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Fidelity National Financial, Inc. - Title
Insurance - Category Directory
(904)
854-8100
601
Riverside Avenue
Jacksonville, Florida 32204
www.fnf.com
Sales
$7.7
billion
Business Description
We
are the largest title insurance and diversified real estate information
services and solutions company in the United States. Our title insurance
underwriters — Fidelity National Title, Chicago Title, Ticor Title, Security
Union Title and Alamo Title — together issued approximately 29% of all title
insurance policies issued nationally during 2002. We provide title insurance
in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S.
Virgin Islands, and in Canada and Mexico. We have leveraged our national
network of 1,500 direct offices and 9,500 agents to secure the leading
market share (based on net premiums written) in three out of the four states
that account for approximately 50% of the real estate activity in the
country. Our acquisition of American Pioneer Title Insurance Company (see
“Recent Developments”) will put us in the number one market position in the
state of Florida, thereby securing the leading market share in all four
states that account for approximately 50% of the real estate activity in the
country.
Through our subsidiary, Fidelity Information Services, Inc. (“FIS”), which
we acquired on April 1, 2003, we are a worldwide provider and one of the
largest providers of information-based technology solutions and processing
services to financial institutions and the mortgage and financial services
industries in the United States. FIS processes nearly 50% of all residential
mortgages in the United States, with balances exceeding $2.5 trillion, has
processing and technology relationships with 46 of the top 50 banks in the
United States and has clients in more than 50 countries who rely on its
processing and outsourcing products and services.
We have five reporting segments: title insurance; financial institution
processing and outsourcing; real estate information services; specialty
insurance; and corporate and other. The title insurance segment consists of
our title insurance underwriters and our wholly-owned title insurance
agencies. The title segment provides core title insurance and escrow and
other title related services including collection and trust activities,
trustee’s sales guarantees, recordings and reconveyances. The financial
institution processing and outsourcing segment consists primarily of the
operations of FIS, which was acquired on April 1, 2003. This segment also
includes our default management services, which include foreclosure posting
and publishing services, loan portfolio services, field services and
property management, as well as our Empower and Softpro software products.
The real estate information services segment includes property appraisal
services, credit reporting, exchange intermediary services in connection
with real estate transactions, real estate tax services, property data and
disclosure services, flood certification and monitoring, relocation
services, multiple listing services and mortgage loan fulfillment services.
The specialty insurance segment, consisting of our various non-title
insurance subsidiaries, issues flood, home warranty and homeowners insurance
policies. The corporate and other segment consists of the operations of the
parent holding company and the operations of our wholly-owned
equipment-leasing subsidiary.
Title
Insurance
Market for title insurance. The title insurance market in the United States
is large and growing. According to Corporate Development Services, Inc.,
total operating income for the entire U.S. title insurance industry grew
from $4.8 billion in 1995 to $12.7 billion in 2002. Growth in the industry
is closely tied to various macroeconomic factors, including, but not limited
to, growth in the gross national product, inflation, interest rates and
sales of new and existing homes, as well as the refinancing of previously
issued mortgages.
Virtually every real estate transaction consummated in the U.S. requires the
use of title insurance by a lending institution before a transaction can be
finalized. Generally, revenues from title insurance policies are directly
correlated with the value of the property underlying the title policy, and
appreciation in the overall value of the real estate market drives growth in
total industry revenues. Industry revenues are also driven by swings in
interest rates, which affect demand for new mortgage loans and refinancing
transactions.
The U.S. title insurance industry is concentrated among a handful of
industry participants. According to Corporate Development Services, Inc.,
the top five title insurance companies accounted for 88% of net premiums
collected in 2002. Over 40 independent title insurance companies accounted
for the remaining 12% of net premiums collected in 2002. Over the years, the
title insurance industry has been consolidating, beginning with the merger
of Lawyers Title Insurance and Commonwealth Land Title Insurance in 1998 to
create LandAmerica Financial Group, Inc., followed by our acquisition of
Chicago Title in March 2000. Consolidation has created opportunities for
increased financial and operating efficiencies for the industry’s largest
participants and should continue to drive profitability and market share in
the industry.
Title Insurance Policies. Generally, real estate buyers and mortgage lenders
purchase title insurance to insure good and marketable title to real estate.
Today, virtually all real property mortgage lenders require their borrowers
to obtain a title insurance policy at the time a mortgage loan is made.
Title insurance premiums are based upon either the purchase price of the
property insured or the amount of the mortgage loan. Title insurance
premiums are due in full at the closing of the real estate transaction, and
the policy generally terminates upon the resale or refinancing of the
property.
Prior to issuing policies, underwriters can reduce or eliminate future claim
losses by accurately performing searches and examinations. A title company’s
predominant expense relates to such searches and examinations, the
preparation of preliminary title reports, policies or commitments and the
maintenance of title “plants,” which are indexed compilations of public
records, maps and other relevant historical documents. Claim losses
generally result from errors or mistakes made in the title search and
examination process and from hidden defects such as fraud, forgery,
incapacity, missing heirs or refinancing of the property.
Commercial real estate title insurance policies insure title to commercial
real property, and generally involve higher coverage amounts and yield
higher premiums. Prior to the Chicago Title merger, we issued primarily
residential real property title insurance policies. In the Chicago Title
merger, we acquired Chicago Title’s National Commercial & Industrial
business group, which specializes in meeting the needs of clients involved
in large commercial transactions. As discussed later under the heading
“Economic Factors Affecting Title Industry,” the volume of commercial real
estate transactions is affected primarily by fluctuations in local supply
and demand conditions for office space, while residential real estate
transaction volume is primarily affected by macroeconomic and seasonal
factors. Thus, we believe the addition of Chicago Title’s commercial real
estate title insurance base helps in maintaining more uniform revenue levels
throughout the seasons.
Losses and Reserves. While most other forms of insurance provide for the
assumption of risk of loss arising out of unforeseen events, title insurance
serves to protect the policyholder from risk of loss from events that
predate the issuance of the policy. As a result, claim losses associated
with issuing title policies are less expensive when compared to other
insurance underwriters. The maximum amount of liability under a title
insurance policy is usually the face amount of the policy plus the cost of
defending the insured’s title against an adverse claim.
Reserves for claim losses are established based upon known claims, as well
as losses we expect to incur based upon historical experience and other
factors, including industry trends, claim loss history, legal environment,
geographic considerations, expected recoupments and the types of policies
written. We also reserve for losses arising from escrow, closing and
disbursement functions due to fraud or operational error.
A title insurance company can minimize its losses by having strict quality
control systems and underwriting standards in place. These controls increase
the likelihood that the appropriate level of diligence is conducted in
completing a title search so that the possibility of potential claims is
significantly mitigated. In the case of independent agents, who conduct
their own title searches, the agency agreement between the agent and the
title insurance underwriter gives the underwriter the ability to proceed
against the agent when a loss arises from a flawed title search.
Courts and juries sometimes award damages against insurance companies,
including title insurance companies, in excess of policy limits. Such awards
are typically based on allegations of fraud, misrepresentation, deceptive
trade practices or other wrongful acts commonly referred to as “bad faith.”
Although we have not experienced damage awards materially in excess of
policy limits, the possibility of such bad faith damage awards may cause us
to experience increased costs and difficulty in settling title claims.
The maximum insurable amount under any single title insurance policy is
determined by statutorily calculated net worth. The highest self-imposed
single policy maximum insurable amounts for any of our title insurance
subsidiaries is $250.0 million.
Direct and Agency Operations. We provide title insurance services through
our direct operations and wholly-owned underwritten title companies, and
additionally through independent title insurance agents who issue title
policies on behalf of title underwriters. Title underwriters determine the
terms and conditions upon which they will insure title to the real property
according to their underwriting standards, policies and procedures. In our
direct operations, the title underwriter issues the title insurance policy
and retains the entire premium paid in connection with the transaction. In
our agency operations, the search and examination function is performed by
an independent agent. The agent thus retains the majority of the title
premium collected, with the balance remitted to the title underwriter for
bearing the risk of loss in the event that a claim is made under the title
insurance policy. Independent agents may select among several title
underwriters based upon the amount of the premium “split” offered by the
underwriter, the overall terms and conditions of the agency agreement and
the scope of services offered to the agent. Premium splits vary by
geographic region.
Our direct operations provide the following benefits:
• higher margins because we retain the entire premium from each transaction
instead of paying a commission to an agent;
• continuity of service levels to a broad range of customers; and
• additional sources of income through escrow and other real estate
information services, such as collection and trust activities, trustee’s
sales guarantees, recordings and reconveyances, property appraisal services,
credit reporting, flood certification and monitoring, real estate tax
services, exchange intermediary services in connection with real estate
transactions, property data and disclosure services, relocation services,
multiple listing services and mortgage loan fulfillment services.
Economic Factors Affecting Title Industry. Title insurance revenue is
closely related to the level of real estate activity and the average price
of real estate sales. Real estate sales are directly affected by the
availability of funds to finance purchases, predominantly mortgage interest
rates. Other factors affecting real estate activity include, but are not
limited to, demand for housing, employment levels, family income levels and
general economic conditions. In addition to real estate sales, mortgage
refinancing is an important source of title insurance revenue. We have found
that residential real estate activity generally decreases in the following
situations:
• when mortgage interest rates are high or increasing;
• when the mortgage funding supply is limited; and
• when the United States economy is weak.
Because commercial real estate transactions tend to be driven more by supply
and demand for commercial space and occupancy rates in a particular area
rather than by macroeconomic events, our commercial real estate title
insurance business can generate revenues which help offset the industry
cycles discussed above.
Historically, real estate transactions have produced seasonal revenue levels
for title insurers. The first calendar quarter is typically the weakest
quarter in terms of revenue due to the generally low volume of home sales
during January and February. The fourth calendar quarter is typically the
strongest in terms of revenue due to commercial entities desiring to
complete transactions by year-end. Significant changes in interest rates may
alter these traditional seasonal patterns due to the effect the cost of
financing has on the volume of real estate transactions.
Title Insurance Operations. Our direct operations are divided into
approximately 200 profit centers consisting of more than 1,500 direct
offices. Each profit center processes title insurance transactions within
its geographical area, which is usually identified by a county, a group of
counties forming a region, or a state, depending on the management structure
in that part of the country. We also transact title insurance business
through a network of approximately 9,500 agents, primarily in those areas in
which agents are the more accepted title insurance provider.
Escrow and Other Title Related Fees. In addition to fees for underwriting
title insurance policies, we derive a significant amount of our revenues
from escrow and other title related fees. A title insurance company in a
real estate transaction generally acts as an intermediary completing all the
necessary documentation and services required for closing the real estate
transaction.
In a typical residential transaction, a title insurance order is received
from a realtor, lawyer, developer, mortgage lender or independent escrow or
closing company. When a title order is received by the title insurance
company or agent, the title search begins and the title order is considered
“open.” Once documentation has been prepared and signed, mortgage lender
payoff demands are in hand and documents have been ordered and the
transaction has been recorded, the title order is considered “closed.” A
lawyer, an escrow company or a title insurance company or agent performs the
closing function, most commonly referred to as an “escrow” in the western
United States. The entity providing the closing function (the “closer”)
holds the seller’s deed of trust and the buyer’s mortgage until all issues
relating to the transaction have been settled. After these issues have been
cleared, the closer delivers the transaction documents, records the
appropriate title documents in the county recorder’s office and arranges the
transfer of funds to pay off prior loans and extinguish the liens securing
such loans. Title policies are then issued. The lender’s policy insures the
lender against any defect affecting the priority of the mortgage in an
amount equal to the outstanding balance of the related mortgage loan. The
buyer’s policy insures the buyer against defects in title in an amount equal
to the purchase price.
Reinsurance. In the ordinary course of business, we limit our maximum loss
exposure by reinsuring certain risks with other title insurers. We also earn
additional income by assuming reinsurance for certain risks of other title
insurers. In addition, we cede a portion of certain policy and other
liabilities under agent fidelity, excess of loss and case-by-case
reinsurance agreements. Reinsurance agreements provide generally that the
reinsurer is liable for loss and loss adjustment expense payments exceeding
the amount retained by the ceding company. However, the ceding company
remains primarily liable in the event the reinsurer does not meet its
contractual obligations.
Financial Institution Processing and Outsourcing
We are a worldwide provider and one of the largest providers of information
based technology solutions and processing services to financial institutions
and the mortgage and financial services industries in the United States. Our
services include the following:
Fidelity Information Services (“FIS”). Through our subsidiary, FIS, which we
acquired on April 1, 2003 (see “Recent Developments”), we market software
and services designed to fulfill substantially all of the information
processing and management information requirements of financial
institutions. In addition, we also provide data processing and related
computer software and systems to financial institutions originating or
servicing single-family mortgage loans. Our software products and processing
services, combined with our team of consultants, are intended to offer a
cost-effective alternative to the extensive technical support staff and the
enlarged group of mortgage bankers, that each customer would otherwise have
to maintain in-house. Our on-line delivery systems automate processing
functions required in the origination of mortgage loans, the management of
such loans while in inventory before they are sold to the secondary market,
and their subsequent servicing. Our services focus on three main markets:
• Mortgage loan processing. We provide the processing for nearly 50% of all
residential mortgage loans in the United States, with balances exceeding
$2.5 trillion. We have 8 of the top 10 and 27 of the top 50 mortgage loan
originators as customers. Our customer relationships are typically long-term
contractual relationships that provide a consistent revenue stream
year-after-year.
• Financial institution processing. We provide core bank processing and
commercial loan processing to financial institutions of varying size and
legal structure both domestically and internationally. We serve 25 of the
top 100 banks in the United States with our deposit solutions products and
34 of the top 100 banks in the United States with our lending solutions
products. Our Integrated Financial Solutions (“IFS”) group provides an
integrated processing suite for credit unions, community banks, thrifts and
other smaller financial institutions. We also provide an integrated family
of commercial lending products that automates the entire range of commercial
lending activity, from deal origination through settlement and accounting to
risk management and loan trading activities. These relationships also are
typically long-term in nature and provide a consistent revenue stream year-
after-year.
• Auto loan processing. We provide processing solutions for auto loans that
leverages on our existing data center capacity.
Economic Factors Affecting FIS. Revenues from our mortgage loan processing,
financial institution processing and auto processing services are closely
related to transactional volume of our customers. We typically earn a
negotiated charge or fee for each transaction processed on our systems. The
long-term nature of the contracts, the recurring revenue stream and the lack
of correlation to the mortgage origination cycle leads to this business
being significantly less cyclical than our title insurance and real estate
information services business.
The ability to grow our mortgage loan processing business is directly
correlated to the total population of mortgage debt outstanding. The total
population of residential mortgage debt has been growing approximately 8 to
10% per year in recent years, regardless of the volatility of refinance
activity. Specific economic factors relating to mortgage debt growth include
housing starts and new home sales.
Revenue volumes for our financial institution processing business are
closely tied to total transactional volume of our customers. Increases in
deposit and lending transactions can positively impact our business and thus
the condition of the overall economy can have an impact on our growth.
However, even when the economy is weak, there is a base level of
transactional volume.
We are also impacted by the decision of financial institutions to outsource
the services we provide versus performing them “in-house”. These decisions
generally are based on the size of the institution, consideration of our
pricing structure and level of support for our products along with general
economic factors that exist at the time.
Default Management Services. We provide a full spectrum of products and
services custom tailored to meet all default needs, from initial inspection
to final release. Our products and services can be ordered individually, or
as part of a complete, integrated solution. These services include the
following:
• Foreclosure posting and publishing. We offer posting and publication of
foreclosure and auction notices to the real estate foreclosure industry.
• Loan portfolio services. We provide a comprehensive line of document
preparation and recording services on a national basis, including
computerized tracking services, mortgage assignment and release preparation,
due diligence and research services, and verifying chain of title.
• Field services. We provide property inspection, preservation and
maintenance services to mortgage lenders nationwide.
• Asset management services. We offer a nationwide advisory and management
role in the coordination of real estate owned (REO) sales transactions for
lenders and servicers.
• Electronic invoice management. NewInvoiceTM provides a comprehensive
e-commerce solution, standardizing all default vendor invoices while
eliminating duplicates and data entry. Our exclusive bi-directional
interface allows clients to seamlessly connect with leading mortgage
servicing platforms, including FIS, MortgageServ and London Bridge, as well
as a provider network of over 700 vendors.
• Land records. We provide abstract and public record research information
for the financial, legal, environmental and governmental sectors.
Empower. We are a leading provider of software solutions to the lending
community. Our Empower software products provide support for every aspect of
the lending process from point-of-sale through secondary marketing, as well
as complete interfacing systems with servicing, flood, property appraisal
and title services.
Softpro. We are the nation’s leading provider of real estate closing and
title insurance software. Our Softpro software products are designed to
increase volume and revenue by reducing the time it takes to process real
estate closings.
Real Estate Information Services
We provide many specialized products and services required to execute and
close real estate transactions that are not offered by our title insurance
and other subsidiaries. Our real estate information services allow us to
diversify from our core title business and yield higher profit margins.
These services include the following:
• Property appraisal services. We offer property appraisal services through
a network of state-licensed contract appraisers. We also provide detailed
real estate property evaluation services to lending institutions utilizing
artificial intelligence software, detailed real estate statistical analysis
and physical property inspections.
• Credit reporting. We provide credit information reports to mortgage
lenders nationwide, as well as a variety of related products to meet the
ever-changing needs of the mortgage industry.
• Flood certification and monitoring. Federal legislation passed in 1994
requires most mortgage lenders to obtain a property’s flood zone status at
the time a loan is originated. We provide these required flood zone
determination reports to mortgage lenders nationwide.
• Real estate tax services. We advise lending and mortgage related
institutions throughout the United States of the status of property tax
payments that are due on properties securing their loans over the entire
life of the loan. We protect lenders against losses from failing to monitor
delinquent taxes.
• Exchange intermediary services. We act as an exchange intermediary for
customers engaging in qualified exchanges under Section 1031 of the Internal
Revenue Code, which allows customers to defer the payment of capital gain
taxes on the sale of their investment property.
• Property data and disclosure services. We provide records data for over
1,250 counties encompassing over 100 million property ownership, mortgage
and sales records, representing 80% of the total property owners in the
United States.
• Multiple listing services. We provide multiple listing service
organizations with systems integration solutions, which combine computer
hardware, internally developed and licensed software, telecommunications,
security, customer support and maintenance to provide immediate and reliable
access to and updating of the property listings database that represents the
“shelf stock” of the real estate profession.
• Mortgage loan fulfillment services. We partner with large and
middle-market homebuilders across the country to establish and manage
captive mortgage finance businesses that originate, underwrite, process and
place first mortgages on newly constructed homes.
• Relocation Services. We assist lenders with their refinance and REO
business; and employees, relocation firms and in-house corporate relocation
programs by providing a “single-source” solution for ordering appraisals,
inspections, title and closing services.
Specialty Insurance
We issue various insurance policies, which include the following:
• Home warranty insurance. We issue one-year, renewable insurance policies
that protect homeowners against defects in household systems and appliances.
• Flood insurance. We issue new and renewable flood insurance policies in
conjunction with the National Flood Insurance Program.
• Homeowners insurance. We offer and underwrite homeowners insurance in
various states.
Tile Insurance Companies in the Directory
Fidelity National Financial
First American
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