Feb 13, 2014
Executives
Daniel Kennedy Murphy - Former Senior Vice President of Finance and Investor Relations of Fidelity National Financial William P. Foley - Chairman, Chairman of FNF Holding and Chairman of Executive Committee Raymond R.
Quirk - Chief Executive Officer Brent Bannister Bickett - President Anthony J. Park - Chief Financial Officer, Principal Accounting Officer and Executive Vice President
Analysts
Eric Beardsley - Goldman Sachs Group Inc., Research Division Mark C. DeVries - Barclays Capital, Research Division Geoffrey M.
Dunn - Dowling & Partners Securities, LLC Brett Huff - Stephens Inc., Research Division Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
Operator
Ladies and gentlemen, thank you for standing by, and welcome to the NFF -- I'm sorry, FNF 2013 Fourth Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded and will be made available for replay starting after 1:00 p.m.
Eastern time today, running through February 20 at midnight. You may access the AT&T replay service at any time by dialing 1 (800) 475-6701 and entering the access code 316606.
International participants may dial 1 (320) 365-3844. I would now like to turn the conference over to our host, Dan Murphy.
Please go ahead.
Daniel Kennedy Murphy
Thank you. Thank you, everyone, for joining us for our fourth quarter 2013 earnings conference call.
Joining me today are Chairman, Bill Foley; CEO, Randy Quirk; President, Brent Bickett; and CFO, Tony Park. We will begin with a brief strategic overview from Bill.
Randy will then provide a review of the title business. Brent will provide an overview of our significant portfolio company investments, and Tony will finish with a review of the financials.
We'll then open the call for your questions and finish with some concluding remarks from Bill. This conference call may contain forward-looking statements that involve a number of risks and uncertainties.
Statements that are not historical facts, including statements about our expectations, hopes, intentions or strategies regarding the future are forward-looking statements. Forward-looking statements are based on management's beliefs, as well as assumptions made by and information currently available to management.
Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.
The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our press release dated yesterday and in the statement regarding forward-looking information, risk factors and other sections of the company's Form 10-K and other filings with the SEC. Let me now turn the call over to our Chairman, Bill Foley.
William P. Foley
Thanks, Dan. The fourth quarter was a solid finish to a year of transition in our title insurance business as we continued to move for a refinance-driven market towards what appears to be a more purchase-driven market.
While this quarter witnessed the majority of the revenue impact from the steep decline in refinance title orders that began during the summer, we were still able to generate an 11% adjusted pre-tax title margin for the fourth quarter and nearly 14% for the full year 2013. After more than a 7-month process, we were able to successively -- successfully close the acquisition of LPS on January 2 of this year.
As we have previously disclosed, LPS and our ServiceLink business had been combined and are operating through 2 new entities: Black Knight Financial Services, consisting of the mortgage technology and data and analytics business from LPS; while ServiceLink Holdings consists of the combined mortgage transaction services business, including both centralized refinance operations and the default management business. The long process of closing gave us the opportunity to explore the cost synergy opportunities in more detail.
At this point, we have recognized an estimated $150 million in annualized run rate synergies, and are now targeting $225 million in total cost synergies. These synergies are in addition to reductions in staff and operations due to the declining refinance market.
We are very excited about the future of Black Knight and ServiceLink -- and the ServiceLink companies, and look forward to their contribution to the continued success of FNF. On January 31, we announced that our Board of Directors approved a plan to create a tracking stock for our portfolio investments.
We will contribute these portfolio company investments into a subsidiary, Fidelity National Financial Ventures and create and distribute a class of shares to FNF shareholders that tracks the performance of FNFV. The primary portfolio of company investments that will be contributed to FNFV includes FNF's equity interest in Remy International; American Blue Ribbon Holdings, our -- one of our restaurant companies; J.
Alexander's, also a restaurant company; Ceridian, the payroll processor; Comdata; and Digital Insurance. FNF also intends to provide $200 million in financial support to FNFV, comprised of $100 million in cash and $100 million in an intercompany loan upon the formation of the tracking stock.
The net asset value of FNFV's portfolio company investments, including the financial support from FNF, is approximately $1.2 billion or $4.50 per FNF common share. We believe that separating the portfolio company investments into a tracking stock will provide greater transparency and clarify to the -- and clarify both the inherent value of our portfolio company investments and cash earnings capabilities of our core real estate technology and mortgage services businesses.
