Document
Table of Contents


 
 
 
 
 
 
 
 
 
 
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 March 31, 2018

OR
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, smaller reporting company, or an 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 þ
 
Accelerated filer o
 
Non-accelerated filer o
 
Smaller reporting company o
 
Emerging growth company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES o NO þ
The number of shares outstanding of the Registrant's common stock as of April 16, 2018 were:    
FNF Common Stock    274,588,956
 
 
 
 
 
 
 
 
 
 


FORM 10-Q
QUARTERLY REPORT
Quarter Ended March 31, 2018
TABLE OF CONTENTS
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


i

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)
 
March 31,
2018

December 31,
2017
 
(Unaudited)
ASSETS
Investments:
 
 
 
Fixed maturity securities available for sale, at fair value, at March 31, 2018 and December 31, 2017 includes pledged fixed maturity securities of $414 and $364, respectively, related to secured trust deposits
$
1,782

 
$
1,816

Preferred securities, at fair value
316

 
319

Equity securities, at fair value
677

 
681

Investments in unconsolidated affiliates
155

 
150

Other long-term investments
135

 
110

Short-term investments, at March 31, 2018 and December 31, 2017 includes short-term investments of $2 and $3 related to secured trust deposits, respectively
346

 
295

Total investments
3,411

 
3,371

Cash and cash equivalents, at March 31, 2018 and December 31, 2017 includes $420 and $475, respectively, of pledged cash related to secured trust deposits
960

 
1,110

Trade and notes receivables, net of allowance of $18, at March 31, 2018 and December 31, 2017, respectively
313

 
317

Goodwill
2,747

 
2,746

Prepaid expenses and other assets
412

 
398

Other intangible assets, net
600

 
618

Title plants
398

 
398

Property and equipment, net
177

 
193

Total assets
$
9,018

 
$
9,151

LIABILITIES AND EQUITY
Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
796

 
$
955

Notes payable
748

 
759

Reserve for title claim losses
1,486

 
1,490

Secured trust deposits
825

 
830

Income taxes payable
164

 
137

Deferred tax liability
176

 
169

Total liabilities
4,195

 
4,340

Commitments and Contingencies:

 

Redeemable non-controlling interest by 21% minority holder of ServiceLink Holdings, LLC
344

 
344

Equity:
 
 
 
FNF Group common stock, $0.0001 par value; authorized 487,000,000 shares as of March 31, 2018 and December 31, 2017; outstanding of 274,576,896 and 274,431,737 as of March 31, 2018 and December 31, 2017, respectively, and issued of 287,866,398 and 287,718,304 as of March 31, 2018 and December 31, 2017, respectively
—

 
—

Preferred stock, $0.0001 par value; authorized 50,000,000 shares; issued and outstanding, none
—

 
—

Additional paid-in capital
4,573

 
4,587

Retained earnings
360

 
217

Accumulated other comprehensive (loss) earnings
(7
)
 
111

Less: Treasury stock, 13,289,502 shares and 13,286,567 shares as of March 31, 2018 and December 31, 2017, respectively, at cost
(468
)
 
(468
)
Total Fidelity National Financial, Inc. shareholders’ equity
4,458

 
4,447

Non-controlling interests
21

 
20

Total equity
4,479

 
4,467

Total liabilities, redeemable non-controlling interest and equity
$
9,018

 
$
9,151

See Notes to Condensed Consolidated Financial Statements

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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Dollars in millions, except per share data)

Three months ended March 31,
 
2018
 
2017
 
(Unaudited)
Revenues:
 
 
 
Direct title insurance premiums
$
472

 
$
465

Agency title insurance premiums
564

 
583

Escrow, title-related and other fees
618

 
571

Interest and investment income
38

 
28

Realized gains and losses, net
1

 
(4
)
Total revenues
1,693

 
1,643

Expenses:
 
 
 
Personnel costs
607

 
569

Agent commissions
431

 
446

Other operating expenses
423

 
389

Depreciation and amortization
47

 
43

Provision for title claim losses
47

 
52

Interest expense
11

 
16

Total expenses
1,566

 
1,515

Earnings from continuing operations before income taxes and equity in earnings of unconsolidated affiliates
127

 
128

Income tax expense
31

 
69

Earnings from continuing operations before equity in earnings of unconsolidated affiliates
96

 
59

Equity in earnings of unconsolidated affiliates
2

 
1

Net earnings from continuing operations
98

 
60

Net earnings from discontinued operations, net of tax
—

 
21

Net earnings
98

 
81

Less: Net earnings attributable to non-controlling interests
1

 
9

Net earnings attributable to Fidelity National Financial, Inc. common shareholders
$
97

 
$
72

Amounts attributable to Fidelity National Financial, Inc. common shareholders
 
 
 
Net earnings from continuing operations attributable to FNF Group common shareholders
$
97

 
$
61

Net earnings from discontinued operations attributable to FNF Group common shareholders
—

 
10

Net earnings attributable to FNF Group common shareholders
$
97

 
$
71

Net earnings from discontinued operations attributable to FNFV Group common shareholders
 
 
$
1

Earnings per share
 
 
 
Basic
 
 
 
Net earnings from continuing operations attributable to FNF Group common shareholders
$
0.36

 
$
0.22

Net earnings from discontinued operations attributable to FNF Group common shareholders
—

 
0.04

Net earnings per share attributable to FNF Group common shareholders
$
0.36

 
$
0.26

Net earnings per share from discontinued operations attributable to FNFV Group common shareholders

 
$
0.02

Diluted
 
 
 
Net earnings from continuing operations attributable to FNF Group common shareholders
$
0.35

 
$
0.22

Net earnings from discontinued operations attributable to FNF Group common shareholders
—

 
0.03

Net earnings per share attributable to FNF Group common shareholders
$
0.35

 
$
0.25

Net earnings per share from discontinued operations attributable to FNFV Group common shareholders

 
$
0.01

Weighted average shares outstanding FNF Group common stock, basic basis
273

 
271

Weighted average shares outstanding FNF Group common stock, diluted basis
280

 
279

Cash dividends paid per share FNF Group common stock
$
0.30

 
$
0.25

Weighted average shares outstanding FNFV Group common stock, basic basis

 
66

Weighted average shares outstanding FNFV Group common stock, diluted basis

 
68

See Notes to Condensed Consolidated Financial Statements

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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In millions)
 
Three months ended March 31,
 
 
2018
 
2017
 
(Unaudited)
Net earnings
$
98

 
$
81

Other comprehensive (loss) earnings:
 
 
 
Unrealized (loss) gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)
(9
)
 
19

Unrealized gain on investments in unconsolidated affiliates (2)
3

 
7

Unrealized (loss) gain on foreign currency translation (3)
(1
)
 
1

Reclassification adjustments for change in unrealized gains and losses included in net earnings (4)
(2
)
 
(3
)
Other comprehensive (loss) earnings
(9
)
 
24

Comprehensive earnings
89

 
105

Less: Comprehensive earnings attributable to non-controlling interests
1

 
8

Comprehensive earnings attributable to Fidelity National Financial, Inc. common shareholders
$
88

 
$
97

Comprehensive earnings attributable to FNF Group common shareholders
$
88

 
$
97

Comprehensive earnings attributable to FNFV Group common shareholders

 
$
—

_______________________________________
 
(1)
Net of income tax (benefit) expense of $(3) million and $8 million for the three-month periods ended March 31, 2018 and 2017, respectively.
(2)
Net of income tax expense of $1 million and $4 million for the three-month periods ended March 31, 2018 and 2017, respectively.
(3)
Net of income tax (benefit) expense of less than $(1) million and $1 million for the three-month periods ended March 31, 2018 and 2017, respectively.
(4)
Net of income tax expense of $1 million and $2 million for the three-month periods ended March 31, 2018 and 2017, respectively.
See Notes to Condensed Consolidated Financial Statements




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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(In millions)
(Unaudited)
 
 
Fidelity National Financial, Inc. Common Shareholders
 
 
 
 
 
 
 
 
FNF
 
FNFV
 
 
 
 
 
Accumulated
 
 
 
 
 
 
 
 
 
 
Group
 
Group
 
 
 
 
 
Other
 
 
 
 
 
 
 
Redeemable
 
 
Common
 
Common
 
Additional
 
 
 
Comprehensive
 
Treasury
 
Non-
 
 
 
Non-
 
 
Stock
 
Stock
 
Paid-in
 
Retained
 
Earnings
 
Stock
 
controlling
 
Total
 
controlling
 
 
Shares
 
$
 
Shares
 
$
 
Capital
 
Earnings
 
(Loss)
 
Shares
 
$
 
Interests
 
Equity
 
Interests
Balance, December 31, 2016
 
285

 
$
—

 
81

 
$
—

 
$
4,848

 
$
1,784

 
$
(13
)
 
27

 
$
(623
)
 
$
902

 
$
6,898

 
$
344

Exercise of stock options
 
—

 
—

 
—

 
—

 
2

 
—

 
—

 
—

 
—

 
—

 
2

 
—

Other comprehensive earnings — unrealized gain (loss) on investments and other financial instruments
 
—

 
—

 
—

 
—

 
—

 
—

 
19

 
—

 
—

 
(1
)
 
18

 
—

Other comprehensive earnings — unrealized gain on investments in unconsolidated affiliates
 
—

 
—

 
—

 
—

 
—

 
—

 
7

 
—

 
—

 
—

 
7

 
—

Other comprehensive earnings — unrealized gain on foreign currency translation
 
—

 
—

 
—

 
—

 
—

 
—

 
1

 
—

 
—

 
—

 
1

 
—

Reclassification adjustments for change in unrealized gains and losses included in net earnings
 
—

 
—

 
—

 
—

 
—

 
—

 
(3
)
 
—

 
—

 
—

 
(3
)
 
—

Equity portion of debt conversions settled in cash
 
—

 
—

 
—

 
—

 
(56
)
 
—

 
—

 
—

 
—

 
—

 
(56
)
 
—

Stock-based compensation
 
—

 
—

 
—

 
—

 
9

 
—

 
—

 
—

 
—

 
1

 
10

 
—

Dividends declared
 
—

 
—

 
—

 
—

 
—

 
(68
)
 
—

 
—

 
—

 
—

 
(68
)
 
—

Acquisitions of non-controlling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

