Though its fourth-quarter profits fell, Fidelity National Financial Inc. beat analysts' expectations on the strength of better-than-expected title insurance activity, the company said Tuesday.
Executives of the Jacksonville, Fla., company, the nation's largest title insurer, also said Tuesday that a public offering of Fidelity Information Services, which was announced last year then shelved in favor of selling a quarter of the unit to a pair of private equity companies, remained an option.
Fidelity reported that its fourth-quarter earnings fell 11%, to $174.9 million, or 98 cents a share, from a year earlier. Revenue rose 3%, to $2.1 billion.
Excluding charges - including expenses related to the attempt to take Fidelity Information Services public - per-share earnings were $1.08, well above Wall Street's average estimate of 96 cents.
Profits for the year fell 14%, to $741 million. Revenue for the year was $8.3 billion.
William P. Foley 2d, Fidelity's chairman and chief executive, said the partial sale of the information services unit remains on track to close in mid-March, along with a complicated recapitalization plan.
The plan involves the unit's borrowing up to $2.8 billion and then handing over most of that money to the parent company to pay for, among other things, a $10-per-share dividend to Fidelity National shareholders.
Mr. Foley said the loan and the sale of a quarter of a stake in FIS to the leveraged buyout firms Thomas H. Lee Partners LP of Boston and Texas Pacific Group of Fort Worth should close in a few weeks.
Once those transactions are out of the way, Mr. Foley said, Fidelity might hit the acquisition trail again, both for its core insurance segment and the information services unit.
The information services unit has made several acquisitions in the past two years and might want to continue expanding its transaction processing capabilities through further deals, Mr. Foley said. The parent would look for parts of other companies, he said.
But Mr. Foley stressed on a conference call with analysts that the company's first financial priority in 2005 "is going to be to pay down that debt and help our partners monetize their investment."
Fidelity said last May that it was planning a public offering for Fidelity Information Services. It put that plan on hold in September when it agreed to buy the financial outsourcer InterCept Inc. of Atlanta for $408.2 million.
That deal closed in November. A month later Fidelity canceled the IPO plan altogether after the private equity groups agreed to buy a minority share in Fidelity Information Services for $500 million.
But the idea is not dead, just delayed, Mr. Foley said Tuesday. "An IPO, if market conditions are good, is definitely in the works for our business," he said. But he added that Fidelity would continue to be a major shareholder of the unit even after an IPO.
Though the information services unit received loan commitments totaling $3.2 billion from several major banks last month, it expects to draw down only $2.8 billion of that sum, Mr. Foley said. Of that, $1.75 billion will go to fund the $10 cash dividend, leaving $950 million available for other purposes.
Fidelity plans to use $400 million of that to pay down a revolving credit facility, leaving $550 million in cash available for acquisitions; Mr. Foley said the company is looking at specialty lines of insurance to supplement its title insurance business.
Analysts said they were impressed by the strength of the company's insurance business in a slow mortgage market.
Nikolai Fisken of Stephens Inc. said Fidelity did a good job in maintaining volume in its title insurance business, though overall mortgage activity has declined.
Geoffrey M. Dunn at Keefe, Bruyette & Woods Inc. said that Fidelity Information Services is starting to benefit from its acquisitions, including three last year: InterCept, Sanchez Computer Associates Inc., and Aurum Technologies Inc.
"They're getting the synergies they looked for, and then some," Mr. Dunn said. "I think their story is incrementally better today than it was yesterday."
