S&P Raises Counterparty, Issue Ratings on Fidelity National Financial (FNF) to 'BBB'

Standard & Poor's Rating Services said today that it has raised issue and counterparty credit ratings on Fidelity National Financial (NYSE: FNF) to 'BBB' from 'BBB-' and its financial strength ratings on FNF's operating title insurance companies (Fidelity National Title Insurance Co., Chicago Title Insurance Co., Alamo Title Insurance Co., and Commonwealth Land Title Insurance Co.--collectively, FNF Title) to 'A' from 'A-'. The outlook is stable.

"We based the rating upgrades on our view that FNF Title will maintain its strong competitive positon and financial profile. FNF Title's rating benefits from our positive view of its business profile strength, which has outperformed its rated peers, and the group's ability to sustain its market share position and profitability in a constantly changing U.S. mortgage and real estate origination market," said Standard & Poor's credit analyst Marc Cohen. "We view FNF's Black Knight Financial Services LLC, the company's technology and transaction services and mortgage servicing segment, as a material contributor to FNF's core operations EBIT, providing diversification to its niche title insurance offerings.

The stable outlook reflects our expectation that FNF Title will maintain its strong competitive position and continue to demonstrate higher operating performance metrics than peers and a market share above 30% in the title insurance sector. "Although we see limited upside at this time, we would consider an upgrade if we believed FNF Title can maintain a lower risk position that would reduce potential earnings volatility and future capital migration at its operating insurance companies," Mr. Cohen continued.

We would lower the rating by at least one notch if FNF Title's market share falls below 30%, if it becomes unable to maintain title-segment generally accepted accounting principles (GAAP) adjusted EBIT return on revenue of at least 10%, or if its distribution of extraordinary capital from its regulated insurance companies materially affects its capital adequacy. A sustained consolidated EBITDA fixed-charge coverage ratio of less than 5x or financial leverage at or above 35% could also lead to a downgrade.

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