FIDELITY NATIONAL FINANCIAL, INC.
20 17 An nu al Repor t
Net Earnings Attributable to FNF Group Common Shareholders
$
662
F I N A N C I A L H I G H L I G H T S
(Dollars in millions)
I NCOM E STATEMENT:
Total Revenue
Adjusted Pre-Tax Title Margin
Cash Flow from Operations
BAL ANC E SH EET:
Total Assets
Cash and Investment Portfolio
Reserve for Claim Losses
Total Equity
2017
2016
2015
Year Ended December 31,
$ 7,663
14.5%
$
737
$ 7,257
654
$
14.7%
$ 1,162
At December 31,
$ 9,151
$ 4,481
$ 1,490
$ 4,467
$ 14,521
$ 4,831
$ 1,487
$ 6,898
$ 6,664
$
540
14.3%
$
951
$ 13,931
$ 4,711
$ 1,583
$ 6,588
$6,664
$7,257
$7,663
14.3%
14.7%
14.5%
’15
’16
’17
Total Revenue
’15
’16
’17
Adjusted Pre-Tax Title Margin
$540
$654
$662
$13,931
$14,521
$9,151
’15
’16
’17
Net Earnings
’15
’16
’17
Total Assets
F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . 1
William P. Foley, II
Raymond R. Quirk
T O O U R S H A R E H O L D E R S
2017 was a very successful strategic year for our company on a number of fronts, as we
continued to deploy capital in our ongoing quest to create value for our shareholders. We
simplified our corporate structure through the completion of two transactions during the
year. On September 29, we completed the tax-free distribution of Black Knight, as FNF
shareholders received approximately 0.3 shares of Black Knight common stock for each
share of FNF common stock. Black Knight is now a stand-alone public company, with
no FNF ownership. On November 17, the exchange of the FNFV tracking stock for a
new Cannae Holdings common stock and then subsequent split-off of Cannae Holdings
was completed. Cannae is now a separate legal entity and a stand-alone public company.
We believe these transactions have created a streamlined FNF corporate structure that has
already provided meaningful value for our shareholders.
We also continued to make acquisitions to strengthen our title insurance business. In
2017, we acquired ten title and escrow companies for a total of approximately $130 million,
the most significant being the Title Guaranty of Hawaii deal in August. We believe there
will be a number of appealing title and escrow company targets to continue this title agent
acquisition strategy in 2018. For full-year 2017, our title business generated more than $1
billion in adjusted pre-tax title earnings and an adjusted pre-tax title margin of 14.5%
We continued building our real estate technology platform aimed at the real estate
broker and agent markets through the Real Geeks and SkySlope acquisitions. Real Geeks
provides a customer relationship management platform and other SaaS-based internet
marketing solutions to real estate professionals and is a great complement for our existing
CINC business. While CINC focuses on elite real estate teams, Real Geeks focuses on
elite single agents at a lower price point. We believe the combined capabilities of Real
Geeks and CINC will allow us to provide valuable technology solutions to a much larger
universe of our real estate customers. SkySlope is a leading provider of digital transaction
management and closing solutions to real estate professionals that will broaden FNF’s
service offerings to real estate professionals and further advance our strategy of helping
real estate agents and brokers gain more customers and more efficiently close transactions.
2 F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C .
As we enter 2018, we expect to
continue to seek ways to deploy
capital that will maximize returns
for our shareholders.
We are now focused on integrating our lead management, CRM and digital transaction
management technologies to offer a suite of best of breed technology solutions to our real
estate agent customers and further solidify our relationships with this vital group of clients.
We also devoted a significant amount of cash for the repurchase of our outstanding
convertible bonds during the year. In total, we repurchased $230 million in face value of
the convertible notes for a total purchase price of $549 million, leaving $65 million of the
notes currently outstanding at the end of 2017. This eliminated the need to issue nearly 12
million shares of FNF stock if the notes had been converted.
Finally, for the sixth straight year, our board elected to increase our quarterly cash
dividend, with our fourth quarter 2017 dividend increasing to $0.27 per share, an 8%
increase from the previous quarterly cash dividend of $0.25. Additionally, in January, our
board also decided to raise our first quarter 2018 cash dividend to $0.30 per share, an 11%
increase from the fourth quarter 2017 dividend. The outlook for our title business and
recent federal tax reform leave us confident in our ability to continue to generate the
strong cash flow necessary to support the higher dividend.
As we enter 2018, we expect to continue to seek ways to deploy capital that will
maximize returns for our shareholders.
We thank all of our employees for their efforts in 2017 and we thank all of our share-
holders for their continued support. The following pages illustrate our intent to focus on
being the leading provider of title insurance and transaction services to the real estate and
mortgage industries in the country.
William P. Foley, II
Chairman of the Board
Raymond R. Quirk
Chief Executive Officer
F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . 3
4 F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C .
F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . 5
6 F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C .
F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C . 7
F I D E L I T Y N AT I O N A L F I N A N C I A L , I N C .
F O R M
10k
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year Ended December 31, 2017
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 1-32630
_________________________________
Fidelity National Financial, Inc.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
601 Riverside Avenue
Jacksonville, Florida 32204
(Address of principal executive offices, including zip code)
16-1725106
(I.R.S. Employer Identification No.)
(904) 854-8100
(Registrant’s telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
FNF Common Stock, $0.0001 par value
Name of Each Exchange on Which Registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes
No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes
No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during
the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated
by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)
Smaller reporting company
Emerging growth company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
No
The aggregate market value of the shares of FNF common stock held by non-affiliates of the registrant as of June 30, 2017 was
$8,461,286,198 based on the closing price of $32.37 as reported by The New York Stock Exchange.
As of January 31, 2018 there were 274,438,819 shares of FNF common stock outstanding.
The information in Part III hereof for the fiscal year ended December 31, 2017, will be filed within 120 days after the close of
the fiscal year that is the subject of this Report.
FIDELITY NATIONAL FINANCIAL, INC.
FORM 10-K
TABLE OF CONTENTS
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
PART I
PART II
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosure About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Directors and Executive Officers of the Registrant
Executive Compensation
PART III
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Item 15.
Exhibits, Financial Statement Schedules
PART IV
Page
Number
1
12
17
17
17
18
21
25
42
44
92
92
92
93
93
93
93
93
94
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Table of Contents
Item 1.
Business
Introductory Note
PART I
The following describes the business of Fidelity National Financial, Inc. and its subsidiaries. Except where otherwise noted,
all references to “we,” “us,” “our,” "the Company" or “FNF” are to Fidelity National Financial, Inc. and its subsidiaries, taken
together.
Overview
We are a leading provider of (i) title insurance, escrow and other title-related services, including trust activities, trustee sales
guarantees, recordings and reconveyances and home warranty products and (ii) technology and transaction services to the real
estate and mortgage industries. FNF is the nation’s largest title insurance company operating through its title insurance underwriters
- Fidelity National Title Insurance Company ("FNTIC"), Chicago Title Insurance Company ("Chicago Title"), Commonwealth
Land Title Insurance Company ("Commonwealth Title"), Alamo Title Insurance and National Title Insurance of New York Inc. -
which collectively issue more title insurance policies than any other title company in the United States. Through our subsidiary
ServiceLink Holdings, LLC ("ServiceLink"), we provide mortgage transaction services including title-related services and
facilitation of production and management of mortgage loans.
As of December 31, 2017, we had the following reporting segments:
•
•
Title. This segment consists of the operations of our title insurance underwriters and related businesses. This segment
provides core title insurance and escrow and other title-related services including trust activities, trustee sales guarantees,
recordings and reconveyances, and home warranty products. This segment also includes our transaction services business,
which includes other title-related services used in the production and management of mortgage loans, including mortgage
loans that experience default.
Corporate and Other. This segment consists of the operations of the parent holding company, our various real estate
brokerage businesses, and Commissions, Inc. ("CINC") and other real estate technology subsidiaries. This segment also
includes certain other unallocated corporate overhead expenses and eliminations of revenues and expenses between it
and our Title segment.
In the year ended December 31, 2017, we completed two significant transactions which simplified the structure of our business.
On November 17, 2017 we completed our previously announced split-off (the “FNFV Split-Off”) of our former wholly-owned
subsidiary Cannae Holdings, Inc. (“Cannae”) which consisted of the businesses, assets and liabilities formerly attributed to our
FNF Ventures ("FNFV") Group including Ceridian Holding, LLC, American Blue Ribbon Holdings, LLC and T-System Holding
LLC. The FNFV Split-Off was accomplished by the Company's redemption (the “Redemption”) of all of the outstanding shares
of FNFV Group common stock, par value $0.0001 per share (“FNFV common stock”) for outstanding shares of common stock
of Cannae, par value $0.0001 per share (“Cannae common stock”), amounting to a redemption on a per share basis of each
outstanding share of FNFV common stock for one share of Cannae common stock, as of November 17, 2017. As a result of the
FNFV Split-Off, Cannae is a separate, publicly traded company (NYSE: CNNE). All of the Company’s core title insurance, real
estate, technology and mortgage related businesses, assets and liabilities previously attributed to the Company’s FNF Group
common stock that were not held by Cannae remain with the Company. As a result of the FNFV Split-Off, we have reclassified
the assets and liabilities divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of
December 31, 2016. Further, the financial results of FNFV Group have been reclassified to discontinued operations for all periods
presented in our Consolidated Statements of Earnings. See Note G. Discontinued Operations to our Consolidated Financial
Statements included in Item 8 of Part II of this Annual Report for further details of the results of FNFV Group.
On September 29, 2017 we completed our tax-free distribution to FNF Group shareholders, of all 83.3 million shares of New
BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK
Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting
in the formation of a new publicly-traded holding company, Black Knight, Inc. ("New Black Knight"). Holders of FNF Group
common stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF Group
common stock held at the close of business on September 20, 2017, the record date for the BK Distribution. New Black Knight's
common stock is now listed under the symbol “BKI” on the New York Stock Exchange. The BK Distribution is expected to
generally be tax-free to FNF Group shareholders for U.S. federal income tax purposes, except to the extent of any cash received
in lieu of New Black Knight's fractional shares. As a result of the BK Distribution, we have reclassified the assets and liabilities
divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of December 31, 2016. Further,
the financial results of Black Knight have been reclassified to discontinued operations for all periods presented in our Consolidated
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Statements of Earnings. See Note G. Discontinued Operations to our Consolidated Financial Statements included in Item 8 of
Part II of this Annual Report for further details of the results of Black Knight.
Competitive Strengths
We believe that our competitive strengths include the following:
Corporate principles. A cornerstone of our management philosophy and operating success is the six fundamental precepts
upon which we were founded, which are:
• Autonomy and entrepreneurship;
• Bias for action;
• Customer-oriented and motivated;
• Minimize bureaucracy;
• Employee ownership; and
• Highest standard of conduct.
These six precepts are emphasized to our employees from the first day of employment and are integral to many of our strategies
described below.
Competitive cost structure. We have been able to maintain competitive operating margins in part by monitoring our businesses
in a disciplined manner through continual evaluation of title order activity and management of our cost structure. When compared
to our industry competitors, we also believe that our structure is more efficiently designed, which allows us to operate with lower
overhead costs.
We believe that our competitive strengths position us well to take advantage of future changes to the real estate market.
Leading title insurance company. We are the largest title insurance company in the United States and a leading provider of
title insurance and escrow and other title-related services for real estate transactions. Through the third quarter of 2017, our
insurance companies had a 33.4% share of the U.S. title insurance market, according to the American Land Title Association
("ALTA").
Established relationships with our customers. We have strong relationships with the customers who use our title services.
Our distribution network, which includes approximately 1,400 direct residential title offices and more than 5,200 agents, is among
the largest in the United States. We also benefit from strong brand recognition in our multiple title brands that allows us to access
a broader client base than if we operated under a single consolidated brand and provides our customers with a choice among
brands.
Strong value proposition for our customers. We provide our customers with title insurance and escrow and other title-related
services that support their ability to effectively close real estate transactions. We help make the real estate closing more efficient
for our customers by offering a single point of access to a broad platform of title-related products and resources necessary to close
real estate transactions.
Proven management team. The managers of our operating businesses have successfully built our title business over an
extended period of time, resulting in our business attaining the size, scope and presence in the industry that it has today. Our
managers have demonstrated their leadership ability during numerous acquisitions through which we have grown and throughout
a number of business cycles and significant periods of industry change.
Commercial title insurance. While residential title insurance comprises the majority of our business, we are also a significant
provider of commercial real estate title insurance in the United States. Our network of agents, attorneys, underwriters and closers
that service the commercial real estate markets is one of the largest in the industry. Our commercial network combined with our
financial strength makes our title insurance operations attractive to large national lenders that require the underwriting and issuing
of larger commercial title policies.
Strategy
Our strategy in the title business is to maximize operating profits by increasing our market share and managing operating
expenses throughout the real estate business cycle. To accomplish our goals, we intend to do the following:
• Continue to operate multiple title brands independently. We believe that in order to maintain and strengthen our title
insurance customer base, we must operate our strongest brands in a given marketplace independently of each other. Our
national and regional brands include Fidelity National Title, Chicago Title, Commonwealth Land Title, Lawyers Title,
Ticor Title, Alamo Title, and National Title of New York. In our largest markets, we operate multiple brands. This approach
allows us to continue to attract customers who identify with a particular brand and allows us to utilize a broader base of
local agents and local operations than we would have with a single consolidated brand.
• Consistently deliver superior customer service. We believe customer service and consistent product delivery are the most
important factors in attracting and retaining customers. Our ability to provide superior customer service and consistent
2
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product delivery requires continued focus on providing high quality service and products at competitive prices. Our goal
is to continue to improve the experience of our customers, in all aspects of our business.
• Manage our operations successfully through business cycles. We operate in a cyclical industry and our ability to diversify
our revenue base within our core title insurance business and manage the duration of our investments may allow us to
better operate in this cyclical business. Maintaining a broad geographic revenue base, utilizing both direct and independent
agency operations and pursuing both residential and commercial title insurance business help diversify our title insurance
revenues. We continue to monitor, evaluate and execute upon the consolidation of administrative functions, legal entity
structure, and office consolidation, as necessary, to respond to the continually changing marketplace. We maintain shorter
durations on our investment portfolio to mitigate our interest rate risk. A more detailed discussion of our investment
strategies is included in “Investment Policies and Investment Portfolio.”
• Continue to improve our products and technology. As a national provider of real estate transaction products and services,
we participate in an industry that is subject to significant change, frequent new product and service introductions and
evolving industry standards. We believe that our future success will depend in part on our ability to anticipate industry
changes and offer products and services that meet evolving industry standards. In connection with our service offerings,
we are continuing to deploy new information system technologies to our direct and agency operations. We expect to
improve the process of ordering title and escrow services and improve the delivery of our products to our customers.
• Maintain values supporting our strategy. We believe that our continued focus on and support of our long-established
corporate culture will reinforce and support our business strategy. Our goal is to foster and support a corporate culture
where our employees and agents seek to operate independently and maintain profitability at the local level while forming
close customer relationships by meeting customer needs and improving customer service. Utilizing a relatively flat
managerial structure and providing our employees with a sense of individual ownership support this goal.
• Effectively manage costs based on economic factors. We believe that our focus on our operating margins is essential to
our continued success in the title insurance business. Regardless of the business cycle in which we may be operating, we
seek to continue to evaluate and manage our cost structure and make appropriate adjustments where economic conditions
dictate. This continual focus on our cost structure helps us to better maintain our operating margins.
Acquisitions, Dispositions, Minority Owned Operating Subsidiaries and Financings
Acquisitions have been an important part of our growth strategy and dispositions have been an important aspect of our strategy
of returning value to shareholders. On an ongoing basis, with assistance from our advisors, we actively evaluate possible
transactions, such as acquisitions and dispositions of business units and operating assets and business combination transactions.
In the future, we may seek to sell certain investments or other assets to increase our liquidity. Further, our management has
stated that we may make acquisitions in lines of business that are not directly tied to, or synergistic with, our core operating
segment. In the past we have obtained majority and minority investments in entities and securities where we see the potential to
achieve above market returns. Fundamentally our goal is to acquire quality companies that are well-positioned in their respective
industries, run by best in class management teams in industries that have attractive organic and acquired growth opportunities.
We leverage our operational expertise and track record of growing industry leading companies and also our active interaction with
the acquired company's management directly or through our board of directors, to ultimately provide value for our shareholders.
There can be no assurance that any suitable opportunities will arise or that any particular transaction will be completed. We
have made a number of acquisitions and dispositions over the past several years to strengthen and expand our service offerings
and customer base in our various businesses, to expand into other businesses or where we otherwise saw value, and to monetize
investments in assets and businesses.
Title Insurance
Market for title insurance. According to Demotech Performance of Title Insurance Companies 2017 Edition, an annual
compilation of financial information from the title insurance industry that is published by Demotech Inc., an independent firm
("Demotech"), total operating income for the entire U.S. title insurance industry has increased over the last five years from
approximately $12.2 billion in 2012 to $14.9 billion in 2016, which represents a $1.2 billion increase from 2015. The size of the
industry is closely tied to various macroeconomic factors, including, but not limited to, growth in the gross domestic product,
inflation, unemployment, the availability of credit, consumer confidence, interest rates, and sales volumes and prices for new and
existing homes, as well as the volume of refinancing of previously issued mortgages.
Most real estate transactions consummated in the U.S. require the use of title insurance by a lending institution before the
transaction can be completed. Generally, revenues from title insurance policies are directly correlated with the value of the property
underlying the title policy, and appreciation or depreciation in the overall value of the real estate market are major factors in total
industry revenues. Industry revenues are also driven by factors affecting the volume of real estate closings, such as the state of
the economy, the availability of mortgage funding, and changes in interest rates, which affect demand for new mortgage loans and
refinancing transactions.
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Table of Contents
The U.S. title insurance industry is concentrated among a handful of industry participants. According to Demotech, the top
four title insurance groups accounted for 85% of net premiums written in 2016. Approximately 34 independent title insurance
companies accounted for the remaining 15% of net premiums written in 2016. Consolidation has created opportunities for increased
financial and operating efficiencies for the industry’s largest participants and should continue to drive profitability and market
share in the industry.
Our Title segment revenue is closely related to the level of real estate activity which includes sales, mortgage financing and
mortgage refinancing. For further discussion of current trends in real estate activity in the United States, see discussion under
Business Trends and Conditions included in Item 7 of Part II of this Report, which is incorporated by reference into this Part I,
Item 1.
Title Insurance Policies. Generally, real estate buyers and mortgage lenders purchase title insurance to insure good and
marketable title to real estate and priority of lien. A brief generalized description of the process of issuing a title insurance policy
is as follows:
• The customer, typically a real estate salesperson or broker, escrow agent, attorney or lender, places an order for a title
policy.
• Company personnel note the specifics of the title policy order and place a request with the title company or its agents for
a preliminary report or commitment.
• After the relevant historical data on the property is compiled, the title officer prepares a preliminary report that documents
the current status of title to the property, any exclusions, exceptions and/or limitations that the title company might include
in the policy, and specific issues that need to be addressed and resolved by the parties to the transaction before the title
policy will be issued.
• The preliminary report is circulated to all the parties for satisfaction of any specific issues.
• After the specific issues identified in the preliminary report are satisfied, an escrow agent closes the transaction in
accordance with the instructions of the parties and the title company’s conditions.
• Once the transaction is closed and all monies have been released, the title company issues a title insurance policy.
In real estate transactions financed with a mortgage, virtually all real property mortgage lenders require their borrowers to
obtain a title insurance policy at the time a mortgage loan is made. This lender’s policy insures the lender against any defect
affecting the priority of the mortgage in an amount equal to the outstanding balance of the related mortgage loan. An owner’s
policy is typically also issued, insuring the buyer against defects in title in an amount equal to the purchase price. In a refinancing
transaction, only a lender’s policy is generally purchased because ownership of the property has not changed. In the case of an
all-cash real estate purchase, no lender’s policy is issued but typically an owner’s title policy is issued.
Title insurance premiums paid in connection with a title insurance policy are based on (and typically are a percentage of)
either the amount of the mortgage loan or the purchase price of the property insured. Applicable state insurance regulations or
regulatory practices may limit the maximum, or in some cases the minimum, premium that can be charged on a policy. Title
insurance premiums are due in full at the closing of the real estate transaction.
The amount of the insured risk or “face amount” of insurance under a title insurance policy is generally equal to either the
amount of the loan secured by the property or the purchase price of the property. The title insurer is also responsible for the cost
of defending the insured title against covered claims. The insurer’s actual exposure at any given time, however, generally is less
than the total face amount of policies outstanding because the coverage of a lender’s policy is reduced and eventually terminated
as a result of payments on the mortgage loan. A title insurer also generally does not know when a property has been sold or
refinanced except when it issues the replacement coverage. Because of these factors, the total liability of a title underwriter on
outstanding policies cannot be precisely determined.
Title insurance companies typically issue title insurance policies directly through branch offices or through affiliated title
agencies, or indirectly through independent third party agencies unaffiliated with the title insurance company. Where the policy
is issued through a branch or wholly-owned subsidiary agency operation, the title insurance company typically performs or directs
the title search, and the premiums collected are retained by the title company. Where the policy is issued through an independent
agent, the agent generally performs the title search (in some areas searches are performed by approved attorneys), examines the
title, collects the premium and retains a majority of the premium. The remainder of the premium is remitted to the title insurance
company as compensation, part of which is for bearing the risk of loss in the event a claim is made under the policy. The percentage
of the premium retained by an agent varies from region to region and is sometimes regulated by the states. The title insurance
company is obligated to pay title claims in accordance with the terms of its policies, regardless of whether the title insurance
company issues policies through its direct operations or through independent agents.
Prior to issuing policies, title insurers and their agents attempt to reduce the risk of future claim losses by accurately performing
title searches and examinations. A title insurance company’s predominant expense relates to such searches and examinations, the
preparation of preliminary title reports, policies or commitments, the maintenance of "title plants,” which are indexed compilations
of public records, maps and other relevant historical documents, and the facilitation and closing of real estate transactions. Claim
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losses generally result from errors made in the title search and examination process, from hidden defects such as fraud, forgery,
incapacity, or missing heirs of the property, and from closing related errors.
Residential real estate business results from the construction, sale, resale and refinancing of residential properties, while
commercial real estate business results from similar activities with respect to properties with a business or commercial use.
Commercial real estate title insurance policies insure title to commercial real property, and generally involve higher coverage
amounts and yield higher premiums. Residential real estate transaction volume is primarily affected by macroeconomic and
seasonal factors while commercial real estate transaction volume is affected primarily by fluctuations in local supply and demand
conditions for commercial space.
Direct and Agency Operations. We provide title insurance services through our direct operations and through independent
title insurance agents who issue title policies on behalf of our title insurance companies. Our title insurance companies determine
the terms and conditions upon which they will insure title to the real property according to our underwriting standards, policies
and procedures.
Direct Operations. Our direct operations include both the operations of our underwriters as well as affiliated agencies. In our
direct operations, the title insurer issues the title insurance policy and retains the entire premium paid in connection with the
transaction. Our direct operations provide the following benefits:
•
•
•
higher margins because we retain the entire premium from each transaction instead of paying a commission to an
independent agent;
continuity of service levels to a broad range of customers; and
additional sources of income through escrow and closing services.
We have approximately 1,400 offices throughout the U.S. primarily providing residential real estate title insurance. We
continuously monitor the number of direct offices to make sure that it remains in line with our strategy and the current economic
environment. Our commercial real estate title insurance business is operated almost exclusively through our direct operations. We
maintain direct operations for our commercial title insurance business in all the major real estate markets including Atlanta, Boston,
Chicago, Dallas, Houston, Los Angeles, New York, Philadelphia, Phoenix, Seattle and Washington D.C.
Agency Operations. In our agency operations, the search and examination function is performed by an independent agent or
the agent may purchase the search product from us. In either case, the agent is responsible to ensure that the search and examination
is completed. The agent thus retains the majority of the title premium collected, with the balance remitted to the title underwriter
for bearing the risk of loss in the event that a claim is made under the title insurance policy. Independent agents may select among
several title underwriters based upon their relationship with the underwriter, the amount of the premium “split” offered by the
underwriter, the overall terms and conditions of the agency agreement and the scope of services offered to the agent. Premium
splits vary by geographic region, and in some states are fixed by insurance regulatory requirements. Our relationship with each
agent is governed by an agency agreement defining how the agent issues a title insurance policy on our behalf. The agency
agreement also sets forth the agent’s liability to us for policy losses attributable to the agent’s errors. An agency agreement is
usually terminable without cause upon 30 days notice or immediately for cause. In determining whether to engage or retain an
independent agent, we consider the agent’s experience, financial condition and loss history. For each agent with whom we enter
into an agency agreement, we maintain financial and loss experience records. We also conduct periodic audits of our agents and
strategically manage the number of agents with which we transact business in an effort to reduce future expenses and manage
risks. As of December 31, 2017, we transact business with approximately 5,200 agents.
Fees and Premiums. One method of analyzing our business is to examine the level of premiums generated by direct and
agency operations.
The following table presents the percentages of our title insurance premiums generated by direct and agency operations:
Direct
Agency
Total title insurance premiums
Year Ended December 31,
2017
2016
2015
Amount
%
Amount
%
Amount
%
(Dollars in millions)
$
$
2,170
2,723
4,893
44.3% $
55.7
100.0% $
2,097
2,626
4,723
44.4% $
55.6
100.0% $
2,009
2,277
4,286
46.9%
53.1
100.0%
The premium for title insurance is due in full when the real estate transaction is closed. We recognize title insurance premium
revenues from direct operations upon the closing of the transaction, whereas premium revenues from agency operations include
an accrual based on estimates of the volume of transactions that have closed in a particular period for which premiums have not
yet been reported to us. The accrual for agency premiums is necessary because of the lag between the closing of these transactions
and the reporting of these policies to us by the agent, and is based on estimates utilizing historical information.
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Escrow, Title-Related and Other Fees. In addition to fees for underwriting title insurance policies, we derive a significant
amount of our revenues from escrow and other title-related services including trust activities, trustee sales guarantees, recordings
and reconveyances, and home warranty products. The escrow and other services provided by us include all of those typically
required in connection with residential and commercial real estate purchases and refinance activities. Escrow, title-related and
other fees included in our Title segment represented approximately 30.2%, 30.5%, and 31.2% of total title segment revenues in
2017, 2016, and 2015, respectively.
Sales and Marketing. We market and distribute our title and escrow products and services to customers in the residential and
commercial market sectors of the real estate industry through customer solicitation by sales personnel. Although in many instances
the individual homeowner is the beneficiary of a title insurance policy, we do not focus our marketing efforts on the homeowner.
We actively encourage our sales personnel to develop new business relationships with persons in the real estate community, such
as real estate sales agents and brokers, financial institutions, independent escrow companies and title agents, real estate developers,
mortgage brokers and attorneys who order title insurance policies for their clients. While our smaller, local clients remain important,
large customers, such as national residential mortgage lenders, real estate investment trusts and developers are an important part
of our business. The buying criteria of locally based clients differ from those of large, geographically diverse customers in that
the former tend to emphasize personal relationships and ease of transaction execution, while the latter generally place more
emphasis on consistent product delivery across diverse geographical regions and the ability of service providers to meet their
information systems requirements for electronic product delivery.
Claims. An important part of our operations is the handling of title and escrow claims. We employ a large staff of attorneys
in our claims department. Our claims processing centers are located in Omaha, Nebraska and Jacksonville, Florida. In-house
claims counsel are also located in other parts of the country.
Claims result from a wide range of causes. These causes generally include, but are not limited to, search and exam errors,
forgeries, incorrect legal descriptions, signature and notary errors, unrecorded liens, mechanics’ liens, the failure to pay off existing
liens, mortgage lending fraud, mishandling or theft of settlement funds (including independent agency theft), and mistakes in the
escrow process. Under our policies, we are required to defend insureds when covered claims are filed against their interest in the
property. Some claimants seek damages in excess of policy limits. Those claims are based on various legal theories, including in
some cases allegations of negligence or an intentional tort. We occasionally incur losses in excess of policy limits. Experience
shows that most policy claims and claim payments are made in the first five years after the policy has been issued, although claims
may also be reported and paid many years later.
Title losses due to independent agency defalcations typically occur when the independent agency misappropriates funds from
escrow accounts under its control. Such losses are usually discovered when the independent agency fails to pay off an outstanding
mortgage loan at closing (or immediately thereafter) from the proceeds of the new loan. Once the previous lender determines that
its loan has not been paid off timely, it will file a claim against the title insurer.
Claims can be complex, vary greatly in dollar amounts and are affected by economic and market conditions and the legal
environment existing at the time claims are processed. In our commercial title business, we may issue polices with face amounts
well in excess of $100 million, and from time to time claims are submitted with respect to large policies. We believe we are
appropriately reserved with respect to all claims (large and small) that we currently face. Occasionally we experience large losses
from title policies that have been issued or from our escrow operations, or overall worsening loss payment experience, which
require us to increase our title loss reserves. These events are unpredictable and adversely affect our earnings. Claims can result
in litigation in which we may represent our insured and/or ourselves. We consider this type of litigation to be an ordinary course
aspect of the conduct of our business.
Reinsurance and Coinsurance. We limit our maximum loss exposure by reinsuring risks with other insurers under excess of
loss and case-by-case (“facultative”) reinsurance agreements. Reinsurance agreements generally provide that the reinsurer is liable
for loss and loss adjustment expense payments exceeding the amount retained by the ceding company. However, the ceding
company remains primarily liable to the insured whether or not the reinsurer is able to meet its contractual obligations. Facultative
reinsurance agreements are entered into with other title insurers when the transaction to be insured will exceed state statutory or
self-imposed limits. Excess of loss reinsurance coverage protects us from a large loss from a single loss occurrence. Our excess
of loss reinsurance coverage is split into two contracts. The first excess of loss reinsurance contract provides an $80 million
aggregate limit of coverage from a single loss occurrence for residential and commercial losses in excess of a $20 million retention
per single loss occurrence ("First XOL Contract"). The second excess of loss reinsurance contract ("Second XOL Contract")
provides an additional $300 million aggregate limit of coverage, with the Company co-participating at approximately 10%. Subject
to the Company’s retention and co-participation on the Second XOL Contract, the maximum coverage provided under the First
and Second XOL Contracts is $350 million.
In addition to reinsurance, we carry errors and omissions insurance and fidelity bond coverage, each of which can provide
protection to us in the event of certain types of losses that can occur in our businesses.
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Our policy is to be selective in choosing our reinsurers, seeking only those companies that we consider to be financially stable
and adequately capitalized. In an effort to minimize exposure to the insolvency of a reinsurer, we periodically review the financial
condition of our reinsurers.
We also use coinsurance in our commercial title business to provide coverage in amounts greater than we would be willing
or able to provide individually. In coinsurance transactions, each individual underwriting company issues a separate policy and
assumes a portion of the overall total risk. As a coinsurer we are only liable for the portion of the risk we assume.
We also earn a small amount of additional income, which is reflected in our direct premiums, by assuming reinsurance for
certain risks of other title insurers.
Competition. Competition in the title insurance industry is based primarily on expertise, service and price. In addition, the
financial strength of the insurer has become an increasingly important factor in decisions relating to the purchase of title insurance,
particularly in multi-state transactions and in situations involving real estate-related investment vehicles such as real estate
investment trusts and real estate mortgage investment conduits. The number and size of competing companies varies in the different
geographic areas in which we conduct our business. In our principal markets, competitors include other major title underwriters
such as First American Financial Corporation, Old Republic International Corporation and Stewart Information Services
Corporation, as well as numerous smaller title insurance companies, underwritten title companies and independent agency
operations at the regional and local level. The addition or removal of regulatory barriers might result in changes to competition
in the title insurance business. New competitors may include diversified financial services companies that have greater financial
resources than we do and possess other competitive advantages. Competition among the major title insurance companies, expansion
by smaller regional companies and any new entrants with alternative products could affect our business operations and financial
condition.
Regulation. Our insurance subsidiaries, including title insurers, underwritten title companies and insurance agencies, are
subject to extensive regulation under applicable state laws. Each of the insurers is subject to a holding company act in its state of
domicile, which regulates, among other matters, the ability to pay dividends and enter into transactions with affiliates. The laws
of most states in which we transact business establish supervisory agencies with broad administrative powers relating to issuing
and revoking licenses to transact business, regulating trade practices, licensing agents, approving policy forms, accounting practices,
financial practices, establishing reserve and capital and surplus as regards policyholders (“capital and surplus”) requirements,
defining suitable investments for reserves and capital and surplus and approving rate schedules. The process of state regulation
of changes in rates ranges from states which set rates, to states where individual companies or associations of companies prepare
rate filings which are submitted for approval, to a few states in which rate changes do not need to be filed for approval.
Since we are governed by both state and federal governments and the applicable insurance laws and regulations are constantly
subject to change, it is not possible to predict the potential effects on our insurance operations of any laws or regulations that may
become more restrictive in the future or if new restrictive laws will be enacted.
Pursuant to statutory accounting requirements of the various states in which our title insurers are domiciled, these insurers
must defer a portion of premiums as an unearned premium reserve for the protection of policyholders (in addition to their reserves
for known claims) and must maintain qualified assets in an amount equal to the statutory requirements. The level of unearned
premium reserve required to be maintained at any time is determined by a statutory formula based upon either the age, number
of policies, and dollar amount of policy liabilities underwritten, or the age and dollar amount of statutory premiums written. As
of December 31, 2017, the combined statutory unearned premium reserve required and reported for our title insurers was
$1,400 million. In addition to statutory unearned premium reserves and reserves for known claims, each of our insurers maintains
surplus funds for policyholder protection and business operations.
Each of our insurance subsidiaries is regulated by the insurance regulatory authority in its respective state of domicile, as well
as that of each state in which it is licensed. The insurance commissioners of their respective states of domicile are the primary
regulators of our insurance subsidiaries. Each of the insurers is subject to periodic regulatory financial examination by regulatory
authorities.
Under the statutes governing insurance holding companies in most states, insurers may not enter into certain transactions,
including sales, reinsurance agreements and service or management contracts, with their affiliates unless the regulatory authority
of the insurer’s state of domicile has received notice at least 30 days prior to the intended effective date of such transaction and
has not objected to, or has approved, the transaction within the 30-day period.
In addition to state-level regulation, our title insurance and certain other real estate businesses are subject to regulation by
federal agencies, including the Consumer Financial Protection Bureau (“CFPB”). The CFPB was established under the Dodd-
Frank Wall Street Reform and Consumer Protection Act of 2010 ("Dodd-Frank") which also included regulation over financial
services and other lending related businesses. The CFPB has broad authority to regulate, among other areas, the mortgage and
real estate markets in matters pertaining to consumers. This authority includes the enforcement of the Truth-in-Lending Act
("TILA") and the Real Estate Settlement Procedures Act (individually, "RESPA", and together, "TILA-RESPA Integrated
Disclosure" or "TRID") formerly placed with the Department of Housing and Urban Development.
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As a holding company with no significant business operations of our own, we depend on dividends or other distributions from
our subsidiaries as the principal source of cash to meet our obligations, including the payment of interest on and repayment of
principal of any debt obligations, and to pay any dividends to our shareholders. The payment of dividends or other distributions
to us by our insurers is regulated by the insurance laws and regulations of their respective states of domicile. In general, an insurance
company subsidiary may not pay an “extraordinary” dividend or distribution unless the applicable insurance regulator has received
notice of the intended payment at least 30 days prior to payment and has not objected to or has approved the payment within the
30-day period. In general, an “extraordinary” dividend or distribution is statutorily defined as a dividend or distribution that,
together with other dividends and distributions made within the preceding 12 months, exceeds the greater of:
•
•
10% of the insurer’s statutory surplus as of the immediately prior year end; or
the statutory net income of the insurer during the prior calendar year.
The laws and regulations of some jurisdictions also prohibit an insurer from declaring or paying a dividend except out of its
earned surplus or require the insurer to obtain prior regulatory approval. During 2018, our directly owned title insurers can pay
dividends or make distributions to us of approximately $363 million; however, insurance regulators have the authority to prohibit
the payment of ordinary dividends or other payments by our title insurers to us (such as a payment under a tax sharing agreement
or for other services) if they determine that such payment could be adverse to our policyholders. There are no restrictions on our
retained earnings regarding our ability to pay dividends to shareholders.
The combined statutory capital and surplus of our title insurers was approximately $1,389 million and $1,469 million as of
December 31, 2017 and 2016, respectively. The combined statutory earnings of our title insurers were $434 million, $541 million,
and $381 million for the years ended December 31, 2017, 2016, and 2015, respectively.
As a condition to continued authority to underwrite policies in the states in which our insurers conduct their business, they
are required to pay certain fees and file information regarding their officers, directors and financial condition.