Importantly, once the tracker is distributed, all future noncore acquisitions will be funded by FNFV, while FNF's free cash flow will be used to reinvest in our core businesses, repay debt, pay dividends and repurchase shares. Our ultimate goal is to help investors more easily value our company and maximize returns for all of our shareholders.
I'll now turn the call over to Randy Quirk to discuss the title business.
Raymond R. Quirk
Thank you, Bill. The expected transition from a refinance-driven market to a purchase-driven market continued in the fourth quarter.
55% of open orders and 56% of closed orders were purchase-related in the fourth quarter, both significant increases from the 32% of open orders and 33% of closed orders that were purchase-related in the fourth quarter of 2012. Total open order counts declined each month during the quarter, driven by the decline in refinance orders.
For the fourth quarter, open orders averaged 6,200 per day, with October at 6,800, November at 6,500 and December averaging 5,300. We averaged more than 7,100 open orders per day for the month of January, assisted by the LPS acquisition but also by an increase in refinance orders in the last 2 weeks of January.
FNT alone had 5,300 order -- open orders per day in January, and the combined ServiceLink operation contributed 1,800 open orders per day. The mix continued to shift to more purchase each month during the fourth quarter, with October and November at 54% and December averaging 56%.
For the month of January, purchase transactions made up 53% of total open orders. We had another impressive quarter in the commercial title insurance business, generating $146 million in revenue, a 2% decline from the strong fourth quarter of 2012, as the average fee per file of $11,400 grew by 5%, and closed orders of $12,800 declined by 6%.
We are also encouraged that open commercial orders increased by 2% over the strong fourth quarter of 2012. The fee per file in the fourth quarter was positively impacted by the continued mix shift towards purchase, as well as home price appreciation and a strong commercial title quarter.
The total fee per file of $2,082 increased 33% versus the fourth quarter 2012 fee for file of $1,565, and increase sequentially 15% versus the third quarter 2013 fee per file of $1,807. Also excluding our national commercial revenue, the fee per file was $1,676, a 28% increase over the prior year quarter and a 7% sequential improvement from the third quarter of 2013.
With a significant decline in refinance volumes in the second half of 2013, we focus on our cost structure and staffing in the field offices. During the fourth quarter, we reduced headcount in our operations by more than 700 positions, split relatively evenly between our local offices and ServiceLink, although the percentage reduction at ServiceLink was much larger at 26% of total ServiceLink positions.
From our peak of May 2013 staffing levels at 12,250, we reduced staffing by nearly 2,400 or more than 19%, with ServiceLink seeing more than 50% reduction in staffing over that time period. In the month of January, we removed an additional 300 positions in our FNT operations.
Let me now turn the call over to Brent Bickett to review our portfolio investment companies.
Brent Bannister Bickett
Thanks, Randy. The restaurant group produced operating revenue of $371 million and adjusted EBITDA of $26 million for the fourth quarter, increases of 4% and 37%, respectively, over the fourth quarter of 2012.
The restaurant group's fourth quarter adjusted EBITDA margin was 7%, a 170 basis-point improvement from the fourth quarter of 2012. For 2013, the restaurant group produced operating revenue of $1.4 billion and adjusted EBITDA of $81 million, increases of 55% and 103%, respectively, over 2012.
Notably, despite the economic and weather challenges in the casual dining category, the turnaround story at O'Charley's continues to improve as it generated its first positive quarterly same-store sales growth under our ownership in the fourth quarter of 2013. Remy generated operating revenue of $293 million and adjusted EBITDA of $38 million for the fourth quarter, an increase of 7% and a decrease of 5%, respectively, versus the fourth quarter of 2012.
Fourth quarter adjusted EBITDA margin was 13%, a 160-point decline from the fourth quarter of 2012. Remy's stock traded recently above $21, valuing FNF's investment at approximately $350 million.
On a combined basis, Ceridian and Comdata generated quarterly revenue of $377 million and EBITDA of approximately $97 million, decreases of 2% and 4%, respectively, versus the prior year period. The EBITDA margin of 26% was consistent with the prior year.
Our 32% share of Ceridian and Comdata's net loss of $7 million -- was $7 million, as Ceridian took a combined $7 million charge related to the write-off of a deferred tax asset, debt-extinguishment costs and transaction costs related to the business separation of Comdata. Finally, Digital Insurance generated revenue of $19 million and an EBITDA of $4 million in the fourth quarter of 2013, representing an EBITDA margin of 19%.
