Fidelity National Financial (FNF) is expected to remain the title pretax margins leader after years of being at the top thanks to its cost-management strategy, and this insurance company hopes to grow some of its noncore/nontitle assets through capital deployment, says Brett Huff, Research Analyst at Stephens Inc.
“FNF in particular is well-known as being the margin leader; title pretax margins is the main metric that folks use, and they’ve been the historic leader over many, many years. We expect that to continue, simply because we think they have the tightest cost management processes in the business. And in addition, FNF is known for buying stock back particularly at or just above book value, so we think that helps provide somewhat of a floor to the stock, and book value is in the low $20, $22, $23,” Huff said.
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Huff says FNF has been growing its restaurant business, among others, and although the timing of the returns from these strategies is not yet clear, he keeps an eye on this insurance company.
“FNF historically has deployed excess capital buying not just title and related mortgage services businesses, but they’ve also bought noncore or nontitle assets, including restaurants, payments processing companies, even things like distressed timberlands, especially over the last few years where they found what they thought were good deals in distressed situations,” Huff said.
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