Pursuant to statutory requirements of the various states in which our insurers are domiciled, such insurers must maintain
certain levels of minimum capital and surplus. Required levels of minimum capital and surplus are not significant to the insurers
individually or in the aggregate. Each of our insurers has complied with the minimum statutory requirements as of December 31,
2017.
Our underwritten title companies are also subject to certain regulation by insurance regulatory or banking authorities, primarily
relating to minimum net worth. Minimum net worth requirements for each underwritten title company is less than $1 million.
These companies were in compliance with their respective minimum net worth requirements at December 31, 2017.
From time to time we receive inquiries and requests for information from state insurance departments, attorneys general and
other regulatory agencies about various matters relating to our business. Sometimes these take the form of civil investigative
demands or subpoenas. We cooperate with all such inquiries and we have responded to or are currently responding to inquiries
from multiple governmental agencies. Various governmental entities are studying the title insurance product, market, pricing, and
business practices, and potential regulatory and legislative changes, which may materially affect our business and operations.
From time to time, we are assessed fines for violations of regulations or other matters or enter into settlements with such authorities
which may require us to pay fines or claims or take other actions. For further discussion, see Item 3, Legal Proceedings.
Before a person can acquire control of a U.S. insurance company, prior written approval must be obtained from the insurance
commissioner of the state in which the insurer is domiciled. Prior to granting approval of an application to acquire control of a
domestic insurer, the state insurance commissioner will consider such factors as the financial strength of the applicant, the integrity
and management of the applicant’s Board of Directors and executive officers, the acquirer’s plans for the insurer’s Board of
Directors and executive officers, the acquirer’s plans for the future operations of the domestic insurer and any anti-competitive
results that may arise from the consummation of the acquisition of control. Generally, state statutes provide that control over a
domestic insurer is presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds
proxies representing 10% or more of the voting securities of the domestic insurer. Because a person acquiring 10% or more of our
common shares would indirectly control the same percentage of the stock of our insurers, the insurance change of control laws
would likely apply to such a transaction.
The National Association of Insurance Commissioners ("NAIC") has adopted an instruction requiring an annual certification
of reserve adequacy by a qualified actuary. Because all of the states in which our title insurers are domiciled require adherence to
NAIC filing procedures, each such insurer, unless it qualifies for an exemption, must file an actuarial opinion with respect to the
adequacy of its reserves.
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Title Insurance Ratings. Our title insurance underwriters are regularly assigned ratings by independent agencies designed to
indicate their financial condition and/or claims paying ability. The rating agencies determine ratings by quantitatively and
qualitatively analyzing financial data and other information. Our title subsidiaries include Alamo Title, Chicago Title,
Commonwealth Land Title, Fidelity National Title and National Title of New York. Standard & Poor’s Ratings Group (“S&P”)
and Moody’s Investors Service (“Moody’s”) provide ratings for the entire FNF family of companies as a whole as follows:
FNF family of companies
S&P
Moody’s
A
A3
The relative position of each of our ratings among the ratings scale assigned by each rating agency is as follows:
• An S&P "A" rating is the third highest rating of 10 ratings for S&P. According to S&P, an “A” rating represents an
investment grade company that, in its opinion, has strong capacity to meet financial commitments, but is somewhat
susceptible to adverse economic conditions.
• A Moody's "A3" rating is the third highest rating of 9 ratings for Moody's. Moody's states that companies rated “A3”
are judged to be upper-medium grade and are subject to low credit risk.
Demotech provides financial strength/stability ratings for each of our principal title insurance underwriters individually, as
follows:
Alamo Title Insurance
Chicago Title Insurance Company
Commonwealth Land Title Insurance Company
Fidelity National Title Insurance Company
National Title Insurance of New York
A'
A''
A'
A'
A'
Demotech states that its ratings of "A"(A double prime)" and "A' (A prime)" reflect its opinion that, regardless of the severity
of a general economic downturn or deterioration in the insurance cycle, the insurers assigned either of those ratings possess
"Unsurpassed" financial stability related to maintaining positive surplus as regards policyholders. The A'' and A' ratings are the
two highest ratings of Demotech's six ratings.
The ratings of S&P, Moody’s, and Demotech described above are not designed to be, and do not serve as, measures of protection
or valuation offered to investors. These financial strength ratings should not be relied on with respect to making an investment in
our securities. See “Item 1A. Risk Factors — If the rating agencies downgrade our Company, our results of operations and
competitive position in the title insurance industry may suffer” for further information.
Intellectual Property
We rely on a combination of contractual restrictions, internal security practices, and copyright and trade secret law to establish
and protect our software, technology, and expertise across our businesses. Further, we have developed a number of brands that
have accumulated substantial goodwill in the marketplace, and we rely on trademark law to protect our rights in that area. We
intend to continue our policy of taking all measures we deem necessary to protect our copyright, trade secret, and trademark rights.
These legal protections and arrangements afford only limited protection of our proprietary rights, and there is no assurance that
our competitors will not independently develop or license products, services, or capabilities that are substantially equivalent or
superior to ours.
Technology and Research and Development
As a national provider of real estate transaction products and services, we participate in an industry that is subject to significant
regulatory requirements, frequent new product and service introductions, and evolving industry standards. We believe that our
future success depends in part on our ability to anticipate industry changes and offer products and services that meet evolving
industry standards. In connection with our title segment service offerings, we are continuing to deploy new information system
technologies to our direct and agency operations. We continue to improve the process of ordering title and escrow services and
improve the delivery of our products to our customers. In order to meet new regulatory requirements, we also continue to expand
our data collection and reporting abilities.
Investment Policies and Investment Portfolio
Our investment policy is designed to maximize total return through investment income and capital appreciation consistent
with moderate risk of principal, while providing adequate liquidity. Our insurance subsidiaries, including title insurers, underwritten
title companies and insurance agencies, are subject to extensive regulation under applicable state laws. The various states in which
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we operate our underwriters regulate the types of assets that qualify for purposes of capital, surplus, and statutory unearned premium
reserves. Our investment policy specifically limits duration and non-investment grade allocations in the FNF core fixed-income
portfolio. Maintaining shorter durations on the investment portfolio allows for the mitigation of interest rate risk. Equity securities
and preferred stock are utilized to take advantage of perceived value or for strategic purposes. Due to the magnitude of the
investment portfolio in relation to our claims loss reserves, durations of investments are not specifically matched to the cash
outflows required to pay claims.
As of December 31, 2017 and 2016, the carrying amount of total investments, which approximates the fair value, excluding
investments in unconsolidated affiliates, was $3.2 billion and $3.6 billion, respectively.
We purchase investment grade fixed maturity securities, selected non-investment grade fixed maturity securities, preferred
stock and equity securities. The securities in our portfolio are subject to economic conditions and normal market risks and
uncertainties.
The following table presents certain information regarding the investment ratings of our fixed maturity securities and preferred
stock portfolio at December 31, 2017 and 2016:
Rating(1)
Aaa/AAA
Aa/AA
A
Baa/BBB
Ba/BB/B
Lower
Other (2)
2017
Amortized
Cost
% of
Total
Fair
Value
$
398
335
575
510
155
45
95
18.8% $
15.9
27.3
24.1
7.3
2.1
4.5
396
337
578
519
159
49
97
December 31,
% of
Total
Amortized
Cost
(Dollars in millions)
18.5% $
15.8
27.2
24.3
7.4
2.3
4.5
418
519
849
723
98
53
48
2016
% of
Total
Fair
Value
% of
Total
15.4% $
19.2
31.4
26.6
3.6
2.0
1.8
412
525
856
728
97
55
49
15.1%
19.3
31.5
26.7
3.6
2.0
1.8
$
2,113
100.0% $
2,135
100.0% $
2,708
100.0% $
2,722
100.0%
______________________________________
(1) Ratings as assigned by Moody’s Investors Service or Standard & Poor’s Ratings Group if a Moody's rating is unavailable.
(2) This category is composed of unrated securities.
The following table presents certain information regarding contractual maturities of our fixed maturity securities:
Maturity
One year or less
After one year through five years
After five years through ten years
After ten years
Mortgage-backed/asset-backed securities
December 31, 2017
Amortized
Cost
% of
Total
Fair
Value
% of
Total
(Dollars in millions)
$
496
1,219
31
5
55
27.5% $
67.5
1.7
0.3
3.0
496
1,227
27.3%
67.5
32
5
56
1.8
0.3
3.1
$
1,806
100% $
1,816
100%
Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations
with or without call or prepayment penalties. Because of the potential for prepayment on mortgage-backed and asset-backed
securities, they are not categorized by contractual maturity.
Our equity securities at December 31, 2017 and 2016 consisted of investments with a cost basis of $517 million and $278
million, respectively, and fair value of $681 million and $386 million, respectively.
At December 31, 2017 and 2016, we also held $150 million in investments that are accounted for using the equity method of
accounting.
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As of December 31, 2017 and 2016, other long-term investments were $110 million and $42 million, respectively. Other long-
term investments include investments accounted for using the cost method of accounting and company-owned life insurance
policies carried at cash surrender value.
Short-term investments, which consist primarily of commercial paper and money market instruments which have an original
maturity of one year or less, are carried at amortized cost, which approximates fair value. As of December 31, 2017 and 2016,
short-term investments amounted to $295 million and $482 million, respectively.
Our investment results for the years ended December 31, 2017, 2016 and 2015 were as follows:
Net investment income (1)
Average invested assets
Effective return on average invested assets
______________________________________
December 31,
2017
2016
2015
(Dollars in millions)
$
$
139
3,296
$
$
141
3,936
$
$
137
4,020
4.2%
3.6%
3.4%
(1) Net investment income as reported in our Consolidated Statements of Earnings has been adjusted in the presentation
above to provide the tax equivalent yield on tax exempt investments and to exclude interest earned on cash and cash
equivalents.
Loss Reserves
For information about our loss reserves, see Item 7. Management’s Discussion and Analysis of Financial Condition and Results
of Operations — Critical Accounting Estimates.
Geographic Operations
Our direct title operations are divided into approximately 180 profit centers. Each profit center processes title insurance
transactions within its geographical area, which is usually identified by a county, a group of counties forming a region, or a state,
depending on the management structure in that part of the country. We also transact title insurance business through a network of
approximately 5,200 agents, primarily in those areas in which agents are the more prevalent title insurance provider. Substantially
all of our revenues are generated in the United States.
The following table sets forth the approximate dollar and percentage volumes of our title insurance premium revenue by state:
Year Ended December 31,
2017
2016
2015
Amount
%
Amount
%
Amount
%
(Dollars in millions)
$
$
708
693
392
311
283
2,506
4,893
14.5% $
14.2
8.0
6.3
5.8
51.2
100.0% $
690
670
364
336
267
2,396
4,723
14.6% $
14.2
7.7
7.1
5.7
50.7
100.0% $
649
616
349
349
243
15.1%
14.4
8.1
8.1
5.7
2,080
4,286
48.6
100.0%
California
Texas
Florida
New York
Illinois
All others
Totals
Employees
As of February 2, 2018, we had 24,367 full-time equivalent employees, which includes 23,617 in our Title segment and 750
in our Corporate and other segment. We monitor our staffing levels based on current economic activity. None of our employees
are subject to collective bargaining agreements. We believe that our relations with employees are generally good.
Financial Information by Operating Segment
For financial information by operating segment, see Note R Segment Information to our Consolidated Financial Statements
included in Item 8 of Part II of this Annual Report.
Statement Regarding Forward-Looking Information
The statements contained in this Form 10-K or in our other documents or in oral presentations or other statements made by
our management that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities
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Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, hopes,
intentions, or strategies regarding the future. These statements relate to, among other things, future financial and operating results
of the Company. In many cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,”
“expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” or “continue,” or the negative of these terms and other
comparable terminology. Actual results could differ materially from those anticipated in these statements as a result of a number
of factors, including, but not limited to the following:
•
•
•
•
•
•
•
•
•
•
•
•
changes in general economic, business, and political conditions, including changes in the financial markets;
the severity of our title insurance claims;
downgrade of our credit rating by rating agencies;
adverse changes in the level of real estate activity, which may be caused by, among other things, high or increasing interest
rates, a limited supply of mortgage funding, increased mortgage defaults, or a weak U.S. economy;
compliance with extensive government regulation of our operating subsidiaries and adverse changes in applicable laws
or regulations or in their application by regulators;
regulatory investigations of the title insurance industry;
loss of key personnel that could negatively affect our financial results and impair our operating abilities;
our business concentration in the States of California and Texas are the source of approximately 14.5% and14.2%,
respectively, of our title insurance premiums;
our potential inability to find suitable acquisition candidates, as well as the risks associated with acquisitions in lines of
business that will not necessarily be limited to our traditional areas of focus, or difficulties integrating acquisitions;
our dependence on distributions from our title insurance underwriters as our main source of cash flow;
competition from other title insurance companies; and
other risks detailed in "Risk Factors" below and elsewhere in this document and in our other filings with the SEC.
We are not under any obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements,
whether as a result of new information, future events or otherwise. You should carefully consider the possibility that actual results
may differ materially from our forward-looking statements.
Additional Information
Our website address is www.fnf.com. We make available free of charge on or through our website our Annual Report on
Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after
such material is electronically filed with or furnished to the Securities and Exchange Commission. However, the information found
on our website is not part of this or any other report.
Item 1A.
Risk Factors
In addition to the normal risks of business, we are subject to significant risks and uncertainties, including those listed below
and others described elsewhere in this Annual Report on Form 10-K. Any of the risks described herein could result in a significant
or material adverse effect on our results of operations or financial condition.
General
We have recorded goodwill as a result of prior acquisitions, and an economic downturn could cause these balances to become
impaired, requiring write-downs that would reduce our operating income.
Goodwill aggregated approximately $2,746 million, or 30.0% of our total assets, as of December 31, 2017. Current accounting
rules require that goodwill be assessed for impairment at least annually or whenever changes in circumstances indicate that the
carrying amount may not be recoverable from estimated future cash flows. Factors that may be considered a change in circumstance
indicating the carrying value of our intangible assets, including goodwill, may not be recoverable include, but are not limited to,
significant underperformance relative to historical or projected future operating results, a significant decline in our stock price
and market capitalization, and negative industry or economic trends. No goodwill impairment charge was recorded in the years
ended December 31, 2017, 2016, or 2015. However, if there is an economic downturn in the future, the carrying amount of our
goodwill may no longer be recoverable, and we may be required to record an impairment charge, which would have a negative
impact on our results of operations and financial condition. We will continue to monitor our market capitalization and the impact
of the economy to determine if there is an impairment of goodwill in future periods.
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Our management has articulated a willingness to seek growth through acquisitions, both in our current lines of business as
well as in lines of business outside of our traditional areas of focus or geographic areas. This expansion of our business
subjects us to associated risks, such as risks and uncertainties associated with new companies, the diversion of management’s
attention and lack of experience in operating unrelated businesses, and may affect our credit and ability to repay our debt.
Our management has stated that we may make acquisitions, both in our current lines of business, as well as lines of business
that are not directly tied to or synergistic with our core operations. Accordingly, we have in the past acquired, and may in the future
acquire, businesses in industries or geographic areas with which management is less familiar than we are with our core businesses.
These activities involve risks that could adversely affect our operating results, due to uncertainties involved with new companies,
diversion of management’s attention and lack of substantial experience in operating such businesses. There can be no guarantee
that we will not enter into transactions or make acquisitions that will cause us to incur additional debt, increase our exposure to
market and other risks and cause our credit or financial strength ratings to decline.
We are a holding company and depend on distributions from our subsidiaries for cash.
We are a holding company whose primary assets are the securities of our operating subsidiaries. Our ability to pay interest
on our outstanding debt and our other obligations and to pay dividends is dependent on the ability of our subsidiaries to pay
dividends or make other distributions or payments to us. If our operating subsidiaries are not able to pay dividends to us, we may
not be able to meet our obligations or pay dividends on our common stock.
Our title insurance subsidiaries must comply with state laws which require them to maintain minimum amounts of working
capital, surplus and reserves, and place restrictions on the amount of dividends that they can distribute to us. Compliance with
these laws will limit the amounts our regulated subsidiaries can dividend to us. During 2018, our title insurers may pay dividends
or make distributions to us of approximately $363 million; however, insurance regulators have the authority to prohibit the payment
of ordinary dividends or other payments by our title insurers to us if they determine that such payment could be adverse to our
policyholders.
The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends, which
may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an
insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.
Further, depending on business and regulatory conditions, we may in the future need to retain cash in our underwriters or even
contribute cash to one or more of them in order to maintain their ratings or their statutory capital position. Such a requirement
could be the result of investment losses, reserve charges, adverse operating conditions in the current economic environment or
changes in interpretation of statutory accounting requirements by regulators.
The loss of key personnel could negatively affect our financial results and impair our operating abilities.
Our success substantially depends on our ability to attract and retain key members of our senior management team and officers.
If we lose one or more of these key employees, our operating results and in turn the value of our common stock could be materially
adversely affected. Although we have employment agreements with many of our officers, there can be no assurance that the entire
term of the employment agreement will be served or that the employment agreement will be renewed upon expiration.
Failure of our information security systems or processes could result in a loss or disclosure of confidential information,
damage to our reputation, monetary losses, additional costs and impairment of our ability to conduct business effectively.
Our operations are highly dependent upon the effective operation of our computer systems. We use our computer systems to
receive, process, store and transmit sensitive personal consumer data (such as names and addresses, social security numbers,
driver's license numbers, credit cards and bank account information) and important business information of our customers. We
also electronically manage substantial cash, investment assets and escrow account balances on behalf of ourselves and our
customers, as well as financial information about our businesses generally. The integrity of our computer systems and the protection
of the information that resides on such systems are important to our successful operation. If we fail to maintain an adequate
security infrastructure, adapt to emerging security threats or follow our internal business processes with respect to security, the
information or assets we hold could be compromised. Further, even if we, or third parties to which we outsource certain information
technology services, maintain a reasonable, industry-standard information security infrastructure to mitigate these risks, the inherent
risk that unauthorized access to information or assets remains. This risk is increased by transmittal of information over the internet
and the increased threat and sophistication of cyber criminals. While, to date, we believe that we have not experienced a material
breach of our computer systems, the occurrence or scope of such events is not always apparent. If additional information regarding
an event previously considered immaterial is discovered, or a new event were to occur, it could potentially have a material adverse
effect on our operations or financial condition. In addition, some laws and certain of our contracts require notification of various
parties, including regulators, consumers or customers, in the event that confidential or personal information has or may have been
taken or accessed by unauthorized parties. Such notifications can potentially result, among other things, in adverse publicity,
diversion of management and other resources, the attention of regulatory authorities, the imposition of fines, and disruptions in
business operations, the effects of which may be material. Any inability to prevent security or privacy breaches, or the perception
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that such breaches may occur, could inhibit our ability to retain or attract new clients and/or result in financial losses, litigation,
increased costs, negative publicity, or other adverse consequences to our business.
Further, our financial institution clients have obligations to safeguard their information technology systems and the
confidentiality of customer information. In certain of our businesses, we are bound contractually and/or by regulation to comply
with the same requirements. If we fail to comply with these regulations and requirements, we could be exposed to suits for breach
of contract, governmental proceedings or the imposition of fines. In addition, future adoption of more restrictive privacy laws,
rules or industry security requirements by federal or state regulatory bodies or by a specific industry in which we do business
could have an adverse impact on us through increased costs or restrictions on business processes.
If economic and credit market conditions deteriorate, it could have a material adverse impact on our investment portfolio.
Our investment portfolio is exposed to economic and financial market risks, including changes in interest rates, credit markets
and prices of marketable equity and fixed-income securities. Our investment policy is designed to maximize total return through
investment income and capital appreciation consistent with moderate risk of principal, while providing adequate liquidity and
complying with internal and regulatory guidelines. To achieve this objective, our marketable debt investments are primarily
investment grade, liquid, fixed-income securities and money market instruments denominated in U.S. dollars. We make investments
in certain equity securities and preferred stock in order to take advantage of perceived value and for strategic purposes. In the past,
economic and credit market conditions have adversely affected the ability of some issuers of investment securities to repay their
obligations and have affected the values of investment securities. If the carrying value of our investments exceeds the fair value,
and the decline in fair value is deemed to be other-than-temporary, we will be required to write down the value of our investments,
which could have a material negative impact on our results of operations and financial condition.
Failure of our enterprise-wide risk management processes could result in unexpected monetary losses, damage to our
reputation, additional costs or impairment of our ability to conduct business effectively.
As a large insurance entity and a publicly traded company, the Company has always had risk management functions, policies
and procedures throughout its operations and management. These functions include but are not limited to departments dedicated
to enterprise risk management and information technology risk management, information security, business continuity, lender
strategy and development, and vendor risk management. These policies and procedures have evolved over the years as we
continually reassess our processes both internally and to comply with changes in the regulatory environment. Due to limitations
inherent in any internal process, if the Company's risk management processes prove unsuccessful at identifying and responding
to risks, we could incur unexpected monetary losses, damage to our reputation, additional costs or impairment of our ability to
conduct business effectively.
We are the subject of various legal proceedings that could have a material adverse effect on our results of operations.
We are involved from time to time in various legal proceedings, including in some cases class-action lawsuits and regulatory
inquiries, investigations or other proceedings. If we are unsuccessful in our defense of litigation matters or regulatory proceedings,
we may be forced to pay damages, fines or penalties and/or change our business practices, any of which could have a material
adverse effect on our business and results of operations. See Note M Commitments and Contingencies to our Consolidated Financial
Statements included in Item 8 of Part II of this Annual Report for further discussion of pending litigation and regulatory matters
and our related accrual.
If adverse changes in the levels of real estate activity occur, our revenues may decline.
Title insurance revenue is closely related to the level of real estate activity which includes sales, mortgage financing and
mortgage refinancing. The levels of real estate activity are primarily affected by the average price of real estate sales, the availability
of funds to finance purchases and mortgage interest rates.
We have found that residential real estate activity generally decreases in the following situations:
• when mortgage interest rates are high or increasing;
• when the mortgage funding supply is limited; and
• when the United States economy is weak, including high unemployment levels.
Declines in the level of real estate activity or the average price of real estate sales are likely to adversely affect our title
insurance revenues. The Mortgage Bankers Association's ("MBA") Mortgage Finance Forecast as of January 20, 2018 estimates
an approximately $1.6 trillion mortgage origination market for 2018, which would be a decrease of 5.9% from 2017. The MBA
forecasts that the 5.9% decrease will result from a decrease in refinance activity, offset by a slight increase in forecast purchase
transactions. Our revenues in future periods will continue to be subject to these and other factors which are beyond our control
and, as a result, are likely to fluctuate.
If financial institutions at which we hold escrow funds fail, it could have a material adverse impact on our company.
We hold customers' assets in escrow at various financial institutions, pending completion of real estate transactions. These
assets are maintained in segregated bank accounts and have not been included in the accompanying Consolidated Balance Sheets.
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We have a contingent liability relating to proper disposition of these balances for our customers, which amounted to $15.4 billion
at December 31, 2017. Failure of one or more of these financial institutions may lead us to become liable for the funds owed to
third parties and there is no guarantee that we would recover the funds deposited, whether through Federal Deposit Insurance
Corporation coverage or otherwise.
If we experience changes in the rate or severity of title insurance claims, it may be necessary for us to record additional
charges to our claim loss reserve. This may result in lower net earnings and the potential for earnings volatility.
By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market conditions
and the legal environment existing at the time of settlement of the claims. Estimating future title loss payments is difficult because
of the complex nature of title claims, the long periods of time over which claims are paid, significantly varying dollar amounts of
individual claims and other factors. From time to time, we experience large losses or an overall worsening of our loss payment
experience in regard to the frequency or severity of claims that require us to record additional charges to our claims loss reserve.
There are currently pending several large claims which we believe can be defended successfully without material loss payments.
However, if unanticipated material payments are required to settle these claims, it could result in or contribute to additional charges
to our claim loss reserves. These loss events are unpredictable and adversely affect our earnings.
At each quarter end, our recorded reserve for claim losses is initially the result of taking the prior recorded reserve for claim
losses, adding the current provision to that balance and subtracting actual paid claims from that balance, resulting in an amount
that management then compares to our actuary's central estimate provided in the actuarial calculation. Due to the uncertainty and
judgment used by both management and our actuary, our ultimate liability may be greater or less than our current reserves and/or
our actuary’s calculation. If the recorded amount is within a reasonable range of the actuary’s central estimate, but not at the central
estimate, management assesses other factors in order to determine our best estimate. These factors, which are both qualitative and
quantitative, can change from period to period and include items such as current trends in the real estate industry (which management
can assess, but for which there is a time lag in the development of the data used by our actuary), any adjustments from the actuarial
estimates needed for the effects of unusually large or small claims, improvements in our claims management processes, and other
cost saving measures. Depending upon our assessment of these factors, we may or may not adjust the recorded reserve. If the
recorded amount is not within a reasonable range of the actuary’s central estimate, we would record a charge or credit and reassess
the provision rate on a go forward basis.
Our subsidiaries must comply with extensive regulations. These regulations may increase our costs or impede or impose
burdensome conditions on actions that we might seek to take to increase the revenues of those subsidiaries.
Our insurance businesses are subject to extensive regulation by state insurance authorities in each state in which they operate.
These agencies have broad administrative and supervisory power relating to the following, among other matters:
•
•
•
•
•
•
•
•
•
•
•
licensing requirements;
trade and marketing practices;
accounting and financing practices;
disclosure requirements on key terms of mortgage loans;
capital and surplus requirements;
the amount of dividends and other payments made by insurance subsidiaries;
investment practices;
rate schedules;
deposits of securities for the benefit of policyholders;
establishing reserves; and
regulation of reinsurance.
Most states also regulate insurance holding companies like us with respect to acquisitions, changes of control and the terms
of transactions with our affiliates. State regulations may impede or impose burdensome conditions on our ability to increase or
maintain rate levels or on other actions that we may want to take to enhance our operating results. In addition, we may incur
significant costs in the course of complying with regulatory requirements. Further, various state legislatures have in the past
considered offering a public alternative to the title industry in their states, as a means to increase state government revenues.
Although we think this situation is unlikely, if one or more such takeovers were to occur they could adversely affect our business.
We cannot be assured that future legislative or regulatory changes will not adversely affect our business operations. See “Item 1.
Business — Regulation” for further discussion of the current regulatory environment.
Our ServiceLink subsidiary provides mortgage transaction services including title-related services and facilitation of
production and management of mortgage loans. Certain of these businesses are subject to federal and state regulatory oversight.
For example, ServiceLink’s LoanCare business services and subservices mortgage loans secured primarily by residential real
estate throughout the United States. LoanCare is subject to extensive federal, state and local regulatory oversight, including federal
and state regulatory examinations, information gathering requests, inquiries, and investigations by governmental and regulatory
agencies, including the CFPB. In connection with formal and informal inquiries by those agencies, LoanCare receives numerous
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requests, subpoenas, and orders for documents, testimony and information in connection with various aspects of its or its clients’
regulated activities. The ongoing implementation of the Dodd Frank Act, including the implementation of the originations and
servicing rules by the CFPB, could increase our regulatory compliance burden and associated costs and place restrictions on our
ability to operate the LoanCare business.
LoanCare is also required to maintain a variety of licenses, both federal and state. License requirements are in a frequent state
of renewal and reexamination as regulations change or are reinterpreted. In addition, federal and state statutes establish specific
guidelines and procedures that debt collectors must follow when collecting consumer accounts. LoanCare’s failure to comply with
any of these laws, should the states take an opposing interpretation, could have an adverse effect on LoanCare in the event and to
the extent that they apply to some or all of its servicing activities.
State regulation of the rates we charge for title insurance could adversely affect our results of operations.
Our title insurance subsidiaries are subject to extensive rate regulation by the applicable state agencies in the jurisdictions in
which they operate. Title insurance rates are regulated differently in various states, with some states requiring the subsidiaries to
file and receive approval of rates before such rates become effective and some states promulgating the rates that can be charged.
In general, premium rates are determined on the basis of historical data for claim frequency and severity as well as related production
costs and other expenses. In all states in which our title subsidiaries operate, our rates must not be excessive, inadequate or unfairly
discriminatory. Premium rates are likely to prove insufficient when ultimate claims and expenses exceed historically projected
levels. Premium rate inadequacy may not become evident quickly and may take time to correct, and could adversely affect the
Company’s business operating results and financial conditions.
Regulatory investigations of the insurance industry may lead to fines, settlements, new regulation or legal uncertainty, which
could negatively affect our results of operations.
From time to time we receive inquiries and requests for information from state insurance departments, attorneys general and
other regulatory agencies about various matters relating to our business. Sometimes these take the form of civil investigative
demands or subpoenas. We cooperate with all such inquiries and we have responded to or are currently responding to inquiries
from multiple governmental agencies. Also, regulators and courts have been dealing with issues arising from foreclosures and
related processes and documentation. Various governmental entities are studying the title insurance product, market, pricing, and
business practices, and potential regulatory and legislative changes, which may materially affect our business and operations.
From time to time, we are assessed fines for violations of regulations or other matters or enter into settlements with such authorities
which may require us to pay fines or claims or take other actions.
Because we are dependent upon California and Texas for approximately 14.5% and 14.2% and of our title insurance
premiums, respectively, our business may be adversely affected by regulatory conditions in California and/or Texas.
California and Texas are the two largest sources of revenue for our title segment and, in 2017, California-based premiums
accounted for 29.5% of premiums earned by our direct operations and 0.7% of our agency premium revenues. Texas-based
premiums accounted for 18.2% of premiums earned by our direct operations and 10.3% of our agency premium revenues. In the
aggregate, California and Texas accounted for approximately 14.5% and 14.2%, respectively, of our total title insurance premiums
for 2017. A significant part of our revenues and profitability are therefore subject to our operations in California and Texas and
to the prevailing regulatory conditions in these states. Adverse regulatory developments in California and Texas, which could
include reductions in the maximum rates permitted to be charged, inadequate rate increases or more fundamental changes in the
design or implementation of the California and Texas title insurance regulatory framework, could have a material adverse effect
on our results of operations and financial condition.
If the rating agencies downgrade our insurance companies, our results of operations and competitive position in the title
insurance industry may suffer.
Ratings have always been an important factor in establishing the competitive position of insurance companies. Our title
insurance subsidiaries are rated by S&P, Moody’s, and Demotech. Ratings reflect the opinion of a rating agency with regard to an
insurance company’s or insurance holding company’s financial strength, operating performance and ability to meet its obligations
to policyholders and are not evaluations directed to investors. Our ratings are subject to continued periodic review by rating
agencies and the continued retention of those ratings cannot be assured. If our ratings are reduced from their current levels by
those entities, our results of operations could be adversely affected.
If the Company's claim loss prevention procedures fail, we could incur significant claim losses.
In the ordinary course of our title insurance business, we assume risks related to insuring clear title to residential and commercial
properties. The Company has established procedures to mitigate the risk of loss from title claims, including extensive underwriting
and risk assessment procedures. We also mitigate the risk of large claim losses by reinsuring risks with other insurers under excess
of loss and case-by-case (“facultative”) reinsurance agreements. Reinsurance agreements generally provide that the reinsurer is
liable for loss and loss adjustment expense payments exceeding the amount retained by the ceding company. However, the ceding
company remains primarily liable to the insured whether or not the reinsurer is able to meet its contractual obligations. If inherent
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limitations cause our claim loss risk mitigation procedures to fail, we could incur substantial losses having an adverse effect on
our results of operations or financial condition.
The Company's use of independent agents for a significant amount of our title insurance policies could adversely impact
the frequency and severity of title claims.
In the Company’s agency operations, an independent agent performs the search and examination function or the agent may
purchase a search product from the Company. In either case, the agent is responsible for ensuring that the search and examination
is completed. The agent thus retains the majority of the title premium collected, with the balance remitted to the title underwriter
for bearing the risk of loss in the event that a claim is made under the title insurance policy. The Company’s relationship with each
agent is governed by an agency agreement defining how the agent issues a title insurance policy on the Company’s behalf. The
agency agreement also sets forth the agent’s liability to the Company for policy losses attributable to the agent’s errors. For each
agent with whom the Company enters into an agency agreement, financial and loss experience records are maintained. Periodic
audits of our agents are also conducted and the number of agents with which the Company transacts business is strategically
managed in an effort to reduce future expenses and manage risks. Despite efforts to monitor the independent agents with which
we transact business, there is no guarantee that an agent will comply with their contractual obligations to the Company. Furthermore,
we cannot be certain that, due to changes in the regulatory environment and litigation trends, the Company will not be held liable
for errors and omissions by agents. Accordingly, our use of independent agents could adversely impact the frequency and severity
of title claims.
Failure to respond to rapid changes in technology could adversely affect the Company
Rapidly evolving technologies and innovations in software and financial technology could drive changes in how real estate
transactions are recorded and processed throughout the mortgage life cycle. There is no guarantee that we will be able to effectively
adapt to and utilize changing technology. Our competitors may be able to utilize technology more effectively than us which could
result in the loss of market share.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Our corporate headquarters are on our campus in Jacksonville, Florida in owned facilities.
The majority of our branch offices are leased from third parties. See Note M Commitments and Contingencies to our
Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further information on our outstanding
leases. Our subsidiaries conduct their business operations primarily in leased office space in 44 states, Washington, DC, Canada
and India.
Item 3.
Legal Proceedings
For a description of our legal proceedings see discussion of Legal and Regulatory Contingencies in Note M Commitments
and Contingencies to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report, which is
incorporated by reference into this Part I, Item 3.
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PART II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Our common stock trades on the New York Stock Exchange under the trading symbol "FNF". The following tables provide
the high and low closing sales prices of our common stock and cash dividends declared per share of common stock for each quarter
during 2017 and 2016.
Year ended December 31, 2017
First quarter
Second quarter
Third quarter
Fourth quarter
Year ended December 31, 2016
First quarter
Second quarter
Third quarter
Fourth quarter
Stock Price
High
Stock Price
Low
Cash
Dividends
Declared
$
$
27.64 $
31.91
34.78
40.35
23.54 $
26.99
31.54
33.84
23.19 $
25.76
26.40
25.65
19.97 $
21.63
24.92
22.01
0.25
0.25
0.25
0.27
0.21
0.21
0.21
0.25
Information concerning securities authorized for issuance under our equity compensation plans will be included in Item 12
of Part III of this report.
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PERFORMANCE GRAPH
Set forth below is a graph comparing cumulative total shareholder return on our FNF common stock against the cumulative
total return on the S&P 500 Index and against the cumulative total return of a peer group index consisting of certain companies
in the primary industry in which we compete (SIC code 6361 — Title Insurance) for the period ending December 31, 2017. This
peer group consists of the following companies: First American Financial Corporation and Stewart Information Services Corp.
The peer group comparison has been weighted based on their stock market capitalization. The graph assumes an initial investment
of $100.00 on December 31, 2012, with dividends reinvested over the periods indicated.
Fidelity National Financial, Inc.
S&P 500
Peer Group
100.00
100.00
100.00
141.40
132.39
120.24
186.97
150.51
146.83
192.43
152.59
158.07
193.40
170.84
172.47
317.26
208.14
249.23
12/31/2012
12/31/2013
12/31/2014
12/31/2015
12/31/2016
12/31/2017
On January 31, 2018, the last reported sale price of our common stock on the New York Stock Exchange was $38.98. We had
approximately 7,000 shareholders of record.
On January 26, 2018, our Board of Directors formally declared a $0.30 per FNF share cash dividend that is payable on
March 30, 2018 to FNF shareholders of record as of March 16, 2018.
Our current dividend policy anticipates the payment of quarterly dividends in the future. The declaration and payment of
dividends will be at the discretion of our Board of Directors and will be dependent upon our future earnings, financial condition
and capital requirements. There are no restrictions on our retained earnings regarding our ability to pay dividends to shareholders,
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although there are limits on the ability of certain subsidiaries to pay dividends to us, as described below. Our ability to declare
dividends is subject to restrictions under our existing credit agreement. We do not believe the restrictions contained in our credit
agreement will, in the foreseeable future, adversely affect our ability to pay cash dividends at the current dividend rate.
Since we are a holding company, our ability to pay dividends will depend largely on the ability of our subsidiaries to pay
dividends to us, and the ability of our title insurance subsidiaries to do so is subject to, among other factors, their compliance with
applicable insurance regulations. As of December 31, 2017, $1,700 million of our net assets are restricted from dividend payments
without prior approval from the Departments of Insurance in the states where our title insurance subsidiaries are domiciled. During
2018, our directly owned title insurance subsidiaries can pay dividends or make distributions to us of approximately $363 million
without prior approval. The limits placed on such subsidiaries’ abilities to pay dividends affect our ability to pay dividends.