 
2

 
—

Subsidiary dividends declared to non-controlling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
(2
)
 
—

Net earnings
 
—

 
—

 
—

 
—

 
—

 
72

 
—

 
—

 
—

 
9

 
81

 
—

Balance, March 31, 2017
 
285

 
$
—

 
81

 
$
—

 
$
4,803

 
$
1,788

 
$
11

 
27

 
$
(623
)
 
$
911

 
$
6,890

 
$
344

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2017
 
288

 
$
—

 
—

 
$
—

 
$
4,587

 
$
217

 
$
111

 
13

 
$
(468
)
 
$
20

 
$
4,467

 
$
344

Adjustment for cumulative effect for adoption of ASU 2016-01
 
—

 
—

 
—

 
—

 
—

 
128

 
(109
)
 
—

 
—

 
—

 
19

 
—

Exercise of stock options
 
—

 
—

 
—

 
—

 
3

 
—

 
—

 
—

 
—

 
—

 
3

 
—

Other comprehensive earnings — unrealized losses on investments and other financial instruments
 
—

 
—

 
—

 
—

 
—

 
—

 
(9
)
 
—

 
—

 
—

 
(9
)
 
—

Other comprehensive earnings — unrealized gain on investments in unconsolidated affiliates
 
—

 
—

 
—

 
—

 
—

 
—

 
3

 
—

 
—

 
—

 
3

 
—

Other comprehensive earnings — unrealized losses on foreign currency translation
 
—

 
—

 
—

 
—

 
—

 
—

 
(1
)
 
—

 
—

 
—

 
(1
)
 
—

Reclassification adjustments for change in unrealized gains and losses included in net earnings
 
—

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
—

 
—

 
—

 
(2
)
 
—

Stock-based compensation
 
—

 
—

 
—

 
—

 
7

 
—

 
—

 
—

 
—

 
—

 
7

 
—

Dividends declared
 
—

 
—

 
—

 
—

 
—

 
(82
)
 
—

 
—

 
—

 
—

 
(82
)
 
—

Acquisitions of noncontrolling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2

 
2

 
—

Equity portion of debt conversions settled in cash
 
—

 
—

 
—

 
—

 
(24
)
 
—

 
—

 
—

 
—

 
—

 
(24
)
 
—

Subsidiary dividends declared to non-controlling interests
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(2
)
 
(2
)
 
—

Net earnings
 
—

 
—

 
—

 
—

 
—

 
97

 
—

 
—

 
—

 
1

 
98

 
—

Balance, March 31, 2018
 
288

 
$
—


—


$
—

 
$
4,573

 
$
360

 
$
(7
)
 
13

 
$
(468
)
 
$
21

 
$
4,479

 
$
344

See Notes to Condensed Consolidated Financial Statements

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FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
 
For the three months ended March 31,
 
 
2018

2017
 
(Unaudited)
Cash flows from operating activities:
 
 
 

Net earnings
$
98

 
$
81

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
            Depreciation and amortization
47

 
112

            Equity in (earnings) losses of unconsolidated affiliates
(2
)
 
2

            Gain on sales of investments and other assets, net
(8
)
 
(1
)
            Impairment of assets
—

 
2

            Distributions from unconsolidated affiliates, return on investment
1

 
—

            Stock-based compensation cost
7

 
10

            Change in valuation of equity and preferred securities available for sale, net
7

 
—

Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
Net decrease in trade receivables
6

 
15

Net increase in prepaid expenses and other assets
(14
)
 
(41
)
Net decrease in accounts payable, accrued liabilities, deferred revenue and other
(150
)
 
(236
)
Net decrease in reserve for title claim losses
(5
)
 
(3
)
Net change in income taxes
31

 
63

Net cash provided by operating activities
18

 
4

Cash flows from investing activities:
 
 
 
Proceeds from sales of investment securities
189

 
105

Proceeds from calls and maturities of investment securities
120

 
154

Proceeds from sales of property and equipment
21

 
—

Additions to property and equipment and capitalized software
(20
)
 
(46
)
Purchases of investment securities
(283
)
 
(84
)
Net (purchases of) proceeds from short-term investment securities
(51
)
 
140

Additional investments in unconsolidated affiliates
(21
)
 
(32
)
Distributions from unconsolidated affiliates, return of investment
19

 
20

Net other investing activities
(1
)
 
(1
)
Other acquisitions/disposals of businesses, net of cash acquired
(5
)
 
(32
)
Net cash (used in) provided by investing activities
(32
)
 
224

Cash flows from financing activities:
 
 
 
Borrowings
—

 
50

Debt service payments
(15
)
 
(69
)
Equity portion of debt conversions paid in cash

(31
)
 
(44
)
Dividends paid
(82
)
 
(68
)
Subsidiary dividends paid to non-controlling interest shareholders
(2
)
 
(2
)
Exercise of stock options
3

 
2

Net change in secured trust deposits
(5
)
 
(112
)
Payment of contingent consideration for prior period acquisitions
(4
)
 
(6
)
Net cash used in financing activities
(136
)
 
(249
)
Net decrease in cash and cash equivalents
(150
)
 
