Fidelity National Financial Inc. is looking to sell its flood and personal lines of insurance to maintain the company’s $1.20 annual dividend to shareholders, fund a stock repurchase program, and pay down debt.
Fidelity said the two businesses — fee-for-service flood insurance and traditional homeowners, automobile and other personal lines of insurance — generated $333 million in revenue in 2007 and are "an attractive acquisition opportunity for strategic buyers."
The Jacksonville, Fla.-based company said it does not plan to put a third specialty insurance line, home warranties, up for sale.
In a separate announcement, the company said first-quarter operating revenue was $1.14 billion, down 17 percent from $1.37 billion a year ago. Net earnings fell 67 percent to $27.2 million.
The title insurance group reported $1 billion in revenue, down 19 percent from a year ago, while pre-tax earnings fell 53 percent to $54 million.
Fidelity paid out $76 million in title claims during the quarter, exceeding provisions for losses by $21 million and denting balance sheet reserves. The $55 million provision for title claims losses represented 7.5 percent of premiums for the quarter.
Direct orders opened totaled 562,200 down 14 percent from a year ago. Direct orders closed fell even more precipitously to 307,800, down 21 percent from a year ago. Some 45 percent of orders failed to close during the quarter, compared with 40 percent a year ago.
Refinance orders accounted for about 66 percent of open and closed order volumes for the first quarter, compared with 62 percent in both the previous quarter and the first quarter of 2007.
"While we peaked above 11,000 open orders per day for a few weeks in late January and early February, open orders have settled down closer to 8,000 to 8,500 per day over the last six weeks," Chairman William Foley said in a conference call with analysts.
That volume is the highest seen since the summer of 2007, before the credit crisis hit the mortgage markets, Foley said.
"We have definitely seen a better start to 2008, particularly given that the first quarter is generally the weakest quarter of the year and the fact that we now have our cost structure better aligned with that level of order volumes," he said.
At $334 million, personnel costs were down 19 percent from a year ago. The company started the year with 9,950 title insurance employees in the field and added only about 50 positions during the quarter.
"In some very select situations we have taken advantage of the uncertainty that these tough market conditions present and added a few large revenue producers from other title companies," President Raymond Quirk told analysts. A transcript of the call is available at Seeking Alpha.
Foley said changes at rival First American "are causing some consternation within that company, and that is making some individuals available that are revenue producers … (Quirk) is just trying to be very careful about who he hires to make sure … they really are revenue-attached."
Asked about the potential for further consolidation in the title insurance industry, Foley said that the Federal Trade Commission looks at control of real estate information and title plants on a county-by-county basis. He said First American and Fidelity "would have a difficult time getting together" because the two companies would control about three quarters of the national market.
"Beyond that I would say that every other company would be in play," Foley said.
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