For 2013, Digital Insurance generated revenue of $69 million and EBITDA of $16 million, representing a 23% EBITDA margin. Digital Insurance completed 6 acquisitions during 2013, and we expect that trend of multiple acquisitions to continue in 2014.
Let me now turn the call over to Tony Park to review the financial highlights.
Anthony J. Park
Thank you, Brent. Our core operations generated nearly $1.4 billion in revenue in the fourth quarter compared to nearly $1.6 billion in the fourth quarter of 2012, as total title and escrow revenue declined by $216 million or 14%, driven by the previously mentioned decline in refinance orders.
Adjusted core net earnings were $94 million or $0.37 per diluted share, which excludes $3 million in after-tax purchase price amortization, a $7 million after-tax executive separation charge and $3 million of after-tax expenses related to the LPS acquisition. Core free cash flow was $38 million.
The title segment generated more than $1.3 billion in title and escrow revenue for the fourth quarter, a 14% decrease from the fourth quarter of 2012. Direct title premiums declined by 18%, driven by a 41% decrease in closed orders, offset somewhat by the 33% increase in the fee per file.
Agency premiums declined by 5%. Title segment personnel costs declined by $39 million or 8% versus the fourth quarter of 2012, while other operating expenses declined by $48 million or 16%.
$34 million of the fourth quarter decline in other operating expenses came at ServiceLink. Total personnel and other operating expenses combined declined by 11%, slightly lower than the 14% decline in total title and escrow revenue.
As mentioned earlier, we have combined LPS and ServiceLink and are operating those businesses through Black Knight and ServiceLink, and we will begin reporting their results in the first quarter. Although they were not included in our results for the fourth quarter, Black Knight, the mortgage technology company, had pro forma revenue of $186 million and adjusted EBITDA of $70 million, and ServiceLink had combined pro forma revenue of $272 million and adjusted EBITDA of $34 million.
Debt outstanding, excluding ABRH and Remy, was $984 million with no FNF maturities until May 2017. Additionally, there were no borrowings under our $800 million credit facility as of December 31.
Remy and the restaurant group had debt of $340 million, with $272 million from Remy and $68 million from the restaurant group. FNF does not provide any corporate guarantee on the debt of either Remy or the restaurant group.
Our debt-to-total-capital ratio was 20% at December 31. Our outstanding debt did increase after the closing of the LPS acquisition with the funding of our $1.1 billion term loan, a $300 million borrowing under our existing credit facility, and Black Knight's assumption of $600 million and 5.75% LPS senior notes.
We expect our debt-to-total-capital ratio to be near 35% at the end of the first quarter. Total title claims paid were $100 million during the fourth quarter, a decrease of $31 million or 24% from the fourth quarter of 2012.
We expect to begin 2014 by continuing to provide for future claims at a 7% provision level. We will evaluate our provision level as we move through 2014.
Finally, our investment portfolio totaled nearly $5.8 billion at December 31. From a regulated standpoint, we have nearly $1.8 billion in statutory reserves, $1.5 billion in regulated cash and investments, and approximately $600 million in secured trust deposits, for a total of nearly $3.9 billion in regulated cash and investments.
From an unregulated perspective, we have $360 million in minority equity investments, which is primarily our Ceridian investment, and approximately $1.1 billion in unregulated cash and investments, for a total of approximately $1.5 billion in unregulated cash and investments. A large portion of that unregulated cash was used in the LPS acquisition, as we have approximately $250 million of unregulated cash as of January 31.
There's also approximately $200 million in consolidated cash and investments at Remy, the restaurant group and other subsidiaries that is necessary for their operations, and approximately $200 million in cash at subsidiaries that is restricted by minimum working capital or other requirements. Let me now turn the call back to our operator to allow for any questions.
Operator
[Operator Instructions] We'll go to the line of Eric Beardsley with Goldman Sachs.
Eric Beardsley - Goldman Sachs Group Inc., Research Division
You might have mentioned this, but I'm not sure if you gave the exact details. But what was the LPS revenue and pre-tax income for the fourth quarter?
Anthony J. Park
Yes, we did mention that and broke it down into the 2 pieces. The Black Knight, which is the technology business, had a revenue of $186 million and adjusted EBITDA of $70 million.