On July 20, 2015, our Board of Directors approved a new three-year stock repurchase program under which we can purchase
up to 25 million shares of our FNF Group common stock through July 30, 2018. We may make repurchases from time to time in
the open market, in block purchases or in privately negotiated transactions, depending on market conditions and other factors.
Since the original commencement of the plan, we have repurchased a total of 10,589,000 FNF Group common shares for $372
million, or an average of $35.10 per share, and there are 14,411,000 shares available to be repurchased under this program. We
have not made any repurchases under this program in the year ended December 31, 2017 or in the subsequent period ended January
31, 2018.
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Item 6.
Selected Financial Data
The information set forth below should be read in conjunction with the consolidated financial statements and related notes
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 10-
K. Certain reclassifications have been made to the prior year amounts to conform with the 2017 presentation.
On November 17, 2017 we completed our previously announced split-off (the “FNFV Split-Off”) of our former wholly-owned
subsidiary Cannae Holdings, Inc. (“Cannae”), which consisted of the businesses, assets and liabilities formerly attributed to our
FNF Ventures ("FNFV") Group including Ceridian Holding, LLC, American Blue Ribbon Holdings, LLC and T-System Holding
LLC. The results of FNFV are presented as discontinued operations in the following tables.
On September 29, 2017 we completed our tax-free distribution to FNF Group shareholders, of all 83.3 million shares of New
BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK
Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting
in the formation of a new publicly-traded holding company, Black Knight, Inc. ("New Black Knight"). The results of Black Knight
are presented as discontinued operations in the following tables.
On June 30, 2014, we completed a recapitalization of FNF common stock into two tracking stocks, FNF Group common stock
and FNFV Group common stock. Each share of the previously outstanding FNF Class A common stock ("Old FNF common
stock") was converted into one share of FNF Group common stock and 0.3333 of a share of FNFV Group common stock.
2017
Year Ended December 31,
2015
2014
2016
2013
(Dollars in millions, except share data)
$
7,663
$
7,257
$
6,664
$
5,647
$
5,950
2,460
2,089
1,781
183
238
48
6,799
864
235
629
10
639
155
794
23
771
$
2,275
1,998
1,648
160
157
64
6,302
955
347
608
14
622
70
692
42
650
$
2,137
1,731
1,557
150
246
73
5,894
770
274
496
5
501
60
561
34
527
$
1,921
1,471
1,367
148
228
91
5,226
421
175
246
3
249
270
519
(64)
583
$
1,881
1,789
1,189
68
291
68
5,286
664
238
426
4
430
(19)
411
17
394
Operating Data:
Revenue
Expenses:
Personnel costs
Agent commissions
Other operating expenses
Depreciation and amortization
Provision for title claim losses
Interest expense
Earnings before income taxes, equity in earnings (loss) of
unconsolidated affiliates, and noncontrolling interest
Income tax expense
Earnings before equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Earnings from continuing operations, net of tax
Earnings (loss) from discontinued operations, net of tax
Net earnings
Less: net earnings (loss) attributable to noncontrolling interests
Net earnings attributable to FNF common shareholders
$
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Per Share Data:
Basic net earnings per share attributable to Old FNF common
shareholders
Basic net earnings per share attributable to FNF Group common
shareholders
Basic net earnings (loss) per share attributable to FNFV Group
common shareholders
Weighted average shares outstanding Old FNF, basic basis (1)
Weighted average shares outstanding FNF Group, basic basis (1)
Weighted average shares outstanding FNFV Group, basic basis
(1)
Diluted net earnings per share attributable to Old FNF common
shareholders
Diluted net earnings per share attributable to FNF Group common
shareholders
Diluted net earnings (loss) per share attributable to FNFV Group
common shareholders
Weighted average shares outstanding Old FNF, diluted basis (1)
Weighted average shares outstanding FNF Group, diluted basis
(1)
Weighted average shares outstanding FNFV Group, diluted basis
(1)
$
$
$
$
Year Ended December 31,
2017
2016
2015
2014
2013
(Dollars in millions, except share data)
$
0.33
$
1.71
2.44
$
2.40
$
1.95
1.68
$ (0.06)
$ (0.16)
271
65
272
67
277
79
0.77
3.04
138
138
46
230
2.38
$
2.34
$
1.89
1.63
$ (0.06)
$ (0.16)
278
67
280
70
286
82
$
0.32
$
1.68
0.75
3.01
142
142
47
0.36
0.37
$
$
235
$
0.66
Dividends declared per share of Old FNF common stock
Dividends declared per share of FNF Group common stock
Balance Sheet Data:
$
1.02
$
0.88
$
0.80
Investments (2)
Cash and cash equivalents (3)
Total assets
Notes payable
Reserve for title claim losses
Redeemable NCI
Equity
Book value per share Old FNF
Book value per share FNF Group (4)
Book value per share FNFV Group (4)
Other Data:
$ 3,371
$ 3,782
$ 4,015
$ 3,694
$ 3,387
1,110
9,151
759
1,490
344
4,467
1,049
14,521
987
1,487
344
6,898
696
604
14,043
13,868
981
1,583
344
6,588
2,086
1,621
715
6,073
1,815
10,573
983
1,636
—
5,535
$ 22.14
$ 17.53
$ 22.81
$ 21.21
$ 18.87
$ 15.54
$ 15.05
$ 16.31
Orders opened by direct title operations (in 000's)
Orders closed by direct title operations (in 000's)
1,942
1,428
2,184
1,575
2,092
1,472
1,914
1,319
2,181
1,708
Provision for title insurance claim losses as a percent of title
insurance premiums (5)
4.9%
3.3%
5.7%
6.2%
7.0%
Title-related revenue (6):
Percentage direct operations
Percentage agency operations
______________________________________
63.8%
36.2%
63.2%
36.8%
65.1%
34.9%
64.8%
35.2%
59.5%
40.5%
(1) Weighted average shares outstanding as of December 31, 2014 includes 25,920,078 FNF shares that were issued as part
of the acquisition of LPS on January 2, 2014 and 91,711,237 FNFV shares that were issued as part of the recapitalization
completed on June 30, 2014. Weighted average shares outstanding as of December 31, 2013 includes 19,837,500 shares
that were issued as part of an equity offering by FNF on October 31, 2013.
22
Table of Contents
(2) Investments as of December 31, 2017, 2016, 2015, 2014, and 2013, include securities pledged to secured trust deposits
of $367 million, $544 million, $608 million, $499 million, and $261 million, respectively.
(3) Cash and cash equivalents as of December 31, 2017, 2016, 2015, 2014, and 2013 include cash pledged to secured trust
deposits of $475 million, $331 million, $108 million, $136 million, and $339 million, respectively.
(4) Book value per share is calculated as equity at December 31 of each year presented divided by actual shares outstanding
at December 31 of each year presented.
(5) Includes the effects of the release of $97 million of excess reserves in the quarter ended December 31, 2016.
(6) Includes title insurance premiums and escrow, title-related and other fees.
Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data is as follows:
2017
Revenue
Earnings from continuing operations before income taxes, equity in
earnings of unconsolidated affiliates, and noncontrolling interest
Net earnings attributable to FNF Group common shareholders
Net earnings (loss) attributable to FNFV Group common shareholders
Basic earnings per share attributable to FNF Group common shareholders
Basic earnings (loss) per share attributable to FNFV Group common
shareholders
Diluted earnings per share attributable to FNF Group common
shareholders
Diluted earnings (loss) per share attributable to FNFV Group common
shareholders
Dividends paid per share FNF Group common stock
2016
Quarter Ended
March 31,
June 30,
September 30, December 31,
(Dollars in millions, except per share data)
$
1,643
$
2,059
$
1,986
$
1,975
128
71
1
0.26
0.02
0.25
0.01
0.25
274
175
121
0.65
1.83
0.63
1.81
0.25
242
170
(5)
0.63
220
246
(8)
0.90
(0.08)
(0.12)
0.62
0.88
(0.08)
0.25
(0.12)
0.27
Revenue
$
1,492
$
1,894
$
1,948
$
1,923
Earnings from continuing operations before income taxes, equity in
earnings of unconsolidated affiliates, and noncontrolling interest
Net earnings attributable to FNF Group common shareholders
Net earnings (loss) attributable to FNFV Group common shareholders
Basic earnings per share attributable to FNF Group common shareholders
Basic earnings (loss) per share attributable to FNFV Group common
shareholders
Diluted earnings per share attributable to FNF Group common
shareholders
Diluted earnings (loss) per share attributable to FNFV Group common
shareholders
Dividends paid per share FNF Group common stock
101
73
1
0.27
0.01
0.26
0.01
0.21
261
187
10
0.69
0.15
0.67
0.14
0.21
251
163
(7)
0.60
342
231
(8)
0.85
(0.11)
(0.12)
0.58
0.83
(0.11)
0.21
(0.12)
0.25
23
Table of Contents
As a result of the BK Distribution and FNFV Split-Off, the results of operations of Black Knight and FNFV were reclassified
to discontinued operations in the quarters ended September 30, 2017 and December 31, 2017, respectively. Accordingly, revenue
and earnings from continuing operations before income taxes, equity in earnings of unconsolidated affiliates, and noncontrolling
interest ("earnings from continuing operations") for the quarters ended March 31, 2016 through September 30, 2017 differ from
our previously reported amounts on our corresponding Form 10-Q or Form 10-K, as applicable.
A reconciliation of our selected quarterly financial data to our previously reported amounts is shown below:
2017
Revenue, continuing operations
Revenue, discontinued operations (1)
Revenue, as reported (2)
Earnings from continuing operations
Earnings from continuing operations, subsequently discontinued (1)
Earnings from continuing operations, as reported (2)
2016
Revenue, continuing operations
Revenue, discontinued operations (1)
Revenue, as reported (2)
Earnings from continuing operations
Earnings from continuing operations, subsequently discontinued (1)
Earnings from continuing operations, as reported (2)
______________________________________
Quarter Ended
March 31,
June 30,
September 30,
December 31,
(Dollars in millions, except per share data)
$ 1,643
$ 2,059
$
574
2,217
128
33
161
828
2,887
274
256
530
1,986
279
2,265
242
(21)
221
$ 1,492
$ 1,894
$
1,948
$
556
2,048
101
30
131
588
2,482
261
47
308
569
2,517
251
20
271
1,923
584
2,507
342
20
362
(1) Represents total revenue and earnings from Black Knight and FNFV.
(2) As previously reported on our corresponding Form 10-Q or Form 10-K.
24
Table of Contents
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto
and Selected Financial Data included elsewhere in this Form 10-K.
Overview
For a description of our business, including descriptions of segments, see the discussion under Business in Item 1 of Part I
of this Annual Report, which is incorporated by reference into this Part II, Item 7 of this Annual Report.
Recent Developments
On November 30, 2017, FGL Holdings (formerly known as CF Corporation), a Cayman Islands exempted company,
consummated its previously announced acquisition of Fidelity & Guaranty Life, a Delaware corporation (“FGL”), pursuant to the
Agreement and Plan of Merger, dated as of May 24, 2017, as amended (the “Merger Agreement”), by and among CF Corporation,
FGL, and certain subsidiaries of CF Corporation and FGL (collectively, the "FGL Merger"). In connection with the FGL Merger,
FNF received 13,732,000 common shares and 100,000 Series B Cumulative Preferred ('FG Preferred") shares in exchange for an
aggregate investment of $213 million. As of December 31, 2017 FNF owns 16,732,000 common shares, inclusive of 3,000,000
common shares of CF Corporation held prior to the FGL Merger, and 100,000 FG Preferred shares with an aggregate market value
of $246 million and we own approximately 8.5% of the outstanding common equity of FGL. The Company’s non-executive
Chairman, William P. Foley, II, is also the Co-Executive Chairman of FGL.
On November 17, 2017 we completed our previously announced split-off (the “FNFV Split-Off”) of our former wholly-owned
subsidiary Cannae Holdings, Inc. (“Cannae”) which consisted of the businesses, assets and liabilities formerly attributed to our
FNF Ventures ("FNFV") Group including Ceridian Holding, LLC, American Blue Ribbon Holdings, LLC and T-System Holding
LLC.. The FNFV Split-Off was accomplished by the Company's redemption (the “Redemption”) of all of the outstanding shares
of FNFV Group common stock, par value $0.0001 per share (“FNFV common stock”) for outstanding shares of common stock
of Cannae, par value $0.0001 per share (“Cannae common stock”), amounting to a redemption on a per share basis of each
outstanding share of FNFV common stock for one share of Cannae common stock, as of November 17, 2017. As a result of the
FNFV Split-Off, Cannae is a separate, publicly traded company (NYSE: CNNE). All of the Company’s core title insurance, real
estate, technology and mortgage related businesses, assets and liabilities currently attributed to the Company’s FNF Group common
stock that were not held by Cannae remain with the Company. As a result of the FNFV Split-Off, we have reclassified the assets
and liabilities divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of December 31,
2016. Further, the financial results of FNFV Group have been reclassified to discontinued operations for all periods presented in
our Consolidated Statements of Earnings. See Note G. Discontinued Operations to our Consolidated Financial Statements included
in Item 8 of Part II of this Annual Report for further details of the results of FNFV Group.
On November 17, 2017, Frank P. Willey resigned from our Board of Directors.
On September 29, 2017 we completed our tax-free distribution to FNF Group shareholders, of all 83.3 million shares of New
BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK
Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting
in the formation of a new publicly-traded holding company, Black Knight, Inc. ("New Black Knight"). Holders of FNF Group
common stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF Group
common stock held at the close of business on September 20, 2017, the record date for the BK Distribution. New Black Knight's
common stock is now listed under the symbol “BKI” on the New York Stock Exchange. The BK Distribution is expected to
generally be tax-free to FNF Group shareholders for U.S. federal income tax purposes, except to the extent of any cash received
in lieu of New Black Knight's fractional shares. As a result of the BK Distribution, we have reclassified the assets and liabilities
divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of December 31, 2016. Further,
the financial results of Black Knight have been reclassified to discontinued operations for all periods presented in our Consolidated
Statements of Earnings. See Note G. Discontinued Operations to our Consolidated Financial Statements included in Item 8 of
Part II of this Annual Report for further details of the results of Black Knight.
On August 31, 2017, FNF Group completed its acquisition of 90% of the membership interests of Title Guaranty of
Hawaii ("Title Guaranty") for $98 million. Title Guaranty was previously an unaffiliated agent of Chicago Title and will continue
to be closely aligned with Chicago Title as it formally becomes part of the FNF title company family. Founded in 1896, Title
Guaranty is the oldest title company in the State of Hawaii and is a leading provider of title and escrow services, with more than
300 employees in branches across the State of Hawaii providing title insurance and real estate closing services. See Note J
Acquisitions for further discussion.
On May 3, 2017, our Board of Directors adopted a resolution to increase the size of our Board of Directors to thirteen and
elected Heather H. Murren to serve on our Board of Directors. Ms. Murren will serve in Class I of our Board of Directors, and
her term will expire at the annual meeting of our shareholders to be held in 2018. In January 2018, Ms. Murren was appointed to
the Audit Committee of our Board.
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Table of Contents
Effective March 1, 2017, three of the Company’s title insurance underwriters, Fidelity National Title Insurance Company,
Chicago Title Insurance Company and Commonwealth Land Title Insurance Company, redomesticated from their respective former
states of domicile to Florida (the "Redomestication"). In conjunction with the Redomestication, the Company received a special
dividend of $280 million from these title insurance underwriters on March 15, 2017.
Business Trends and Conditions
Title
Our Title segment revenue is closely related to the level of real estate activity which includes sales, mortgage financing and
mortgage refinancing. Declines in the level of real estate activity or the average price of real estate sales will adversely affect our
title insurance revenues.
We have found that residential real estate activity is generally dependent on the following factors:
• mortgage interest rates;
• mortgage funding supply; and
•
strength of the United States economy, including employment levels.
As of January 20, 2018, the Mortgage Banker's Association ("MBA") estimated the size of the U.S. mortgage originations
market as shown in the following table for 2016 - 2020 in its "Mortgage Finance Forecast" (in trillions):
Purchase transactions
Refinance transactions
Total U.S. mortgage originations
2020
2019
2018
2017
2016
$
$
1.3
0.4
1.7
$
$
1.2
0.4
1.6
$
$
1.2
0.4
1.6
$
$
1.1
0.6
1.7
$
$
1.1
1.0
2.1
In 2016 and 2017, total originations were reflective of a generally improving residential real estate market driven by increasing
home prices and historically low mortgage interest rates. Mortgage interest rates increased slightly in 2017 from 2016, but remained
low compared to historical rates. Refinance transactions decreased in 2017 from the historically high levels experienced in recent
years through 2016. Existing home sales increased and there was a decline in total housing inventory. In 2018 and beyond, increasing
mortgage interest rates driven by gradual increases in the target federal funds rate are expected to adversely impact mortgage
originations. In a rising interest rate environment, refinance transactions are expected to continue to decline. The MBA predicts
overall mortgage originations in 2018 through 2019 will decrease compared to the 2016 and 2017 periods due to a decrease in
refinance transactions, offset by a slight increase in purchase transactions. Purchase transactions involve the issuance of both a
lender’s policy and an owner’s policy, resulting in higher title premiums, whereas refinance transactions only require a lender’s
policy, resulting in lower title premiums.
While projected increases in mortgage interest rates present a potential headwind for mortgage originations, other economic
indicators used to measure the health of the United States economy, including the unemployment rate and consumer confidence,
have improved in recent years. According to the United States Department of Labor's Bureau of Labor, the unemployment rate
has dropped from 7.4% in 2013 to 4.1% in December 2017. Additionally, the Conference Board's monthly Consumer Confidence
Index rose sharply at the end of 2016 and has remained at historical highs through 2017. We believe that improvements in both
of these economic indicators, among other indicators which support a generally improving United States economy, present potential
tailwinds for mortgage originations and support recent home price trends.
We cannot be certain how, if at all, the positive effects of a change in mix of purchase to refinance transactions and of a
generally improving United States economy and the negative effects of projected decreases in overall originations and increases
in interest rates will impact our future results of operations. We continually monitor origination trends and believe that, based on
our ability to produce industry leading operating margins through all economic cycles, we are well positioned to adjust our
operations for adverse changes in real estate activity.
Because commercial real estate transactions tend to be generally driven by supply and demand for commercial space and
occupancy rates in a particular area rather than by interest rate fluctuations, we believe that our commercial real estate title insurance
business is less dependent on the industry cycles discussed above than our residential real estate title business. Commercial real
estate transaction volume is also often linked to the availability of financing. For several years through 2015, we experienced
continual year-over-year increases in the fee per file of commercial transactions. In 2016, we experienced a slight decrease in the
volume and fee per file of commercial transactions as compared to 2015, but commercial markets still remained at historically
elevated levels. Through 2017, we have continued to see strong demand for commercial transactions and have experienced
historically high fees per file.
Historically, real estate transactions have produced seasonal revenue fluctuations in the real estate industry. The first calendar
quarter is typically the weakest quarter in terms of revenue due to the generally low volume of home sales during January and
February. The third calendar quarter is typically the strongest quarter in terms of revenue, primarily due to a higher volume of
26
Table of Contents
home sales in the summer months. The fourth quarter is typically also strong due to the desire of commercial entities to complete
transactions by year-end. We have noted short-term fluctuations through recent years in resale and refinance transactions as a
result of changes in interest rates.
Critical Accounting Estimates
The accounting estimates described below are those we consider critical in preparing our Consolidated Financial Statements.
Management is required to make estimates and assumptions that can affect the reported amounts of assets and liabilities and
disclosures with respect to contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported
amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. See Note A
Business and Summary of Significant Accounting Policies to our Consolidated Financial Statements included in Item 8 of Part II
of this Annual Report for additional description of the significant accounting policies that have been followed in preparing our
Consolidated Financial Statements.
Reserve for Title Claim Losses. Title companies issue two types of policies, owner's and lender's policies, since both the new
owner and the lender in real estate transactions want to know that their interest in the property is insured against certain title defects
outlined in the policy. An owner's policy insures the buyer against such defects for as long as he or she owns the property (as well
as against warranty claims arising out of the sale of the property by such owner). A lender's policy insures the priority of the
lender's security interest over the claims that other parties may have in the property. The maximum amount of liability under a
title insurance policy is generally the face amount of the policy plus the cost of defending the insured's title against an adverse
claim; however, occasionally we do incur losses in excess of policy limits. While most non-title forms of insurance, including
property and casualty, provide for the assumption of risk of loss arising out of unforeseen future events, title insurance serves to
protect the policyholder from risk of loss for events that predate the issuance of the policy.
Unlike many other forms of insurance, title insurance requires only a one-time premium for continuous coverage until another
policy is warranted due to changes in property circumstances arising from refinance, resale, additional liens, or other events. Unless
we issue the subsequent policy, we receive no notice that our exposure under our policy has ended and, as a result, we are unable
to track the actual terminations of our exposures.
Our reserve for title claim losses includes reserves for known claims as well as for losses that have been incurred but not yet
reported to us (“IBNR”), net of recoupments. We reserve for each known claim based on our review of the estimated amount of
the claim and the costs required to settle the claim. Reserves for IBNR claims are estimates that are established at the time the
premium revenue is recognized and are based upon historical experience and other factors, including industry trends, claim loss
history, legal environment, geographic considerations, and the types of policies written. We also reserve for losses arising from
closing and disbursement functions due to fraud or operational error.
The table below summarizes our reserves for known claims and incurred but not reported claims related to title insurance:
Known claims
IBNR
Total Reserve for Title Claim Losses
December 31, 2017
%
December 31, 2016
%
$
$
159
1,331
1,490
(in millions)
10.7% $
89.3
100.0% $
166
1,321
1,487
11.2%
88.8
100.0%
Although claims against title insurance policies can be reported relatively soon after the policy has been issued, claims may
be reported many years later. Historically, approximately 60% of claims are paid within approximately five years of the policy
being written. By their nature, claims are often complex, vary greatly in dollar amounts and are affected by economic and market
conditions, as well as the legal environment existing at the time of settlement of the claims. Estimating future title loss payments
is difficult because of the complex nature of title claims, the long periods of time over which claims are paid, significantly varying
dollar amounts of individual claims and other factors.
Our process for recording our reserves for title claim losses begins with analysis of our loss provision rate. We forecast ultimate
losses for each policy year based upon historical policy year loss emergence and development patterns and adjust these to reflect
policy year and policy type differences which affect the timing, frequency and severity of claims. We also use a technique that
relies on historical loss emergence and on a premium-based exposure measurement. The latter technique is particularly applicable
to the most recent policy years, which have few reported claims relative to an expected ultimate claim volume. After considering
historical claim losses, reporting patterns and current market information, and analyzing quantitative and qualitative data provided
by our legal, claims and underwriting departments, we determine a loss provision rate, which is recorded as a percentage of current
title premiums. This loss provision rate is set to provide for losses on current year policies, but due to development of prior years
and our long claim duration, it periodically includes amounts of estimated adverse or positive development on prior years' policies.
Any significant adjustments to strengthen or release loss reserves resulting from the comparison with our actuarial analysis are
made in addition to this loss provision rate. At each quarter end, our recorded reserve for claim losses is initially the result of
27
Table of Contents
taking the prior recorded reserve for claim losses, adding the current provision and subtracting actual paid claims, resulting in an
amount that management then compares to the range of reasonable estimates provided by the actuarial calculation. We recorded
our loss provision rate at 5.0% for the nine months ended September 30, 2017 and at 4.5% for the three months ended December 31,
2017. Our average loss provision rate was 4.9% for the year-ended December 31, 2017. Our average loss provision rate was 3.3%
and 5.7% for the years ended December 31, 2016 and 2015, respectively. Our loss provision rate for the year ended December
31, 2016 also included a $97 million adjustment to reduce our prior claim loss reserves. Of such annual loss provision rates, 4.5%,
5.0% and 5.2% related to losses on policies written in the current year, and the remainder related to developments on prior year
policies. The decrease in the loss provision rate during 2015 through 2017, excluding a one-time adjustment included in the 2016
period, was primarily driven by continued positive development in the more recent policy years. In 2017 and 2015, adverse
development of prior year losses of $19 million or 0.4% of 2017 premium and $22 million or 0.5% of 2015 premium was accounted
for in the provision rate. In 2016, favorable development of prior year losses of $79 million or 1.7% of 2016 premium was accounted
for in the provision rate.
Due to the uncertainty inherent in the process and due to the judgment used by both management and our actuary, our ultimate
liability may be greater or less than our carried reserves. If the recorded amount is within the actuarial range but not at the central
estimate, we assess the position within the actuarial range by analysis of other factors in order to determine that the recorded
amount is our best estimate. These factors, which are both qualitative and quantitative, can change from period to period, and
include items such as current trends in the real estate industry (which we can assess, but for which there is a time lag in the
development of the data), any adjustments from the actuarial estimates needed for the effects of unusually large or small claims,
improvements in our claims management processes, and other cost saving measures. If the recorded amount is not within a
reasonable range of our actuary's central estimate, we may have to record a charge or credit and reassess the loss provision rate
on a go forward basis. We will continue to reassess the provision to be recorded in future periods consistent with this methodology.
During the quarter ended December 31, 2016, we released excess title reserves of $97 million. The release of excess reserves
was due to analysis of historical ultimate loss ratios, the reduced volatility of development of those historical ultimate loss ratios
and lower policy year loss ratios in recent years. Due to the reduction in volatility of prior year ultimate loss ratios experienced
at the time, we felt that actual results were more in line with our actuarial analysis and released excess reserves to bring our recorded
position in line with actuarial projections.
The table below presents our title insurance loss development experience for the past three years:
Beginning balance
Change in reinsurance recoverable
Claims loss provision related to:
Current year
Prior years (1)
Total title claims loss provision
Claims paid, net of recoupments related to:
Current year
Prior years
Total title claims paid, net of recoupments
Ending balance
Title premiums
_____________________
2017
2016
2015
(In millions)
$
$
1,487
(4)
1,583
(8)
219
19
238
236
(79)
157
$
1,621
1
224
22
246
(8)
(223)
(231)
1,490
4,893
$
$
(10)
(235)
(245)
1,487
4,723
$
$
(7)
(278)
(285)
1,583
4,286
$
$
(1) Reserve of $97 million released in 2016 related to improving development on prior year claim trends.
Provision for claim losses as a percentage of title insurance premiums:
Current year
Prior years
Total provision
2017
2016
2015
4.5%
0.4
4.9%
5.0%
(1.7)
3.3%
5.2%
0.5
5.7%
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Table of Contents
Actual claims payments consist of loss payments and claims management expenses offset by recoupments and were as follows
(in millions):
Year ended December 31, 2017
Year ended December 31, 2016
Year ended December 31, 2015
Loss
Payments
Claims
Management
Expenses
Recoupments
Net Loss
Payments
$
$
145
179
211
$
121
121
137
(35) $
(55)
(63)
231
245
285
As of December 31, 2017 and 2016, our recorded reserves were $1,490 million and $1,487 million, respectively, which we
determined were reasonable and represented our best estimate and these recorded amounts were within a reasonable range of the
central estimates provided by our actuaries. Our recorded reserves were $30 million above the mid-point of the provided range
of our actuarial estimates of $1.3 billion to $1.7 billion as of December 31, 2017. Our recorded reserves were equal to the mid-
point of the range of our actuarial estimates as of December 31, 2016.
During 2017 and 2016, payment patterns were consistent with our actuaries' and management's expectations. Also, compared
to prior years we have seen a leveling off of the ultimate loss ratios in more mature policy years, particularly 2005-2008. While
we still see claims opened on these policy years, the proportion of our claims inventory represented by these policy years has
continued to decrease. Additionally, we continued to see positive development relating to the 2009 through 2016 policy years,
which we believe is indicative of more stringent underwriting standards by us and the lending industry. Further, we have seen
significant positive development in residential owner's policies due to increased payments on residential lender's policies which
inherently limit the potential loss on the related owner's policy to the differential in coverage amount between the amount insured
under the owner's policy and the amount paid under the residential lender's policy. Also, any residential lender's policy claim paid
relating to a property that is in foreclosure negates any potential loss under an owner's policy previously issued on the property
as the owner has no equity in the property. Our ending open claim inventory decreased from approximately 15,000 claims at
December 31, 2016 to approximately 14,000 claims at December 31, 2017. If actual claims loss development varies from what
is currently expected and is not offset by other factors, it is possible that our recorded reserves may fall outside a reasonable range
of our actuaries' central estimate, which may require additional reserve adjustments in future periods.
An approximate $49 million increase (decrease) in our annualized provision for title claim losses would occur if our loss
provision rate were 1% higher (lower), based on 2017 title premiums of $4,893 million. A 10% increase (decrease) in our reserve
for title claim losses, as of December 31, 2017, would result in an increase (decrease) in our provision for title claim losses of
approximately $149 million.
Valuation of Investments. We regularly review our investment portfolio for factors that may indicate that a decline in fair
value of an investment is other-than-temporary. Some factors considered in evaluating whether or not a decline in fair value is
other-than-temporary include: (i) our intent and need to sell the investment prior to a period of time sufficient to allow for a recovery
in value; (ii) the duration and extent to which the fair value has been less than cost; and (iii) the financial condition and prospects
of the issuer. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future
periods resulting in a realized loss. Investments are selected for analysis whenever an unrealized loss is greater than a certain
threshold that we determine based on the size of our portfolio or by using other qualitative factors. Fixed maturity investments
that have unrealized losses caused by interest rate movements are not at risk as we do not anticipate having the need or intent to
sell prior to maturity. Unrealized losses on investments in equity securities, preferred stock and fixed maturity instruments that
are susceptible to credit related declines are evaluated based on the aforementioned factors. Currently available market data is
considered and estimates are made as to the duration and prospects for recovery, and the intent or ability to retain the investment
until such recovery takes place. These estimates are revisited quarterly and any material degradation in the prospect for recovery
will be considered in the other-than-temporary impairment analysis. We believe that our monitoring and analysis has provided for
the proper recognition of other-than-temporary impairments over the past three-year period. Any change in estimate in this area
will have an impact on the results of operations of the period in which a charge is taken.
The fair value hierarchy established by the standard on fair value includes three levels, which are based on the priority of the
inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical
assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial
instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to
the fair value measurement of the instrument.
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In accordance with the standard on fair value, our financial assets and liabilities that are recorded in the Consolidated Balance
Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities
in an active market that we have the ability to access.
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model
inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.
The following table presents our fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis
as of December 31, 2017 and 2016, respectively:
December 31, 2017
Level 1
Level 2
Level 3
Total
(In millions)
Assets:
Fixed-maturity securities available for sale:
U.S. government and agencies
State and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total assets
Assets:
Fixed-maturity securities available for sale:
U.S. government and agencies
State and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total assets
$
— $
—
—
—
—
23
681
704
$
195
391
1,117
57
56
296
—
$
— $
—
—
—
—
—
—
195
391
1,117
57
56
319
681
$
2,112
$
— $
2,816
December 31, 2016
Level 1
Level 2
Level 3
Total
(In millions)
$
— $
—
—
—
—
32
386
418
$
117
615
1,508
109
58
283
—
$
— $
—
—
—
—
—
—
117
615
1,508
109
58
315
386
$
2,690
$
— $
3,108
Our Level 2 fair value measures for preferred stock and fixed-maturity securities available for sale are provided by a third-
party pricing service. We utilize one firm for our preferred stock and our bond portfolios. The pricing service is a leading global
provider of financial market data, analytics and related services to financial institutions. We rely on one price for each instrument
to determine the carrying amount of the assets on our balance sheet. The inputs utilized in these pricing methodologies include
observable measures such as benchmark yields, reported trades, broker dealer quotes, issuer spreads, two sided markets, benchmark
securities, bids, offers and reference data including market research publications. We review the pricing methodologies for all of
our Level 2 securities by obtaining an understanding of the valuation models and assumptions used by the third-party as well as
independently comparing the resulting prices to other publicly available measures of fair value and internally developed models.
The pricing methodologies used by the relevant third party pricing services are as follows:
• U.S. government and agencies: These securities are valued based on data obtained for similar securities in active markets
and from inter-dealer brokers.
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•
State and political subdivisions: These securities are valued based on data obtained for similar securities in active markets
and from inter-dealer brokers. Factors considered include relevant trade information, dealer quotes and other relevant
market data.
• Corporate debt securities: These securities are valued based on dealer quotes and related market trading activity. Factors
considered include the bond's yield, its terms and conditions, or any other feature which may influence its risk and thus
marketability, as well as relative credit information and relevant sector news.
Foreign government bonds: These securities are valued based on a discounted cash flow model incorporating observable
market inputs such as available broker quotes and yields of comparable securities.
•
• Mortgage-backed/asset-backed securities: These securities are comprised of commercial mortgage-backed securities,
agency mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities. They are valued
based on available trade information, dealer quotes, cash flows, relevant indices and market data for similar assets in
active markets.
Preferred stock: Preferred stocks are valued by calculating the appropriate spread over a comparable US Treasury security.
Inputs include benchmark quotes and other relevant market data.
•
As of December 31, 2017 and 2016 we held no material assets nor liabilities measured at fair value using Level 3 inputs.
During the years ended December 31, 2017, 2016 and 2015, we incurred impairment charges relating to investments that
were determined to be other-than-temporarily impaired of $1 million, $19 million, and $14 million, respectively. Refer to Note
D. Investments to our Consolidated Financial Statements included in Item 8, Part II of this Report for further discussion.
Included in our Investments as of December 31, 2017 are various holdings in foreign securities as follows (in millions):
Available for sale securities:
Australia
Belgium
Cayman Islands
Canada
China
France
Germany
Ireland
Japan
Norway
New Zealand
Switzerland
United Kingdom
Total
Carrying
Value
Cost Basis
Unrealized
Gains
Unrealized
Losses
Market
Value
(In millions)
$
$
22
14
171
61
6
9
50
28
49
1
17
6
24
22
14
167
62
6
9
50
28
49
1
17
6
24
$
458
$
455
$
— $
— $
—
4
1
—
—
—
—
—
—
—
—
—
5
—
—
(2)
—
—
—
—
—
—
—
—
—
(2) $
$
22
14
171
61
6
9
50
28
49
1
17
6
24
458
We have reviewed all of these securities as of December 31, 2017 and do not believe that there is a risk of significant credit
loss as these securities are in a gross unrealized gain position of $5 million and a gross unrealized loss position of $2 million. We
held no European sovereign debt at December 31, 2017.
Goodwill. We have made acquisitions that have resulted in a significant amount of goodwill. As of December 31, 2017 and
2016, goodwill aggregated was $2,746 million and $2,555 million, respectively. The majority of our goodwill as of December 31,
2017 relates to goodwill recorded in connection with the Chicago Title merger in 2000 and our acquisition of ServiceLink in 2014.
Refer to Note F Goodwill to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for a
summary of recent changes in our Goodwill balance.
In evaluating the recoverability of goodwill, we perform a qualitative analysis to determine whether it is more likely than not
that the fair value of our recorded goodwill exceeds its carrying value. Based on the results of this analysis, an annual goodwill
impairment test may be completed based on an analysis of the discounted future cash flows generated by the underlying assets.
The process of determining whether or not goodwill is impaired or recoverable relies on projections of future cash flows, operating
results and market conditions. Future cash flow estimates are based partly on projections of market conditions such as the volume
and mix of refinance and purchase transactions and interest rates, which are beyond our control and are likely to fluctuate. While
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we believe that our estimates of future cash flows are reasonable, these estimates are not guarantees of future performance and
are subject to risks and uncertainties that may cause actual results to differ from what is assumed in our impairment tests. Such
analyses are particularly sensitive to changes in estimates of future cash flows and discount rates. Changes to these estimates might
result in material changes in fair value and determination of the recoverability of goodwill, which may result in charges against
earnings and a reduction in the carrying value of our goodwill in the future.We have completed our annual goodwill impairment
analysis in each of the past three years and as a result, no impairment charges were recorded to goodwill in 2017, 2016, or 2015.
As of December 31, 2017, we have determined that our goodwill has a fair value which substantially exceeds its carrying value.
Other Intangible Assets. We have other intangible assets, not including goodwill, which consist primarily of customer
relationships and contracts, trademarks and tradenames, and computer software, which are generally recorded in connection with
acquisitions at their fair value. Intangible assets with estimable lives are amortized over their respective estimated useful lives to
their estimated residual values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. In general, customer relationships are amortized over their estimated useful lives using an
accelerated method which takes into consideration expected customer attrition rates. Contractual relationships are generally
amortized over their contractual life. Trademarks and tradenames are generally amortized over 10 years. Capitalized software
includes the fair value of software acquired in business combinations, purchased software and capitalized software development
costs. Purchased software is recorded at cost and amortized using the straight-line method over its estimated useful life. Software
acquired in business combinations is recorded at its fair value and amortized using straight-line or accelerated methods over its
estimated useful life, ranging from 5 to 10 years. For internal-use computer software products, internal and external costs incurred
during the preliminary project stage are expensed as they are incurred. Internal and external costs incurred during the application
development stage are capitalized and amortized on a product by product basis commencing on the date the software is ready for
its intended use. We do not capitalize any costs once the software is ready for its intended use.
