Edgar Filing: Fidelity National Financial, Inc.

Large accelerated filer þ

Accelerated filer o

Non-accelerated filer o

Smaller reporting company o

(Do not check if a smaller reporting company)

FNF 09.30.14 10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q



þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2014



o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-32630

FIDELITY NATIONAL FINANCIAL, INC.

______________________________________________________________________________________________________________________________________________________

(Exact name of registrant as specified in its charter)



Delaware		16-1725106
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

601 Riverside Avenue, Jacksonville, Florida		32204
(Address of principal executive offices)		(Zip Code)

(904) 854-8100

___________________________________________________________________

(Registrant’s telephone number, including area code)

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 þ NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO R

The number of shares outstanding of the Registrant's common stock as of October 31, 2014 were:

FNF Group Common Stock 277,907,550

FNFV Group Common Stock 92,944,570

FORM 10-Q

QUARTERLY REPORT

Quarter Ended September 30, 2014

TABLE OF CONTENTS




	Page
Part I: FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
A. Condensed Consolidated Balance Sheets as of September 30, 2014 and December 31, 2013	1
B. Condensed Consolidated Statements of Earnings for the three-month and nine-month periods ended September 30, 2014 and 2013	2
C. Condensed Consolidated Statements of Comprehensive Earnings for the three-month and nine-month periods ended September 30, 2014 and 2013	4
D. Condensed Consolidated Statement of Equity for the nine-month period ended September 30, 2014	5
E. Condensed Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2014 and 2013	7
F. Notes to Condensed Consolidated Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3. Quantitative and Qualitative Disclosure About Market Risk	53
Item 4. Controls and Procedures	53
Part II: OTHER INFORMATION
Item 1. Legal Proceedings	54
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	54
Item 6. Exhibits	55

Table of Contents

Part I: FINANCIAL INFORMATION


Item 1.	Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Dollars in millions, except share data)



	September 30, 2014		December 31, 2013
	(Unaudited)
ASSETS
Investments:
Fixed maturity securities available for sale, at fair value, at September 30, 2014 and December 31, 2013 includes pledged fixed maturity securities of $351 and $261, respectively, related to secured trust deposits	$	3,022	$	2,959
Preferred stock available for sale, at fair value	194		151
Equity securities available for sale, at fair value	149		136
Investments in unconsolidated affiliates	297		357
Other long-term investments	175		162
Short-term investments	26		26
Total investments	3,863		3,791
Cash and cash equivalents, at September 30, 2014 and December 31, 2013 includes $385 and $339, respectively, of pledged cash related to secured trust deposits	1,195		1,969
Trade and notes receivables, net of allowance of $21, at September 30, 2014 and December 31, 2013	749		482
Goodwill	4,957		1,901
Prepaid expenses and other assets	758		682
Capitalized software, net	588		39
Other intangible assets, net	1,495		619
Title plants	395		370
Property and equipment, net	775		645
Income taxes receivable	—		30
	$	14,775	$	10,528
LIABILITIES AND EQUITY
Liabilities:
Accounts payable and accrued liabilities, at December 31, 2013 includes accounts payable to related parties of $3	$	1,568	$	1,302
Notes payable	3,240		1,323
Reserve for title claim losses	1,640		1,636
Secured trust deposits	722		588
Income taxes payable	9		—
Deferred tax liability	555		144
Total liabilities	7,734		4,993
Commitments and Contingencies:
Redeemable non-controlling interest by 33% minority holder of Black Knight Financial Services, LLC and 35% minority holder of ServiceLink Holdings, LLC	698		—
Equity:
FNF Class A common stock, $0.0001 par value: authorized 600,000,000 as of December 31, 2013; issued 292,289,166 as of December 31, 2013	—		—
FNF Group common stock, $0.0001 par value; authorized 487,000,000 shares as of September 30, 2014; issued 277,876,023 as of September 30, 2014	—		—
FNFV Group common stock, $0.0001 par value; authorized 113,000,000 shares as of September 30, 2014; issued 92,946,545 as of September 30, 2014	—		—
Preferred stock, $0.0001 par value; authorized 50,000,000 shares; issued and outstanding, none	—		—
Additional paid-in capital	4,822		4,642
Retained earnings	1,130		1,089
Accumulated other comprehensive earnings	32		37
Less: treasury stock, 5,925 shares as of September 30, 2014 and 41,948,518 shares as of December 31, 2013, at cost	—		(707		)
Total Fidelity National Financial, Inc. shareholders’ equity	5,984		5,061
Non-controlling interests	359		474
Total equity	6,343		5,535
	$	14,775	$	10,528

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(Dollars in millions)



	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Revenues:
Direct title insurance premiums	$	465		$	472		$	1,249		$	1,377
Agency title insurance premiums	528			630			1,450			1,779
Escrow, title related and other fees	735			437			2,097			1,361
Restaurant revenue	343			336			1,055			1,037
Auto parts revenue	290			266			892			834
Interest and investment income	29			29			94			99
Realized gains and losses, net	(7		)	4			(6		)	7
Total revenues	2,383			2,174			6,831			6,494
Expenses:
Personnel costs	645			546			1,950			1,611
Agent commissions	396			482			1,098			1,352
Other operating expenses	428			329			1,289			1,020
Cost of auto parts revenue, includes $19 of depreciation and amortization for the three months ended September 30, 2014 and 2013, respectively, and $51 and $55 for the nine months ended September 30, 2014 and 2013, respectively	266			223			771			704
Cost of restaurant revenue	296			292			899			889
Depreciation and amortization	102			36			305			104
Provision for title claim losses	59			77			169			221
Interest expense	37			27			111			71
Total expenses	2,229			2,012			6,592			5,972
Earnings from continuing operations before income taxes and equity in losses of unconsolidated affiliates	154			162			239			522
Income tax expense	59			52			79			170
Earnings from continuing operations before equity in losses of unconsolidated affiliates	95			110			160			352
Equity in losses of unconsolidated affiliates	(7		)	(14		)	(43		)	(20		)
Net earnings from continuing operations	88			96			117			332
Net loss from discontinued operations, net of tax	—			—			(1		)	(2		)
Net earnings	88			96			116			330
Less: Net (loss) earnings attributable to non-controlling interests	(14		)	2			(75		)	8
Net earnings attributable to Fidelity National Financial, Inc. common shareholders	$	102		$	94		$	191		$	322
Amounts attributable to Fidelity National Financial, Inc. common shareholders
Net earnings from continuing operations attributable to Old FNF common shareholders	$	—		$	94		$	88		$	320
Net loss from discontinued operations attributable to Old FNF common shareholders	$	—		$	—		$	(1	)	$	(2	)
Net earnings attributable to Old FNF common shareholders	$	—		$	94		$	89		$	322

