A.M. Best Places Ratings of FNF and Its Subsidiaries Under Review With Negative Implications
December 8, 2008
A.M. Best Co. has placed the financial strength rating (FSR) of A (Excellent) and issuer credit ratings (ICR) of "a" of Fidelity National Financial Group (Fidelity) and its eight title insurance members under review with negative implications. In addition, A.M. Best has placed the ICR of "bbb" of Fidelity National Financial, Inc. (FNF) (headquartered in Jacksonville, FL) (NYSE: FNF) under review with negative implications.
Previously, the ratings were removed from under review following the announcement of the termination of Fidelity's proposed merger agreement with LandAmerica Financial Group, Inc. (LandAmerica) (Virginia) the third-largest national writer of title insurance in the United States, following a two week due diligence period, which expired on November 21, 2008. (Please see A.M. Best's press release dated November 25, 2008.)
The ratings of FNF and Fidelity have been placed under review as A.M. Best assesses the implications of Fidelity's newly announced plans, which were not previously disclosed to A.M. Best, concerning acquiring four insurance underwriting companies of LandAmerica, following the announcement of LandAmerica's filing for Chapter 11 bankruptcy protection. The stock purchase agreement calls for Fidelity's leading title insurance subsidiaries to acquire four LandAmerica insurance underwriters. Specifically, Chicago Title Insurance Company (Omaha, NE) will acquire Commonwealth Land Title Insurance Company and Commonwealth Land Title of New Jersey, while Fidelity National Title Insurance Company (Santa Barbara, CA) will acquire Lawyers Title Insurance Corporation and United Capital Title. The total purchase price will be approximately $300 million. The proposed acquisitions are expected to result in a significant increase in underwriting leverage for Fidelity, which may result in adversely impacting its financial strength and risk-adjusted capitalization. Additionally, the acquisition is expected to carry execution risks of integrating two large insurance organizations. The proposed transaction, which will result in the largest title insurance organization in the United States, will be subject to regulatory and judicial approvals including federal anti-trust review, final approved orders by the Chapter 11 court, and approvals from all applicable state insurance regulators.
A.M. Best expects to resolve the under review status of the ratings following the closing of the transaction which is expected to occur by year-end 2008, along with obtaining further information from management.
The FSR of A (Excellent) and ICRs of "a" have been placed under review with negative implications for Fidelity National Financial Group and its following members:
- Alamo Title Insurance
- Chicago Title Insurance Company of Oregon
- Chicago Title Insurance Company
- Fidelity National Title Insurance Company
- National Title Insurance of New York, Inc.
- Security Union Title Insurance Company
- Ticor Title Insurance Company of Florida
- * Ticor Title Insurance Company
For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.
Source: A.M. Best Co.
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