Fidelity National Financial Inc.
Fidelity National Financial Inc.
Total Assets: $5.24 billion (2002)
Stock Exchanges: New York
Ticker Symbol: FNF
NAIC: 524127 Direct Title Insurance Carriers; 551112 Offices of Other Holding Companies
Fidelity National Financial Inc., the nation’s top title insurance company, found early success by concentrating on the residential real estate market. Successfully executed acquisitions have expanded its reach throughout the country, including 49 states and the District of Columbia, plus Guam, Mexico, Puerto Rico, the U.S. Virgin Islands, and Canada. Seeking to cushion itself from the ups and downs of the industry, Fidelity has systematically broadened its range of services and products and has taken steps to move into the larger world of finance.
Building a Solid Foundation in Title Business: 1980s
Fidelity National Financial’s roots can be traced back to the mid-19th century with its predecessors doing business in California and Illinois. Fidelity’s timeline notes that those early title businesses had to contend with challenges including the Great Chicago Fire in 1871 and the San Francisco earthquake and fire of 1906.
The company’s current incarnation began to take form in 1980. That year, Fidelity National Title Insurance Co. (FNTIC), which began doing business in Nebraska in 1961, acquired the assets of a small underwriter in Tucson, Arizona. The purchase brought William P. Foley II and Frank P. Willey into the picture. In those early days of the 1980s, FNTIC ranked near the bottom among the top 50 title insurance companies in the United States, with revenues around $6 million.
Foley and Willey incorporated Fidelity National Financial Inc. in 1984 and took controlling interest in FNTIC in a leveraged buyout, a deal worth approximately $21 million. Foley served as president and chairman of the holding company, which owned several other small firms. The sale of stock to employees in 1985 gave Fidelity the distinction of being the nation’s first and only employee-owned title insurance underwriter.
Concurrently, the pair implemented sweeping changes in the way the business was operated. “For starters, Foley and Willey decided to curb the company’s dependence on independent agents and to emphasize direct selling through employees. This approach gave Fidelity control over costs. By constantly monitoring policies originated in-house, Fidelity was able to avoid the kinds of losses incurred by competitors,” recounted Philip Capelle for California Business in 1992.
The company made a public offering in 1987, trading on the American Stock Exchange under the symbol FNF. Another large purchase took place the same year. Western Title Insurance Co. and its subsidiaries were acquired for about $30 million in cash. Fidelity also left Arizona for California in 1987, moving corporate headquarters from Scottsdale to Irvine.
The 1989 purchase of an El Paso, Texas-based title company gave Fidelity its first direct title operations in that key state—in 1992 Texas ranked second, behind California and ahead of Florida, in terms of the nation’s title insurance market. In 1998, nine years after its initial entry in the state, FNTIC would merge with Alamo Title and gain the number two spot among underwriters in Texas.
Buying Up Properties: 1990s
Thanks to Foley and Willey’s management skills, Fidelity accomplished what no other major title company could in the late 1980s and into the early 1990s: churn out consecutive years of profitability. California, Fidelity’s home base, had been especially hard hit by the depressed market. But, while others struggled in the midst of a nationwide real estate downturn, Fidelity continued to report operating earnings. In 1991, company revenues were $220.6 million, a 23.5 percent increase over the previous year, and profits were $6.2 million, up 36 percent, according to California Business. In addition, Fidelity’s claim payment rates were the lowest in the industry in 1991 at 6.7 percent of earned premiums.
Contributing to the company’s success were the following: emphasis on the more stable sector of residential, as opposed to commercial, real estate; careful attention to customer service, particularly delivering policies on time; and Foley and Willey’s hands-on management style. Capelle explained the nature of the service Fidelity performed: “Title insurance is not a glamorous business, yet title companies provide an invaluable service for business. Their policies shield real estate holders—primarily lenders and buyers of real estate—from losses that may arise from claims filed against a property. They also protect customers from unforeseen tax liens or outright fraud by conducting a thorough title search on property before it’s bought.” Fidelity was earning high marks on how it negotiated the title insurance waters.
Fidelity switched to the New York Stock Exchange in 1992. It also made two large acquisitions: Meridian Title Insurance Co. and Security Title and Guarantee Co. The additions significantly boosted Fidelity’s revenues and extended direct operations to Florida, Michigan, Missouri, New Jersey, New York, North Carolina, and Pennsylvania. Year-end 1993 revenue was $575 million.
As part of his commitment to provide the best possible service to customers, Foley had invested heavily in technology. Fidelity deepened its involvement in technical services when it purchased, in 1994, ACS Systems Inc. The computer software development entity moved Fidelity into electronic commerce two years later. Stepping outside the title business, Fidelity’s 1995 acquisition of World Tax Service worked to further enhance its market position in California. The company also was making real estate investments to strengthen its economic base.
Foley strayed from Fidelity’s core business when he got involved in the effort to turn around the struggling CKE Restaurants, Inc., beginning in 1993. In the process, Fidelity invested in the fast-food industry. Foley’s initial success, however, diminished later in the decade when a large acquisition proved problematic; he would scale back his involvement to concentrate once again on Fidelity.
Fidelity brought the country’s eighth largest title underwriter into the fold in 1996 and, by doing so, doubled its existing agency base. Nations Title Inc., unlike Fidelity, was an agency driven title insurer, a system favored by the eastern and mid-western markets. Foley said, “The combination of our established direct operations and Nations’ strong agency network will provide a balance to Fidelity’s title premium revenue as well as hedge against future market downturns.”
The Nations Title purchase solidified Fidelity’s position as the number four title insurance company in the country, behind Commonwealth Title, Chicago Title, and industry leader First American. In 1997, Fidelity added the following: another title company, this one operating in the Southeast; three credit reporting companies; a flood certification company; and an attorney services provider.
The title insurance industry posted substantial gains in 1998, aided by a strong real estate market. But the first half of 1999 saw the industry slumping again in response to rising interest rates and a slowing down of property transactions. The inherent volatility of the industry was a driving force behind a trend toward consolidation. Pending legislative reform of the financial services sector and concerns about overcapacity also pushed companies to merge, according to an August 1999 American Banker article. In light of this environment, Fidelity announced plans to acquire a competitor that outranked them in size.
Over the Top: 2000 and Beyond
Fidelity’s merger with Chicago Title Corp., parent to Chicago Title, Ticor Title, and Security Union, would create the largest title insurer in the nation, giving Fidelity 30 percent of the U.S. title insurance market. Aside from the obvious benefits related to sheer size, such as economics of scale, Chicago Title and Fidelity were complementary companies. “For instance, Chicago Title has a strong appraisal business, whereas Fidelity is strong in tax services, a market not served by Chicago Title. Even where the two firms have overlapping businesses, they have traditionally had different geographic strengths,” wrote Ted Cornwell for National Mortgage News in August 1999.
Moreover, Fidelity and Chicago both cross-marketed products—an emerging segment of the title insurance business—to their title insurance customers. Fidelity had begun working, in 1997, on its bundled services capacity, including title and escrow, tax, credit, flood, foreclosure appraisal, document record, and electronic commerce. Combined with Chicago’s offerings, Fidelity broadened and deepened its scope. First American was probably the only other title insurer to have comparable ability to provide bundled services independently, that is, without having to contract out some services to other companies, thus increasing the package price.
Another plus for Fidelity was Chicago’s financial strength. The company’s debt-to-capital ratio was the lowest in the industry at 4 percent, while Fidelity was the highest at 28 percent. In addition, Chicago’s reserves-to-revenue ratio was nearly double Fidelity’s, according to a 1999 Forbes article. Fidelity’s acquisition of Chicago was completed in 2000 and valued at more than $1 billion. Fidelity’s year-end total revenue for 2001 reached $3.9 billion.
Our company was founded on five corporate precepts —Bias for Action, Autonomy and Entrepreneurship, Close Customer Relationships, Minimal Bureaucracy and Employee Ownership.
As Fidelity worked to strengthen its balance sheet, particularly paying down debt in the wake of the Chicago acquisition, Foley continued his quest for diversity. He planned to boost income of non-title insurance, such as flood and mortgage. Those areas had not yet produced significant streams of revenue. Fidelity bolstered its ancillary businesses as well.
NASDAQ-traded Fidelity National Information Solutions (FNIS) provided real estate-related data, technical solutions and services to lenders, agents, and others involved in the purchase process. Formed in 2001 through a merger with and reorganization of VISTA Information Solutions, FNIS was the largest provider of Multiple Listing Services in the nation only a year into operation. Another majority-owned subsidiary, Micro General, which had absorbed the software, systems integration, and telecommunications services in 1998, merged with FNIS in 2002.
The maneuvers made in the early years of the 21st century had elevated Fidelity to both Fortune 500 and Forbes 500 lists. In addition, Fidelity’s earnings hit record levels in 2002, up 74 percent over the prior year to $531.7 million.
Coinciding with the 2002 year-end report, Fidelity announced plans to acquire Alltel Information Services for approximately $1 billion. The subsidiary of Alltel Corp. was one of the largest providers of information-based technology in the world. While Alltel processed large numbers of mortgages, a greater portion of its revenue came from retail banking loans, according to a January 2004 American Banker article. Thus, explained Will Wade, the deal moved Fidelity closer toward its goal of becoming a full-service vendor in the financial services industry.
Chicago Title; Ticor Title; Security Union; Fidelity National Title Insurance Company; Alamo Title Insurance; FNF Capital, Inc.; Fidelity National Home Warranty; Investment Property Exchange Services, Inc.; Fidelity National Information Solutions (majority owned); American National Financial, Inc. (greater than 15% ownership).
First American Corporation; LandAmerican Financial Group; Old Republic.
- Fidelity National Title Insurance Co. (FNTIC) is incorporated in Nebraska; Chicago Title Insurance Co. is formed that same year.
- FNTIC, with revenues of $6.2 million, is the 48th largest title insurer in the United States.
- A holding company, Fidelity National Financial Inc., is formed and buys controlling interest in FNTIC.
- Via stock sale to employees, Fidelity becomes the nation’s first and only employee-owned title insurance underwriter.
- Trading begins on the American Stock Exchange.
- Fidelity moves to the New York Stock Exchange.
- The acquisition of Nation’s Title boosts Fidelity to fourth place among U.S. title underwriters.
- The purchase of Chicago Title and its subsidiaries Ticor Title and Security Union creates the world’s largest title insurance organization.
- Year-end revenues hit $3.9 billion.
Capelle, Philip, “How Tom Peters Helped One Title Company Thrive in a Bad Market,” California Business, November 1992, p. 16.
Cornwell, Ted, “Merger Allows Fidelity and Chicago Title to Achieve Economics of Scale,” National Mortgage News, August 23, 1999, p. 30.
Ferguson, Tim W., “Indigestion,” Forbes, October 4, 1999, p. 102.
Johnson, Kelly, “Merging Title Companies Expect Smooth Transition,” Sacramento Business Journal, November 19, 1999, p. 13.
Marcial, Gene G., “This Title Insurer Has Curb Appeal,” Business Week, May 6, 2002, p. 111.
Moore, Michael, “Insurance: Real Estate Pinch Spurring Title Insurance Consolidation,” American Banker, August 10, 1999, p. 8.
Wade, Will, “‘Real Coup,’ for Fidelity National—Now What?,” American Banker, January 30, 2003, p. 1.
—Kathleen M. Peippo