2019
ANNUAL REPORT
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
12926 Gran Bay Parkway, Suite 500
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 Stockholder
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 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, 2019.
INVESTOR RELATIONS
Please visit the Contact Investor Relations
section of FNF's Investor Info website at
FNF.com to submit a question or request to
the Investor Relations department.
You can also contact FNF's Investor
Relations department via email at
investors@fnf.com
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Raymond R. Quirk
Chief Executive Officer
Michael J. Nolan
President
Roger S. Jewkes
Chief Operating Officer
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
GENERAL INFORMATION
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
1 State Street
30th Floor
New York, NY 10004
(212) 509-4000
cstmail@continentalstock.com
www.continentalstock.com/contact
William P. Foley, II
Chairman of the Board
Fidelity National Financial, Inc.
Douglas K. Ammerman
Retired
KPMG LLP
Thomas M. Hagerty
Managing Partner
Thomas H. Lee Partners, L.P.
Daniel D. Lane
Chairman of the Board
Lane/Kuhn Pacific
Richard N. Massey
Chief Executive Officer
Cannae Holdings, Inc.
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
Willie D. Davis
Director Emeritus
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
FINANCIAL HIGHLIGHTS
(Dollars in millions, except per share amounts)
INCOME STATEMENT:
Total Revenue
2019
2018
2017
Year Ended December 31,
$ 8,469
$ 7,594
$ 7,663
Net Earnings Attributable to Common Shareholders
$ 1,062
$ 628
$ 771
Adjusted Pre-Tax Title Margin
Cash Flow from Operations
16.3%
14.8%
$ 1,121
$ 943
14.5%
$ 737
BALANCE SHEET:
Total Assets
Cash and Investment Portfolio
Reserve for Claim Losses
Total Equity
At December 31,
$ 10,677
$ 9,301
$ 5,760
$ 4,806
$ 1,509
$ 1,488
$ 9,151
$ 4,481
$ 1,490
$ 5,365
$ 4,628
$ 4,467
$8,469
16.3%
TOTAL
REVENUE
$7,663
$7,594
ADJUSTED
PRE-TAX
TITLE MARGIN
14.8%
14.5%
‘17
‘18
‘19
‘17
‘18
‘19
$1,062
$10,677
$771
$628
NET EARNINGS
ATTRIBUTABLE
TO COMMON
SHAREHOLDERS
TOTAL
ASSETS
$9,301
$9,151
‘17
‘18
‘19
‘17
‘18
‘19
FIDELITY NATIONAL FINANCIAL, INC. | 1
William P. Foley, II
Chairman of the Board
Raymond R. Quirk
Chief Executive Officer
TO OUR SHAREHOLDERS
We are pleased that 2019 was another year of financial strength for our Company as
we generated total revenue of $8.5 billion, net earnings of $1.1 billion and cash flow from
operations of $1.1 billion. Diluted earnings per share were $3.83 and adjusted earnings per
share1 were $3.39. Our title business generated record adjusted pre-tax title earnings1 of
$1.3 billion, with an adjusted pre-tax title margin of 16.3%, our best year since 2003. Total
commercial revenue for the full year was $1.1 billion, making 2019 the best commercial
revenue year in company history. We continued to strengthen our balance sheet, ending the
year with over $1.1 billion of holding company cash and a debt to capital ratio below 13%. The
strength of our balance sheet and continued profitability of our title business positions us
well to take advantage of strategic opportunities as they arise and protect us from any macro-
economic headwinds that we may encounter.
In 2019, we made investments in our digital platform by expanding our WireSafe and
startSafe programs. These programs educate consumers about wire fraud and how to mitigate
risk while engaging home buyers and sellers in a new digital opening workspace. In addition,
we made progress enhancing core title production system technologies and integrations
and advancing automated title and underwriting capabilities. We have also made additional
investments in our CRM, transaction coordination and transaction management technologies
leveraged by real estate agents and brokers. All of these investments align with our mission to
advance, expand, and protect the life changing experience of home ownership.
Strategically, we spent the majority of 2019 working to close our acquisition of Stewart
Information Services, a transaction that was announced in March of 2018 and which had
an equity value of approximately $1.2 billion. Unfortunately, we faced insurmountable
regulatory hurdles and, as a result, made the decision to terminate the Stewart merger in
September which we believed was in the best interest of our shareholders.
Following the termination announcement, the Board and management team underwent
a comprehensive review of FNF’s capital allocation strategy and determined that expanding
into the annuity market through the acquisition of FGL Holdings (“F&G”), announced
2 | FIDELITY NATIONAL FINANCIAL, INC.
Our title business generated record
adjusted pre-tax title earnings1 of $1.3
billion, with an adjusted pre-tax title
margin of 16.3%, our best year since 2003.
February 2020, would best maximize value for our shareholders. FNF has been a minority
owner in F&G for the past three years and decided to acquire the remaining interest in F&G as
a way to diversify our earnings and reduce the risk and volatility inherent in our stand-alone
title operations. F&G off ers an attractive return on our capital investment in an industry with
strong secular growth tailwinds that will perform well in economic environments that may
be more challenging for title insurance. The closing of the transaction is subject to certain
regulatory and closing conditions including the approval by F&G shareholders, federal and
state regulatory approvals and the satisfaction of other customary closing conditions. We
expect the closing to be in the second or third quarter of 2020 and look forward to welcoming
the F&G employees and clients to the FNF family.
Lastly, for the eighth straight year, our board elected to increase our quarterly cash
dividend. Our fourth quarter dividend increased to $0.33 per share, a 6.5% increase from
the previous quarterly cash dividend of $0.31 per share. We remained committed to value
creation through the means of share repurchases, repurchasing over 2.1 million shares
throughout the year. The board will continue to evaluate capital allocation including share
repurchases, dividends, debt pay down and further investment in our business segments.
We currently fi nd ourselves in unprecedented times as our communities have been
rapidly aff ected by the infl ux of COVID-19 that has impacted the world. We have plans in
place to address a pandemic and are taking the necessary actions to support our customers
and protect our employees and their families.
While we recognize the challenges and uncertainties that a global pandemic brings to the
market, we remain cautiously optimistic about the prospects that a continued low interest
rate environment will provide to our title business. We are proud of what we were able to
accomplish in 2019 and we remain committed to leading the title insurance industry in
profi tability and continuing to create value for our shareholders in 2020 and beyond. We
thank all of our employees for their eff orts in 2019 and thank all of our shareholders for their
continued support.
William P. Foley, II
Chairman of the Board
Raymond R. Quirk
Chief Executive Offi cer
(1) See the Non-GAAP Financial Measures page for reconciliations of GAAP to non-GAAP fi nancial measures.
FIDELITY NATIONAL FINANCIAL, INC. | 3
NON-GAAP FINANCIAL MEASURES
RECONCILIATION OF PRE-TAX EARNINGS TO ADJUSTED PRE-TAX EARNINGS
($ in millions)
Pre-tax earnings
Realized (gains) and losses, net
Purchase price amortization
Transaction costs
Severance costs and other adjustments
Adjusted Pre-tax earnings
2019
CONSOLIDATED
$ 1,369
(318)
105
58
7
TITLE
$ 1,536
(326)
86
-
1
$1,221
$1,297
RECONCILIATION OF DILUTED EARNINGS PER SHARE TO ADJUSTED EARNINGS PER SHARE
($ in millions, except per share data)
Net earnings attributable to common shareholders
Realized (gains) and losses, net
Purchase price amortization
Transaction costs
Severance costs and other adjustments
Income taxes on non-GAAP adjustments
Non-controlling interest on non-GAAP adjustments
Adjusted net earnings attributable to common shareholders
Earnings per share - diluted
Adjusted earnings per share - diluted
Weighted average shares outstanding - diluted
2019
$ 1,062
(318)
105
58
7
38
(12)
$940
$3.83
$3.39
277
Use of Non-GAAP Financial Information
Generally Accepted Accounting Principles (GAAP) is the term used to refer to the standard framework of guidelines for
financial accounting. GAAP includes the standards, conventions, and rules accountants follow in recording and summarizing
transactions and in the preparation of financial statements. In addition to reporting financial results in accordance with
GAAP, FNF has provided non-GAAP financial measures, which it believes are useful to help investors better understand its
financial performance, competitive position and prospects for the future. These non-GAAP measures include adjusted
pre-tax earnings and adjusted earnings per share.
Any non-GAAP measures should be considered in context with the GAAP financial presentation and should not be
considered in isolation or as a substitute for GAAP net earnings. Further, FNF's non-GAAP measures may be calculated
differently from similarly titled measures of other companies. Reconciliations of these non-GAAP measures to related GAAP
measures are provided above.
4 | FIDELITY NATIONAL FINANCIAL, INC.
FIDELIT Y NATIONAL FINA NCIAL, I NC.
F O R M
1OK
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, 2019
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)
16-1725106
(I.R.S. Employer Identification No.)
601 Riverside Avenue, Jacksonville, Florida
(Address of principal executive offices)
32204
(zip code)
(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
5.50% Notes due September 2022
Trading Symbol(s)
FNF
FNF22
Name of Each Exchange on Which Registered
New York Stock Exchange
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 every Interactive Data File required to be submitted
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 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
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, 2019 was
$10,594,534,815 based on the closing price of $40.30 as reported by The New York Stock Exchange.
As of January 31, 2020 there were 275,607,954 shares of FNF common stock outstanding.
The information in Part III hereof for the fiscal year ended December 31, 2019, 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.
Item 16.
Exhibits, Financial Statement Schedules
Summary
PART IV
Page
Number
1
12
17
17
17
18
21
24
41
43
89
89
89
90
90
90
90
90
91
95
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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) transaction services to the real estate and mortgage
industries. FNF is one of the nation’s largest title insurance companies operating through its title insurance underwriters - Fidelity
National Title Insurance Company ("FNTIC"), Chicago Title Insurance Company ("Chicago Title"), Commonwealth Land Title
Insurance Company ("Commonwealth Land 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, 2019, we had the following reporting segments:
•
•
Title. This segment consists of the operations of our title insurance underwriters and related businesses which provide
title insurance and escrow and other title-related services including trust activities, trustee sales guarantees, 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 real estate technology
subsidiaries, other smaller, non-title businesses and certain unallocated corporate overhead expenses and eliminations of
revenues and expenses between it and our Title segment.
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.
Leading title insurance company. We are one of the largest title insurance companies 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 2019,
our insurance companies had a 34.1% 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 more than 1,300 direct residential title offices and more than 5,300 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 process more
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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.
We believe that our competitive strengths position us well to take advantage of future changes to the real estate market.
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 FNTIC, 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
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 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.
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In the future, we may seek to sell certain investments or other assets to increase our liquidity. 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 run by best in class management teams and 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.
Refer to discussion under Selected Financial Data and Certain Factors Affecting Comparability included in Item 6 and Item
7 of Part II of this Annual Report on Form 10-K (this "Annual Report"), respectively, which are incorporated by reference into
this Item 1 of Part I, for further discussion of material dispositions of businesses.
Termination of Stewart Merger Agreement and Payment of Reverse Termination Fee
On March 18, 2018, we signed a merger agreement (the "Stewart Merger Agreement") to acquire Stewart Information Services
Corporation ("Stewart") (NYSE: STC) (the "Stewart Merger"). On, September 9, 2019, we entered into a mutual Termination
Agreement with Stewart (the “Termination Agreement”), pursuant to which the parties agreed to terminate the Stewart Merger
Agreement, due to the Federal Trade Commission's issuance of an administrative complaint seeking to block the merger. In
connection with the termination of the Stewart Merger Agreement, we paid to Stewart, on September 12, 2019, the Reverse
Termination Fee (as defined in the Stewart Merger Agreement) consisting of $50 million in cash, which is included within other
operating expenses in the Consolidated Statements of Earnings.
Pending Acquisition of FGL
On February 7, 2020, we signed a merger agreement (the “Merger Agreement”) to acquire FGL Holdings (“FGL”) (NYSE:
FG) (the “FGL Merger”). Subject to the terms and conditions of the Merger Agreement, which has been approved by the board
of directors of FNF, at the First Effective Time (as defined in the Merger Agreement), the ordinary shares of FGL (the “Ordinary
Shares”), including all restricted Ordinary Shares (whether vested or unvested), issued and outstanding as of immediately prior
to the First Effective Time (other than (i) shares owned by FGL and any of its subsidiaries or FNF and any of its subsidiaries and
(ii) shares in respect of which dissenters rights have been properly exercised and perfected under Cayman law) will be converted
into the right to receive $12.50 in cash or 0.2558 shares (“the Stock Consideration”) of common stock of FNF (“FNF Common
Stock”), at the election of the holder thereof and subject to the proration mechanics set forth in the Merger Agreement. Pursuant
to the Merger Agreement, all Ordinary Shares held by FNF and its subsidiaries will be converted into the right to receive the Stock
Consideration. Each Series B Cumulative Preferred Share, all of which are held by FNF and its subsidiaries, will be converted
into the right to receive a number of shares of FNF Common Stock that is equal to (i) the Liquidation Preference (as defined in
the Merger Agreement) divided by (ii) the Reference Parent Common Stock Price (as defined in the Merger Agreement).
Additionally, all options to purchase Ordinary Shares (“FGL Share Option”) and phantom unit denominated in Ordinary
Shares (“FGL Phantom Unit”), in each case, outstanding immediately prior to the First Effective Time, will be canceled and
converted into options to purchase FNF Common Stock and phantom units denominated in FNF Common Stock at the First
Effective Time (collectively, the “Rollover Awards”), as applicable. The Rollover Awards will generally be subject to the same
terms and conditions as applicable to the applicable canceled FGL Share Option or FGL Phantom Unit immediately prior to the
First Effective Time, except that (i) all performance-vesting criteria will be deemed satisfied at the First Effective Time at the
levels described in the Merger Agreement and such Rollover Awards will be subject only to time-based vesting conditions after
the First Effective Time, and (ii) immediately prior to the First Effective Time, additional time-vesting credits will be provided to
holders in respect of FGL Share Options and FGL Phantom Units granted prior to January 1, 2020, as described in the Merger
Agreement.
The closing of the transaction is subject to certain closing conditions, including the approval by FGL stockholders, federal and
state regulatory approvals, and the satisfaction of other customary closing conditions. Closing is expected in the second or third
quarter of 2020.
Title Insurance
Market for title insurance. According to Demotech Performance of Title Insurance Companies 2019 Edition, an annual
compilation of financial information from the title insurance industry that is published by Demotech Inc. ("Demotech"), an
independent firm, total operating income for the entire U.S. title insurance industry has increased over the last five years from
approximately $12.2 billion in 2014 to $15.9 billion in 2018, which represents a $0.3 billion increase from 2017. The size of the
industry is closely tied to various macroeconomic factors, including, but not limited to, growth in the gross domestic product,
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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.
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 84% of net premiums written in 2018. Approximately 38 independent title insurance
companies accounted for the remaining 16% of net premiums written in 2018. 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 Annual Report, which is incorporated by reference into this
Item 1 of Part I.
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
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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
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 and those of 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 more than 1,300 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 primarily 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, 2019, we transact business with approximately 5,300 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:
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Direct
Agency
Total title insurance premiums
Year Ended December 31,
2019
2018
2017
Amount
%
Amount
%
Amount
%
(Dollars in millions)
$
$
2,381
2,961
5,342
44.6% $
55.4
100.0% $
2,221
2,690
4,911
45.2% $
54.8
100.0% $
2,170
2,723
4,893
44.3%
55.7
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. 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.
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 closing and 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 28.9%, 30.6%, and 30.2% of total Title segment revenues
in 2019, 2018, and 2017, 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
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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 four contracts. The first excess of loss reinsurance contract provides an $80 million 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 limit of coverage from a single loss occurrence for commercial loss, with the Company co-participating at
approximately 10%. The third excess of loss reinsurance contract ("Third XOL Contract") provides an additional $80 million
limit of coverage from a single loss occurrence for commercial loss, with the Company co-participating at approximately 10%.
The fourth excess of loss reinsurance contract ("Fourth XOL Contract") provides an additional $220 million limit of coverage
from a single loss occurrence for commercial loss, with the Company co-participating at approximately 10%. Subject to the
Company’s retention and co-participation on the Second, Third and Fourth XOL Contracts, the maximum coverage from a single
loss occurrence provided under our excess of loss reinsurance coverage is $620 million. Each XOL Contract provides for one
reinstatement of its respective limit, so the aggregate limit of coverage is $1.24 billion.
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.
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 service and price. 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, Stewart Information Services Corporation, Westcor Land Title Insurance Company, and WFG National Title Insurance
Company, 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, 2019, the combined statutory unearned premium reserve required and reported for our title insurers was $1,446
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.
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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.
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 2020, our directly owned title insurers can pay
dividends or make distributions to us of approximately $518 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 $1,581 million and $1,383 million as of
December 31, 2019 and 2018, respectively. The combined statutory earnings of our title insurers were $583 million, $625 million,
and $434 million for the years ended December 31, 2019, 2018, and 2017, 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,
2019.
Our underwritten title companies, primarily those domiciled in California, are also subject to certain regulation by insurance
regulatory or banking authorities relating to their net worth and working capital. Minimum net worth and working capital
requirements for each underwritten title company is less than $1 million. These companies were in compliance with their respective
minimum net worth and working capital requirements at December 31, 2019.
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
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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.
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, FNTIC 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
A
Moody’s
A2
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 11 ratings for S&P. According to S&P, an insurer rated “A” has strong
capacity to meet its financial commitments, but is somewhat more susceptible to adverse effects of changes in
circumstances and economic conditions than insurers with "AAA" or "AA" ratings.
• A Moody's "A2" rating is the third highest rating of 9 ratings for Moody's. Moody's states that companies rated “A2”
are judged to be upper-medium grade and are subject to low credit risk.
Demotech provides financial strength/stability ratings for each of our 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 the insurer possesses
"Unsurpassed" ability to maintain liquidity of invested assets, quality reinsurance, acceptable financial leverage and realistic
pricing while simultaneously establishing loss and loss adjustment expense reserves at reasonable levels. 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
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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
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 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, 2019 and 2018, the carrying amount of total investments, which approximates the fair value, excluding
investments in unconsolidated affiliates, was $4.3 billion and $3.4 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, 2019 and 2018:
Rating(1)
Aaa/AAA
Aa/AA
A
Baa/BBB
Lower
Other (2)
2019
Amortized
Cost
% of
Total
Fair
Value
$
529
239
704
663
134
204
21.4% $
9.7
28.5
26.8
5.4
8.2
539
247
727
676
139
204
December 31,
% of
Total
Amortized
Cost
(Dollars in millions)
21.3% $
436
9.8
28.7
26.6
5.5
8.1
260
749
633
133
200
2018
% of
Total
Fair
Value
% of
Total
18.1% $
10.8
31.0
26.3
5.5
8.3
430
260
749
630
131
200
17.9%
10.8
31.3
26.3
5.4
8.3
$
2,473
100.0% $
2,532
100.0% $
2,411
100.0% $
2,400
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.
