Fitch Downgrades a Third National Underwriting Group

The downgrade of the insurer financial strength and issuer default ratings of Fidelity National Financial Inc., Jacksonville, Fla., by Fitch Ratings, Chicago, means the rating agency has downgraded three of the four remaining national title underwriting groups in the past week. Fitch cut FNF's IDR by two notches, from "BB" down to "B+". The two-notch downgrade, the Fitch report said, reflects not only the IFS cut on FNF's title insurance subsidiaries, but the greater weight given the substantial amount of goodwill at the holding company level. FNF has a debt-to-tangible capital ratio of 44% as of June 30, which Fitch categorized as outside its expectations. A positive is that FNF reduced financial leverage by paying down debt after an equity offering in April 2009. The IFS downgrade affects all FNF title subsidiaries except the former LandAmerica operations. The rating was dropped to BBB- from BBB. Fitch feels FNF has an aggressive capital management strategy, resulting in a higher operating leverage at the underwriting units than its competition. Despite this, Fitch retains an investment grade IFS rating on FNF in recognition that its historical results through the first half of this year have been better than its competition's. Another positive is that FNF now has a 46% market share, thanks to the LandAmerica acquisition.