Fidelity National Financial, Inc. · NYSE:FNF
Fidelity National Financial — Investor Presentation (November 2003)
32 slides from Fidelity National Financial's investor presentation, November 2003
Slide 1: Investor Update November 2003
Investor Update November 2003 0
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS • This presentation contains statements related to future events and expectations and, as such, constitutes forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause actual results, p
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS • Continued dominance in the title insurance market • Diversification into transaction processing for financial institutions and the real estate industry • A more balanced financial profile • 50% of revenue and earnings coming from processing and other outsourced services 2
Slide 4: Overview
OVERVIEW • A diversified provider of products, services and solutions to financial institutions and the real estate industry – Nation’s largest title insurance and escrow services company Alamo Title Chicago Title Fidelity National Title Security Union Ticor Title 3
Slide 5: Overview
OVERVIEW – One of the country’s largest financial outsourcing providers • Nation’s largest mortgage loan processor • Large and mid-sized core bank processing • International core bank processing • Automotive loan processing • Commercial loan processing – Proven provider of outsourced real estate ser
Slide 6: Strategy
STRATEGY • Operational – Leverage our market leadership, customer relationships and processing expertise in the title and escrow industry to significantly broaden both the outsourcing and processing opportunities with financial institutions and the real estate industry • Financial – Grow the non-tit
Slide 7: Growth Timeline & Milestones
GROWTH TIMELINE & MILESTONES $ In millions American Pioneer acquisition announced $6,000 AIS ACQUISITION (April 2003) $5,000 $5.1 billion Formation of Corporate HQ FNIS Relocation to JAX $4,000 $3.9 billion Alamo Title Acquisition CHICAGO $3,000 FNF acquires Meridian $2.7 billion Title and Security
Slide 8: Keys to Success
KEYS TO SUCCESS • Bias for Action • Corporate headquarters move to Jacksonville • Eliminated nearly 3,600 positions, or 18% of the tile and escrow workforce from August 1 through October • Autonomy and Entrepreneurship • Reward performance and results through compensation • Close Customer Relationsh
Slide 9: Products and Services
PRODUCTS AND SERVICES Cyclical Non-Cyclical Fidelity Title and Escrow Information Real Estate Related Services Services ($1.7 B in Q3 Revenue) ($214 mm in Q3 Revenue) ($217 mm in Q3 Revenue) Fidelity Flood, Tax and Relocation Services Residential Credit Lending Solutions Chicago Real Pro
Slide 10: Title Insurance – Core Business
FNF Title Insurance core Business TITLE INSURANCE – CORE BUSINESS Fidelity National Others Financial 12.3% 29.3% CA – 35% mkt. share FNF is #1 in the 4 TX – 34% Old Republic states that comprise FL – 28%* 6.1% nearly 50% of title NY – 37% insurance premiums Stewart * Pro forma for APTIC acquisition
Slide 11: Products and Services
PRODUCTS AND SERVICES Cyclical Non-Cyclical Fidelity Title and Escrow Real Estate Related Services Information Services ($1.7 B in Q3 Revenue) ($214 mm in Q3 Revenue) ($217 mm in Q3 Revenue) Fidelity Flood, Tax and Relocation Services Residential Credit Lending Solutions Real Property Data
Slide 12: Real Estate Related Services
REAL ESTATE RELATED SERVICES • Less cyclical and inherently higher growth businesses than our core title and escrow business • An $850 million revenue base with a pre- tax margin of 28% in the 3rd quarter of 2003 • Industry consolidation opportunities • Real estate related products and services are
Slide 13: Real Estate Related Services
REAL ESTATE RELATED SERVICES 3rd Quarter 2003 Revenue Breakdown Flood, Tax, Credit and Valuations Default $69 mm Management $47 mm Other - $12 mm Flood Insurance Home Processing Property Records Warranty $20 mm $6 mm $13 mm Relo Services MLS - $6 mm 1031 $13 mm Exchange Mortgage LOS $7 mm $6 mm Coll
Slide 14: Products and Services
PRODUCTS AND SERVICES Cyclical Non-Cyclical Fidelity Title and Escrow Information Real Estate Related Services Services ($1.7 B in Q3 Revenue) ($214 mm in Q3 Revenue) ($217 mm in Q3 Revenue) Fidelity Flood, Tax and Relocation Services Residential Lending Credit Solutions Chicago Real Pro
Slide 15: Overview – Fidelity Information Services
OVERVIEW – FIDELITY INFORMATION SERVICES • Core mortgage and financial institution processing and outsourcing services • Long term, contractual, recurring revenue and earnings streams • $850 million annual revenue base in 2003 • 20% pre-tax margin before purchase price amortization expense • Goal is
Slide 16: Overview - Fidelity Information Services
OVERVIEW - FIDELITY INFORMATION SERVICES Revenue Breakdown – 3rd Quarter 2003 Residential Lending Solutions 33% Enterprise Commercial Banking Solutions 5% 35% Auto Finance 8% Inter- Integrated national Financial 10% Solutions 10% • 2.6% sequential organic growth in 3rd quarter of 2003 and 3.6% total