We recorded $1 million in impairment expense to other intangible assets during the years ended December 31, 2017 and 2016.
The impairment in 2017 was for computer software at ServiceLink. The impairment in 2016 was for customer relationships and
tradenames at our real estate subsidiaries in our Corporate and Other segment. We recorded no impairment expense related to
other intangible assets in the year ended December 31, 2015.
Title Revenue Recognition. Our direct title insurance premiums and escrow, title-related and other fees are recognized as
revenue at the time of closing of the related transaction as the earnings process is then considered complete.
Premium revenues from agency operations and agency commissions include an accrual based on estimates using historical
information of the volume of transactions that have closed in a particular period for which premiums have not yet been reported
to us. The accrual for agency premiums is necessary because of the lag between the closing of these transactions and the reporting
of these policies to us by the agent. Historically, the time lag between the closing of these transactions by our agents and the
reporting of these policies, or premiums, to us has been up to 15 months, with 84 - 88% reported within three months following
closing, an additional 9 - 12% reported within the next three months and the remainder within seven to fifteen months. In addition
to accruing these earned but unreported agency premiums, we also accrue agent commission expense, which was 76.7% of agent
premiums earned in 2017, 76.1% of agent premiums earned in 2016, and 76.0% of agent premiums earned in 2015. We also record
a provision for claim losses at the provision rate at the time we record the accrual for the premiums, which averaged 4.9% for
2017, 5.4%, excluding the release of excess reserves relating to prior years of $97 million, for 2016, and 5.7% for 2015 and accruals
for premium taxes and other expenses relating to our premium accrual. The resulting impact to pretax earnings in any period is
approximately 11% or less of the accrued premium amount. The impact of the change in the accrual for agency premiums and
related expenses on our pretax earnings was an increase of $1 million for the year ended December 31, 2017, an increase of $4
million for the year ended 2016 and a decrease of $5 million for the year ended 2015. The amount due from our agents relating
to this accrual, i.e., the agent premium less their contractual retained commission, was approximately $55 million and $53 million
at December 31, 2017 and 2016, respectively, which represents agency premiums of approximately $280 million and $267 million
at December 31, 2017 and 2016, respectively, and agent commissions of $225 million and $214 million at December 31, 2017
and 2016, respectively. We may have changes in our accrual for agency revenue in the future if additional relevant information
becomes available.
Accounting for Income Taxes. As part of the process of preparing the consolidated financial statements, we are required to
determine income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax expense
together with assessing temporary differences resulting from differing recognition of items for income tax and accounting purposes.
These differences result in deferred income tax assets and liabilities, which are included within the Consolidated Balance Sheets.
We must then assess the likelihood that deferred income tax assets will be recovered from future taxable income and, to the extent
we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase
this allowance in a period, we must reflect this increase as expense within Income tax expense in the Consolidated Statement of
Earnings. Determination of income tax expense requires estimates and can involve complex issues that may require an extended
period to resolve. Further, the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary
from period to period. We believe that our tax positions comply with applicable tax law and that we adequately provide for any
known tax contingencies. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are
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reasonable. Final determination of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of
limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax provisions. The
outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the
period that determination is made.
Refer to Note K Income Taxes to our Consolidated Financial Statements in Item 8 of Part II of this Annual Report for discussion
of the enactment of the Tax Cuts and Jobs Act ("Tax Reform") in December 2017 and the related impact on our accounting for
income taxes.
Certain Factors Affecting Comparability
Year ended December 31, 2017. As a result of the BK Distribution and the FNFV Split-Off, we have reclassified the results
of operations of Black Knight and FNFV to discontinued operations for all periods presented. See discussion under 'Recent
Developments' above and Note G Discontinued Operations to our Consolidated Financial Statements in Item 8 of Part II of this
Annual Report, which is incorporated by reference into this Part II, Item 7 of this Annual Report for further information on the
results of Black Knight and FNFV.
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Results of Operations
Consolidated Results of Operations
Net earnings. The following table presents certain financial data for the years indicated:
Revenue:
Direct title insurance premiums
Agency title insurance premiums
Escrow, title-related and other fees
Interest and investment income
Realized gains and losses, net
Total revenue
Expenses:
Personnel costs
Agent commissions
Other operating expenses
Depreciation and amortization
Provision for title claim losses
Interest expense
Total expenses
Earnings from continuing operations before income taxes and equity in earnings of
unconsolidated affiliates
Income tax expense
Equity in earnings of unconsolidated affiliates
Net earnings from continuing operations
Revenues.
Year Ended December 31,
2017
2016
2015
(Dollars in millions)
$
$
2,170
2,723
2,637
131
2
7,663
2,460
2,089
1,781
183
238
48
6,799
864
235
10
639
$
$
$
2,097
2,626
2,416
126
(8)
7,257
2,275
1,998
1,648
160
157
64
6,302
955
347
14
622
$
2,009
2,277
2,246
121
11
6,664
2,137
1,731
1,557
150
246
73
5,894
770
274
5
501
Total revenue in 2017 increased $406 million compared to 2016, primarily due to an increase in fee per file offset by a decrease
in closed order volumes in our direct title business and an increase in agent remittances. Total revenue in 2016 increased $593
million compared to 2015, primarily due to an increase in closed order volumes in our direct title business and increases in agent
remittances.
Total net earnings from continuing operations increased $17 million in the year ended December 31, 2017, compared to
the 2016 period and increased $121 million in the year ended December 31, 2016, compared to the 2015 period.
The change in revenue and net earnings is discussed in further detail at the segment level below.
Interest and investment income levels are primarily a function of securities markets, interest rates and the amount of cash
available for investment. Interest and investment income was $131 million, $126 million, and $121 million for the years ended
December 31, 2017, 2016, and 2015, respectively. The increase in 2017 as compared to 2016 is primarily attributable to increased
yield on our cash and cash equivalents and short term investments and an increase in other investment income, offset by a decrease
in income from our fixed maturity holdings resulting from a decrease in average invested assets. The increase in 2016 as compared
to 2015 is primarily attributable to increased yield on our fixed maturity holdings and increased dividend income on our equity
and preferred securities, offset by a decrease in average invested assets. The effective return on average invested assets, excluding
realized gains and losses, was 4.2%, 3.6%, and 3.4% for the years ended December 31, 2017, 2016, and 2015, respectively.
Net realized gains (losses) totaled $2 million, $(8) million, and $11 million for the years ended December 31, 2017, 2016,
and 2015, respectively. Net realized gains for the year ended December 31, 2017 includes a gain of $9 million on the sale of an
other long term investment and a gain of $2 million related to the sale of fixed assets, offset by losses of $6 million on redemptions
of convertible debt, net losses on sales and impairment of available for sale investments of $1 million, and $2 million of other
miscellaneous losses. The net realized losses for the year ended December 31, 2016 includes $12 million for net gains on sales of
available for sale investments, a gain of $2 million related to the favorable outcome of litigation, and $1 million for other individually
insignificant gains. The gains were more than offset by losses of $13 million on impairments of available for sale investments, $3
million for impairment of an equity method investment, $4 million for losses on disposal of fixed assets, a $1 million loss related
to the impairments of other intangible assets, and $2 million in realized losses related to other individually insignificant items.
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The net realized gain for the year ended December 31, 2015 includes a net realized gain of $1 million on our investment portfolio,
net realized gains of $16 million due to favorable settlement of litigation, and $6 million of miscellaneous other net realized losses.
Expenses.
Our operating expenses consist primarily of personnel costs; other operating expenses, which in our title business are incurred
as orders are received and processed; and agent commissions, which are incurred as revenue is recognized. Title insurance premiums,
escrow and title-related fees are generally recognized as income at the time the underlying transaction closes or other service is
provided. Direct title operations revenue often lags approximately 45-60 days behind expenses and therefore gross margins may
fluctuate. The changes in the market environment, mix of business between direct and agency operations and the contributions
from our various business units have historically impacted margins and net earnings. We have implemented programs and have
taken necessary actions to maintain expense levels consistent with revenue streams. However, a short time lag exists in reducing
variable costs and certain fixed costs are incurred regardless of revenue levels.
Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and
are one of our most significant operating expenses.
Agent commissions represent the portion of premiums retained by our third-party agents pursuant to the terms of their respective
agency contracts.
Other operating expenses consist primarily of facilities expenses, title plant maintenance, premium taxes (which insurance
underwriters are required to pay on title premiums in lieu of franchise and other state taxes), appraisal fees and other cost of sales
on ServiceLink product offerings and other title-related products, postage and courier services, computer services, professional
services, travel expenses, general insurance, and bad debt expense on our trade and notes receivable.
The provision for title claim losses includes an estimate of anticipated title and title-related claims, and escrow losses.
The change in expenses is discussed in further detail at the segment level below.
Income tax expense was $235 million, $347 million, and $274 million for the years ended December 31, 2017, 2016, and
2015, respectively. Income tax expense as a percentage of earnings from continuing operations before income taxes for the years
ended December 31, 2017, 2016, and 2015 was 27.2%, 36.3%, and 35.6%, respectively. The decrease in the effective tax rate in
2017 from 2016 is primarily attributable to Tax Reform as described in Note K Income Taxes to our Consolidated Financial
Statements included in Item 8 of of Part II of this Annual Report. The increase in the effective tax rate in 2016 from 2015 is
primarily related to lower tax exempt interest income, tax credits and an increase in non-deductible expenses. The fluctuation in
income tax expense as a percentage of earnings from continuing operations before income taxes is attributable to our estimate of
ultimate income tax liability and changes in the characteristics of net earnings year to year, such as the weighting of operating
income versus investment income.
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Segment Results of Operations
Title
The following table presents the results of our Title segment for the years indicated:
Revenues:
Direct title insurance premiums
Agency title insurance premiums
Escrow, title-related and other fees
Interest and investment income
Realized gains and losses, net
Total revenue
Expenses:
Personnel costs
Other operating expenses
Agent commissions
Depreciation and amortization
Provision for title claim losses
Total expenses
Earnings before income taxes
Orders opened by direct title operations (in 000's)
Orders closed by direct title operations (in 000's)
Year Ended December 31,
2017
2016
2015
(In millions)
$
2,170
$
2,097
$
2,723
2,181
131
6
7,211
2,366
1,404
2,089
159
238
6,256
2,626
2,128
127
—
6,978
2,214
1,436
1,998
148
157
5,953
$
955
$
1,025
$
1,942
1,428
2,184
1,575
2,009
2,277
2,005
123
14
6,428
2,090
1,381
1,731
144
246
5,592
836
2,092
1,472
Total revenues in 2017 increased $233 million or 3% compared to 2016. Total revenues in 2016 increased $550 million or
9% compared to 2015. The increase in the year ended December 31, 2017 is primarily attributable to increases in both our direct
and agency title insurance premiums and growth and acquisitions in our Corporate and Other segment.The increase in the year
ended December 31, 2016 is primarily attributable to improvements in the overall real estate markets driving increases in closed
order volumes, increased remittances from agents, and revenue associated with acquisitions.
The following table presents the percentages of title insurance premiums generated by our direct and agency operations:
Year Ended December 31,
2017
2016
2015
Amount
%
Amount
%
Amount
%
(Dollars in millions)
Title premiums from direct operations
Title premiums from agency operations
Total title premiums
$
$
2,170
2,723
4,893
44.3% $
55.7
100.0% $
2,097
2,626
4,723
44.4% $
55.6
100.0% $
2,009
2,277
4,286
46.9%
53.1
100.0%
Title premiums increased 4% in the year ended December 31, 2017 as compared to the 2016 period. The increase was a result
of an increase in premiums from direct operations of $73 million, or 3% and an increase in premiums from agency operations
of $97 million, or 4%. Title premiums increased 10% in the year ended December 31, 2016 as compared to the 2015 period. The
increase was the result of an increase in premiums from direct operations of $88 million, or 4%, and an increase in premiums from
agency operations of $349 million, or 15%.
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The following table presents the percentages of opened and closed title insurance orders generated by purchase and refinance
transactions by our direct operations:
Opened title insurance orders from purchase transactions (1)
Opened title insurance orders from refinance transactions (1)
Closed title insurance orders from purchase transactions (1)
Closed title insurance orders from refinance transactions (1)
_______________________________________
Year ended December 31,
2017
2016
2015
63.1%
36.9
53.5%
46.5
54.0%
46.0
100.0%
100.0%
100.0%
62.8%
37.2
100.0%
54.1%
45.9
100.0%
54.5%
45.5
100.0%
(1)
Percentages exclude consideration of an immaterial number of non-purchase and non-refinance orders.
Title premiums from direct operations increased in 2017, primarily due to an increase in the average fee per file, offset by a
decrease in closed order volumes as compared to the prior year. Closed order volumes were 1,428,000 in the year
ended December 31, 2017 compared with 1,575,000 in the year ended December 31, 2016. This represented a decrease of 9%.
The decrease in closed order volumes was primarily related to a decrease in refinance transactions, offset by an increase in purchase
transactions in the year ended December 31, 2017 compared to the 2016 period.
The average fee per file in our direct operations was $2,346 and $2,065 in the years ended December 31, 2017 and 2016,
respectively. The increase in average fee per file year over year reflects an increase in the average fee per file in both commercial
and residential transactions. The increase in average fee per file from residential transactions is driven by an increase in purchase
transactions and decrease in refinance transactions. The residential fee per file tends to change as the mix of refinance and purchase
transactions changes, because purchase transactions involve the issuance of both a lender’s policy and an owner’s policy, resulting
in higher fees, whereas refinance transactions only require a lender’s policy, resulting in lower fees.
The increase in title premiums from agency operations is primarily the result of an increase in remitted agency premiums that
reflects an improving residential purchase environment in many markets throughout the country. The increase also reflects a
concerted effort by management to increase remittances with existing agents as well as cultivate new relationships with potential
new agents while reducing unprofitable agency relationships.
Escrow, title-related and other fees increased by $53 million, or 2%, in the year ended December 31, 2017 from the 2016
period. Escrow fees, which are more directly related to our direct operations, increased $21 million, or 3%, in the year
ended December 31, 2017 compared to the 2016 period. The increase is primarily driven by the related increase in direct title
premiums. Other fees in the Title segment, excluding escrow fees, increased $30 million, or 2%, in the year ended December 31,
2017 compared to the 2016 period. The increase in other fees was primarily attributable to revenue growth associated with our
home warranty businesses and increased servicing revenue at ServiceLink, offset by decreases at certain other ServiceLink
subsidiaries. Escrow, title related and other fees increased by $123 million, or 6%, in the year ended December 31, 2016 from the
2015 period. Escrow fees, which are more directly related to our direct operations, increased $102 million, or 15%, in the year
ended December 31, 2016 compared to the 2015 period. The increase is consistent with the increase in direct title premiums. Other
fees in the Title segment, excluding escrow fees, increased $21 million, or 1%, in the year ended December 31, 2016 compared
to the 2015 period. The increase in other fees was primarily attributable to revenue growth associated with our home warranty
businesses as well as acquisitions.
Interest and investment income levels are primarily a function of securities markets, interest rates and the amount of cash
available for investment. Interest and investment income increased $4 million in the year ended December 31, 2017 compared to
the 2016 period and increased $4 million in the year ended December 31, 2016 compared to the 2015 period.
Personnel costs include base salaries, commissions, benefits, stock-based compensation and bonuses paid to employees, and
are one of our most significant operating expenses. The $152 million, or 7% increase in the year ended December 31,
2017 compared to the 2016 period is directionally consistent with and primarily attributable to the increase in revenue. The $124
million, or 6% increase in the year ended December 31, 2016 compared to the 2015 period is primarily related to additional expense
associated with the increased order volumes and acquisitions in 2016. Personnel costs as a percentage of total revenues from direct
title premiums and escrow, title-related and other fees was 54% and 52% for years ended December 31, 2017 and 2016,
respectively. The increase in the 2017 period is primarily attributable to the increase in order volumes from purchase transactions,
acquisitions, and the realignment of Property Insight in January 2017 which resulted in increased personnel costs offset by reduced
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other operating expenses. Average employee count in the Title segment was 23,245 and 21,999 in the years ended December 31,
2017 and 2016, respectively.
Other operating expenses decreased $32 million, or 2%, in the year ended December 31, 2017 from the corresponding 2016
period. The decrease in the 2017 period is primarily attributable to the realignment of Property Insight in January 2017 and a
reduction in operating expenses at certain ServiceLink subsidiaries. Other operating expenses increased $55 million, or 4% in the
year ended December 31, 2016 from the corresponding 2015 period. Other operating expenses increased consistently with the
increase in direct title premiums and escrow, title-related and other fee income offset by other miscellaneous cost reductions.
Agent commissions represent the portion of premiums retained by agents pursuant to the terms of their respective agency
contracts. Agent commissions and the resulting percentage of agent premiums we retain vary according to regional differences in
real estate closing practices and state regulations.
The following table illustrates the relationship of agent title premiums and agent commissions:
Year Ended December 31,
2017
2016
2015
Amount
%
Amount
%
Amount
%
(Dollars in millions)
Agent title premiums
Agent commissions
Net retained agent premiums
$
$
2,723
2,089
634
100.0% $
76.7
23.3% $
2,626
1,998
628
100.0% $
76.1
23.9% $
2,277
1,731
546
100.0%
76.0
24.0%
Net margin from agency title insurance premiums retained as a percentage of total agency premiums in the year ended
December 31, 2017 remained relatively consistent with the 2016 and 2015 periods, with the slight decrease attributable to new
agents signed in the current year.
The provision for title claim losses includes an estimate of anticipated title and title-related claims and escrow losses. The
estimate of anticipated title and title-related claims is accrued as a percentage of title premium revenue based on our historical
loss experience and other relevant factors. Any significant adjustments to strengthen or release loss reserves resulting from the
comparison with our actuarial analysis are made in addition to this loss provision rate. After considering historical claim losses,
reporting patterns and current market information, and analyzing quantitative and qualitative data provided by our legal, claims
and underwriting departments, we determine a loss provision rate, which is recorded as a percentage of current title premiums.
This loss provision rate is set to provide for losses on current year policies, but due to development of prior years and our long
claim duration, it periodically includes amounts of estimated adverse or positive development on prior years' policies. Effective
October 1, 2017, we revised our loss provision rate to 4.5% from 5%. Effective October 1, 2016, we revised our loss provision
rate to 5.0% from 5.5%. Effective July 1, 2015, we revised our loss provision rate to 5.5% from 6%. All revisions were attributable
to favorable development on more recent policy year claims.
The claim loss provision for title insurance was $238 million, $157 million, and $246 million for the years ended December 31,
2017, 2016, and 2015, respectively. These amounts reflected average claim loss provision rates of 4.9% for 2017, 3.3% for 2016,
and 5.7% of title premiums for 2015. The decrease in the provision in 2016 reflects the release of excess title reserves of $97
million as well as the reduction in the loss provision rate from 5.5% to 5.0% in the fourth quarter of 2016. The release of excess
reserves and change in provision rate was due to analysis of historical ultimate loss ratios, the reduced volatility of development
of those historical ultimate loss ratios and lower policy year loss ratios in recent years. We will continue to monitor and evaluate
our loss provision level, actual claims paid, and the loss reserve position each quarter.
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Corporate and Other
The following table presents the results of our Corporate and Other segment for the years indicated:
Revenues:
Escrow, title-related and other fees
Interest and investment income
Realized gains and losses, net
Total revenue
Expenses:
Personnel costs
Other operating expenses
Depreciation and amortization
Interest expense
Total expenses
Earnings before income taxes
Year Ended December 31,
2017
2016
2015
(In millions)
$
456
$
—
(4)
452
94
377
24
48
$
288
(1)
(8)
279
61
212
12
64
543
(91) $
349
(70) $
$
241
(2)
(3)
236
47
176
6
73
302
(66)
The Corporate and Other segment consists of the operations of the parent holding company, our various real estate brokerage
businesses, and CINC. This segment also includes certain other unallocated corporate overhead expenses and eliminations of
revenues and expenses between it and our Title segment.
Total revenue in our Corporate and Other segment increased $173 million, or 62%, in the year ended December 31, 2017 from
the corresponding period in 2016 and increased $43 million, or 18%, in the year ended December 31, 2016 from the corresponding
period in 2015. The increase in 2017 is primarily driven by revenue growth of $111 million at our real estate brokerage companies
and $53 million at our real estate technology companies, which included $9 million total from the acquisitions of Real Geeks and
SkySlope acquired in September and October 2017, respectively. Revenue in 2017 also includes $15 million related to recording
one additional month of results of operations for our real estate brokerages in order to catch up their results which were previously
recorded on a one month lag. The increase in the year ended December 31, 2016 was primarily driven by growth at our real estate
brokerage companies and the acquisition of CINC. Revenue in the 2016 period included $19 million in revenue from CINC which
represented 4 months of activity.
Personnel costs increased $33 million, or 54%, in the year ended December 31, 2017 from the corresponding period in 2016
and increased $14 million or 30% in the year ended December 31, 2016 compared to the corresponding 2015 period. The increase
in both periods is primarily driven by acquisitions.
Other operating expenses increased $165 million, or 78% in the year ended December 31, 2017 from the 2016 period
and increased $36 million, or 20% in the year ended December 31, 2016 from the 2015 period. The increase in the 2017 period
from 2016 is primarily attributable to current period acquisitions and increased operating expense associated with higher revenue.
Other operating expenses in 2017 also includes $14 million related to recording one additional month results of operations for our
real estate brokerages in order to catch up their results which were previously recorded on a one month lag and $17 million related
to expenses incurred related to services received from Black Knight that no longer eliminate after the BK Distribution. The increase
in the 2016 period from 2015 is primarily attributable to growth of our real estate subsidiaries and current period acquisitions.
Interest expense decreased $16 million, or 25%, in the year ended December 31, 2017 from the corresponding period in 2016
and decreased $9 million or 12% in the year ended December 31, 2016 compared to the corresponding 2015 period. The decrease
in the 2017 period is primarily attributable to decreased interest on our convertible Notes resulting from redemptions in the current
year. The decrease in the 2016 period is primarily attributable to the payoff of the FNF term loan in May 2015 upon the initial
public offering of Black Knight.
Discontinued Operations
As a result of the FNFV Split-off and BK Distribution, the results of operations of FNFV and Black Knight are included in
discontinued operations. Earnings from discontinued operations, net of tax, were $155 million, $70 million, and $60 million in
the years ended December 31, 2017, 2016, and 2015, respectively. The increase in the 2017 period from the corresponding period
in 2016 is primarily attributable to FNFV's realized gain on the sale of a subsidiary in the 2017 period. Refer to Note G Discontinued
39
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Operations to our Consolidated Financial Statements in Item 8 of Part II of this Annual Report for further information, including
a breakout of the results of operations of both FNFV and Black Knight.
Liquidity and Capital Resources
Cash Requirements. Our current cash requirements include personnel costs; operating expenses; claim payments; taxes;
payments of interest and principal on our debt, including any premiums thereon, if any; capital expenditures; business acquisitions;
stock repurchases and dividends on our common stock. We paid dividends of $1.02 per share during 2017, or approximately
$278 million. On January 26, 2018, our Board of Directors formally declared a $0.30 per share cash dividend that is payable on
March 30, 2018 to FNF Group shareholders of record as of March 16, 2018. There are no restrictions on our retained earnings
regarding our ability to pay dividends to shareholders, although there are limits on the ability of certain subsidiaries to pay dividends
to us, as described below. The declaration of any future dividends is at the discretion of our Board of Directors. Additional uses
of cash flow are expected to include stock repurchases, acquisitions, and debt repayments.
We continually assess our capital allocation strategy, including decisions relating to the amount of our dividend, reducing
debt, repurchasing our stock, and/or conserving cash. We believe that all anticipated cash requirements for current operations will
be met from internally generated funds, through cash dividends from subsidiaries, cash generated by investment securities, potential
sales of non-strategic assets, and borrowings on existing credit facilities. Our short-term and long-term liquidity requirements are
monitored regularly to ensure that we can meet our cash requirements. We forecast the needs of all of our subsidiaries and
periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment
and cash flow assumptions underlying such forecasts.
Our insurance subsidiaries generate cash from premiums earned and their respective investment portfolios and these funds
are adequate to satisfy the payments of claims and other liabilities. Due to the magnitude of our investment portfolio in relation
to our claims loss reserves, we do not specifically match durations of our investments to the cash outflows required to pay claims,
but do manage outflows on a shorter time frame.
Our two significant sources of internally generated funds are dividends and other payments from our subsidiaries. As a holding
company, we receive cash from our subsidiaries in the form of dividends and as reimbursement for operating and other administrative
expenses we incur. The reimbursements are paid within the guidelines of management agreements among us and our subsidiaries.
Our insurance subsidiaries are restricted by state regulation in their ability to pay dividends and make distributions. Each state of
domicile regulates the extent to which our title underwriters can pay dividends or make distributions. As of December 31, 2017,
$1,700 million of our net assets were restricted from dividend payments without prior approval from the relevant departments of
insurance. During 2018, our title insurance subsidiaries can pay or make distributions to us of approximately $363 million. Our
underwritten title companies and non-title insurance subsidiaries collect revenue and pay operating expenses. However, they are
not regulated to the same extent as our insurance subsidiaries.
The maximum dividend permitted by law is not necessarily indicative of an insurer’s actual ability to pay dividends, which
may be constrained by business and regulatory considerations, such as the impact of dividends on surplus, which could affect an
insurer’s ratings or competitive position, the amount of premiums that can be written and the ability to pay future dividends.
Further, depending on business and regulatory conditions, we may in the future need to retain cash in our underwriters or even
contribute cash to one or more of them in order to maintain their ratings or their statutory capital position. Such a requirement
could be the result of investment losses, reserve charges, adverse operating conditions in the current economic environment or
changes in interpretation of statutory accounting requirements by regulators.
Cash flow from FNF's operations is expected to be used for general corporate purposes including to reinvest in operations,
repay debt, pay dividends, repurchase stock, other strategic initiatives or conserving cash.
Operating Cash Flow. Our cash flows provided by operations for the years ended December 31, 2017, 2016, and 2015 were
$737 million, $1,162 million and $951 million, respectively, inclusive of discontinued operations. Operating cash flows from
discontinued operations for the years ended December 31, 2017, 2016, and 2015 were $106 million, $407 million, and $277
million, respectively. The decrease in cash provided by operations of $425 million in the 2017 period from the 2016 period is
primarily attributable to increased cash payments for taxes of $161 million and increased realized gains on sales of investments
and assets which are included in earnings of $256 million, but which related to investing activities, in the 2017 period. The increase
in cash provided by operations of $211 million in the 2016 period from the 2015 period is primarily attributable to increased
earnings from operations before equity in earnings of unconsolidated affiliates of $123 million (inclusive of discontinued
operations), lower claims payments of $40 million, and lower payments in the 2016 period under our executive investment success
bonus program of $27 million, offset by increased payments for income taxes in 2016 compared to 2015 of $118 million. The
remaining change in the 2016 period from the 2015 period is attributable to timing of receivables and payables.
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Investing Cash Flows. Our cash used in investing activities for the years ended December 31, 2017, 2016, and 2015 were $95
million, $254 million and $571 million, respectively, inclusive of discontinued operations. Cash (used in) provided by investing
activities from discontinued operations for the years ended December 31, 2017, 2016, and 2015 were $(57) million, $(163) million,
and $63 million, respectively. The decrease in cash used in investing activities of $159 million in the 2017 period from the 2016
period is primarily attributable to the $325 million in proceeds from the sale of a subsidiary by FNFV prior to the FNFV Split-
Off, lower cash paid for acquisitions of $75 million and decreased capital expenditures of $141 million, offset by a $380 million
decrease in net inflows from the sales and distributions of and from equity and fixed income investments, net of purchases and
additional investments in unconsolidated investees. The decrease in cash used in investing activities of $317 million in the 2016
period from the 2015 period is primarily attributable to a $860 million increase in net cash inflows from the sales and distributions
of and from equity and fixed income investments, net of purchases and additional investments in unconsolidated investees, offset
by a $502 million increase in net cash used for acquisitions and dispositions and increased capital expenditures.
Capital Expenditures. Total capital expenditures for property and equipment and capitalized software were $149 million,
$290 million and $241 million for the years ended December 31, 2017, 2016, and 2015, respectively. The 2017 period consists
of capital expenditures of $74 million related to our continuing operations, primarily our Title segment, and $75 million related
to discontinued operations. The decrease in the 2017 period from the 2016 period is primarily attributable to the purchase of our
corporate headquarters for $71 million in the second quarter of 2016.
Financing Cash Flows. Our cash used in financing activities for the years ended December 31, 2017, 2016, and 2015 were
$999 million, $588 million and $272 million, respectively, inclusive of discontinued operations. The increase in cash used in
financing activities of $411 million in the 2017 period from the 2016 period is primarily attributable to increased net debt service
activity of $143 million, cash transferred in the FNFV Split-off and BK Distribution of $109 million, an increase in dividends
paid of $39 million, payment of premiums to repurchase convertible Notes of $317 million, and repurchases of BKFS stock by
Black Knight of $47 million in the 2017 period prior to the BK Distribution, offset by a reduction in spending on treasury stock
repurchases of $253 million. The increase in cash used in financing activities of $316 million in the 2016 period from the 2015
period was primarily attributable to proceeds received from the IPO of Black Knight of $475 million in the 2015 period and
increased net debt service activity of $69 million in the 2016 period, offset by a reduction in treasury stock repurchases in 2016
of $222 million.
Financing. For a description of our financing arrangements see Note J Notes Payable to the Consolidated Financial Statements
included in Item 8 of Part II of this Annual Report, which is incorporated by reference into this Part II, Item 7.
Seasonality. Historically, real estate transactions have produced seasonal revenue levels for the real estate industry including
title insurers. The first calendar quarter is typically the weakest quarter in terms of revenue due to the generally low volume of
home sales during January and February. The third calendar quarter has been typically the strongest in terms of revenue primarily
due to a higher volume of home sales in the summer months and the fourth quarter is usually also strong due to commercial entities
desiring to complete transactions by year-end. We have noted short term fluctuations through recent years in resale and refinance
transactions as a result of changes in interest rates.
Contractual Obligations. Our long term contractual obligations generally include our loss reserves, our credit agreements
and other debt facilities and operating lease payments on certain of our premises and equipment.
As of December 31, 2017, our required annual payments relating to these contractual obligations were as follows:
2018
2019
2020
2021
2022
Thereafter
Total
Notes payable
Operating lease payments
Pension and other benefit payments
Title claim losses
Interest on fixed rate notes payable
$
66
$
— $
150
18
230
25
127
16
218
22
1
98
16
174
22
(In millions)
$
— $
700
$
— $
71
15
149
22
46
14
96
15
44
99
623
—
767
536
178
1,490
106
Total
$
489
$
383
$
311
$
257
$
871
$
766
$
3,077
As of December 31, 2017, we had title insurance reserves of $1,490 million. The amounts and timing of these obligations are
estimated and are not set contractually. While we believe that historical loss payments are a reasonable source for projecting future
claim payments, there is significant inherent uncertainty in this payment pattern estimate because of the potential impact of changes
in:
•
future mortgage interest rates, which will affect the number of real estate and refinancing transactions and, therefore, the
rate at which title insurance claims will emerge;
41
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•
•
•
the legal environment whereby court decisions and reinterpretations of title insurance policy language to broaden coverage
could increase total obligations and influence claim payout patterns;
events such as fraud, escrow theft, multiple property title defects, foreclosure rates and individual large loss events that
can substantially and unexpectedly cause increases in both the amount and timing of estimated title insurance loss
payments; and
loss cost trends whereby increases or decreases in inflationary factors (including the value of real estate) will influence
the ultimate amount of title insurance loss payments.
Based on historical title insurance claim experience, we anticipate the above payment patterns. The uncertainty and variation
in the timing and amount of claim payments could have a material impact on our cash flows from operations in a particular period.
We sponsor multiple pension plans and other post-retirement benefit plans. See Note O. Employee Benefit Plans to our
Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further information.
Capital Stock Transactions. On July 20, 2015, our Board of Directors approved a new three-year stock repurchase program
under which we can purchase up to 25 million shares of our FNF Group common stock through July 30, 2018. We may make
repurchases from time to time in the open market, in block purchases or in privately negotiated transactions, depending on market
conditions and other factors. Since the original commencement of the plan, we have repurchased a total of 10,589,000 FNF common
shares for $372 million, or an average of $35.10 per share, and there are 14,411,000 shares available to be repurchased under this
program. We have not made any repurchases under this program in the year ended December 31, 2017 or in the subsequent period
ended January 31, 2018.
Equity Security and Preferred Stock Investments. Our equity security and preferred stock investments may be subject to
significant volatility. Should the fair value of these investments fall below our cost basis and/or the financial condition or prospects
of these companies deteriorate, we may determine in a future period that this decline in fair value is other-than-temporary, requiring
that an impairment loss be recognized in the period such a determination is made.
Off-Balance Sheet Arrangements. We do not engage in off-balance sheet activities other than our escrow operations. In
conducting our operations, we routinely hold customers’ assets in escrow, pending completion of real estate transactions, and are
responsible for the proper disposition of these balances for our customers. Certain of these amounts are maintained in segregated
bank accounts and have not been included in the accompanying Consolidated Balance Sheets, consistent with Generally Accepted
Accounting Principles and industry practice. These balances amounted to $15.4 billion and $14.0 billion at December 31, 2017
and 2016, respectively. As a result of holding these customers’ assets in escrow, we have ongoing programs for realizing economic
benefits during the year through favorable borrowing and vendor arrangements with various banks.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note S Recent Accounting Pronouncements to our Consolidated
Financial Statements included in Item 8 of Part II of this Annual Report.
Item 7A.
Quantitative and Qualitative Disclosure about Market Risk
In the normal course of business, we are routinely subject to a variety of risks, as described in Item 1A. Risk Factors of this
Annual Report on Form 10-K and in our other filings with the Securities and Exchange Commission. For example, we are exposed
to the risk that decreased real estate activity, which depends in part on the level of interest rates, may reduce our revenues.
The risks related to our business also include certain market risks that may affect our debt and other financial instruments. At
present, we face the market risks associated with our marketable equity securities subject to equity price volatility and with interest
rate movements on our outstanding debt and fixed income investments.
We regularly assess these market risks and have established policies and business practices designed to protect against the
adverse effects of these exposures.
At December 31, 2017, we had $759 million in long-term debt, of which $295 million, net of unamortized debt issuance costs
of $5 million, bears interest at a floating rate. Accordingly, fluctuations in market interest rates will not have a material impact on
our resulting interest expense.
Our fixed maturity investments, certain preferred stocks and our floating rate debt are subject to an element of market risk
from changes in interest rates. Increases and decreases in prevailing interest rates generally translate into decreases and increases
in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the
creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and
other general market conditions. We manage interest rate risk through a variety of measures. We monitor our interest rate risk and
make investment decisions to manage the perceived risk.
Equity price risk is the risk that we will incur economic losses due to adverse changes in equity prices. In the past, our exposure
to changes in equity prices primarily resulted from our holdings of equity securities. At December 31, 2017, we held $681 million
42
Table of Contents
in marketable equity securities (not including our investments in preferred stock of $319 million at December 31, 2017 and our
Investments in unconsolidated affiliates, which amounted to $150 million at December 31, 2017). The carrying values of
investments subject to equity price risks are based on quoted market prices as of the balance sheet date. Market prices are subject
to fluctuation and, consequently, the amount realized in the subsequent sale of an investment may significantly differ from the
reported market value. Fluctuation in the market price of a security may result from perceived changes in the underlying economic
characteristics of the investee, the relative price of alternative investments and general market conditions. Furthermore, amounts
realized in the sale of a particular security may be affected by the relative quantity of the security being sold.
Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash equivalents,
short-term investments, and trade receivables. We require placement of cash in financial institutions evaluated as highly
creditworthy.
For purposes of this Annual Report on Form 10-K, we perform a sensitivity analysis to determine the effects that market risk
exposures may have on the fair values of our debt and other financial instruments.
The financial instruments that are included in the sensitivity analysis with respect to interest rate risk include fixed maturity
investments, preferred stock and notes payable. The financial instruments that are included in the sensitivity analysis with respect
to equity price risk include marketable equity securities. With the exception of our equity method investments, it is not anticipated
that there would be a significant change in the fair value of other long-term investments or short-term investments if there were
a change in market conditions, based on the nature and duration of the financial instruments involved.
