Fitch Affirms Fidelity National Financial’s IFS Ratings; Outlook Stable
KEY RATING DRIVERS
Fitch's affirmation of FNF's IFS ratings are based on market-leading scale, margins, and operating company capitalization. Offsetting these positives though has been a history of periodic consolidated balance sheet financial leverage increases to fund acquisitions of ancillary businesses. While Fitch notes that past ventures have been successful, historical results do not mitigate future risks.
FNF's more aggressive holding company capital management, coupled with higher tangible financial leverage, are the primary reasons for the expansion of holding company debt notching in relation to the IFS rating. FNF's financial leverage as of
Fitch's ratings analysis considers both the two tracking stocks, FNF Core (Ticker: FNF NYSE) and
FNF has a leading position in title insurance accounting for approximately 33% of the
Fidelity's title insurance operating subsidiaries have strong capitalization when measured by statutory operating leverage and a risk adjusted capital (RAC) score. Fitch anticipates this will continue over the rating horizon.
RATING SENSITIVITIES
The following is a list of key rating drivers that could lead to an upgrade for the holding company ratings:
--Sustained improvement in debt/EBITDA of 2.3x or lower and/or significant improvement in tangible financial leverage;
--No material deterioration in GAAP fixed charge coverage.
These factors, as well as the following, could lead to an upgrade of both IFS and debt ratings:
--Maintenance of operating company capital strength as demonstrated by a RAC score above 175% and net leverage below 4.0x;
--An improvement in stated financial leverage to 25%;
--Maintenance of GAAP title operating margins at current levels that remain in the top tier versus industry peers.
The following is a list of key rating drivers that could lead to a downgrade:
--A RAC score below 130%.
--Any acquisition that increases financial leverage above 35%.
--A significant write-down in goodwill or signs that indicate a potential write-down of goodwill is possible.
--Deterioration in earnings, primarily measured by consolidated pretax GAAP margins, at a pace greater than peer averages.
--Sustained material adverse reserve development.
FULL LIST OF RATING ACTIONS
Fitch has affirmed the following ratings with a Stable Outlook:
Fidelity National Title Ins. Co.
Chicago Title Ins. Co.
--IFS ratings at 'A-'.
Fitch has affirmed the following ratings with a Stable Outlook:
--IDR at 'BBB-';
--
--
--
--Four-year
Additional information is available on www.fitchratings.com.
Applicable Criteria
Insurance Rating Methodology (pub.
https://www.fitchratings.com/site/re/887191
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