Fidelity National Financial Inc.’s revenue has dropped in each of the past three years, but its earnings per share have increased each year while profit margins in its title insurance business continue to rise.
CEO George Scanlon told shareholders at Wednesday’s annual meeting that the improved profitability is a credit to the efficiency of Fidelity’s operations.
“We have been operating in a very difficult environment,” Scanlon said at the meeting at Fidelity’s Riverside Avenue office complex.
“We’re very proud of the way our field operations have focused on the market at hand,” he said.
Fidelity’s revenue declined from $5.5 billion in 2009 to $4.8 billion last year while the slumping housing market hurt demand for its title insurance services.
Over that same three-year period, the operating profit margin from Fidelity’s title business rose from 6.6 percent to 10.9 percent. So Fidelity’s earnings per share rose from 97 cents in 2009 to $1.66 last year.
Title insurance volume is expected to continue to fall in the next couple of years. Scanlon showed Mortgage Bankers Association data that mortgage origination volume is projected to drop from $1.26 trillion last year to $1.1 trillion this year and $1.06 trillion in 2013.
Fidelity is outperforming its competitors, Scanlon said. Of the four companies that dominate the U.S. title market, Fidelity produced 43 percent of the revenue last year but 76 percent of the profit.
He said shareholders were rewarded for that performance, considering Fidelity’s stock rose 16.4 percent last year. Fidelity’s largest competitor, First American Financial Corp., had a 15.2 percent decline last year and the Standard & Poor’s 500 index was flat.
While the title insurance business is cyclical, Fidelity continues to seek other sources of income by investing its excess cash in a broad range of business with “the common theme being they are unregulated,” Scanlon said.
Those investments include American Blue Ribbon Holdings, which operates several restaurant chains, and Ceridian, which provides human resources and payments solutions.
Fidelity also owns 47 percent of Indiana-based auto parts manufacturer Remy International Inc. Fidelity has been hoping to monetize its investment in Remy this year with an initial public offering of its stock.
Scanlon said after the meeting that the company is waiting for better market conditions before completing Remy’s IPO, but the business is profitable, so there’s no rush.
“We’re under no pressure to do anything,” Scanlon said.
“We’re just exploring when is the right time to go public right now,” he said.
356-2466