To perform the sensitivity analysis, we assess the risk of loss in fair values from the effect of hypothetical changes in interest
rates and equity prices on market-sensitive instruments. The changes in fair values for interest rate risks are determined by estimating
the present value of future cash flows using various models, primarily duration modeling. The changes in fair values for equity
price risk are determined by comparing the market price of investments against their reported values as of the balance sheet date.
Information provided by the sensitivity analysis does not necessarily represent the actual changes in fair value that we would
incur under normal market conditions because, due to practical limitations, all variables other than the specific market risk factor
are held constant. For example, our reserve for title claim losses (representing 34.3% of total liabilities at December 31, 2017) is
not included in the hypothetical effects.
We have no market risk sensitive instruments entered into for trading purposes; therefore, all of our market risk sensitive
instruments were entered into for purposes other than trading. The results of the sensitivity analysis at December 31, 2017 and
December 31, 2016, are as follows:
Interest Rate Risk
At December 31, 2017, an increase (decrease) in the levels of interest rates of 100 basis points, with all other variables held
constant, would result in a (decrease) increase in the fair value of our fixed maturity securities and certain of our investments in
preferred stock which are tied to interest rates of $45 million as compared with a (decrease) increase of $59 million at December 31,
2016.
Equity Price Risk
At December 31, 2017, a 20% increase (decrease) in market prices, with all other variables held constant, would result in an
increase (decrease) in the fair value of our equity securities portfolio of $136 million, as compared with an increase (decrease) of
$77 million at December 31, 2016.
43
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Item 8. Financial Statements and Supplementary Data
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL INFORMATION
Report of Independent Registered Public Accounting Firm on Effectiveness of Internal Control over Financial
Reporting
Reports of Independent Registered Public Accounting Firm on Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Earnings for the years ended December 31, 2017, 2016, and 2015
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2017, 2016, and 2015
Consolidated Statements of Equity for the years ended December 31, 2017, 2016, and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016, and 2015
Notes to Consolidated Financial Statements
Page
Number
45
46
48
49
51
52
54
55
44
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Fidelity National Financial, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Fidelity National Financial, Inc. and subsidiaries’ internal control over financial reporting as of December 31,
2017, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Fidelity National Financial, Inc. and
subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of
December 31, 2017, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the consolidated balance sheet of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2017, and the
related consolidated statements of earnings, comprehensive earnings, equity and cash flows for the year then ended, and the related
notes and financial statement schedules listed in the Index at Item 15(a)(2) and our report dated February 23, 2018 expressed an
unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying “Management’s Annual
Report on Internal Control over Financial Reporting”. Our responsibility is to express an opinion on the Company’s internal control
over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all
material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material
weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable
basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions
of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation
of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Certified Public Accountants
Jacksonville, Florida
February 23, 2018
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and the Board of Directors of Fidelity National Financial, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Fidelity National Financial, Inc. and subsidiaries as of
December 31, 2017, and the related consolidated statements of earnings, comprehensive earnings, equity and cash flows for the
year then ended, and the related notes and financial statement schedules listed in the Index at Item 15(a)(2) (collectively referred
to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated
financial position of the Company at December 31, 2017, and the consolidated results of its operations and its cash flows for the
year then ended in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)
(PCAOB), the Company's internal control over financial reporting as of December 31, 2017, based on criteria established in
Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013
framework) and our report dated February 23, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are
required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to
error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
Certified Public Accountants
We have served as the Company's auditor since 2017
Jacksonville, Florida
February 23, 2018
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
Fidelity National Financial, Inc.:
We have audited the accompanying Consolidated Balance Sheet of Fidelity National Financial, Inc. and subsidiaries as of
December 31, 2016, and the related Consolidated Statements of Earnings, Comprehensive Earnings, Equity, and Cash Flows for
each of the years in the two-year period ended December 31, 2016. In connection with our audits of the Consolidated Financial
Statements, we also have audited the Financial Statement Schedules listed in the Index at Item 15. These Consolidated Financial
Statements and Financial Statement Schedules are the responsibility of the Company’s management. Our responsibility is to
express an opinion on these Consolidated Financial Statements and Financial Statement Schedules based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the financial
position of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2016, and the results of their operations and their
cash flows for each of the years in the two-year period ended December 31, 2016, in conformity with U.S. generally accepted
accounting principles. Also, in our opinion, the related Financial Statement Schedules, when considered in relation to the basic
Consolidated Financial Statements taken as a whole, present fairly, in all material respect, the information set forth therein.
////s/ KPMG LLP
Jacksonville, Florida
February 27, 2017, except for Notes A and G,
as to which are February 23, 2018
Certified Public Accountants
47
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Investments:
ASSETS
Fixed maturities available for sale, at fair value, at December 31, 2017 and 2016, includes pledged fixed maturities of
$364 and $332, respectively, related to secured trust deposits
$
1,816
$
2,407
December 31,
2017
2016
(In millions, except share data)
Preferred stock available for sale, at fair value
Equity securities available for sale, at fair value
Investments in unconsolidated affiliates
Other long-term investments
Short-term investments, includes pledged short term investments of $3 and $212 at December 31, 2017 and 2016,
respectively, related to secured trust deposits
Total investments
Cash and cash equivalents, at December 31, 2017 and 2016, includes pledged cash of $475 and $331, respectively,
related to secured trust deposits
Trade and notes receivables, net of allowance of $18 and $21 at December 31, 2017 and 2016, respectively
Goodwill
Prepaid expenses and other assets
Other intangible assets, net
Title plants
Property and equipment, net
Assets of discontinued operations
Total assets
LIABILITIES AND EQUITY
Liabilities:
Accounts payable and other accrued liabilities
Income taxes payable
Notes payable
Reserve for title claim losses
Secured trust deposits
Deferred tax liability
Liabilities of discontinued operations
Total liabilities
Commitments and Contingencies:
Redeemable non-controlling interest by 21% minority holder of ServiceLink Holdings, LLC
Equity:
FNF Group common stock, $0.0001 par value; authorized 487,000,000 shares as of December 31, 2017 and 2016;
outstanding of 274,431,737 and 272,205,261 as of December 31, 2017 and 2016, respectively; and issued of
287,718,304 and 285,041,900 as of December 31, 2017 and 2016, respectively
FNFV Group common stock, $0.0001 par value; authorized 113,000,000 shares as of December 31, 2016, outstanding
of 66,416,822 as of December 31, 2016, and issued of 80,581,675 as of December 31, 2016, see Note G
Preferred stock, $0.0001 par value; authorized, 50,000,000 shares; issued and outstanding, none
Additional paid-in capital
Retained earnings
Accumulated other comprehensive earnings (loss)
Less: Treasury stock, 13,286,567 shares and 27,001,492 shares as of December 31, 2017 and 2016, respectively, at cost
Total Fidelity National Financial, Inc. shareholders’ equity
Noncontrolling interests
Total equity
$
$
319
681
150
110
295
3,371
1,110
317
2,746
398
618
398
193
—
9,151
$
$
955
137
759
1,490
830
169
—
4,340
344
—
—
—
4,587
217
111
(468)
4,447
20
4,467
315
386
150
42
482
3,782
1,049
322
2,555
422
585
395
192
5,219
14,521
933
4
987
1,487
860
370
2,638
7,279
344
—
—
—
4,848
1,784
(13)
(623)
5,996
902
6,898
Total liabilities, redeemable non-controlling interest and equity
$
9,151
$
14,521
See Notes to Consolidated Financial Statements.
48
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
2017
Year Ended December 31,
2016
(In millions, except share data)
2015
Revenues:
Direct title insurance premiums
Agency title insurance premiums
Escrow, title-related and other fees
Interest and investment income
Realized gains and losses, net
Total revenues
Expenses:
Personnel costs
Agent commissions
Other operating expenses
Depreciation and amortization
Provision for title claim losses
Interest expense
Total expenses
$
2,170
$
2,097
$
2,723
2,637
131
2
7,663
2,460
2,089
1,781
183
238
48
2,626
2,416
126
(8)
7,257
2,275
1,998
1,648
160
157
64
2,009
2,277
2,246
121
11
6,664
2,137
1,731
1,557
150
246
73
6,799
6,302
5,894
864
235
629
10
639
155
794
23
955
347
608
14
622
70
692
42
771
$
650
$
627
27
654
$
$
639
23
662
109
$
$
$
(4) $
(13)
770
274
496
5
501
60
561
34
527
511
29
540
Earnings from continuing operations before income taxes and equity in earnings of unconsolidated affiliates
Income tax expense on continuing operations
Earnings from continuing operations before equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Net earnings from continuing operations
Earnings from discontinued operations, net of tax
Net earnings
Less: Net earnings attributable to non-controlling interests
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Amounts attributable to Fidelity National Financial, Inc., common shareholders:
Net earnings from continuing operations, attributable to FNF Group common shareholders
Net earnings from discontinued operations, attributable to FNF Group common shareholders
Net earnings attributable to FNF Group common shareholders
Net earnings (loss) from discontinued operations attributable to FNFV Group common shareholders
See Notes to Consolidated Financial Statements.
$
$
$
$
49
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - (continued)
Year Ended December 31,
2017
2016
2015
2.36
$
2.31
$
0.09
2.40
$
2.30
$
2.24
$
0.08
2.44
1.68
$
$
$
$
0.08
2.38
1.63
271
278
(0.06) $
(0.16)
(0.06) $
(0.16)
0.10
2.34
$
272
280
1.85
0.10
1.95
1.79
0.10
1.89
277
286
0.80
79
82
Earnings per share
Basic
Net earnings from continuing operations attributable to FNF Group common shareholders
Net earnings from discontinued operations attributable to FNF Group common shareholders
Net earnings per share attributable to FNF Group common shareholders
Net earnings (loss) per share from discontinued operations attributable to FNFV Group common
shareholders
Diluted
Net earnings from continuing operations attributable to FNF Group common shareholders
Net earnings from discontinued operations attributable to FNF Group common shareholders
Net earnings per share attributable to FNF Group common shareholders
Net earnings (loss) per share from discontinued operations attributable to FNFV Group common
shareholders
$
$
$
$
$
$
Weighted average shares outstanding FNF Group common stock, basic basis
Weighted average shares outstanding FNF Group common stock, diluted basis
Cash dividends paid per share FNF Group common stock
$
1.02
$
0.88
$
Weighted average shares outstanding FNFV Group common stock, basic basis
Weighted average shares outstanding FNFV Group common stock, diluted basis
65
67
67
70
See Notes to Consolidated Financial Statements.
50
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
Net earnings
Other comprehensive earnings (loss), net of tax:
Unrealized gain (loss) on investments and other financial instruments, net (excluding
investments in unconsolidated affiliates) (1)
Unrealized gain (loss) relating to investments in unconsolidated affiliates (2)
Unrealized gain (loss) on foreign currency translation and cash flow hedging(3)
Reclassification adjustments for change in unrealized gains and losses included in net
earnings (4)
Minimum pension liability adjustment (5)
Other comprehensive earnings (loss)
Comprehensive earnings
Less: Comprehensive earnings attributable to noncontrolling interests
Comprehensive earnings attributable to Fidelity National Financial Inc. common shareholders
Comprehensive earnings attributable to FNF Group common shareholders
Comprehensive earnings (loss) attributable to FNFV Group common shareholders
$
$
$
_______________________________________
Year Ended December 31,
2017
2016
2015
(In millions)
$
794
$
692
$
561
25
12
6
3
9
55
849
25
824
709
115
$
$
$
38
10
2
—
6
56
748
41
707
703
4
$
$
$
(38)
(27)
(8)
—
2
(71)
490
34
456
494
(38)
(1)
(2)
(3)
(4)
(5)
Net of income tax expense (benefit) of $16 million, $23 million, and $(23) million for the years ended December 31,
2017, 2016 and 2015, respectively.
Net of income tax expense (benefit) of $7 million, $6 million, and $(17) million for the years ended December 31,
2017, 2016 and 2015, respectively.
Net of income tax expense (benefit) of $4 million, $1 million, and $(7) million for the years ended December 31,
2017, 2016, and 2015, respectively.
Net of income tax expense of $2 million for the year ended December 31, 2017.
Net of income tax expense of $3 million for the years ended December 31, 2017, 2016, and 2015, respectively.
See Notes to Consolidated Financial Statements.
51
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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Fidelity National Financial, Inc. Common Shareholders
FNF Group
Common
Stock
FNFV Group
Common
Stock
Shares
$
Shares
$
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings
(Loss)
Treasury Stock
Shares
$
Non-
controlling
Interests
Total
Equity
Redeemable
Non-
controlling
Interests
$ — $
4,855
$
1,150
(In millions)
$
— $ (13)
$
79
$ 6,073
$
715
(96)
475
—
—
—
—
—
—
—
—
—
(41)
—
—
(1)
(27)
430
—
(13)
—
—
(6)
34
(43)
475
26
(6)
21
—
(1)
(38)
(27)
(8)
2
(3)
(14)
(505)
(1)
(27)
430
—
(94)
(5)
(222)
(6)
561
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
53
—
26
(6)
21
—
(1)
—
—
—
—
38
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12) —
(186)
—
—
—
—
—
—
(5)
—
—
—
(81)
—
(222)
—
527
Balance, December 31, 2014
279
$ —
Gain on Black Knight IPO
Proceeds Black Knight IPO
Exercise of stock options
Purchase of additional interest in consolidated
subsidiaries
Tax benefit associated with the exercise of
stock-based compensation
Issuance of restricted stock
Equity offering costs
Other comprehensive earnings — unrealized
loss on investments and other financial
instruments
Other comprehensive earnings — unrealized
loss on investments in unconsolidated affiliates
Other comprehensive earnings — unrealized
loss on foreign currency and cash flow hedging
Other comprehensive earnings — minimum
pension liability adjustment
Stock-based compensation
Shares withheld for taxes and in treasury
Purchases of treasury stock
Contributions to noncontrolling interests
Sale of noncontrolling interest
Reclassification of redeemable NCI resulting
from IPO/share conversion
Retirement of treasury shares
Distribution of J. Alexander's to FNFV
Shareholders
Dilution of ownership in affiliates
Dividends declared
Subsidiary dividends paid to noncontrolling
interests
Net earnings
Balance, December 31, 2015
Exercise of stock options
Issuance of restricted stock
Other comprehensive earnings — unrealized
gain (loss) on investments and other financial
instruments
Other comprehensive earnings — unrealized
gain on investments in unconsolidated affiliates
Other comprehensive earnings — unrealized
gain on foreign currency and cash flow hedging
Other comprehensive earnings — minimum
pension liability adjustment
Stock-based compensation
Shares withheld for taxes and in treasury
Purchases of treasury stock
Debt conversion settled in cash
Acquisition of noncontrolling interest
Dividends declared
Subsidiary dividends paid to noncontrolling
interests
Net earnings
—
—
2
—
—
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
282
$ —
2
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2016
285
$ —
93
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
2
—
—
—
—
—
—
—
(38)
(27)
(8)
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(14)
(505)
—
—
—
(12)
186
—
—
—
—
—
—
—
—
—
—
15
—
—
—
—
—
—
—
—
12
—
—
—
—
—
27
$ — $
4,795
$
1,374
$
(69)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
19
—
—
—
—
—
36
—
—
(2)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(240)
—
650
—
—
38
10
2
6
—
—
—
—
—
—
—
—
$ — $
4,848
$
1,784
$
(13)
$ (346)
$
834
$ 6,588
$
—
—
—
—
—
—
—
(9)
(268)
—
—
—
—
—
—
—
(1)
—
—
—
22
—
—
—
14
—
(9)
42
19
—
37
10
2
6
58
(9)
(268)
(2)
14
(240)
(9)
692
$ (623)
$
902
$ 6,898
$
344
—
—
—
—
—
—
—
—
—
—
—
59
—
—
—
—
(430)
—
—
—
—
—
—
344
—
—
—
—
—
—
—
—
—
—
—
—
—
See Notes to Consolidated Financial Statements.
52
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY - (continued)
Fidelity National Financial, Inc. Common Shareholders
FNF Group
Common
Stock
FNFV Group
Common
Stock
Shares
$
Shares
$
Additional
Paid-In
Capital
Retained
Earnings
Treasury Stock
Shares
$
Non-
controlling
Interests
Total
Equity
Redeemable
Non-
controlling
Interests
$ — $
4,848
$
1,784
$ (623)
$
902
$ 6,898
$
Accumulated
Other
Comprehensive
Earnings
(Loss)
(In millions)
$
(13)
—
—
25
12
6
9
3
—
—
—
—
—
—
—
—
—
69
—
—
—
$
111
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(823)
(1,236)
(279)
—
771
217
31
—
—
—
—
—
—
33
(1)
—
—
—
(324)
—
—
—
—
—
—
—
27
—
—
—
—
—
—
—
—
—
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(18)
(23)
—
—
—
—
—
(16)
196
—
—
—
13
—
—
—
$ (468)
$
—
—
2
—
—
—
—
11
(1)
—
—
(6)
—
44
(47)
31
—
27
12
6
9
3
44
(2)
(18)
(23)
(6)
(324)
44
(47)
(801)
(1,624)
(98)
(1,069)
(279)
(9)
794
—
(9)
23
20
344
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2016
Exercise of stock options
Issuance of restricted stock
Other comprehensive earnings — unrealized
gain on investments and other financial
instruments
Other comprehensive earnings — unrealized
gain on investments in unconsolidated affiliates
Other comprehensive earnings — unrealized
gain on foreign currency and cash flow hedging
Other comprehensive earnings — minimum
pension liability adjustment
Reclassification adjustments for change in
unrealized gains and losses included in net
earnings
Stock-based compensation
Purchase of additional interest in consolidated
subsidiaries
Shares withheld for taxes and in treasury
Purchases of treasury stock
Sale of consolidated subsidiary
Debt conversions settled in cash
Acquisitions of noncontrolling interests
Black Knight repurchases of BKFS stock
Spin-off of Black Knight
Distribution of FNFV to Cannae Holdings
Dividends declared
Subsidiary dividends paid to noncontrolling
interests
Net earnings
285
$ —
2
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
81
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(81) —
—
—
—
—
—
—
Balance, December 31, 2017
288
$ —
— $ — $
4,587
$
$ 4,467
$
344
See Notes to Consolidated Financial Statements.
53
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2017
Year Ended December 31,
2016
(In millions)
2015
Cash Flows From Operating Activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
$
794
$
692
$
561
Depreciation and amortization
Equity in losses of unconsolidated affiliates
Net loss on sales of investments and other assets, net
Gain on sale of OneDigital
Gain on sale of Cascade Timberlands
Stock-based compensation cost
Changes in assets and liabilities, net of effects from acquisitions:
Net increase in pledged cash, pledged investments and secured trust deposits
Net (increase) decrease in trade receivables
Net increase in prepaid expenses and other assets
Net (decrease) increase in accounts payable, accrued liabilities, deferred revenue and other
Net increase (decrease) in reserve for title claim losses
Net change in income taxes
Net cash provided by operating activities
Cash Flows From Investing Activities:
Proceeds from sales of investment securities available for sale
Proceeds from calls and maturities of investment securities available for sale
Proceeds from sales of other assets
Proceeds from the sale of cost method and other investments
Additions to property and equipment and capitalized software
Purchases of investment securities available for sale
Purchases of other long-term investments
Net (purchases of) proceeds from short-term investment activities
Contributions to investments in unconsolidated affiliates
Distributions from unconsolidated affiliates
Net other investing activities
Proceeds from the sale of OneDigital
Acquisition of T-System Holding LLC, net of cash acquired
Acquisition of Title Guaranty of Hawaii, net of cash acquired
Acquisition of BPG Holdings, LLC, net of cash acquired
Proceeds from sale of Cascade Timberlands
Acquisition of Commissions, Inc., net of cash acquired
Acquisition of eLynx Holdings, Inc., net of cash acquired
Acquisitions of Real Geeks, LLC and Sky Slope, Inc., net of cash acquired
Other acquisitions/disposals of businesses, net of cash acquired
Net cash used in investing activities
Cash Flows From Financing Activities:
Borrowings
Debt service payments
Additional investment in noncontrolling interest
Equity portion of debt conversions paid in cash
Proceeds from Black Knight IPO
Distributions by Black Knight to member
Debt and equity issuance costs
Black Knight treasury stock repurchases of BKFS stock
Cash transferred in J. Alexander's spin-off
Cash transferred in the Black Knight spin-off
Cash transferred in the FNFV split-off
Dividends paid
Subsidiary dividends paid to noncontrolling interest shareholders
Exercise of stock options
Payment of contingent consideration for prior period acquisitions
Payment for shares withheld for taxes and in treasury
Purchases of treasury stock
Net cash used in financing activities
Net (decrease) increase in cash and cash equivalents, excluding pledged cash related to secured trust deposits
Cash and cash equivalents, excluding pledged cash related to secured trust deposits, at beginning of year
Cash and cash equivalents, excluding pledged cash related to secured trust deposits, at end of year
$
See Notes to Consolidated Financial Statements.
54
389
2
16
(276)
—
44
—
(11)
(60)
(31)
3
(133)
737
434
626
4
21
(149)
(643)
(86)
(164)
(78)
104
(7)
325
(202)
(93)
—
—
—
—
(82)
(105)
(95)
785
(996)
(2)
(317)
—
—
—
(47)
—
(87)
(22)
(278)
(9)
31
(16)
(18)
(23)
(999)
(357)
992
635
$
431
8
2
—
—
58
—
(14)
(4)
87
(96)
(2)
1,162
238
452
6
36
(290)
(598)
—
493
(166)
139
(7)
—
—
—
—
—
(229)
(115)
—
(213)
(254)
132
(200)
—
(2)
—
—
—
—
—
—
—
(239)
(9)
19
(4)
(9)
(276)
(588)
320
672
992
$
410
16
13
—
(12)
56
(2)
7
(95)
(2)
(38)
37
951
775
383
2
14
(241)
(1,102)
(27)
(565)
(97)
353
(11)
—
—
—
(43)
56
—
—
—
(68)
(571)
1,360
(1,359)
(6)
—
475
(17)
(1)
—
(13)
—
—
(220)
(6)
26
—
(13)
(498)
(272)
108
564
672
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note A.
Business and Summary of Significant Accounting Policies
The following describes the business and significant accounting policies of Fidelity National Financial, Inc. and its subsidiaries
(collectively, “we,” “us,” “our,” "the Company" or “FNF”) which have been followed in preparing the accompanying Consolidated
Financial Statements.
Description of Business
We are a leading provider of (i) title insurance, escrow and other title-related services, including trust activities, trustee sales
guarantees, recordings and reconveyances and home warranty products and (ii) technology and transaction services to the real
estate and mortgage industries. FNF is the nation’s largest title insurance company operating through its title insurance underwriters
- Fidelity National Title Insurance Company ("FNTIC"), Chicago Title Insurance Company ("Chicago Title"), Commonwealth
Land Title Insurance Company ("Commonwealth Title"), Alamo Title Insurance and National Title Insurance of New York Inc. -
which collectively issue more title insurance policies than any other title company in the United States. Through our subsidiary,
ServiceLink Holdings, LLC ("ServiceLink"), we provide mortgage transaction services, including title-related services and
facilitation of production and management of mortgage loans.
For information about our reportable segments, refer to Note R Segment Information.
Recent Developments
On November 30, 2017, FGL Holdings (formerly known as CF Corporation), a Cayman Islands exempted company,
consummated its previously announced acquisition of Fidelity & Guaranty Life, a Delaware corporation (“FGL”), pursuant to the
Agreement and Plan of Merger, dated as of May 24, 2017, as amended (the “Merger Agreement”), by and among CF Corporation,
FGL, and certain subsidiaries of CF Corporation and FGL (collectively, the "FGL Merger"). In connection with the FGL Merger,
FNF received 13,732,000 common shares and 100,000 Series B Cumulative Preferred ("FG Preferred") shares in exchange for an
aggregate investment of $213 million. As of December 31, 2017 FNF owns 16,732,000 common shares, inclusive of 3,000,000
common shares of CF Corporation held prior to the FGL Merger, and 100,000 FG Preferred shares with an aggregate market value
of $246 million and we own approximately 8.5% of the outstanding common equity of FGL. The Company’s non-executive
Chairman, William P. Foley, II, is also the Co-Executive Chairman of FGL.
On November 17, 2017 we completed our previously announced split-off (the “FNFV Split-Off”) of our former wholly-owned
subsidiary Cannae Holdings, Inc. (“Cannae”) which consisted of the businesses, assets and liabilities formerly attributed to our
FNF Ventures ("FNFV") Group including Ceridian Holding, LLC, American Blue Ribbon Holdings, LLC and T-System Holding
LLC. The FNFV Split-Off was accomplished by the Company's redemption (the “Redemption”) of all of the outstanding shares
of FNFV Group common stock, par value $0.0001 per share (“FNFV common stock”) for outstanding shares of common stock
of Cannae, par value $0.0001 per share (“Cannae common stock”), amounting to a redemption on a per share basis of each
outstanding share of FNFV common stock for one share of Cannae common stock, as of November 17, 2017. As a result of the
FNFV Split-Off, Cannae is a separate, publicly traded company (NYSE: CNNE). All of the Company’s core title insurance, real
estate, technology and mortgage related businesses, assets and liabilities currently attributed to the Company’s FNF Group common
stock that are not held by Cannae remain with the Company. As a result of the FNFV Split-Off, we have reclassified the assets
and liabilities divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of December 31,
2016. Further, the financial results of FNFV Group have been reclassified to discontinued operations for all periods presented in
our Consolidated Statements of Earnings. See Note G. Discontinued Operations for further details of the results of FNFV Group.
On November 17, 2017, Frank P. Willey resigned from our Board of Directors.
On September 29, 2017 we completed our tax-free distribution, to FNF Group shareholders of all 83.3 million shares of New
BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK
Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting
in the formation of a new publicly-traded holding company, Black Knight, Inc. ("New Black Knight"). Holders of FNF Group
common stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF Group
common stock held at the close of business on September 20, 2017, the record date for the BK Distribution. New Black Knight's
common stock is now listed under the symbol “BKI” on the New York Stock Exchange. The BK Distribution is expected to
generally be tax-free to FNF Group shareholders for U.S. federal income tax purposes, except to the extent of any cash received
in lieu of New Black Knight's fractional shares. As a result of the BK Distribution, we have reclassified the assets and liabilities
divested as assets and liabilities of discontinued operations in our Consolidated Balance Sheet as of December 31, 2016. Further,
the financial results of Black Knight have been reclassified to discontinued operations for all periods presented in our Consolidated
Statements of Earnings. See Note G. Discontinued Operations for further details of the results of Black Knight.
55
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
On August 31, 2017, we completed our acquisition of 90% of the membership interests of Title Guaranty of Hawaii ("Title
Guaranty") for $98 million. Title Guaranty was previously an unaffiliated agent of Chicago Title and will continue to be closely
aligned with Chicago Title as it formally becomes part of the FNF title company family. Founded in 1896, Title Guaranty is the
oldest title company in the State of Hawaii and is a leading provider of title and escrow services, with more than 300 employees
in branches across the State of Hawaii providing title insurance and real estate closing services. See Note B. Acquisitions for
further discussion.
On May 3, 2017, our Board of Directors adopted a resolution to increase the size of our Board of Directors to thirteen and
elected Heather H. Murren to serve on our Board of Directors. Ms. Murren will serve in Class I of our Board of Directors, and
her term will expire at the annual meeting of our shareholders to be held in 2018. In January 2018, Ms. Murren was appointed to
the Audit Committee of our Board.
Effective March 1, 2017, three of the Company’s title insurance underwriters, Fidelity National Title Insurance Company,
Chicago Title Insurance Company and Commonwealth Land Title Insurance Company, redomesticated from their respective former
states of domicile to Florida (the "Redomestication"). In conjunction with the Redomestication, the Company received a special
dividend of $280 million from these title insurance underwriters on March 15, 2017.
Principles of Consolidation and Basis of Presentation
The accompanying Consolidated Financial Statements are prepared in accordance with generally accepted accounting
principles in the United States ("GAAP") and include our accounts as well as our wholly-owned and majority-owned subsidiaries.
All intercompany profits, transactions and balances have been eliminated. Our investments in non-majority-owned partnerships
and affiliates are accounted for using the equity method until such time that they become wholly or majority-owned. Earnings
attributable to noncontrolling interests are recorded on the Consolidated Statements of Earnings relating to majority-owned
subsidiaries with the appropriate noncontrolling interest that represents the portion of equity not related to our ownership interest
recorded on the Consolidated Balance Sheets in each period.
Investments
Fixed maturity securities are purchased to support our investment strategies, which are developed based on factors including
rate of return, maturity, credit risk, duration, tax considerations and regulatory requirements. Fixed maturity securities which may
be sold prior to maturity to support our investment strategies are carried at fair value and are classified as available for sale as of
the balance sheet dates. Fair values for fixed maturity securities are principally a function of current market conditions and are
valued based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly.
Discount or premium is recorded for the difference between the purchase price and the principal amount. The discount or premium
is amortized or accrued using the interest method and is recorded as an adjustment to interest and investment income. The interest
method results in the recognition of a constant rate of return on the investment equal to the prevailing rate at the time of purchase
or at the time of subsequent adjustments of book value. Changes in prepayment assumptions are accounted for retrospectively.
Equity securities and preferred stocks held are considered to be available for sale and carried at fair value as of the balance
sheet dates. Our equity securities and certain preferred stocks are Level 1 financial assets and fair values are based on quoted
prices in active markets. Other preferred stock holdings are Level 2 financial assets and are valued based on quoted prices in
markets that are not active or model inputs that are observable either directly or indirectly.
Investments in unconsolidated affiliates are recorded using the equity method of accounting.
Other long-term investments consist of various cost-method investments and company-owned life insurance policies. The
cost-method investments are carried at historical cost. The carrying value of our cost-method investments is $78 million and $6
million, at December 31, 2017 and 2016, respectively. Company-owned life insurance policies are carried at cash surrender value.
Short-term investments, which consist primarily of commercial paper and money market instruments, which have an original
maturity of one year or less, are carried at amortized cost, which approximates fair value.
Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold
and are credited or charged to income on a trade date basis. Unrealized gains or losses on securities which are classified as available
for sale, net of applicable deferred income tax expenses (benefits), are excluded from earnings and credited or charged directly to
a separate component of equity. If any unrealized losses on available for sale securities are determined to be other-than-temporary,
such unrealized losses are recognized as realized losses. Unrealized losses are considered other-than-temporary if factors exist
that cause us to believe that the value will not increase to a level sufficient to recover our cost basis. Some factors considered in
evaluating whether or not a decline in fair value is other-than-temporary include: (i) our need and intent to sell the investment
prior to a period of time sufficient to allow for a recovery in value; (ii) the duration and extent to which the fair value has been
less than cost; and (iii) the financial condition and prospects of the issuer. Such reviews are inherently uncertain and the value of
the investment may not fully recover or may decline in future periods resulting in a realized loss.
56
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Cash and Cash Equivalents
Highly liquid instruments purchased as part of cash management with original maturities of three months or less are considered
cash equivalents. The carrying amounts reported in the Consolidated Balance Sheets for these instruments approximate their fair
value.
Fair Value of Financial Instruments
The fair values of financial instruments presented in the Consolidated Financial Statements are estimates of the fair values at
a specific point in time using available market information and appropriate valuation methodologies. These estimates are subjective
in nature and involve uncertainties and significant judgment in the interpretation of current market data. We do not necessarily
intend to dispose of or liquidate such instruments prior to maturity.
Trade and Notes Receivables
The carrying values reported in the Consolidated Balance Sheets for trade and notes receivables approximate their fair value.
Goodwill
Goodwill represents the excess of cost over fair value of identifiable net assets acquired and assumed in a business combination.
Goodwill and other intangible assets with indefinite useful lives are reviewed for impairment annually or more frequently if
circumstances indicate potential impairment, through a comparison of fair value to the carrying amount. In evaluating the
recoverability of goodwill, we perform an annual goodwill impairment analysis based on a review of qualitative factors to determine
if events and circumstances exist which will lead to a determination that the fair value of a reporting unit is greater than its carrying
amount, prior to performing a full fair-value assessment.
We completed annual goodwill impairment analyses in the fourth quarter of each period presented using a September 30
measurement date and as a result no goodwill impairments have been recorded. For the years ended December 31, 2017 and 2016,
we determined there were no events or circumstances which indicated that the carrying value exceeded the fair value.
Other Intangible Assets
We have other intangible assets, not including goodwill, which consist primarily of customer relationships and contracts,
trademarks and tradenames, and computer software, which are generally recorded in connection with acquisitions at their fair
value. Intangible assets with estimable lives are amortized over their respective estimated useful lives to their estimated residual
values and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. In general, customer relationships are amortized over their estimated useful lives, generally 10 years, using an
accelerated method which takes into consideration expected customer attrition rates. Contractual relationships are generally
amortized over their contractual life. Trademarks and tradenames are generally amortized over 10 years. Capitalized software
includes the fair value of software acquired in business combinations, purchased software and capitalized software development
costs. Purchased software is recorded at cost and amortized using the straight-line method over its estimated useful life. Software
acquired in business combinations is recorded at its fair value and amortized using straight-line or accelerated methods over its
estimated useful life, ranging from 5 to 10 years. For internal-use computer software products, internal and external costs incurred
during the preliminary project stage are expensed as they are incurred. Internal and external costs incurred during the application
development stage are capitalized and amortized on a product by product basis commencing on the date the software is ready for
its intended use. We do not capitalize any costs once the software is ready for its intended use.
We recorded $1 million in impairment expense to other intangible assets during the years ended December 31, 2017 and 2016.
The impairment in 2017 was for computer software at ServiceLink. The impairment in 2016 was for customer relationships and
tradenames at our real estate subsidiaries in our Corporate and Other segment. We recorded no impairment expense related to
other intangible assets in the year ended December 31, 2015.
Title Plants
Title plants are recorded at the cost incurred to construct or obtain and organize historical title information to the point it can
be used to perform title searches. Costs incurred to maintain, update and operate title plants are expensed as incurred. Title plants
are not amortized as they are considered to have an indefinite life if maintained. Sales of title plants are reported at the amount
received net of the adjusted costs of the title plant sold. Sales of title plant copies are reported at the amount received. No cost is
allocated to the sale of copies of title plants unless the carrying value of the title plant is diminished or impaired. Title plants are
reviewed for impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. We reviewed
title plants for impairment but recorded no impairment expense related to title plants in the years ended December 31, 2017 or
2016. We reviewed title plants for impairment in the year ended December 31, 2015 and identified and recorded impairment
expense of $1 million.
57
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Property and Equipment
Property and equipment are recorded at cost, less accumulated depreciation. Depreciation is computed primarily using the
straight-line method based on the estimated useful lives of the related assets: twenty to thirty years for buildings and three to
twenty-five years for furniture, fixtures and equipment. Leasehold improvements are amortized on a straight-line basis over the
lesser of the term of the applicable lease or the estimated useful lives of such assets. Property and equipment are reviewed for
impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable.
Reserve for Title Claim Losses
Our reserve for title claim losses includes known claims as well as losses we expect to incur, net of recoupments. Each known
claim is reserved based on our review as to the estimated amount of the claim and the costs required to settle the claim. Reserves
for claims which are incurred but not reported are established at the time premium revenue is recognized based on historical loss
experience and also take into consideration other factors, including industry trends, claim loss history, current legal environment,
geographic considerations and the type of policy written.
The reserve for title claim losses also includes reserves for losses arising from closing and disbursement functions due to
fraud or operational error.
If a loss is related to a policy issued by an independent agent, we may proceed against the independent agent pursuant to the
terms of the agency agreement. In any event, we may proceed against third parties who are responsible for any loss under the title
insurance policy under rights of subrogation.
Secured Trust Deposits
In the state of Illinois, a trust company is permitted to commingle and invest customers’ assets with its own assets, pending
completion of real estate transactions. Accordingly, our Consolidated Balance Sheets reflect a secured trust deposit liability of
$830 million and $860 million at December 31, 2017 and 2016, respectively, representing customers’ assets held by us and
corresponding assets including cash and investments pledged as security for those trust balances.
Income Taxes
We recognize deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax
basis of our assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The impact on deferred taxes of changes in tax rates and laws, if any, is applied
to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period
enacted.
Reinsurance
In a limited number of situations, we limit our maximum loss exposure by reinsuring certain risks with other insurers. We
also earn a small amount of additional income, which is reflected in our direct premiums, by assuming reinsurance for certain
risks of other insurers. We cede a portion of certain policy and other liabilities under agent fidelity, excess of loss and case-by-
case reinsurance agreements. Reinsurance agreements provide that in the event of a loss (including costs, attorneys’ fees and
expenses) exceeding the retained amounts, the reinsurer is liable for the excess amount assumed. However, the ceding company
remains primarily liable in the event the reinsurer does not meet its contractual obligations.
