UPDATE 2-Restaurant unit boosts insurer Fidelity National's profit

Mon Jul 23, 2012 6:32pm EDT

* Q2 EPS $0.65 vs est $0.47

* Q2 rev $1.74 bln vs $1.52 bln

* Total tile premiums earned in Q2 rises 12 pct

* Q2 restaurant unit oper profit $253 mln

July 23 (Reuters) - Fidelity National Financial Inc's results handily beat estimates on a strong performance at its core title insurance business, and the company started reporting results of its restaurant holdings unit as a separate segment.

The No. 1 U.S. property title insurer has been making moves outside its core title insurance business and sees its restaurant holdings portfolio -- American Blue Ribbon Holdings (ABRH)-- growing into a larger operating unit.

Consolidation of the ABRH results began on May 11 and for the partial quarter the company reported operating revenue of $253 million from the segment.

"I think it is a good sign because it will allow investors some more transparency into that asset so they can get a better sense of its quality and value it properly," Stephens analyst Brett Huff told Reuters.

In February, ABRH agreed to buy O'Charley's Inc in a deal that valued the casual dining chain at $221 million.

"The integration of O'Charley's into ABRH has begun and we look forward to reporting improving margins as we move forward with our integration plans," Fidelity National's Chief Executive George Scanlon said in a statement.

The company said last month that a newly formed unit of its restaurant subsidiary would buy restaurant operator J Alexander's Corp for $72 million and that the combined entity would trade on public markets.

On completion of the deal, which is facing opposition from some J Alexander shareholders, the combined ABRH operations are expected to generate annual revenue of about $1.5 billion.

STRONG SECOND QUARTER

The company's profit for the quarter rose 80 percent on the back of strong premium growth and pretax margins at its core title insurance business.

Second quarter net income rose to $147 million, or 65 cents per share, from $80 million, or 36 cents per share, a year earlier.

Total revenue for the quarter rose 41 percent to $1.74 billion.

Analysts on an average expected the company to earn 47 cents per share on revenue of $1.52 billion, according to Thomson Reuters I/B/E/S.

Total title premiums earned in the quarter rose 12 percent to $946 million, while pretax title margins, excluding gains, rose to 14.4 percent from 11.6 percent last year.

"The earnings report is positive as it shows that the company's core title business can put up extremely strong margins even in a housing environment that isn't in full recovery yet," Stephens analyst Huff said.

Title insurance guarantees that property owners have title to property and can legally transfer the title. Many lenders require that buyers have the insurance before extending loans.

Shares of Fidelity National, which has a market capitalization of $4.24 billion, have risen 20 percent since the beginning of the year.

They closed at $18.69 on Monday on the New York Stock Exchange.

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