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The following table presents certain information regarding contractual maturities of our fixed maturity securities at
December 31, 2019:
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, 2019
Amortized
Cost
% of
Total
Fair
Value
% of
Total
$
341
1,093
403
132
60
(Dollars in millions)
16.8% $
53.9
19.8
6.5
3.0
341
1,117
424
146
62
16.3%
53.4
20.3
7.0
3.0
$
2,029
100.0% $
2,090
100.0%
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.
At December 31, 2019 and 2018, we held $131 million and $137 million, respectively, in investments that are accounted for
using the equity method of accounting.
As of December 31, 2019 and 2018, other long-term investments were $153 million and $135 million, respectively. Other
long-term investments include other investments carried at fair value 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, 2019 and 2018,
short-term investments amounted to $876 million and $480 million, respectively.
Our investment results for the years ended December 31, 2019, 2018 and 2017 were as follows:
December 31,
2019
2018
2017
Net investment income (1)
Average invested assets
Effective return on average invested assets
______________________________________
$
$
(Dollars in millions)
$
169
$
206
139
3,768
$
3,291
$
3,296
5.5%
5.1%
4.2%
(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. Net investment income includes fees earned by holding customer funds in escrow (off-balance sheet) during
facilitation of tax-deferred property exchanges. See Note D Investments to our Consolidated Financial Statements included
in Item 8 of Part II of this Annual Report for a detail of our interest income.
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.
Employees
As of January 31, 2020, we had 25,063 full-time equivalent employees, which includes 24,443 in our Title segment and 620
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
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The statements contained in this Annual Report 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
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), 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;
inability to obtain without unanticipated conditions or significant delay, if at all, the necessary approvals to consummate
the FGL Merger;
inability to timely satisfy or obtain waiver of any of the closing conditions to the proposed FGL Merger;
failure to successfully integrate FGL’s business with that of FNF, that such integration may be more difficult, time-
consuming or costly than expected or that the expected benefits of the FGL Merger will not be realized;
potential impact of the announcement or consummation of the FGL Merger on relationships, including employees,
suppliers, customers and competitors;
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 14.3% and 13.8%,
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 Exchange Act 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. 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 $2,727 million, or 25.5% of our total assets, as of December 31, 2019. 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. In the year ended December 31, 2018, we recorded $3 million
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of goodwill impairment related to a real estate brokerage subsidiary in our Corporate and other segment. For the years ended
December 31, 2019 and 2017, no goodwill impairment charge was recorded. 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.
Our management has historically sought to grow 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 historically sought to grow through acquisitions, both in our current lines of business, as well as lines
of business that are not directly tied to or synergistic with our current 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 current 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 2020, our title insurers may pay dividends
or make distributions to us of approximately $518 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
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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
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. Economic
and credit market conditions may adversely affect the ability of some issuers of investment securities to repay their obligations
and affect 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, we have always had risk management functions, policies and
procedures throughout our 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 our 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;
• when housing inventory is limited or home prices are high or increasing; 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 17, 2020 calculates
an approximately $2.1 trillion mortgage origination market for 2019, which would be an increase from 2018 resulting primarily
from increased refinance activity. However, the MBA predicts overall mortgage originations in 2020 and 2021 will decrease
slightly when compared to 2019. Our revenues in future periods will continue to be subject to these and other factors which are
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beyond our control and, as a result, are likely to fluctuate. See discussion under 'Business Trends and Conditions' within
Management's Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of Part II of this
Annual Report for further discussion of current market trends.
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.
We have a contingent liability relating to proper disposition of these balances for our customers, which amounted to $18.7 billion
at December 31, 2019. 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.
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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
requests, subpoenas, and orders for documents, testimony and information in connection with various aspects of its or its clients’
regulated activities.
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 our
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 14.3% and 13.8% 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 2019, California-based premiums
accounted for approximately 28.9% of premiums earned by our direct operations and 0.8% of our agency premium revenues.
Texas-based premiums accounted for 17.9% of premiums earned by our direct operations and 9.8% of our agency premium
revenues. In the aggregate, California and Texas accounted for approximately 14.3% and 13.8%, respectively, of our total title
insurance premiums for 2019. 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 our 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. We have established procedures to mitigate the risk of loss from title claims, including extensive underwriting and risk
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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 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.
Our use of independent agents for a significant amount of our title insurance policies could adversely impact the frequency
and severity of title claims.
In our agency operations, an independent agent performs the search and examination function or the agent may purchase a
search product from us. 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. 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. For each agent with whom we enter 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 whom we transact 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 us. Furthermore, we cannot be certain that, due to changes in the regulatory environment and litigation
trends, we 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 our results of operations or financial condition.
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. Existing or new competitors may be able to utilize or create technology more effectively
than us, which could result in the loss of market share.
Our pending acquisition of FGL may expose us to certain risks.
On February 7, 2020, we signed a merger agreement (the “Merger Agreement”) to acquire FGL Holdings (“FGL”) (NYSE:
FG) (the “FGL Merger”). Consummation of the FGL Merger is subject to the satisfaction or waiver of customary conditions.
Additionally, the Merger Agreement contains certain customary termination rights in favor of either FNF or FGL. If the FGL
Merger is completed, we may face challenges in integrating FGL into our existing infrastructure. These challenges include
evaluating and possibly changing operations, facilities and systems, coordinating management and personnel, retaining key
employees, and managing different corporate cultures. There can be no assurance that we will be able to fully integrate all aspects
of the acquired business successfully, and the process of integrating this acquisition may disrupt our business and divert our
resources.
Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Our corporate headquarters are in Jacksonville, Florida in owned facilities.
The majority of our branch offices are leased from third parties. See Note B Leases 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 45 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 Item 3 of Part I.
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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".
On January 31, 2020, the last reported sale price of our common stock on the New York Stock Exchange was $48.75. We had
approximately 6,400 shareholders of record.
Refer to Note O. Employee Benefit Plans to our Consolidated Financial Statements included in Item 7 of Part II of this Annual
Report, which is incorporated by reference into this Item 5 of Part II, for further information on securities issued for employee
stock compensation pursuant to our Omnibus Plan.
Information concerning securities authorized for issuance under our equity compensation plans will be included in Item 12
of Part III of this Annual 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, 2019. 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, 2014, with dividends reinvested over the periods indicated.
Fidelity National Financial, Inc.
S&P 500
Peer Group
100.00
100.00
100.00
102.92
101.38
107.66
103.44
113.51
117.46
169.69
138.29
169.75
140.42
132.23
143.77
208.88
173.86
185.71
12/31/2014
12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
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Dividends
Dividends declared on our common stock for the two most recent fiscal years are as follows:
First quarter
Second quarter
Third quarter
Fourth quarter
Year Ended December 31,
2019
2018
Cash Dividends per Share
$
$
0.31
0.31
0.31
0.33
0.30
0.30
0.30
0.30
On February 13, 2020, our Board of Directors formally declared a $0.33 per FNF share cash dividend that is payable on
March 31, 2020 to FNF shareholders of record as of March 17, 2020.
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,
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, 2019, $1,868 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
2020, our directly owned title insurance subsidiaries can pay dividends or make distributions to us of approximately $518 million
without prior approval. The limits placed on such subsidiaries’ abilities to pay dividends affect our ability to pay dividends.
Purchases of Equity Securities by the Issuer
On July 17, 2018, our Board of Directors approved a new three-year stock repurchase program effective August 1, 2018 (the
"2018 Repurchase Program") under which we may purchase up to 25 million shares of our FNF common stock through July 31,
2021. 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. During the year ended December 31, 2019, we repurchased a total of 2,120,000
FNF common shares for an aggregate amount of $85 million or an average of $40.09 per share. Since the original commencement
of the 2018 Repurchase Program, we repurchased a total of 2,780,000 FNF common shares for an aggregate amount of $106
million, or an average of $38.24 per share.
The following table summarizes repurchases of equity securities by FNF during the year ending December 31, 2019:
Period
1/1/2019 - 1/31/2019
2/1/2019 - 2/28/2019
3/1/2019 - 3/31/2019
4/1/2019 - 4/30/2019
5/1/2019 - 5/31/2019
6/1/2019 - 6/30/2019
7/1/2019 - 7/31/2019
8/1/2019 - 8/31/2019
9/1/2019 - 9/30/2019
10/1/2019 - 10/31/2019
11/1/2019 - 11/30/2019
12/1/2019 - 12/31/2019
Total
Total Number of
Shares Purchased
Average Price Paid
per Share
31.83
34.83
35.56
38.39
39.03
39.95
42.47
43.73
44.13
44.13
46.32
—
40.09
60,000
$
135,000
315,000
90,000
330,000
300,000
180,000
330,000
300,000
60,000
20,000
—
2,120,000
$
20
Total Number of Shares
Purchased as Part of
Publicly Announced
Plans or Programs (1)
60,000
Maximum Number of
Shares that May Yet Be
Purchased Under the
Plans or Programs (2)
24,280,000
135,000
315,000
90,000
330,000
300,000
180,000
330,000
300,000
60,000
20,000
—
2,120,000
24,145,000
23,830,000
23,740,000
23,410,000
23,110,000
22,930,000
22,600,000
22,300,000
22,240,000
22,220,000
22,220,000
Table of Contents
(1)
On July 17, 2018, our Board of Directors approved a three-year stock repurchase program effective August 1, 2018.
Under the stock repurchase program, we may repurchase up to 25 million shares of our FNF common stock through
July 31, 2021.
(2)
As of the last day of the applicable month.
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 Annual
Report. Certain reclassifications have been made to the prior year amounts to conform with the 2019 presentation.
On November 17, 2017 we completed the 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”). The results of Black Knight are
presented as discontinued operations in the following tables.
Prior to November 17, 2017, our common stock was comprised of two tracking stocks, FNF Group common stock and FNFV
Group common stock.
Year Ended December 31,
2019
2018
2017
2016
2015
(Dollars in millions, except share data)
$
8,469
$
7,594
$
7,663
$
7,257
$
6,664
2,696
2,258
1,681
178
240
47
7,100
1,369
308
1,061
15
1,076
—
1,076
14
1,062
$
2,538
2,059
1,801
182
221
43
6,844
750
120
630
5
635
—
635
7
628
$
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
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 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 from discontinued operations, net of tax
Net earnings
Less: net earnings attributable to noncontrolling interests
Net earnings attributable to FNF common shareholders
$
21
Table of Contents
Per Share Data:
2019
Year Ended December 31,
2018
2017
(Dollars in millions, except share data)
2016
2015
Basic net earnings per share attributable to FNF Group common
shareholders
$
3.89
$
2.30
Basic net earnings (loss) per share attributable to FNFV Group
common shareholders
Weighted average shares outstanding FNF Group, basic basis
273
273
Weighted average shares outstanding FNFV Group, basic basis
Diluted net earnings per share attributable to FNF Group common
shareholders
$
3.83
$
2.26
Diluted net earnings (loss) per share attributable to FNFV Group
common shareholders
Weighted average shares outstanding FNF Group, diluted basis
277
278
$
$
$
$
2.44
$
2.40
$
1.95
1.68
271
65
$ (0.06)
272
$ (0.16)
277
67
79
2.38
$
2.34
$
1.89
1.63
278
67
$ (0.06)
280
$ (0.16)
286
70
82
Weighted average shares outstanding FNFV Group, diluted basis
Dividends declared per share of FNF Group common stock
Balance Sheet Data:
Investments (1)
Cash and cash equivalents (2)
Total assets
Notes payable
Reserve for title claim losses
Redeemable NCI
Equity
Book value per share FNF Group (3)
Book value per share FNFV Group (3)
Other Data:
$
1.26
$
1.20
$
1.02
$
0.88
$
0.80
$ 4,384
$ 3,549
$ 3,371
$ 3,782
$ 4,015
1,376
10,677
838
1,509
344
5,365
1,257
9,301
836
1,488
344
4,628
1,110
9,151
759
1,490
344
4,467
1,049
14,521
987
1,487
344
6,898
696
14,043
981
1,583
344
6,588
$ 20.71
$ 18.05
$ 17.53
$ 22.81
$ 21.21
$ 15.54
$ 15.05
Orders opened by direct title operations (in 000's)
Orders closed by direct title operations (in 000's)
2,066
1,448
1,818
1,315
1,942
1,428
2,184
1,575
2,092
1,472
Provision for title insurance claim losses as a percent of title
insurance premiums (4)
4.5%
4.5%
4.9%
3.3%
5.7%
Title-related revenue (5):
Percentage direct operations
Percentage agency operations
______________________________________
62.6%
37.4%
64.3%
35.7%
63.8%
36.2%
63.2%
36.8%
65.1%
34.9%
(1) Investments as of December 31, 2019, 2018, 2017, 2016, and 2015, include securities pledged to secured trust deposits
of $422 million, $426 million, $367 million, $544 million, and $608 million, respectively.
(2) Cash and cash equivalents as of December 31, 2019, 2018, 2017, 2016, and 2015 include cash pledged to secured trust
deposits of $384 million, $412 million, $475 million, $331 million, and $108 million, respectively.
(3) 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.
(4) Includes the effects of the release of $97 million of excess reserves in the quarter ended December 31, 2016.
(5) Includes title insurance premiums and escrow, title-related and other fees.
22
Table of Contents
Selected Quarterly Financial Data (Unaudited)
Selected quarterly financial data is as follows:
2019
Revenue
Earnings from continuing operations before income taxes, equity in
earnings of unconsolidated affiliates, and noncontrolling interest
Net earnings attributable to FNF common shareholders
Basic earnings per share attributable to FNF common shareholders
Diluted earnings per share attributable to FNF common shareholders
Dividends paid per share FNF common stock
2018
Revenue
Earnings from continuing operations before income taxes, equity in
earnings of unconsolidated affiliates, and noncontrolling interest
Net earnings attributable to FNF common shareholders
Basic earnings per share attributable to FNF common shareholders
Diluted earnings per share attributable to FNF common shareholders
Dividends paid per share FNF common stock
Quarter Ended
March 31,
June 30,
September 30, December 31,
(Dollars in millions, except per share data)
$
1,722
$
2,144
$
2,241
$
2,362
264
206
0.75
0.74
0.31
353
266
0.97
0.96
0.31
313
250
0.92
0.90
0.31
439
340
1.24
1.22
0.33
$
1,693
$
2,123
$
2,085
$
1,693
127
97
0.36
0.35
0.30
275
251
0.92
0.90
0.30
287
236
0.86
0.85
0.30
61
44
0.16
0.16
0.30
23
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 Annual Report.
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 Item 7 of Part II of this Annual Report.
Recent Developments
Termination of Stewart Merger Agreement and Payment of Reverse Termination Fee
On March 18, 2018, we signed a merger agreement (the "Stewart Merger Agreement") to acquire Stewart Information Services
Corporation ("Stewart") (NYSE: STC) (the "Stewart Merger"). On September 9, 2019, we entered into a mutual Termination
Agreement with Stewart (the “Termination Agreement”), pursuant to which the parties agreed to terminate the Stewart Merger
Agreement, due to the Federal Trade Commission's issuance of an administrative complaint seeking to block the merger. In
connection with the termination of the Stewart Merger Agreement, on September 12, 2019, we paid to Stewart the Reverse
Termination Fee (as defined in the Stewart Merger Agreement) consisting of $50 million in cash, which is included within other
operating expenses in the Consolidated Statements of Earnings.
Pending Acquisition of FGL
On February 7, 2020, we signed a merger agreement (the “Merger Agreement”) to acquire FGL Holdings (“FGL”) (NYSE:
FG) (the “FGL Merger”). Subject to the terms and conditions of the Merger Agreement, which has been approved by the board
of directors of FNF, at the First Effective Time (as defined in the Merger Agreement), the ordinary shares of FGL (the “Ordinary
Shares”), including all restricted Ordinary Shares (whether vested or unvested), issued and outstanding as of immediately prior
to the First Effective Time (other than (i) shares owned by FGL and any of its subsidiaries or FNF and any of its subsidiaries and
(ii) shares in respect of which dissenters rights have been properly exercised and perfected under Cayman law) will be converted
into the right to receive $12.50 in cash or 0.2558 shares (“the Stock Consideration”) of common stock of FNF (“FNF Common
Stock”), at the election of the holder thereof and subject to the proration mechanics set forth in the Merger Agreement. Pursuant
to the Merger Agreement, all Ordinary Shares held by FNF and its subsidiaries will be converted into the right to receive the Stock
Consideration. Each Series B Cumulative Preferred Share, all of which are held by FNF and its subsidiaries, will be converted
into the right to receive a number of shares of FNF Common Stock that is equal to (i) the Liquidation Preference (as defined in
the Merger Agreement) divided by (ii) the Reference Parent Common Stock Price (as defined in the Merger Agreement).
Additionally, all options to purchase Ordinary Shares (“FGL Share Option”) and phantom unit denominated in Ordinary
Shares (“FGL Phantom Unit”), in each case, outstanding immediately prior to the First Effective Time, will be canceled and
converted into options to purchase FNF Common Stock and phantom units denominated in FNF Common Stock at the First
Effective Time (collectively, the “Rollover Awards”), as applicable. The Rollover Awards will generally be subject to the same
terms and conditions as applicable to the applicable canceled FGL Share Option or FGL Phantom Unit immediately prior to the
First Effective Time, except that (i) all performance-vesting criteria will be deemed satisfied at the First Effective Time at the
levels described in the Merger Agreement and such Rollover Awards will be subject only to time-based vesting conditions after
the First Effective Time, and (ii) immediately prior to the First Effective Time, additional time-vesting credits will be provided to
holders in respect of FGL Share Options and FGL Phantom Units granted prior to January 1, 2020, as described in the Merger
Agreement.
The closing of the transaction is subject to certain closing conditions, including the approval by FGL stockholders, federal and
state regulatory approvals, and the satisfaction of other customary closing conditions. Closing is expected in the second or third
quarter of 2020.
Business Trends and Conditions
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;
•
•
housing inventory and home prices; and
strength of the United States economy, including employment levels.
As of January 17, 2020, the Mortgage Banker's Association ("MBA") estimated the size of the United States ("U.S.") residential
mortgage originations market as shown in the following table for 2019 - 2022 in its "Mortgage Finance Forecast" (in trillions,
2018 represents actual originations):
24
Table of Contents
Purchase transactions
Refinance transactions
Total U.S. mortgage originations
2022
2021
2020
2019
2018
$
$
1.4
0.4
1.8
$
$
1.3
0.5
1.8
$
$
1.3
0.6
1.9
$
$
1.3
0.8
2.1
$
$
1.2
0.5
1.7
In 2018, total originations were reflective of a generally improving residential real estate market driven by increasing home
prices and low mortgage interest rates. In 2018 average interest rates on 30-year, fixed-rate mortgages in the U.S. rose from
approximately 4.0% to 4.9% through October, representing an increase of 22%, before retreating to 4.55% in the last week of
December according to mortgage buyer Freddie Mac. As a result of the overall upward trend in rates, refinance transactions slightly
decreased in 2018 from the historically high levels experienced in preceding years. Existing home sales also slightly decreased
in 2018. In 2019, concerns over a slowing global economy and the impact of a prolonged trade war resulted in additional interest
rate cuts in the second half of the year which significantly increased refinance transactions and slightly increased purchase
transactions when compared to 2018.
During the second half of 2019, the combination of reduced housing inventory, lower mortgage interest rates and increasing
home prices led the MBA to keep purchase transaction forecasts relatively flat for 2020 and beyond. The MBA expects a decrease
in refinance transactions in each of the next three years. Mortgage interest rates are generally expected to remain flat in 2020. In
a stagnate interest rate environment, refinance transactions are expected to stagnate. The MBA predicts overall residential mortgage
originations in 2020 and 2021 will decrease compared to 2019.
Other economic indicators used to measure the health of the U.S. economy, including the unemployment rate and consumer
confidence, have continued to indicate the U.S. economy remains on strong footing. According to the U.S. Department of Labor's
Bureau of Labor, the unemployment rate was at a historically low 3.5% in December 2019. Additionally, the Conference Board's
monthly Consumer Confidence Index has remained at high levels through 2019, despite a slight decrease in the second half of the
year. Toward the end of the fiscal year of 2018 and into 2019, there has been increased global economic uncertainty and stock
market volatility as a result of, among other things, the ongoing trade war. Such market uncertainty could ultimately impact U.S.
real estate markets if they worsen. We believe continued strong readings in domestic U.S. economic indicators present potential
tailwinds for mortgage originations, despite growing risks from global economic uncertainties.
We cannot be certain how the positive effects of a generally strong U.S. economy and the negative effects of flat or slightly
increasing mortgage interest rates and global economic uncertainty will impact mortgage originations and our future results of
operations from our residential business. We continually monitor mortgage 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. Factors including U.S. tax reform and a shift in U.S.
monetary policy have had, or are expected to have, varying effects on availability of financing in the U.S. Lower corporate and
individual tax rates and corporate tax-deductibility of capital expenditures have provided increased capacity and incentive for
investments in commercial real estate. Conversely, long-term gradual increases in the Fed Funds Rate are generally expected to
adversely impact availability of financing. In recent years, we have continued to experience strong demand in commercial real
estate markets and from 2017 to 2019 experienced historically high volumes and fee-per-file in our commercial business.
Seasonality. 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 second and third calendar quarters are typically the strongest quarters in terms of revenue, primarily
due to a higher volume of residential transactions in the spring and 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.
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 5,300 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.
25
Table of Contents
The following table sets forth the approximate dollar and percentage volumes of our title insurance premium revenue by state:
California
Texas
Florida
New York
Illinois
All others
Totals
Year Ended December 31,
2019
2018
Amount
%
Amount
%
(Dollars in millions)
2017
Amount
%
$
$
764
734
492
311
273
2,768
5,342
14.3% $
13.8
9.2
5.8
5.1
51.8
100.0% $
681
707
432
310
271
2,510
4,911
13.9% $
14.4
8.8
6.3
5.5
51.1
100.0% $
708
693
392
311
283
14.5%
14.2
8.0
6.3
5.8
2,506
4,893
51.2
100.0%
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, 2019
%
December 31, 2018
%
(in millions)
(in millions)
$
$
176
1,333
1,509
11.7% $
88.3
100.0% $
173
1,315
1,488
11.6%
88.4
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
26
Table of Contents
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
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 4.5% for the year ended December 31, 2019. Our average loss provision rate was 4.5%,
4.5% and 4.9% for the years ended December 31, 2019, 2018 and 2017, respectively. Of such annual loss provision rates, 4.5%,
for each of the years ended December 31, 2019, 2018 and 2017, respectively, related to losses on policies written in the current
year, and the remainder, if any related to developments on prior year policies. The provision rate in 2019, 2018, and 2017 is
supported by significant payment declines for prior policy years, and qualitative factors that would indicate favorable results,
including better lender underwriting standards, extension of credit to higher quality borrowers, a high proportion of refinance
activity, better claims expense management, better mechanic’s lien underwriting practices, and better fraud awareness by lenders,
title insurers and settlement agents. In 2017, adverse development of prior year losses of $19 million or 0.4% of 2017 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.
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
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
Title premiums
2019
$
1,488
2018
(In millions)
1,490
$
1
240
—
240
—
221
—
221
2017
$
1,487
(4)
219
19
238
(8)
(223)
(231)
1,490
4,893
(11)
(209)
(220)
1,509
5,342
$
$
(10)
(213)
(223)
1,488
4,911
$
$
$
$
27
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Provision for title insurance claim losses as a percentage of title insurance premiums:
Current year
Prior years
Total provision
2019
2018
2017
4.5%
—
4.5%
4.5%
—
4.5%
4.5%
0.4
4.9%
Actual claims payments consist of loss payments and claims management expenses offset by recoupments and were as follows
(in millions):
Year ended December 31, 2019
Year ended December 31, 2018
Year ended December 31, 2017
Loss
Payments
Claims
Management
Expenses
$
$
139
140
145
112
118
121
Recoupments
$
(31) $
(35)
(35)
Net Loss
Payments
220
223
231
As of December 31, 2019 and 2018, our recorded reserves were $1,509 million and $1,488 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 $34 million above the mid-point of the provided range
of $1.3 billion to $1.7 billion of our actuarial estimates as of December 31, 2019. Our recorded reserves were $44 million above
the mid-point of the provided range of our actuarial estimates of $1.3 billion to $1.6 billion as of December 31, 2018.
During 2019, 2018, and 2017, 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 2019 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 12,800 claims at
December 31, 2018 to approximately 11,800 claims at December 31, 2019. 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 $53 million increase (decrease) in our annualized provision for title claim losses would occur if our loss
provision rate were 1% higher (lower), based on 2019 title premiums of $5,342 million. A 10% increase (decrease) in our reserve
for title claim losses, as of December 31, 2019, would result in an increase (decrease) in our provision for title claim losses of
approximately $151 million.
Valuation of Investments. Investments in fixed maturity, equity, and preferred securities are recorded on the balance sheet at
fair value. We regularly review our fixed maturity 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 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.
28
Table of Contents
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. Beginning January 1, 2018, unrealized gains or losses on equity and
preferred securities are included in earnings. Unrealized gains or losses on fixed maturity securities (and equity and preferred
securities prior to January 1, 2018) 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 on fixed maturity securities 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.
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.
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, 2019 and 2018, respectively:
December 31, 2019
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 securities
Equity securities
Other long-term investments
Total assets
288
93
1,587
60
62
323
811
120
$
3,344
$
— $
288
$
— $
—
—
—
—
65
810
—
93
1,570
60
62
258
—
—
$
875
$
2,331
$
—
17
—
—
—
1
120
138
29
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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 securities
Equity securities
Other long-term investments
Total assets
December 31, 2018
Level 1
Level 2
Level 3
Total
(In millions)
$
— $
—
—
—
—
16
498
—
225
148
1,486
62
60
285
—
—
$
— $
225
148
1,503
62
60
301
498
101
—
17
—
—
—
—
101
118
$
514
$
2,266
$
$
2,898
Our Level 2 fair value measures for preferred securities and fixed-maturity securities available for sale are provided by a
third-party pricing service. We utilize one firm for our preferred security 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.
When available and for certain investments, we independently compare 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 securities: Preferred securities are valued by calculating the appropriate spread over a comparable US Treasury
security. Inputs include benchmark quotes and other relevant market data.
•
In conjunction with our adoption of ASU No. 2016-01, beginning January 1, 2018, we began recording certain preferred
equity investments in other long term investments at fair value which were previously accounted for as cost method investments.
Our Level 3 fair value measures for our other long term investment are provided by a third-party pricing service. We utilize
one firm to value our Level 3 other long-term investment. The pricing service is a leading global provider of financial market data,
analytics and related services to financial institutions. We utilize the income approach and a discounted cash flow analysis in
determining the fair value of our Level 3 other long-term investment. The primary unobservable input utilized in this pricing
methodology is the discount rate used which is determined based on underwriting yield, credit spreads, yields on benchmark
indices, and comparable public company debt. The discount rate used in our determination of the fair value of our Level 3 other
long-term investment as of December 31, 2019 was a range of 6.8% - 7.4% and a weighted-average of 7.0%. Based on the total
fair value of our Level 3 other long-term investment as of December 31, 2019, changes in the discount rate utilized will not result
in a fair value significantly different than the amount recorded.
The following table presents a summary of the changes in the fair values of Level 3 assets, measured on a recurring basis,
for the twelve months ended December 31, 2019.
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Table of Contents
Fair value, December 31, 2017
$
— $
(In millions)
— $
— $
Other long-term
investments
Equity
securities
Corporate debt
securities
Total
Fair value of assets associated with the adoption of
ASU 2016-01 (1)
Transfers from Level 2
Paid-in-kind dividends (2)
Purchases
Net change in fair value included in earnings (3)
Net unrealized loss included in other comprehensive
(loss) earnings
Fair value, December 31, 2018
Transfers to Level 2
Paid-in-kind dividends (2)
Purchases
Net change in fair value included in earnings (3)
Fair value, December 31, 2019
___________________________________________
100
—
7
—
(6)
—
—
—
—
—
—
—
$
$
101
$
— $
—
8
—
11
120
$
—
—
—
1
1
$
(1) See Note S. Recent Accounting Pronouncements for further discussion.
(2) Included in Interest and investment income on the Consolidated Statements of Earnings
(3) Included in Realized gains and losses, net on the Consolidated Statements of Earnings
—
17
—
1
—
(1)
17
(6)
1
7
(2)
17
$
$
—
100
17
7
1
(6)
(1)
118
(6)
9
7
10
138
Transfers into or out of the Level 3 fair value category occur when unobservable inputs become more or less significant to
the fair value measurement or upon a change in valuation technique. For the year ended December 31, 2019, transfers between
Level 2 and Level 3 are not considered material to the Company's financial position or results of operations. For the year
ended December 31, 2018, transfers between Level 2 and Level 3 were based on changes in significance of unobservable inputs
used associated with a change in the valuation technique used for certain of the Company’s corporate debt securities and are not
considered material to the Company's financial position or results of operations. The Company’s policy is to recognize transfers
between levels in the fair value hierarchy at the end of the reporting period.
During the years ended December 31, 2019, 2018 and 2017, we incurred impairment charges relating to investments that
were determined to be other-than-temporarily impaired of $8 million, $3 million, and $1 million, respectively. Refer to Note D.
Investments to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for further discussion.
Goodwill. We have made acquisitions that have resulted in a significant amount of goodwill. As of December 31, 2019 and
2018, goodwill was $2,727 million and $2,726 million, respectively. The majority of our goodwill as of December 31, 2019 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
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 completed annual goodwill impairment analyses
in the fourth quarter of each period presented using a September 30 measurement date. As a result of our analysis, $3 million of
goodwill impairment related to a real estate brokerage subsidiary in our Corporate and other segment was recorded in the year
ended December 31, 2018 . For the years ended December 31, 2019 and 2017, we determined there were no events or circumstances
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which indicated that the carrying value exceeded the fair value. As of December 31, 2019, we have determined that our title
segment 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, generally ten
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 ten 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 five to ten 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 no impairment expense to other intangible assets during the year ended December 31, 2019. We recorded $3
million and $1 million in impairment expense to other intangible assets during the years ended December 31, 2018 and 2017,
respectively. The impairment in 2018 primarily relates to an acquired customer relationship asset in our Title segment. The
impairment in 2017 was for computer software at ServiceLink.
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
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 details.
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. Refer to 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 Item 7 of Part II of this Annual Report for further information on the results of operations of Black Knight and FNFV.
32
Table of Contents
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 on continuing operations
Equity in earnings of unconsolidated affiliates
Net earnings from continuing operations
Revenues.
Year Ended December 31,
2019
2018
2017
(Dollars in millions)
$
$
2,381
2,961
2,584
225
318
8,469
2,696
2,258
1,681
178
240
47
7,100
1,369
308
15
1,076
$
$
$
2,221
2,690
2,615
177
(109)
7,594
2,538
2,059
1,801
182
221
43
6,844
750
120
5
635
$
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
Total revenue in 2019 increased $875 million compared to 2018, primarily attributable to increases in both our direct and
agency premiums, increases in interest and investment income, and non-cash valuation gains on our equity and preferred investment
holdings, partially offset by a decrease in escrow, title-related and other fees. Total revenue in 2018 decreased $69 million compared
to 2017, primarily due to a decrease in agent remittances and non-cash valuation losses on our equity and preferred investment
holdings, partially offset by an increase in interest income and direct title premiums.
See Note T. Revenue Recognition to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report
for a breakout of our consolidated revenues.
Total net earnings from continuing operations increased $441 million in the year ended December 31, 2019, compared to 2018
and decreased $4 million in the year ended December 31, 2018, compared to 2017.
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 $225 million, $177 million, and $131 million for the years ended
December 31, 2019, 2018, and 2017, respectively. The increase in 2019 as compared to 2018 is primarily attributable to increased
fixed maturity interest income due to an increased average fixed maturity portfolio balance, increased interest income from our
tax-deferred property exchange business, and increased interest income from a higher average balance of cash and cash equivalents
and short term investments portfolio balance compared to the prior year, partially offset by lower investment yields as a result of
declining interest rates year-over-year. The increase in 2018 as compared to 2017 is primarily attributable to increased interest
income in our tax-deferred property exchange business and increased yield on our cash and cash equivalents and short term
investments. The effective return on average invested assets, excluding realized gains and losses, was 5.5%, 5.1%, and 4.2% for
the years ended December 31, 2019, 2018, and 2017, respectively.
Net realized gains (losses) totaled $318 million, $(109) million, and $2 million for the years ended December 31, 2019, 2018,
and 2017, respectively. Net realized gains for the year ended December 31, 2019 are primarily attributable to non-cash valuation
gains on equity and preferred security holdings of $316 million, non-cash valuation gains on other long-term investments of $11
million, gains on sales of equity securities of $10 million, partially offset by impairments of lease assets of $8 million, net realized
33
Table of Contents
losses of $5 million on sales and maturities of fixed maturity investment securities, and $7 million of other net realized losses.
Net realized losses for the year ended December 31, 2018 are primarily attributable to non-cash valuation losses on equity and
preferred security holdings of $95 million, losses on sales of equity securities of $21 million, and asset impairments of $7 million,
partially offset by net realized gains of $3 million on sales and maturities of preferred and fixed maturity investment securities
and $9 million of other realized gains. The 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.
See Note D. Investments to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for a
breakout of our consolidated interest and investment income and realized gains and 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 operating expenses is discussed in further detail at the segment level below.
Income tax expense was $308 million, $120 million, and $235 million for the years ended December 31, 2019, 2018, and
2017, respectively. Income tax expense as a percentage of earnings from continuing operations before income taxes for the years
ended December 31, 2019, 2018, and 2017 was 22.5%, 16.0%, and 27.2%, respectively. Income tax expense as a percentage of
earnings before income taxes fluctuates depending on our estimate of ultimate income tax liability and changes in the characteristics
of net earnings, such as the weighting of operating income versus investment income. On December 22, 2017, the U.S. government
enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). Among other
provisions, the Tax Reform Act reduced the Federal statutory corporate income tax rate from 35% to 21% and limited or eliminated
certain deductions. The increase in the effective rate in 2019 compared to 2018 is primarily attributable to the residual impacts of
the Tax Reform Act in 2018. The decrease in the effective tax rate in 2018 compared to 2017 period is primarily attributable to
the decreased federal tax rate associated with the passage of the Tax Reform Act and a $45 million decrease in tax expense in 2018
regarding the timing of payments for, and tax rate applicable to, our tax liability resulting from the decrease in our statutory
premium reserves associated with the redomestication of certain of our title insurance underwriters in 2017. See Note K. Income
Taxes to our Consolidated Financial Statements included in Item 8 of Part II of this Annual Report for a breakout of our income
tax expense, deferred tax assets and liabilities, and effective tax rate.
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Table of Contents
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,
2019
2018
2017
(In millions)
$
2,381
$
2,221
$
2,961
2,389
202
326
8,259
2,562
1,509
2,258
154
240
6,723
2,690
2,204
170
(110)
7,175
2,444
1,421
2,059
154
221
6,299
$
1,536
$
876
$
2,066
1,448
1,818
1,315
2,170
2,723
2,181
131
6
7,211
2,366
1,404
2,089
159
238
6,256
955
1,942
1,428
Total revenues in 2019 increased $1,084 million or 15% compared to 2018. Total revenues in 2018 decreased $36 million or
less than 1% compared to 2017. The increase in the year ended December 31, 2019 is primarily attributable to increases in both
our direct and agency premiums, increases in escrow, title-related and other fees, increases in interest and investment income, and
non-cash valuation gains on our equity and preferred investment holdings. The decrease in the year ended December 31, 2018 is
primarily attributable to a decrease in agency remittances and non-cash valuation losses on our equity and preferred investment
holdings, partially offset by an increase in investment income and direct title premiums.
The following table presents the percentages of title insurance premiums generated by our direct and agency operations:
Year Ended December 31,
2019
2018
2017
Amount
%
Amount
%
Amount
%
(Dollars in millions)
Title premiums from direct operations
Title premiums from agency operations
Total title premiums
$
$
2,381
2,961
5,342
44.6% $
55.4
100.0% $
2,221
2,690
4,911
45.2% $
54.8
100.0% $
2,170
2,723
4,893
44.3%
55.7
100.0%
Title premiums increased 9% in the year ended December 31, 2019 as compared to 2018. The increase was a result of
an increase in premiums from direct operations of $160 million, or 7%, and an increase in premiums from agency operations
of $271 million, or 10%. Title premiums increased less than 1% in the year ended December 31, 2018 as compared to 2017.
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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,
2019
2018
2017
56.7%
43.3
68.5%
31.5
63.1%
36.9
100.0%
100.0%
100.0%
57.6%
42.4
100.0%
68.2%
31.8
100.0%
62.8%
37.2
100.0%
(1)
Percentages exclude consideration of an immaterial number of non-purchase and non-refinance orders.
Title premiums from direct operations increased in 2019, primarily due to an increase in closed order volumes, partially offset
by a decrease in the average fee per file. Closed order volumes were 1,448,000 in the year ended December 31, 2019 compared
with 1,315,000 in the year ended December 31, 2018. This represented an increase of 10.1%. The increase in closed order volumes
was primarily attributable to increased residential refinance activity as a result of lower mortgage interest rates in the year ended
December 31, 2019 compared to 2018.
The average fee per file in our direct operations was $2,511 and $2,585 in the years ended December 31, 2019 and 2018,
respectively. The decrease in average fee per file year over year reflects the increase in residential refinance activity, partially
offset by an increase in the average fee per file in both commercial and residential purchase 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.
Title premiums from agency operations increased $271 million, or 10%, in the year ended December 31, 2019 as compared
to 2018 and decreased $33 million, or 1%, in the year ended December 31, 2018 as compared to 2017. The increase in 2019 as
compared to 2018 reflects an improving residential purchase environment in many markets throughout the country and a concerted
effort by management to increase remittances with existing agents as well as cultivate new relationships with potential new agents.
In addition, lower mortgage rates have resulted in increased refinance business with agents. The decrease in 2018 as compared to
2017 reflects a decrease of $51 million related to adjustments to our accrued agent premiums receivable, partially offset by an
increase in remittances.
Escrow, title-related and other fees increased by $185 million, or 8%, in the year ended December 31, 2019 from 2018. Escrow
fees, which are more directly related to our direct operations, increased $72 million, or 9%, in the year ended December 31, 2019
compared to 2018. The increase is primarily driven by the related increase in direct title premiums. Other fees in the Title segment,
excluding escrow fees, increased $113 million, or 8%, in the year ended December 31, 2019 compared to 2018. The change in
both escrow fees and other fees is directionally consistent with the change in title premiums from direct operations. Escrow, title
related and other fees increased by $23 million, or 1%, in the year ended December 31, 2018 from 2017. Escrow fees increased
$6 million, or less than 1%, in the year ended December 31, 2018 compared to 2017. The increase is primarily driven by the
related increase in direct title premiums. Other fees in the Title segment, excluding escrow fees, increased $17 million, or 1%, in
the year ended December 31, 2018 compared to 2017. The change in both escrow fees and other fees is directionally consistent
with the change in title premiums from direct operations.
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 $32 million in the year ended December 31, 2019 compared
to 2018 and increased $39 million in the year ended December 31, 2018 compared to 2017. The increase in 2019 was primarily
attributable to increased fixed maturity interest income due to an increased average fixed maturity portfolio balance, increased
interest income from our tax-deferred property exchange business, and increased yield on our cash and cash equivalents and short
term investments.The increase in 2018 was primarily attributable to increased interest income in our tax-deferred property exchange
business.
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 $118 million, or 5% increase in the year ended December 31,
2019 compared to 2018 is directionally consistent with and primarily attributable to the increase in revenue. The $78 million,
or 3%, increase in the year ended December 31, 2018 compared to 2017 is directionally consistent with and primarily attributable
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to the increase in revenue. Personnel costs as a percentage of total revenues from direct title premiums and escrow, title-related
and other fees was 54% and 55% for years ended December 31, 2019 and 2018, respectively. Average employee count in the Title
segment was 23,484 and 23,165 in the years ended December 31, 2019 and 2018, respectively.
Other operating expenses increased $88 million, or 6%, in the year ended December 31, 2019 compared to 2018. Other
operating expenses as a percentage of total revenue excluding agency premiums, interest and investment income, and realized
gains and losses remained flat in the year ended December 31, 2019 compared to 2018. Other operating expenses increased $17
million, or 1% in the year ended December 31, 2018 compared to 2017. Other operating expenses as a percentage of total revenue
excluding agency premiums, interest and investment income, and realized gains and losses was 32% in the years ended December
31, 2019, 2018, and 2017.
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,
2019
2018
2017
Amount
%
Amount
%
Amount
%
(Dollars in millions)
Agent title premiums
Agent commissions
Net retained agent premiums
$
$
2,961
2,258
703
100.0% $
76.3
23.7% $
2,690
2,059
631
100.0% $
76.5
23.5% $
2,723
2,089
634
100.0%
76.7
23.3%
Net margin from agency title insurance premiums retained as a percentage of total agency premiums in the year ended
December 31, 2019 increased due to increased refinance activity when compared to the 2018 and 2017 periods.
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%. The revision was attributable to favorable development on
more recent policy year claims. No revisions were made to our loss provision in the years ended December 31, 2019 or 2018.
The claim loss provision for title insurance was $240 million, $221 million, and $238 million for the years ended December 31,
2019, 2018, and 2017, respectively. These amounts reflected average claim loss provision rates of 4.5% for 2019, 4.5% for 2018,
and 4.9% for 2017. 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
Loss before income taxes
Year Ended December 31,
2019
2018
2017
(In millions)
$
195
$
411
$
23
(8)
210
134
172
24
47
7
1
419
94
380
28
43
377
(167) $
545
(126) $
$
456
—
(4)
452
94
377
24
48
543
(91)
Total revenue in our Corporate and Other segment decreased $209 million, or 50%, in the year ended December 31, 2019
compared to 2018 and decreased $33 million, or 7%, in the year ended December 31, 2018 compared to 2017. The decrease in
2019 is primarily attributable to the sale of Pacific Union in the third quarter of 2018, partially offset by increased revenue associated
with the valuation of deferred compensation assets. The decrease in 2018 is primarily attributable to a decrease of $74 million
associated with lower real estate brokerage revenue resulting from the sale of Pacific Union, partially offset by growth and
acquisitions in our real estate technology businesses resulting in increased revenue of $31 million in 2018 and increased interest
income on corporate cash holdings of $7 million in 2018.
Personnel costs increased $40 million, or 43%, in the year ended December 31, 2019 compared to 2018 and remained flat in
the year ended December 31, 2018 compared to 2017. The increase in 2019 is primarily attributable to increased valuation of
deferred compensation plan assets, increased costs resulting from growth of our real estate technology subsidiaries, and increased
severance expense related to the departure of certain executives. In 2018 there were increased personnel costs related to acquisitions
when compared 2017; however, these increased personnel costs were offset by the Pacific Union sale.
Other operating expenses decreased $208 million, or 55% in the year ended December 31, 2019 from 2018 and increased $3
million, or 1%, in the year ended December 31, 2018 from 2017. The decrease in 2019 from 2018 is primarily attributable to the
Pacific Union sale, which is partially offset by the Reverse Termination Fee of $50 million paid to Stewart on September 12, 2019.
The increase in 2018 from 2017 is primarily attributable to an increase of $13 million attributable to growth in our real estate
technology subsidiaries in 2018 and the inclusion of $33 million of expense eliminations (reduction to expense) in 2017 related
to elimination of expense with Black Knight, partially offset by decreased expense in 2018 resulting from the Pacific Union sale.
Interest expense increased $4 million, or 9%, in the year ended December 31, 2019 compared to 2018 and decreased $5 million,
or 10%, in the year ended December 31, 2018 compared to 2017. The increase in 2019 is primarily attributable to interest associated
with our 4.50% Notes issued in August 2018. The decrease in 2018 compared to 2017 is primarily attributable to the final settlement
of our convertible Notes in August 2018 and 6.6% Senior Notes in the 2017 period, partially offset by interest associated with our
4.50% Notes issued in August 2018. See Note J Notes Payable to our Consolidated Financial Statements included in Item 8 of
Part II of this Annual Report for further discussion of our outstanding debt.
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 in the year ended December 31,
2017. Refer to Note G Discontinued 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.
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Table of Contents
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 $1.26 per share during 2019, or approximately $344
million. On February 13, 2020, our Board of Directors formally declared a $0.33 per share cash dividend that is payable on
March 31, 2020 to FNF shareholders of record as of March 17, 2020. 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.
As of December 31, 2019, we had cash and cash equivalents of $1,376 million, short term investments of $876 million and
available capacity under our Revolving Credit Facility of $800 million. 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
our Revolving Credit Facility. 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, 2019,
$1,868 million of our net assets were restricted from dividend payments without prior approval from the relevant departments of
insurance. During 2020, our title insurance subsidiaries can pay or make distributions to us of approximately $518 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, 2019, 2018, and 2017 were
$1,121 million, $943 million and $737 million, respectively, inclusive of discontinued operations. Operating cash flows from
discontinued operations for the year ended December 31, 2017 was $106 million. The increase in cash provided by operations of
$178 million in the 2019 period from the 2018 period is primarily attributable to the increase in pre-tax earnings and the timing
of receipts and payments of payables, partially offset by the timing of receipts and payments of prepaid assets, receivables and
income taxes. Included in net earnings in the 2019 period is our payment to Stewart of the Reverse Termination Fee of $50 million.
The increase in cash provided by operations of $206 million in the 2018 period from the 2017 period is primarily attributable to
lower realized gains on sales of investments and assets, which are included in earnings but relate to investing activities, and a $128
million decrease in payments for income taxes by continuing operations in the 2018 period, partially offset by the inclusion of
cash flows from discontinued operations in the 2017 period.
Investing Cash Flows. Our cash (used in) provided by investing activities for the years ended December 31, 2019, 2018, and
2017 were $(520) million, $(354) million and $79 million, respectively, inclusive of discontinued operations. Cash used in investing
activities from discontinued operations for the year ended December 31, 2017 was $57 million. The decrease in cash provided by
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(increase in cash used in) investing activities of $(166) million in the 2019 period from the 2018 period is primarily attributable
to a decrease in net cash inflow from proceeds from calls and maturities of investment securities, partially offset by reduced
purchases of investment securities. The decrease in cash provided by (increase in cash used in) investing activities of $(433) million
in the 2018 period from the 2017 period is primarily attributable to $681 million increase in net outflows from purchases of
investments and additional investments in unconsolidated investees, net of sales of investments and distributions of and from
equity and fixed income investments, partially offset by a $160 million decrease in cash used in acquisitions, net of disposals, and
a decrease in capital expenditures in the 2018 period.
Capital Expenditures. Total capital expenditures for property and equipment and capitalized software were $96 million, $83
million and $149 million for the years ended December 31, 2019, 2018, and 2017, respectively. The 2019 period primarily consists
of capital expenditures in our Title segment. The 2018 period primarily consists of capital expenditures in our Title segment and
the decrease from the 2017 period is primarily attributable to discontinued operations. 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.
Financing Cash Flows. Our cash used in financing activities for the years ended December 31, 2019, 2018, and 2017 were
$482 million, $442 million and $1,029 million, respectively, inclusive of discontinued operations. The increase in cash used in
financing activities of $40 million in the 2019 period from the 2018 period is primarily attributable to increased purchases of
treasury stock of $66 million, a decrease in the change in net borrowing activity of $72 million, a decrease in net change of secured
trust deposits of $23 million, increased dividends paid of $16 million, and increased other financing activities of $25 million,
partially offset by increased exercise of stock options of $20 million and the payment of the equity portion of debt conversions
settled in cash of $142 million in the 2018 period. The decrease in cash used in financing activities of $587 million in the 2018
period from the 2017 period is primarily attributable to a $458 million decrease in net debt service payments, net of borrowings,
in the 2018 period, $109 million in cash transferred in the BK Distribution and FNFV Split-off in the 2017 period, repurchases
of BKFS stock by Black Knight of $47 million in the 2017 period, and a $22 million decrease in change in secured trust deposits,
partially offset by an increase in cash dividends paid of $50 million in the 2018 period.
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 Item 7 of Part II.
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, 2019, our required annual payments relating to these contractual obligations were as follows:
2020
2021
2022
2023
2024
Thereafter
Total
Notes payable principal repayment
$
— $
— $
400
(In millions)
$
— $
Operating lease payments
Pension and other benefit payments
Title claim loss estimated payments
Interest on fixed rate notes payable
Total
145
15
220
42
422
$
121
14
218
42
395
$
93
13
173
35
714
$
64
12
138
20
234
$
$
— $
450
$
37
12
97
20
166
$
23
95
663
102
1,333
$
850
483
161
1,509
261
3,264
As of December 31, 2019, we had title insurance reserves of $1,509 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;
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.
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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 certain frozen pension 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 17, 2018, our Board of Directors approved a new three-year stock repurchase program
effective August 1, 2018 (the "2018 Repurchase Program") under which we can purchase up to 25 million shares of our FNF
common stock through July 31, 2021. 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. During the year ended December 31, 2019,
we repurchased a total of 2,120,000 FNF common shares for an aggregate of $85 million or an average of $40.09 per share. Since
the original commencement of the 2018 Repurchase Program, we have repurchased a total of 2,780,000 FNF common shares for
an aggregate of $106 million, or an average of $38.24 per share.
Equity and Preferred Security Investments. Our equity and preferred security investments may be subject to significant
volatility. Currently prevailing accounting standards require us to record the change in fair value of equity and preferred security
investments held as of any given period end within earnings. Our results of operations in future periods will be subject to such
volatility.
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 $18.7 billion and $13.5 billion at December 31, 2019
and 2018, 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 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 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, 2019, we had $838 million in long-term debt, none of which 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 securities 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, 2019, we held $811 million
in marketable equity securities (not including our investments in preferred securities of $323 million and our investments in
unconsolidated affiliates of $131 million). 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.
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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, 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 securities 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 30.4% of total liabilities at December 31, 2019) 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, 2019 and
December 31, 2018, are as follows:
Interest Rate Risk
At December 31, 2019, 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 securities which are tied to interest rates of $86 million as compared with a (decrease) increase of $70 million at
December 31, 2018.
Equity Price Risk
At December 31, 2019, 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 $162 million, as compared with an increase (decrease) of
$100 million at December 31, 2018.
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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
Report of Independent Registered Public Accounting Firms on Consolidated Financial Statements
Consolidated Balance Sheets as of December 31, 2019 and 2018
Consolidated Statements of Earnings for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Equity for the years ended December 31, 2019, 2018, and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017
Notes to Consolidated Financial Statements
Page
Number
44
45
47
48
50
51
53
54
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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,
2019, 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, 2019, 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 sheets of the Company as of December 31, 2019 and 2018, and the related consolidated
statements of earnings, comprehensive earnings, equity and cash flows for each of the three years in the period ended December
31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated February
14, 2020 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
Jacksonville, Florida
February 14, 2020
44
Table of Contents
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 sheets of Fidelity National Financial, Inc. and subsidiaries (the Company)
as of December 31, 2019 and 2018, and the related consolidated statements of earnings, comprehensive earnings, equity and cash
flows for each of the three years in the period ended December 31, 2019, and the related notes and financial statement schedule
listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31,
2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31,
2019, 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, 2019, 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 14, 2020 expressed an unqualified opinion thereon.
Adoption of Accounting Standards Update (ASU) No. 2016-01
As discussed in Note S to the consolidated financial statements, the Company changed its method of accounting for equity
investments with readily determinable fair values in 2018 due to the adoption of ASU 2016-01, Recognition and Measurement of
Financial Assets and Financial Liabilities.
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.
45
Table of Contents
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was
communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are
material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The
communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken
as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit
matter or on the accounts or disclosures to which it relates.
Description of the Matter
How we Addressed the
Matter in Our Audit
Reserve for Title Claim Losses
The Company’s reserve for title claim losses totaled $1.51 billion as of December 31, 2019. As
discussed in Note A to the consolidated financial statements, the reserve for title claim losses includes
known claims as well as losses that have been incurred but not yet reported, net of recoupments.
The Company establishes reserves for claims which are incurred but not reported at the time premium
revenue is recognized based on estimated loss provision rates. There is significant uncertainty
inherent in determining the loss provision rates.
Auditing the Company’s reserve for title claim losses was complex because of the highly judgmental
nature of the determination of the loss provision rates used in the valuation of the reserve for title
claim losses. The significant judgment was primarily due to the sensitivity of management’s estimate
to claim loss history, industry trends, current legal environment, and geographic considerations.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of the
Company’s controls over management’s process for the development of the loss provision rates and
the recorded reserve for title claim losses. These controls included, among others, the review and
approval process management has in place for the development of the loss provision rates and the
estimation of the reserve for title claim losses.
To evaluate the judgment used by management in determining the loss provision rates, among other
procedures, we considered claim loss history, industry trends, current legal environment and
geographic considerations, and how management assessed these factors in the current period as
compared to prior periods. With the assistance of our actuarial specialists, we performed an
evaluation of the Company’s current year loss provision rates compared with those used in prior
periods, as well as a review of loss development experience for prior years. We also independently
calculated a range of reasonable reserve estimates which we compared to management’s recorded
reserve for title claim losses.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2017
Jacksonville, Florida
February 14, 2020
46
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, 2019 and 2018, includes pledged fixed maturities of
$410 and $418, respectively, related to secured trust deposits
$
2,090
$
1,998
December 31,
2019
2018
(In millions, except share data)
Preferred securities, at fair value
Equity securities, at fair value
Investments in unconsolidated affiliates
Other long-term investments
Short-term investments, includes pledged short term investments of $12 and $8 at December 31, 2019 and 2018,
respectively, related to secured trust deposits
Total investments
Cash and cash equivalents, at December 31, 2019 and 2018, includes pledged cash of $384 and $412, respectively,
related to secured trust deposits
Trade and notes receivables, net of allowance of $20 and $19 at December 31, 2019 and 2018, respectively
Goodwill
Prepaid expenses and other assets
Lease assets
Other intangible assets, net
Title plants
Property and equipment, net
Income taxes receivable
Total assets
Liabilities:
Accounts payable and other accrued liabilities
LIABILITIES AND EQUITY
Income taxes payable
Notes payable
Reserve for title claim losses
Secured trust deposits
Lease liabilities
Deferred tax liability
Total liabilities
Commitments and Contingencies:
Redeemable non-controlling interest by 21% minority holder of ServiceLink Holdings, LLC
Equity:
FNF common stock, $0.0001 par value; authorized 600,000,000 shares as of December 31, 2019 and 2018; outstanding
of 275,563,436 and 275,373,834 as of December 31, 2019 and 2018, respectively; and issued of 292,236,476 and
289,601,523 as of December 31, 2019 and 2018, respectively
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, 16,673,040 shares and 14,227,689 shares as of December 31, 2019 and 2018, respectively, at cost
Total Fidelity National Financial, Inc. shareholders’ equity
Noncontrolling interests
Total equity
$
$
323
811
131
153
876
4,384
1,376
346
2,727
432
410
422
404
176
—
301
498
137
135
480
3,549
1,257
306
2,726
377
—
513
405
164
4
10,677
$
9,301
1,094
$
10
838
1,509
791
442
284
4,968
344
—
—
4,581
1,356
43
(598)
5,382
(17)
5,365
956
—
836
1,488
822
—
227
4,329
344
—
—
4,500
641
(13)
(498)
4,630
(2)
4,628
9,301
Total liabilities, redeemable non-controlling interest and equity
$
10,677
$
See Notes to Consolidated Financial Statements.
47
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
2019
Year Ended December 31,
2018
(In millions, except share data)
2017
$
2,381
$
2,221
$
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
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
2,961
2,584
225
318
8,469
2,696
2,258
1,681
178
240
47
7,100
1,369
308
1,061
15
1,076
—
1,076
14
2,690
2,615
177
(109)
7,594
2,538
2,059
1,801
182
221
43
750
120
630
5
635
—
635
7
6,844
6,799
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 from discontinued operations attributable to FNFV Group common shareholders
$
$
$
1,062
$
628
$
1,062
—
1,062
$
$
628
—
628
$
$
$
See Notes to Consolidated Financial Statements.
48
2,170
2,723
2,637
131
2
7,663
2,460
2,089
1,781
183
238
48
864
235
629
10
639
155
794
23
771
639
23
662
109
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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS - (continued)
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 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 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
Weighted average shares outstanding FNFV Group common stock, basic basis
Weighted average shares outstanding FNFV Group common stock, diluted basis
See Notes to Consolidated Financial Statements.
Year Ended December 31,
2019
2018
2017
$
$
$
$
3.89
$
2.30
$
—
3.89
$
—
2.30
$
$
3.83
$
2.26
$
—
3.83
$
—
2.26
$
$
273
277
273
278
2.36
0.08
2.44
1.68
2.30
0.08
2.38
1.63
271
278
65
67
49
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 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 attributable to FNFV Group common shareholders
_______________________________________
Year Ended December 31,
2019
2018
2017
(In millions)
$
1,076
$
635
$
794
56
5
4
(9)
—
56
1,132
14
1,118
1,118
$
$
$
$
(11)
3
(8)
—
1
(15)
620
7
613
613
$
$
$
25
12
6
3
9
55
849
25
824
709
115
(1)
(2)
(3)
(4)
(5)
Net of income tax expense (benefit) of $17 million, $(4) million, and $16 million for the years ended December 31,
2019, 2018 and 2017, respectively.
Net of income tax expense of $2 million, $1 million, and $7 million for the years ended December 31, 2019, 2018
and 2017, respectively.
Net of income tax expense (benefit) of $1 million, $(2) million, and $4 million for the years ended December 31,
2019, 2018, and 2017, respectively.
Net of income tax (benefit) expense of $(3) million and $2 million for the years ended December 31, 2019 and 2017,
respectively.
Net of income tax expense of less than $1 million and $3 million for the years ended December 31, 2018 and 2017,
respectively.
See Notes to Consolidated Financial Statements.
50
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
Fidelity National Financial, Inc. Common Shareholders
FNF
Common
Stock
FNFV Group
Common
Stock
Shares
$
Shares
$
Additional
Paid-In
Capital
Retained
Earnings
Balance, December 31, 2016
285
$ —
81
$ — $
4,848
$
1,784
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
2
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Balance, December 31, 2017
288
Adjustment for cumulative effect for adoption
of ASU 2016-01
Exercise of stock options
Issuance of restricted stock
Other comprehensive earnings — unrealized
loss on investments and other financial
instruments
Other comprehensive earnings — unrealized
gain 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
Debt conversions settled in cash
Dilution resulting from subsidiary equity
issuance
Subsidiary dividends paid to noncontrolling
interests
Pacific Union Sale
Other equity activity
Dividends declared
Net earnings
—
1
1
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— —
— —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— —
—
—
—
—
—
—
—
—
— —
—
—
(81) —
—
—
—
—
—
—
31
—
—
—
—
—
—
33
(1)
—
—
—
(324)
—
—
—
—
—
—
—
— —
4,587
—
—
— —
—
—
—
—
—
—
—
—
—
—
—
—
— —
—
—
—
—
—
—
—
—
—
—
—
—
—
—
— —
—
19
—
—
—
—
—
31
—
—
(134)
(3)
—
—
—
—
—
Balance, December 31, 2018
290
$ —
— $ — $
4,500
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(823)
(1,236)
(279)
—
771
217
128
—
—
—
—
—
—
—
—
—
—
—
—
—
(2)
(330)
628
641
Accumulated
Other
Comprehensive
Earnings
(Loss)
(In millions)
$
(13)
—
—
25
12
6
9
3
—
—
—
—
—
—
—
—
—
69
—
—
—
111
(109)
—
—
(11)
3
(8)
1
—
—
—
—
—
—
—
—
—
—
$
(13)
Treasury Stock
Shares
$
Non-
controlling
Interests
Total
Equity
Redeemable
Non-
controlling
Interests
27
—
—
—
—
—
—
—
—
—
1
1
—
—
—
—
—
(16)
—
—
—
13
—
—
—
—
—
—
—
—
—
1
—
—
—
—
—
—
—
14
$ (623)
$
902
$ 6,898
$
—
—
—
—
—
—
—
—
—
(18)
(23)
—
—
—
—
—
196
—
—
—
(468)
—
—
—
—
—
—
—
—
(9)
(21)
—
—
—
—
—
—
—
—
—
2
—
—
—
—
11
(1)
—
—
(6)
—
44
(47)
(801)
(98)
—
31
—
27
12
6
9
3
44
(2)
(18)
(23)
(6)
(324)
44
(47)
(1,624)
(1,069)
(279)
(9)
(9)
23
20
—
—
—
—
—
—
—
—
—
—
—
5
(10)
(25)
1
—
7
794
4,467
19
19
—
(11)
3
(8)
1
31
(9)
(21)
(134)
2
(10)
(25)
(1)
(330)
635
344
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
344
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
$ (498)
$
(2)
$ 4,628
$
344
See Notes to Consolidated Financial Statements.
51
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY - (continued)
Fidelity National Financial, Inc. Common Shareholders
FNF Common
Stock
Shares
$
Additional
Paid-In
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
Earnings (Loss)
Treasury Stock
Shares
$
Non-
controlling
Interests
Total
Equity
Redeemable
Non-
controlling
Interests
Balance, December 31, 2018
Exercise of stock options
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
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
Subsidiary dividends paid to noncontrolling interests
Dividends declared
Net earnings
290
$ — $
4,500
$
641
$
2
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
39
—
—
—
—
38
4
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(347)
1,062
Balance, December 31, 2019
292
$ — $
4,581
$
1,356
$
(In millions)
(13)
—
56
5
4
(9)
—
—
—
—
—
—
—
43
14
—
—
—
—
—
—
—
1
2
—
—
—
17
$ (498)
$
(2)
$
4,628
$
—
—
—
—
—
—
—
(15)
(85)
—
—
—
—
—
—
—
—
—
(18)
—
—
(11)
—
14
39
56
5
4
(9)
38
(14)
(15)
(85)
(11)
(347)
1,076
344
—
—
—
—
—
—
—
—
—
—
—
$ (598)
$
(17)
$
5,365
$
344
See Notes to Consolidated Financial Statements.
52
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
2019
Year Ended December 31,
2018
(In millions)
2017
Cash Flows From Operating Activities:
Net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization
Equity in (earnings) losses of unconsolidated affiliates
Loss on sales of investments and other assets and asset impairments, net
Gain on sale of business by FNFV Group
Gain on Pacific Union Sale
(Gain) loss on valuation of equity and preferred securities, net
Stock-based compensation cost
Non-cash lease costs
Operating lease payments
Distributions from unconsolidated affiliates, return on investment
Changes in assets and liabilities, net of effects from acquisitions:
Net (increase) decrease in trade receivables
Net (increase) decrease in prepaid expenses and other assets
Net increase (decrease) in accounts payable, accrued liabilities, deferred revenue and other liabilities
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 property and equipment
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
Additional investments in unconsolidated affiliates
Distributions from unconsolidated affiliates, return of investment
Fundings of Cannae Holdings Inc. note receivable
Proceeds from repayments of Cannae Holdings Inc. note receivable
Other investing activities
Cash proceeds from Pacific Union Sale, net of cash transferred
Proceeds from the sale of business by FNFV Group
Acquisition of T-System Holding LLC, net of cash acquired
Acquisition of Title Guaranty of Hawaii, 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/disposed
Net cash (used in) provided by investing activities
Cash Flows From Financing Activities:
Net change in secured trust deposits
Borrowings
Debt service payments
Additional investment in noncontrolling interest
Equity portion of debt conversions paid in cash
Black Knight treasury stock repurchases of BKFS stock
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
Other financing activity
Net cash used in financing activities
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents, at beginning of year
Cash and cash equivalents, at end of year
See Notes to Consolidated Financial Statements.
53
$
1,076
$
635
$
794
178
(15)
10
—
—
(328)
38
147
(149)
5
(36)
(54)
175
21
53
1,121
534
297
4
—
(96)
(867)
—
(395)
(34)
46
(200)
200
(8)
—
—
—
—
—
(1)
(520)
(31)
—
—
(3)
—
—
—
—
(344)
(11)
39
(21)
(15)
(86)
(10)
(482)
119
1,257
1,376
$
182
(5)
18
—
(4)
95
31
—
—
6
15
17
38
(2)
(83)
943
676
517
21
—
(83)
(1,313)
—
(185)
(62)
73
—
—
(1)
33
—
—
—
—
(30)
(354)
(8)
442
(370)
—
(142)
—
—
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(328)
(10)
19
(13)
(9)
(20)
(3)
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147
1,110
1,257
389
2
16
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—
—
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—
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(11)
(60)
(31)
3
(133)
737
434
626
4
21
(149)
(659)
(86)
26
(78)
104
—
—
(7)
—
325
(202)
(93)
(82)
(105)
79
(30)
785
(996)
—
(317)
(47)
(87)
(22)
(278)
(9)
31
(16)
(18)
(23)
(2)
(1,029)
(213)
1,323
1,110
$
$
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 one of the nation’s largest title insurance companies 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 on businesses comprising our reportable segments, refer to Note R Segment Information.
Recent Developments
Termination of Stewart Merger Agreement and Payment of Reverse Termination Fee
On March 18, 2018, we signed a merger agreement (the "Stewart Merger Agreement") to acquire Stewart Information Services
Corporation ("Stewart") (NYSE: STC) (the "Stewart Merger"). On, September 9, 2019, we entered into a mutual Termination
Agreement with Stewart (the “Termination Agreement”), pursuant to which the parties agreed to terminate the Stewart Merger
Agreement, due to the Federal Trade Commission's issuance of an administrative complaint seeking to block the merger. In
connection with the termination of the Stewart Merger Agreement, we paid to Stewart, on September 12, 2019, the Reverse
Termination Fee (as defined in the Stewart Merger Agreement) consisting of $50 million in cash, which is included within other
operating expenses in the Consolidated Statements of Earnings.
Pending Acquisition of FGL
On February 7, 2020, we signed a merger agreement (the “Merger Agreement”) to acquire FGL Holdings (“FGL”) (NYSE:
FG) (the “FGL Merger”). Subject to the terms and conditions of the Merger Agreement, which has been approved by the board
of directors of FNF, at the First Effective Time (as defined in the Merger Agreement), the ordinary shares of FGL (the “Ordinary
Shares”), including all restricted Ordinary Shares (whether vested or unvested), issued and outstanding as of immediately prior
to the First Effective Time (other than (i) shares owned by FGL and any of its subsidiaries or FNF and any of its subsidiaries and
(ii) shares in respect of which dissenters rights have been properly exercised and perfected under Cayman law) will be converted
into the right to receive $12.50 in cash or 0.2558 shares (“the Stock Consideration”) of common stock of FNF (“FNF Common
Stock”), at the election of the holder thereof and subject to the proration mechanics set forth in the Merger Agreement. Pursuant
to the Merger Agreement, all Ordinary Shares held by FNF and its subsidiaries will be converted into the right to receive the Stock
Consideration. Each Series B Cumulative Preferred Share, all of which are held by FNF and its subsidiaries, will be converted
into the right to receive a number of shares of FNF Common Stock that is equal to (i) the Liquidation Preference (as defined in
the Merger Agreement) divided by (ii) the Reference Parent Common Stock Price (as defined in the Merger Agreement).
Additionally, all options to purchase Ordinary Shares (“FGL Share Option”) and phantom unit denominated in Ordinary
Shares (“FGL Phantom Unit”), in each case, outstanding immediately prior to the First Effective Time, will be canceled and
converted into options to purchase FNF Common Stock and phantom units denominated in FNF Common Stock at the First
Effective Time (collectively, the “Rollover Awards”), as applicable. The Rollover Awards will generally be subject to the same
terms and conditions as applicable to the applicable canceled FGL Share Option or FGL Phantom Unit immediately prior to the
First Effective Time, except that (i) all performance-vesting criteria will be deemed satisfied at the First Effective Time at the
levels described in the Merger Agreement and such Rollover Awards will be subject only to time-based vesting conditions after
the First Effective Time, and (ii) immediately prior to the First Effective Time, additional time-vesting credits will be provided to
holders in respect of FGL Share Options and FGL Phantom Units granted prior to January 1, 2020, as described in the Merger
Agreement.
The closing of the transaction is subject to certain closing conditions, including the approval by FGL stockholders, federal and
state regulatory approvals, and the satisfaction of other customary closing conditions. Closing is expected in the second or third
quarter of 2020.
54
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note Receivable from Cannae
In November 2017, in conjunction with the split-off of our former portfolio company investments into a separate company,
Cannae Holdings, Inc. ("Cannae"), we issued to Cannae a revolver note (the "Cannae Revolver") in the aggregate principal amount
of up to $100 million. Cannae is considered a related party to FNF.
The Cannae Revolver accrues interest quarterly at LIBOR plus 450 basis points and matures on the five-year anniversary
from the date of issuance. 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.
On February 7, 2019, Cannae borrowed $100 million from FNF under the Cannae Revolver. On June 12, 2019, Cannae repaid
to FNF the entire $100 million outstanding amount under the Cannae Revolver.
On July 5, 2019, Cannae borrowed $100 million from FNF under the Cannae Revolver. On September 11, 2019, Cannae
repaid to FNF the entire $100 million outstanding amount under the Cannae Revolver.
As of December 31, 2019, there is no outstanding balance under the Cannae Revolver.
We account for the Cannae Revolver as a financing receivable. Interest income is recorded ratably in periods in which principal
is outstanding. Uncollectible financing receivables are written off or impaired when, based on all available information, it is
probable that a loss has occurred.
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. 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 and preferred securities held are carried at fair value as of the balance sheet dates. Our equity and certain preferred
securities 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 other investments and company-owned life insurance policies. Other investments are
carried at fair value. See Note C Fair Value Measurements for further discussion of other investments. Company-owned life
insurance policies are carried at cash surrender value.
Short-term investments consist primarily of money market instruments, which are carried at fair value, and commercial paper,
which have an original maturity of one year or less and 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. Beginning January 1, 2018, unrealized gains or losses on equity and
preferred securities are included in earnings. Unrealized gains or losses on fixed maturity securities (and equity and preferred
securities prior to January 1, 2018) 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 on fixed maturity securities 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
55
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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.
See Note S. Recent Accounting Pronouncements for discussion of ASU No. 2016-01 Financial Instruments - Overall (Subtopic
825-10): Recognition and Measurement of Financial Assets and Financial Liabilities which changed the accounting for unrealized
gains and losses on equity and preferred securities.
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.
Premium revenues from agency title operations are recognized when the underlying title order and transaction closing, if
applicable, are complete and reported to us. Premium revenues from agency operations and related commissions include an accrual
based on estimated historical transaction volume data for policies that have closed in a particular period in which premiums have
not yet been reported to us. 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 89% - 94% reported within three months following closing, an
additional 6% - 9% 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 76.3% of agent premiums
earned in 2019, 76.5% of agent premiums earned in 2018, and 76.7% of agent premiums earned in 2017. The amount due from
our agents relating to this accrual, i.e., the agent premium less their contractual retained commission, was approximately $46
million and $44 million at December 31, 2019 and 2018, respectively. Due to the offsetting effects of reversing prior period
accruals, the impact of this accrual to our recorded Agency title insurance premiums, Agent commissions and net earnings in any
given period is not considered material.
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. As a result of the analysis, $3 million of goodwill impairment related to a real estate brokerage reporting unit
in our Corporate and other segment was recorded in the year ended December 31, 2018. For the years ended December 31, 2019
and 2017, we determined there were no events or circumstances which indicated that the carrying value exceeded the fair value.
See Note F. Goodwill.
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 ten 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 ten years. Capitalized software
includes the fair value of software acquired in business combinations, purchased software and capitalized software development
56
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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 five to ten 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 no impairment expense to other intangible assets during the year ended December 31, 2019. We recorded $3
million and $1 million in impairment expense to other intangible assets during the years ended December 31, 2018 and 2017,
respectively. The impairment in 2018 primarily relates to an acquired customer relationship asset in our Title segment. The
impairment in 2017 was for computer software at ServiceLink.
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 recorded
$1 million in impairment expense to title plants during the year ended December 31, 2019 for two title plants which are no longer
in use. We reviewed title plants for impairment but recorded no impairment expense related to title plants in the years ended
December 31, 2018 or 2017.
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
$791 million and $822 million at December 31, 2019 and 2018, 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.
57
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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
Refer to Note T. Revenue Recognition for a description of our accounting for our various revenue streams.
Discontinued Operations
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 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 became a separate, publicly-traded company (NYSE: CNNE) as of November 20, 2017. 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 common stock that were not held by Cannae remain with the Company. As a result of the FNFV Split-Off, the financial
results of FNFV Group have been reclassified to discontinued operations for the year ended December 31, 2017.
On September 29, 2017 we completed our tax-free distribution to FNF 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 common
stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF 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 was generally tax-free to FNF
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, the financial results of Black Knight have been reclassified to discontinued operations
for the year ended December 31, 2017.
See Note G. Discontinued Operations for further details of the results and financial position of FNFV and Black Knight.
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:
58
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Unrealized gain (loss) on
investments and other
financial instruments,
net (excluding
investments in
unconsolidated affiliates)
Unrealized gain
(loss) relating to
investments in
unconsolidated
affiliates
Unrealized
(loss) gain on
foreign currency
translation and
cash flow
hedging
Minimum
pension
liability
adjustment
Total
Accumulated
Other
Comprehensive
Earnings
(Loss)
(In millions)
Balance December 31, 2017
$
116
$
11
$
(7) $
(9) $
111
Adjustment for cumulative
effect for adoption of ASU
2016-01
Adoption of ASU 2018-02
Other comprehensive
earnings
Balance December 31, 2018
Reclassification adjustments
Other comprehensive
earnings
Balance December 31, 2019
$
Redeemable Non-controlling Interest
(109)
(1)
(11)
(5)
(5)
56
46
$
—
3
3
17
(4)
5
—
—
(8)
(15)
—
4
—
(2)
1
(10)
—
—
18
$
(11) $
(10) $
(109)
—
(15)
(13)
(9)
65
43
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,
2019, the redeemable noncontrolling interests have a fair value of approximately $176 million and we do not believe the exercise
of their remaining put right in ServiceLink to be probable. The redeemable noncontrolling interests are recorded at their initial
value of $344 million in our consolidated balance sheets and would be adjusted to fair value were such value to rise above the
initial value.
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 of permanent equity; and the
Consolidated Statement of Earnings reflects the respective redeemable noncontrolling interests in Net earnings attributable to non-
controlling interests, the effect of which is removed from the net earnings attributable to Fidelity National Financial, Inc. common
shareholders.
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.
Restricted stock, options or other instruments which provide the ability to acquire shares of our common stock that are
antidilutive are excluded from the computation of diluted earnings per share. For the years ended December 31, 2019 and 2018,
no antidilutive shares were outstanding.
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.
59
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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 2018 and 2017 Consolidated Financial Statements to conform to classifications
used in 2019. 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.
60
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note B. Leases
We adopted ASC Topic 842 on January 1, 2019 using a modified retrospective approach. Prior year periods continue to be
reported under ASC Topic 840. See Note S. Recent Accounting Pronouncements for further discussion of the current period effects
of adoption of ASU No. 2016-02 Leases (Topic 842).
Right-of-use assets and lease liabilities related to operating leases under ASC Topic 842 are recorded when we are party to a
contract which conveys the right for the Company to control an asset for a specified period of time. Substantially all of our operating
lease arrangements relate to rented office space and real estate for our title operations. We generally are not a party to any material
contracts considered finance leases. Right-of-use assets and lease liabilities under ASC Topic 842 are recorded as Lease assets and
Lease liabilities, respectively, on the Consolidated Balance Sheet as of December 31, 2019.
Our operating leases range in term from one to ten years. As of December 31, 2019, the weighted-average remaining lease
term of our operating leases was 4.2 years.
Our lease agreements do not contain material variable lease payments, buyout options, residual value guarantees or restrictive
covenants.
Most of our leases include one or more options to renew, with renewal terms that can extend the lease term by varying amounts.
The exercise of lease renewal options is at our sole discretion. We do not include options to renew in our measurement of lease
assets and lease liabilities as they are not considered reasonably assured of exercise.
Our operating lease liability is determined by discounting future lease payments using a discount rate based on the Company's
incremental borrowing rate for similar collateralized borrowing. The discount rate is calculated as an average of the current yield
on our unsecured notes payable and 140 basis points in excess of the current five year LIBOR swap rate. As of December 31, 2019
the weighted-average discount rate used to determine our operating lease liability was 4.23%.
We do not separate lease components from non-lease components for any of our right-of-use assets.
Our lease costs are included in Other operating expenses on the Consolidated Statements of Income and was $146 million for
the year ended December 31, 2019. We do not have any material short term lease costs, variable lease costs, or sublease income.
Rent expense incurred for operating leases under ASC Topic 840 during the years ended December 31, 2018 and 2017 was
$150 million and $144 million, respectively.
Future payments under operating lease arrangements accounted for under ASC Topic 842 as of December 31, 2019 are as
follows (in millions):
2020
2021
2022
2023
2024
Thereafter
Total operating lease payments, undiscounted
Less: present value discount
Lease liability, at present value
$
$
$
145
121
93
64
37
23
483
41
442
See Note P. Supplementary Cash Flow Information for certain information on noncash investing and financing activities
related to our operating lease arrangements.
61
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, 2019 and 2018, respectively:
December 31, 2019
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 securities
Equity securities
Other long-term investments
Total
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 securities
Equity securities
Other long-term investments
Total
$
— $
288
$
— $
—
—
—
—
65
810
—
93
1,570
60
62
258
—
—
$
875
$
2,331
$
—
17
—
—
—
1
120
138
$
3,344
December 31, 2018
Level 1
Level 2
Level 3
Total
(In millions)
$
— $
—
—
—
—
16
498
—
225
148
1,486
62
60
285
—
—
$
— $
—
17
—
—
—
—
101
118
$
514
$
2,266
$
$
2,898
288
93
1,587
60
62
323
811
120
225
148
1,503
62
60
301
498
101
Our Level 2 fair value measures for preferred and fixed-maturity securities available for sale are provided by a third-party
pricing service. We utilize one firm for our preferred securities 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
62
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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. When
available and for certain investments, we independently compare 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 securities: Preferred securities are valued by calculating the appropriate spread over a comparable US Treasury
security. Inputs include benchmark quotes and other relevant market data.
•
In conjunction with our adoption of ASU No. 2016-01, beginning January 1, 2018, we began recording certain preferred
equity investments included in other long term investments at fair value which were previously accounted for as cost method
investments. See discussion of Recent Accounting Pronouncements in Note S. Recent Accounting Pronouncements for further
information on the impact of the adoption of ASU No. 2016-01.
Our Level 3 fair value measures for our other long term investment are provided by a third-party pricing service. We utilize
one firm to value our Level 3 other long-term investment. The pricing service is a leading global provider of financial market data,
analytics and related services to financial institutions. We utilize the income approach and a discounted cash flow analysis in
determining the fair value of our Level 3 other long-term investment. The primary unobservable input utilized in this pricing
methodology is the discount rate used which is determined based on underwriting yield, credit spreads, yields on benchmark
indices, and comparable public company debt. The discount rate used in our determination of the fair value of our Level 3 other
long-term investment as of December 31, 2019 was a range of 6.8% - 7.4% and a weighted-average of 7.0%. Based on the total
fair value of our Level 3 other long-term investment as of December 31, 2019, changes in the discount rate utilized will not result
in a fair value significantly different than the amount recorded.
63
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
The following table presents a summary of the changes in fair values of Level 3 assets, measured on a recurring basis, for the
years ended December 31, 2019 and 2018:
Fair value, December 31, 2017
$
— $
(In millions)
— $
— $
Other long-term
investments
Equity
securities
Corporate debt
securities
Total
Fair value of assets associated with the adoption of
ASU 2016-01 (1)
Transfers from Level 2
Paid-in-kind dividends (2)
Purchases
Net change in fair value included in earnings (3)
Net unrealized loss included in other comprehensive
(loss) earnings
Fair value, December 31, 2018
Transfers to Level 2
Paid-in-kind dividends (2)
Purchases
Net change in fair value included in earnings (3)
Fair value, December 31, 2019
___________________________________________
$
$
100
—
7
—
(6)
—
101
—
8
—
11
$
120
$
—
—
—
—
—
—
— $
—
—
—
1
1
$
—
17
—
1
—
(1)
17
(6)
1
7
(2)
17
$
$
—
100
17
7
1
(6)
(1)
118
(6)
9
7
10
138
(1) See Note S. Recent Accounting Pronouncements for further discussion.
(2) Included in Interest and investment income on the Consolidated Statements of Earnings.
(3) Included in Realized gains and losses, net on the Consolidated Statements of Earnings.
Transfers into or out of the Level 3 fair value category occur when unobservable inputs become more or less significant to
the fair value measurement or upon a change in valuation technique. For the year ended December 31, 2019, transfers between
Level 2 and Level 3 are not considered material to the Company's financial position or results of operations. For the year
ended December 31, 2018, transfers between Level 2 and Level 3 were based on changes in significance of unobservable inputs
used associated with a change in the valuation technique used for certain of the Company’s corporate debt securities and are not
considered material to the Company's financial position or results of operations. The Company’s policy is to recognize transfers
between levels in the fair value hierarchy at the end of the reporting period.
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, 2019 or 2018.
Substantially all of the unrealized gain (loss) on investments and other financial instruments, net (excluding investments in
unconsolidated affiliates) on our Consolidated Statements of Comprehensive Income relate to fixed maturity securities which are
considered Level 2 fair value measures.
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.
64
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note D. Investments
The cost basis and fair values of our available for sale securities at December 31, 2019 and 2018 are as follows:
December 31, 2019
Carrying
Value
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Fair
Value
(In millions)
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
$
288
$
282
$
93
1,587
60
62
90
1,536
61
60
$
7
3
54
1
2
Total
$
2,090
$
2,029
$
67
$
(1) $
—
(3)
(2)
—
(6) $
288
93
1,587
60
62
2,090
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
Total
December 31, 2018
Carrying
Value
Cost
Basis
Unrealized
Gains
Unrealized
Losses
Fair
Value
(In millions)
$
$
225
148
$
226
147
1,503
1,510
62
60
67
59
$
1,998
$
2,009
$
1
1
6
—
1
9
$
$
(2) $
—
(13)
(5)
—
(20) $
225
148
1,503
62
60
1,998
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, 2019, 2018, and 2017
was an increase (decrease) of $72 million, $(21) million, and $(1) million, respectively.
The following table presents certain information regarding contractual maturities of our fixed maturity securities at
December 31, 2019:
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, 2019
Amortized
Cost
% of
Total
Fair
Value
% of
Total
$
341
1,093
403
132
60
(Dollars in millions)
16.8% $
53.9
19.8
6.5
3.0
341
1,117
424
146
62
16.3%
53.4
20.3
7.0
3.0
$
2,029
100.0% $
2,090
100.0%
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 $94 million and $122 million were on deposit with various governmental
authorities at December 31, 2019 and 2018, respectively, as required by law.
65
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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, 2019 and 2018
are as follows (in millions):
December 31, 2019
Corporate debt securities
U.S. government and agencies
Foreign government bonds
Total temporarily impaired securities
December 31, 2018
Corporate debt securities
U.S. government and agencies
Foreign government bonds
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
$
98
62
—
160
$
(2) $
(1)
—
(3) $
51
—
33
84
$
$
(1)
—
(2)
(3) $
149
$
62
33
244
$
(3)
(1)
(2)
(6)
Less than 12 Months
12 Months or Longer
Total
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
Fair
Value
Unrealized
Losses
$
661
71
52
784
$
(8) $
(1)
(3)
(12) $
$
301
117
10
428
$
(5) $
(1)
(2)
(8) $
$
962
188
62
1,212
$
(13)
(2)
(5)
(20)
$
$
$
$
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, 2019. 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, 2019, 2018 and 2017 we incurred impairment charges relating to investments that were
determined to be other-than-temporarily impaired, which resulted in impairment charges of $8 million, $3 million and $1 million,
respectively. The impairment charges in 2019 related to credit risks of certain issuers of our fixed maturity securities which have
exhibited a decreasing fair value and from which we are uncertain of our ability to recover our initial investment. The impairment
charges in 2018 and 2017 related to fixed maturity securities of investees entering Chapter 11 bankruptcy which have exhibited
a decreasing fair market value and from which we are uncertain of our ability to recover our initial investment.
As of December 31, 2019, we held $9 million of investment securities for which other-than-temporary impairments have been
previously recognized. As of December 31, 2018, we held no investment securities for which other-than-temporary impairments
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.
66
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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, 2019, 2018, and 2017, respectively:
Year ended December 31, 2019
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gains
(Losses)
Gross
Proceeds
from Sale/
Maturity
Fixed maturity securities available for sale
Preferred stock
Equity securities
Valuation gain on equity securities (1)
Valuation gain on preferred securities (1)
Valuation of other long term investments (1)
Impairment of lease assets
Other realized gains and losses, net
Total
(1) See discussion of adoption of ASU 2016-01 in Note S. Recent Accounting Pronouncements
$
$
4
1
10
(In millions)
(9) $
—
—
(5) $
1
10
299
17
11
(8)
(7)
318
$
$
614
55
160
—
—
—
—
—
829
Fixed maturity securities available for sale
Preferred stock
Equity securities
Valuation loss on equity securities (1)
Valuation loss on preferred securities (1)
Property and equipment
Asset impairments
Pacific Union Sale
Other realized gains and losses, net
Total
(1) See discussion of adoption of ASU 2016-01 in Note S. Recent Accounting Pronouncements
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
67
Year ended December 31, 2018
Gross
Realized
Gains
Gross
Realized
Losses
Net
Realized
Gains
(Losses)
Gross
Proceeds
from Sale/
Maturity
$
$
6
1
5
2
$
(In millions)
(4) $
—
(21)
1
(16)
(71)
(24)
5
(7)
4
(3)
838
60
298
—
—
21
—
47
—
$ (109) $
1,264
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) $
—
968
10
21
—
4
—
—
$
1,003
9
(6)
2
(1)
(1)
2
$
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Interest and investment income consists of the following:
Tax-deferred property exchange income
Fixed maturity securities available for sale
Equity securities and preferred stock available for sale
Cash and cash equivalents
Short-term investments
Other
Total
Note E.
Property and Equipment
Property and equipment consists of the following:
Furniture, fixtures and equipment
Data processing equipment
Leasehold improvements
Buildings
Land
Other
Total property and equipment, gross
Accumulated depreciation and amortization
Total property and equipment, net
Year Ended December 31,
2019
$
72
70
34
22
14
13
2017
2018
(In millions)
65
$
$
55
34
12
8
3
31
61
28
3
4
4
$
225
$
177
$
131
December 31,
2019
2018
(In millions)
222
$
174
102
85
16
5
604
(428)
176
$
217
157
87
84
19
3
567
(403)
164
$
$
Depreciation expense on property and equipment was $42 million, $46 million, and $48 million for the years ended
December 31, 2019, 2018, and 2017, respectively.
Note F.
Goodwill
Goodwill consists of the following:
Balance, December 31, 2017
Goodwill acquired during the year
Adjustments to prior year acquisitions
Pacific Union Sale
Impairment
Balance, December 31, 2018
Adjustments to prior year acquisitions
Balance, December 31, 2019
68
Title
$
2,432
Corporate
and Other
(In millions)
314
$
Total
$
2,746
18
12
—
—
$
$
2,462
—
2,462
$
$
3
2
(52)
(3)
264
1
265
$
$
21
14
(52)
(3)
2,726
1
2,727
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, 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. The cash inflows and outflows from and to Black Knight as well as revenues and expenses
included in continuing operations subsequent to the BK Distribution which were previously eliminated in our consolidated financial
statements as intra-entity transactions, are not considered material to our results of operations.
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
(in millions)
745
(13)
732
292
145
154
42
633
99
40
59
36
23
240
(46)
$
$
$
69
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
FNFV
As a result of the FNFV Split-Off, 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 to 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, 2019, we own approximately
7.2% 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.
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”):
• 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;
• 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
• 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 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).
70
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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
Earnings from continuing operations before equity in losses of unconsolidated affiliates
Equity in losses of unconsolidated affiliates
Net earnings from discontinued operations
Less: Net losses attributable to non-controlling interests
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Cash flow from discontinued operations data:
Net cash used in operations
Net cash used in investing activities
Reconciliation to Consolidated Financial Statements
Year Ended
December 31,
2017
(in millions)
$
$
$
111
981
5
277
1,374
148
94
861
51
9
1,163
211
103
108
(12)
96
(13)
109
(134)
(11)
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 from discontinued operations attributable to FNFV
Total earnings from discontinued operations, net of tax
Year Ended
December 31,
2017
(in millions)
59
$
96
155
$
71
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note H.
Other Intangible Assets
Other intangible assets consist of the following:
Customer relationships and contracts
Computer software
Trademarks and tradenames
Other
Accumulated amortization
December 31,
2019
2018
(In millions)
758
$
421
65
23
1,267
(845)
422
$
827
385
64
27
1,303
(790)
513
$
$
Amortization expense for amortizable intangible assets, which consist primarily of customer relationships and computer
software, was $131 million, $119 million, and $130 million for the years ended December 31, 2019, 2018 and 2017, respectively.
Estimated amortization expense for the next five years for assets owned at December 31, 2019, is $115 million in 2020, $87 million
in 2021, $65 million in 2022, $46 million in 2023 and $20 million in 2024.
Note I.
Accounts Payable and Other Accrued Liabilities
Accounts payable and other accrued liabilities consist of the following:
Salaries and incentives
Accrued benefits
Deferred revenue
Contingent consideration - acquisitions
Trade accounts payable
Accrued recording fees and transfer taxes
Accrued premium taxes
Other accrued liabilities
Note J.
Notes Payable
Notes payable consists of the following:
4.50% Notes, net of discount
5.50% Notes, net of discount
Revolving credit facility
December 31,
2019
2018
(In millions)
341
$
$
289
111
17
44
10
26
256
$
1,094
$
295
245
105
39
35
20
19
198
956
December 31,
2019
2018
(In millions)
443
$
398
(3)
838
$
442
398
(4)
836
$
$
At December 31, 2019, the estimated fair value of our unsecured notes payable was approximately $918 million, or $68
million higher than its carrying value, excluding $12 million of net unamortized debt issuance costs and premium/discount. The
fair values of our unsecured notes payable are based on established market prices for the securities on December 31, 2019 and are
considered Level 2 financial liabilities.
72
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
On August 13, 2018, we completed an offering of $450 million in aggregate principal amount of notes due August 2028 with
stated interest of 4.50% per annum (the "4.50% Notes"), pursuant to Rule 144A and Regulation S under the Securities Act of 1933,
as amended. The 4.50% Notes were priced at 99.252% of par to yield 4.594% annual interest. We pay interest on the 4.50% Notes
semi-annually on the 15th of February and August, beginning February 15, 2019. The 4.50% Notes contain customary covenants
and events of default for investment grade public debt, which primarily relate to failure to make principal or interest payments.
On May 16, 2019, we completed an offering to exchange the 4.50% Notes for substantially identical notes registered under the
Securities Act of 1933 (the "4.50% Notes Exchange"). There were no material changes to the terms of the 4.50% Notes as a result
of the 4.50% Notes Exchange and all holders of the 4.50% Notes accepted the offer to exchange.
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 Baa2/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, 2019, there is no balance outstanding, $3 million in unamortized debt issuance costs and $800
million of 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. We pay interest on the 5.50% 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 payment
when due or (ii) the occurrence of an event which results in such debt being due and payable prior to its scheduled maturity.
Gross principal maturities of notes payable at December 31, 2019 are as follows (in millions):
2020
2021
2022
2023
2024
Thereafter
$
$
—
—
400
—
—
450
850
73
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note K.
Income Taxes
Income tax expense (benefit) on continuing operations consists of the following:
Year Ended December 31,
2019
2018
2017
Current
Deferred
$
$
(In millions)
64
$
268
40
308
$
$
$
476
(241)
235
56
120
Total income tax expense was allocated as follows (in millions):
Year Ended December 31,
2019
2018
2017
Net earnings from continuing operations
$
308
$
120
$
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
—
16
1
—
17
Total income taxes
$
325
$
—
(3)
(2)
—
(5)
115
$
235
144
25
4
3
32
411
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
Year Ended December 31,
2019
2018
2017
21.0%
21.0%
35.0%
1.7
(0.1)
—
(0.8)
(0.1)
(0.2)
—
1.0
3.1
(0.1)
(0.1)
(0.5)
(0.2)
(0.2)
(7.1)
0.2
1.8
(0.2)
(0.4)
(1.4)
(0.1)
—
(10.7)
3.2
22.5%
16.1%
27.2%
74
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
The significant components of deferred tax assets and liabilities at December 31, 2019 and 2018 consist of the following:
Deferred Tax Assets:
Employee benefit accruals
Net operating loss carryforwards
Accrued liabilities
Allowance for uncollectible accounts receivable
Pension plan
Tax credits
State income taxes
Investment securities
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,
2019
2018
(In millions)
$
71
$
64
3
3
4
3
39
3
—
9
135
25
110
$
(55) $
(113)
(6)
(11)
(75)
(12)
(54)
(68)
(394) $
(284) $
7
7
4
2
41
3
3
1
132
22
110
(55)
(113)
(6)
(23)
—
(11)
(68)
(61)
(337)
(227)
$
$
$
$
Our net deferred tax liability was $284 million and $227 million at December 31, 2019, and 2018, respectively. The significant
changes in the deferred taxes are as follows: the deferred tax liability for investment securities increased (prior year asset decreased)
by $78 million largely due to unrealized gains recorded for investment securities. The deferred tax liability relating to partnerships
decreased by $14 million primarily related to ServiceLink book intangibles not amortizable for tax.
SEC Staff Accounting Bulletin No. 118 ("SAB 118"), provided guidance for companies that had 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. We completed our accounting for the tax effects of the
enactment of the Tax Reform as of December 31, 2018.
At December 31, 2019, we have net operating losses ("NOL") on a pretax basis of $14 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 2012, including Buyers Protection Group, Inc., Digital Insurance Holdings, Inc., and ServiceLink. Most of the NOLs are
subject to an annual Internal Revenue Code Section 382 limitation. These losses will begin to expire in year 2023 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, 2019 and 2018, we had $39 million and $41 million of tax credits, respectively, which expire in 2032. The
credits primarily consist of general business credits from historical acquisitions. We anticipate that these credits will be utilized
prior to expiration after a valuation allowance of $21 million on the general business credits.
75
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
As of December 31, 2019 and 2018, we had approximately $8 million and $9 million (including interest of $2 million),
respectively, of total unrecognized tax benefits that, if recognized, would favorably affect our income tax rate. 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 IRS for the 2018 through 2020 tax years. We file income tax returns in various foreign
and US state jurisdictions. Our state income tax returns for the 2014 through 2019 tax years remain subject to examination by
state jurisdictions.
Note L.
Summary of Reserve for Claim Losses
A summary of the reserve for claim losses follows:
Year Ended December 31,
2019
2018
2017
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
$
1,488
1
240
—
240
(Dollars in millions)
$
1,490
$
—
221
—
221
1,487
(4)
219
19
238
(11)
(209)
(220)
1,509
$
(10)
(213)
(223)
1,488
(8)
(223)
(231)
1,490
$
$
Provision for title insurance claim losses as a percentage of title insurance premiums
4.5%
4.5%
4.9%
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%. In response to
favorable development on recent year claims, the average provision rate decreased in 2017 and remained constant in 2018 and
2019.
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.
During the 4th quarter of 2019, three lawsuits were filed by various parties against Chicago Title Company and Chicago
Title Insurance Company as its alter ego, (collectively the “Named Companies”) among others. Generally, plaintiffs claim they
are investors who were solicited by Gina Champion-Cain to provide funds that purportedly were to be used for high-interest,
short-term loans to parties seeking to acquire California alcoholic beverage licenses. Plaintiffs contend that under California
state law, alcoholic beverage license applicants are required to escrow an amount equal to the license purchase price while their
applications remain pending with the State. It is further alleged that Chicago Title Company participated with Ms. Champion-
Cain and her entities in a fraud scheme involving an escrow account maintained by Chicago Title Company into which the
plaintiffs’ funds were deposited.
The three lawsuits are as follows:
On October 22, 2019, a lawsuit styled, Ovation Fin. Holdings 2 LLC, Ovation Fund Mgmt. II, LLC, Banc of California,
N.A. v. Chicago Title Ins. Co., Chicago Title Co., was filed in the United States District Court for the Southern District of
California. Plaintiffs claim losses of more than $75 million as a result of the alleged fraud scheme, and also seek consequential,
76
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
treble, and punitive damages. The Named Companies are defending and have filed a motion to dismiss the complaint on
several grounds, or alternatively, to stay the case.
On November 5, 2019, a putative class action lawsuit styled, Blake E. Allred and Melissa M. Allred v. Chicago Title Co.,
Chicago Title Ins. Co., Adelle E. Ducharme, Betty Elixman, Gina Champion-Cain, Joelle Hanson, Cris Torres, and Rachel
Bond, was filed in the United States District Court for the Southern District of California. Plaintiffs seek class certification and
consequential, treble, and punitive damages. The Named Companies are defending and have filed a motion to dismiss the
complaint on several grounds, or alternatively, to stay the case.
On December 13, 2019, a lawsuit styled, Kim Funding, LLC, Kim H. Peterson, Joseph J. Cohen, and ABC Funding
Strategies, LLC v. Chicago Title Co., Chicago Title Ins. Co., Thomas Schwiebert, Adelle Ducharme, and Betty Elixman, was
filed in the Superior Court of San Diego County for the State of California. Plaintiffs claim losses of more than $250 million as
a result of the alleged fraud scheme, and also seek statutory, treble, and punitive damages. The Named Companies are
defending and have filed a motion to dismiss the complaint on several grounds.
In addition, the Chicago Title Company is also in receipt of a pre-suit demand for approximately $30 million from another
group of alleged investors. Chicago Title Company has acknowledged receipt of the claim and is investigating.
At this time, the Company is unable to ascertain its liability, if any, and is unable to make an estimate of a reasonably possible
claim loss for any of these claims due to the complex nature of the claims and litigation, the early procedural status of each claim
(involving unresolved questions of fact without any rulings on the merits or determinations of liability), the extent of discovery
not yet conducted, potential insurance coverage, and an incomplete evaluation of possible defenses, counterclaims, crossclaims
or third-party claims that may exist. Moreover, it is likely that in some instances, the claims listed above are duplicative. The
Company, however, has recorded an incurred claim loss reserve for legal fees related to these matters as of December 31, 2019,
which is included in its consolidated reserve for claim losses. As further information becomes available, the Company will continue
to evaluate the adequacy of its consolidated reserve for claim losses.
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. See Note L. Summary of Reserve for Claim Losses for further discussion. 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 $22 million and $11 million as of December 31,
2019 and 2018, respectively. 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.
In a class action captioned, Patterson, et al. v. Fidelity National Title Insurance Company, et al., originally filed on October
27, 2003, and pending in the Court of Common Pleas of Allegheny County, Pennsylvania, plaintiffs allege the named Company
underwriters violated Pennsylvania’s Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) by failing to provide
premium discounts in accordance with filed rates in refinancing transactions. Contrary to rulings in similar federal court cases
that considered the rate rule and agreed with the Company’s position, the court held that the rate rule should be interpreted such
that an institutional mortgage in the public record is a “proxy” for prior title insurance entitling a consumer to a discount rate when
refinancing when there is a mortgage of record within the number of years required by the rate rule. The rate rule requires sufficient
evidence of a prior policy, and because not all institutional mortgages were insured, the Company’s position is that a recorded first
mortgage alone does not constitute sufficient evidence of an earlier policy entitling consumers to a discounted rate. The court
certified the class refusing to follow prior Pennsylvania Supreme Court and appellate court decisions holding that the UTPCPL
77
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
requires proof of reliance, an individual issue that precludes certification. After notice to the class, plaintiffs moved for partial
summary judgment on liability, and defendants moved for summary judgment. On June 27, 2018, the court entered an order
granting plaintiffs’ motion for partial summary judgment on liability, and denying the Company’s motion. The court also determined
that a multiplier of 1.5, not treble, should be applied to the amount of damages, if any, proven by class members at trial, and that
Plaintiffs should bear the responsibility of identifying class members and calculating damages. The Company’s requests for
interlocutory appeals of both the liability and damage multiplier issues were denied. The parties have reached an agreement in
principle to resolve the matter, and are in the process of documenting the settlement agreement for submission to the court for
approval. We do not believe the settlement 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. We do not anticipate such fines and settlements, either individually
or in the aggregate, will have a material adverse effect on our financial condition
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 $18.7 billion at December 31, 2019. 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, 2019 and 2018 related to these arrangements.
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, 2019, the combined statutory
unearned premium reserve required and reported for our title insurers was $1,446 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
78
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
states of domicile. As of December 31, 2019, $1,868 million of our net assets are restricted from dividend payments without prior
approval from the Departments of Insurance. During 2020, our title insurers can pay or make distributions to us of approximately
$518 million, without prior approval.
The combined statutory capital and surplus of our title insurers was approximately $1,581 million and $1,383 million as of
December 31, 2019 and 2018, respectively. The combined statutory net earnings of our title insurance subsidiaries were $583
million, $625 million, and $434 million for the years ended December 31, 2019, 2018, and 2017, 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
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, 2019 and 2018, respectively, was lower by approximately $33 million and $28 million than if we had reported such
amounts in accordance with NAIC SAP.
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,
2019.
Our underwritten title companies, primarily those domiciled in California, are also subject to certain regulation by insurance
regulatory or banking authorities relating to their net worth and working capital. Minimum net worth and working capital
requirements for each underwritten title company is less than $1 million. These companies were in compliance with their respective
minimum net worth and working capital requirements at December 31, 2019.
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 17, 2018, our Board of Directors approved a new three-year stock repurchase program effective August 1, 2018 (the
"2018 Repurchase Program") under which we can purchase up to 25 million shares of our FNF common stock through July 31,
2021. 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. During the year ended December 31, 2019, we repurchased a total of 2,120,000
FNF common shares for an aggregate of $85 million or an average of $40.09 per share. Since the original commencement of the
2018 Repurchase Program, we repurchased a total of 2,780,000 FNF common shares for an aggregate of $106 million, or an
average of $38.24 per share.
Note O.
Employee Benefit Plans
Stock Purchase Plan
During the three-year period ended December 31, 2019, our eligible employees could voluntarily participate in our employee
stock purchase plan (“ESPP”) sponsored by us. Pursuant to the ESPP, employees may contribute an amount between 3% and 15%
of their base salary and certain commissions. We contribute varying amounts as specified in the ESPP.
We contributed $28 million, $25 million, and $23 million to the ESPP in the years ended December 31, 2019, 2018, and 2017,
respectively, in accordance with our matching contribution.
401(k) Profit Sharing Plan
During the three-year period ended December 31, 2019, we have offered our employees the opportunity to participate in our
401(k) profit sharing plan (the “401(k) Plan”), a qualified voluntary contributory savings plan that is available to substantially all
of our employees. Eligible employees may contribute up to 40% of their pre-tax 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 was $29 million, $30 million,
and $26 million for the years ended December 31, 2019, 2018, and 2017, respectively, and was credited based on the participant's
individual investment elections in the FNF 401(k) Plan.
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Table of Contents
Omnibus Incentive Plan
In 2005, we established the FNT 2005 Omnibus Incentive Plan (as amended and restated, 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, 2019, there were 1,517,176 shares of restricted stock and 5,530,125 stock options outstanding
under the Omnibus 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 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 2019, 2018, and 2017 are as follows:
Weighted
Average
Exercise Price
27.38
$
Exercisable
5,821,592
Balance, December 31, 2016
Options issued as make-whole adjustment for BK Distribution
Exercised
Canceled
Balance, December 31, 2017
Exercised
Balance, December 31, 2018
Exercised
Canceled
Balance, December 31, 2019
Options
7,481,683
2,375,111
(1,313,061)
(14,306)
8,529,427
(985,640)
7,543,787
(2,009,112)
(4,550)
5,530,125
20.32
18.38
24.49
20.38
19.09
20.55
19.61
25.34
20.88
$
$
$
FNF restricted stock transactions under the Omnibus Plan in 2019, 2018, and 2017 are as follows:
Balance, December 31, 2016
Granted
Restricted stock issued as make-whole adjustment for BK Distribution
Canceled
Vested
Balance, December 31, 2017
Granted
Canceled
Vested
Balance, December 31, 2018
Granted
Canceled
Vested
Balance, December 31, 2019
80
Shares
1,471,673
828,818
545,676
(11,233)
(995,873)
1,839,061
912,694
(15,201)
(915,316)
1,821,238
640,698
(14,937)
(929,823)
1,517,176
7,648,837
7,530,137
5,530,125
Weighted
Average
Grant Date
Fair Value
$
$
$
$
33.79
37.12
24.62
24.52
23.98
30.58
32.32
29.49
28.80
32.35
45.84
31.94
30.98
38.90
Table of Contents
The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2019:
Options Outstanding
Weighted
Average
Weighted
Remaining
Average
Options Exercisable
Weighted
Average
Weighted
Remaining
Average
Range of
Exercise Prices
$0.00 - $17.76
$17.77 - $21.84
$21.85 - $25.53
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)
2,870,481
918,236
1,741,408
5,530,125
0.89
1.84
2.83
$ 17.76
$
21.84
25.53
79
22
35
$
136
2,870,481
918,236
1,741,408
5,530,125
0.89
1.84
2.83
$ 17.76
$
21.84
25.53
79
22
35
$
136
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, 2019, 2018 and 2017 was $29 million, $29 million, and $31 million, respectively. The total fair value
of restricted stock awards which vested in the years ended December 31, 2019, 2018 and 2017 was $42 million, $29 million, and
$38 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, 2019, 2018 and 2017 was $48 million, $19
million, and $25 million, respectively. Net earnings attributable to FNF Shareholders reflects stock-based compensation expense
amounts of $38 million for the year ended December 31, 2019, $31 million for the year ended December 31, 2018, and $44 million
for the year ended December 31, 2017, which are included in personnel costs in the reported financial results of each period.
At December 31, 2019, the total unrecognized compensation cost related to non-vested stock option grants and restricted
stock grants is $45 million, which is expected to be recognized in pre-tax income over a weighted average period of 1.66 years.
Pension Plan
In 2000, FNF merged with Chicago Title Corporation ("CTC"). In connection with the merger, we assumed CTC’s
noncontributory defined contribution plan and noncontributory defined benefit pension plan (the “Pension Plan”). The Pension
Plan covers certain CTC 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 discount rate used to determine the benefit obligation as of the years ended December 31, 2019 and 2018 was 2.79% and
3.90%, respectively. As of the years ended December 31, 2019 and 2018, the projected benefit obligation was $160 million and
$150 million, respectively, and the fair value of plan assets was $150 million and $144 million, respectively. The net pension
liability and net periodic expense included in our financial position and results of operations relating to the Pension Plan is not
considered material for any period presented.
81
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
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:
Change in proceeds of sales of investments available for sale receivable in period
Change in purchases of investments available for sale payable in period
Change in treasury stock purchases payable in period
Change in accrued dividends payable in period
Lease liabilities recognized in exchange for lease right-of-use assets
Remeasurement of lease liabilities
Liabilities assumed in connection with acquisitions:
Fair value of assets acquired
Less: Total purchase price
Liabilities and noncontrolling interests assumed
$
$
$
$
Year Ended December 31,
2019
2018
2017
(In millions)
44
$
34
$
251
204
102
528
$
1
(1)
(1)
2
36
101
$
1
1
— $
3
(9)
—
(1)
—
—
(3) $
(2)
1
2
—
—
50
33
17
$
$
595
481
114
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 Texas, California, 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
2019
2018
2017
14.3%
13.8%
9.2%
5.8%
13.9%
14.4%
8.8%
6.3%
14.5%
14.2%
8.0%
6.3%
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.
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.
82
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note R.
Segment Information
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, 2019:
Title
Corporate
and Other
(In millions)
Total FNF
$
5,342
$
— $
2,389
7,731
528
8,259
154
—
1,536
363
1,173
13
1,186
9,071
2,462
$
$
195
195
15
210
24
47
(167)
(55)
(112)
2
5,342
2,584
7,926
543
8,469
178
47
1,369
308
1,061
15
$
$
(110) $
1,076
1,606
$
10,677
265
2,727
Title
Corporate
and Other
(In millions)
Total FNF
$
4,911
$
— $
2,204
7,115
60
7,175
154
—
876
163
713
4
717
8,391
2,462
$
$
411
411
8
419
28
43
(126)
(43)
(83)
1
$
$
(82) $
$
910
264
4,911
2,615
7,526
68
7,594
182
43
750
120
630
5
635
9,301
2,726
Title premiums
Other revenues
Revenues from external customers
Interest and investment income, 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, 2018:
Title premiums
Other revenues
Revenues from external customers
Interest and investment income, 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
83
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
As of and for the year ended December 31, 2017:
Title premiums
Other revenues
Revenues from external customers
Interest and investment income, 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
The activities in our segments include the following:
•
•
Title. This segment consists of the operations of our title insurance underwriters and related businesses which provide
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 real estate technology
subsidiaries, other smaller, non-title businesses and certain unallocated corporate overhead expenses and eliminations of
revenues and expenses between it and our Title segment. This segment also includes the results of operations of Pacific
Union International, Inc. ("Pacific Union") through September 24, 2018, the date we closed on the sale of all of our equity
interest in, and notes outstanding from, Pacific Union.
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 adopted these revenue standards on January 1, 2018 using the modified retrospective approach. As there was no
material impact to our historical revenue recognition, we did not record a cumulative-effect adjustment to the opening balance
of retained earnings in the current year. See Note T. Revenue Recognition for further discussion of our revenue.
84
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Leases
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 resulting from applying the fair value measurement, 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 allows for 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. In July
2018, the FASB issued ASU 2018-11 Leases (Topic 842): Targeted Improvements which allows entities the option to adopt this
standard prospectively with a cumulative-effect adjustment to opening equity and include required disclosures for prior periods.
We adopted Topic 842 on January 1, 2019 using a modified retrospective approach and recorded lease right-of-use assets
("Lease assets") of $421 million and liabilities for future discounted lease payment obligations ("Lease Liabilities") of $437 million
at the date of adoption. The adoption also resulted in a decrease of $9 million and $25 million to our Prepaid expenses and other
assets and Accounts payable and accrued liabilities, respectively. There was no impact to opening equity as a result of the
adoption.We elected to apply the following package of practical expedients on a consistent basis permitting entities not to reassess:
(i) whether any expired or existing contracts are or contain a lease; (ii) lease classification for any expired or existing leases and
(iii) whether initial direct costs for any expired or existing leases qualify for capitalization under the amended guidance.
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.
We adopted this new guidance on January 1, 2018, which resulted in the reclassification of our unrealized gains and losses
on our equity and preferred securities available for sale previously included in accumulated other comprehensive income to
beginning retained earnings. Changes in the fair value of our investments in equity and preferred securities subsequent to January
1, 2018 are now included in Realized gains and losses, net in our Consolidated Statements of Earnings. See Note D. Investments for
further details. We reclassified a total of $109 million from Accumulated other comprehensive income to beginning Retained
earnings as of January 1, 2018. The total cumulative effect on opening equity, including an increase in Retained earnings of $19
million attributable to an increase in value of certain Other long term investments resulting from recording at fair value, was an
increase in Retained earnings of $128 million and decrease in Accumulated other comprehensive income of $109 million.
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 previously did not include specific guidance
on the cash flow classification and presentation of changes in restricted cash. The Company previously excluded 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. The ASU requires retrospective application to all
prior periods presented upon adoption.
We adopted this ASU on January 1, 2018 and have retrospectively restated our Consolidated Statements of Cash Flows
included herein. The adoption of this ASU resulted in the following retrospective changes to our Consolidated Statements of Cash
Flows for the year ended December 31, 2017: an increase in the net change in cash and cash equivalents of $144 million due to
the inclusion of the change in our cash pledged against secured trust deposits; an increase in cash provided by investing activities
of $174 million related to the movement of cash paid/received for investments pledged against secured trust deposits from operating
to investing activities; and an increase in cash used in financing activities of $30 million related to the movement of the change
in secured trust deposits from operating to financing activities.
85
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
In February 2018, the FASB issued ASU No. 2018-02 Income Statement—Reporting Comprehensive Income (Topic 220):
Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a
reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax
Reform. We adopted this ASU on April 1, 2018. Adoption of this ASU resulted in no net reclassification from Accumulated other
comprehensive loss to Retained earnings.
Other Pronouncements Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on
Financial Instruments (Topic 326). The amendments in this and the related ASUs 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
fixed maturity securities available for sale. This update is effective for annual periods beginning after December 15, 2019,
including interim periods within those fiscal years. We are finalizing the effect this new guidance will have on our Consolidated
Financial Statements and related disclosures. Based on our implementation analysis performed, we have concluded that the
overall effect of Topic 326 is not expected to be material to the Consolidated Financial Statements upon adoption. We did not
early adopt this standard.
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. We
do not expect this guidance to have a material impact on our consolidated financial statements and related disclosures and did not
early adopt this standard.
In December 2019, the FASB issued ASU 2019-12 Income Taxes - Simplifying the Accounting for Income Taxes (Topic 740),
which simplifies various aspects of the income tax accounting guidance and will be applied using different approaches depending
on what the specific amendment relates to and, for public entities, are effective for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2020. Early adoption is permitted. We do not expect this guidance to have a material
impact on our Consolidated Financial Statements and related disclosures upon adoption.
86
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Note T — Revenue Recognition
On January 1, 2018, we adopted ASC Topic 606 by applying the modified retrospective method. Results for reporting periods
beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be
reported under the accounting standards in effect for the prior period.
The adoption of ASC Topic 606 did not have an impact on the recognition of our primary sources of revenue, direct and agency
title premiums, as those revenue streams are subject to the accounting and reporting requirements under ASC Topic 944. Timing
of recognition of substantially all of our remaining revenue was also not impacted and we therefore did not record any cumulative
effect adjustment to opening equity.
Disaggregation of Revenue
Our revenue consists of:
Revenue Stream
Income Statement Classification
Segment
Revenue from insurance contracts:
Direct title insurance premiums
Agency title insurance premiums
Home warranty
Total revenue from insurance contracts
Revenue from contracts with customers:
Escrow fees
Other title-related fees and income
Direct title insurance premiums
Agency title insurance premiums
Escrow, title-related and other fees
Escrow, title-related and other fees
Escrow, title-related and other fees
ServiceLink, excluding title premiums, escrow fees,
and subservicing fees
Escrow, title-related and other fees
Title
Title
Title
Title
Title
Title
Real estate brokerage
Real estate technology
Other
Total revenue from contracts with customers
Other revenue:
Loan subservicing revenue
Interest and investment income
Realized gains and losses, net
Total revenues
Escrow, title-related and other fees
Corporate and other
Escrow, title-related and other fees
Corporate and other
Escrow, title-related and other fees
Corporate and other
Escrow, title-related and other fees
Interest and investment income
Realized gains and losses, net
Total revenues
Title
Various
Various
Year ended December 31,
2019
2018
Total Revenue
(in millions)
$
2,381
$
2,961
177
5,519
899
639
389
39
110
46
2,221
2,690
182
5,093
826
600
379
316
101
(6)
2,122
2,216
285
225
318
8,469
217
177
(109)
7,594
Our Direct title insurance premiums are recognized as revenue at a point-in-time upon of closing of the underlying real estate
transaction as the earnings process is then considered complete. Regulation of title insurance rates varies by state. Premiums are
charged to customers based on rates predetermined in coordination with each state's respective Department of Insurance. Cash
associated with such revenue is typically collected at closing of the underlying real estate transaction.
Premium revenues from agency title operations is primarily comprised of premiums recognized when the underlying title
order and real estate transaction closing, if applicable, are complete and reported to us. Premium revenues from agency title
operations also include an accrual for premiums which have not yet been reported to us, which is estimated based on historical
information.
Revenues from our home warranty business are generated from insurance contracts with customers to provide warranty for
major home appliances. Substantially all of our home warranty contracts are one year in length and revenue is recognized over
the term of the contract.
Escrow fees and Other title-related fees and income in our Title segment are closely related to Direct title insurance premiums
and are primarily associated with managing the closing of real estate transactions including the processing of funds on behalf of
the transaction participants, gathering and recording the required closing documents, providing notary and home inspection services,
87
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (continued)
and other real estate or title-related activities. Revenue is primarily recognized at a point-in-time upon closing of the underlying
real estate transaction or completion and billing of services. Cash associated with such revenue is typically collected at closing.
Revenues from ServiceLink, excluding its title premiums, escrow fees, and loan subservicing fees, primarily include revenues
from real estate appraisal services and foreclosure processing and facilitation services. Revenues from real estate appraisal services
are recognized at a point-in-time when all appraisal work is complete, a final report is issued to the client and the client is billed.
Revenues from foreclosure processing and facilitation services are primarily recognized upon completion of the services and when
billing to the client is complete.
Real estate brokerage revenues are primarily comprised of commission revenues earned in association with the facilitation of
real estate transactions and are recognized upon closing of the sale of the underlying real estate transaction.
Real estate technology revenues are primarily comprised of subscription fees for use of software provided to real estate
professionals. Subscriptions are only offered on a month-by-month basis and fees are billed monthly. Revenue is recognized in
the month services are provided.
Loan subservicing revenues are generated by certain subsidiaries of ServiceLink and are associated with the servicing of
mortgage loans on behalf of its customers. Revenue is recognized when the underlying work is performed and billed. Loan
subservicing revenues are subject to the recognition requirements of ASC Topic 860.
Interest and investment income consists primarily of interest payments received on fixed maturity security holdings and
dividends received on equity and preferred security holdings.
We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one
year or less, primarily related to revenue from our home warranty business, and (ii) contracts for which we recognize revenue at
the amount to which we have the right to invoice for services performed.
Contract Balances
The following table provides information about trade receivables and deferred revenue:
Trade receivables
Deferred revenue (contract liabilities)
December 31, 2019
December 31, 2018
$
(In millions)
321
$
111
284
105
Deferred revenue is recorded primarily for our home warranty contracts. Revenues from home warranty products are recognized
over the life of the policy, which is primarily one year. The unrecognized portion is recorded as deferred revenue in accounts
payable and other accrued liabilities in the Consolidated Balance Sheets. During the years ended December 31, 2019 and 2018,
we recognized $103 million and $97 million, respectively, of revenue which was included in deferred revenue at the beginning of
the period.
88
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,
2019 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,
2019. The effectiveness of our internal control over financial reporting as of December 31, 2019 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.
89
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.
90
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, 2019 and 2018
Consolidated Statements of Earnings for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017
Notes to Consolidated Financial Statements
44
45
47
48
50
51
53
54
(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)
97
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.
91
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
2.1
Description
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)
2.2 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)
2.3
2.4 Agreement and Plan of Merger, dated February 7, 2020, by and between FGL Holdings, Fidelity National Financial,
Inc., F Corp I and F Corp II. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-
K filed on February 7, 2020)
3.1
3.2
4.1
4.2
4.3
Fifth 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 13, 2018)
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)
4.4 Officers’ Certificate, dated August 28, 2012, pursuant to the Indenture dated December 8, 2005, as supplemented by the
First Supplemental Indenture dated as of January 6, 2006 and as further supplemented by the Second Supplemental
Indenture dated as of May 5, 2010 (incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form
8-K filed on August 28, 2012)
4.5
4.6
4.7
4.8
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)
Fourth Supplemental Indenture, dated August 13, 2018, between the Registrant and The Bank of New York Mellon Trust
Company, N.A. (incorporated by reference to Exhibit 4.4 to the Registrant's Current Report on Form 8-K filed on August
13, 2018)
Form of 4.50% Senior Note of the Registrant due 2028 (incorporated by reference to Exhibit A to Exhibit 4.4 to the
Registrant's Current Report on Form 8-K filed on August 13, 2018).
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)
4.9 Description of FNF Common Stock
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 Amended and Restated Fidelity National Financial, Inc. 2013 Employee Stock Purchase Plan (incorporated by reference
to Exhibit 10.3 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018) (1)
10.4
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)
92
Table of Contents
Exhibit
Number
10.5
10.6
10.7
10.8
Description
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 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)
10.9 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)
10.10 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)
10.11 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)
10.12 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)
10.13 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)(1)
10.14 Amended and Restated Employment Agreement between the Registrant and Brent B. Bickett, effective July 2, 2008
(incorporated by reference to Exhibit 10.17 to the Registrants Annual Report on Form 10-K for the year ended December
31, 2017) (1)
10.15 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)
10.16 Amended and Restated Employment Agreement between the Registrant and Raymond R. Quirk, effective as of
October 10, 2008 (incorporated by reference to Exhibit 10.16 to Registrant’s Annual Report on Form 10-K for the year
ended December 31, 2008)(1)
10.17 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)
10.18 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)
10.19 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)
10.20 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)
10.21 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)
10.22 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)
93
Table of Contents
Exhibit
Number
10.23 ServiceLink Holdings, LLC Incentive Plan (incorporated by reference to Exhibit 10.6 to the to the Registrant’s Current
Description
Report on Form 8-K filed on January 15, 2014) (1)
10.24 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)
10.25 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)
10.26 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)
10.27 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)
10.28 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)
10.29 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)
10.30 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)
10.31 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)
10.32 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)
10.33 Form of Notice of Restricted Stock Grant and FNF Restricted Stock Award Agreement under Amended and Restated
Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for October 2019 Awards (1)
10.34 Form of Notice of FNF Restricted Stock Grant and FNF Restricted Stock Award Agreement under Amended and Restated
Fidelity National Financial, Inc. 2005 Omnibus Incentive Plan for October 2018 Awards (incorporated by reference to
Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2018) (1)
10.35 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 (incorporated by
reference to Exhibit 10.39 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 2017) (1)
10.36 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)
10.37 Termination Agreement, dated September 9, 2019, among Stewart Information Services Corporation, Fidelity National
Financial, Inc., A Holdco Corp. and S Holdco LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current
Report on Form 8-K filed on September 11, 2019)
10.38 Amendment effective November 1, 2019 to Amended and Restated Employment Agreement between the Registrant
and Michael L. Gravelle effective May 3, 2016 (incorporated by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 2019) (1)
94
Table of Contents
Exhibit
Number
21.1
23.1
31.1
31.2
32.1
32.2
Subsidiaries of the Registrant
Description
Consent of Ernst & Young 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
101.INS Inline XBRL Instance Document (2)
101.SCH Inline XBRL Taxonomy Extension Schema Document
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document
104
Cover Page Interactive Data File formatted in Inline XBRL and contained in Exhibit 101
(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
(2) The instance document does not appear in the interactive data file because its XBRL tags are embedded within the inline
XBRL document.
Item 16.
Summary
None.
95
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 14, 2020
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/ Thomas M. Hagerty
Thomas M. Hagerty
/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 14, 2020
(Principal Executive Officer)
Chief Financial Officer
February 14, 2020
(Principal Financial and Accounting Officer)
Director and Chairman of the Board
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
February 14, 2020
Director
Director
Director
Director
Director
Director
Director
Director
96
Table of Contents
SCHEDULE II
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
BALANCE SHEETS
ASSETS
December 31,
2019
2018
(In millions, except share data)
Cash
Short term investments
Equity securities, 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
Income taxes receivable
Total assets
Liabilities:
Accounts payable and other accrued liabilities
Income taxes payable
Deferred tax liability
Notes payable
Total liabilities
Equity:
$
$
$
LIABILITIES AND EQUITY
FNF common stock, $0.0001 par value; authorized 600,000,000 shares as of December 31, 2019 and 2018;
outstanding of 275,563,436 and 275,373,834 as of December 31, 2019 and 2018, respectively; and issued of
292,236,476 and 289,601,523 as of December 31, 2019 and 2018, respectively
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, 16,673,040 shares and 14,227,689 shares as of December 31, 2019 and 2018, respectively, at
cost
Total equity of Fidelity National Financial, Inc. common shareholders
$
565
564
1
8
498
4,916
2
235
—
349
202
1
12
543
4,629
5
11
4
6,789
$
5,756
275
$
10
284
838
1,407
—
—
4,581
1,356
43
(598)
5,382
63
—
227
836
1,126
—
—
4,500
641
(13)
(498)
4,630
5,756
Total liabilities and equity
$
6,789
$
See Notes to Financial Statements
97
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC.
(Parent Company)
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
SCHEDULE II
Year Ended December 31,
2018
2017
2019
(In millions, except per share data)
$
— $
40
4
44
35
20
43
98
(54)
(9)
(45)
673
628
—
628
217
(330)
—
—
128
(2)
628
641
$
$
$
1
24
—
25
32
8
48
88
(63)
(17)
(46)
685
639
132
771
1,784
(279)
(823)
(1,236)
—
—
771
217
Revenues:
Other fees and revenue
Interest and investment income and realized gains
Realized gains and losses, net
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
Cumulative effect of adoption of accounting standards
Other equity activity
$
$
$
38
54
(4)
88
80
62
48
190
(102)
(23)
(79)
1,141
1,062
—
1,062
641
(347)
—
—
—
—
$
$
Net earnings attributable to Fidelity National Financial, Inc. common shareholders
Retained earnings, end of year
$
1,062
1,356
$
See Notes to Financial Statements
98
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
Gain on Pacific Union Sale
Impairment of assets
Equity in earnings of subsidiaries
Depreciation and amortization
Stock-based compensation
Net change in income taxes
Net (increase) decrease in prepaid expenses and other assets
Net increase in accounts payable and other accrued liabilities
Net cash provided by (used in) operating activities
Cash Flows From Investing Activities:
Purchases of investments available for sale
Net purchases of short-term investment activities
Cash proceeds from the Pacific Union Sale
Additions to notes receivable
Collection of notes receivable
Distributions from unconsolidated affiliates
Additional investments in unconsolidated affiliates
Net cash used in 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 financing activities
Net change in cash and cash equivalents
Cash at beginning of year
Cash at end of year
See Notes to Financial Statements
$
99
SCHEDULE II
Year Ended December 31,
2019
2018
2017
(In millions)
$
1,062
$
628
$
771
(2)
—
4
(1,141)
1
38
53
(185)
211
41
—
(362)
—
(200)
209
2
—
(351)
—
—
—
(344)
(86)
39
(15)
—
—
5
927
526
216
349
565
$
(2)
(4)
—
(673)
—
31
(81)
(10)
2
(109)
—
(117)
33
—
33
2
—
(49)
442
(368)
(142)
(328)
(20)
19
(9)
—
—
(2)
685
277
119
230
349
$
—
—
—
(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
230
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:
4.5% Notes, net of discount
5.5% Notes, net of discount
Revolving credit facility
C.
Supplemental Cash Flow Information
Cash paid during the year:
Interest paid
Income tax payments
D.
Cash Dividends Received
December 31,
2019
2018
(In millions)
443
$
398
(3)
838
$
442
398
(4)
836
$
$
Year Ended December 31,
2019
2018
2017
(In millions)
$
44
$
34
$
251
204
54
528
We have received cash dividends from subsidiaries and affiliates of $0.5 billion, $0.4 billion, and $0.8 billion during the years
ended December 31, 2019, 2018, and 2017, respectively.
100
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP
12926 Gran Bay Parkway, Suite 500
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 Stockholder
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 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, 2019.
INVESTOR RELATIONS
Please visit the Contact Investor Relations
section of FNF's Investor Info website at
FNF.com to submit a question or request to
the Investor Relations department.
You can also contact FNF's Investor
Relations department via email at
investors@fnf.com
BOARD OF DIRECTORS
EXECUTIVE OFFICERS
Raymond R. Quirk
Chief Executive Officer
Michael J. Nolan
President
Roger S. Jewkes
Chief Operating Officer
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
GENERAL INFORMATION
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
1 State Street
30th Floor
New York, NY 10004
(212) 509-4000
cstmail@continentalstock.com
www.continentalstock.com/contact
William P. Foley, II
Chairman of the Board
Fidelity National Financial, Inc.
Douglas K. Ammerman
Retired
KPMG LLP
Thomas M. Hagerty
Managing Partner
Thomas H. Lee Partners, L.P.
Daniel D. Lane
Chairman of the Board
Lane/Kuhn Pacific
Richard N. Massey
Chief Executive Officer
Cannae Holdings, Inc.
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
Willie D. Davis
Director Emeritus
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
2019
ANNUAL REPORT