Revenue Recognition
Title. Our direct title insurance premiums and escrow, title-related and other fees are recognized as revenue at the time of
closing of the related transaction as the earnings process is then considered complete.
Premium revenues from agency operations and agency commissions include an accrual based on estimates using historical
information of the volume of transactions that have closed in a particular period for which premiums have not yet been reported
to us. The accrual for agency premiums is necessary because of the lag between the closing of these transactions and the reporting
of these policies to us by the agent. Historically, the time lag between the closing of these transactions by our agents and the
reporting of these policies, or premiums, to us has been up to 15 months, with 84 - 88% reported within three months following
closing, an additional 9 - 12% reported within the next three months and the remainder within seven to fifteen months. In addition
to accruing these earned but unreported agency premiums, we also accrue agent commission expense, which was 76.7%, of agent
premiums earned in 2017, 76.1% of agent premiums earned in 2016, and 76.0% of agent premiums earned in 2015. We also record
a provision for claim losses at the provision rate at the time we record the accrual for the premiums, which averaged 4.9% for
2017, 5.4%, excluding the release of excess reserves relating to prior years of $97 million, for 2016, and 5.7% for 2015 and accruals
for premium taxes and other expenses relating to our premium accrual. The resulting impact to pretax earnings in any period is
approximately 11% or less of the accrued premium amount. The impact of the change in the accrual for agency premiums and
58
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
related expenses on our pretax earnings was an increase of $1 million for the year ended December 31, 2017, an increase of $4
million for the year ended 2016 and a decrease of $5 million for the year ended 2015. The amount due from our agents relating
to this accrual, i.e., the agent premium less their contractual retained commission, was approximately $55 million and $53 million
at December 31, 2017 and 2016, respectively, which represents agency premiums of approximately $280 million and $267 million
at December 31, 2017 and 2016, respectively, and agent commissions of $225 million and $214 million at December 31, 2017
and 2016, respectively.
Revenues from home warranty products are recognized over the life of the policy, which is one year. The unrecognized portion
is recorded as deferred revenue in accounts payable and other accrued liabilities in the Consolidated Balance Sheets.
Comprehensive Earnings (Loss)
We report Comprehensive earnings (loss) in accordance with GAAP on the Consolidated Statements of Comprehensive
Earnings. Total comprehensive earnings are defined as all changes in shareholders' equity during a period, other than those resulting
from investments by and distributions to shareholders. While total comprehensive earnings is the activity in a period and is largely
driven by net earnings in that period, accumulated other comprehensive earnings or loss represents the cumulative balance of other
comprehensive earnings, net of tax, as of the balance sheet date. Amounts reclassified to net earnings relate to the realized gains
(losses) on our investments and other financial instruments, excluding investments in unconsolidated affiliates, and are included
in Realized gains and losses, net on the Consolidated Statements of Earnings.
Changes in the balance of Other comprehensive earnings (loss) by component are as follows:
Unrealized gain on
investments and other
financial instruments, net
(excluding investments in
unconsolidated affiliates)
Unrealized
(loss) gain
relating to
investments in
unconsolidated
affiliates
Unrealized
(loss) gain on
foreign currency
translation and
cash flow
hedging
(In millions)
Minimum
pension
liability
adjustment
Total
Accumulated
Other
Comprehensive
(Loss) Earnings
Balance December 31, 2015
Other comprehensive
earnings
Balance December 31, 2016
Other comprehensive
earnings
Reclassification
adjustments
Distribution of FNFV to
Cannae Holdings
48
38
86
25
3
2
Balance December 31, 2017
$
116
$
Redeemable Non-controlling Interest
(78)
10
(68)
12
—
67
11
(15)
2
(13)
6
—
(24)
6
(18)
9
—
$
—
(7) $
—
(9) $
(69)
56
(13)
52
3
69
111
Subsequent to our acquisition of Lender Processing Services, Inc. ("LPS") in January 2014, we issued a 35% ownership
interest in ServiceLink to funds affiliated with Thomas H. Lee Partners ("THL" or "the minority interest holder"). THL has an
option to put its ownership interests of ServiceLink to us if no public offering of the corresponding business was consummated
after four years from the date of FNF's purchase of LPS. The units owned by THL (the "redeemable noncontrolling interests")
may be settled in cash or common stock of FNF or a combination of both at our election. As of January 2018, no public offering
was made and the redeemable noncontrolling interests were no longer subject to a holding requirement. The redeemable
noncontrolling interests will be settled at the current fair value at the time we receive notice of THL's put election as determined
by the parties or by a third party appraisal under the terms of the Unit Purchase Agreement. As a result of a recapitalization of
ServiceLink in 2015, the ownership interest by the minority interest holder was reduced from 35% to 21%. As of December 31,
2017, we do not believe the exercise of their remaining put right in ServiceLink to be probable.
As these redeemable noncontrolling interests provide for redemption features not solely within our control, we classify the
redeemable noncontrolling interests outside of permanent equity. Redeemable noncontrolling interests held by third parties in
subsidiaries owned or controlled by FNF is reported on the Consolidated Balance Sheet outside permanent of equity; and the
Consolidated Statement of Earnings reflects the respective redeemable noncontrolling interests in Net earnings (loss) attributable
to non-controlling interests, the effect of which is removed from the net earnings attributable to Fidelity National Financial, Inc.
common shareholders.
59
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Earnings Per Share
Basic earnings per share, as presented on the Consolidated Statement of Earnings, is computed by dividing net earnings
available to common shareholders by the weighted average number of common shares outstanding during the period. In periods
when earnings are positive, diluted earnings per share is calculated by dividing net earnings available to common shareholders
by the weighted average number of common shares outstanding plus the impact of assumed conversions of potentially dilutive
securities. For periods when we recognize a net loss, diluted earnings per share is equal to basic earnings per share as the impact
of assumed conversions of potentially dilutive securities is considered to be antidilutive. We have granted certain stock options,
shares of restricted stock, convertible debt instruments and certain other convertible share based payments which have been treated
as common share equivalents for purposes of calculating diluted earnings per share for periods in which positive earnings have
been reported.
Options or other instruments which provide the ability to purchase shares of our common stock that are antidilutive are
excluded from the computation of diluted earnings per share. For the year ended December 31, 2017, no antidilutive options were
outstanding. For the year ended December 31, 2016 and 2015, options to purchase two million shares and one million shares,
respectively, of our common stock were excluded from the computation of diluted earnings per share.
Basic and diluted earnings per share attributable to our former FNFV group common stock for the 2017 period were calculated
using weighted average shares outstanding through the date of the FNFV Split-off, November 17, 2017.
Stock-Based Compensation Plans
We account for stock-based compensation plans using the fair value method. Using the fair value method of accounting,
compensation cost is measured based on the fair value of the award at the grant date, using the Black-Scholes Model, and recognized
over the service period.
Management Estimates
The preparation of these Consolidated Financial Statements in conformity with GAAP requires us to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date
of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Certain Reclassifications
Certain reclassifications have been made in the 2016 and 2015 Consolidated Financial Statements to conform to classifications
used in 2017. These reclassifications have not changed net earnings or total equity, as previously reported.
See Note G. Discontinued Operations for further information on reclassifications related to disposed businesses.
As of December 31, 2017, we have reclassified our Computer software to Other intangible assets, net. The impact for the
Consolidated Balance Sheet as of December 31, 2016 was a decrease to Computer software and corresponding increase to Other
intangible assets, net of $114 million. See Note H. Other Intangible Assets for further details.
Note B.
Acquisitions
The results of operations and financial position of the entities acquired during any year are included in the Consolidated
Financial Statements from and after the date of acquisition.
Title
Title Guaranty of Hawaii
On August 31, 2017, FNF Group completed its acquisition of 90% of the membership interest of Title Guaranty of
Hawaii ("Title Guaranty") for $98 million. Title Guaranty was previously an unaffiliated agent and will continue to be closely
aligned with Chicago Title as it formally becomes part of the FNF title company family. Founded in 1896, Title Guaranty is the
oldest title company in the State of Hawaii and is a leading provider of title and escrow services, with more than 300 employees
in branches across the State of Hawaii providing title insurance and real estate closing services. The acquisition does not meet the
definition of "significant" pursuant to Article 3 of Regulation S-X (§210.3-05). Further, the results of operations are not material
to our historical financial statements.
60
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
We paid total consideration, net of cash received, of $93 million in exchange for 90% of the equity interests of Title Guaranty.
The total cash consideration paid was as follows (in millions):
Total cash paid
Less: Cash acquired
Total net consideration paid
$
$
98
(5)
93
The purchase price has been initially allocated to Title Guaranty's assets acquired and liabilities assumed based on our best
estimates of their fair values as of the acquisition date. Goodwill has been recorded based on the amount that the purchase price
exceeds the fair value of the net assets acquired. The goodwill recorded is expected to be deductible for tax purposes. These
estimates are preliminary and subject to adjustments as we complete our valuation process with respect to Title plant, Goodwill,
and Other intangible assets.
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for
the assets acquired and liabilities assumed as of the acquisition date (in millions):
Accounts receivable
Property and equipment
Other intangible assets
Goodwill
Title plant
Prepaid expenses and other
Total assets acquired
Accounts payable and accrued liabilities
Total liabilities assumed
Non-controlling interests assumed
Total liabilities and equity assumed
Net assets acquired
Fair
Value
1
4
60
40
3
1
109
5
5
11
16
93
$
$
The gross carrying value and weighted average estimated useful lives of Property and equipment and Other intangible assets
acquired in the Title Guaranty acquisition consist of the following (dollars in millions):
Property and equipment
Other intangible assets:
Customer relationships
Trade name
Non-compete agreements
Total Other intangible assets
Total
Other Title Acquisitions
Gross Carrying Value
4
$
Weighted Average
Estimated Useful Life
(in years)
5
10
10
5
52
7
1
60
64
$
During the year ended December 31, 2016, we completed several acquisitions of businesses (the "Title Acquisitions") aligned
with our Title segment. The Title Acquisitions do not meet the definition of "significant", individually or in the aggregate, pursuant
to Article 3 of Regulation S-X (§210.3-05). Further, their historical results of operations are not material to our financial statements.
61
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
We paid total consideration, net of cash received, of $89 million in exchange for the assets and/or equity interests of the Title
Acquisitions. The total consideration paid was as follows (in millions):
Cash paid
Less: Cash acquired
Total net consideration paid
$
$
92
(3)
89
The purchase price has been allocated to the Title Acquisitions' assets acquired and liabilities assumed based on our best
estimates of their fair values as of the acquisition date. Goodwill has been recorded based on the amount that the purchase price
exceeds the fair value of the net assets acquired.
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for
the assets acquired and liabilities assumed for the Title Acquisitions as of the acquisition date (in millions):
Trade and notes receivable
Other intangible assets
Goodwill
Prepaid expenses and other assets
Title plant
Property and equipment, net
Total assets acquired
Accounts payable and accrued liabilities
Deferred tax liability
Total liabilities assumed
Net assets acquired
Fair Value
5
68
48
1
2
3
127
30
8
38
89
$
$
The gross carrying value and weighted average estimated useful lives of Computer software and Other intangible assets
acquired in the Title Acquisitions consist of the following (dollars in millions):
Other intangible assets:
Customer relationships
Trade name
Non-compete agreements
Computer software
Other
Total Other intangible assets
Corporate and Other
Real Geeks and SkySlope
Gross Carrying Value
Weighted Average
Estimated Useful Life
(in years)
$
$
57
6
1
2
2
68
10
10
5
3
1
During the year ended December 31, 2017, CINC and FNF completed their acquisitions of Real Geeks, LLC ("RG") and
SkySlope, Inc. ("SS"), respectively (together, the "Real Estate Technology Acquisitions"). The Real Estate Technology Acquisitions
were made to supplement our Commissions, Inc. ("CINC") business. The Real Estate Technology Acquisitions do not meet the
definition of "significant", individually or in the aggregate, pursuant to Article 3 of Regulation S-X (§210.3-05). Further, their
historical results of operations are not material to our financial statements.
62
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
CINC and FNF paid total aggregate consideration, net of cash received, of $98 million in exchange for 100% and 67% of the
equity interests of RG and SS, respectively. The total consideration paid was as follows (in millions):
Total purchase price
Less: Cash acquired
Total net assets acquired
Less: Contingent consideration payable
Total net cash paid
$
$
101
(3)
98
(16)
82
The purchase price has been allocated to the Real Estate Technology Acquisitions' assets acquired and liabilities assumed
based on our best estimates of their fair values as of the acquisition date. Goodwill has been recorded based on the amount that
the purchase price exceeds the fair value of the net assets acquired. $37 million of the goodwill recorded is expected to be deductible
for tax purposes. These estimates are preliminary and subject to adjustments as we complete our valuation process with respect
to Goodwill and Other intangible assets.
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for
the assets acquired and liabilities assumed for the Real Estate Technology Acquisitions as of the acquisition date (in millions):
Other intangible assets
Goodwill
Property and equipment, net
Total assets acquired
Accounts payable and accrued liabilities
Deferred tax liability
Total liabilities assumed
Non-controlling interests
Total liabilities and equity assumed
Net assets acquired
Fair Value
38
92
1
131
1
9
10
23
33
98
$
$
The gross carrying value and weighted average estimated useful lives of the Other intangible assets acquired in the Real Estate
Technology Acquisitions consist of the following (dollars in millions):
Property and equipment, net
Other intangible assets:
Customer relationships
Trade name
Non-compete agreements
Computer software
Total Other intangible assets
Commissions, Inc.
Gross Carrying Value
1
$
Weighted Average
Estimated Useful Life
(in years)
1 - 5
14
5
2
17
38
10
10
5
7
$
On August 23, 2016, we completed our acquisition of CINC, a leading provider of web-based real estate marketing and
customer relationship management software for elite Realtors® and agent teams across North America, for $229 million. CINC’s
product offerings include software, marketing and services designed to enhance the productivity and sales results of elite Realtors®
and agent teams through lead generation and proactive lead management. CINC's financial position and results of operations from
the acquisition date are included in our Corporate and Other segment. The acquisition does not meet the definition of "significant"
pursuant to Article 3 of Regulation S-X (§210.3-05). Further, the results of operations are not material to our historical financial
statements.
63
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
We paid total consideration, net of cash received, of $229 million in exchange for 95% of the equity interests of CINC. The
total consideration paid was as follows (in millions):
Cash paid
Less: Cash Acquired
Total net consideration paid
$
$
240
(11)
229
The purchase price has been initially allocated to CINC's assets acquired and liabilities assumed based on our best estimates
of their fair values as of the acquisition date. Goodwill has been recorded based on the amount that the purchase price exceeds the
fair value of the net assets acquired.
The following table summarizes the total purchase price consideration and the preliminary fair value amounts recognized for
the assets acquired and liabilities assumed as of the acquisition date (in millions):
Trade and notes receivable, net
Prepaid and other assets
Other intangible assets
Goodwill
Income taxes receivable
Total assets acquired
Accounts payable and accrued liabilities
Deferred tax liability
Total liabilities assumed
Non-controlling interests
Total liabilities and equity assumed
Net assets acquired
Fair Value
1
2
90
165
2
260
7
12
19
12
31
229
$
$
The gross carrying value and weighted average estimated useful lives of Computer software and Other intangible assets
acquired in the CINC acquisition consist of the following (dollars in millions):
Other intangible assets:
Customer relationships
Tradename
Computer software
Non-compete agreements
Total Other intangible assets
Gross Carrying Value
Weighted Average
Estimated Useful Life
(in years)
$
$
46
13
28
3
90
10
10
7
4
For comparative purposes, selected unaudited pro-forma consolidated results of operations of FNF for the years ended
December 31, 2016 and 2015 are presented below. Pro-forma results presented assume the consolidation of CINC occurred as of
the beginning of the 2015 period. Amounts reflect our 95% ownership interest in CINC and are adjusted to exclude costs directly
attributable to the acquisition of CINC, including transaction costs.
Total revenues
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Year ended December 31,
2016
2015
$
7,285
$
653
6,695
529
64
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note C.
Fair Value Measurements
The fair value hierarchy established by the accounting standards on fair value measurements includes three levels which are
based on the priority of the inputs to the valuation technique. The fair value hierarchy gives the highest priority to quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs
used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest
level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities that are recorded in
the Consolidated Balance Sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities
in an active market that we have the ability to access.
Level 2. Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model
inputs that are observable either directly or indirectly for substantially the full term of the asset or liability.
Level 3. Financial assets and liabilities whose values are based on model inputs that are unobservable.
The following table presents our fair value hierarchy for those assets measured at fair value on a recurring basis as of
December 31, 2017 and 2016, respectively:
December 31, 2017
Level 1
Level 2
Level 3
Total
(In millions)
Assets:
Fixed-maturity securities available for sale:
U.S. government and agencies
State and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total
Fixed-maturity securities available for sale:
U.S. government and agencies
State and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total
$
— $
—
—
—
—
23
681
704
$
195
391
1,117
57
56
296
—
$
— $
—
—
—
—
—
—
195
391
1,117
57
56
319
681
$
2,112
$
— $
2,816
December 31, 2016
Level 1
Level 2
Level 3
Total
(In millions)
$
— $
—
—
—
—
32
386
418
$
117
615
1,508
109
58
283
—
$
— $
—
—
—
—
—
—
117
615
1,508
109
58
315
386
$
2,690
$
— $
3,108
Our Level 2 fair value measures for preferred stock and fixed-maturity securities available for sale are provided by a third-
party pricing service. We utilize one firm for our preferred stock and our bond portfolios. The pricing service is a leading global
provider of financial market data, analytics and related services to financial institutions. We rely on one price for each instrument
to determine the carrying amount of the assets on our balance sheet. The inputs utilized in these pricing methodologies include
observable measures such as benchmark yields, reported trades, broker dealer quotes, issuer spreads, two sided markets, benchmark
securities, bids, offers and reference data including market research publications. We review the pricing methodologies for all of
our Level 2 securities by obtaining an understanding of the valuation models and assumptions used by the third-party as well as
65
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
independently comparing the resulting prices to other publicly available measures of fair value and internally developed models.
The pricing methodologies used by the relevant third party pricing services are as follows:
• U.S. government and agencies: These securities are valued based on data obtained for similar securities in active markets
•
and from inter-dealer brokers.
State and political subdivisions: These securities are valued based on data obtained for similar securities in active markets
and from inter-dealer brokers. Factors considered include relevant trade information, dealer quotes and other relevant
market data.
• Corporate debt securities: These securities are valued based on dealer quotes and related market trading activity. Factors
considered include the bond's yield, its terms and conditions, or any other feature which may influence its risk and thus
marketability, as well as relative credit information and relevant sector news.
Foreign government bonds: These securities are valued based on a discounted cash flow model incorporating observable
market inputs such as available broker quotes and yields of comparable securities.
•
• Mortgage-backed/asset-backed securities: These securities are comprised of commercial mortgage-backed securities,
agency mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities. They are valued
based on available trade information, dealer quotes, cash flows, relevant indices and market data for similar assets in
active markets.
Preferred stock: Preferred stocks are valued by calculating the appropriate spread over a comparable US Treasury security.
Inputs include benchmark quotes and other relevant market data.
•
As of December 31, 2017 and 2016 we held no material assets or liabilities measured at fair value using Level 3 inputs.
There were no transfers of assets or liabilities measured at fair value using Level 1 inputs to Level 2 in the years ended
December 31, 2017 or 2016.
The carrying amounts of short-term investments, accounts receivable and notes receivable approximate fair value due to their
short-term nature. The fair value of our notes payable is included in Note J Notes Payable.
Additional information regarding the fair value of our investment portfolio is included in Note D Investments.
66
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note D. Investments
The carrying amounts and fair values of our available for sale securities at December 31, 2017 and 2016 are as follows:
December 31, 2017
Carrying
Value
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Fair
Value
Fixed maturity investments available for sale:
U.S. government and agencies
States and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total
Fixed maturity investments available for sale:
U.S. government and agencies
States and political subdivisions
Corporate debt securities
Foreign government bonds
Mortgage-backed/asset-backed securities
Preferred stock available for sale
Equity securities available for sale
Total
(In millions)
$
— $
$
$
195
391
196
387
1,117
1,110
57
56
319
681
58
55
307
517
$
2,816
$
2,630
$
4
11
1
1
12
172
201
$
(1) $
—
(4)
(2)
—
—
(8)
(15) $
195
391
1,117
57
56
319
681
2,816
December 31, 2016
Carrying
Value
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Fair
Value
(In millions)
$
— $
$
$
117
615
117
607
1,508
1,499
109
58
315
386
117
56
312
278
$
3,108
$
2,986
$
9
15
—
2
6
108
140
$
— $
(1)
(6)
(8)
—
(3)
—
(18) $
117
615
1,508
109
58
315
386
3,108
The cost basis of fixed maturity securities available for sale includes an adjustment for amortized premium or discount since
the date of purchase.
The change in net unrealized gains and (losses) on fixed maturities for the years ended December 31, 2017, 2016, and 2015
was $(1) million, $13 million, and $(64) million, respectively.
The following table presents certain information regarding contractual maturities of our fixed maturity securities at
December 31, 2017:
Maturity
One year or less
After one year through five years
After five years through ten years
After ten years
Mortgage-backed/asset-backed securities
December 31, 2017
Amortized
Cost
% of
Total
Fair
Value
% of
Total
$
496
1,219
31
5
55
(Dollars in millions)
27.5% $
67.5
1.7
0.3
3.0
496
1,227
32
5
56
27.3%
67.5
1.8
0.3
3.1
$
1,806
100.0% $
1,816
100.0%
67
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations
with or without call or prepayment penalties. Because of the potential for prepayment on mortgage-backed and asset-backed
securities, they are not categorized by contractual maturity.
Fixed maturity securities valued at approximately $128 million and $123 million were on deposit with various governmental
authorities at December 31, 2017 and 2016, respectively, as required by law.
Equity securities are carried at fair value. The change in net unrealized gains and losses on equity securities for the years
ended December 31, 2017, 2016 and 2015 was a net increase (decrease) of $56 million, $39 million, and $(4) million, respectively.
Net unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category
and length of time that individual securities have been in a continuous unrealized loss position at December 31, 2017 and 2016
are as follows (in millions):
December 31, 2017
Corporate debt securities
U.S. government and agencies
Foreign government bonds
Equity securities available for sale
Total temporarily impaired securities
December 31, 2016
States and political subdivisions
Corporate debt securities
Foreign government bonds
Preferred stock available for sale
Total temporarily impaired securities
Less than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
464
149
—
121
734
$
$
(3) $
(1)
—
(7)
(11) $
51
—
10
5
66
$
$
(1) $
—
(2)
(1)
(4) $
515
149
10
126
800
$
$
(4)
(1)
(2)
(8)
(15)
Less than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
107
410
85
55
657
$
$
(1) $
(4)
(4)
(2)
(11) $
— $
11
20
42
73
$
— $
(2)
(4)
(1)
(7) $
107
421
105
97
730
$
$
(1)
(6)
(8)
(3)
(18)
$
$
$
$
The unrealized losses for the corporate debt securities and U.S. government bonds were primarily caused by fluctuations in
interest rates. The unrealized losses for the foreign government bonds were primarily caused by foreign exchange fluctuations.
We consider the unrealized losses related to these securities to be temporary rather than changes in credit quality. We expect to
recover the entire amortized cost basis of our temporarily impaired fixed maturity securities as we do not intend to sell these
securities and we do not believe that we will be required to sell the fixed maturity securities before recovery of the cost basis. For
these reasons, we do not consider these securities other-than-temporarily impaired at December 31, 2017. It is reasonably possible
that declines in fair value below cost not considered other-than-temporary in the current period could be considered to be other-
than-temporary in a future period and earnings would be reduced to the extent of the impairment.
The unrealized losses for the equity securities available for sale were primarily caused by market volatility in certain investees
and market sectors. We expect to recover the entire cost basis of our temporarily impaired equity securities available for sale as
we do not intend to sell these securities and we do not believe that we will be required to sell the securities before recovery of the
cost basis. For these reasons, we do not consider these securities other-than-temporarily impaired at December 31, 2017. It is
reasonably possible that declines in fair value below cost not considered other-than-temporary in the current period could be
considered to be other-than-temporary in a future period and earnings would be reduced to the extent of the impairment.
During the years ended December 31, 2017, 2016 and 2015 we incurred impairment charges relating to investments that were
determined to be other-than-temporarily impaired, which resulted in impairment charges of $1 million, $19 million and $14
million, respectively. The impairment charges in 2017 related to a fixed maturity security of an investee entering Chapter 11
bankruptcy which has exhibited a decreasing fair market value and from which we are uncertain of our ability to recover our initial
investment.The impairment charges in 2016 related to fixed maturity securities of $13 million, an investment in an unconsolidated
affiliate of $3 million, and an other long term investment of $3 million. In each case, we determined the credit risk of the holdings
68
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
was high and the ability to recover our investment was unlikely. Impairment charges in the 2015 period was for a fixed maturity
security that we determined the credit risk was high and the ability of the issuer to pay the full amount of the principal outstanding
was unlikely.
As of December 31, 2017, we held no securities for which other-than-temporary impairments had been previously recognized.
As of December 31, 2016, we held $7 million investments for which an other-than-temporary impairment had been previously
recognized. It is possible that future events may lead us to recognize potential future impairment losses related to our investment
portfolio and that unanticipated future events may lead us to dispose of certain investment holdings and recognize the effects of
any market movements in our consolidated financial statements.
The following table presents realized gains and losses on investments and other assets and proceeds from the sale or maturity
of investments and other assets for the years ended December 31, 2017, 2016, and 2015, respectively:
Fixed maturity securities available for sale
Preferred stock available for sale
Other long-term investments
Loss on debt conversions
Property, plant and equipment
Other intangible assets
Other realized gains and losses, net
Total
Fixed maturity securities available for sale
Preferred stock available for sale
Equity securities available for sale
Investments in unconsolidated affiliates
Other intangible assets
Other assets
Total
Fixed maturity securities available for sale
Preferred stock available for sale
Equity securities available for sale
Other assets
Total
Year ended December 31, 2017
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gains
(Losses)
Gross
Proceeds
from Sale/
Maturity
$
$
7
—
(In millions)
(8) $
—
$
(1) $
—
9
(6)
2
(1)
(1)
2
$
968
10
21
—
4
—
—
1,003
Year ended December 31, 2016
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gains
(Losses)
Gross
Proceeds
from Sale/
Maturity
(In millions)
$
$
4
1
11
(16) $
—
(1)
$
(12) $
1
10
(3)
(1)
(3)
(8) $
624
9
50
—
—
6
689
Year ended December 31, 2015
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gains
(Losses)
Gross
Proceeds
from Sale/
Maturity
(In millions)
$
$
14
1
13
(17) $
—
(11)
$
69
(3) $
1
2
11
11
1,076
58
51
—
$
1,185
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Interest and investment income consists of the following:
Cash and cash equivalents
Fixed maturity securities available for sale
Equity securities and preferred stock available for sale
Short-term investments
Other
Total
Note E.
Property and Equipment
Property and equipment consists of the following:
Land
Buildings
Leasehold improvements
Data processing equipment
Furniture, fixtures and equipment
Accumulated depreciation and amortization
Year Ended December 31,
2017
2016
2015
$
3
61
28
4
35
(In millions)
$
— $
76
28
2
20
—
82
24
—
15
$
131
$
126
$
121
December 31,
2017
2016
(In millions)
$
22
$
111
92
156
224
605
(412)
193
$
$
23
108
89
159
225
604
(412)
192
Depreciation expense on property and equipment was $48 million, $45 million, and $42 million for the years ended
December 31, 2017, 2016, and 2015, respectively.
Note F.
Goodwill
Goodwill consists of the following:
Balance, December 31, 2015
Goodwill acquired during the year (1)
Adjustments to prior year acquisitions
Balance, December 31, 2016
Goodwill acquired during the year (1)
Adjustments to prior year acquisitions
Balance, December 31, 2017
_____________________________________
(1) See Note B Acquisitions for further discussion of significant goodwill acquired.
Title
Corporate
and Other
(In millions)
Total
$
2,303
$
45
$
2,348
48
(6)
2,345
$
$
84
3
170
(5)
210
104
—
$
218
(11)
2,555
188
3
$
2,432
$
314
$
2,746
70
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note G.
Discontinued Operations
Black Knight
As a result of the BK Distribution, we have reclassified the assets and liabilities divested as assets and liabilities of discontinued
operations in our Consolidated Balance Sheet as of December 31, 2016. Further, the financial results of Black Knight have been
reclassified to discontinued operations for all periods presented in our Consolidated Statements of Earnings. We retained no
ownership in Black Knight.
We have various agreements with Black Knight to provide technology, data and analytics services, as well as corporate shared
services and information technology. We are also a party to certain other agreements under which we incur other expenses or
receive revenues from Black Knight. We expect to continue utilizing Black Knight to provide technology and data and analytics
services for the foreseeable future. Subsequent to the BK Distribution, Black Knight is considered a related party for FNF. The
cash inflows and outflows from and to Black Knight as well as revenues and expenses included in continuing operations subsequent
to September 29, 2017, the date of the BK Distribution, which were previously eliminated in our consolidated financial statements
as intra-entity transactions, are not material to our results of operations for the year ended December 31, 2017.
A summary of the operations of Black Knight included in discontinued operations is shown below:
Revenues:
Escrow, title-related and other fees
Realized gains and losses, net
Total revenues
Expenses:
Personnel costs
Other operating expenses
Depreciation and amortization
Interest expense
Total expenses
Earnings from discontinued operations before income taxes
Income tax expense
Net earnings from discontinued operations
Less: Net earnings attributable to non-controlling interests
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Cash flow from discontinued operations data:
Net cash provided by operations
Net cash used in investing activities
Year Ended December 31,
2017
745
(13)
732
292
145
154
42
633
99
40
59
36
23
240
(46)
$
$
$
2016
(in millions)
963
$
—
963
393
190
208
62
853
110
36
74
47
27
326
(230)
$
$
2015
874
(5)
869
377
156
195
49
777
92
35
57
28
29
248
(103)
$
$
$
71
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
A summary of the financial position of Black Knight included as assets and liabilities of discontinued operations is shown
below:
Cash and cash equivalents
Short term investments
Trade and notes receivable
Goodwill
Prepaid expenses and other assets
Capitalized software, net
Other intangible assets, net
Property and equipment, net
Total assets of discontinued operations
Accounts payable and accrued liabilities
Notes payable
Income taxes payable
Deferred tax liabilities
Total liabilities of discontinued operations
FNFV
December 31,
2016
(in millions)
130
4
157
2,304
184
450
359
173
3,761
287
1,526
26
334
2,173
$
$
$
$
As a result of the FNFV Split-Off we have reclassified the assets and liabilities divested as assets and liabilities of discontinued
operations in our Consolidated Balance Sheet as of December 31, 2016. Further, the financial results of FNFV Group have been
reclassified to discontinued operations for all periods presented in our Consolidated Statements of Earnings. Subsequent to the
FNFV Split-Off, Cannae is considered a related party for FNF. The cash inflows and outflows from and to Cannae as well as
revenues and expenses included in continuing operations subsequent to November 17, 2017, the date of the FNFV Split-Off, which
were previously eliminated in our consolidated financial statements as intra-entity transactions, are not material to our results of
operations for the year ended December 31, 2017.
In conjunction with the FNFV Split-Off, FNTIC, Chicago Title, and Commonwealth Title contributed an aggregate of $100
million to Cannae in exchange for 5,706,134 shares of Cannae common stock. As of December 31, 2017, we own approximately
8.1% of Cannae's outstanding common equity. In addition we issued to Cannae a revolver note (the "Cannae Revolver") in the
aggregate principal amount of up to $100 million, which accrues interest at LIBOR plus 450 basis points and matures on the five-
year anniversary of the date of the revolver note. The maturity date is automatically extended for additional five-year terms unless
notice of non-renewal is otherwise provided by either FNF or Cannae, in their sole discretion. As of December 31, 2017, there is
no outstanding balance under the Cannae Revolver.
In connection with the FNFV Split-Off, the following material agreements were entered into by and between the Company
and Cannae (the “Split-Off Agreements”):
•
a Reorganization Agreement, dated as of November 17, 2017, by and between the Company and Cannae, which
provides for, among other things, the principal corporate transactions required to effect the Split-Off, certain conditions
to the Split-Off and provisions governing the relationship between the Company and Cannae with respect to and resulting
from the Split-Off;
•
a Tax Matters Agreement, dated as of November 17, 2017, by and between the Company and Cannae, which
governs the Company’s and Cannae’s respective rights, responsibilities and obligations with respect to taxes and tax
benefits, the filing of tax returns, the control of audits and other tax matters; and
•
a Voting Agreement, dated as of November 17, 2017, by and between the Company and Cannae, pursuant to
which the Company agrees to appear or cause all shares of Cannae common stock that the Company or its subsidiaries,
as applicable, own after the Split-Off to be counted as present at any meeting of the stockholders of Cannae, for the
purpose of establishing a quorum, and agrees to vote all of such shares of Cannae common stock (or cause them to be
72
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
voted) in the same manner as, and in the same proportion to, all shares voted by holders of Cannae common stock (other
than the Company and its subsidiaries).
A summary of the operations of FNFV included in discontinued operations is shown below:
Revenues:
Escrow, title-related and other fees
Restaurant revenue
Interest and investment income
Realized gains and losses, net
Total revenues
Expenses:
Personnel costs
Other operating expenses
Cost of restaurant revenue
Depreciation and amortization
Interest expense
Total expenses
Earnings from discontinued operations before income taxes
Income tax expense (benefit)
Earnings from continuing operations before equity in (losses) earnings of unconsolidated
affiliates
Equity in losses of unconsolidated affiliates
Net earnings (loss) from discontinued operations
Less: Net (losses) earnings attributable to non-controlling interests
Net earnings (loss) attributable to Fidelity National Financial, Inc. common shareholders
Cash flow from discontinued operations data:
Net cash (used in) provided by operations
Net cash (used in) provided by investing activities
Year Ended December 31,
2017
111
981
5
277
1,374
148
94
861
51
9
1,163
211
103
$
2016
(in millions)
168
$
1,158
3
6
1,335
165
106
984
63
10
1,328
7
(11)
108
(12)
96
(13)
109
$
18
(22)
(4)
—
(4) $
2015
204
1,412
2
(19)
1,599
158
167
1,195
65
8
1,593
6
(19)
25
(22)
3
16
(13)
(134) $
(11)
$
81
67
29
166
$
$
$
73
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
A summary of the financial position of FNFV included as assets and liabilities of discontinued operations is shown below:
Investments:
Fixed maturities available for sale, at fair value
Equity securities available for sale, at fair value
Investments in unconsolidated affiliates
Other long term investments
Short term investments
Total investments
Cash and cash equivalents
Trade and notes receivable
Goodwill
Prepaid expenses and other assets
Capitalized software, net
Deferred tax assets
Other intangible assets, net
Property and equipment, net
Total assets of discontinued operations
Accounts payable and accrued liabilities
Notes payable
Income taxes payable
Total liabilities of discontinued operations
December 31,
2016
(in millions)
25
52
407
12
2
498
144
52
206
33
16
58
200
251
1,458
214
233
18
465
$
$
$
$
As a result of the reclassification of the assets and liabilities of FNFV to assets and liabilities of discontinued operations, the
deferred tax assets of FNFV, which were formerly netted with our consolidated deferred tax liability in our Condensed Consolidated
Balance Sheet as of December 31, 2016, were reclassified to assets of discontinued operations resulting in an increase to both our
assets and liabilities of $58 million as of December 31, 2016.
Reconciliation to Consolidated Financial Statements
A reconciliation of the net earnings of Black Knight and FNFV to the Statement of Operations is shown below:
Earnings from discontinued operations attributable to Black Knight
Earnings (loss) from discontinued operations attributable to FNFV
Total earnings from discontinued operations, net of tax
Year Ended December 31,
2017
$
$
59
96
155
2016
(in millions)
74
$
(4)
70
$
$
$
2015
57
3
60
74
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
A reconciliation of the financial position of Black Knight and FNFV to the Balance Sheet is shown below:
Assets:
Assets of discontinued operations attributable to Black Knight
Assets of discontinued operations attributable to FNFV
Total assets of discontinued operations
Liabilities:
Liabilities of discontinued operations attributable to Black Knight
Liabilities of discontinued operations attributable to FNFV
Total liabilities of discontinued operations
Note H.
Other Intangible Assets
Other intangible assets consist of the following:
Customer relationships and contracts
Trademarks and tradenames
Computer software
Accumulated amortization
December 31,
2016
(in millions)
$
$
$
$
3,761
1,458
5,219
2,173
465
2,638
December 31,
2017
2016
(In millions)
860
$
81
357
1,298
(680)
618
$
748
74
324
1,146
(561)
585
$
$
Amortization expense for amortizable intangible assets, which consist primarily of customer relationships and computer
software, was $130 million, $110 million, and $103 million for the years ended December 31, 2017, 2016 and 2015, respectively.