Net earnings attributable to FNF Group common shareholders	$	114		$	—		$	114		$	—

Net loss attributable to FNFV Group common shareholders	$	(12	)	$	—		$	(12	)	$	—

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS - Continued

(In millions, except per share data)



	Three months ended September 30,					Nine months ended September 30,
	2014			2013		2014			2013
	(Unaudited)					(Unaudited)
Earnings per share
Basic
Net earnings per share from continuing operations attributable to Old FNF common shareholders	$	—		$	0.41	$	0.33		$	1.43
Net loss per share from discontinued operations attributable to Old FNF common shareholders	—			—		—			(0.01		)
Net earnings per share attributable to Old FNF common shareholders	$	—		$	0.41	$	0.33		$	1.42
Net earnings per share attributable to FNF Group common shareholders	$	0.41		$	—	$	0.41		$	—
Net loss per share attributable to FNFV Group common shareholders	$	(0.13	)	$	—	$	(0.13	)	$	—

Diluted
Net earnings per share from continuing operations attributable to Old FNF common shareholders	$	—		$	0.41	$	0.32		$	1.40
Net loss per share from discontinued operations attributable to Old FNF common shareholders	—			—		—			(0.01		)
Net earnings per share attributable to Old FNF common shareholders	$	—		$	0.41	$	0.32		$	1.39
Net earnings per share attributable to FNF Group common shareholders	$	0.40		$	—	$	0.40		$	—
Net loss per share attributable to FNFV Group common shareholders	$	(0.13	)	$	—	$	(0.13	)	$	—

Weighted average shares outstanding Old FNF common stock, basic basis	—			226		183			225
Weighted average shares outstanding Old FNF common stock, diluted basis	—			230		189			230
Cash dividends paid per share Old FNF common stock	$	—		$	0.16	$	0.36		$	0.48

Weighted average shares outstanding FNF Group common stock, basic basis	275			—		92			—
Weighted average shares outstanding FNF Group common stock, diluted basis	284			—		94			—
Cash dividends paid per share FNF Group common stock	$	0.18		$	—	$	0.18		$	—

Weighted average shares outstanding FNFV Group common stock, basic basis	92			—		31			—
Weighted average shares outstanding FNFV Group common stock, diluted basis	93			—		31			—

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In millions)



	Three months ended September 30,						Nine months ended September 30,
	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
	(Unaudited)						(Unaudited)
Net earnings	$	88		$	96		$	116		$	330
Other comprehensive earnings:
Unrealized (loss) gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)	(12		)	1			9			(22		)
Unrealized loss on investments in unconsolidated affiliates (2)	(7		)	(7		)	(8		)	(18		)
Unrealized (loss) gain on foreign currency translation and cash flow hedging (3)	(8		)	6			(5		)	(3		)
Reclassification adjustments for change in unrealized gains and losses included in net earnings (4)	1			1			—			(4		)
Minimum pension liability adjustment (5)	—			—			—			(1		)
Other comprehensive (loss) earnings	(26		)	1			(4		)	(48		)
Comprehensive earnings	62			97			112			282
Less: Comprehensive (loss) earnings attributable to non-controlling interests	(14		)	2			(75		)	8
Comprehensive earnings attributable to Fidelity National Financial, Inc. common shareholders	$	76		$	95		$	187		$	274

Comprehensive earnings attributable to Old FNF common shareholders	$	—		$	95		$	111		$	274

Comprehensive earnings attributable to FNF Group common shareholders	$	100		$	—		$	100		$	—

Comprehensive loss attributable to FNFV Group common shareholders	$	(24	)	$	—		$	(24	)	$	—

_______________________________________


(1)	Net of income tax (benefit) expense of $(7) million and $1 million for the three-month periods ended September 30, 2014 and 2013, respectively, and $5 million and $(13) million for the nine-month periods ended September 30, 2014 and 2013, respectively.


(2)	Net of income tax benefit of $4 million and $4 million for the three-month periods ended September 30, 2014 and 2013, respectively, and $5 million and $11 million for the nine-month periods ended September 30, 2014 and 2013, respectively.


(3)	Net of income tax (benefit) expense of $(5) million and $4 million for the three-month periods ended September 30, 2014 and 2013, respectively, and $(3) million and $(2) million for the nine-month periods ended September 30, 2014 and 2013, respectively.


(4)	Net of income tax expense (benefit) of $1 million for both the three-month periods ended September 30, 2014 and 2013, and $(3) million for the nine-month period ended September 30, 2013.


(5)	Net of income tax benefit of less than $1 million for the nine-month period ended September 30, 2013.

