Fidelity Benefits From Acquisition, Housing Boom
By RAJIV VYAS
A timely merger, low mortgage rates and the boom in home refinancing helped Irvine-based Fidelity National Financial Inc. post the biggest three-year gain,in dollar terms,of any Orange County company.
The title insurer and financial services company grew its revenue at a 208.8% clip to $4.3 billion in the past three years ended June 30.
That’s a sales gain of $2.9 billion in the period and it puts Fidelity National at No. 9 on this year’s Business Journal list of the fastest-growing companies in OC, up from No. 11 last year.
Much of the growth in Fidelity’s revenue can be attributed to its acquisition of Chicago Title Corp. in 2000. At the time, Fidelity’s sales were $1.3 billion.
“Back at the time they were bigger than us,” said Daniel Murphy, senior vice president at Fidelity National Financial. Fidelity borrowed money and used its cash reserves to acquire Chicago Title.
Prior to the buyout, Fidelity National was the fourth-largest title insurer in the U.S.; today it is No. 1 with a market share of about 30%. Santa Ana rival First American Corp. is the No. 2 title insurer with some 22% of the market.
Fidelity National has more than 1,000 offices and 7,000 agents. It was ranked by Fortune magazine as the 426th largest company based on revenue last year.
About 500 workers are in OC,unchanged from last year. The company still reports to the Securities and Exchange Commission from its Irvine headquarters, although like much of chairman and chief executive Bill Foley’s empire, it is overseen from Santa Barbara.
The Chicago Title acquisition not only helped Fidelity boost its revenue, but also its profit. Net income grew 293% to $389.6 million through June 30, an annual compounded rate of 58%.
And its free cash flow,the money that is available to shareholders after subtracting capital expenditures,more than tripled in 2001 to $385 million vs. a year earlier.
Investors have fared well. For the three-year period through June 30, Fidelity National’s stock price rose 90%. Its market value is $2.8 billion at recent check.
But Fidelity’s growth rate is slowing as refinancing activity plateaus.
In its September quarter, the company’s revenue growth slowed to 39%, while profits rose 44%. That’s still strong growth, albeit at a slower rate than the past few years.
“The market is fabulous right now,I don’t know how much better it is going to get from here or how much worse,” Murphy said. “Most likely, it is going to be somewhere in the middle. The only (problem area) is commercial real estate.”