(21
)
Cash and cash equivalents at beginning of period
1,110

 
1,323

Cash and cash equivalents at end of period
$
960

 
$
1,302

See Notes to Condensed Consolidated Financial Statements

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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. All adjustments made were of a normal, recurring nature. This report should be read in conjunction with our Annual Report on Form 10-K (our "Annual Report") for the year ended December 31, 2017.
Certain reclassifications have been made in the 2017 Condensed Consolidated Financial Statements to conform to classifications used in 2018.
Description of the Business
We are a leading provider of (i) title insurance, escrow and other title-related services, including trust activities, trustee sales guarantees and home warranty products and (ii) technology and transaction services to the real estate and mortgage industries. FNF is the nation’s largest title insurance company operating through its title insurance underwriters - Fidelity National Title Insurance Company ("FNTIC"), Chicago Title Insurance Company ("Chicago Title"), Commonwealth Land Title Insurance Company ("Commonwealth Title"), Alamo Title Insurance and National Title Insurance of New York Inc. - which collectively issue more title insurance policies than any other title company in the United States. Through our subsidiary, ServiceLink Holdings, LLC ("ServiceLink"), we provide mortgage transaction services, including title-related services and facilitation of production and management of mortgage loans.
For information about our reportable segments refer to Note H Segment Information.
Recent Developments
On March 18, 2018, we signed a merger agreement (the "Merger Agreement") to acquire Stewart Information Services Corporation ("Stewart") (NYSE: STC) (the "Stewart Merger"), pursuant to which each share of Stewart common stock issued and outstanding immediately prior to the effective time of the Stewart Merger (other than shares owned by Stewart, its subsidiaries, FNF or the wholly-owned subsidiaries of FNF party to the Merger Agreement and shares in respect of which appraisal rights have been properly exercised and perfected under Delaware law), will be converted into the right to receive, at the election of the holder of such share, (i) $50.00 in cash, (ii) 1.2850 shares of FNF Group common stock, or (iii) $25.00 in cash and 0.6425 shares of FNF Group common stock, subject to potential adjustment (as described below) and proration to the extent the option to receive cash or the option to receive stock is oversubscribed.
Under the terms of the Merger Agreement, if the combined company is required to divest assets or businesses for which 2017 annual revenues exceed $75 million, up to a cap of $225 million, in order to receive required regulatory approvals, the purchase price will be adjusted down on a pro-rata basis to a minimum purchase price of $45.50 per share of common stock of Stewart. If the Stewart Merger is not completed for failure to obtain the required regulatory approvals, we are required to pay a reverse break-up fee of $50 million to Stewart.
FNF currently intends to fund the $1.2 billion purchase price through a combination of cash on hand at FNF, debt financing and the issuance of FNF common stock to Stewart stockholders. Including the assumption of $109 million of Stewart debt, pro forma debt to total capital is expected to be no more than approximately 20% at the close of the transaction.
The closing of the Stewart Merger is subject to certain closing conditions, including Stewart stockholder approval, federal and state regulatory approvals and the satisfaction of other customary closing conditions.  Closing of the Stewart Merger is expected in the first or second quarter of 2019.
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 in a given period by the weighted average number of common shares outstanding during such 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.

6
Table of Contents
FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

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 outstanding during the three-month period ended March 31, 2018. There were 2 million antidilutive options outstanding during the three-month period ended March 31, 2017.
Income Tax
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. Our effective tax rate was 24.4% and 54.4% in the three months ended March 31, 2018 and 2017, respectively. The decrease was primarily attributable to the Tax Reform Act and increased tax expense of $21 million in the 2017 period resulting from a change in judgment of the tax deductibility of legal settlements finalized in the period.
SEC Staff Accounting Bulletin No. 118 ("SAB 118"), has provided guidance for companies that have not completed their accounting for the income tax effects of the Tax Reform Act in the period of enactment, allowing for a measurement period of up to one year after the enactment date to finalize the recording of the related tax impacts. As of March 31, 2018, we have not completed our accounting for the tax effects of the enactment of the Tax Reform Act, however, we have made a reasonable estimate of the effects on our deferred tax balances. In other cases, we have not been able to make a reasonable estimate and will continue to analyze the Tax Reform Act in order to finalize any related impacts within the measurement period.
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 is 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 Group common stock that are 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 three months ended March 31, 2017. 
On September 29, 2017 we completed our tax-free distribution, to FNF Group shareholders, of all 83.3 million shares of New BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting in the formation of a new publicly traded holding company, Black Knight, Inc. ("New Black Knight"). Holders of FNF Group common stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF Group common stock held at the close of business on September 20, 2017, the record date for the BK Distribution. New Black Knight's common stock is now listed under the symbol “BKI” on the New York Stock Exchange. The BK Distribution is expected to generally be tax-free to FNF Group shareholders for U.S. federal income tax purposes, except to the extent of any cash received in lieu of New Black Knight's fractional shares. As a result of the BK Distribution, the financial results of Black Knight have been reclassified to discontinued operations for the three months ended March 31, 2017. 
See Note K. Discontinued Operations for further details of the results of FNFV and Black Knight.
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

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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 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 J. Revenue Recognition for further discussion of our revenue.
Other Adopted Pronouncements
In January 2016, the FASB issued ASU No. 2016-01 Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The primary amendments required by the ASU include: requiring equity investments with readily determinable fair values to be measured at fair value through net income rather than through other comprehensive income; allowing entities with equity investments without readily determinable fair values to report the investments at cost, adjusted for changes in observable prices, less impairment; requiring entities that elect the fair value option for financial liabilities to report the change in fair value attributable to instrument-specific credit risk in other comprehensive income; and clarifying that entities should assess the need for a valuation allowance on a deferred tax asset related to available-for-sale debt securities in combination with other deferred tax assets. The amendments in this ASU are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The ASU requires a cumulative-effect adjustment of the balance sheet as of the beginning of the year of adoption. Early adoption of the ASU is not permitted, except for the provision related to financial liabilities for which the fair value option has been elected.
We 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 our earnings from continuing operations. 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 currently does 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. The adoption of this ASU resulted in the following retrospective changes to our Statement of Cash Flows for the three months ended March 31, 2017: an increase in the net change in cash and cash equivalents of $67 million due to the inclusion of the change in our cash pledged against secured trust deposits, an increase in investing cash inflow of $179 million related to the movement of cash paid for investments pledged against secured trust deposits from operating to investing activities, and an increase in financing cash outflow of $112 million related to the movement of the change in secured trust deposits from operating to financing activities.
Other Pronouncements Not Yet Adopted
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 requires a modified retrospective approach to transitioning which allows for the use of practical expedients to effectively account for leases commenced prior to the effective date in accordance with previous GAAP, except that

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lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. We are still evaluating the totality of the effects this new guidance will have on our business process and systems, consolidated financial statements, and related disclosures. We have identified a vendor with software suited to track and account for leases under the new standard. We have not concluded on the anticipated financial statement effects of adoption. We plan to adopt this standard on January 1, 2019.
In June 2016, the FASB issued ASU No. 2016-13 Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. The amendments in this ASU introduce broad changes to accounting for credit impairment of financial instruments. The primary updates include the introduction of a new current expected credit loss ("CECL") model that is based on expected rather than incurred losses and amendments to the accounting for impairment of 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. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. We are currently evaluating the effect this new guidance will have on our consolidated financial statements and related disclosures and have not yet concluded on its effects. We do not plan to early adopt the standard.
In January 2017, the FASB issued ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.  The guidance simplifies the measurement of goodwill impairment by removing step 2 of the goodwill impairment test, which requires the determination of the fair value of individual assets and liabilities of a reporting unit.  The new guidance requires goodwill impairment to be measured as the amount by which a reporting unit’s carrying value exceeds its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The amendments should be applied on a prospective basis.  The new standard is effective for fiscal years beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. We are currently evaluating the effect this new guidance will have on our consolidated financial statements and related disclosures and have not yet concluded on its effects.

Note B — Summary of Reserve for Claim Losses
 A summary of the reserve for claim losses follows:
 
Three months ended March 31,
 
2018
 
2017
 
(Dollars in millions)
Beginning balance
$
1,490

 
$
1,487

Change in reinsurance recoverable
—

 
(4
)
Claim loss provision related to:
 
 
 

Current year
47

 
51

Prior years
—

 
1

Total title claim loss provision
47

 
52

Claims paid, net of recoupments related to:
 

 
 

Current year
(1
)
 
(1
)
Prior years
(50
)
 
(50
)
Total title claims paid, net of recoupments
(51
)
 
(51
)
Ending balance of claim loss reserve for title insurance
$
1,486

 
$
1,484

Provision for title insurance claim losses as a percentage of title insurance premiums
4.5
%
 
5.0
%

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.
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

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factors, it is possible that our recorded reserves may fall outside a reasonable range of our actuary's central estimate, which may require additional reserve adjustments in future periods.
Note 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 March 31, 2018 and December 31, 2017, respectively:
 
March 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
U.S. government and agencies
$
—

 
$
245

 
$
—

 
$
245

State and political subdivisions
—

 
230

 
—

 
230

Corporate debt securities
—

 
1,183

 
13

 
1,196

Mortgage-backed/asset-backed securities
—

 
53

 
—

 
53

Foreign government bonds
—

 
58

 
—

 
58

Preferred securities
23

 
293

 
—

 
316

Equity securities
677

 
—

 
—

 
677

Other long-term investments
—

 
—

 
101

 
101

Total assets
$
700

 
$
2,062

 
$
114

 
$
2,876

 
December 31, 2017
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
U.S. government and agencies
$
—

 
$
195

 
$
—

 
$
195

State and political subdivisions
—

 
391

 
—

 
391

Corporate debt securities
—

 
1,117

 
—

 
1,117

Mortgage-backed/asset-backed securities
—

 
56

 
—

 
56

Foreign government bonds
—

 
57

 
—

 
57

Preferred securities
23

 
296

 
—

 
319

Equity securities
681

 
—

 
—

 
681

Total assets
$
704

 
$
2,112

 
$
—

 
$
2,816

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 stock and our bond portfolios. The pricing service is a leading global provider of financial market data, analytics and related services to financial institutions. 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, 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

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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 U.S. 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 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 A. Basis of Financial Statements for further information on the impact of the adoption of ASU No. 2016-01.
Our Level 3 fair value measures for other long term investments 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 March 31, 2018 was 8.0%. Based on the total fair value of our Level 3 other long term investment as of March 31, 2018, 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 three months ended March 31, 2018.
 
March 31, 2018
 
Other long-term
 
Corporate debt
 
 
 
investments
 
securities
 
Total
 
(In millions)
Fair value, December 31, 2017
$
—

 
$
—

 
$
—

Fair value of assets associated with the adoption of ASU 2016-01
100

 
—

 
100

Transfers from Level 2
—

 
13

 
13

Paid-in-kind dividends
1

 
—

 
1

Total
$
101

 
$
13

 
$
114


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 three months ended March 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.
We recorded no realized or unrealized gains or losses in net earnings or other comprehensive (loss) earnings related to the change in fair value or sales of assets measured using Level 3 inputs in the three months ended March 31, 2018 or 2017.
As of December 31, 2017 and March 31, 2017, we held no material assets or liabilities measured at fair value using Level 3 inputs.
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. Investments.

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Note D — Investments
The carrying amounts and fair values of our available for sale securities at March 31, 2018 and December 31, 2017 are as follows:
 
March 31, 2018
 
Carrying
 
Cost
 
Unrealized
 
Unrealized
 
Fair
 
Value
 
Basis
 
Gains
 
Losses
 
Value
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
245

 
$
247

 
$
—

 
$
(2
)
 
$
245

State and political subdivisions
230

 
227

 
3

 
—

 
230

Corporate debt securities
1,196

 
1,201

 
6

 
(11
)
 
1,196

Mortgage-backed/asset-backed securities
53

 
53

 
1

 
(1
)
 
53

Foreign government bonds
58

 
60

 
—

 
(2
)
 
58

Total
$
1,782

 
$
1,788

 
$
10

 
$
(16
)
 
$
1,782

 
December 31, 2017
 
Carrying
 
Cost
 
Unrealized
 
Unrealized
 
Fair
 
Value
 
Basis
 
Gains
 
Losses
 
Value
 
(In millions)
Fixed maturity securities available for sale:
 
 
 
 
 
 
 
 
 
U.S. government and agencies
$
195

 
$
196

 
$
—

 
$
(1
)
 
$
195

State and political subdivisions
391

 
387

 
4

 
—

 
391

Corporate debt securities
1,117

 
1,110

 
11

 
(4
)
 
1,117

Mortgage-backed/asset-backed securities
56

 
55

 
1

 
—

 
56

Foreign government bonds
57

 
58

 
1

 
(2
)
 
57

Preferred securities
319

 
307

 
12

 
—

 
319

Equity securities
681

 
517

 
172

 
(8
)
 
681

Total
$
2,816

 
$
2,630

 
$
201

 
$
(15
)
 
$
2,816

The cost basis of fixed maturity securities available for sale includes an adjustment for amortized premium or accreted discount since the date of purchase.
In conjunction with our adoption of ASU No. 2016-01, beginning January 1, 2018, unrealized gains and losses on equity and preferred securities are included in Realized gains and losses, net on the Condensed Consolidated Statement of Earnings for the three months ended March 31, 2018. Accordingly, they are excluded from the table as of March 31, 2018 above. Refer to discussion under Recent Accounting Pronouncements included in Note A. Basis of Financial Statements for further discussion of the effects of the adoption of ASU 2016-01.

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The following table presents certain information regarding contractual maturities of our fixed maturity securities at March 31, 2018:
 
 
March 31, 2018
 
 
Amortized
 
% of
 
Fair
 
% of
Maturity
 
Cost
 
Total
 
Value
 
Total
 
 
(Dollars in millions)
One year or less
 
$
445

 
25
%
 
$
444

 
25
%
After one year through five years
 
1,269

 
71

 
1,264

 
71

After five years through ten years
 
16

 
1

 
16

 
1

After ten years
 
5

 
—

 
5

 
—

Mortgage-backed/asset-backed securities
 
53

 
3

 
53

 
3

Total
 
$
1,788

 
100
%
 
$
1,782

 
100
%
Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Because of the potential for prepayment on mortgage-backed and asset-backed securities, they are not categorized by contractual maturity.
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 March 31, 2018 and December 31, 2017, were as follows (in millions):
March 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
U.S. government and agencies
$
210

 
$
(2
)
 
$
—

 
$
—

 
$
210

 
$
(2
)
Corporate debt securities
830

 
(8
)
 
44

 
(3
)
 
874

 
(11
)
Foreign government bonds
19

 
(1
)
 
7

 
(1
)
 
26

 
(2
)
Mortgage-backed/asset-backed securities
29

 
(1
)
 
—

 
—

 
29

 
(1
)
Total temporarily impaired securities
$
1,088

 
$
(12
)
 
$
51

 
$
(4
)
 
$
1,139

 
$
(16
)
December 31, 2017
 
 
 
 
 
 
 
 
 
 
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Fair
 
Unrealized
 
Value
 
Losses
 
Value
 
Losses
 
Value
 
Losses
U.S. government and agencies
$
149

 
$
(1
)
 
$
—

 
$
—

 
$
149

 
$
(1
)
Corporate debt securities
464

 
(3
)
 
51

 
(1
)
 
515

 
(4
)
Foreign government bonds
—

 
—

 
10

 
(2
)
 
10

 
(2
)
Equity securities
121

 
(7
)
 
5

 
(1
)
 
126

 
(8
)
Total temporarily impaired securities
$
734

 
$
(11
)
 
$
66

 
$
(4
)
 
$
800

 
$
(15
)
We recorded no impairment charges relating to investments during the three-month periods ended March 31, 2018 or 2017.
As of March 31, 2018 and December 31, 2017, we held no investment securities for which an other-than-temporary impairment had been previously recognized. It is possible that future events may lead us to recognize 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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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-month periods ended March 31, 2018 and 2017, respectively:
 
 
Three months ended March 31, 2018
 
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
 
(In millions)
Fixed maturity securities available for sale
 
$
3

 
$
—

 
$
3

 
$
298

Valuation losses on equity securities
 
 
 
 
 
(4
)
 
—

Valuation losses on preferred securities
 
 
 
 
 
(3
)
 
—

Property and equipment
 
 
 
 
 
5

 
21

Total
 
 
 
 
 
$
1

 
$
319

 
 
Three months ended March 31, 2017
 
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
 
(In millions)
Fixed maturity securities available for sale
 
$
3

 
$
(3
)
 
$
—

 
$
236

Loss on debt redemptions
 
 
 
 
 
(2
)
 
—

Other assets
 
 
 
 
 
(2
)
 
—

Total
 
 
 
 
 
$
(4
)
 
$
236



Note E —Notes Payable
Notes payable consists of the following:
 
 
March 31,
2018
 
December 31,
2017
 
 
(In millions)
Unsecured notes, net of discount, interest payable semi-annually at 5.50%, due September 2022
 
$
398

 
$
397

Unsecured convertible notes, net of discount, interest payable semi-annually at 4.25%, due August 2018
 
53

 
65

Revolving Credit Facility, unsecured, unused portion of $500, due April 2022 with interest payable quarterly at LIBOR + 1.40% (3.12% at March 31, 2018)
 
295

 
295

Other
 
2

 
2

 
 
$
748

 
$
759

At March 31, 2018, the estimated fair value of our long-term debt was approximately $899 million, which was $144 million higher than its carrying value, excluding $7 million of net unamortized debt issuance costs and premium/discount. The fair value of our unsecured notes payable was $597 million as of March 31, 2018. The fair values of our unsecured notes payable are based on established market prices for the securities on March 31, 2018 and are considered Level 2 financial liabilities. The carrying value of the Revolving Credit Facility approximates fair value at March 31, 2018, as it is a variable rate instrument with a short reset period (monthly) which reflects current market rates. The revolving credit facilities are considered Level 2 financial liabilities.
On June 25, 2013, FNF 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 Existing Credit Agreement was amended (the "Restated Credit Agreement").The material terms of the Revolving Credit Facility are set forth in our Annual Report for the year ended December 31, 2017. As of March 31, 2018,
there was $295 million outstanding, net of $5 million of unamortized debt issuance costs, and $500 million of remaining borrowing capacity under the Revolving Credit Facility.
On August 28, 2012, FNF 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 SEC. The material terms of the 5.50% notes are set forth in our Annual Report for the year ended December 31, 2017.
On August 2, 2011, FNF completed an offering of $300 million in aggregate principal amount of 4.25% convertible senior notes due August 2018 (the "Notes") in an offering conducted in accordance with Rule 144A under the Securities Act of 1933, as amended. The material terms of the Notes are set forth in our Annual Report for the year ended December 31, 2017. Beginning October 1, 2013, these notes are convertible under the 130% Sale Price Condition described in our Annual Report. During the three months ended March 31, 2018, we repurchased Notes with aggregate principal of $16 million for $47 million. Upon maturity of the Notes in August 2018, we expect to settle in cash, pay approximately $163 million, and record a gain of approximately $6 million based on stock prices and conversion rates as of March 31, 2018.
      Gross principal maturities of notes payable at March 31, 2018 are as follows (in millions):
 
2018 (remaining)
$
54

2019
—

2020
1

2021
—

2022
700

Thereafter
—

 
$
755

Note F — Commitments and Contingencies
Legal and Regulatory Contingencies
In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations, some of which include claims for punitive or exemplary damages. With respect to our title insurance operations, this customary litigation includes but is not limited to a wide variety of cases arising out of or related to title and escrow claims, for which we make provisions through our loss reserves. Additionally, like other companies, our ordinary course litigation includes a number of class action and purported class action lawsuits, which make allegations related to aspects of our operations. We believe that no actions, other than the matters discussed below, if any, depart from customary litigation incidental to our business.
We review lawsuits and other legal and regulatory matters (collectively “legal proceedings”) on an ongoing basis when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, management bases its decision on its assessment of the ultimate outcome assuming all appeals have been exhausted. For legal proceedings in which it has been determined that a loss is both probable and reasonably estimable, a liability based on known facts and which represents our best estimate has been recorded. Our accrual for legal and regulatory matters was $11 million and $2 million as of March 31, 2018 and December 31, 2017, 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.
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.

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Operating Leases
Future minimum operating lease payments are as follows (in millions):
2018 (remaining)
$
115

2019
135

2020
106

2021
78

2022
53

Thereafter
51

Total future minimum operating lease payments
$
538

Note G — Dividends
On May 2, 2018, our Board of Directors declared cash dividends of $0.30 per share, payable on June 29, 2018, to FNF common shareholders of record as of June 15, 2018.


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Note H — Segment Information
Summarized financial information concerning our reportable segments is shown in the following tables.
As of and for the three months ended March 31, 2018:
 
Title
 
Corporate and Other
 
Total
 
(In millions)
Title premiums
$
1,036

 
$
—

 
$
1,036

Other revenues
516

 
102

 
618

Revenues from external customers
1,552

 
102

 
1,654

Interest and investment income, including realized gains and losses
38

 
1

 
39

Total revenues
1,590

 
103

 
1,693

Depreciation and amortization
40

 
7

 
47

Interest expense
—

 
11

 
11

Earnings (loss) from continuing operations, before income taxes and equity in earnings of unconsolidated affiliates
163

 
(36
)
 
127

Income tax expense (benefit)
40

 
(9
)
 
31

Earnings (loss) from continuing operations, before equity in earnings of unconsolidated affiliates
123

 
(27
)
 
96

Equity in earnings of unconsolidated affiliates
1

 
1

 
2

Earnings (loss) from continuing operations
$
124

 
$
(26
)
 
$
98

Assets
$
8,276

 
$
742

 
$
9,018

Goodwill
2,434

 
313

 
2,747

As of and for the three months ended March 31, 2017:
 
Title
 
Corporate and Other
 
Total
 
 
Title premiums
$
1,048

 
$
—

 
$
1,048

Other revenues
496

 
75

 
571

Revenues from external customers
1,544

 
75

 
1,619

Interest and investment income, including realized gains and losses
26

 
(2
)
 
24

Total revenues
1,570

 
73

 
1,643

Depreciation and amortization
38

 
5

 
43

Interest expense
—

 
16

 
16

Earnings (loss) from continuing operations, before income taxes and equity in earnings (losses) of unconsolidated affiliates
151

 
(23
)
 
128

Income tax expense (benefit)
78

 
(9
)
 
69

Earnings (loss) from continuing operations, before equity in earnings (losses) of unconsolidated affiliates
73

 
(14
)
 
59

Equity in earnings (losses) of unconsolidated affiliates
2

 
(1
)
 
1

Earnings (loss) from continuing operations
$
75

 
$
(15
)
 
$
60

Assets
$
8,264

 
$
5,914

 
$
14,178

Goodwill
2,347

 
215

 
2,562


The activities in our segments include the following:
•
Title. This segment consists of the operations of our title insurance underwriters and related businesses. This segment provides core title insurance and escrow and other title-related services including trust activities, trustee sales guarantees, 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.

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•
Corporate and Other. This segment consists of the operations of the parent holding company, our various real estate brokerage businesses, and our real estate technology subsidiaries. This segment also includes certain other unallocated corporate overhead expenses and eliminations of revenues and expenses between it and our Title segment, as well as the assets of discontinued operations of Black Knight and FNFV as of March 31, 2017.
Note I — Supplemental Cash Flow Information
The following supplemental cash flow information is provided with respect to certain non-cash investing and financing activities.
 
 
Three months ended March 31,
 
 
2018
 
2017
Cash paid for:
 
 
 
 

Interest
 
$
15

 
$
30

Income taxes
 
2

 
14

Non-cash investing and financing activities:
 
 
 
 
Investing activities:
 
 

 
 

Change in proceeds of sales of investments available for sale receivable in period
 
$
11

 
$
(9
)
Change in purchases of investments available for sale payable in period
 
(4
)
 
1

 
 
 
 
 
Financing activities:
 
 
 
 
Accrual for unsettled debt service payments related to the Notes
 
$
—

 
$
9

Accrual for the equity portion of unsettled repurchases of the Notes
 
—

 
12


Note J — 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

Disaggregation of Revenue
Our revenue consists of:
 
 
 
 
 
 
Three months ended March 31,
 
 
 
 
 
 
2018
 
2017
Revenue Stream
 
Income Statement Classification
 
Segment
 
Total Revenue
Revenue from insurance contracts:
 
 
 
 
 
(in millions)
Title insurance premiums
 
Direct title insurance premiums;
Agency title insurance premiums
 
Title
 
$
1,036

 
$
1,048

Home warranty
 
Escrow, title-related and other fees
 
Title
 
45

 
41

Total revenue from insurance contracts
 
 
 
 
 
1,081

 
1,089

Revenue from contracts with customers:
 
 
 
 
 
 
 
 
Escrow fees
 
Escrow, title-related and other fees
 
Title
 
183

 
174

Other title-related fees and income
 
Escrow, title-related and other fees
 
Title
 
140

 
138

ServiceLink, excluding title premiums, escrow fees, and subservicing fees
 
Escrow, title-related and other fees
 
Title
 
94

 
106

Real estate brokerage
 
Escrow, title-related and other fees
 
Corporate and other
 
76

 
57

Real estate technology
 
Escrow, title-related and other fees
 
Corporate and other
 
25

 
15

Other
 
Escrow, title-related and other fees
 
Corporate and other
 
2

 
2

Total revenue from contracts with customers
 
 
 
 
 
520

 
492

Other revenue: