Fitch Upgrades Fidelity National Financial's IFS Ratings; Outlook Stable

Fitch Ratings has upgraded Fidelity National Financial, Inc.'s (FNF) title insurance operating companies' Insurer Financial Strength (IFS) ratings to 'A-' from 'BBB+'. In addition, Fitch has affirmed FNF's Issuer Default Rating (IDR) at 'BBB-' and senior unsecured debt at 'BB+.' The Rating Outlook is Stable. A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

Fitch's upgrade 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 high tangible financial leverage are the primary reasons for the expansion of holding company debt-notching with the IFS rating upgrade. On Jan. 2, 2014, FNF acquired Lender Processing Services, Inc. (LPS) for $3.4 billion, generating approximately $3 billion of the total $4.7 billion in goodwill.

FNF's financial leverage as of March 31, 2015 was 33%; however, tangible financial leverage was 100%. Prior to the LPS transaction, financial leverage was 19% and tangible financial leverage was 31% at year-end 2013.

Fitch's ratings analysis considers both the two tracking stocks, FNF Core (Ticker: FNF NYSE) and FNF Financial Ventures (Ticker: FNFV NYSE). While Fitch recognizes the tracking stock gives FNF's management the ability to streamline the organizational chart and lessen the volatility of title insurance operations it does not alleviate holding company obligations, as neither is a separate legal entity. Any future material organizational structure changes at FNF would merit further assessment of the ratings.

FNF has a dominant position in title insurance accounting for approximately 32% of the U.S. title insurance market. This scale coupled with an aggressive cost management focus has allowed FNF to be one of the most profitable title insurance companies, reporting a GAAP pretax operating margin of 12.2% for full-year 2014, the highest amongst large publicly traded title insurance companies.

As of March 31, 2015, GAAP fixed charge coverage (FCC) was 5.9x. Fitch anticipates modest improvement in the FCC ratio as the company actively reduces its debt load.

Fidelity's title insurance operating subsidiaries have strong capitalization with statutory operating leverage of 2.5x as of year-end 2014 and a risk adjusted capital (RAC) score of 197%; both metrics are favorable relative to title insurer peers.

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 higher; year-end 2014 debt/EBITDA was 2.8x.

--Significant improvement in tangible financial leverage.

--Sustained GAAP FCC ratio of 8.0x or higher.

These factors, as well as the following items 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.

--Maintenance of GAAP operating margins at current levels that remain in top tier versus industry norms.

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 upgraded the following ratings with a Stable Outlook:

Fidelity National Title Ins. Co.

Alamo Title Insurance Co. of TX

Chicago Title Ins. Co.

Commonwealth Land Title Insurance Co.

--IFS ratings to 'A-' from 'BBB+'.

Fitch has affirmed the following ratings with a Stable Outlook:

Fidelity National Financial, Inc.

--IDR at 'BBB-';

--$300 million 4.25% convertible senior note maturing Aug. 15, 2018 at 'BB+';

--$300 million 6.6% senior note maturing May 15, 2017 at 'BB+';

--$400 million 5.5% senior note maturing Sept. 1, 2022 at 'BB+'

--Four-year $800 million unsecured revolving bank line of credit due July 2018 at 'BB+'.

Additional information is available on www.fitchratings.com

Applicable Criteria

Exposure Draft: Insurance Notching Criteria (Proposed Methodology Changes) (pub. 12 May 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865576

Insurance Rating Methodology (pub. 04 Sep 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=756650

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=987138

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=987138

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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