Estimated amortization expense for the next five years for assets owned at December 31, 2017, is $100 million in 2018, $93 million
in 2019, $79 million in 2020, $64 million in 2021 and $50 million in 2022.
Note I.
Accounts Payable and Other Accrued Liabilities
Accounts payable and other accrued liabilities consist of the following:
Accrued benefits
Salaries and incentives
Accrued rent
Trade accounts payable
Accrued recording fees and transfer taxes
Accrued premium taxes
Deferred revenue
Other accrued liabilities
75
December 31,
2017
2016
(In millions)
$
254
277
22
39
17
20
107
219
955
$
245
267
19
42
16
26
103
215
933
$
$
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note J.
Notes Payable
Notes payable consists of the following:
December 31,
2017
2016
(In millions)
Unsecured notes, net of discount, interest payable semi-annually at 5.50%, due September 2022
$
397
$
Unsecured convertible notes, net of discount, interest payable semi-annually at 4.25%, due August
2018
Unsecured notes, net of discount, interest payable semi-annually at 6.60%, due May 2017
Revolving Credit Facility, unsecured, unused portion of $500 at December 31, 2017, due April 2022
with interest payable monthly at LIBOR + 1.40% (2.76% at December 31, 2017)
Other
65
—
295
2
397
291
300
(3)
2
$
759
$
987
At December 31, 2017, the estimated fair value of our long-term debt was approximately $940 million, or $173 million higher
than its carrying value, excluding $8 million of net unamortized debt issuance costs and premium/discount. The fair value of our
unsecured notes payable was $638 million as of December 31, 2017. The fair values of our unsecured notes payable are based on
established market prices for the securities on December 31, 2017 and are considered Level 2 financial liabilities. The carrying
value of the Revolving Credit Facility approximates fair value at December 31, 2017, as it is a variable rate instrument with a
short reset period (monthly) which reflects current market rates. The Revolving Credit Facility is considered a Level 2 financial
liability.
On June 25, 2013, we entered into an agreement to amend and restate our existing $800 million Second Amended and Restated
Credit Agreement (the “Existing Credit Agreement”), dated as of April 16, 2012 with Bank of America, N.A., as administrative
agent (in such capacity, the “Administrative Agent”) and the other agents party thereto (the “Revolving Credit Facility”). On April
27, 2017, the Revolving Credit Facility was amended (the "Restated Credit Agreement") to extend the term for 5 years, from a
maturity date of July 15, 2018 to April 27, 2022. Revolving loans under the credit facility generally bear interest at a variable rate
based on either (i) the base rate (which is the highest of (a) 0.5% in excess of the federal funds rate, (b) the Administrative Agent's
“prime rate”, or (c) the sum of 1% plus one-month LIBOR) plus a margin of between 10 and 60 basis points depending on the
senior unsecured long-term debt ratings of FNF or (ii) LIBOR plus a margin of between 110 and 160 basis points depending on
the senior unsecured long-term debt ratings of the Company. Based on our current Moody’s and Standard & Poor’s senior unsecured
long-term debt ratings of Baa3/BBB, respectively, the applicable margin for revolving loans subject to LIBOR is 140 basis points.
In addition, we pay a commitment fee of between 15 and 40 basis points on the entire facility, also depending on our senior
unsecured long-term debt ratings. Under the Revolving Credit Facility, we are subject to customary affirmative, negative and
financial covenants, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness,
restrictions on investments, dispositions and transactions with affiliates, limitations on dividends and other restricted payments,
a minimum net worth and a maximum debt to capitalization ratio. The Revolving Credit Facility also includes customary events
of default for facilities of this type (with customary grace periods, as applicable) and provides that, if an event of default occurs
and is continuing, the interest rate on all outstanding obligations may be increased, payments of all outstanding loans may be
accelerated and/or the lenders' commitments may be terminated. These events of default include a cross-default provision that,
subject to limited exceptions, permits the lenders to declare the Revolving Credit Facility in default if: (i) (a) we fail to make any
payment after the applicable grace period under any indebtedness with a principal amount (including undrawn committed amounts)
in excess of 3.0% of our net worth, as defined in the Revolving Credit Facility, or (b) we fail to perform any other term under any
such indebtedness, or any other event occurs, as a result of which the holders thereof may cause it to become due and payable
prior to its maturity; or (ii) certain termination events occur under significant interest rate, equity or other swap contracts. In
addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Revolving
Credit Facility shall automatically become immediately due and payable, and the lenders' commitments will automatically
terminate. As of December 31, 2017, there is $295 million outstanding, net of $5 million in unamortized debt issuance costs, and
$500 million of remaining borrowing capacity under the Revolving Credit Facility.
On August 28, 2012, we completed an offering of $400 million in aggregate principal amount of 5.50% notes due September
2022 (the "5.50% notes"), pursuant to an effective registration statement previously filed with the Securities and Exchange
Commission. The notes were priced at 99.513% of par to yield 5.564% annual interest. The 5.50% notes will pay interest semi-
annually on the 1st of March and September, beginning March 1, 2013. These notes contain customary covenants and events of
default for investment grade public debt. These events of default include a cross default provision, with respect to any other debt
of the Company in an aggregate amount exceeding $100 million for all such debt, arising from (i) failure to make a principal
76
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
payment when due or (ii) the occurrence of an event which results in such debt being due and payable prior to its scheduled
maturity.
On August 2, 2011, we completed an offering of $300 million in aggregate principal amount of 4.25% convertible senior
notes due August 2018 (the "Notes") in an offering conducted in accordance with Rule 144A under the Securities Act of 1933, as
amended. The Notes contain customary event-of-default provisions which, subject to certain notice and cure-period conditions,
can result in the acceleration of the principal amount of, and accrued interest on, all outstanding Notes if we breach the terms of
the Notes or the indenture pursuant to which the Notes were issued. The Notes are unsecured and unsubordinated obligations and
(i) rank senior in right of payment to any of our existing or future unsecured indebtedness that is expressly subordinated in right
of payment to the Notes; (ii) rank equal in right of payment to our existing and future unsecured indebtedness that is not so
subordinated; (iii) are effectively subordinated in right of payment to any of our secured indebtedness to the extent of the value
of the assets securing such indebtedness; and (iv) are structurally subordinated to all existing and future indebtedness and liabilities
of our subsidiaries. Interest is payable on the principal amount of the Notes, semi-annually in arrears in cash on February 15 and
August 15 of each year, commencing February 15, 2012. The Notes mature on August 15, 2018, unless earlier purchased by us
or converted. The Notes were issued for cash at 100% of their principal amount. However, for financial reporting purposes, the
notes were deemed to have been issued at 92.818% of par value, and as such we recorded a discount of $22 million to be amortized
to August 2018, when the Notes mature. The Notes will be convertible into cash, shares of common stock, or a combination of
cash and shares of common stock, at our election, based on an initial conversion rate, subject to adjustment, of 46.387 shares per
$1,000 principal amount of the Notes (which represents an initial conversion price of approximately $21.56 per share), only in
the following circumstances and to the following extent: (i) during any calendar quarter commencing after December 31, 2011,
if, for each of at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on, and
including, the last trading day of the immediately preceding calendar quarter, the last reported sale price per share of our common
stock on such trading day is greater than or equal to 130% of the applicable conversion price on such trading day; (ii) during the
five consecutive business day period immediately following any ten consecutive trading day period (the “measurement period”)
in which, for each trading day of the measurement period, the trading price per $1,000 principal amount of notes was less than
98% of the product of the last reported sale price per share of our common stock on such trading day and the applicable conversion
rate on such trading day; (iii) upon the occurrence of specified corporate transactions; or (iv) at any time on and after May 15,
2018. However, in all cases, the Notes will cease to be convertible at the close of business on the second scheduled trading day
immediately preceding the maturity date. It is our intent and policy to settle conversions through “net-share settlement”. Generally,
under “net-share settlement,” the conversion value is settled in cash, up to the principal amount being converted, and the conversion
value in excess of the principal amount is settled in shares of our common stock. As of October 1, 2013, these notes were convertible
under the 130% Sale Price Condition described above. During the year ended December 31, 2017, we repurchased Notes with
aggregate principal of $230 million for $549 million.
Gross principal maturities of notes payable at December 31, 2017 are as follows (in millions):
2018
2019
2020
2021
2022
Thereafter
Note K.
Income Taxes
Income tax expense on continuing operations consists of the following:
Current
Deferred
77
$
$
66
—
1
—
700
—
767
Year Ended December 31,
2017
2016
2015
(In millions)
$
$
476
(241)
235
$
$
333
14
347
$
$
275
(1)
274
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Year Ended December 31,
2017
2016
2015
235
144
25
4
3
32
—
$
347
$
25
29
1
3
33
—
$
411
$
405
$
274
16
(40)
(7)
3
(44)
(21)
225
Year Ended December 31,
2017
2016
2015
35.0%
35.0%
35.0%
1.8
(0.2)
(0.4)
(1.4)
(0.1)
—
(10.7)
3.2
2.8
(0.1)
(0.5)
(1.7)
(0.1)
0.2
—
0.8
27.2%
36.4%
3.0
(0.2)
(0.8)
—
(0.1)
0.4
—
(1.6)
35.7%
Total income tax expense (benefit) was allocated as follows (in millions):
Net earnings from continuing operations
$
Tax expense attributable to net earnings from discontinued operations
Other comprehensive earnings (loss):
Unrealized gain (loss) on investments and other financial instruments
Unrealized gain (loss) on foreign currency translation and cash flow hedging
Minimum pension liability adjustment
Total income tax expense (benefit) allocated to other comprehensive earnings
Additional paid-in capital, stock-based compensation
Total income taxes
A reconciliation of the federal statutory rate to our effective tax rate is as follows:
Federal statutory rate
State income taxes, net of federal benefit
Deductible dividends paid to FNF 401(k) plan
Tax exempt interest income
Stock compensation
Tax Credits
Consolidated Partnerships
Tax reform
Non-deductible expenses and other, net
Effective tax rate
78
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
The significant components of deferred tax assets and liabilities at December 31, 2017 and 2016 consist of the following:
Deferred Tax Assets:
Employee benefit accruals
Net operating loss carryforwards
Insurance reserve discounting
Accrued liabilities
Allowance for uncollectible accounts receivable
Pension plan
Tax credits
State income taxes
Other
Total gross deferred tax asset
Less: valuation allowance
Total deferred tax asset
Deferred Tax Liabilities:
Title plant
Amortization of goodwill and intangible assets
Other investments
Other
Investment securities
Depreciation
Partnerships
Insurance reserve discounting
Total deferred tax liability
Net deferred tax liability
December 31,
2017
2016
(In millions)
$
$
$
$
$
$
68
9
26
10
4
2
40
4
1
164
22
142
$
(55) $
(113)
(5)
(13)
(41)
(9)
(75)
—
(311) $
(169) $
36
22
—
18
—
5
41
13
3
138
10
128
(85)
(174)
(4)
(11)
(39)
(12)
(94)
(79)
(498)
(370)
Our net deferred tax liability was $169 million and $370 million at December 31, 2017, and 2016, respectively. Deferred tax
liability incurred a one-time reduction of $93 million which was primarily a result of the decrease in the corporate tax rate from
35% to 21% associated with the enactment of the Tax Cuts and Jobs Act of 2017 ("Tax Reform"). The significant changes in the
deferred taxes are as follows: The increase in the deferred tax asset for employee benefit accruals is a $71 million increase in
deferred compensation related to a change in accounting method offset by a $38 million decrease driven by Tax Reform. The
deferred tax liability for insurance reserve discounting decreased by $119 million largely due to the redomestication of certain of
our insurance underwriters in 2017, offset by an increase of $15 million attributable to Tax Reform. The deferred tax liability for
title plant decreased by $30 million primarily due to Tax Reform. The deferred tax liability relating to partnerships decreased by
$19 million primarily due to an increase of $23 million related to ServiceLink activity offset by a $42 million decrease driven by
Tax Reform. The deferred tax liability on amortization decreased by $61 million primarily due to Tax Reform. The decrease in
the deferred tax asset on net operating losses of $13 million is primarily attributable to usage of assets in the current year and Tax
Reform.
We had a valuation allowance of $22 million and $10 million at December 31, 2017 and 2016, respectively. The increase in
the valuation allowance is primarily attributable to Tax Reform which decreased the ability to use credit carryovers before they
expire in future years.
SEC Staff Accounting Bulletin No. 118 ("SAB 118"), has provided guidance for companies that have not completed their
accounting for the income tax effects of the Tax Reform in the period of enactment, allowing for a measurement period of up to
one year after the enactment date to finalize the recording of the related tax impacts. As of December 31, 2017, we have not
completed our accounting for the tax effects of the enactment of the Tax Reform, however, we have made a reasonable estimate
79
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
of the effects on our deferred tax balances. In other cases, we have not been able to make a reasonable estimate and will continue
to analyze the Tax Reform in order to finalize any related impacts within the measurement period.
At December 31, 2017, we have net operating losses on a pretax basis of $36 million available to carryforward and offset
future federal taxable income. The net operating losses are US federal net operating losses arising from acquisitions made since
2008, including CINC and are subject to an annual Internal Revenue Code Section 382 limitation. These losses will begin to
expire in year 2021 and we fully anticipate utilizing these losses prior to expiration with the exception of $3 million of gross net
operating losses that are offset by a $1 million valuation allowance.
At December 31, 2017 and 2016, we had $40 million and $41 million of tax credits, respectively. The credits primarily consist
of general business credits from acquisitions in the Restaurant Group. We anticipate that these credits will be utilized prior to
expiration after a valuation allowance of $21 million on the general business credits.
A tax benefit of $21 million associated with the exercise of employee stock options and the vesting of restricted stock grants
was allocated to equity for the year ended December 31, 2015. For the years ended December 31, 2017 and 2016 we have recorded
$13 million and $17 million in income tax benefit related to the tax effects associated with the exercise of stock options and vesting
of restricted stock. Our adoption of ASU 2016-09 in 2016 resulted in a change in accounting for the tax-effects of stock-based
compensation. Beginning January 1, 2016, the tax-effect of the difference in grant date and vest date fair value of stock-based
compensation is included in total income tax expense (benefit).
As of December 31, 2017 and 2016, we had approximately $11 million (including interest of less than $1 million) and $18
million (including interest of less than $1 million), respectively, of total gross unrecognized tax benefits that, if recognized, would
favorably affect our income tax rate. These amounts are reported on a gross basis and do not reflect a federal tax benefit on state
income taxes. We record interest and penalties related to income taxes as a component of income tax expense.
The Internal Revenue Service (“IRS”) has selected us to participate in the Compliance Assurance Program that is a real-time
audit. We are currently under audit by the Internal Revenue Service for the 2016 through 2018 tax years. We file income tax returns
in various foreign and US state jurisdictions.
Note L.
Summary of Reserve for Claim Losses
A summary of the reserve for claim losses follows:
Beginning balance
Change in reinsurance recoverable
Claim loss provision related to:
Current year
Prior years
Total title claim loss provision
Claims paid, net of recoupments related to:
Current year
Prior years
Total title claims paid, net of recoupments
Ending balance of claim loss reserve for title insurance
Year Ended December 31,
2017
2016
2015
(Dollars in millions)
$
1,487
(4)
$
1,583
(8)
219
19
238
(8)
(223)
(231)
1,490
$
$
236
(79)
157
(10)
(235)
(245)
1,487
$
1,621
1
224
22
246
(7)
(278)
(285)
1,583
$
Provision for title insurance claim losses as a percentage of title insurance premiums
4.9%
3.3%
5.7%
We continually update loss reserve estimates as new information becomes known, new loss patterns emerge, or as other
contributing factors are considered and incorporated into the analysis of reserve for claim losses. Estimating future title loss
payments is difficult because of the complex nature of title claims, the long periods of time over which claims are paid, significantly
varying dollar amounts of individual claims and other factors.
In the quarter ended December 31, 2017, we reduced the current quarter provision for claims losses to 4.5%. During the
quarter ended December 31, 2016, we released excess title reserves of $97 million in addition to reducing the provision for claims
80
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
losses for the quarter to 5.0%. In response to favorable development on recent year claims, the average provision rate has decreased
in each of the years ended 2015, 2016, and 2017.
Due to the uncertainty inherent in the process and to the judgment used by management, the ultimate liability may be greater
or less than our current reserves. If actual claims loss development varies from what is currently expected and is not offset by
other factors, it is possible that our recorded reserves may fall outside a reasonable range of our actuary's central estimate, which
may require additional reserve adjustments in future periods.
Note M.
Commitments and Contingencies
Legal and Regulatory Contingencies
In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations,
some of which include claims for punitive or exemplary damages. With respect to our title insurance operations, this customary
litigation includes but is not limited to a wide variety of cases arising out of or related to title and escrow claims, for which we
make provisions through our loss reserves. Additionally, like other companies, our ordinary course litigation includes a number
of class action and purported class action lawsuits, which make allegations related to aspects of our operations. We believe that
no actions, other than the matters discussed below, if any, depart from customary litigation incidental to our business.
We review lawsuits and other legal and regulatory matters (collectively “legal proceedings”) on an ongoing basis when making
accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on
its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings in which it has been
determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best
estimate has been recorded. Our accrual for legal and regulatory matters was $2 million and $68 million as of December 31, 2017
and 2016, respectively. During the quarter ended March 31, 2017, ServiceLink paid $65 million to settle all remaining obligations
to complete the document execution review under the 2011 LPS consent order with certain banking agencies. Details of the consent
order and the terms of the settlement are set forth in Note M Commitments and Contingencies to our Consolidated Financial
Statements in our Annual Report for the year ended December 31, 2016. On January 12, 2018, the banking agencies entered an
Order terminating the 2011 LPS consent order, having found ServiceLink attained full compliance. None of the amounts we have
currently recorded are considered to be material to our financial condition individually or in the aggregate. Actual losses may
materially differ from the amounts recorded and the ultimate outcome of our pending legal proceedings is generally not yet
determinable. While some of these matters could be material to our operating results or cash flows for any particular period if an
unfavorable outcome results, at present we do not believe that the ultimate resolution of currently pending legal proceedings, either
individually or in the aggregate, will have a material adverse effect on our financial condition.
From time to time we receive inquiries and requests for information from state insurance departments, attorneys general and
other regulatory agencies about various matters relating to our business. Sometimes these take the form of civil investigative
demands or subpoenas. We cooperate with all such inquiries and we have responded to or are currently responding to inquiries
from multiple governmental agencies. Also, regulators and courts have been dealing with issues arising from foreclosures and
related processes and documentation. Various governmental entities are studying the title insurance product, market, pricing, and
business practices, and potential regulatory and legislative changes, which may materially affect our business and operations.
From time to time, we are assessed fines for violations of regulations or other matters or enter into settlements with such authorities
which may require us to pay fines or claims or take other actions.
Escrow Balances
In conducting our operations, we routinely hold customers’ assets in escrow, pending completion of real estate transactions,
and are responsible for the proper disposition of these balances for our customers. Certain of these amounts are maintained in
segregated bank accounts and have not been included in the accompanying Consolidated Balance Sheets, consistent with Generally
Accepted Accounting Principles and industry practice. These balances amounted to $15.4 billion at December 31, 2017. As a result
of holding these customers’ assets in escrow, we have ongoing programs for realizing economic benefits during the year through
favorable borrowing and vendor arrangements with various banks. There were no investments or loans outstanding as of
December 31, 2017 and 2016 related to these arrangements.
81
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Operating Leases
Future minimum operating lease payments are as follows (in millions):
2018
2019
2020
2021
2022
Thereafter
Total future minimum operating lease payments
$
150
127
98
71
46
44
$
536
Rent expense incurred under operating leases during the years ended December 31, 2017, 2016 and 2015 was $144 million,
$128 million, and $122 million, respectively. Rent expense in 2017, 2016, and 2015 includes abandoned lease charges related to
office closures of $1 million.
Note N.
Regulation and Equity
Regulation
Our insurance subsidiaries, including title insurers, underwritten title companies and insurance agencies, are subject to
extensive regulation under applicable state laws. Each of the insurance underwriters is subject to a holding company act in its state
of domicile which regulates, among other matters, the ability to pay dividends and enter into transactions with affiliates. The laws
of most states in which we transact business establish supervisory agencies with broad administrative powers relating to issuing
and revoking licenses to transact business, regulating trade practices, licensing agents, approving policy forms, accounting practices,
financial practices, establishing reserve and capital and surplus as regards policyholders (“capital and surplus”) requirements,
defining suitable investments for reserves and capital and surplus and approving rate schedules. The process of state regulation
of changes in rates ranges from states which set rates, to states where individual companies or associations of companies prepare
rate filings which are submitted for approval, to a few states in which rate changes do not need to be filed for approval.
Since we are regulated by both state and federal governments and the applicable insurance laws and regulations are constantly
subject to change, it is not possible to predict the potential effects on our insurance operations, particularly the Title segment, of
any laws or regulations that may become more restrictive in the future or if new restrictive laws will be enacted.
Pursuant to statutory accounting requirements of the various states in which our insurers are domiciled, these insurers must
defer a portion of premiums earned as an unearned premium reserve for the protection of policyholders and must maintain qualified
assets in an amount equal to the statutory requirements. The level of unearned premium reserve required to be maintained at any
time is determined by statutory formula based upon either the age, number of policies and dollar amount of policy liabilities
underwritten, or the age and dollar amount of statutory premiums written. As of December 31, 2017, the combined statutory
unearned premium reserve required and reported for our title insurers was $1,400 million. In addition to statutory unearned premium
reserves, each of our insurers maintains reserves for known claims and surplus funds for policyholder protection and business
operations.
Each of our insurance subsidiaries is regulated by the insurance regulatory authority in its respective state of domicile, as well
as that of each state in which it is licensed. The insurance commissioners of their respective states of domicile are the primary
regulators of our title insurance subsidiaries. Each of the insurers is subject to periodic regulatory financial examination by
regulatory authorities.
Our insurance subsidiaries are subject to regulations that restrict their ability to pay dividends or make other distributions of
cash or property to their immediate parent company without prior approval from the Department of Insurance of their respective
states of domicile. As of December 31, 2017, $1,700 million of our net assets are restricted from dividend payments without prior
approval from the Departments of Insurance. During 2018, our title insurers can pay or make distributions to us of approximately
$363 million, without prior approval.
The combined statutory capital and surplus of our title insurers was approximately $1,389 million and $1,469 million as of
December 31, 2017 and 2016, respectively. The combined statutory net earnings of our title insurance subsidiaries were
$434 million, $541 million, and $381 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Statutory-basis financial statements are prepared in accordance with accounting practices prescribed or permitted by the
various state insurance regulatory authorities. The National Association of Insurance Commissioners' (“NAIC”) Accounting
82
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Practices and Procedures manual (“NAIC SAP”) has been adopted as a component of prescribed or permitted practices by each
of the states that regulate us. Each of our states of domicile for our title insurance underwriter subsidiaries have adopted a material
prescribed accounting practice that differs from that found in NAIC SAP. Specifically, in both years the timing of amounts released
from the statutory unearned premium reserve under NAIC SAP differs from the states' required practice. Statutory surplus at
December 31, 2017 and 2016, respectively, was lower by approximately $28 million and $207 million than if we had reported
such amounts in accordance with NAIC SAP. The decrease at December 31, 2017 from 2016 is primarily attributable to the
Redomestication.
As a condition to continued authority to underwrite policies in the states in which our insurers conduct their business, the
insurers are required to pay certain fees and file information regarding their officers, directors and financial condition. In addition,
our escrow and trust business is subject to regulation by various state banking authorities.
Pursuant to statutory requirements of the various states in which our insurers are domiciled, such insurers must maintain
certain levels of minimum capital and surplus. Required levels of minimum capital and surplus are not significant to the insurers
individually or in the aggregate. Each of our insurers has complied with the minimum statutory requirements as of December 31,
2017.
Our underwritten title companies are also subject to certain regulation by insurance regulatory or banking authorities, primarily
relating to minimum net worth. Minimum net worth requirements for each underwritten title company is less than $1 million.
These companies were in compliance with their respective minimum net worth requirements at December 31, 2017.
There are no restrictions on our retained earnings regarding our ability to pay dividends to shareholders although there are
limits on the ability of certain subsidiaries to pay dividends to us, as described above.
Equity
On July 20, 2015, our Board of Directors approved a three-year stock repurchase program under which we can purchase up
to 25 million shares of our FNF Group common stock through July 30, 2018. We may make repurchases from time to time in the
open market, in block purchases or in privately negotiated transactions, depending on market conditions and other factors. Since
the original commencement of the plan, we have repurchased a total of 10,589,000 FNF common shares for $372 million, or an
average of $35.10 per share, and there are 14,411,000 shares available to be repurchased under this program.
Note O.
Employee Benefit Plans
Stock Purchase Plan
During the three-year period ended December 31, 2017, our eligible employees could voluntarily participate in employee
stock purchase plans (“ESPPs”) sponsored by us and our subsidiaries. Pursuant to the ESPPs, employees may contribute an amount
between 3% and 15% of their base salary and certain commissions. We contribute varying amounts as specified in the ESPPs.
We contributed $23 million, $20 million, and $18 million to the ESPPs in the years ended December 31, 2017, 2016, and
2015, respectively, in accordance with the employer’s matching contribution.
401(k) Profit Sharing Plan
During the three-year period ended December 31, 2017, we have offered our employees the opportunity to participate in our
401(k) profit sharing plans (the “401(k) Plan”), qualified voluntary contributory savings plans which are available to substantially
all of our employees. Eligible employees may contribute up to 40% of their pretax annual compensation, up to the amount allowed
pursuant to the Internal Revenue Code. We make an employer match on the 401(k) Plan of $0.375 on each $1.00 contributed up
to the first 6% of eligible earnings contributed to the 401(k) Plan by employees. The employer match for the years ended
December 31, 2017, 2016 and 2015 was $26 million, $26 million and $23 million, respectively, that was credited based on the
participant's individual investment elections in the FNF 401(k) Plan.
Omnibus Incentive Plan
In 2005, we established the FNT 2005 Omnibus Incentive Plan (the “Omnibus Plan”) authorizing the issuance of up to 8
million shares of common stock, subject to the terms of the Omnibus Plan. On October 23, 2006; May 29, 2008; May 25, 2011;
May 22, 2013; and June 15, 2016 the shareholders of FNF approved amendments to increase the number of shares for issuance
under the Omnibus Plan by 16 million, 11 million, 6 million, 6 million and 10 million shares, respectively. The primary purpose
of the increases were to assure that we had adequate means to provide equity incentive compensation to our employees on a going-
forward basis. The Omnibus Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted
stock units and performance shares, performance units, other cash and stock-based awards and dividend equivalents. As of
December 31, 2017, there were 1,839,061 shares of restricted stock and 8,529,427 stock options outstanding under this plan.
Awards granted are approved by the Compensation Committee of the Board of Directors. Options vest over a 3 year period and
have a contractual life of 7 years. The exercise price for options granted equals the market price of the underlying stock on the
83
Table of Contents
grant date. Stock option grants vest according to certain time based and operating performance criteria. Option exercises by
participants are settled on the open market.
FNF stock option transactions under the Omnibus Plan for 2015, 2016, and 2017 are as follows:
Balance, December 31, 2014
Granted
Exercised
Canceled
Balance, December 31, 2015
Granted
Exercised
Canceled
Balance, December 31, 2016
Options issued as make-whole adjustment for BK Distribution
Exercised
Canceled
Balance, December 31, 2017
Options
Weighted
Average
Exercise Price
9,393,211
$
1,886,320
(1,966,937)
(12,085)
9,300,509
35,000
(1,846,153)
(7,673)
7,481,683
2,375,111
(1,313,061)
(14,306)
8,529,427
$
$
$
19.43
34.84
12.96
26.62
23.92
35.63
10.12
26.17
27.38
20.32
18.38
24.49
20.38
Exercisable
5,173,802
5,256,426
5,821,592
7,648,837
FNF restricted stock transactions under the Omnibus Plan in 2015, 2016, and 2017 are as follows:
Balance, December 31, 2014
Granted
Canceled
Vested
Balance, December 31, 2015
Granted
Canceled
Vested
Balance, December 31, 2016
Granted
Restricted stock issued as make-whole adjustment for BK Distribution
Canceled
Vested
Balance, December 31, 2017
Weighted
Average
Grant Date
Fair Value
Shares
1,770,781
$
613,960
(10,105)
(982,762)
1,391,874
803,292
(3,266)
(720,227)
1,471,673
828,818
545,676
(11,233)
(995,873)
1,839,061
$
$
$
25.08
34.84
26.14
23.00
30.85
34.54
28.07
28.97
33.79
37.12
24.62
24.52
23.98
30.58
84
Table of Contents
The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2017:
Range of
Exercise Prices
$0.00 — $14.38
$14.39 — $17.76
$17.77 — $21.84
$21.85 — $25.34
$25.35 — $25.53
$25.54 — $26.99
Options Outstanding
Weighted
Average
Weighted
Remaining
Average
Options Exercisable
Weighted
Average
Weighted
Remaining
Average
Number of
Contractual
Exercise
Intrinsic
Number of
Contractual
Exercise
Intrinsic
Options
Life
Price
Value
Options
Life
Price
Value
(In years)
(In millions)
(In years)
(In millions)
662,763
4,070,183
1,342,007
13,648
2,422,627
18,199
8,529,427
1.85
2.89
3.84
5.98
4.83
5.55
$ 14.38
$
17.76
21.84
25.34
25.53
26.99
16
87
23
—
33
—
662,763
4,070,183
1,342,007
4,549
1,569,335
—
1.85
2.89
3.84
5.98
4.83
0
$ 14.38
$
17.76
21.84
25.34
25.53
—
16
87
23
—
22
—
$
159
7,648,837
$
148
We account for stock-based compensation plans in accordance with GAAP on share-based payments, which requires that
compensation cost relating to share-based payments be recognized in the consolidated financial statements based on the fair value
of each award. Using the fair value method of accounting, compensation cost is measured based on the fair value of the award at
the grant date and recognized over the service period. Fair value of restricted stock awards and units is based on the grant date
value of the underlying stock derived from quoted market prices. The total fair value of restricted stock awards granted in the
years ended December 31, 2017, 2016 and 2015 was $31 million,$29 million, and $21 million, respectively. The total fair value
of restricted stock awards which vested in the years ended December 31, 2017, 2016 and 2015 was $38 million, $25 million, and
$35 million, respectively. Option awards are measured at fair value on the grant date using the Black Scholes Option Pricing
Model. The intrinsic value of options exercised in the years ended December 31, 2017, 2016 and 2015 was $25 million, $46
million, and $47 million, respectively. Net earnings attributable to FNF Shareholders reflects stock-based compensation expense
amounts of $44 million for the year ended December 31, 2017, $58 million for the year ended December 31, 2016, and $56 million
for the year ended December 31, 2015, which are included in personnel costs in the reported financial results of each period.
At December 31, 2017, the total unrecognized compensation cost related to non-vested stock option grants and restricted
stock grants is $56 million, which is expected to be recognized in pre-tax income over a weighted average period of 1.65 years.
Pension Plans
In 2000, FNF merged with Chicago Title Corporation ("Chicago Title"). In connection with the merger, we assumed Chicago
Title’s noncontributory defined contribution plan and noncontributory defined benefit pension plan (the “Pension Plan”). The
Pension Plan covers certain Chicago Title employees. The benefits are based on years of service and the employee’s average
monthly compensation in the highest 60 consecutive calendar months during the 120 months ending at retirement or termination.
Effective December 31, 2000, the Pension Plan was frozen and there will be no future credit given for years of service or changes
in salary. The accumulated benefit obligation is the same as the projected benefit obligation due to the pension plan being frozen
as of December 31, 2000. Pursuant to GAAP on employers’ accounting for defined benefit pension and other post retirement plans,
the measurement date is December 31.
The net pension liability included in Accounts payable and other accrued liabilities as of December 31, 2017, and 2016 was
$4 million and $11 million, respectively. The discount rate used to determine the benefit obligation as of the years ended
December 31, 2017 and 2016 was 3.34% and 3.54%, respectively. As of the years ended December 31, 2017 and 2016 the projected
benefit obligation was $166 million and $168 million, respectively, and the fair value of plan assets was $162 million and $157
million, respectively. The net periodic expense included in the results of operations relating to these plans was $5 million, $6 million,
and $8 million for the years ended December 31, 2017, 2016, and 2015, respectively.
Postretirement and Other Nonqualified Employee Benefit Plans
We assumed certain health care and life insurance benefits for retired Chicago Title employees in connection with the FNF
merger with Chicago Title. Beginning on January 1, 2001, these benefits were offered to all employees who met specific eligibility
requirements. Additionally, in connection with the acquisition of LandAmerica Financial Group's two principal title insurance
underwriters, Commonwealth Land Title Insurance Company and Lawyers Title Insurance Corporation, as well as United Capital
Title Insurance Company (collectively, the "LFG Underwriters"), we assumed certain of the LFG Underwriters' nonqualified
benefit plans, which provide various postretirement benefits to certain executives and retirees. The costs of these benefit plans are
85
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
accrued during the periods the employees render service. We are both self-insured and fully insured for postretirement health care
and life insurance benefit plans, and the plans are not funded. The health care plans provide for insurance benefits after retirement
and are generally contributory, with contributions adjusted annually. Postretirement life insurance benefits are primarily
contributory, with coverage amounts declining with increases in a retiree’s age. The aggregate benefit obligation for these plans
was $13 million at December 31, 2017 and $14 million at December 31, 2016. The net costs relating to these plans were immaterial
for the years ended December 31, 2017, 2016, and 2015.
Note P.
Supplementary Cash Flow Information
The following supplemental cash flow information is provided with respect to interest and tax payments, as well as certain
non-cash investing and financing activities.
Cash paid during the year:
Interest
Income taxes
Non-cash investing and financing activities:
Investing activities:
Change in proceeds of sales of investments available for sale receivable in period
Change in purchases of investments available for sale payable in period
Financing activities:
Liabilities assumed in connection with acquisitions (1):
Fair value of net assets acquired
Less: Total purchase price
Liabilities and noncontrolling interests assumed
Change in treasury stock purchases payable in period
Year Ended December 31,
2017
2016
2015
(In millions)
$
$
$
$
$
$
102
528
125
367
$
3
(9)
7
19
595
481
114
$
$
— $
625
557
68
8
$
$
$
$
$
124
250
(25)
(2)
155
111
44
(7)
_____________________________________
(1) See Note B Acquisitions for further discussion of assets and liabilities acquired in business combinations in the current year.
Note Q.
Financial Instruments with Off-Balance Sheet Risk and Concentration of Risk
Title
In the normal course of business we and certain of our subsidiaries enter into off-balance sheet credit arrangements associated
with certain aspects of the title insurance business and other activities.
We generate a significant amount of title insurance premiums in California, Texas, Florida and New York. Title insurance
premiums as a percentage of the total title insurance premiums written from those four states are detailed as follows:
California
Texas
Florida
New York
2017
2016
2015
14.5%
14.2%
8.0%
6.3%
14.6%
14.2%
7.7%
7.1%
15.1%
14.4%
8.1%
8.1%
Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, short-
term investments, and trade receivables.
We place cash equivalents and short-term investments with high credit quality financial institutions and, by policy, limit the
amount of credit exposure with any one financial institution. Investments in commercial paper of industrial firms and financial
institutions are rated investment grade by nationally recognized rating agencies.
86
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Concentrations of credit risk with respect to trade receivables are limited because a large number of geographically diverse
customers make up our customer base, thus spreading the trade receivables credit risk. We control credit risk through monitoring
procedures.
Note R.
Segment Information
On September 29, 2017, we completed the BK Distribution. As a result, Black Knight is no longer a reportable segment and
the historical results of Black Knight are presented as discontinued operations for all periods presented and are excluded from the
following tables. Refer to Note G Discontinued Operations for further discussion of the results of Black Knight.
On November 17, 2017, we completed the FNFV Split-off. As a result, FNFV is no longer a reportable segment and the
historical results of FNFV are presented as discontinued operations for all periods presented and are excluded from the following
tables. Refer to Note G Discontinued Operations for further discussion of the results of FNFV.
Summarized financial information concerning our reportable segments is shown in the following tables. There are certain
intercompany corporate related arrangements between our various businesses. The effects of these arrangements including
intercompany notes and related interest and any other non-operational intercompany revenues and expenses have been eliminated
in the segment presentations below.