And the combined ServiceLink businesses, which is both the ServiceLink business from the FNF side as well as the LPS transaction services business, had a pro forma revenue of $272 million and adjusted EBITDA of $34 million.
Eric Beardsley - Goldman Sachs Group Inc., Research Division
Great. And on a pre-tax earnings basis, do you have that?
Anthony J. Park
I do not.
Eric Beardsley - Goldman Sachs Group Inc., Research Division
Okay. Great.
And then just secondly, I guess, we're pretty early in February here, but have you seen any trends thus far in how it's performing relative to January?
Raymond R. Quirk
Sure, this is Randy. We have seen the orders start to move back up.
You got to get through the last couple of weeks of December where the orders fall off very dramatically. And it takes a week or 2 for the orders to start coming back up.
But they have come back up to levels of -- probably the early part of November. We've seen, in the last 2 or 3 weeks, a little uptick on the refinance side.
So it looks like we -- it could be at the beginning of what we fully expected is orders to start gradually coming back as you move back to the back end of January into February. And then -- and the expectation is to get the resale activity going in February and then March, and get the resale bounce that is pretty traditional for us.
Operator
We'll go to the line of Mark DeVries with Barclays.
Mark C. DeVries - Barclays Capital, Research Division
My first question's around the synergy target of $225 million. Can you give us a sense of how quickly you expect to ramp to that level, and also, whether you see any additional potential upside above that?
William P. Foley
Sure. Well, we increased the estimate, of course, from $100 million to $225 million because we were very successful, really, right out of the box, in obtaining significant synergies.
As we've gotten into the 2 businesses, we're seeing a number of additional opportunities, which we did not really include in our original synergy targets. So we're at $150 million-plus right now.
We believe that we're going to be at least $180 million to $190 million by the end of the first quarter. We should be at $225 million or greater by the end of the second quarter.
And at the next quarterly conference call, when we talk about -- when we update the synergy situation, we'll then be in a position to give you a revised target. We just didn't want to get too far ahead of ourselves right now.
Mark C. DeVries - Barclays Capital, Research Division
Okay. Great.
That's really helpful. And then on the tracking stock, can you talk about what impact, if any, or limitations that may place on your ability to monetize your noncore investments, particularly during the next 6 months that you estimate you'll need to complete that process?
William P. Foley
No, it's not going to -- if we have the opportunity to, for example, do an IPO at one of the restaurant companies, or if there's a situation of a sale or public offering of one of the other companies, we're not going to slow anything down because of the tracking stock. We'll continue to look at all opportunities.
And we have gotten a few inquiries on particular businesses after we announced the formation of the tracking stock. Nothing has come to fruition as of yet.
But we won't be slowed down just by the fact that we are forming this tracking stock. Because we view -- and assuming nothing does sell between now and the issuance of the tracker, we -- the whole purpose of the tracker is to monetize those investments and reinvest funds and distribute cash and/or stock to our shareholders at various points in time of various tracking instruments.
So you're going to find that tracking stock will be a very vibrant vehicle in terms of shareholder value creation and shareholder -- and distributions to shareholders. It's an interesting concept that really came to us from an existing shareholder.
And I won't mention who it is. I don't have permission to do that.
But it was a terrific idea, and we implemented the idea -- or are in the process of implementing the idea. And the more we get into it, the more excited we are about the tracking stock.
Mark C. DeVries - Barclays Capital, Research Division
Okay. Great.
And then just one last question on expenses. You guys have done a great job looking at this past year of taking out expenses as volumes or order counts have pulled back.
If refi activity remains muted in this year, could you give us a little sense of how much room more there is in the title side to take out additional expenses?
William P. Foley
We hope there's not going to be any. But Randy has this targets of openings for -- files openings per employee and closings per employee.
And we've always run our business by these metrics. And as the closings per employee fall and the openings per employee fall, and obviously, the openings per employee are our first indicator, we take out staff.
We're into a seasonal market, so -- and we're -- we believe that the resale market will accelerate beginning in the spring and summer, as rates are continuing to be muted. But if the volumes fall or the resale market doesn't develop as we believe it will, there will be more cost saves.
Operator
And we'll go to the line of Geoffrey Dunn with Dowling & Partners.
Geoffrey M. Dunn - Dowling & Partners Securities, LLC
First, given your projected cash flows for the year, can you give us an idea of the amount of debt you think you can retire in the course of '14?
