Fitch Affirms Fidelity National Title Subs IFS Ratings at 'A'

February 20, 2004

Changes Outlook to Positive

Fitch Ratings has affirmed the insurer financial strength ratings of the title insurance underwriting subsidiaries of Fidelity National Financial, Inc. (FNF) at 'A', and the long-term issuer rating of FNF at 'BBB'. In addition, the Rating Outlook has been changed to Positive from Stable.

The Positive Rating Outlook reflects Fitch's opinion that overall earnings quality has exceeded expectations. Further, the favorable consideration tied to the company's profitability levels in recent periods has offset modest concerns relative to insurance subsidiary capital levels.

The ratings reflect FNF's leading title insurance market share and strong operating performance. Fitch also recognizes FNF's growth efforts in both the information services and ancillary real estate services lines of business, both contributing to the holding company's non-regulated cash flow. These strengths are balanced against risk-adjusted capital and operating leverage ratios lagging industry peers, and the general acquisitive nature of FNF which carries the usual integration issues.

In the title business, FNF's announced its agreement to purchase American Pioneer Title Insurance Co. (APTIC). The acquisition will bring FNF leading market share in Florida estimated at 28%, and gives FNF leading market share in the four largest revenue producing states of CA, TX, FL, and NY. FNF's market share nationwide is estimated at 30%.

FNF's GAAP operating performance continues to be a core strength, comparing favorably to peer companies. FNF reported total revenue and net earnings of $7.7 billion and $862 million, respectively for 2003, both high-water marks. FNF's ancillary real estate services and information services business contributed $1.4 billion or 18% to consolidated GAAP revenue for 2003. Title operating revenue grew by an impressive 49%, and pretax title earnings grew by 179% which was more than any other public title insurer.

As of the close of the third quarter 2003, FNF's debt-to-capital ratio was below 16%, while interest coverage was quite strong at greater than 30 times (x). Management has a stated long-term leverage target between 20% and 25%, but also stated a willingness to go as high as 35% with a large acquisition. Leverage over 30% would place pressure on the 3 tick gap between the financial strength and long-term issuer rating. FNF reported a Fitch Risk-Adjusted Capital ratio (RAC) of 162% at year-end 2002, which remains below the average of the other national title insurers. Fitch does consider FNF's RAC ratio acceptable, and the ratio continues to be positively impacted by reserve redundancies.

Entity/Issue/Type Action Rating/Outlook
Fidelity National Title Ins. Co.
Fidelity National Title Ins. Co. of NY
Alamo Title Insurance Co. of TX
Nations Title Insurance of NY
Chicago Title Ins. Co.
Chicago Title Ins. Co. of OR
Security Union Title Ins. Co.
Ticor Title Ins. Co.

--Insurer financial strength 

Affirmed  'A'/Positive.
Fidelity National Financial Inc.    

--Long-term issuer

Affirmed     'BBB'/Positive.

Source: Fitch Ratings

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