Fitch Upgrades Fidelity National Title Group Ratings
|October 25, 2006|
CHICAGO -- The ratings for Fidelity National Title Group, Inc. (FNT) and its title insurance subsidiaries (please see complete list below) were upgraded and removed from Rating Watch Positive by Fitch after the distribution of FNT stock to Fidelity National Financial, Inc. (FNF) shareholders, making FNT a standalone enterprise with significantly reduced financial leverage. The Rating Outlook is Stable.
FNT now consists of title insurance operations, specialty insurance, and Sedgwick CMS, Inc. a third party administrator business. FNT will be renamed Fidelity National Financial, Inc. on Nov. 9, 2006, after the closing of the merger between FNF and Fidelity National Information Services, Inc. (FIS).
Most noticeably, the upgrade reflects significant reduction in consolidated financial leverage following FNT's spin off from FNF as well as the elimination of the risk that dividends from title insurance underwriters will be used to support debt at FIS. The strong operating performance of FNT's title underwriting subsidiaries, a top-tier competitive position among national title companies, and a number two market share of approximately 29% are all considered favorably in FNT's ratings.
Balanced against these positives are the acquisitive nature of the management team at FNT and the multitude of investigations and law suits facing FNT and the title insurance industry in general. It is expected that FNT will support the growth of Sedgwick through acquisitions, and consequently, future financial leverage will remain a key rating issue.
Debt-to-total capital at FNT was 18% as of June 30, 2006, which was significantly lower than the 49% consolidated leverage within FNF at the close of the second quarter of 2006. Over a longer time horizon, FNT's financial leverage is expected to stay below 25% and pretax earnings are expected to cover interest expense by at least 10 times.
No rating actions were taken on FIS or Sedgwick as Fitch continues to analyze the impact of the transaction on these companies as well as expectations for the respective capital structures.
Fitch upgraded the following ratings: