Fidelity National Financial
Annual Report 2018

Plain-text annual report

FIDELITY NATIONAL FINANCIAL, INC. 2018 Annual Repor t F I N A N C I A L H I G H L I G H T S (Dollars in millions, except per share amounts) I N C O M E S TAT E M E N T : Total Revenue Net Earnings Attributable to Common Shareholders Adjusted Pre-Tax Title Margin Cash Flow from Operations BA L A N C E S H E E T: Total Assets Cash and Investment Portfolio Reserve for Claim Losses Total Equity 2018 2017 2016 Year Ended December 31, $ 7,594 $ $ 628 14.8% 943 $ 9,301 $ 4,806 $ 1,488 $ 4,628 $ 7,663 $ $ 771 14.5% 737 At December 31, $ 9,151 $ 4,481 $ 1,490 $ 4,467 $ 7,257 $ 650 14.7% $ 1,162 $ 14,521 $ 4,831 $ 1,487 $ 6,898 $7,257 $7,663 $7,594 14.7% 14.5% 14.8% ’16 ’17 Total Revenue ’18 ’16 ’17 Adjusted Pre-Tax Title Margin ’18 $650 $771 $628 $14,521 $9,151 $9,301 ’16 ’17 Net Earnings Attributable to Common Shareholders ’18 ’16 ’17 Total Assets ’18 F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C  William P. Foley, II Chairman of the Board Raymond R. Quirk Chief Executive Officer T O O U R S H A R E H O L D E R S F E B R U A R Y 1 9 , 2 0 1 9 2018 was another strong year financially for our company. For the full-year 2018, we generated net earnings of $628 million and adjusted net earnings of $750 million. Diluted earnings per share were $2.26 and adjusted diluted earnings per share were $2.70. In our title insurance business, we generated adjusted pre-tax title earnings of nearly $1.1 billion, and an adjusted pre-tax title margin of 14.8%, increases of 3% and 30 basis points, respectively, over full-year 2017. 2018 was also a busy year on the capital allocation front. We allocated nearly $330 million to pay our four quarterly common stock dividends during the year. We also spent a total of $210 million to retire the remaining convertible bonds outstanding during the year. In August, we issued $450 million in 4.50% senior notes due in 2028, utilizing a majority of the proceeds to repay borrowings under our credit facility and the final convertible bonds that matured that month. Finally, we restarted our stock repurchase program in late October and repurchased nearly 700,000 shares for approximately $20 million in the fourth quarter. The big strategic news of the year was our March 2018 announcement of the signing of a merger agreement under which FNF will acquire Stewart Information Services Corporation for $50 per share of common stock, representing an equity value of approximately $1.2 billion. The consideration will be paid 50% in cash and 50% in FNF common stock. Stewart and FNF agreed upon a fixed exchange ratio of 1.285 shares of FNF common stock for each share of Stewart common stock exchanged in the combination. Assuming the announced $50 per share price, FNF would issue approximately 15.3 million common shares, representing just over 5% of FNF outstanding common shares. Under the terms of the merger agreement, if FNF or Stewart are required to divest assets or businesses in order to obtain required regulatory approval of the transaction that results in the loss of more than $75 million in revenue up to a maximum of $225 million in revenue, the purchase price will be adjusted downwards on a pro-rata basis from $50 per share to a minimum purchase price of $45.50 per share. We have targeted $135 million in operational cost synergies. At this targeted amount, the combination would have been more than 15% accretive to pro forma 2017 adjusted net earnings per share had the transaction closed at the beginning of 2017.  F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . In our title insurance business, we generated adjusted pre-tax title earnings of nearly $1.1 billion, and an adjusted pre-tax title margin of 14.8% We continue to work through the regulatory process for the Stewart Information Services acquisition and are engaged in the Second Request related to the FTC's HSR regulatory review of the transaction. Unfortunately, the FTC informed us that no work related to the regulatory review occurred during the 35 day government shutdown in December 2018 and January 2019. Also, on January 31, 2019, the New York State Department of Financial Services provided written notice of its disapproval of FNF's application to acquire control of Stewart Title Insurance Company, a New York domiciled title insurance underwriter that is licensed only in the State of New York. We are evaluating the appropriate course of action, which may include a discussion with the New York State Department of Financial Services to better understand its concerns and respond to the letter. We continue to believe the Stewart acquisition will create meaningful long- term value for our shareholders We are excited for the opportunity to welcome Stewart, its employees and its customers to the FNF family. The venerable Stewart brand has a long and respected history in the title insurance industry and we see tremendous potential in working with the Stewart management team to invest in and grow the Stewart brand on a national basis as part of our long-time, successful strategy of operating multiple title insurance brands under the FNF umbrella. We are very familiar with Stewart in the marketplace and see multiple areas where we can assist and accelerate Stewart’s growth plans. We thank all of our employees for their efforts in 2018 and we thank all of our shareholders for their continued support. Our company continued to evolve in 2018, looking very different than it did 35 years ago and much different than we looked even two years ago. The following pages illustrate a similar evolution in home ownership and families that traces the roots of our company back more than 150 years. William P. Foley, II Chairman of the Board Raymond R. Quirk Chief Executive Officer F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C   F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C   F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C   F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . B OA R D O F D I R E CTO RS EXE C UTIVE O F F I C E RS INDEPENDENT REGISTERED PUBLIC Raymond R. Quirk Chief Executive Officer Michael J. Nolan President Roger S. Jewkes Chief Operating Officer Brent B. Bickett Executive Vice President, Corporate Strategy Anthony J. Park Executive Vice President, Chief Financial Officer Peter T. Sadowski Executive Vice President, Chief Legal Officer Michael L. Gravelle Executive Vice President, General Counsel and Corporate Secretary G E N E RA L I N FO R M ATI O N CORPORATE OFFICE Fidelity National Financial, Inc. 601 Riverside Avenue Jacksonville, FL 32204 www.fnf.com STOCK TRANSFER AGENT AND REGISTRAR Continental Stock Transfer and Trust Company 1 State Street 30th Floor New York, NY 10004 (212) 509-4000 cstmail@continentalstock.com www.continentalstock.com/contact ACCOUNTING FIRM Ernst & Young 12926 Gran Bay Parkway Jacksonville, FL 32258 PUBLICATIONS The Company’s Annual Report on Form 10-K and quarterly reports on Form 10-Q are available on the Investor Relations section of the Company’s website at www.fnf.com. A Notice of Annual Meeting of Stockholders and Proxy Statement are furnished to stockholders in advance of the Annual Meeting. STOCK EXCHANGE LISTING Fidelity National Financial, Inc. common stock is listed on the New York Stock Exchange under the trading symbol FNF. CERTIFICATIONS FNF filed the Chief Executive Officer and Chief Financial Officer certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 as exhibits to its Annual Report on Form 10-K for the fiscal year ended December 31, 2018. INVESTOR RELATIONS Daniel Kennedy Murphy, CFA Senior Vice President and Treasurer Fidelity National Financial, Inc. (NYSE:FNF) 601 Riverside Avenue Jacksonville, FL 32204 (904) 854-8120 dkmurphy@fnf.com www.fnf.com William P. Foley, II Chairman of the Board Fidelity National Financial, Inc. Douglas K. Ammerman Retired KPMG LLP Thomas M. Hagerty Managing Partner Thomas H. Lee Partners, L.P. Daniel D. Lane Chairman of the Board Lane/Kuhn Pacific Richard N. Massey Partner Westrock Capital Partners Heather H. Murren Managing Partner Murren Family Office Raymond R. Quirk Chief Executive Officer Fidelity National Financial, Inc. John D. Rood Chairman The Vestcor Companies, Inc. Peter O. Shea, Jr. President and Chief Executive Officer J.F. Shea Company Cary H. Thompson Vice Chairman Banc of America Merrill Lynch Willie D. Davis Director Emeritus AUDIT COMMITTEE Douglas K.Ammerman, Chair Heather H. Murren John D. Rood COMPENSATION COMMITTEE Richard N. Massey, Chair Daniel D. Lane Cary H.Thompson GOVERNANCE COMMITTEE Peter O. Shea, Jr., Chair Richard N. Massey 

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