Slide 17: Fidelity Information Services
FIDELITY INFORMATION SERVICES • Residential Lending Solutions – Mortgage loan processing for 46% of all the mortgage loans in the U. S. – 8 of the top 10 and 27 of the top 50 mortgage loan originators as customers – $71 million in 3rd Quarter 2003 revenue – Long-term, contractual revenue stream (per
Slide 18: Fidelity Information Services
FIDELITY INFORMATION SERVICES • Enterprise Banking Solutions – Core bank processing, channel delivery and information analysis for large, domestic financial institutions – 25 of the top 100 U. S. banks use EBS deposit solutions and 34 of the top 100 use EBS lending solutions – $77 million in 3rd Qua
Slide 19: Fidelity Information Services
FIDELITY INFORMATION SERVICES • Integrated Financial Solutions – Integrated core processing suite for community/smaller banks – $21 million in 3rd Quarter 2003 revenue – Broadens FNF’s relationships with smaller financial institutions – New and renewal contracts totaling $65 million in 2003; client
Slide 20: Fidelity Information Services
FIDELITY INFORMATION SERVICES • International – Core bank processing, channel delivery and information analysis for large, international institutions – $21 million in 3rd Quarter 2003 revenue – Leverages existing data center capacity – New and renewal contracts of $75 million total revenue; $35 mill
Slide 21: 2003 Selected FIS Customer Wins
2003 SELECTED FIS CUSTOMER WINS CUSTOMER BUSINESS COMPETITION SI Bank Mortgage Fiserv Bank of America Mortgage Fiserv Option One Mortgage Renewal/Fiserv New South Federal Mortgage Renewal Riggs Bank Enterprise Banking Metavante First Tennessee Enterprise Banking IBM Wachovia Enterprise Banking In-ho
Slide 22: Recent Selected FNF Customer Wins
RECENT SELECTED FNF CUSTOMER WINS • WAMU-default, additional title and escrow • Bank of America – default, additional title and escrow, appraisal, opportunity in tax, flood and credit • ABN Amro – default, valuations • Household-default • Irwin Mortgage-additional title and escrow, appraisal, valuat
Slide 23: Financial Highlights
FINANCIAL HIGHLIGHTS Q3 2003 Nine Months of 2003 Revenue $2.2 billion $5.7 billion Net Earnings $277 million $666 million Cash Flow from Operations $378 million $984 million Dec 31, 2002 Sep 30, 2003 Investment Portfolio $3.0 billion $3.2 billion Reserve for Claim Losses $888 million $928 million St
Slide 24: Return on Equity and Book Value
RETURN ON EQUITY AND BOOK VALUE 12% to 15% Trough Return on Equity 40.3% 40.0% $24.96 $30.00 $25.00 No benefit from 33.0% 31.5% FIS type 30.0% 25.9% 27.1% recurring revenue 27.3% and earnings stream 22.2% $20.00 20.0% 17.1% $15.00 14.1% 10.3% 10.0% $10.00 10.0% $5.00 0.0% $0.00 1993 1994 1995 1996 1
Slide 25: Cash Flow from Operations
CASH FLOW FROM OPERATIONS Nine Months Ended Sept. 2003 Amount Per Share Net Earnings $665,604,000 $4.95 Depreciation and Amortization $160,458,000 $1.19 Net change in reserve $31,793,000 $0.24 Net Change in other B/S accts. $126,029,000 $0.94 Cash Flow from Operations $983,884,000 $7.32 Trough Cash
Slide 26: Managing Through a Trough
MANAGING THROUGH A TROUGH • Monitor metrics every week – Open and closed orders and revenue per employee • React quickly – utilize the “order lag” to our advantage • Aggressively reduce headcount as metrics dictate • No severance costs paid • Sales commissions are purely a variable cost • Heavily we
Slide 27: Trough Earnings – Top Down
TROUGH EARNINGS – TOP DOWN • Trough earnings have historically come in periods of successive, sustained, aggressive interest rate hikes by the Fed, such as 2000 and 1994 • A slowdown from peak refinance volume does not necessarily imply a trough scenario • FNF can generate a 12% - 15% return on equi
Slide 28: Trough Earnings – Bottom Up
TROUGH EARNINGS – BOTTOM UP Business Revenue Pre-tax Margin Pre-tax Earnings FIS $900 mm 20% $180 mm Default Mgmt. $400 mm 25% $100 mm Flood processing $100 mm 12% $12 mm Other Real Estate $400 mm 15% $60 mm Investment Income $150 mm - $150 mm Subtotal $2 billion $500 mm Title and Escrow $3 billion
Slide 29: Conclusion: Objective, A Balanced Financial Profile
CONCLUSION OBJECTIVE A BALANCED FINANCIAL PROFILE 28
Slide 30: 2000 Revenue Breakdown
2000 REVENUE BREAKDOWN 2000 Total Revenue of $2.7 billion 88% of 3% revenue Title and Escrow Other $2.4B Income - $83 mm Investment Income - $87 mm 3% 6% Real Estate 29 Related $167 mm
Slide 31: Current Revenue Breakdown
CURRENT REVENUE BREAKDOWN Q3 2003 Total Revenue - $2.2 billion 78% Title and Escrow 3% $1.73B Investment - Record title and Income/Other- Real Estate $52 mm Related escrow revenues $214 mm FIS - 10% $217 mm 30 10%
Slide 32: Future Potential
FUTURE POTENTIAL Total Revenue in Three Years?? - $7.1 billion Assumptions 49% ¾50% decline in title and escrow Title and Escrow from annualized third quarter 2003 $3.5B levels ¾FIS grows to $2B through organic 3% and acquisition Investment Income - Real Estate FIS growth $200 million Related - $2.0
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