Best Says LPS Helps Diversify FNF

Fidelity National Financial’s proposed acquisition of Lender Processing Services will enhance the nation’s No. 1 title insurance underwriter’s leadership position in that industry by creating “a larger, more diversified revenue base,” said Oldwick, N.J.-based ratings agency A.M. Best.

The deal will also give FNF “a more comprehensive products and services offering” which will allow it to ride out the cyclical nature of the real estate-mortgage-title insurance businesses.

But, Best added, there is execution risk for FNF to getting the deal done successfully and in a timely manner.

The transaction will also raise FNF’s financial leverage due in part to the increased debt the title company is taking on to pay for the deal, plus the assumption of LPS’ debt.

“Nevertheless, given FNF’s history of successfully acquiring and integrating companies within stated guidance and objective and history of strong earnings, A.M. Best expects financial leverage will return to historical norms over the intermediate term,” the ratings agency said.