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF EQUITY

(In millions)

(Unaudited)



					Fidelity National Financial, Inc. Common Shareholders
	FNF				FNF			FNFV									Accumulated
	Class A				Group			Group									Other														Redeemable
	Common				Common			Common			Additional						Comprehensive			Treasury					Non-						Non-
	Stock				Stock			Stock			Paid-in			Retained			Earnings			Stock					controlling			Total			controlling
	Shares		$		Shares	$		Shares	$		Capital			Earnings			(Loss)			Shares		$			Interests			Equity			Interests
Balance, December 31, 2013	292		$	—	—	$	—	—	$	—	$	4,642		$	1,089		$	37		42		$	(707	)	$	474		$	5,535		$	—
Acquisition of Lender Processing Services, Inc.	26		—		—	—		—	—		839			—			—			—		—			—			839			—
Exercise of stock options	1		—		1	—		—	—		22			—			—			—		—			—			22			—
Recapitalization of FNF stock	(277	)	—		277	—		92	—		(6		)	—			—			—		—			—			(6		)	—
Tax benefit associated with the exercise of stock options	—		—		—	—		—	—		5			—			—			—		—			—			5			—
Other comprehensive earnings — unrealized gain on investments and other financial instruments (excluding investments in unconsolidated affiliates)	—		—		—	—		—	—		—			—			9			—		—			—			9			—
Other comprehensive earnings — unrealized loss on investments in unconsolidated affiliates	—		—		—	—		—	—		—			—			(8		)	—		—			—			(8		)	—
Other comprehensive earnings — unrealized loss on foreign currency translation and cash flow hedging	—		—		—	—		—	—		—			—			(5		)	—		—			(2		)	(7		)	—
Other comprehensive earnings — minimum pension liability adjustment	—		—		—	—		—	—		—			—			(1		)	—		—			—			(1		)	—
Stock-based compensation	—		—		—	—		—	—		26			—			—			—		—			2			28			11
Retirement of treasury shares	(42	)	—		—	—		—	—		(707		)	—			—			(42	)	707			—			—			—
Dividends declared	—		—		—	—		—	—		—			(150		)	—			—		—			—			(150		)	—
Issuance of restricted stock awards	—		—		—	—		1	—		—			—			—			—		—			—			—			—
Contribution by minority owner to acquire minority interest in Black Knight Financial Services, LLC and ServiceLink Holdings, LLC	—		—		—	—		—	—		1			—			—			—		—			(1		)	—			687
Contributions to non-controlling interests	—		—		—	—		—	—		—			—			—			—		—			8			8			—
Subsidiary dividends declared to non-controlling interests	—		—		—	—		—	—		—			—			—			—		—			(47		)	(47		)	—
Net earnings (loss)	—		—		—	—		—	—		—			191			—			—		—			(75		)	116			—
Balance, September 30, 2014	—		$	—	278	$	—	93	$	—	$	4,822		$	1,130		$	32		—		$	—		$	359		$	6,343		$	698

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)



	For the nine months Ended September 30,

	2014			2013
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	116		$	330
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization	356			159
Equity in losses of unconsolidated affiliates	43			20
Gain (loss) on sales of investments and other assets, net	6			(7		)
Stock-based compensation cost	39			24
Tax benefit associated with the exercise of stock options	(5		)	(3		)
Changes in assets and liabilities, net of effects from acquisitions:
Net decrease in pledged cash, pledged investments, and secured trust deposits	—			11
Net increase in trade receivables	(53		)	(14		)
Net increase in prepaid expenses and other assets	(56		)	(47		)
Net decrease in accounts payable, accrued liabilities, deferred revenue and other	(182		)	(23		)
Net decrease in reserve for title claim losses	(50		)	(81		)
Net change in income taxes	75			(25		)
Net cash provided by operating activities	289			344
Cash flows from investing activities:
Proceeds from sales of investment securities available for sale	581			495
Proceeds from calls and maturities of investment securities available for sale	321			230
Proceeds from sale of other assets	2			—
Additions to property and equipment and capitalized software	(144		)	(116		)
Purchases of investment securities available for sale	(841		)	(681		)
Net proceeds from short-term investment securities	—			16
Net purchases of other long-term investments	(57		)	(81		)
Distribution from (contributions to) investments in unconsolidated affiliates	33			(19		)
Net other investing activities	(3		)	17
Acquisition of Lender Processing Services, Inc., net of cash acquired	(2,253		)	—
Acquisition of USA Industries, Inc., net of cash acquired	(40		)	—
Other acquisitions/disposals of businesses, net of cash acquired	(45		)	(19		)
Net cash used in investing activities	(2,446		)	(158		)
Cash flows from financing activities:
Borrowings	1,683			329
Debt service payments	(860		)	(325		)
Additional investment in non-controlling interest	—			(14		)
Proceeds from sale of 4% ownership interest of Digital Insurance, Inc.	—			3
Proceeds from sale of 35% of Black Knight Financial Services, LLC and ServiceLink, LLC to minority interest holder	687			—
Dividends paid	(150		)	(109		)
Subsidiary dividends paid to non-controlling interest shareholders	(47		)	(15		)
Exercise of stock options	22			49
Equity and debt issuance costs	(3		)	(14		)
Tax benefit associated with the exercise of stock options	5			3
Purchases of treasury stock	—			(34		)
Net cash provided by (used in) financing activities	1,337			(127		)
Net (decrease) increase in cash and cash equivalents, excluding pledged cash related to secured trust deposits	(820		)	59
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at beginning of period	1,630			866
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at end of period	$	810		$	925
Supplemental cash flow information:
Income taxes paid, net	$	(7	)	$	183
Interest paid	$	101		$	72

See Notes to Condensed Consolidated Financial Statements

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A — Basis of Financial Statements

The unaudited financial information in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, “we,” “us,” “our,” or “FNF”) prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2013.

Certain reclassifications have been made in the 2013 Condensed Consolidated Financial Statements to conform to classifications used in 2014. In addition, we have corrected an immaterial prior period error to accrued personnel cost which affected the Balance Sheet, the Statement of Earnings and the Statement of Equity. We reviewed the impact of this error on the prior period financial statements and determined that the error was not material to the financial statements.

