reported a net income of $611.7 million in 2012, up 61.4% year over year.

Total revenues for full year 2012 increased 48.8% year over year to $7.2 billion.

Actual title claims paid decreased 16.7% year over year to $433.3 million.

Direct operations orders opened in the quarter were 2.7 million, up 26.3% year over year. Direct operations orders closed were 1.9 million, up 23.3% year over year.

Financial Position

Fidelity exited 2012 with cash and investments worth $5.2 billion, up 9.9% year over year.

Cash from operating activities stood at $620.0 million in 2012, up 462.1% year over year.

As of Dec 31, 2012, total assets of the company were $9.9 billion, up 26% year over year.

Shareholders’ equity increased 29.9% year over year to $4.7 billion at 2012 end. The debt to capital ratio of the company improved 210 basis points year over year to 22.1% in 2012.

Performance of Few Other Property and Casualty Insurers

Allstate Corporation’s (ALL) fourth-quarter 2012 operating earnings per share of 59 cents significantly exceeded the Zacks Consensus Estimate of a loss of 7 cents but lagged the year-ago quarter’s earnings of $1.45 a share.

XL Group Plc’s (XL) fourth-quarter 2012 operating income of 13 cents per share outpaced the Zacks Consensus Estimate of a loss of 35 cents. Earnings rebounded from a loss of 25 cents incurred in the year-ago quarter.

American Financial Group Inc.'s (AFG) fourth quarter adjusted earnings of 67 cents breezed past the Zacks Consensus Estimate by 3.1%. However, results were down 36.2% year over year from $1.05 earned in the year-ago quarter.

Zacks Rank

Fidelity currently carries a Zacks Rank #1 (Strong Buy).

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