William P. Foley
I think Tony has a pretty good handle on that.
Anthony J. Park
Yes. I think what we modeled toward a sort of top level, assuming what we can take upstream from our underwriters during the course of '14, we feel like we can retire the $300 million borrowed under the revolver and take out, I believe, it was a couple of hundred million, maybe $300 million off of the term loan, the $1.1 billion term loan.
So that's kind of what we've targeted at this point for 2014.
Geoffrey M. Dunn - Dowling & Partners Securities, LLC
Great. And then, Bill, I had a question to follow up on the $225 million synergies.
First, are those synergies being run off the 3Q expense basis that we saw? Or did the actions start occurring before that?
And then second, is that a net synergy number, meaning net of any reinvestment? Or could that number be knocked down in reality as you maybe reinvest some of that into businesses?
William P. Foley
Well, to answer the first question, we began tracking synergies about August 8 of this past year. So that was -- and those synergies came both on the FNF side and down at the LPS side.
But we really had control of the FNF side. And they are synergies that are -- that were deal-related and not volume-related at the ServiceLink business or the LSI businesses.
And these are net synergy numbers. For example, one of the synergies is a decrease in stock option expense and employee bonus expense.
There are going to be bonuses and there are going to be stock option expenses going forward, but it's a net number. So that's an example of how we netted things out.
The other thing we've done is when we've added a person, that becomes a negative synergy. So that if we took out the CEO at LPS and the Chief Operating Officer, but we added a CEO at some salary level, then it was a net number between those 3 individuals.
So we're trying to be very straightforward on the synergy tracking. We do get it audited by a third party.
We know our shareholders are happy for us to get these synergies, but they want them to be correct.
Geoffrey M. Dunn - Dowling & Partners Securities, LLC
Okay. And then just so I can triangulate this, can you give us an idea what the run rate savings were at the end of the third quarter as it compares to the $150 million now?
William P. Foley
Tony has it. Yes.
Anthony J. Park
Yes. So, Geoff, the -- most of it was in the fourth quarter, but it was about $50 million that we had realized through closing, and then the other $100 million was really in the month of January.
Geoffrey M. Dunn - Dowling & Partners Securities, LLC
Okay. And as we think about just the pro forma, how -- is that $100 million basically attributable to the LPS side coming in, meaning, it's -- the $50 million is already in the FNF run rate at end of the year, the $100 million is incremental to our '14 models?
William P. Foley
Yes. The $50 million would be split between FNF and LPS.
There was probably a bit more on the FNF side when you went into everything. And then the $100 million is totally Black Knight.
We haven't really achieved any FNF synergies. We have some FNF synergies coming that will be -- some will be hitting in the first quarter of this year.
But the LPS or Black Knight synergies were really things that happened -- a lot of them happened Day 1. I mean, we were ready.
My 2 CEOs of the 2 respective businesses had their marching orders. Our CFO down at Black Knight was right behind them.
And I mean, things happened immediately, including the CEO of LPS, who is a good guy but wanted to move on, and the Chief Operating Officer, the CFO, the director of -- the fellow who was running the analytics business, I mean, it just went right down the line. The Controller, the Chief Administrative Officer, it goes just all the way down the line.
And there's a lot more to come, obviously.
Geoffrey M. Dunn - Dowling & Partners Securities, LLC
Okay. So not to belabor this, but -- so maybe the right way to think of it is, relative to the last LPS numbers we saw, probably strip out maybe $30 million of synergies on the FNF side.
There is, call it, almost $200 million of synergies relative to the third quarter FNF -- I'm sorry, in third quarter LPS and year end FNF numbers.
William P. Foley
I think you're math's right.
Operator
[Operator Instructions] We'll go to the line of Brett Huff with Stephens Inc.
Brett Huff - Stephens Inc., Research Division
You had mentioned purchase market assumptions. I think, Bill, you mentioned it.
I know you guys don't explicitly make forecasts, but can you give us a directional goalpost, kind of how you think the world looks as we roll through this year in terms of unit volume increases for purchase?
William P. Foley
Well, yes, of course, the MBA has said it's going to be a poorer, not as good a year. We started seeing good resale increases last year, and as the market has improved, we're continuing to see activity in a lot of the high-velocity states.
And high velocity, I'm really referring to California, Florida, Texas, Arizona, Nevada, states where people move in, they buy houses, they -- and they start getting price appreciation. I can't put a percent -- Randy may be able to help you with thoughts on the level of increases this year that he believes are going to happen.
Raymond R. Quirk
Yes, Bill. We're seeing, in some, as Bill had mentioned, some of the large metropolitan areas where there seems to be some traction on the resale side, particularly in California.
Texas has been very strong. They're running currently -- probably 70%, 80% of their volume right now is resale.
Florida has started to pick up. South Florida is getting strong.
So we think the mix -- our mix right now is maybe 55%, pushing towards 60% resale. So that could, over the course of the next 6 months with appropriate traction and appreciation, that looks like it could be coming towards the purchase market.
It could roll up another 10%. But it's -- we're getting a sense that there's some momentum there.
It just hasn't -- it's still pretty early in the year.
Brett Huff - Stephens Inc., Research Division
So you're saying the 10% number is a unit volume? Or you -- on purchase, or are you guys kind of including house price appreciation in that, too?
Raymond R. Quirk
Well, yes, unit volume and also in the mix.
Brett Huff - Stephens Inc., Research Division
Got it. So all-in.
Okay. And then the 11% title pre-tax margin we thought was nice.
Was -- you guys split up the business a little bit differently, I think, just given the changes that are going on. Was the corporate -- or sorry, the costs that were allocated to FNT apples-to-apples to the way it's been allocated in the recent past?
Or was there some shifting around that we need to be aware of that's not an apples-to-apples number on that title pre-tax?
Anthony J. Park
No, Brett. It's Tony.
It's apples-to-apples. It's exactly as you've seen it before.
So that FNT column is the title segment. What we did do differently, as you can probably see in our segment reporting, is we've got 2 corporate and other segments.
We've got the core, if you will, corporate and other, and then we've got the portfolio, corporate and other. And that's really a separation.
It's either a direct allocation for people or expenses that directly relate to one or the other of those segments, or if we didn't have a direct allocation, then we typically allocate it based on revenue. And so you'll see some of it as just a 70-30 allocation, with 70% going to core, 30% to the other.
And again, the FNF corporate is primarily departments such as CEO, CFO, Chief Legal Officer, M&A, Investor Relations and a few others. So it's not a significant bucket.
Brett Huff - Stephens Inc., Research Division
Okay. That's helpful.
And then on the tracking stock, I just want to make sure. I don't want to beat this to death.
I want to make sure I get it. If -- so I understand, Bill, you said if you monetize something between now and when that starts, that value attributes to the FNF corporate parent and you can pay down debt or do whatever you need to do, as I understand it.
Once that tracking stock is made and you put the assets in there, when you monetize that asset, IP or whatever happens, and that -- and the stock or that tracking entity gets the money, can that money -- you said that money gets distributed to folks who own the stock, is any of that -- how does it get back to FNF to pay down the debt? Or does it never do that once it's in the tracking stock?
William P. Foley
We really feel like that once it's in the tracking stock, that's where it stays. And distributions would be made to shareholders of the tracker or it would be retained for further portfolio investments.
So if there were to be an IPO of one of the restaurant companies and funds were received from that IPO, those funds, and they'll be fairly modest, those funds would probably -- would stay in the tracker as opposed to being distributed. However, if we have an investment that is mature and we feel like we have done everything we can do with that particular investment, and we want to spin it off, that would be a direct benefit to the tracker shareholders.
They would receive that particular -- those particular shares of stock and then they can do what they want to do with that investment.
Brett Huff - Stephens Inc., Research Division
And in terms of -- will you guys see any -- will the corporate parent see any proceeds when that thing is formed? Or is that -- so you won't see the economic value particularly from that when it's formed?
William P. Foley
The corporate parent really will not see any economic value. The corporate parent actually is going to contribute as a -- as kind of an initial cash flow, $100 million of cash, and provide a line of credit for $100 million so the tracker can fund like -- continue to fund various acquisitions for Digital Insurance, if that were necessary, or make other acquisitions that we think are opportunistic.
But obviously, our acquisition strategy is going to be somewhat muted going forward because we won't have the full resources of FNF. The basic resources of FNF are going to be utilized to, as money flows up from Black Knight or from the title insurance underwriters, it's going to be used to pay down debt.
It's going to be used to pay dividends, to buy back shares, or to make core investments in technology, primarily related to the Black Knight asset.
