Q2 2005 Fidelity National Financial Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good day. Welcome, ladies and gentlemen. Thank you for standing by. Welcome to the Fidelity National Financial second quarter's earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. (OPERATOR INSTRUCTIONS).

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host today, Mr. Dan Murphy. Please go ahead.

DAN MURPHY, SVP, FINANCE, IR, FIDELITY NATIONAL FINANCIAL: Thank you and thank you for joining us, everyone. Joining me today on this call are Bill Foley, our Chairman and Chief Executive Officer, Randy Quirk, our Chief Executive Officer for Fidelity National Title, Al Stinson, our Chief Financial Officer and Tony Park, our Chief Financial Officer for Fidelity National Title.

We will follow our usual format this morning. Bill Foley will begin with a strategic overview. Randy Quirk will provide an update on conditions in the title industry and Al Stinson will review the financials for the quarter. We will then open it up for your questions and finish with some concluding remarks from Bill Foley.

This conference call may contain statements related to future events and expectations and as such constitutes forward-looking statements. These forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results, performance, or achievements of the Company to be different from those expressed or implied during this call. The Company expressly disclaims any duty to update or revise those forward-looking statements.

The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, the effect of government regulations, the economy, competition, and other risks detailed from time to time in the Management's Discussion and Analysis section of the Company's Form 10-K and other reports and filings with the SEC.

This call will be available for webcast replay at our web site at FNF.com and also will be available by phone replay beginning at 2:00 Eastern this afternoon through August 10th. That dial-in number is 800-475-6701 with an access code of 789158.

With that let me turn the call over to Bill Foley, our Chairman and Chief Executive Officer.

BILL FOLEY, CHAIRMAN, CEO, FIDELITY NATIONAL FINANCIAL: Thanks Dan. During the second quarter we announced that our Board of Directors approved a strategic restructuring that will result in the public distribution of a minority interest in FNF's Title Insurance operations. Since that announcement in May we have formed Fidelity National Title Group Inc. or FNT, which will act as the publicly traded parent company for our Title Insurance operations.

On July 6th, we filed a registration statement with the SEC related to the expected distribution of FNT stock to FNF shareholders. As detailed in that registration statement, we expect to distribute 17.5% of the stock in FNT to existing FNF stockholders. FNT will pay a $1 annual dividend to its stockholders. Also FNT plans to pay a $295 million dividend to FNF, prior to the distribution.

This will be accomplished through $150 million in FNT borrowings under a new FNT credit facility and a $145 million dividend from the insurance underwriters.

Additionally, FNT intends to either issue two $250 million intercompany notes payable to FNF with terms that mirror the existing FNF Senior Notes that mature in 2011 and 2013; or, alternatively, FNT may make an exchange offer in which it would legally convert the outstanding FNF notes, the notes that FNT would issue having substantially the same economic terms as existing FNF Senior Notes.

We expect that the distribution of FNT stock will take place before the end of the third quarter, subject to the receipts of all regulatory approvals.

At the FNF Board meeting yesterday, we formed a new and distinct Board of Directors for Fidelity National Title Group, that will be effective upon the distribution of the stock of FNT. The formation of this board sets the stage for FNF to truly operate as a holding company as we discussed on the conference call announcing the formation of Fidelity National Title Group back in May.

FNF will initially have majority ownership positions in Fidelity National Title Group and Fidelity National Information Services and 100% ownership of our Specialty Insurance business. As a holding company FNF will have the flexibility to make investments in other lines of business that it feels will allow it to best achieve its ultimate goal of maximizing FNF shareholder value. Attainment of that goal may involve investments in businesses that are not directly tied to or synergistic with our existing Title Financial processes or Specialty Insurance lines of business.

Last Wednesday we announced that we reached a settlement with the California Department of Insurance on their inquiry into captive reinsurance practices in the Title Insurance industry. Under the terms of the settlement, FNF will refund approximately $7.7 million to those consumers whose California property were subject to a captive reinsurance arrangement and will also pay a penalty of $5.6 million. As part of the settlement, FNF denied any wrongdoing. This settlement ends the captive reinsurance inquiry in California.

We also announced the acquisition of ServiceLink in June. ServiceLink provides national centralized mortgage and residential real estate title and closing services for major financial institutions at institutional lenders including six of the top 10 residential lending institutions ranked by loan origination volume.

The acquisition of ServiceLink provides FNF and its Title Insurance subsidiaries with centralized title and closing capabilities and improved direct access to national lender accounts.

ServiceLink will also utilize FNF and its subsidiaries for bundled service data needs surrounding the real estate and mortgage loan closing process, providing for cross selling of products and services, such as valuation and appraisal services, (indiscernible) determinations tax, services and mortgage credit information services. ServiceLink -- prior to its acquisition -- was an agent of First American.

As we told you last quarter, we have been primarily focused on two things at FIS. Organic growth and the repayment of debt from the March 2005 recapitalization of FIS. We've had great success on both fronts of the second quarter. Organic growth in our FIS segment was 9% for the second quarter with particular strength in our large BankGroup Enterprise Banking Solutions, our Mortgage Processing business and our Commercial Lending Processing Group. While it did not impact organic growth in the quarter, we signed a very large 10-year international license and maintenance contract with a …