A summary of the effects of the immaterial correction on our Condensed Consolidated Financial Statements for the three and nine month periods ended September 30, 2013 and as of December 31, 2013 is as follows: Personnel costs increased $6 million in both the three and nine month periods ended September 30, 2013 and Income tax expense decreased by $2 million, resulting in Net earnings attributable to common shareholders decreasing by $4 million in each period, with a corresponding decrease to EPS of $0.02 for each period. On the December 31, 2013 Balance Sheet, Income taxes payable decreased by $4 million, Accounts payable and accrued expenses increased by $12 million and Retained earnings decreased by $8 million. There was no impact on our other Condensed Consolidated Financial Statements presented.

Description of the Business

We have organized our business into two groups, FNF Core Operations and FNF Ventures, known as "FNFV." Through our Core operations, FNF is a leading provider of title insurance, technology and transaction services to the real estate and mortgage industries. FNF is the nation’s largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York - that collectively issue more title insurance policies than any other title company in the United States. FNF also provides industry-leading mortgage technology solutions and transaction services, including MSP®, the leading residential mortgage servicing technology platform in the U.S., through its majority-owned subsidiaries, Black Knight Financial Services, LLC ("BKFS") and ServiceLink Holdings, LLC. In addition, in our FNFV group, we own majority and minority equity investment stakes in a number of entities, including American Blue Ribbon Holdings, LLC ("ABRH"), J. Alexander’s, LLC ("J. Alexander's"), Remy International, Inc. ("Remy"), Ceridian HCM, Inc. and Comdata Inc. (collectively "Ceridian") and Digital Insurance, Inc. ("Digital Insurance").

Recent Developments

On October 28, 2014, our Board of Directors approved a three-year stock purchase program, effective November 6, 2014, under which we can repurchase up to 10 million shares of our FNFV Group common stock through November 30, 2017. 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. We did not repurchase any FNFV Group shares from November 6, 2014 through market close on November 7, 2014.

On September 9, 2014, we filed a draft registration statement with the Securities and Exchange Commission (“SEC”) relating to a proposed initial public offering of J. Alexander's common stock. J. Alexander's is currently presented as part of the Restaurant Group segment. The number of shares to be offered and the price range for the proposed offering have not yet been determined. The registration statement has not yet become effective. As a result shares to be registered may not be sold nor may offers to buy be accepted prior to the time when the registration statement becomes effective.

On September 7, 2014, we entered into an agreement with Remy for a transaction (the "Spin-off"). Under the Spin-off, FNFV will combine all of the 16,342,508 shares of Remy common stock that FNFV owns and a small company called Fidelity National Technology Imaging, LLC ("Imaging") into a newly-formed subsidiary ("New Remy"). New Remy will then be distributed to FNFV shareholders. Immediately following the distribution of New Remy to FNFV shareholders, New Remy and Remy will engage in a series of stock-for-stock transactions ending with a new publicly-traded holding company, New Remy Holdco ("New Holdco"). In the Spin-off, FNFV shareholders will receive an estimated total of 16,615,359 shares of New Holdco common stock, or approximately 0.18117 shares for each share of FNFV tracking stock owned. The remaining shareholders of Remy (other than New Remy) will receive an estimated total of 15,652,824 shares, or one share of New Holdco for each share of Remy owned. Remy currently has approximately 32 million shares of common stock outstanding and at the conclusion of the Spin-off, New Holdco will have approximately 32 million shares of common stock outstanding. The Spin-off should be tax-free to all existing Remy and FNFV shareholders. This structure will result in New Holdco becoming the new public parent of Remy. Under the organizational documents of New Holdco, the rights of the holders of the common stock of New Holdco will be the same as the

Table of Contents

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

rights of holders of Remy common stock. The Spin-off is subject to customary closing conditions, including Remy shareholder approval, which based on FNFV's ownership of Remy is assured. On October 6, 2014, New Holdco filed an initial Form S-4 registration statement with the SEC, which includes a preliminary proxy statement with respect to the foregoing shareholder vote. In addition, on October 10, 2014, New Remy filed a Form S-1 registration statement with the SEC with regard to the Spin-off. Both of these filings are subject to SEC review and comment before the Remy shareholder meeting can be set. The Spin-off is expected to close in December 2014 or in the first quarter of 2015.

On August 25, 2014, we acquired a 70% ownership interest in LandCastle Title ("LandCastle"), in exchange for our agreement to fund any escrow shortfalls in LandCastle's escrow accounts. At the time of the acquisition, LandCastle was a large third-party agent of FNF, operating primarily in the State of Georgia. To date, FNF's total cash contribution to LandCastle is approximately $19 million and based on our current understanding of the business could increase by approximately $0 - $10 million.

On August 19, 2014, ABRH completed a recapitalization whereby they entered into a new credit agreement for $210 million. As part of the recapitalization, ABRH's parent paid a special dividend to it's members, totaling $75 million. Of this special dividend, FNFV received $41 million. ABRH's parent also distributed its 28% ownership interest in J. Alexander's to FNFV, resulting in FNFV now directly owning 87% of J. Alexander's. See Note F for further discussion of the new credit agreement.

On August 12, 2014, we announced that Ceridian reached an agreement to exchange its subsidiary Comdata Inc. ("Comdata") with FleetCor Technologies Inc. ("FleetCor") stock in a transaction valued at approximately $3.5 billion. After repayment of existing Comdata indebtedness and transaction related expenses, total consideration received by Ceridian will be approximately $950 million, which will be paid in approximately 7 million shares of FleetCor common stock. FNFV owns approximately 32% of Ceridian. Approximately $250 million of the common stock of FleetCor will be placed in an escrow account to cover potential indemnity claims as set forth in the merger agreement. The escrowed shares will be released over a three-year period. The actual number of shares of FleetCor common stock received by Ceridian will be subject to adjustment based on the amounts of indebtedness and working capital outstanding at Comdata at the closing of the transaction as set forth in the merger agreement. The shares of FleetCor common stock that Ceridian will receive will be subject to a six-month lockup period after closing of the transaction. At the expiration of the six-month lockup period, Ceridian will be entitled to demand registration rights on all shares of FleetCor common stock, subject to customary limitations. At closing of the Comdata merger FNFV will indirectly own approximately 3% of the outstanding shares of FleetCor. The stock-for-stock transaction is expected to be tax-free for Ceridian and its shareholders. The transaction is subject to customary closing conditions and is expected to close in the fourth quarter of 2014.