Brett Huff - Stephens Inc., Research Division
Okay. That's helpful.
And then just 2 quick questions on -- there's a lot of debt on the Ceridian HR and the Ceridian-Comdata pieces. When you guys think about that, how do you allocate that debt if we're thinking about how to value each of those entities individually?
William P. Foley
Brent knows -- Brent may know [indiscernible]. It is allocated now because the companies are separated.
So Comdata is actually a separate company owned by the same shareholders that own Ceridian. So we've gone through that process to prepare Comdata for its own future.
You know about the debt?
Brent Bannister Bickett
The ballpark debt is roughly $3.4 billion, $2.2 billion on the Comdata piece and $1.2 billion on the payroll piece.
Brett Huff - Stephens Inc., Research Division
And can you do that same number for BKFS and ServiceLink? Do you guys separate it down to that level?
William P. Foley
We did. I don't know that I have -- we've separated the equity in terms of being $1 billion per entity, and then the debt was also -- was it disproportionate, Tony?
Anthony J. Park
Yes, a little bit. I'll get it.
William P. Foley
I think we need to give it to you off -- we have it right here.
Operator
And we'll go to the line of Ryan Byrnes with Janney Capital.
Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
And sorry to belabor the fact, but I just want to make sure I understand that the synergies, as they've already been presented, have any of the synergies flown through to the bottom line in the third and fourth quarter for either LPS or for FNF?
William P. Foley
Well, they've gone through to the bottom line. But normally, the synergies were one-time expenses, in the case of personnel.
So Tony, do you want to...
Anthony J. Park
Yes. I mean, of the pre-closed synergies that we talked about of $50 million, if you assume kind of those were taken out evenly across the course of the fourth quarter, then arguably, you've got about $25 million of that $50 million benefit that actually would show up in the bottom line of the combined organization, being some of it in FNF because of the ServiceLink business, and some of it in the Black Knight businesses, the LPS business.
Ryan J. Byrnes - Janney Montgomery Scott LLC, Research Division
Okay. Great.
And then quickly, I think you guys had mentioned the kind of the loss ratio going forward. It seems to be kind of stuck in that 7% range.
And I haven't seen, obviously, haven't seen the 10-K yet. But I imagine there is probably a little bit of kind of reserve strengthening from previous years.
I just want to figure out how much longer you guys expect that dynamic to happen.
Anthony J. Park
Yes. We're watching that, obviously, pretty closely.
It's been at 7% for several years now. As you mentioned, trends have been very favorable for us.
Payments continue to trend down. In fact, $100 million paid in the fourth quarter of 2013 is the lowest fourth quarter that I think we've seen in many years.
The expectation is, as claim counts have trended well off of where they were a year ago, and especially major claims, which we define as $2.5 million or greater, is dramatically down from where it was even a year ago. We expect payments to continue to trend down below the $400 million that we paid in 2013.
And so I wouldn't be surprised if somewhere -- when we get to a position where we're very comfortable and our auditors and actuaries are very comfortable with our carried amount, that we'll probably trend that 7% down at least 50 basis points, probably 100 basis points. We just -- we like to be conservative in this area.
We don't like to be volatile and bounce it around. So that's why we've kind of held it at 7% to make sure we're well through the challenging years where we had high ratios and, frankly, huge premiums, where a lot of policies were issued.
But those years are well in the past now. Those years of 2006, '07 and '08 are the distant past.
And so we're getting more and more comfortable as we move along.
Operator
And we have no further questions in queue. I'll turn it back over to Mr.
Foley for closing remarks.
William P. Foley
Thank you very much. Just in response to the earlier question with regard to the split of debt between Black Knight Financial Services and ServiceLink, there's about $2.2 billion allocated to Black Knight Financial Services and $1.1 billion allocated to ServiceLink.
So it's about a 2:1 ratio, and the total debt being $3.3 billion. Have I got that right, Brent?
Brent Bannister Bickett
That's correct.
William P. Foley
Okay. So that's our debt allocation.
And we want to thank all of you for being with us today. We're excited about our core title, mortgage technology and transaction services businesses as we enter 2014.
As always, we will look to maximize profitability in all of our businesses and continue to strive to create as much value as possible for our shareholders. Thanks for being with us today.
Operator
Thank you. And ladies and gentlemen, that does conclude our conference for today.
Thank you for your participation and for using AT&T Teleconference. You may now disconnect.