As of and for the year ended December 31, 2017:
Title premiums
Other revenues
Revenues from external customers
Interest and investment income (loss), including realized gains and losses
Total revenues
Depreciation and amortization
Interest expense
Earnings (loss) from continuing operations, before income taxes and equity in earnings of unconsolidated
affiliates
Income tax expense (benefit)
Earnings (loss) from continuing operations, before equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Earnings (loss) from continuing operations
Assets
Goodwill
Title
Corporate
and Other
(In millions)
Total FNF
$
4,893
$
— $
2,181
7,074
137
7,211
159
—
955
274
681
10
691
8,405
2,432
$
$
456
456
(4)
452
24
48
(91)
(39)
(52)
—
$
$
(52) $
$
746
314
4,893
2,637
7,530
133
7,663
183
48
864
235
629
10
639
9,151
2,746
87
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
As of and for the year ended December 31, 2016:
Title
Corporate
and Other
(In millions)
Total FNF
$
4,723
$
— $
Title premiums
Other revenues
Revenues from external customers
Interest and investment income (loss), including realized gains and losses
Total revenues
Depreciation and amortization
Interest expense
Earnings (loss) from continuing operations, before income taxes and equity in earnings of unconsolidated
affiliates
Income tax expense (benefit)
Earnings (loss) from continuing operations, before equity in earnings of unconsolidated affiliates
Equity in earnings of unconsolidated affiliates
Earnings (loss) from continuing operations
Assets
Goodwill
As of and for the year ended December 31, 2015:
Title premiums
Other revenues
Revenues from external customers
Interest and investment income (loss), including realized gains and losses
Total revenues
Depreciation and amortization
Interest expense
Earnings (loss) from continuing operations, before income taxes and equity in earnings (loss) of unconsolidated
affiliates
Income tax expense (benefit)
Earnings (loss) from continuing operations, before equity in earnings (loss) of unconsolidated affiliates
Equity in earnings (loss) of unconsolidated affiliates
Earnings (loss) from continuing operations
Assets
Goodwill
2,128
6,851
127
6,978
148
—
1,025
386
639
13
652
8,756
2,345
$
$
$
$
2,005
6,291
137
6,428
144
—
836
305
531
6
537
8,533
2,303
$
$
$
$
5,765
$
14,521
210
2,555
288
288
(9)
279
12
64
(70)
(39)
(31)
1
(30) $
241
241
(5)
236
6
73
(66)
(31)
(35)
(1)
(36) $
4,723
2,416
7,139
118
7,257
160
64
955
347
608
14
622
4,286
2,246
6,532
132
6,664
150
73
770
274
496
5
501
5,510
$
14,043
45
2,348
Title
Corporate
and Other
(In millions)
Total FNF
$
4,286
$
— $
The activities in our segments include the following:
•
•
Title. This segment consists of the operations of our title insurance underwriters and related businesses. This segment
provides core title insurance and escrow and other title-related services including trust activities, trustee sales guarantees,
recordings and reconveyances, and home warranty products. This segment also includes our transaction services business,
which includes other title-related services used in the production and management of mortgage loans, including mortgage
loans that experience default.
Corporate and Other. This segment consists of the operations of the parent holding company, our various real estate
brokerage businesses, and CINC and other real estate technology subsidiaries. This segment also includes certain other
unallocated corporate overhead expenses and eliminations of revenues and expenses between it and our Title segment.
This segment also includes the assets of discontinued operations, Black Knight and FNFV, as of December 31, 2016 and
2015. Refer to Note G. Discontinued Operations for further information.
88
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note S.
Recent Accounting Pronouncements
Revenue Recognition
In May 2014, the Financial Accounting Standards Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with
Customers (Topic 606). This ASU provides a new comprehensive revenue recognition model that requires companies to recognize
revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive
in exchange for those goods or services. This update also requires additional disclosure about the nature, amount, timing and
uncertainty of revenue and cash flows arising from customer contracts. This update permits the use of either the retrospective or
cumulative effect transition method. ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus
Agent Considerations was issued by FASB in March 2016 to clarify the principal versus agent considerations within ASU 2014-09.
ASU 2016-10 Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing was
issued by the FASB in April 2016 to clarify how to determine whether goods and services are separately identifiable and thus
accounted for as separate performance obligations. ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-
Scope Improvements and Practical Expedients was issued by the FASB in May 2016 to clarify certain terms from the aforementioned
updates and to add practical expedients for contracts at various stages of completion. ASU 2016-20, Technical Corrections and
Improvements to Topic 606, Revenue from Contracts with Customers, was issued by the FASB in December 2016 which includes
thirteen technical corrections and improvements affecting narrow aspects of the guidance issued in ASU 2014-09.
We have completed our analysis of the impact of the standards and have concluded that these standards will not have a material
impact on our accounting or reporting.
Upon issuance of ASU 2015-14, the effective date of ASU 2014-09 was deferred to annual and interim periods beginning on
or after December 15, 2017. We will adopt the guidance on January 1, 2018. Either of the following transition methods is permitted:
(i) a full retrospective approach reflecting the application of the new standard in each prior reporting period, or (ii) a modified
retrospective approach with a cumulative-effect adjustment to the opening balance of retained earnings in the year the new standard
is first applied. We plan to transition to this new guidance using the modified retrospective approach.
Other Pronouncements
In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and
Measurement of Financial Assets and Financial Liabilities. The primary amendments required by the ASU include: requiring
equity investments with readily determinable fair values to be measured at fair value through net income rather than through other
comprehensive income; allowing entities with equity investments without readily determinable fair values to report the investments
at cost, adjusted for changes in observable prices, less impairment; requiring entities that elect the fair value option for financial
liabilities to report the change in fair value attributable to instrument-specific credit risk in other comprehensive income; and
clarifying that entities should assess the need for a valuation allowance on a deferred tax asset related to available-for-sale debt
securities in combination with other deferred tax assets. The amendments in this ASU are effective for fiscal years beginning after
December 15, 2017, including interim periods within those fiscal years. The ASU requires a cumulative-effect adjustment of the
balance sheet as of the beginning of the year of adoption. Early adoption of the ASU is not permitted, except for the provision
related to financial liabilities for which the fair value option has been elected. We have completed our evaluation of the effects
this new guidance will have on our consolidated financial statements and related disclosures and have determined that the ASU
will result in: (1) reclassification of our unrealized gains and losses on our equity and preferred securities available for sale currently
included in accumulated other comprehensive income to beginning retained earnings as of January 1, 2018 and (2) changes in fair
value of our equity and preferred securities available for sale subsequent to January 1, 2018 to be included in our earnings from
continuing operations. As of December 31, 2017, we held equity and preferred securities available for sale with combined net
unrealized gains (net of losses) of $164 million and $12 million, respectively. Including the associated effects of deferred taxes,
based on the net of tax balances as of December 31, 2017, we expect to reclassify a total of approximately $109 million from
Accumulated other comprehensive income to beginning Retained earnings as of January 1, 2018.
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The amendments in this ASU introduce broad
changes to the accounting and reporting for leases by lessees. The main provisions of the new standard include: clarifications to
the definitions of a lease, components of leases, and criteria for determining lease classification; requiring virtually all leased
assets, including operating leases and related liabilities, to be reflected on the lessee's balance sheet; and expanding and adding
to the required disclosures for lessees. This update is effective for annual and interim periods beginning after December 15, 2018,
including interim periods within those fiscal years. Early application of the standard is permitted. The ASU requires a modified
retrospective approach to transitioning which allows for the use of practical expedients to effectively account for leases commenced
prior to the effective date in accordance with previous GAAP, except that lessees are required to recognize a right-of-use asset
and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental
payments that were tracked and disclosed under previous GAAP. We are still evaluating the totality of the effects this new guidance
89
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
will have on our business process and systems, consolidated financial statements, related disclosures. We have identified a vendor
with software suited to track and account for leases under the new standard. We have not concluded on the anticipated financial
statement effects of adoption. We plan to adopt this standard on January 1, 2019. We are currently evaluating the impact of the
adoption of this standard on our consolidated financial statements.
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on
Financial Instruments. The amendments in this ASU introduce broad changes to accounting for credit impairment of financial
instruments. The primary updates include the introduction of a new current expected credit loss ("CECL") model that is based on
expected rather than incurred losses and amendments to the accounting for impairment of debt securities available for sale. This
update is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years.
Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal
years. We are currently evaluating the effect this new guidance will have on our consolidated financial statements and related
disclosures and have not yet concluded on its effects. We do not plan to early adopt the standard.
In August 2016, the FASB issued ASU No. 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash
Receipts and Cash Payments. The amendments in this ASU introduce clarifications to the presentation of certain cash receipts
and cash payments in the statement of cash flows. The primary updates include additions and clarifications of the classification
of cash flows related to certain debt repayment activities, contingent consideration payments related to business combinations,
proceeds from insurance policies, distributions from equity method investees, and cash flows related to securitized receivables.
This update is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years.
Early adoption of this ASU is permitted, including in interim periods. The ASU requires retrospective application to all prior
periods presented upon adoption. We will adopt this ASU on January 1, 2018 and based on our preliminary analysis, we do not
expect the adoption of this ASU to have a material impact on our resulting operating, investing, or financing cash flows.
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The amendments
in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and
amounts generally described as restricted cash or restricted cash equivalents. GAAP currently does not include specific guidance
on the cash flow classification and presentation of changes in restricted cash. The Company currently excludes cash pledged related
to secured trust deposits, which generally meets the definition of restricted cash, from the reconciliation of beginning-of-period
to end-of-period total amounts shown on the statement of cash flows. This update is effective for annual periods beginning after
December 15, 2017, including interim periods within those fiscal years. Early adoption of this ASU is permitted, including in
interim periods. The ASU requires retrospective application to all prior periods presented upon adoption. We will adopt this ASU
on January 1, 2018. Based on our preliminary analysis, we expect the adoption of this ASU to result in the movement of the change
in our cash pledged against secured trust deposits from operating activities to the net change in cash, the change in investments
pledged against secured trust deposits from operating to investing activities, and the change in secured trust deposits from operating
to financing activities.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business
to assist companies with evaluating whether transactions should be accounted for as acquisitions of assets or businesses. The new
guidance requires a company to evaluate if substantially all of the fair value of the gross assets acquired (or disposed of) is
concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of assets and activities is not a
business. The guidance also requires a business to include at least one substantive process and narrows the definition of outputs
by more closely aligning it with how outputs are described in the guidance for revenue from contracts with customers. The new
standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017, with early
adoption permitted. The guidance should be applied prospectively to any transactions occurring within the period of adoption. We
will adopt this ASU on January 1, 2018. Based on our historical acquisition activity, we do not expect this to have a material impact
on our ongoing accounting or financial reporting.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for
Goodwill Impairment. The guidance simplifies the measurement of goodwill impairment by removing step 2 of the goodwill
impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit. The new
guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair
value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments
should be applied on a prospective basis. The new standard is effective for fiscal years beginning after December 15, 2019 with
early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We are currently
evaluating the effect this new guidance will have on our consolidated financial statements and related disclosures and have not
yet concluded on its effects.
In March 2017, the FASB issued ASU No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Topic 310-20):
Premium Amortization on Purchased Callable Debt Securities. The amendments in this ASU shortens the amortization period for
90
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
the premium on certain purchased callable debt securities to the earliest call date. The new guidance does not change the accounting
for purchased callable debt securities held at a discount. This update is effective for annual periods beginning after December 15,
2018, including interim periods within those fiscal years. Early adoption of this ASU is permitted, including in interim periods.
We early adopted the standard as of January 1, 2017. The adoption of this standard did not have a material impact on our financial
statements.
91
Table of Contents
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
Controls and Procedures
As of the end of the year covered by this report, we carried out an evaluation, under the supervision and with the participation
of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as such term is defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act. Based on this evaluation,
our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in the reports that we file or submit under the Act is: (a) recorded,
processed, summarized and reported, within the time periods specified in the Commission’s rules and forms; and (b) accumulated
and communicated to management, including our principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31,
2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term
is defined in Exchange Act Rule 13a-15(f) or 15d-15(f). Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting. Management has adopted the framework in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation
under this framework, our management concluded that our internal control over financial reporting was effective as of December 31,
2017. The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which is included herein.
Item 9B.
Other Information
None.
92
Table of Contents
Items 10-14.
PART III
Within 120 days after the close of our fiscal year, we intend to file with the Securities and Exchange Commission the matters
required by these items.
93
Table of Contents
PART IV
Item 15.
Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements. The following is a list of the Consolidated Financial Statements of Fidelity National Financial,
Inc. and its subsidiaries included in Item 8 of Part II:
Report of Independent Registered Public Accounting Firm on Effectiveness of Internal Control over Financial
Reporting
Report of Independent Registered Public Accounting Firm on Financial Statements
Consolidated Balance Sheets as of December 31, 2017 and 2016
Consolidated Statements of Earnings for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Equity for the years ended December 31, 2017, 2016 and 2015
Consolidated Statements of Cash Flows for the years ended December 31, 2017, 2016 and 2015
Notes to Consolidated Financial Statements
45
46
48
49
51
52
54
55
(a) (2) Financial Statement Schedules. The following is a list of financial statement schedules filed as part of this annual
report on Form 10-K:
Schedule II: Fidelity National Financial, Inc. (Parent Company Financial Statements)
Schedule V: Valuation and Qualifying Accounts
99
103
All other schedules are omitted because they are not applicable or not required, or because the required information is included
in the Consolidated Financial Statements or notes thereto.
94
Table of Contents
(a) (3) The following exhibits are incorporated by reference or are set forth on pages to this Form 10-K:
Exhibit
Number
Description
2.1
2.2
2.3
2.4
2.5
3.1
3.2
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Securities Exchange and Distribution Agreement between Old FNF and the Registrant, dated as of June 25, 2006, as
amended and restated as of September 18, 2006 (incorporated by reference to Annex A to the Registrant’s Schedule 14C
filed on September 19, 2006
Agreement and Plan of Merger, dated as of May 28, 2013, among Fidelity National Financial, Inc., Lion Merger Sub,
Inc. and Lender Processing Services, Inc. (incorporated by reference to Exhibit 2.1 to Fidelity National Financial, Inc.’s
Current Report on Form 8-K, filed on May 28, 2013)
Reorganization Agreement, dated as of June 8, 2017, by and among Fidelity National Financial, Inc., Black Knight
Holdings, Inc., and New BKH Corp. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on
Form 8-K filed on June 9, 2017)
Agreement and Plan of Merger, dated as of June 8, 2017, by and among Fidelity National Financial, Inc., New BKH
Corp., Black Knight Financial Services, Inc., Black Knight Holdco Corp., New BKH Merger Sub, Inc., and BKFS
Merger Sub, Inc. (incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed on
June 9, 2017)
Reorganization Agreement, dated as of November 17, 2017, by and between Fidelity National Financial, Inc. and
Cannae Holdings, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K
filed on November 20, 2017)
Fourth Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the
company's Current Report on Form 8-K filed on June 30, 2014)
Fourth Amended and Restated Bylaws of Fidelity National Financial, Inc., February 1, 2017 (incorporated by
reference to Exhibit 3.1 to Fidelity National Financial, Inc.’s Current Report on Form 8-K, dated February 2, 2017)
Indenture between the Registrant and The Bank of New York Trust Company, N.A., dated December 8, 2005
(incorporated by reference to Exhibit 4.1 to the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2005)
First Supplemental Indenture between the Registrant and the Bank of New York Trust Company, N.A., dated as of
January 6, 2006 (incorporated by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K filed on
January 24, 2006)
Second Supplemental Indenture, dated May 5, 2010, between the Registrant and The Bank of New York Mellon Trust
Company, N.A. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed on May
5, 2010)
Third Supplemental Indenture, dated as of June 30, 2014, between the Registrant and The Bank of New York Mellon
Trust Company, N.A. (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K filed
on June 30, 2014)
Form of Subordinated Indenture between the Registrant and the Bank of New York Trust Company, N.A. (incorporated
by reference to Exhibit 4.2 (A) to the Registrant’s Registration Statement on Form S-3 filed on November 14, 2007)
Form of 4.25% Convertible Senior Note due August 2018 (incorporated by reference to Exhibit 4.5 to the Registrant's
Current Report on Form 8-K filed on August 2, 2011)
Specimen certificate for shares of the Registrant’s FNF Group common stock, par value $0.0001 per Share (incorporated
by reference to Exhibit 4.1 to the Registrant’s Registration Statement on Form S-4/A filed on May 5, 2014)
10.1
Fourth Amended and Restated Credit Agreement, dated as of April 27, 2017, by and among Fidelity National Financial,
Inc., a Delaware corporation, as the borrower, Bank of America, N.A., as administrative agent, the other agents party
thereto and the financial institutions party thereto as lenders (incorporated by reference to Exhibit 10.2 to the Registrant's
Current Report on Form 8-K filed on May 2, 2017)
10.2 Amended and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan (incorporated by reference to
Annex A to the Registrant’s Schedule 14A filed on April 29, 2016) (1)
10.3
10.4
10.5
10.6
Fidelity National Financial, Inc. 2013 Employee Stock Purchase Plan (incorporated by reference to Annex D to the
Registrant’s Schedule 14A filed on May 9, 2014)(1)
Fidelity National Financial, Inc. Annual Incentive Plan (incorporated by reference to Annex B to the Registrant's
Schedule 14A filed on April 29, 2016) (1)
Fidelity National Financial, Inc. Deferred Compensation Plan, as amended and restated, effective January 1, 2009
(incorporated by reference to Exhibit 10.18 to the Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008) (1)
Form of Notice of FNF Group Restricted Stock Grant and FNF Group Restricted Stock Award Agreement under
Amended and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for October 2015 Awards (1)
(incorporated by reference to Exhibit 10.11 to Registrant's Annual Report on Form 10-K for the year ended December
31, 2015)
95
Table of Contents
Exhibit
Number
10.7
10.8
10.9
Description
Form of Notice of FNF Group Stock Option Award and FNF Group Stock Option Award Agreement under Amended
and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for October 2015 Awards (incorporated
by reference to Exhibit 10.12 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2015)(1)
Form of Notice of Stock Option Award and Stock Option Award Agreement under Amended and Restated Fidelity
National Financial, Inc. 2005 Omnibus Incentive Plan for November 2013 Awards (incorporated by reference to Exhibit
10.12 to the Registrant’s Annual Report on Form 10-K for the year ended December 31, 2013)(1)
Form of Notice of Stock Option Grant and Stock Option Award Agreement under Amended and Restated Fidelity
National Financial, Inc. 2005 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.10 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 2012) (1)
10.10 Tax Disaffiliation Agreement by and among Old FNF, the Registrant and FIS, dated as of October 23, 2006 (incorporated
by reference to Exhibit 99.1 to Old FNF’s Form 8-K, filed on October 27, 2006)
10.11 Cross-Indemnity Agreement by and between the Registrant and FIS, dated as of October 23, 2006 (incorporated by
reference to Exhibit 99.2 to Old FNF’s Form 8-K, filed on October 27, 2006)
10.12 Amended and Restated Employment Agreement between the Registrant and Anthony J. Park, effective as of October 10,
2008 (incorporated by reference to Exhibit 10.11 to Registrant’s Annual Report on Form 10-K for the year ended
December 31, 2008) (1)
10.13 Amendment effective February 4, 2010 to Amended and Restated Employment Agreement between the Registrant and
Anthony J. Park, effective as of October 10, 2008 (incorporated by reference to Exhibit 10.13 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 2009) (1)
10.14 Amendment effective as of July 1, 2012 to Amended and Restated Employment Agreement between the Registrant
and Brent B. Bickett (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2012)(1)
10.15 Amendment effective as of January 1, 2012 to Amended and Restated Employment Agreement between the Registrant
and Brent B. Bickett (incorporated by reference to Exhibit 10.16 to the Registrant’s Annual Report on Form 10-K for
the year ended December 31, 2011)(1)
10.16 Amendment effective February 4, 2010 to Amended and Restated Employment Agreement between the Registrant and
Brent B. Bickett (incorporated by reference to Exhibit 10.15 to the Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2009)
10.17
Amended and Restated Employment Agreement between the Registrant and Brent B. Bickett, effective July 2, 2008
(1)
10.18 Director Services Agreement between Fidelity National Financial, Inc. and William P. Foley, II (incorporated by
reference to Exhibit 10.27 to Registrant's Annual Report on Form 10-K for the year ended December 31, 2015) (1)
10.19 Amended and Restated Employment Agreement between the Registrant and Raymond R. Quirk, effective as of
October 10, 2008 (1) (incorporated by reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the
year ended December 31, 2008)
10.20 Amendment effective February 4, 2010 to Amended and Restated Employment Agreement between the Registrant and
Raymond R. Quirk, effective as of October 10, 2008 (incorporated by reference to Exhibit 10.21 to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 2009) (1)
10.21 Amended and Restated Employment Agreement between the Registrant and Michael L. Gravelle, effective as of
January 30, 2013 (incorporated by reference to Exhibit 10.22 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 2012) (1)
10.22 Amendment No. 2 to Amended and Restated Employment Agreement between the Registrant and Michael L. Gravelle,
effective as of March 1, 2015 (incorporated by reference to Exhibit 10.2 to the Registrant’s Quarterly Report on Form 10-
Q for the quarter ended March 31, 2015) (1)
10.23 Amended and Restated Employment Agreement between the Registrant and Peter T. Sadowski, effective as of February
4, 2010 (incorporated by reference to Exhibit 10.26 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2012) (1)
10.24
10.25
10.26
ServiceLink Holdings, LLC 2013 Management Incentive Plan (incorporated by reference to Exhibit 10.2 to the
Registrant’s Current Report on Form 8-K filed on January 15, 2014)(1)
Form of ServiceLink Holdings, LLC Unit Grant Agreement (incorporated by reference to Exhibit 10.4 to the Registrant's
Current Report on Form 8-K filed on January 15, 2014)(1)
ServiceLink Holdings, LLC Incentive Plan (incorporated by reference to Exhibit 10.6 to the to the Registrant’s Current
Report on Form 8-K filed on January 15, 2014) (1)
10.27 Amendment effective May 3, 2016 to Director Services Agreement between the Registrant and William P. Foley II
(incorporated by reference to Exhibit 10.1 to Registrant's Quarterly Report on Form 10-Q for the quarter ended June
30, 2016) (1)
96
Table of Contents
Exhibit
Number
10.28 Amendment effective May 3, 2016 to Amended and Restated Employment Agreement between the Registrant and
Raymond R. Quirk (incorporated by reference to Exhibit 10.2 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2016) (1)
Description
10.29 Amendment effective May 3, 2016 to Amended and Restated Employment Agreement between the Registrant and
Brent B. Bickett (incorporated by reference to Exhibit 10.3 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2016) (1)
10.30 Amendment effective May 3, 2016 to Amended and Restated Employment Agreement between the Registrant and
Anthony J. Park (incorporated by reference to Exhibit 10.4 to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2016) (1)
10.31 Amendment effective May 3, 2016 to Amended and Restated Employment Agreement between the Registrant and
Michael L. Gravelle (incorporated by reference to Exhibit 10.5 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2016) (1)
10.32 Amendment effective May 3, 2016 to Amended and Restated Employment Agreement between the Registrant and
Peter T. Sadowski (incorporated by reference to Exhibit 10.6 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2016) (1)
10.33 Employment Agreement between the Registrant and Michael Nolan effective March 2, 2016 (incorporated by reference
to Exhibit 10.7 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) (1)
10.34 Amendment effective May 3, 2016 to Employment Agreement between the Registrant and Michael Nolan (incorporated
by reference to Exhibit 10.8 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)
(1)
10.35 Employment Agreement between the Registrant and Roger Jewkes effective March 3, 2016 (incorporated by reference
to Exhibit 10.9 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016) (1)
10.36 Amendment effective May 3, 2016 to Employment Agreement between the Registrant and Roger Jewkes (incorporated
by reference to Exhibit 10.10 to the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2016)
(1)
10.37
10.38
Form of Notice of FNF Group Restricted Stock Grant and FNF Group Restricted Stock Award Agreement (Time-
Based) under Amended and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for March 2016
Awards (incorporated by reference to Exhibit 10.58 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 2016) (1)
Form of Notice of FNF Group Restricted Stock Grant and FNF Group Restricted Stock Award Agreement under
Amended and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for December 2016 Awards
(incorporated by reference to Exhibit 10.59 to the Registrant's Annual Report on Form 10-K for the year ended December
31, 2016)(1)
10.39
Form of Notice of FNF Group Restricted Stock Grant and FNF Group Restricted Stock Award Agreement under
Amended and Restated Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for October 2017 Awards (1)
10.40 Tax Matters Agreement, dated as of November 17, 2017, by and between Fidelity National Financial, Inc. and Cannae
Holdings, Inc. (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on
November 20, 2017)
21.1
23.1
23.2
31.1
31.2
32.1
32.2
101
Subsidiaries of the Registrant
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350
Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, 18 U.S.C. Section 1350
The following materials from Fidelity National Financial, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 2017, formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance
Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Comprehensive Earnings,
(iv) the Consolidated Statements of Stockholders' Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the
Notes to Consolidated Financial Statements.
(1) A management or compensatory plan or arrangement required to be filed as an exhibit to this report pursuant to Item 15(c)
of Form 10-K
97
Table of Contents
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SIGNATURES
Fidelity National Financial, Inc.
By:
/s/ Raymond R. Quirk
Raymond R. Quirk
Chief Executive Officer and Director
Date: February 23, 2018
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ Raymond R. Quirk
Raymond R. Quirk
/s/ Anthony J. Park
Anthony J. Park
/s/ William P. Foley, II
William P. Foley, II
/s/ Douglas K. Ammerman
Douglas K. Ammerman
/s/ Willie D. Davis
Willie D. Davis
/s/ Thomas M. Hagerty
Thomas M. Hagerty
/s/ Janet E. Kerr
Janet E. Kerr
/s/ Daniel D. (Ron) Lane
Daniel D. (Ron) Lane
/s/ Richard N. Massey
Richard N. Massey
/s/ Heather H. Murren
Heather H. Murren
/s/ John D. Rood
John D. Rood
/s/ Peter O. Shea, Jr.
Peter O. Shea, Jr.
/s/ Cary H. Thompson
Cary H. Thompson
Title
Date
Chief Executive Officer and Director
February 23, 2018
(Principal Executive Officer)
Chief Financial Officer
February 23, 2018
(Principal Financial and Accounting Officer)
Director and Chairman of the Board
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
February 23, 2018
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
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Table of Contents
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
BALANCE SHEETS
SCHEDULE II
December 31,
2017
2016
(In millions, except share data)
ASSETS
$
230
$
85
1
13
576
4,672
4
1
—
$
$
5,582
$
72
$
137
169
757
1,135
—
—
4,587
217
111
(468)
4,447
246
1
—
7
622
4,253
4
3
2,581
7,717
42
65
629
985
1,721
—
—
4,848
1,784
(13)
(623)
5,996
7,717
Cash
Short term investments
Equity securities available for sale, at fair value
Investment in unconsolidated affiliates
Notes receivable
Investments in and amounts due from subsidiaries
Property and equipment, net
Prepaid expenses and other assets
Investments in discontinued subsidiaries
Total assets
Liabilities:
Accounts payable and other accrued liabilities
Income taxes payable
Deferred tax liability
Notes payable
Total liabilities
Equity:
LIABILITIES AND EQUITY
FNF Group common stock, $0.0001 par value; authorized 487,000,000 shares as of December 31, 2017 and 2016;
outstanding of 274,431,737 and 272,205,261 as of December 31, 2017 and 2016, respectively; and issued of
287,718,304 and 285,041,900 as of December 31, 2017 and 2016, respectively
FNFV Group common stock, $0.0001 par value; authorized 113,000,000 shares as of December 31, 2016, outstanding
of 66,416,822 as of December 31, 2016, and issued of 80,581,675 as of December 31, 2016, see Note G
Additional paid-in capital
Retained earnings
Accumulated other comprehensive loss
Less: Treasury stock, 13,286,567 shares and 27,001,492 shares as of December 31, 2017 and 2016, respectively, at
cost
Total equity of Fidelity National Financial, Inc. common shareholders
Total liabilities and equity
$
5,582
$
See Notes to Financial Statements
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Table of Contents
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
SCHEDULE II
Year Ended December 31,
2017
2016
2015
(In millions, except per share data)
$
1
24
25
$
4
24
28
26
6
64
96
(68)
(24)
(44)
671
627
23
650
1,374
(240)
—
—
—
650
$
$
$
$
32
8
48
88
(63)
(17)
(46)
685
639
132
771
1,784
(279)
(823)
(1,236)
—
771
217
3
86
89
28
1
74
103
(14)
(5)
(9)
520
511
16
527
1,150
(222)
—
—
(81)
527
$
1,784
$
1,374
Revenues:
Other fees and revenue
Interest and investment income and realized gains
Total revenues
Expenses:
Personnel expenses
Other operating expenses
Interest expense
Total expenses
Losses before income tax benefit and equity in earnings of subsidiaries
Income tax benefit
Losses before equity in earnings of subsidiaries
Equity in earnings of subsidiaries
Earnings from continuing operations
Equity in earnings of discontinued operations
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Retained earnings, beginning of year
Dividends declared
Distribution of Black Knight to FNF common shareholders
Redemption of FNFV tracking stock and distribution of Cannae Holdings, Inc.
common stock to holders of FNFV tracking stock
Distribution of J. Alexander's to FNFV Group common shareholders
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Retained earnings, end of year
See Notes to Financial Statements
$
$
$
$
100
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
STATEMENTS OF CASH FLOWS
Cash Flows From Operating Activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Equity in earnings of unconsolidated affiliates
Impairment of assets
Equity in earnings of subsidiaries
Depreciation and amortization
Stock-based compensation
Net change in income taxes
Net decrease (increase) in prepaid expenses and other assets
Net increase (decrease) in accounts payable and other accrued liabilities
Net cash (used in) provided by operating activities
Cash Flows From Investing Activities:
Purchases of investments available for sale
Net (purchases of) proceeds from short-term investment activities
Additions to notes receivable
Collection of notes receivable
Distributions from unconsolidated affiliates
Additional investments in unconsolidated affiliates
Net cash (used in) provided by investing activities
Cash Flows From Financing Activities:
Borrowings
Debt service payments
Equity portion of debt conversions paid in cash
Dividends paid
Purchases of treasury stock
Exercise of stock options
Payment for shares withheld for taxes and in treasury
Cash transferred in the Black Knight spin-off
Cash transferred in the FNFV split-off
Other financing activity
Net dividends from subsidiaries
Net cash provided by (used in) financing activities
Net change in cash and cash equivalents
Cash at beginning of year
Cash at end of year
See Notes to Financial Statements
101
SCHEDULE II
Year Ended December 31,
2017
2016
2015
(In millions)
$
771
$
650
$
527
—
—
(817)
—
34
(130)
18
17
(107)
(1)
(84)
(13)
49
1
(2)
(50)
296
(530)
(317)
(278)
(23)
31
(18)
(87)
(22)
(1)
1,090
141
(16)
246
(2)
3
(694)
1
36
29
26
(13)
36
—
162
(24)
22
2
(8)
154
—
(2)
(2)
(240)
(268)
19
(9)
—
—
—
265
(237)
(47)
293
$
230
$
246
$
—
—
(536)
2
38
17
(25)
2
25
—
(163)
(28)
1,542
—
—
1,351
—
(1,100)
—
(220)
(506)
26
(13)
—
—
(15)
594
(1,234)
142
151
293
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
NOTES TO FINANCIAL STATEMENTS
SCHEDULE II
A.
Summary of Significant Accounting Policies
Fidelity National Financial, Inc. transacts substantially all of its business through its subsidiaries. The Parent Company Financial
Statements should be read in connection with the aforementioned Consolidated Financial Statements and Notes thereto included
elsewhere herein.
B.
Notes Payable
Notes payable consist of the following:
December 31,
2017
2016
(In millions)
Unsecured notes, net of discount, interest payable semi-annually at 5.50%, due September 2022
$
397
$
Unsecured convertible notes, net of discount, interest payable semi-annually at 4.25%, due August
2018
Unsecured notes, net of discount, interest payable semi-annually at 6.60%, due May 2017
Revolving Credit Facility, unsecured, unused portion of $500 at December 31, 2017, due April 2022
with interest payable monthly at LIBOR + 1.40% (2.76% at December 31, 2017)
65
—
295
757
$
$
397
291
300
(3)
985
C.
Supplemental Cash Flow Information
Cash paid during the year:
Interest paid
Income tax payments
D.
Cash Dividends Received
Year Ended December 31,
2017
2016
2015
(In millions)
$
54
$
63
$
528
367
72
250
We have received cash dividends from subsidiaries and affiliates of $0.8 billion, $0.4 billion, and $0.2 billion during the years
ended December 31, 2017, 2016, and 2015, respectively.
102
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2017, 2016 and 2015
SCHEDULE V
Column A
Description
Year ended December 31, 2017:
Reserve for claim losses
Year ended December 31, 2016:
Reserve for claim losses
Year ended December 31, 2015:
Reserve for claim losses
____________________________
Column B
Column C
Additions
Balance at
Charge to
Column D
Beginning of
Costs and
Other
Deduction
Period
Expenses
(Described)
(Described)
(In millions)
Column E
Balance at
End of
Period
$
$
$
1,487
$
238
$
(4) (1)
1,583
$
157
$
(8) (1)
1,621
$
246
$
1 (1)
$
$
$
231 (2)
245 (2)
285 (2)
$
$
$
1,490
1,487
1,583
(1) Represents the change in reinsurance recoverable.
(2) Represents payments of claim losses, net of recoupments.
See Accompanying Report of Independent Registered Public Accounting Firm
103
B OA R D OF DI R ECTORS
EXECUTIVE OFFIC ERS
INDEPENDENT REGISTERED PUBLIC
Raymond R. Quirk
Chief Executive Officer
Michael J. Nolan
President
Roger S. Jewkes
Chief Operating Officer
Brent B. Bickett
Executive Vice President,
Corporate Strategy
Anthony J. Park
Executive Vice President,
Chief Financial Officer
Peter T. Sadowski
Executive Vice President,
Chief Legal Officer
Michael L. Gravelle
Executive Vice President,
General Counsel and Corporate Secretary
GEN ERAL I N FORMATION
CORPORATE OFFICE
Fidelity National Financial, Inc.
601 Riverside Avenue
Jacksonville, FL 32204
www.fnf.com
STOCK TRANSFER AGENT AND REGISTRAR
Continental Stock Transfer and
Trust Company
17 Battery Place
New York, New York 10004
(212) 509-4000
ACCOUNTING FIRM
Ernst & Young
12926 Gran Bay Parkway
Jacksonville, FL 32258
PUBLICATIONS
The Company’s Annual Report on
Form 10-K and quarterly reports
on Form 10-Q are available on the
Investor Relations section of the
Company’s website at www.fnf.com.
A Notice of Annual Meeting of
Stockholders and Proxy Statement are
furnished to stockholders in advance of
the Annual Meeting.
STOCK EXCHANGE LISTING
Fidelity National Financial, Inc.
common stock is listed on the New
York Stock Exchange under the trading
symbol FNF.
CERTIFICATIONS
FNF filed the Chief Executive
Officer and Chief Financial Officer
certifications required by Section 302
of the Sarbanes-Oxley Act of 2002
as exhibits to its Annual Report on
Form 10-K for the fiscal year ended
December 31, 2017.
INVESTOR RELATIONS
Daniel Kennedy Murphy, CFA
Senior Vice President and Treasurer
Fidelity National Financial, Inc.
(NYSE:FNF)
601 Riverside Avenue
Jacksonville, FL 32204
904-854-8120
dkmurphy@fnf.com
www.fnf.com
William P. Foley, II
Chairman of the Board
Fidelity National Financial, Inc.
Douglas K. Ammerman
Retired
KPMG LLP
Willie D. Davis
President
All-Pro Broadcasting, Inc.
Thomas M. Hagerty
Managing Partner
Thomas H. Lee Partners, L.P.
Janet E. Kerr
Vice Chancellor
Pepperdine University
Daniel D. Lane
Chairman of the Board
Lane/Kuhn Pacific
Richard N. Massey
Partner
Westrock Capital Partners
Heather H. Murren
Managing Partner
Murren Family Office
Raymond R. Quirk
Chief Executive Officer
Fidelity National Financial, Inc.
John D. Rood
Chairman
The Vestcor Companies, Inc.
Peter O. Shea, Jr.
President and Chief Executive Officer
J.F. Shea Company
Cary H. Thompson
Vice Chairman
Banc of America Merrill Lynch
AUDIT COMMITTEE
Douglas K. Ammerman, Chair
Heather H. Murren
John D. Rood
COMPENSATION COMMITTEE
Richard N. Massey, Chair
Daniel D. Lane
Cary H. Thompson
GOVERNANCE COMMITTEE
Peter O. Shea, Jr., Chair
Richard N. Massey