On June 30, 2014, we completed the recapitalization of FNF common stock into two tracking stocks, FNF Group common stock and FNFV Group common stock. Each share of the previously outstanding FNF Class A common stock ("Old FNF common stock") was converted into one share of FNF Group common stock, which now trades on the New York Stock Exchange under the current trading symbol "FNF," and 0.3333 of a share of FNFV Group common stock, which now trades on the New York Stock Exchange under the trading symbol "FNFV." Both FNF and FNFV began regular trading on July 1, 2014.

Effective June 1, 2014, we completed an internal reorganization to contribute our subsidiary Property Insight, a company which provides information used by title insurance underwriters, title agents and closing attorneys to underwrite title insurance policies for real property sales and transfer, from our Title segment to BKFS. As a result of this transfer, our ownership percentage in BKFS increased to 67%. Our results for periods since June 1, 2014, reflect our now 67% ownership interest in BKFS.

On January 13, 2014, Remy acquired substantially all of the assets of United Starters and Alternators Industries, Inc. ("USA Industries"). USA Industries is a leading North American distributor of premium quality remanufactured and new alternators, starters, constant velocity axles and disc brake calipers for the light-duty aftermarket. Total consideration paid was $40 million, net of cash acquired.

On January 2, 2014, we completed the purchase of Lender Processing Services, Inc. ("LPS"). The purchase consideration paid was $37.14 per share, of which $28.10 per share was paid in cash and the remaining $9.04 was paid in FNF common shares. The purchase consideration represented an exchange ratio of 0.28742 Old FNF common shares per share of LPS common stock. Total consideration paid for LPS was $3.4 billion, which consisted of $2,535 million in cash and $839 million in Old FNF common stock. In order to pay the stock component of the consideration, we issued 25,920,078 Old FNF shares to the former LPS shareholders. See Note B for further discussion.

Discontinued Operations

In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. This ASU raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet

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the definition of a discontinued operation. This ASU is effective for annual periods beginning after December 15, 2014, and interim periods within annual periods beginning on or after December 15, 2015, with early adoption permitted. We have adopted this ASU for the interim period beginning July 1, 2014 and this update did not have a material impact on our financial statements.

The results from a small software company, which we acquired with LPS and which was sold during the second quarter of 2014, are included in the Condensed Consolidated Statements of Earnings as discontinued operations for all periods presented. Total revenues included in discontinued operations were $2 million for the nine months ending September 30, 2014. Pre-tax earnings included in discontinued operations are $1 million for the nine months ending September 30, 2014.

The results from two closed J. Alexander's locations and a settlement services company closed in the second quarter of 2013 are reflected in the Condensed Consolidated Statements of Earnings as discontinued operations for all periods presented. There were no revenues included in discontinued operations for the three months ending September 30, 2013, and $8 million for the nine months ending September 30, 2013. Pre-tax loss included in discontinued operations was $3 million for the nine months ending September 30, 2013. There was no pre-tax earnings or loss for the three months ending September 13, 2013

Transactions with Related Parties

As we no longer have any officers in common with Fidelity National Information Services, Inc. ("FIS"), effective January 1, 2014, we no longer consider FIS a related party.

Agreements with FIS

A summary of the agreements that were in effect with FIS through December 31, 2013 is as follows:


•	Information Technology (“IT”) and data processing services from FIS. This agreement governs IT support services provided to us by FIS, primarily consisting of infrastructure support and data center management. Certain subsidiaries of FIS also provided technology consulting services to FNF during 2013.


•	Administrative aviation corporate support and cost-sharing services to FIS.

A detail of net revenues and expenses between us and FIS that were included in our results of operations for the periods presented is as follows:



	Three months ended September 30, 2013			Nine months ended September 30, 2013
	(in millions)
Corporate services and cost-sharing revenue	$	1		$	4
Data processing expense	(9		)	(25		)
Net expense	$	(8	)	$	(21	)

We believe the amounts earned by us or charged to us under each of the foregoing arrangements are fair and reasonable. The IT infrastructure support and data center management services provided to us are priced within the range of prices that FIS offers to its unaffiliated third party customers for the same types of services. However, the amounts we earned or were charged under these arrangements were not negotiated at arm’s-length, and may not represent the terms that we might have obtained from an unrelated third party. The net amount due to FIS as a result of these agreements was $3 million as of December 31, 2013.

Included in equity securities available for sale at December 31, 2013, are 1,303,860 shares of FIS stock which were purchased during the fourth quarter of 2009 in connection with a merger between FIS and Metavante Technologies, Inc. The fair value of our investment was $70 million as of December 31, 2013.

Also included in fixed maturities available for sale are FIS bonds with a fair value of $42 million as of December 31, 2013.

Earnings Per Share

Basic earnings per share, as presented on the Condensed 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

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been treated as common share equivalents for purposes of calculating diluted earnings per share for periods in which positive earnings have been reported.

Options or other instruments which provide the ability to purchase shares of our common stock that are antidilutive are excluded from the computation of diluted earnings per share. There were no antidilutive options during the three and nine month periods ended September 30, 2014. There were one million shares related to antidilutive options excluded for the three and nine month periods ended September 30, 2013.

As of the close of business on June 30, 2014, we completed the recapitalization of Old FNF common stock into two tracking stocks, FNF Group common stock and FNFV Group common stock. As a result of the recapitalization, the weighted average shares outstanding presented on the Condensed Consolidated Statements of Earnings includes shares of Old FNF common stock, FNF Group common stock and FNFV Group common stock. Earnings per share for all periods presented is attributed to the related class of common stock.

Note B — Acquisition of Lender Processing Services, Inc.

The results of operations and financial position of the entities acquired during any year are included in the Condensed Consolidated Financial Statements from and after the date of acquisition.

On January 2, 2014, we completed the purchase of LPS. The purchase consideration paid was $37.14 per share, of which $28.10 per share was paid in cash and the remaining $9.04 was paid in Old FNF common shares. The purchase consideration represented an exchange ratio of 0.28742 Old FNF common shares per share of LPS common stock. Total consideration paid for LPS was $3.4 billion, which consisted of $2,535 million in cash and $839 million in Old FNF common stock. In order to pay the stock component of the consideration, we issued 25,920,078 Old FNF shares to the former LPS shareholders. Goodwill has been recorded based on the amount that the purchase price exceeded the fair value of the net assets acquired.

The initial purchase price is as follows (in millions):



Cash paid for LPS outstanding shares	$	2,535
Less: cash acquired from LPS	(282		)
Net cash paid for LPS	2,253
FNF common stock issued (25,920,078 shares)	839
Total net consideration paid	$	3,092

The purchase price has been initially allocated to the LPS assets acquired and liabilities assumed based on our best estimates of their fair values as of the acquisition date. Goodwill has been recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. This estimate is preliminary and subject to adjustments as we complete our valuation process with respect to certain intangible assets, legal contingencies, taxes and goodwill, which we expect to have complete by December 2014.

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The initial purchase price allocation is as follows (in millions):



Trade and notes receivable	$	184
Investments	77
Prepaid expenses and other assets	59
Property and equipment	149
Capitalized software	552
Intangible assets including title plants	1,010
Income tax receivable	60
Goodwill	3,012
Total assets	5,103
Notes payable	1,091
Reserve for title claims	54
Deferred tax liabilities	435
Other liabilities assumed	431
Total liabilities	2,011
Net assets acquired	$	3,092

In connection with the LPS acquisition, we formed a wholly-owned subsidiary, Black Knight Holdings, Inc. ("Black Knight"). Black Knight is the mortgage and finance industries' leading provider of integrated technology, data and analytics solutions, and transaction services. Black Knight has two operating businesses, ServiceLink and BKFS. After acquiring LPS, we retained a 65% ownership interest in each of the subsidiaries and the subsidiaries each issued 35% minority ownership interest to funds affiliated with Thomas H. Lee Partners and certain related entities on January 3, 2014. BKFS and ServiceLink now own and operate the former LPS businesses and our legacy ServiceLink business.

The following table summarizes the intangible assets acquired (in millions, except for useful life):



	Fair Value as of Consolidation		Weighted Average Useful Life in Years as of Consolidation	Residual Value as of September 30, 2014
Amortizing intangible assets:
Developed technology	$	530	8	$	483
Purchased technology	22		3	17
Trade names	13		10	11
Customer relationships	910		10	842
Non-compete agreements	5		3	3
Other intangibles	4		8	3

Non-amortizing intangible assets:
Developed technology	54			54
Title plants	24			24
Total intangible assets and capitalized software	$	1,562		$	1,437

Pro-forma Financial Results

For comparative purposes, selected unaudited pro-forma consolidated results of operations of FNF for the three and nine months ending September 30, 2014 and 2013 are presented below. Pro-forma results presented assume the consolidation of Black Knight occurred as of the beginning of the 2013 period. Amounts reflect our 65% ownership interest in BKFS and our 65%

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ownership interest in ServiceLink and were adjusted to exclude costs directly attributable to the acquisition of LPS including transaction costs, severance costs and costs related to our synergy bonus program associated with the acquisition (in millions).



	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Total revenues	$	2,383	$	2,593	$	6,831	$	7,854
Net earnings attributable to Fidelity National Financial, Inc. common shareholders	129		129		304		430

As a result of our acquisition of LPS, the following additions were made to our significant accounting policies during the first quarter of 2014:

BKFS Revenue Recognition

Within our BKFS segment, we recognize revenues in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605, Revenue Recognition (“ASC 605”). Recording revenues requires judgment, including determining whether an arrangement includes multiple elements, whether any of the elements are essential to the functionality of any other elements, and the allocation of the consideration based on each element's relative selling price. Customers receive certain contract elements over time and changes to the elements in an arrangement, or in our determination of the relative selling price for these elements, could materially impact the amount of earned and unearned revenue reflected in our financial statements.

The primary judgments relating to our revenue recognition are determining when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) the seller’s price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Judgment is also required to determine whether an arrangement involving more than one deliverable contains more than one unit of accounting and how the arrangement consideration should be measured and allocated to the separate units of accounting.

If the deliverables under a contract are software related, we determine the appropriate units of accounting and how the arrangement consideration should be measured and allocated to the separate units. This determination, as well as management’s ability to establish vendor specific objective evidence (“VSOE”) for the individual deliverables, can impact both the amount and the timing of revenue recognition under these agreements. The inability to establish VSOE for each contract deliverable results in having to record deferred revenues and/or applying the residual method. For arrangements where we determine VSOE for software maintenance using a stated renewal rate within the contract, we use judgment to determine whether the renewal rate represents fair value for that element as if it had been sold on a stand-alone basis. For a small percentage of revenues, we use contract accounting when the arrangement with the customer includes significant customization, modification, or production of software. For elements accounted for under contract accounting, revenue is recognized using the percentage-of-completion method since reasonably dependable estimates of revenues and contract hours applicable to various elements of a contract can be made.

We are often party to multiple concurrent contracts with the same customer. These situations require judgment to determine whether the individual contracts should be aggregated or evaluated separately for purposes of revenue recognition. In making this determination we consider the timing of negotiating and executing the contracts, whether the different elements of the contracts are interdependent and whether any of the payment terms of the contracts are interrelated.

Due to the large number, broad nature and average size of individual contracts we are a party to, the impact of judgments and assumptions that we apply in recognizing revenue for any single contract is not likely to have a material effect on our consolidated operations. However, the broader accounting policy assumptions that we apply across similar arrangements or classes of customers could significantly influence the timing and amount of revenue recognized in our result of operations.

Capitalized Software

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

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methods over its estimated useful life, ranging from 5 to 10 years. In our BKFS segment we have significant internally developed software. These costs are amortized using the straight-line method over the estimated useful life. Useful lives of computer software range from 3 to 10 years. Capitalized software development costs are accounted for in accordance with either ASC Topic 985, Software, Subtopic 20, Costs of Software to Be Sold, Leased, or Marketed (“ASC 985-20”), or ASC 350, Subtopic 40, Internal-Use Software (“ASC 350-40”). For software products to be sold, leased, or otherwise marketed (ASC 985-20 software), all costs incurred to establish the technological feasibility are research and development costs, and are expensed as they are incurred. Costs incurred subsequent to establishing technological feasibility, such as programmers' salaries and related payroll costs and costs of independent contractors, are capitalized and amortized on a product by product basis commencing on the date of general release to customers. We do not capitalize any costs once the product is available for general release to customers. For internal-use computer software products (ASC 350-40 software), 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 also assess the recorded value of computer software for impairment on a regular basis by comparing the carrying value to the estimated future cash flows to be generated by the underlying software asset. There is an inherent uncertainty in determining the expected useful life of or cash flows to be generated from computer software. We have not historically experienced material changes in these estimates but could be subject to them in the future.

Redeemable Non-controlling Interest

As discussed above, subsequent to the acquisition of LPS we issued 35% ownership interests in each of BKFS and ServiceLink to funds affiliated with Thomas H. Lee Partners ("THL" or "the minority interest holder"). As part of the Unit Purchase Agreement with THL, THL has an option to put their ownership interests of either or both of BKFS and ServiceLink to us if no public offering of the corresponding business has been consummated after four years from the date of FNF's purchase of LPS. The units owned by THL ("redeemable noncontrolling interests") may be settled in cash or common stock of FNF or a combination of both at our election. 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 of September 30, 2014, we do not believe the exercise of this put right to be probable.

As these redeemable noncontrolling interests provide for redemption features not solely within our control, we classify the redeemable noncontrolling interests outside of permanent equity in accordance with ASC 480-10, “Distinguishing Liabilities from Equity.” Redeemable noncontrolling interests held by third parties in subsidiaries owned or controlled by FNF is reported on the Condensed Consolidated Balance Sheet outside permanent equity; and the Condensed Consolidated Statement of Earnings reflects the respective redeemable noncontrolling interests in Net earnings (loss) attributable to non-controlling interests, the effect of which is removed from the net earnings attributable to Fidelity National Financial, Inc. common shareholders.

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Note C — Fair Value Measurements

The following table presents the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, respectively:



	September 30, 2014
	Level 1		Level 2		Level 3		Total
	(In millions)
Assets:
Fixed maturity securities available for sale:
U.S. government and agencies	$	—	$	126	$	—	$	126
State and political subdivisions	—		1,020		—		1,020
Corporate debt securities	—		1,744		—		1,744
Mortgage-backed/asset-backed securities	—		96		—		96
Foreign government bonds	—		36		—		36
Preferred stock available for sale	50		144		—		194
Equity securities available for sale	149		—		—		149
Foreign currency contracts	—		2		—		2
Total assets	$	199	$	3,168	$	—	$	3,367

Liabilities:
Interest rate swap contracts	$	—	$	2	$	—	$	2
Commodity contracts	—		2		—		2
Foreign currency contracts	—		1		—		1
Total liabilities	$	—	$	5	$	—	$	5



	December 31, 2013
	Level 1		Level 2		Level 3		Total
	(In millions)
Fixed maturity securities available for sale:
U.S. government and agencies	$	—	$	126	$	—	$	126
State and political subdivisions	—		1,075		—		1,075
Corporate debt securities	—		1,606		—		1,606
Mortgage-backed/asset-backed securities	—		109		—		109
Foreign government bonds	—		43		—		43
Preferred stock available for sale	73		78		—		151
Equity securities available for sale	136		—		—		136
Other long-term investments	—		—		38		38
Foreign currency contracts	—		4		—		4
Interest rate swap contracts	—		2		—		2
Total assets	$	209	$	3,043	$	38	$	3,290

Liabilities:
Interest rate swap contracts	$	—	$	1	$	—	$	1
Commodity contracts	—		2		—		2
Total liabilities	$	—	$	3	$	—	$	3

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Our Level 2 fair value measures for fixed-maturities available for sale are provided by third-party pricing services. We utilize one firm for our taxable bond and preferred stock portfolio and another for our tax-exempt bond portfolio. These pricing services are leading global providers of financial market data, analytics and related services to financial institutions. We rely on one price for each instrument to determine the carrying amount of the assets on our balance sheet. The inputs utilized in these pricing methodologies include observable measures such as benchmark yields, reported trades, broker dealer quotes, issuer spreads, two sided markets, benchmark securities, bids, offers and reference data including market research publications. We review the pricing methodologies for all of our Level 2 securities by obtaining an understanding of the valuation models and assumptions used by the third-party as well as independently comparing the resulting prices to other publicly available measures of fair value and internally developed models. The pricing methodologies used by the relevant third party pricing services are as follows:


•	U.S. government and agencies: These securities are valued based on data obtained for similar securities in active markets and from inter-dealer brokers.


•	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, and any other feature which may influence its risk and thus marketability, as well as relative credit information and relevant sector news.


•	Mortgage-backed/asset-backed securities: These securities are comprised of agency mortgage-backed securities, collaterized 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.


•	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.


•	Preferred stocks: Preferred stocks are valued by calculating the appropriate spread over a comparable U.S. Treasury security. Inputs include benchmark quotes and other relevant market data.

Our Level 2 fair value measures for our interest rate swap, foreign currency contracts, and commodity contracts are valued using the income approach. This approach uses techniques to convert future amounts to a single present value amount based upon market expectations (including present value techniques, option-pricing and excess earnings models).

Our Level 3 investments consist of structured notes that were purchased in 2009. During the third quarter of 2014, all of our outstanding structured notes matured and we received $39 million in cash upon maturity, resulting in a net realized (loss) gain of $(2) million and $1 million for the three and nine months ending September 30, 2014. We recorded no gain or loss relating to the structured notes during the three months ended September 30, 2013, and recorded a net loss of $2 million in the nine months ended September 30, 2013. We held no structured notes at September 30, 2014 and the structured notes had a par value and a fair value of $38 million at December 31, 2013. The structured notes were held for general investment purposes and represented approximately one percent of our total investment portfolio. The structured notes were classified as other long-term investments and were measured in their entirety at fair value with changes in fair value recognized in earnings. The fair value of these instruments represented exit prices obtained from a broker-dealer. These exit prices were the product of a proprietary valuation model utilized by the trading desk of the broker-dealer and contain assumptions relating to volatility, the level of interest rates, and the value of the underlying commodity indices. We reviewed the pricing methodologies for our Level 3 investments to ensure that they are reasonable and we believe they represented an exit price for the securities at December 31, 2013.

The following table presents the changes in our investments that are classified as Level 3 for the period ended September 30, 2014 (in millions):



Balance, December 31, 2013	$	38
Net realized gain	1
Proceeds received upon maturity	(39		)
Balance, September 30, 2014	$	—

The carrying amounts of short-term investments, accounts receivable and notes receivable approximate fair value due to their short-term nature. Additional information regarding the fair value of our investment portfolio is included in Note D.

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Note D — Investments

The carrying amounts and fair values of our available for sale securities at September 30, 2014 and December 31, 2013 are as follows:



	September 30, 2014
	Carrying		Cost		Unrealized		Unrealized			Fair
	Value		Basis		Gains		Losses			Value
	(In millions)
Fixed maturity securities available for sale:
U.S. government and agencies	$	126	$	122	$	4	$	—		$	126
State and political subdivisions	1,020		984		36		—			1,020
Corporate debt securities	1,744		1,711		43		(10		)	1,744
Foreign government bonds	36		38		—		(2		)	36
Mortgage-backed/asset-backed securities	96		92		4		—			96
Preferred stock available for sale	194		194		3		(3		)	194
Equity securities available for sale	149		73		76		—			149
Total	$	3,365	$	3,214	$	166	$	(15	)	$	3,365



	December 31, 2013
	Carrying		Cost		Unrealized		Unrealized			Fair
	Value		Basis		Gains		Losses			Value
	(In millions)
Fixed maturity securities available for sale:
U.S. government and agencies	$	126	$	121	$	5	$	—		$	126
State and political subdivisions	1,075		1,042		36		(3		)	1,075
Corporate debt securities	1,606		1,565		47		(6		)	1,606
Foreign government bonds	43		44		1		(2		)	43
Mortgage-backed/asset-backed securities	109		105		4		—			109
Preferred stock available for sale	151		158		3		(10		)	151
Equity securities available for sale	136		71		65		—			136
Total	$	3,246	$	3,106	$	161	$	(21	)	$	3,246

The cost basis of fixed maturity securities available for sale includes an adjustment for amortized premium or discount since the date of purchase.

The following table presents certain information regarding contractual maturities of our fixed maturity securities at September 30, 2014:



	September 30, 2014
	Amortized		% of		Fair		% of
Maturity	Cost		Total		Value		Total
	(Dollars in millions)
One year or less	$	346	12	%	$	349	12	%
After one year through five years	2,006		68		2,059		68
After five years through ten years	494		17		509		17
After ten years	9		—		9		—
Mortgage-backed/asset-backed securities	92		3		96		3
Total	$	2,947	100	%	$	3,022	100	%
Subject to call	$	1,702	58	%	$	1,732	57	%

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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. Included above in amounts subject to call are $1,393 million and $1,417 million in amortized cost and fair value, respectively, of fixed maturity securities with make-whole call provisions as of September 30, 2014.

Included in our other long-term investments at December 31, 2013, are fixed maturity structured notes purchased in 2009 and various cost-method investments. The structured notes matured during the third quarter of 2014. The structured notes were carried at fair value (see Note C) and changes in the fair value of these structured notes were recorded as Realized gains and losses in the Condensed Consolidated Statements of Earnings.

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 September 30, 2014 and December 31, 2013, were as follows (in millions):



September 30, 2014
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Corporate debt securities	$	536	$	(8	)	$	25	$	(2	)	$	561	$	(10	)
Foreign government bonds	24		(1		)	12		(1		)	36		(2		)
Preferred stock available for sale	62		(1		)	19		(2		)	81		(3		)
Total temporarily impaired securities	$	622	$	(10	)	$	56	$	(5	)	$	678	$	(15	)



December 31, 2013
	Less than 12 Months					12 Months or Longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
States and political subdivisions	$	123	$	(3	)	$	—	$	—		$	123	$	(3	)
Corporate debt securities	367		(4		)	39		(2		)	406		(6		)
Foreign government bonds	17		(1		)	14		(1		)	31		(2		)
Preferred stock available for sale	95		(10		)	—		—			95		(10		)
Total temporarily impaired securities	$	602	$	(18	)	$	53	$	(3	)	$	655	$	(21	)

During the three and nine month period ended September 30, 2014, we recorded no impairment charges relating to investments. During the three-month period ended September 30, 2013, we recorded no impairment charges relating to investments. During the nine month period ended September 30, 2013, we recorded impairment charges on fixed maturity securities relating to investments that were determined to be other-than-temporarily impaired, which resulted in additional expense of $1 million. As of September 30, 2014, we held no fixed maturity securities for which an other-than-temporary impairment had been previously recognized. It is possible that future events may lead us to recognize potential future impairment losses related to our investment portfolio and that unanticipated future events may lead us to dispose of certain investment holdings and recognize the effects of any market movements in our condensed consolidated financial statements.

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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — 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 three and nine-month periods ending September 30, 2014 and 2013, respectively: