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 June 30, 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 July 31, 2018 were:    
FNF Common Stock    274,903,852
 
 
 
 
 
 
 
 
 
 



FORM 10-Q
QUARTERLY REPORT
Quarter Ended June 30, 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)
 
June 30,
2018

December 31,
2017
 
(Unaudited)
ASSETS
Investments:
 
 
 
Fixed maturity securities available for sale, at fair value, at June 30, 2018 and December 31, 2017 includes pledged fixed maturity securities of $418 and $364, respectively, related to secured trust deposits
$
1,781

 
$
1,816

Preferred securities, at fair value
291

 
319

Equity securities, at fair value
670

 
681

Investments in unconsolidated affiliates
144

 
150

Other long-term investments
136

 
110

Short-term investments, at December 31, 2017 includes short-term investments of $3 related to secured trust deposits
255

 
295

Total investments
3,277

 
3,371

Cash and cash equivalents, at June 30, 2018 and December 31, 2017 includes $493 and $475, respectively, of pledged cash related to secured trust deposits
1,320

 
1,110

Trade and notes receivables, net of allowance of $18, at June 30, 2018 and December 31, 2017
338

 
317

Goodwill
2,764

 
2,746

Prepaid expenses and other assets
416

 
398

Other intangible assets, net
564

 
618

Title plants
398

 
398

Property and equipment, net
177

 
193

Total assets
$
9,254

 
$
9,151

LIABILITIES AND EQUITY
Liabilities:
 
 
 
Accounts payable and accrued liabilities
$
912

 
$
955

Notes payable
734

 
759

Reserve for title claim losses
1,487

 
1,490

Secured trust deposits
897

 
830

Income taxes payable
15

 
137

Deferred tax liability
236

 
169

Total liabilities
4,281

 
4,340

Commitments and Contingencies:

 

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

 
344

Equity:
 
 
 
FNF common stock, $0.0001 par value; authorized 487,000,000 shares as of June 30, 2018 and December 31, 2017; outstanding of 274,709,481 and 274,431,737 as of June 30, 2018 and December 31, 2017, respectively, and issued of 287,998,983 and 287,718,304 as of June 30, 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
4,555

 
4,587

Retained earnings
529

 
217

Accumulated other comprehensive (loss) earnings
(13
)
 
111

Less: Treasury stock, 13,289,502 shares and 13,286,567 shares as of June 30, 2018 and December 31, 2017, respectively, at cost
(468
)
 
(468
)
Total Fidelity National Financial, Inc. shareholders’ equity
4,603

 
4,447

Non-controlling interests
26

 
20

Total equity
4,629

 
4,467

Total liabilities, redeemable non-controlling interest and equity
$
9,254

 
$
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 June 30,
 
Six months ended June 30,
 
2018
 
2017
 
2018
 
2017
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Direct title insurance premiums
$
599

 
$
575

 
$
1,071

 
$
1,040

Agency title insurance premiums
732

 
726

 
1,296

 
1,309

Escrow, title-related and other fees
763

 
720

 
1,381

 
1,291

Interest and investment income
45

 
33

 
83

 
61

Realized gains and losses, net
(16
)
 
5

 
(15
)
 
1

Total revenues
2,123

 
2,059

 
3,816

 
3,702

Expenses:
 
 
 
 
 
 
 
Personnel costs
665

 
626

 
1,272

 
1,195

Agent commissions
561

 
558

 
992

 
1,004

Other operating expenses
506

 
479

 
929

 
868

Depreciation and amortization
45

 
44

 
92

 
87

Provision for title claim losses
60

 
65

 
107

 
117

Interest expense
11

 
13

 
22

 
29

Total expenses
1,848

 
1,785

 
3,414

 
3,300

Earnings from continuing operations before income taxes and equity in earnings of unconsolidated affiliates
275

 
274

 
402

 
402

Income tax expense
22

 
101

 
53

 
170

Earnings from continuing operations before equity in earnings of unconsolidated affiliates
253

 
173

 
349

 
232

Equity in earnings of unconsolidated affiliates
1

 
3

 
3

 
4

Net earnings from continuing operations
254

 
176

 
352

 
236

Net earnings from discontinued operations, net of tax

 
126

 

 
147

Net earnings
254

 
302

 
352

 
383

Less: Net earnings attributable to non-controlling interests
3

 
6

 
4

 
15

Net earnings attributable to Fidelity National Financial, Inc. common shareholders
$
251

 
$
296

 
$
348

 
$
368

Amounts attributable to Fidelity National Financial, Inc. common shareholders
 
 
 
 
 
 
 
Net earnings from continuing operations attributable to FNF common shareholders
$
251

 
$
176

 
$
348

 
$
237

Net (loss) earnings from discontinued operations attributable to FNF common shareholders

 
(1
)
 

 
9

Net earnings attributable to FNF common shareholders
$
251

 
$
175

 
$
348

 
$
246

Net earnings from discontinued operations attributable to FNFV Group common shareholders
 
 
$
121

 
 
 
$
122

Earnings per share
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Net earnings from continuing operations attributable to FNF common shareholders
$
0.92

 
$
0.65

 
$
1.27

 
$
0.88

Net earnings from discontinued operations attributable to FNF common shareholders

 

 

 
0.03

Net earnings per share attributable to FNF common shareholders
$
0.92

 
$
0.65

 
$
1.27

 
$
0.91

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

 
$
1.83

 

 
$
1.85

Diluted
 
 
 
 
 
 
 
Net earnings from continuing operations attributable to FNF common shareholders
$
0.90

 
$
0.63

 
$
1.25

 
$
0.85

Net earnings from discontinued operations attributable to FNF common shareholders

 

 

 
0.03

Net earnings per share attributable to FNF common shareholders
$
0.90

 
$
0.63

 
$
1.25

 
$
0.88

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

 
$
1.81

 

 
$
1.79

Weighted average shares outstanding FNF common stock, basic basis
273

 
271

 
273

 
271

Weighted average shares outstanding FNF common stock, diluted basis
278

 
277

 
279

 
278

Cash dividends paid per share FNF common stock
$
0.30

 
$
0.25

 
$
0.60

 
$
0.50

Weighted average shares outstanding FNFV Group common stock, basic basis

 
66

 

 
66

Weighted average shares outstanding FNFV Group common stock, diluted basis

 
67

 

 
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 June 30,
 
Six months ended June 30,
 
 
 
2018
 
2017
 
2018
 
2017
 
(Unaudited)
 
(Unaudited)
Net earnings
$
254

 
$
302

 
$
352

 
$
383

Other comprehensive (loss) earnings:
 
 
 
 
 
 
 
Unrealized (loss) gain on investments and other financial instruments, net (excluding investments in unconsolidated affiliates) (1)
(6
)
 
13

 
(15
)
 
25

Unrealized gain on investments in unconsolidated affiliates (2)
1

 
4

 
4

 
11

Unrealized (loss) gain on foreign currency translation (3)
(1
)
 
4

 
(2
)
 
6

Reclassification adjustments for change in unrealized gains and losses included in net earnings (4)
1

 
(1
)
 
(1
)
 
2

Other comprehensive (loss) earnings
(5
)
 
20

 
(14
)
 
44

Comprehensive earnings
249

 
322

 
338

 
427

Less: Comprehensive earnings attributable to non-controlling interests
3

 
9

 
4

 
17

Comprehensive earnings attributable to Fidelity National Financial, Inc. common shareholders
$
246

 
$
313

 
$
334

 
$
410

Comprehensive earnings attributable to FNF common shareholders
$
246

 
$
190

 
$
334

 
$
287

Comprehensive earnings attributable to FNFV Group common shareholders

 
$
123

 

 
$
123

_______________________________________
 
(1)
Net of income tax (benefit) expense of $(2) million and $8 million for the three-month periods ended June 30, 2018 and 2017, respectively, and $(5) million and $16 million for the six-month periods ended June 30, 2018 and 2017, respectively.
(2)
Net of income tax expense of less than $1 million and $3 million for the three-month periods ended June 30, 2018 and 2017, respectively, and $1 million and $7 million for the six-month periods ended June 30, 2018 and 2017, respectively.
(3)
Net of income tax (benefit) expense of less than $(1) million and $3 million for the three-month periods ended June 30, 2018 and 2017, respectively, and $(1) million and $3 million for the six-month periods ended June 30, 2018 and 2017, respectively.
(4)
Net of income tax expense (benefit) of less than $1 million and $(1) million for the three-month periods ended June 30, 2018 and 2017, respectively, and less than $(1) million and $1 million for the six-month periods ended June 30, 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
 
1

 

 

 

 
16

 

 

 

 

 

 
16

 

Treasury stock repurchased
 

 

 

 

 

 

 

 
1

 
(20
)
 

 
(20
)
 

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

 

 

 

 

 

 
25

 

 

 
2

 
27

 

Other comprehensive earnings — unrealized gain on investments in unconsolidated affiliates
 

 

 

 

 

 

 
11

 

 

 

 
11

 

Other comprehensive earnings — unrealized gain on foreign currency translation
 

 

 

 

 

 

 
6

 

 

 

 
6

 

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

 

 

 

 

 

 
2

 

 

 

 
2

 

Equity portion of debt conversions settled in cash
 

 

 

 

 
(244
)
 

 

 

 

 

 
(244
)
 

Black Knight repurchases of BKFS stock
 

 

 

 

 

 

 

 

 

 
(47
)
 
(47
)
 

Stock-based compensation
 

 

 

 

 
17

 

 

 

 

 
7

 
24

 

Dividends declared
 

 

 

 

 

 
(136
)
 

 

 

 

 
(136
)
 

Sale of OneDigital
 

 

 

 

 

 

 

 

 

 
(6
)
 
(6
)
 

Acquisitions of non-controlling interests
 

 

 

 

 

 

 

 

 

 
9

 
9

 

Subsidiary dividends declared to non-controlling interests
 

 

 

 

 

 

 

 

 

 
(4
)
 
(4
)
 

Net earnings
 

 

 

 

 

 
368

 

 

 

 
15

 
383

 

Balance, June 30, 2017
 
286

 
$

 
81

 
$

 
$
4,637

 
$
2,016

 
$
31

 
28

 
$
(643
)
 
$
878

 
$
6,919

 
$
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
 

 

 

 

 
6

 

 

 

 

 

 
6

 

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

 

 

 

 

 

 
(15
)
 

 

 

 
(15
)
 

Other comprehensive earnings — unrealized gain on investments in unconsolidated affiliates
 

 

 

 

 

 

 
4

 

 

 

 
4

 

Other comprehensive earnings — unrealized losses on foreign currency translation
 

 

 

 

 

 

 
(2
)
 

 

 

 
(2
)
 

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

 

 

 

 

 

 
(1
)
 

 

 

 
(1
)
 

Reclassification for ASU 2018-02
 

 

 

 

 

 
1

 
(1
)
 

 

 

 

 

Stock-based compensation
 

 

 

 

 
15

 

 

 

 

 

 
15

 

Dilution resulting from subsidiary equity issuance
 

 

 

 

 
(2
)
 

 

 

 

 
4

 
2

 

Dividends declared
 

 

 

 

 

 
(165
)
 

 

 

 

 
(165
)
 

Subsidiary equity repurchase
 

 

 

 

 

 

 

 

 

 
(1
)
 
(1
)
 

Acquisitions of noncontrolling interests
 

 

 

 

 

 

 

 

 

 
3

 
3

 

Equity portion of debt conversions settled in cash
 

 

 

 

 
(51
)
 

 

 

 

 

 
(51
)
 

Subsidiary dividends declared to non-controlling interests
 

 

 

 

 

 

 

 

 

 
(4
)
 
(4
)
 

Net earnings
 

 

 

 

 

 
348

 

 

 

 
4

 
352

 

Balance, June 30, 2018
 
288

 
$




$

 
$
4,555

 
$
529

 
$
(13
)
 
13

 
$
(468
)
 
$
26

 
$
4,629

 
$
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 six months ended June 30,
 
 
2018

2017
 
(Unaudited)
Cash flows from operating activities:
 
 
 

Net earnings
$
352

 
$
383

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
            Depreciation and amortization
92

 
222

            Equity in (earnings) losses of unconsolidated affiliates
(3
)
 
4

            (Gain) loss on sales of investments and other assets, net
(5
)
 
12

            Gain on sale of OneDigital

 
(269
)
            Impairment of assets

 
2

            Distributions from unconsolidated affiliates, return on investment
3

 

            Stock-based compensation cost
15

 
24

            Change in valuation of equity and preferred securities available for sale, net
21

 

Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
Net increase in trade receivables
(21
)
 
(30
)
Net increase in prepaid expenses and other assets
(19
)
 
(65
)
Net decrease in accounts payable, accrued liabilities, deferred revenue and other
(25
)
 
(98
)
Net (decrease) increase in reserve for title claim losses
(3
)
 
5

Net change in income taxes
(57
)
 
101

Net cash provided by operating activities
350

 
291

Cash flows from investing activities:
 
 
 
Proceeds from sales of investment securities
309

 
200

Proceeds from calls and maturities of investment securities
304

 
283

Proceeds from sales of property and equipment
21

 

Proceeds from the sale of cost method and other investments

 
14

Additions to property and equipment and capitalized software
(39
)
 
(88
)
Purchases of investment securities
(579
)
 
(199
)
Net proceeds from (purchases of) short-term investment securities
40

 
(45
)
Purchases of other long-term investments

 
(2
)
Additional investments in unconsolidated affiliates
(34
)
 
(47
)
Distributions from unconsolidated affiliates, return of investment
42

 
44

Net other investing activities
(4
)
 
(4
)
Proceeds from the sale of OneDigital

 
326

Other acquisitions/disposals of businesses, net of cash acquired
(6
)
 
(83
)
Net cash provided by investing activities
54

 
399

Cash flows from financing activities:
 
 
 
Borrowings

 
759

Debt service payments
(30
)
 
(922
)
Black Knight treasury stock repurchases of BKFS stock

 
(47
)
Equity portion of debt conversions paid in cash

(58
)
 
(243
)
Dividends paid
(164
)
 
(136
)
Subsidiary dividends paid to non-controlling interest shareholders
(4
)
 
(4
)
Exercise of stock options
6

 
16

Subsidiary equity repurchase
(1
)
 

Net change in secured trust deposits
67

 
32

Payment of contingent consideration for prior period acquisitions
(10
)
 
(11
)
Purchases of treasury stock

 
(16
)
Net cash used in financing activities
(194
)
 
(572
)
Net increase in cash and cash equivalents
210

 
118

Cash and cash equivalents at beginning of period
1,110

 
1,323

Cash and cash equivalents at end of period
$
1,320

 
$
1,441

See Notes to Condensed Consolidated Financial Statements

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Table of Contents


FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note A — Basis of Financial Statements
The financial information in this report presented for interim periods is unaudited and 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. In the opinion of management, 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 one of the nation’s largest title insurance companies and operates 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
Pending Acquisition of Stewart
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 common stock, or (iii) $25.00 in cash and 0.6425 shares of FNF 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.
FNF currently intends to fund the $1.2 billion purchase price through a combination of cash on hand at FNF and the issuance of FNF common stock to Stewart stockholders and will be paid 50% in cash and 50% in FNF common stock. Including the assumption of $109 million of Stewart debt, our pro forma debt to total capital ratio is expected to be no more than approximately 20% at the close of the transaction.
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.
On May 30, 2018, we filed a preliminary registration statement on Form S-4 with the U.S. Securities and Exchange Commission (the "SEC").
On May 31, 2018, we received a request for additional information and documentary material, often referred to as a “Second Request,” from the United States Federal Trade Commission (the “FTC”) in connection with the FTC’s Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) regulatory review of the Stewart Merger.
On July 12, 2018, we filed amendment number one to our preliminary registration statement on Form S-4 with the SEC.
On July 26, 2018, we filed amendment number two to our preliminary registration statement on Form S-4 with the SEC and it was declared effective by the SEC on August 1, 2018.
On August 1, 2018, Stewart filed its definitive proxy statement with the SEC and mailed the proxy statement to its stockholders. The special meeting of Stewart stockholders to vote on the Stewart Merger is scheduled for September 5, 2018.

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

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.
Other Developments
On May 22, 2018, Janet Kerr resigned from our Board of Directors (the "Board") due to personal reasons.
In May 2018, after discussion among the Board, it was decided that Willie D. Davis would not be nominated for re-election at the annual meeting of FNF's shareholders. In order for the Board to continue to benefit from Mr. Davis' valuable insight and diverse point of view, Mr. Davis has been appointed by the board to serve as Director Emeritus for a three-year term beginning immediately following our 2018 annual meeting of shareholders.
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.
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- or six-month periods ended June 30, 2018 or June 30, 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 8.0% and 36.9% in the three months ended June 30, 2018 and 2017, respectively, and 13.2% and 42.3% in the six months ended June 30, 2018 and 2017, respectively. The decrease in both periods is primarily attributable to the decreased federal tax rate associated with the passage of the Tax Reform Act and to a change in tax estimate in the three-month period ended June 30, 2018 regarding the timing of payments for, and tax rate applicable to, our tax liability resulting from the decrease in our statutory premium reserves associated with the redomestication of certain of our title insurance underwriters in 2017. The decrease in the six-month period was also attributable to 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 June 30, 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. Areas of continued analysis with respect to the Tax Reform Act include the tax deductibility of certain executive compensation and final tax return to provision adjustments.
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

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estate, technology and mortgage related businesses, assets and liabilities currently attributed to the Company’s FNF 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 and six months ended June 30, 2017
On September 29, 2017 we completed our tax-free distribution to FNF shareholders of all 83.3 million shares of New BKH Corp. ("New BKH") common stock that we previously owned (the “BK Distribution”). Immediately following the BK Distribution, New BKH and Black Knight Financial Services, Inc. ("Black Knight") engaged in a series of transactions resulting in the formation of a new publicly traded holding company, Black Knight, Inc. ("New Black Knight"). Holders of FNF common stock received approximately 0.30663 shares of New Black Knight common stock for every one share of FNF common stock held at the close of business on September 20, 2017, the record date for the BK Distribution. New Black Knight's common stock is now listed under the symbol “BKI” on the New York Stock Exchange. The BK Distribution was generally tax-free to FNF shareholders for U.S. federal income tax purposes, except to the extent of any cash received in lieu of New Black Knight's fractional shares. As a result of the BK Distribution, the financial results of Black Knight have been reclassified to discontinued operations for the three and six months ended June 30, 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 for as separate performance obligations. ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients was issued by the FASB in May 2016 to clarify certain terms from the aforementioned updates and to add practical expedients for contracts at various stages of completion. ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers, was issued by the FASB in December 2016 which includes thirteen technical corrections and improvements affecting narrow aspects of the guidance issued in ASU 2014-09.
We adopted these revenue standards on January 1, 2018 using the modified retrospective approach. As there was no material impact to our historical revenue recognition, we did not record a cumulative-effect adjustment to the opening balance of retained earnings in the current year. See Note 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

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resulting from recording at fair value, was an increase in Retained earnings of $128 million and decrease in Accumulated other comprehensive income of $109 million.
In November 2016, the FASB issued ASU No. 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. GAAP previously did not include specific guidance on the cash flow classification and presentation of changes in restricted cash. The Company previously excluded cash pledged related to secured trust deposits, which generally meets the definition of restricted cash, from the reconciliation of beginning-of-period to end-of-period total amounts shown on the statement of cash flows. This update is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The ASU requires retrospective application to all prior periods presented upon adoption.
We adopted this ASU on January 1, 2018. The adoption of this ASU resulted in the following retrospective changes to our Statement of Cash Flows for the six months ended June 30, 2017: an increase in the net change in cash and cash equivalents of $206 million due to the inclusion of the change in our cash pledged against secured trust deposits, an increase in investing cash inflow of $174 million related to the movement of cash paid for investments pledged against secured trust deposits from operating to investing activities, and a decrease in financing cash outflow of $32 million related to the movement of the change in secured trust deposits from operating to financing activities.
In February 2018, the FASB issued ASU No. 2018-02 Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The amendments in this ASU allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Reform. We adopted this ASU on April 1, 2018. Adoption of this ASU resulted in the reclassification of $1 million from Accumulated other comprehensive loss to Retained earnings in the three months ended June 30, 2018.
Other Pronouncements Not Yet Adopted
Leases
In February 2016, the FASB issued ASU No. 2016-02 Leases (Topic 842). The amendments in this ASU introduce broad changes to the accounting and reporting for leases by lessees. The main provisions of the new standard include: clarifications to the definitions of a lease, components of leases, and criteria for determining lease classification; requiring virtually all leased assets, including operating leases and related liabilities resulting from applying the fair value measurement, to be reflected on the lessee's balance sheet; and expanding and adding to the required disclosures for lessees. This update is effective for annual and interim periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the standard is permitted. The ASU requires a modified retrospective approach to transitioning which allows for the use of practical expedients to effectively account for leases commenced prior to the effective date in accordance with previous GAAP, except that lessees were 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. In July 2018, the FASB issued ASU 2018-11 Leases (Topic 842): Targeted Improvements which allows entities the option to adopt this standard prospectively with a cumulative-effect adjustment to opening equity and include required disclosures for prior periods.
We have identified a vendor with software suited to track and account for leases under the new standard and are in process of transitioning our lease accounting within the software. We anticipate this standard will have a material impact on our consolidated balance sheets. However, while we are still in the preliminary stages of our analysis, we do not anticipate that adoption of this ASU will have a material impact on our consolidated income statements. While we are continuing to assess all potential impacts of the standard, we currently believe the most significant impact relates to our accounting for leased office space. We plan to adopt this standard on January 1, 2019 and to use the package of practical expedients available upon adoption.
Other
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 still 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.

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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:
 
Six months ended June 30,
 
2018
 
2017
 
(Dollars in millions)
Beginning balance
$
1,490

 
$
1,487

Change in reinsurance recoverable

 
(4
)
Claim loss provision related to:
 
 
 

Current year
107

 
113

Prior years

 
4

Total title claim loss provision
107

 
117

Claims paid, net of recoupments related to:
 

 
 

Current year
(3
)
 
(2
)
Prior years
(107
)
 
(106
)
Total title claims paid, net of recoupments
(110
)
 
(108
)
Ending balance of claim loss reserve for title insurance
$
1,487

 
$
1,492

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 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.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) — continued

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 June 30, 2018 and December 31, 2017, respectively:
 
June 30, 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

 
196

 

 
196

Corporate debt securities

 
1,217

 
13

 
1,230

Mortgage-backed/asset-backed securities

 
51

 

 
51

Foreign government bonds

 
59

 

 
59

Preferred securities
18

 
273

 

 
291

Equity securities
669

 
1

 

 
670

Other long-term investments

 

 
102

 
102

Total assets
$
687

 
$
2,042

 
$
115

 
$
2,844

 
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.

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Mortgage-backed/asset-backed securities: These securities are comprised of commercial mortgage-backed securities, agency mortgage-backed securities, collateralized mortgage obligations, and asset-backed securities. They are valued based on available trade information, dealer quotes, cash flows, relevant indices and market data for similar assets in active markets.
Preferred securities: Preferred securities are valued by calculating the appropriate spread over a comparable 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 June 30, 2018 was 8.0% - 8.2%. Based on the total fair value of our Level 3 other long term investment as of June 30, 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 and six months ended June 30, 2018.
 
Three months ended June 30, 2018
 
Other long-term
 
Corporate debt
 
 
 
investments
 
securities
 
Total
 
(In millions)
Fair value, March 31, 2018
$
101

 
$
13

 
$
114

Paid-in-kind dividends (1)
2

 

 
2

Net valuation loss included in earnings (2)
(1
)
 

 
(1
)
Fair value, June 30, 2018
$
102

 
$
13

 
$
115

 
Six months ended June 30, 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)
3

 

 
3

Net valuation loss included in earnings (2)
(1
)
 

 
(1
)
Fair value, June 30, 2018
$
102

 
$
13

 
$
115

_____________________________________
(1) Included in Interest and investment income on the Condensed Consolidated Statements of Earnings
(2) Included in Realized gains and losses, net on the Condensed Consolidated Statements of Earnings

Transfers into or out of the Level 3 fair value category occur when unobservable inputs become more or less significant to the fair value measurement or upon a change in valuation technique.  For the six months ended June 30, 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. There were no transfers between Level 2 and Level 3 in the three months ended June 30, 2018. The Company’s policy is to recognize transfers between levels in the fair value hierarchy at the end of the reporting period.

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As of December 31, 2017 and June 30, 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.
Note D — Investments
The carrying amounts and fair values of our available for sale securities at June 30, 2018 and December 31, 2017 are as follows:
 
June 30, 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

 
$
248

 
$

 
$
(3
)
 
$
245

State and political subdivisions
196

 
194

 
2

 

 
196

Corporate debt securities
1,230

 
1,238

 
4

 
(12
)
 
1,230

Mortgage-backed/asset-backed securities
51

 
51

 
1

 
(1
)
 
51

Foreign government bonds
59

 
62

 

 
(3
)
 
59

Total
$
1,781

 
$
1,793

 
$
7

 
$
(19
)
 
$
1,781

 
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. Accordingly, they are excluded from the table as of June 30, 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 June 30, 2018:
 
 
June 30, 2018
 
 
Amortized
 
% of
 
Fair
 
% of
Maturity
 
Cost
 
Total
 
Value
 
Total
 
 
(Dollars in millions)
One year or less
 
$
397

 
22
%
 
$
395

 
22
%
After one year through five years
 
1,220

 
68

 
1,210

 
68

After five years through ten years
 
120

 
7

 
120

 
7

After ten years
 
5

 

 
5

 

Mortgage-backed/asset-backed securities
 
51

 
3

 
51

 
3

Total
 
$
1,793

 
100
%
 
$
1,781

 
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 June 30, 2018 and December 31, 2017, were as follows (in millions):
June 30, 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
$
212

 
$
(3
)
 
$

 
$

 
$
212

 
$
(3
)
Corporate debt securities
909

 
(10
)
 
47

 
(2
)
 
956

 
(12
)
Foreign government bonds
41

 
(2
)
 
7

 
(1
)
 
48

 
(3
)
Mortgage-backed/asset-backed securities
28

 
(1
)
 

 

 
28

 
(1
)
Total temporarily impaired securities
$
1,190

 
$
(16
)
 
$
54

 
$
(3
)
 
$
1,244

 
$
(19
)
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 $3 million of impairment charges relating to investments during the three and six-month periods ended June 30, 2018. We recorded $1 million in impairment charges relating to investments during the three and six-month periods ended June 30, 2017. Impairment in these periods relate to fixed maturity securities of investees entering Chapter 11 bankruptcy which exhibited decreasing fair market values and from which we are uncertain of our ability to recover our initial investment.
As of June 30, 2018, we held $1 million of investment securities for which an other-than-temporary impairment had been previously recognized. As of 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.

14

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

The following tables present 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 six-month periods ended June 30, 2018 and 2017, respectively:
 
 
Three months ended June 30, 2018
 
Six months ended June 30, 2018
 
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
Gross Realized Gains
 
Gross Realized Losses
 
Net Realized Gains (Losses)
 
Gross Proceeds from Sale/Maturity
 
 
(In millions)
 
(In millions)
Fixed maturity securities available for sale
 
$
1

 
$
(3
)
 
$
(2
)
 
$
245

 
$
4

 
$
(3
)
 
$
1

 
$
543

Preferred stock
 
1

 

 
1

 
46

 
1

 

 
1

 
46

Equity securities
 
3

 
(4
)
 
(1
)
 
19

 
3

 
(4
)
 
(1
)
 
19

Valuation losses on equity securities
 
 
 
 
 
(8
)
 

 
 
 
 
 
(12
)
 

Valuation losses on preferred securities