The following discussion should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto and Selected Financial Data included
elsewhere in this Annual Report.
Overview
For a description of our business, including descriptions of segments, see the
discussion under Business in Item 1 of Part I of this Annual Report, which is
incorporated by reference into this Item 7 of Part II of this Annual Report.
Recent Developments
Termination of Stewart Merger Agreement and Payment of Reverse Termination Fee
On March 18, 2018, we signed a merger agreement (the "Stewart Merger Agreement")
to acquire Stewart Information Services Corporation ("Stewart") (NYSE: STC) (the
"Stewart Merger"). On September 9, 2019, we entered into a mutual Termination
Agreement with Stewart (the "Termination Agreement"), pursuant to which the
parties agreed to terminate the Stewart Merger Agreement, due to the Federal
Trade Commission's issuance of an administrative complaint seeking to block the
merger. In connection with the termination of the Stewart Merger Agreement, on
September 12, 2019, we paid to Stewart the Reverse Termination Fee (as defined
in the Stewart Merger Agreement) consisting of $50 million in cash, which is
included within other operating expenses in the Consolidated Statements of
Earnings.
Pending Acquisition of FGL
On February 7, 2020, we signed a merger agreement (the "Merger Agreement") to
acquire FGL Holdings ("FGL") (NYSE: FG) (the "FGL Merger"). Subject to the terms
and conditions of the Merger Agreement, which has been approved by the board of
directors of FNF, at the First Effective Time (as defined in the Merger
Agreement), the ordinary shares of FGL (the "Ordinary Shares"), including all
restricted Ordinary Shares (whether vested or unvested), issued and outstanding
as of immediately prior to the First Effective Time (other than (i) shares owned
by FGL and any of its subsidiaries or FNF and any of its subsidiaries and (ii)
shares in respect of which dissenters rights have been properly exercised and
perfected under Cayman law) will be converted into the right to receive $12.50
in cash or 0.2558 shares ("the Stock Consideration") of common stock of FNF
("FNF Common Stock"), at the election of the holder thereof and subject to the
proration mechanics set forth in the Merger Agreement. Pursuant to the Merger
Agreement, all Ordinary Shares held by FNF and its subsidiaries will be
converted into the right to receive the Stock Consideration. Each Series B
Cumulative Preferred Share, all of which are held by FNF and its subsidiaries,
will be converted into the right to receive a number of shares of FNF Common
Stock that is equal to (i) the Liquidation Preference (as defined in the Merger
Agreement) divided by (ii) the Reference Parent Common Stock Price (as defined
in the Merger Agreement).
Additionally, all options to purchase Ordinary Shares ("FGL Share Option") and
phantom unit denominated in Ordinary Shares ("FGL Phantom Unit"), in each case,
outstanding immediately prior to the First Effective Time, will be canceled and
converted into options to purchase FNF Common Stock and phantom units
denominated in FNF Common Stock at the First Effective Time (collectively, the
"Rollover Awards"), as applicable. The Rollover Awards will generally be subject
to the same terms and conditions as applicable to the applicable canceled FGL
Share Option or FGL Phantom Unit immediately prior to the First Effective Time,
except that (i) all performance-vesting criteria will be deemed satisfied at the
First Effective Time at the levels described in the Merger Agreement and such
Rollover Awards will be subject only to time-based vesting conditions after the
First Effective Time, and (ii) immediately prior to the First Effective Time,
additional time-vesting credits will be provided to holders in respect of FGL
Share Options and FGL Phantom Units granted prior to January 1, 2020, as
described in the Merger Agreement.
The closing of the transaction is subject to certain closing conditions,
including the approval by FGL stockholders, federal and state regulatory
approvals, and the satisfaction of other customary closing conditions. Closing
is expected in the second or third quarter of 2020.
Business Trends and Conditions
Our Title segment revenue is closely related to the level of real estate
activity which includes sales, mortgage financing and mortgage refinancing.
Declines in the level of real estate activity or the average price of real
estate sales will adversely affect our title insurance revenues.
We have found that residential real estate activity is generally dependent on
the following factors:
• mortgage interest rates;


• mortgage funding supply;

• housing inventory and home prices; and

• strength of the United States economy, including employment levels.




As of January 17, 2020, the Mortgage Banker's Association ("MBA") estimated the
size of the United States ("U.S.") residential mortgage originations market as
shown in the following table for 2019 - 2022 in its "Mortgage Finance Forecast"
(in trillions, 2018 represents actual originations):

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                                    2022     2021     2020     2019     2018
Purchase transactions              $ 1.4    $ 1.3    $ 1.3    $ 1.3    $ 1.2
Refinance transactions               0.4      0.5      0.6      0.8      0.5

Total U.S. mortgage originations $ 1.8 $ 1.8 $ 1.9 $ 2.1 $ 1.7




In 2018, total originations were reflective of a generally improving residential
real estate market driven by increasing home prices and low mortgage interest
rates. In 2018 average interest rates on 30-year, fixed-rate mortgages in the
U.S. rose from approximately 4.0% to 4.9% through October, representing an
increase of 22%, before retreating to 4.55% in the last week of December
according to mortgage buyer Freddie Mac. As a result of the overall upward trend
in rates, refinance transactions slightly decreased in 2018 from the
historically high levels experienced in preceding years. Existing home sales
also slightly decreased in 2018. In 2019, concerns over a slowing global economy
and the impact of a prolonged trade war resulted in additional interest rate
cuts in the second half of the year which significantly increased refinance
transactions and slightly increased purchase transactions when compared to 2018.
During the second half of 2019, the combination of reduced housing inventory,
lower mortgage interest rates and increasing home prices led the MBA to keep
purchase transaction forecasts relatively flat for 2020 and beyond. The MBA
expects a decrease in refinance transactions in each of the next three years.
Mortgage interest rates are generally expected to remain flat in 2020. In a
stagnate interest rate environment, refinance transactions are expected to
stagnate. The MBA predicts overall residential mortgage originations in 2020 and
2021 will decrease compared to 2019.
Other economic indicators used to measure the health of the U.S. economy,
including the unemployment rate and consumer confidence, have continued to
indicate the U.S. economy remains on strong footing. According to the U.S.
Department of Labor's Bureau of Labor, the unemployment rate was at a
historically low 3.5% in December 2019. Additionally, the Conference Board's
monthly Consumer Confidence Index has remained at high levels through 2019,
despite a slight decrease in the second half of the year. Toward the end of the
fiscal year of 2018 and into 2019, there has been increased global economic
uncertainty and stock market volatility as a result of, among other things, the
ongoing trade war. Such market uncertainty could ultimately impact U.S. real
estate markets if they worsen. We believe continued strong readings in domestic
U.S. economic indicators present potential tailwinds for mortgage originations,
despite growing risks from global economic uncertainties.
We cannot be certain how the positive effects of a generally strong U.S. economy
and the negative effects of flat or slightly increasing mortgage interest rates
and global economic uncertainty will impact mortgage originations and our future
results of operations from our residential business. We continually monitor
mortgage origination trends and believe that, based on our ability to produce
industry leading operating margins through all economic cycles, we are well
positioned to adjust our operations for adverse changes in real estate activity.
Because commercial real estate transactions tend to be generally driven by
supply and demand for commercial space and occupancy rates in a particular area
rather than by interest rate fluctuations, we believe that our commercial real
estate title insurance business is less dependent on the industry cycles
discussed above than our residential real estate title business. Commercial real
estate transaction volume is also often linked to the availability of financing.
Factors including U.S. tax reform and a shift in U.S. monetary policy have had,
or are expected to have, varying effects on availability of financing in the
U.S. Lower corporate and individual tax rates and corporate tax-deductibility of
capital expenditures have provided increased capacity and incentive for
investments in commercial real estate. Conversely, long-term gradual increases
in the Fed Funds Rate are generally expected to adversely impact availability of
financing. In recent years, we have continued to experience strong demand in
commercial real estate markets and from 2017 to 2019 experienced historically
high volumes and fee-per-file in our commercial business.
Seasonality. Historically, real estate transactions have produced seasonal
revenue fluctuations in the real estate industry. The first calendar quarter is
typically the weakest quarter in terms of revenue due to the generally low
volume of home sales during January and February. The second and third calendar
quarters are typically the strongest quarters in terms of revenue, primarily due
to a higher volume of residential transactions in the spring and summer months.
The fourth quarter is typically also strong due to the desire of commercial
entities to complete transactions by year-end. We have noted short-term
fluctuations through recent years in resale and refinance transactions as a
result of changes in interest rates.
Geographic Operations
Our direct title operations are divided into approximately 180 profit centers.
Each profit center processes title insurance transactions within its
geographical area, which is usually identified by a county, a group of counties
forming a region, or a state, depending on the management structure in that part
of the country. We also transact title insurance business through a network of
approximately 5,300 agents, primarily in those areas in which agents are the
more prevalent title insurance provider. Substantially all of our revenues are
generated in the United States.

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The following table sets forth the approximate dollar and percentage volumes of our title insurance premium revenue by state:


                             Year Ended December 31,
                  2019                 2018                 2017
            Amount       %       Amount       %       Amount       %
                              (Dollars in millions)
California $   764     14.3 %   $   681     13.9 %   $   708     14.5 %
Texas          734     13.8         707     14.4         693     14.2
Florida        492      9.2         432      8.8         392      8.0
New York       311      5.8         310      6.3         311      6.3
Illinois       273      5.1         271      5.5         283      5.8
All others   2,768     51.8       2,510     51.1       2,506     51.2
Totals     $ 5,342    100.0 %   $ 4,911    100.0 %   $ 4,893    100.0 %


Critical Accounting Estimates
The accounting estimates described below are those we consider critical in
preparing our Consolidated Financial Statements. Management is required to make
estimates and assumptions that can affect the reported amounts of assets and
liabilities and disclosures with respect to contingent assets and liabilities at
the date of the Consolidated Financial Statements and the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from those estimates. See Note A. Business and Summary of Significant Accounting
Policies to our Consolidated Financial Statements included in Item 8 of Part II
of this Annual Report for additional description of the significant accounting
policies that have been followed in preparing our Consolidated Financial
Statements.
Reserve for Title Claim Losses. Title companies issue two types of policies,
owner's and lender's policies, since both the new owner and the lender in real
estate transactions want to know that their interest in the property is insured
against certain title defects outlined in the policy. An owner's policy insures
the buyer against such defects for as long as he or she owns the property (as
well as against warranty claims arising out of the sale of the property by such
owner). A lender's policy insures the priority of the lender's security interest
over the claims that other parties may have in the property. The maximum amount
of liability under a title insurance policy is generally the face amount of the
policy plus the cost of defending the insured's title against an adverse claim;
however, occasionally we do incur losses in excess of policy limits. While most
non-title forms of insurance, including property and casualty, provide for the
assumption of risk of loss arising out of unforeseen future events, title
insurance serves to protect the policyholder from risk of loss for events that
predate the issuance of the policy.
Unlike many other forms of insurance, title insurance requires only a one-time
premium for continuous coverage until another policy is warranted due to changes
in property circumstances arising from refinance, resale, additional liens, or
other events. Unless we issue the subsequent policy, we receive no notice that
our exposure under our policy has ended and, as a result, we are unable to track
the actual terminations of our exposures.
Our reserve for title claim losses includes reserves for known claims as well as
for losses that have been incurred but not yet reported to us ("IBNR"), net of
recoupments. We reserve for each known claim based on our review of the
estimated amount of the claim and the costs required to settle the claim.
Reserves for IBNR claims are estimates that are established at the time the
premium revenue is recognized and are based upon historical experience and other
factors, including industry trends, claim loss history, legal environment,
geographic considerations, and the types of policies written. We also reserve
for losses arising from closing and disbursement functions due to fraud or
operational error.
The table below summarizes our reserves for known claims and incurred but not
reported claims related to title insurance:
                                             December 31, 2019        %        December 31, 2018        %
                                               (in millions)                     (in millions)
Known claims                               $               176      11.7 %   $               173      11.6 %
IBNR                                                     1,333      88.3                   1,315      88.4
Total Reserve for Title Claim Losses       $             1,509     100.0 %   $             1,488     100.0 %


Although claims against title insurance policies can be reported relatively soon
after the policy has been issued, claims may be reported many years later.
Historically, approximately 60% of claims are paid within approximately five
years of the policy being written. By their nature, claims are often complex,
vary greatly in dollar amounts and are affected by economic and market
conditions, as well as the legal environment existing at the time of settlement
of the claims. Estimating future title loss payments

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is difficult because of the complex nature of title claims, the long periods of
time over which claims are paid, significantly varying dollar amounts of
individual claims and other factors.
Our process for recording our reserves for title claim losses begins with
analysis of our loss provision rate. We forecast ultimate losses for each policy
year based upon historical policy year loss emergence and development patterns
and adjust these to reflect policy year and policy type differences which affect
the timing, frequency and severity of claims. We also use a technique that
relies on historical loss emergence and on a premium-based exposure measurement.
The latter technique is particularly applicable to the most recent policy years,
which have few reported claims relative to an expected ultimate claim volume.
After considering historical claim losses, reporting patterns and current market
information, and analyzing quantitative and qualitative data provided by our
legal, claims and underwriting departments, we determine a loss provision rate,
which is recorded as a percentage of current title premiums. This loss provision
rate is set to provide for losses on current year policies, but due to
development of prior years and our long claim duration, it periodically includes
amounts of estimated adverse or positive development on prior years' policies.
Any significant adjustments to strengthen or release loss reserves resulting
from the comparison with our actuarial analysis are made in addition to this
loss provision rate.  At each quarter end, our recorded reserve for claim losses
is initially the result of taking the prior recorded reserve for claim losses,
adding the current provision and subtracting actual paid claims, resulting in an
amount that management then compares to the range of reasonable estimates
provided by the actuarial calculation.
We recorded our loss provision rate at 4.5% for the year ended December 31,
2019. Our average loss provision rate was 4.5%, 4.5% and 4.9% for the years
ended December 31, 2019, 2018 and 2017, respectively. Of such annual loss
provision rates, 4.5%, for each of the years ended December 31, 2019, 2018 and
2017, respectively, related to losses on policies written in the current year,
and the remainder, if any related to developments on prior year policies. The
provision rate in 2019, 2018, and 2017 is supported by significant payment
declines for prior policy years, and qualitative factors that would indicate
favorable results, including better lender underwriting standards, extension of
credit to higher quality borrowers, a high proportion of refinance activity,
better claims expense management, better mechanic's lien underwriting practices,
and better fraud awareness by lenders, title insurers and settlement agents. In
2017, adverse development of prior year losses of $19 million or 0.4% of 2017
premium was accounted for in the provision rate.
Due to the uncertainty inherent in the process and due to the judgment used by
both management and our actuary, our ultimate liability may be greater or less
than our carried reserves. If the recorded amount is within the actuarial range
but not at the central estimate, we assess the position within the actuarial
range by analysis of other factors in order to determine that the recorded
amount is our best estimate. These factors, which are both qualitative and
quantitative, can change from period to period, and include items such as
current trends in the real estate industry (which we can assess, but for which
there is a time lag in the development of the data), any adjustments from the
actuarial estimates needed for the effects of unusually large or small claims,
improvements in our claims management processes, and other cost saving measures.
If the recorded amount is not within a reasonable range of our actuary's central
estimate, we may have to record a charge or credit and reassess the loss
provision rate on a go forward basis. We will continue to reassess the provision
to be recorded in future periods consistent with this methodology.


The table below presents our title insurance loss development experience for the
past three years:
                                                           2019        2018        2017
                                                                   (In millions)
Beginning balance                                        $ 1,488     $ 1,490     $ 1,487
Change in reinsurance recoverable                              1           -          (4 )
Claims loss provision related to:
Current year                                                 240         221         219
Prior years                                                    -           -          19
Total title claim loss provision                             240         221         238
Claims paid, net of recoupments related to:
Current year                                                 (11 )       (10 )        (8 )
Prior years                                                 (209 )      (213 )      (223 )
Total title claims paid, net of recoupments                 (220 )      (223 )      (231 )
Ending balance of claim loss reserve for title insurance $ 1,509     $ 1,488     $ 1,490
Title premiums                                           $ 5,342     $ 4,911     $ 4,893




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                                                         2019        2018   

2017


Provision for title insurance claim losses as a
percentage of title insurance premiums:
Current year                                               4.5 %       4.5 %       4.5 %
Prior years                                                  -           -         0.4
Total provision                                            4.5 %       4.5 %       4.9 %

Actual claims payments consist of loss payments and claims management expenses offset by recoupments and were as follows (in millions):


                                                                   Claims Management                       Net Loss
                                                 Loss Payments          Expenses         Recoupments       Payments
Year ended December 31, 2019                   $           139     $            112     $       (31 )   $        220
Year ended December 31, 2018                               140                  118             (35 )            223
Year ended December 31, 2017                               145                  121             (35 )            231


As of December 31, 2019 and 2018, our recorded reserves were $1,509 million and
$1,488 million, respectively, which we determined were reasonable and
represented our best estimate and these recorded amounts were within a
reasonable range of the central estimates provided by our actuaries. Our
recorded reserves were $34 million above the mid-point of the provided range of
$1.3 billion to $1.7 billion of our actuarial estimates as of December 31, 2019.
Our recorded reserves were $44 million above the mid-point of the provided range
of our actuarial estimates of $1.3 billion to $1.6 billion as of December 31,
2018.
During 2019, 2018, and 2017, payment patterns were consistent with our
actuaries' and management's expectations. Also, compared to prior years we have
seen a leveling off of the ultimate loss ratios in more mature policy years,
particularly 2005-2008. While we still see claims opened on these policy years,
the proportion of our claims inventory represented by these policy years has
continued to decrease. Additionally, we continued to see positive development
relating to the 2009 through 2019 policy years, which we believe is indicative
of more stringent underwriting standards by us and the lending industry.
Further, we have seen significant positive development in residential owner's
policies due to increased payments on residential lender's policies which
inherently limit the potential loss on the related owner's policy to the
differential in coverage amount between the amount insured under the owner's
policy and the amount paid under the residential lender's policy. Also, any
residential lender's policy claim paid relating to a property that is in
foreclosure negates any potential loss under an owner's policy previously issued
on the property as the owner has no equity in the property. Our ending open
claim inventory decreased from approximately 12,800 claims at December 31, 2018
to approximately 11,800 claims at December 31, 2019. If actual claims loss
development varies from what is currently expected and is not offset by other
factors, it is possible that our recorded reserves may fall outside a reasonable
range of our actuaries' central estimate, which may require additional reserve
adjustments in future periods.
An approximate $53 million increase (decrease) in our annualized provision for
title claim losses would occur if our loss provision rate were 1% higher
(lower), based on 2019 title premiums of $5,342 million. A 10% increase
(decrease) in our reserve for title claim losses, as of December 31, 2019, would
result in an increase (decrease) in our provision for title claim losses of
approximately $151 million.
Valuation of Investments. Investments in fixed maturity, equity, and preferred
securities are recorded on the balance sheet at fair value. We regularly review
our fixed maturity investment portfolio for factors that may indicate that a
decline in fair value of an investment is other-than-temporary. Some factors
considered in evaluating whether or not a decline in fair value is
other-than-temporary include: (i) our intent and need to sell the investment
prior to a period of time sufficient to allow for a recovery in value; (ii) the
duration and extent to which the fair value has been less than cost; and
(iii) the financial condition and prospects of the issuer. Such reviews are
inherently uncertain and the value of the investment may not fully recover or
may decline in future periods resulting in a realized loss. Investments are
selected for analysis whenever an unrealized loss is greater than a certain
threshold that we determine based on the size of our portfolio or by using other
qualitative factors. Fixed maturity investments that have unrealized losses
caused by interest rate movements are not at risk as we do not anticipate having
the need or intent to sell prior to maturity. Unrealized losses on fixed
maturity instruments that are susceptible to credit related declines are
evaluated based on the aforementioned factors. Currently available market data
is considered and estimates are made as to the duration and prospects for
recovery, and the intent or ability to retain the investment until such recovery
takes place. These estimates are revisited quarterly and any material
degradation in the prospect for recovery will be considered in the
other-than-temporary impairment analysis. We believe that our monitoring and
analysis has provided for the proper recognition of other-than-temporary
impairments over the past three-year period. Any change in estimate in this area
will have an impact on the results of operations of the period in which a charge
is taken.

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Realized gains and losses on the sale of investments are determined on the basis
of the cost of the specific investments sold and are credited or charged to
income on a trade date basis. Beginning January 1, 2018, unrealized gains or
losses on equity and preferred securities are included in earnings. Unrealized
gains or losses on fixed maturity securities (and equity and preferred
securities prior to January 1, 2018) which are classified as available for sale,
net of applicable deferred income tax expenses (benefits), are excluded from
earnings and credited or charged directly to a separate component of equity. If
any unrealized losses on available for sale securities are determined to be
other-than-temporary, such unrealized losses are recognized as realized losses.
Unrealized losses on fixed maturity securities are considered
other-than-temporary if factors exist that cause us to believe that the value
will not increase to a level sufficient to recover our cost basis.
The fair value hierarchy established by the standard on fair value includes
three levels, which are based on the priority of the inputs to the valuation
technique. The fair value hierarchy gives the highest priority to quoted prices
in active markets for identical assets or liabilities (Level 1) and the lowest
priority to unobservable inputs (Level 3). If the inputs used to measure the
financial instruments fall within different levels of the hierarchy, the
categorization is based on the lowest level input that is significant to the
fair value measurement of the instrument.
In accordance with the standard on fair value, our financial assets and
liabilities that are recorded in the Consolidated Balance Sheets are categorized
based on the inputs to the valuation techniques as follows:
Level 1. Financial assets and liabilities whose values are based on unadjusted
quoted prices for identical assets or liabilities in an active market that we
have the ability to access.
Level 2. Financial assets and liabilities whose values are based on quoted
prices in markets that are not active or model inputs that are observable either
directly or indirectly for substantially the full term of the asset or
liability.
Level 3. Financial assets and liabilities whose values are based on model inputs
that are unobservable.
The following table presents our fair value hierarchy for those assets and
liabilities measured at fair value on a recurring basis as of December 31, 2019
and 2018, respectively:
                                                            December 31, 2019
                                               Level 1      Level 2     Level 3      Total
                                                              (In millions)
Assets:
Fixed-maturity securities available for sale:
U.S. government and agencies                  $       -    $    288    $       -    $   288
State and political subdivisions                      -          93            -         93
Corporate debt securities                             -       1,570           17      1,587
Foreign government bonds                              -          60            -         60
Mortgage-backed/asset-backed securities               -          62            -         62
Preferred securities                                 65         258            -        323
Equity securities                                   810           -            1        811
Other long-term investments                           -           -          120        120
   Total assets                               $     875    $  2,331    $     138    $ 3,344



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                                                            December 31, 2018
                                               Level 1      Level 2     Level 3      Total
                                                              (In millions)
Assets:
Fixed-maturity securities available for sale:
U.S. government and agencies                  $       -    $    225    $       -    $   225
State and political subdivisions                      -         148            -        148
Corporate debt securities                             -       1,486           17      1,503
Foreign government bonds                              -          62            -         62
Mortgage-backed/asset-backed securities               -          60            -         60
Preferred securities                                 16         285            -        301
Equity securities                                   498           -            -        498
Other long-term investments                           -           -          101        101
   Total assets                               $     514    $  2,266    $     118    $ 2,898



Our Level 2 fair value measures for preferred securities and fixed-maturity
securities available for sale are provided by a third-party pricing service. We
utilize one firm for our preferred security and our bond portfolios. The pricing
service is a leading global provider of financial market data, analytics and
related services to financial institutions. We rely on one price for each
instrument to determine the carrying amount of the assets on our balance sheet.
The inputs utilized in these pricing methodologies include observable measures
such as benchmark yields, reported trades, broker dealer quotes, issuer spreads,
two sided markets, benchmark securities, bids, offers and reference data
including market research publications. We review the pricing methodologies for
all of our Level 2 securities by obtaining an understanding of the valuation
models and assumptions used by the third-party. When available and for certain
investments, we independently compare the resulting prices to other publicly
available measures of fair value and internally developed models. The pricing
methodologies used by the relevant third party pricing services are as follows:
•      U.S. government and agencies: These securities are valued based on data

obtained for similar securities in active markets and from inter-dealer

brokers.

• State and political subdivisions: These securities are valued based on


       data obtained for similar securities in active markets and from
       inter-dealer brokers. Factors considered include relevant trade
       information, dealer quotes and other relevant market data.

• Corporate debt securities: These securities are valued based on dealer

quotes and related market trading activity. Factors considered include the

bond's yield, its terms and conditions, or any other feature which may

influence its risk and thus marketability, as well as relative credit

information and relevant sector news.

• Foreign government bonds: These securities are valued based on a

discounted cash flow model incorporating observable market inputs such as

available broker quotes and yields of comparable securities.

• Mortgage-backed/asset-backed securities: These securities are comprised of

commercial mortgage-backed securities, agency mortgage-backed securities,

collateralized mortgage obligations, and asset-backed securities. They are

valued based on available trade information, dealer quotes, cash flows,

relevant indices and market data for similar assets in active markets.

• Preferred securities: Preferred securities are valued by calculating the

appropriate spread over a comparable US Treasury security. Inputs include

benchmark quotes and other relevant market data.




In conjunction with our adoption of ASU No. 2016-01, beginning January 1, 2018,
we began recording certain preferred equity investments in other long term
investments at fair value which were previously accounted for as cost method
investments.
Our Level 3 fair value measures for our other long term investment are provided
by a third-party pricing service. We utilize one firm to value our Level 3 other
long-term investment. The pricing service is a leading global provider of
financial market data, analytics and related services to financial institutions.
We utilize the income approach and a discounted cash flow analysis in
determining the fair value of our Level 3 other long-term investment. The
primary unobservable input utilized in this pricing methodology is the discount
rate used which is determined based on underwriting yield, credit spreads,
yields on benchmark indices, and comparable public company debt. The discount
rate used in our determination of the fair value of our Level 3 other long-term
investment as of December 31, 2019 was a range of 6.8% - 7.4% and a
weighted-average of 7.0%. Based on the total fair value of our Level 3 other
long-term investment as of December 31, 2019, changes in the discount rate
utilized will not result in a fair value significantly different than the amount
recorded.
The following table presents a summary of the changes in the fair values of
Level 3 assets, measured on a recurring basis, for the twelve months
ended December 31, 2019.

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                                      Other long-term         Equity          Corporate debt
                                        investments         securities          securities          Total
                                                                  (In millions)
Fair value, December 31, 2017        $           -       $            -     $           -        $        -
Fair value of assets associated with
the adoption of ASU 2016-01 (1)                100                    -                 -               100
Transfers from Level 2                           -                    -                17                17
Paid-in-kind dividends (2)                       7                    -                 -                 7
Purchases                                        -                    -                 1                 1
Net change in fair value included in
earnings (3)                                    (6 )                  -                 -                (6 )
Net unrealized loss included in
other comprehensive (loss) earnings              -                    -                (1 )              (1 )
Fair value, December 31, 2018        $         101       $            -     $          17        $      118
Transfers to Level 2                             -                    -                (6 )              (6 )
Paid-in-kind dividends (2)                       8                    -                 1                 9
Purchases                                        -                    -                 7                 7
Net change in fair value included in
earnings (3)                                    11                    1                (2 )              10
Fair value, December 31, 2019        $         120       $            1     

$ 17 $ 138

___________________________________________


(1) See Note S. Recent Accounting Pronouncements for further discussion.
(2) Included in Interest and investment income on the Consolidated Statements of
Earnings
(3) Included in Realized gains and losses, net on the Consolidated Statements of
Earnings

Transfers into or out of the Level 3 fair value category occur when unobservable
inputs become more or less significant to the fair value measurement or upon a
change in valuation technique. For the year ended December 31, 2019, transfers
between Level 2 and Level 3 are not considered material to the Company's
financial position or results of operations. For the year ended December 31,
2018, transfers between Level 2 and Level 3 were based on changes in
significance of unobservable inputs used associated with a change in the
valuation technique used for certain of the Company's corporate debt securities
and are not considered material to the Company's financial position or results
of operations. The Company's policy is to recognize transfers between levels in
the fair value hierarchy at the end of the reporting period.
During the years ended December 31, 2019, 2018 and 2017, we incurred impairment
charges relating to investments that were determined to be
other-than-temporarily impaired of $8 million, $3 million, and $1 million,
respectively. Refer to Note D. Investments to our Consolidated Financial
Statements included in Item 8 of Part II of this Annual Report for further
discussion.
Goodwill. We have made acquisitions that have resulted in a significant amount
of goodwill. As of December 31, 2019 and 2018, goodwill was $2,727 million and
$2,726 million, respectively. The majority of our goodwill as of December 31,
2019 relates to goodwill recorded in connection with the Chicago Title merger in
2000 and our acquisition of ServiceLink in 2014. Refer to Note F Goodwill to our
Consolidated Financial Statements included in Item 8 of Part II of this Annual
Report for a summary of recent changes in our Goodwill balance.
In evaluating the recoverability of goodwill, we perform a qualitative analysis
to determine whether it is more likely than not that the fair value of our
recorded goodwill exceeds its carrying value. Based on the results of this
analysis, an annual goodwill impairment test may be completed based on an
analysis of the discounted future cash flows generated by the underlying assets.
The process of determining whether or not goodwill is impaired or recoverable
relies on projections of future cash flows, operating results and market
conditions. Future cash flow estimates are based partly on projections of market
conditions such as the volume and mix of refinance and purchase transactions and
interest rates, which are beyond our control and are likely to fluctuate. While
we believe that our estimates of future cash flows are reasonable, these
estimates are not guarantees of future performance and are subject to risks and
uncertainties that may cause actual results to differ from what is assumed in
our impairment tests. Such analyses are particularly sensitive to changes in
estimates of future cash flows and discount rates. Changes to these estimates
might result in material changes in fair value and determination of the
recoverability of goodwill, which may result in charges against earnings and a
reduction in the carrying value of our goodwill in the future. We completed
annual goodwill impairment analyses in the fourth quarter of each period
presented using a September 30 measurement date. As a result of our analysis, $3
million of goodwill impairment related to a real estate brokerage subsidiary in
our Corporate and other segment was recorded in the year ended December 31, 2018
. For the years ended December 31, 2019 and 2017, we determined there were no
events or circumstances

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which indicated that the carrying value exceeded the fair value. As of
December 31, 2019, we have determined that our title segment goodwill has a fair
value which substantially exceeds its carrying value.
Other Intangible Assets. We have other intangible assets, not including
goodwill, which consist primarily of customer relationships and contracts,
trademarks and tradenames, and computer software, which are generally recorded
in connection with acquisitions at their fair value. Intangible assets with
estimable lives are amortized over their respective estimated useful lives to
their estimated residual values and reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. In general, customer relationships are amortized over their
estimated useful lives, generally ten years, using an accelerated method which
takes into consideration expected customer attrition rates. Contractual
relationships are generally amortized over their contractual life. Trademarks
and tradenames are generally amortized over ten years. Capitalized software
includes the fair value of software acquired in business combinations, purchased
software and capitalized software development costs. Purchased software is
recorded at cost and amortized using the straight-line method over its estimated
useful life. Software acquired in business combinations is recorded at its fair
value and amortized using straight-line or accelerated methods over its
estimated useful life, ranging from five to ten years. For internal-use computer
software products, internal and external costs incurred during the preliminary
project stage are expensed as they are incurred. Internal and external costs
incurred during the application development stage are capitalized and amortized
on a product by product basis commencing on the date the software is ready for
its intended use. We do not capitalize any costs once the software is ready for
its intended use.
We recorded no impairment expense to other intangible assets during the year
ended December 31, 2019. We recorded $3 million and $1 million in impairment
expense to other intangible assets during the years ended December 31, 2018 and
2017, respectively. The impairment in 2018 primarily relates to an acquired
customer relationship asset in our Title segment. The impairment in 2017 was for
computer software at ServiceLink.
Accounting for Income Taxes. As part of the process of preparing the
consolidated financial statements, we are required to determine income taxes in
each of the jurisdictions in which we operate. This process involves estimating
actual current tax expense together with assessing temporary differences
resulting from differing recognition of items for income tax and accounting
purposes. These differences result in deferred income tax assets and
liabilities, which are included within the Consolidated Balance Sheets. We must
then assess the likelihood that deferred income tax assets will be recovered
from future taxable income and, to the extent we believe that recovery is not
likely, establish a valuation allowance. To the extent we establish a valuation
allowance or increase this allowance in a period, we must reflect this increase
as expense within Income tax expense in the Consolidated Statement of Earnings.
Determination of income tax expense requires estimates and can involve complex
issues that may require an extended period to resolve. Further, the estimated
level of annual pre-tax income can cause the overall effective income tax rate
to vary from period to period. We believe that our tax positions comply with
applicable tax law and that we adequately provide for any known tax
contingencies. We believe the estimates and assumptions used to support our
evaluation of tax benefit realization are reasonable. Final determination of
prior-year tax liabilities, either by settlement with tax authorities or
expiration of statutes of limitations, could be materially different than
estimates reflected in assets and liabilities and historical income tax
provisions. The outcome of these final determinations could have a material
effect on our income tax provision, net income or cash flows in the period that
determination is made.
Refer to Note K Income Taxes to our Consolidated Financial Statements in Item 8
of Part II of this Annual Report for details.
Certain Factors Affecting Comparability
Year ended December 31, 2017. As a result of the BK Distribution and the FNFV
Split-Off, we have reclassified the results of operations of Black Knight and
FNFV to discontinued operations for all periods presented. Refer to Note G
Discontinued Operations to our Consolidated Financial Statements in Item 8 of
Part II of this Annual Report, which is incorporated by reference into this Item
7 of Part II of this Annual Report for further information on the results of
operations of Black Knight and FNFV.

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Results of Operations

Consolidated Results of Operations


 Net earnings. The following table presents certain financial data for the years
indicated:
                                                              Year Ended December 31,
                                                          2019          2018         2017
                                                               (Dollars in millions)
Revenue:
Direct title insurance premiums                        $   2,381     $  2,221     $  2,170
Agency title insurance premiums                            2,961        2,690        2,723
Escrow, title-related and other fees                       2,584        2,615        2,637
Interest and investment income                               225          177          131
Realized gains and losses, net                               318         (109 )          2
Total revenue                                              8,469        7,594        7,663
Expenses:
Personnel costs                                            2,696        2,538        2,460
Agent commissions                                          2,258        2,059        2,089
Other operating expenses                                   1,681        1,801        1,781
Depreciation and amortization                                178          182          183
Provision for title claim losses                             240          221          238
Interest expense                                              47           43           48
Total expenses                                             7,100        6,844        6,799
Earnings from continuing operations before income
taxes and equity in earnings of unconsolidated
affiliates                                                 1,369          750          864
Income tax expense on continuing operations                  308          120          235
Equity in earnings of unconsolidated affiliates               15            5           10
Net earnings from continuing operations                $   1,076     $    

635 $ 639

Revenues.


Total revenue in 2019 increased $875 million compared to 2018, primarily
attributable to increases in both our direct and agency premiums, increases in
interest and investment income, and non-cash valuation gains on our equity and
preferred investment holdings, partially offset by a decrease in escrow,
title-related and other fees. Total revenue in 2018 decreased $69 million
compared to 2017, primarily due to a decrease in agent remittances and non-cash
valuation losses on our equity and preferred investment holdings, partially
offset by an increase in interest income and direct title premiums.
See Note T. Revenue Recognition to our Consolidated Financial Statements
included in Item 8 of Part II of this Annual Report for a breakout of our
consolidated revenues.
Total net earnings from continuing operations increased $441 million in the year
ended December 31, 2019, compared to 2018 and decreased $4 million in the year
ended December 31, 2018, compared to 2017.
The change in revenue and net earnings is discussed in further detail at the
segment level below.
Interest and investment income levels are primarily a function of securities
markets, interest rates and the amount of cash available for investment.
Interest and investment income was $225 million, $177 million, and $131 million
for the years ended December 31, 2019, 2018, and 2017, respectively. The
increase in 2019 as compared to 2018 is primarily attributable to increased
fixed maturity interest income due to an increased average fixed maturity
portfolio balance, increased interest income from our tax-deferred property
exchange business, and increased interest income from a higher average balance
of cash and cash equivalents and short term investments portfolio balance
compared to the prior year, partially offset by lower investment yields as a
result of declining interest rates year-over-year. The increase in 2018 as
compared to 2017 is primarily attributable to increased interest income in our
tax-deferred property exchange business and increased yield on our cash and cash
equivalents and short term investments. The effective return on average invested
assets, excluding realized gains and losses, was 5.5%, 5.1%, and 4.2% for the
years ended December 31, 2019, 2018, and 2017, respectively.
Net realized gains (losses) totaled $318 million, $(109) million, and $2 million
for the years ended December 31, 2019, 2018, and 2017, respectively. Net
realized gains for the year ended December 31, 2019 are primarily attributable
to non-cash valuation gains on equity and preferred security holdings of $316
million, non-cash valuation gains on other long-term investments of $11 million,
gains on sales of equity securities of $10 million, partially offset by
impairments of lease assets of $8 million, net realized

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losses of $5 million on sales and maturities of fixed maturity investment
securities, and $7 million of other net realized losses. Net realized losses for
the year ended December 31, 2018 are primarily attributable to non-cash
valuation losses on equity and preferred security holdings of $95 million,
losses on sales of equity securities of $21 million, and asset impairments of $7
million, partially offset by net realized gains of $3 million on sales and
maturities of preferred and fixed maturity investment securities and $9 million
of other realized gains. The net realized gains for the year ended December 31,
2017 includes a gain of $9 million on the sale of an other long term investment
and a gain of $2 million related to the sale of fixed assets, offset by losses
of $6 million on redemptions of convertible debt, net losses on sales and
impairment of available for sale investments of $1 million, and $2 million of
other miscellaneous losses.
See Note D. Investments to our Consolidated Financial Statements included in
Item 8 of Part II of this Annual Report for a breakout of our consolidated
interest and investment income and realized gains and losses.

Expenses.


Our operating expenses consist primarily of personnel costs; other operating
expenses, which in our title business are incurred as orders are received and
processed; and agent commissions, which are incurred as revenue is recognized.
Title insurance premiums, escrow and title-related fees are generally recognized
as income at the time the underlying transaction closes or other service is
provided. Direct title operations revenue often lags approximately 45-60 days
behind expenses and therefore gross margins may fluctuate. The changes in the
market environment, mix of business between direct and agency operations and the
contributions from our various business units have historically impacted margins
and net earnings. We have implemented programs and have taken necessary actions
to maintain expense levels consistent with revenue streams. However, a short
time lag exists in reducing variable costs and certain fixed costs are incurred
regardless of revenue levels.
Personnel costs include base salaries, commissions, benefits, stock-based
compensation and bonuses paid to employees, and are one of our most significant
operating expenses.
Agent commissions represent the portion of premiums retained by our third-party
agents pursuant to the terms of their respective agency contracts.
Other operating expenses consist primarily of facilities expenses, title plant
maintenance, premium taxes (which insurance underwriters are required to pay on
title premiums in lieu of franchise and other state taxes), appraisal fees and
other cost of sales on ServiceLink product offerings and other title-related
products, postage and courier services, computer services, professional
services, travel expenses, general insurance, and bad debt expense on our trade
and notes receivable.
The provision for title claim losses includes an estimate of anticipated title
and title-related claims, and escrow losses.
The change in operating expenses is discussed in further detail at the segment
level below.
Income tax expense was $308 million, $120 million, and $235 million for the
years ended December 31, 2019, 2018, and 2017, respectively. Income tax expense
as a percentage of earnings from continuing operations before income taxes for
the years ended December 31, 2019, 2018, and 2017 was 22.5%, 16.0%, and 27.2%,
respectively. Income tax expense as a percentage of earnings before income taxes
fluctuates depending on our estimate of ultimate income tax liability and
changes in the characteristics of net earnings, such as the weighting of
operating income versus investment income. On December 22, 2017, the U.S.
government enacted comprehensive tax legislation commonly referred to as the Tax
Cuts and Jobs Act (the "Tax Reform Act"). Among other provisions, the Tax Reform
Act reduced the Federal statutory corporate income tax rate from 35% to 21% and
limited or eliminated certain deductions. The increase in the effective rate in
2019 compared to 2018 is primarily attributable to the residual impacts of the
Tax Reform Act in 2018. The decrease in the effective tax rate in 2018 compared
to 2017 period is primarily attributable to the decreased federal tax rate
associated with the passage of the Tax Reform Act and a $45 million decrease in
tax expense in 2018 regarding the timing of payments for, and tax rate
applicable to, our tax liability resulting from the decrease in our statutory
premium reserves associated with the redomestication of certain of our title
insurance underwriters in 2017. See Note K. Income Taxes to our Consolidated
Financial Statements included in Item 8 of Part II of this Annual Report for a
breakout of our income tax expense, deferred tax assets and liabilities, and
effective tax rate.


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Segment Results of Operations

Title


The following table presents the results of our Title segment for the years
indicated:
                                                         Year Ended December 31,
                                                       2019        2018        2017
                                                              (In millions)
Revenues:
Direct title insurance premiums                     $   2,381    $ 2,221     $ 2,170
Agency title insurance premiums                         2,961      2,690    

2,723


Escrow, title-related and other fees                    2,389      2,204    

2,181


Interest and investment income                            202        170    

131


Realized gains and losses, net                            326       (110 )         6
Total revenue                                           8,259      7,175       7,211
Expenses:
Personnel costs                                         2,562      2,444       2,366
Other operating expenses                                1,509      1,421       1,404
Agent commissions                                       2,258      2,059       2,089
Depreciation and amortization                             154        154    

159


Provision for title claim losses                          240        221    

238


Total expenses                                          6,723      6,299    

6,256


Earnings before income taxes                        $   1,536    $   876     $   955
Orders opened by direct title operations (in 000's)     2,066      1,818    

1,942

Orders closed by direct title operations (in 000's) 1,448 1,315

1,428




Total revenues in 2019 increased $1,084 million or 15% compared to 2018. Total
revenues in 2018 decreased $36 million or less than 1% compared to 2017. The
increase in the year ended December 31, 2019 is primarily attributable to
increases in both our direct and agency premiums, increases in escrow,
title-related and other fees, increases in interest and investment income, and
non-cash valuation gains on our equity and preferred investment holdings. The
decrease in the year ended December 31, 2018 is primarily attributable to a
decrease in agency remittances and non-cash valuation losses on our equity and
preferred investment holdings, partially offset by an increase in investment
income and direct title premiums.
The following table presents the percentages of title insurance premiums
generated by our direct and agency operations:
                                                        Year Ended December 31,
                                             2019                 2018                 2017
                                       Amount       %       Amount       %       Amount       %
                                                         (Dollars in millions)

Title premiums from direct operations $ 2,381 44.6 % $ 2,221 45.2 % $ 2,170 44.3 % Title premiums from agency operations 2,961 55.4 2,690 54.8


      2,723     55.7
Total title premiums                  $ 5,342    100.0 %   $ 4,911    100.0 %   $ 4,893    100.0 %


Title premiums increased 9% in the year ended December 31, 2019 as compared to
2018. The increase was a result of an increase in premiums from direct
operations of $160 million, or 7%, and an increase in premiums from agency
operations of $271 million, or 10%. Title premiums increased less than 1% in the
year ended December 31, 2018 as compared to 2017.

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The following table presents the percentages of opened and closed title insurance orders generated by purchase and refinance transactions by our direct operations:


                                                                    Year ended December 31,
                                                             2019             2018             2017

Opened title insurance orders from purchase
transactions (1)                                               56.7 %           68.5 %           63.1 %
Opened title insurance orders from refinance
transactions (1)                                               43.3             31.5             36.9
                                                              100.0 %          100.0 %          100.0 %

Closed title insurance orders from purchase
transactions (1)                                               57.6 %           68.2 %           62.8 %
Closed title insurance orders from refinance
transactions (1)                                               42.4             31.8             37.2
                                                              100.0 %          100.0 %          100.0 %

_______________________________________



(1)  Percentages exclude consideration of an immaterial number of non-purchase
and non-refinance orders.
Title premiums from direct operations increased in 2019, primarily due to an
increase in closed order volumes, partially offset by a decrease in the average
fee per file. Closed order volumes were 1,448,000 in the year ended December 31,
2019 compared with 1,315,000 in the year ended December 31, 2018. This
represented an increase of 10.1%. The increase in closed order volumes was
primarily attributable to increased residential refinance activity as a result
of lower mortgage interest rates in the year ended December 31, 2019 compared to
2018.
The average fee per file in our direct operations was $2,511 and $2,585 in the
years ended December 31, 2019 and 2018, respectively. The decrease in average
fee per file year over year reflects the increase in residential refinance
activity, partially offset by an increase in the average fee per file in both
commercial and residential purchase transactions. The residential fee per file
tends to change as the mix of refinance and purchase transactions changes,
because purchase transactions involve the issuance of both a lender's policy and
an owner's policy, resulting in higher fees, whereas refinance transactions only
require a lender's policy, resulting in lower fees.
Title premiums from agency operations increased $271 million, or 10%, in the
year ended December 31, 2019 as compared to 2018 and decreased $33 million, or
1%, in the year ended December 31, 2018 as compared to 2017. The increase in
2019 as compared to 2018 reflects an improving residential purchase environment
in many markets throughout the country and a concerted effort by management to
increase remittances with existing agents as well as cultivate new relationships
with potential new agents. In addition, lower mortgage rates have resulted in
increased refinance business with agents. The decrease in 2018 as compared to
2017 reflects a decrease of $51 million related to adjustments to our accrued
agent premiums receivable, partially offset by an increase in remittances.
Escrow, title-related and other fees increased by $185 million, or 8%, in the
year ended December 31, 2019 from 2018. Escrow fees, which are more directly
related to our direct operations, increased $72 million, or 9%, in the year
ended December 31, 2019 compared to 2018. The increase is primarily driven by
the related increase in direct title premiums. Other fees in the Title segment,
excluding escrow fees, increased $113 million, or 8%, in the year
ended December 31, 2019 compared to 2018. The change in both escrow fees and
other fees is directionally consistent with the change in title premiums from
direct operations. Escrow, title related and other fees increased by $23
million, or 1%, in the year ended December 31, 2018 from 2017. Escrow fees
increased $6 million, or less than 1%, in the year ended December 31, 2018
compared to 2017. The increase is primarily driven by the related increase in
direct title premiums. Other fees in the Title segment, excluding escrow fees,
increased $17 million, or 1%, in the year ended December 31, 2018 compared
to 2017. The change in both escrow fees and other fees is directionally
consistent with the change in title premiums from direct operations.
Interest and investment income levels are primarily a function of securities
markets, interest rates and the amount of cash available for investment.
Interest and investment income increased $32 million in the year
ended December 31, 2019 compared to 2018 and increased $39 million in the year
ended December 31, 2018 compared to 2017. The increase in 2019 was primarily
attributable to increased fixed maturity interest income due to an increased
average fixed maturity portfolio balance, increased interest income from our
tax-deferred property exchange business, and increased yield on our cash and
cash equivalents and short term investments.The increase in 2018 was primarily
attributable to increased interest income in our tax-deferred property exchange
business.
Personnel costs include base salaries, commissions, benefits, stock-based
compensation and bonuses paid to employees, and are one of our most significant
operating expenses. The $118 million, or 5% increase in the year
ended December 31, 2019 compared to 2018 is directionally consistent with and
primarily attributable to the increase in revenue. The $78 million,
or 3%, increase in the year ended December 31, 2018 compared to 2017 is
directionally consistent with and primarily attributable

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to the increase in revenue. Personnel costs as a percentage of total revenues
from direct title premiums and escrow, title-related and other fees was 54% and
55% for years ended December 31, 2019 and 2018, respectively. Average employee
count in the Title segment was 23,484 and 23,165 in the years ended December 31,
2019 and 2018, respectively.
Other operating expenses increased $88 million, or 6%, in the year
ended December 31, 2019 compared to 2018. Other operating expenses as a
percentage of total revenue excluding agency premiums, interest and investment
income, and realized gains and losses remained flat in the year ended
December 31, 2019 compared to 2018. Other operating expenses increased $17
million, or 1% in the year ended December 31, 2018 compared to 2017. Other
operating expenses as a percentage of total revenue excluding agency premiums,
interest and investment income, and realized gains and losses was 32% in the
years ended December 31, 2019, 2018, and 2017.
Agent commissions represent the portion of premiums retained by agents pursuant
to the terms of their respective agency contracts. Agent commissions and the
resulting percentage of agent premiums we retain vary according to regional
differences in real estate closing practices and state regulations.
The following table illustrates the relationship of agent title premiums and
agent commissions:
                                              Year Ended December 31,
                                   2019                 2018                 2017
                             Amount       %       Amount       %       Amount       %
                                               (Dollars in millions)
Agent title premiums        $ 2,961    100.0 %   $ 2,690    100.0 %   $ 2,723    100.0 %
Agent commissions             2,258     76.3       2,059     76.5      

2,089 76.7 Net retained agent premiums $ 703 23.7 % $ 631 23.5 % $ 634 23.3 %




Net margin from agency title insurance premiums retained as a percentage of
total agency premiums in the year ended December 31, 2019 increased due to
increased refinance activity when compared to the 2018 and 2017 periods.
The provision for title claim losses includes an estimate of anticipated title
and title-related claims and escrow losses. The estimate of anticipated title
and title-related claims is accrued as a percentage of title premium revenue
based on our historical loss experience and other relevant factors. Any
significant adjustments to strengthen or release loss reserves resulting from
the comparison with our actuarial analysis are made in addition to this loss
provision rate. After considering historical claim losses, reporting patterns
and current market information, and analyzing quantitative and qualitative data
provided by our legal, claims and underwriting departments, we determine a loss
provision rate, which is recorded as a percentage of current title premiums.
This loss provision rate is set to provide for losses on current year policies,
but due to development of prior years and our long claim duration, it
periodically includes amounts of estimated adverse or positive development on
prior years' policies. Effective October 1, 2017, we revised our loss provision
rate to 4.5% from 5%. The revision was attributable to favorable development on
more recent policy year claims. No revisions were made to our loss provision in
the years ended December 31, 2019 or 2018.
The claim loss provision for title insurance was $240 million, $221 million, and
$238 million for the years ended December 31, 2019, 2018, and 2017,
respectively. These amounts reflected average claim loss provision rates of 4.5%
for 2019, 4.5% for 2018, and 4.9% for 2017. We will continue to monitor and
evaluate our loss provision level, actual claims paid, and the loss reserve
position each quarter.

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Corporate and Other
The following table presents the results of our Corporate and Other segment for
the years indicated:
                                          Year Ended December 31,
                                        2019          2018      2017
                                               (In millions)
Revenues:

Escrow, title-related and other fees $ 195 $ 411 $ 456 Interest and investment income

             23            7         -
Realized gains and losses, net             (8 )          1        (4 )
Total revenue                             210          419       452

Expenses:


Personnel costs                           134           94        94
Other operating expenses                  172          380       377
Depreciation and amortization              24           28        24
Interest expense                           47           43        48
Total expenses                            377          545       543
Loss before income taxes             $   (167 )     $ (126 )   $ (91 )


Total revenue in our Corporate and Other segment decreased $209 million, or 50%,
in the year ended December 31, 2019 compared to 2018 and decreased $33 million,
or 7%, in the year ended December 31, 2018 compared to 2017. The decrease in
2019 is primarily attributable to the sale of Pacific Union in the third quarter
of 2018, partially offset by increased revenue associated with the valuation of
deferred compensation assets. The decrease in 2018 is primarily attributable to
a decrease of $74 million associated with lower real estate brokerage revenue
resulting from the sale of Pacific Union, partially offset by growth and
acquisitions in our real estate technology businesses resulting in increased
revenue of $31 million in 2018 and increased interest income on corporate cash
holdings of $7 million in 2018.
Personnel costs increased $40 million, or 43%, in the year ended December 31,
2019 compared to 2018 and remained flat in the year ended December 31,
2018 compared to 2017. The increase in 2019 is primarily attributable to
increased valuation of deferred compensation plan assets, increased costs
resulting from growth of our real estate technology subsidiaries, and increased
severance expense related to the departure of certain executives. In 2018 there
were increased personnel costs related to acquisitions when compared 2017;
however, these increased personnel costs were offset by the Pacific Union sale.
Other operating expenses decreased $208 million, or 55% in the year
ended December 31, 2019 from 2018 and increased $3 million, or 1%, in the year
ended December 31, 2018 from 2017. The decrease in 2019 from 2018  is primarily
attributable to the Pacific Union sale, which is partially offset by the Reverse
Termination Fee of $50 million paid to Stewart on September 12, 2019. The
increase in 2018 from 2017 is primarily attributable to an increase of $13
million attributable to growth in our real estate technology subsidiaries in
2018 and the inclusion of $33 million of expense eliminations (reduction to
expense) in 2017 related to elimination of expense with Black Knight, partially
offset by decreased expense in 2018 resulting from the Pacific Union sale.
Interest expense increased $4 million, or 9%, in the year ended December 31,
2019 compared to 2018 and decreased $5 million, or 10%, in the year
ended December 31, 2018 compared to 2017. The increase in 2019 is primarily
attributable to interest associated with our 4.50% Notes issued in August 2018.
The decrease in 2018 compared to 2017 is primarily attributable to the final
settlement of our convertible Notes in August 2018 and 6.6% Senior Notes in the
2017 period, partially offset by interest associated with our 4.50% Notes issued
in August 2018. See Note J Notes Payable to our Consolidated Financial
Statements included in Item 8 of Part II of this Annual Report for further
discussion of our outstanding debt.
Discontinued Operations
As a result of the FNFV Split-off and BK Distribution, the results of operations
of FNFV and Black Knight are included in discontinued operations. Earnings from
discontinued operations, net of tax, were $155 million in the year ended
December 31, 2017. Refer to Note G Discontinued Operations to our Consolidated
Financial Statements in Item 8 of Part II of this Annual Report for further
information, including a breakout of the results of operations of both FNFV and
Black Knight.

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Liquidity and Capital Resources
Cash Requirements. Our current cash requirements include personnel costs;
operating expenses; claim payments; taxes; payments of interest and principal on
our debt, including any premiums thereon, if any; capital expenditures; business
acquisitions; stock repurchases and dividends on our common stock. We paid
dividends of $1.26 per share during 2019, or approximately $344 million. On
February 13, 2020, our Board of Directors formally declared a $0.33 per share
cash dividend that is payable on March 31, 2020 to FNF shareholders of record as
of March 17, 2020. There are no restrictions on our retained earnings regarding
our ability to pay dividends to shareholders, although there are limits on the
ability of certain subsidiaries to pay dividends to us, as described below. The
declaration of any future dividends is at the discretion of our Board of
Directors. Additional uses of cash flow are expected to include stock
repurchases, acquisitions, and debt repayments.
As of December 31, 2019, we had cash and cash equivalents of $1,376 million,
short term investments of $876 million and available capacity under our
Revolving Credit Facility of $800 million. We continually assess our capital
allocation strategy, including decisions relating to the amount of our dividend,
reducing debt, repurchasing our stock, and/or conserving cash. We believe that
all anticipated cash requirements for current operations will be met from
internally generated funds, through cash dividends from subsidiaries, cash
generated by investment securities, potential sales of non-strategic assets, and
borrowings on our Revolving Credit Facility. Our short-term and long-term
liquidity requirements are monitored regularly to ensure that we can meet our
cash requirements. We forecast the needs of all of our subsidiaries and
periodically review their short-term and long-term projected sources and uses of
funds, as well as the asset, liability, investment and cash flow assumptions
underlying such forecasts.
 Our insurance subsidiaries generate cash from premiums earned and their
respective investment portfolios and these funds are adequate to satisfy the
payments of claims and other liabilities. Due to the magnitude of our investment
portfolio in relation to our claims loss reserves, we do not specifically match
durations of our investments to the cash outflows required to pay claims, but do
manage outflows on a shorter time frame.
 Our two significant sources of internally generated funds are dividends and
other payments from our subsidiaries. As a holding company, we receive cash from
our subsidiaries in the form of dividends and as reimbursement for operating and
other administrative expenses we incur. The reimbursements are paid within the
guidelines of management agreements among us and our subsidiaries. Our insurance
subsidiaries are restricted by state regulation in their ability to pay
dividends and make distributions. Each state of domicile regulates the extent to
which our title underwriters can pay dividends or make distributions. As of
December 31, 2019, $1,868 million of our net assets were restricted from
dividend payments without prior approval from the relevant departments of
insurance. During 2020, our title insurance subsidiaries can pay or make
distributions to us of approximately $518 million. Our underwritten title
companies and non-title insurance subsidiaries collect revenue and pay operating
expenses. However, they are not regulated to the same extent as our insurance
subsidiaries.
The maximum dividend permitted by law is not necessarily indicative of an
insurer's actual ability to pay dividends, which may be constrained by business
and regulatory considerations, such as the impact of dividends on surplus, which
could affect an insurer's ratings or competitive position, the amount of
premiums that can be written and the ability to pay future dividends. Further,
depending on business and regulatory conditions, we may in the future need to
retain cash in our underwriters or even contribute cash to one or more of them
in order to maintain their ratings or their statutory capital position. Such a
requirement could be the result of investment losses, reserve charges, adverse
operating conditions in the current economic environment or changes in
interpretation of statutory accounting requirements by regulators.
Cash flow from FNF's operations is expected to be used for general corporate
purposes including to reinvest in operations, repay debt, pay dividends,
repurchase stock, other strategic initiatives or conserving cash.
Operating Cash Flow. Our cash flows provided by operations for the years ended
December 31, 2019, 2018, and 2017 were $1,121 million, $943 million and $737
million, respectively, inclusive of discontinued operations. Operating cash
flows from discontinued operations for the year ended December 31, 2017 was $106
million. The increase in cash provided by operations of $178 million in the 2019
period from the 2018 period is primarily attributable to the increase in pre-tax
earnings and the timing of receipts and payments of payables, partially offset
by the timing of receipts and payments of prepaid assets, receivables and income
taxes. Included in net earnings in the 2019 period is our payment to Stewart of
the Reverse Termination Fee of $50 million. The increase in cash provided by
operations of $206 million in the 2018 period from the 2017 period is primarily
attributable to lower realized gains on sales of investments and assets, which
are included in earnings but relate to investing activities, and a $128 million
decrease in payments for income taxes by continuing operations in the 2018
period, partially offset by the inclusion of cash flows from discontinued
operations in the 2017 period.
Investing Cash Flows. Our cash (used in) provided by investing activities for
the years ended December 31, 2019, 2018, and 2017 were $(520) million, $(354)
million and $79 million, respectively, inclusive of discontinued operations.
Cash used in investing activities from discontinued operations for the year
ended December 31, 2017 was $57 million. The decrease in cash provided by

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(increase in cash used in) investing activities of $(166) million in the 2019
period from the 2018 period is primarily attributable to a decrease in net cash
inflow from proceeds from calls and maturities of investment securities,
partially offset by reduced purchases of investment securities. The decrease in
cash provided by (increase in cash used in) investing activities of $(433)
million in the 2018 period from the 2017 period is primarily attributable to
$681 million increase in net outflows from purchases of investments and
additional investments in unconsolidated investees, net of sales of investments
and distributions of and from equity and fixed income investments, partially
offset by a $160 million decrease in cash used in acquisitions, net of
disposals, and a decrease in capital expenditures in the 2018 period.
 Capital Expenditures. Total capital expenditures for property and equipment and
capitalized software were $96 million, $83 million and $149 million for the
years ended December 31, 2019, 2018, and 2017, respectively. The 2019 period
primarily consists of capital expenditures in our Title segment. The 2018 period
primarily consists of capital expenditures in our Title segment and the decrease
from the 2017 period is primarily attributable to discontinued operations. The
2017 period consists of capital expenditures of $74 million related to our
continuing operations, primarily our Title segment, and $75 million related to
discontinued operations.
Financing Cash Flows. Our cash used in financing activities for the years ended
December 31, 2019, 2018, and 2017 were $482 million, $442 million and $1,029
million, respectively, inclusive of discontinued operations. The increase in
cash used in financing activities of $40 million in the 2019 period from the
2018 period is primarily attributable to increased purchases of treasury stock
of $66 million, a decrease in the change in net borrowing activity of $72
million, a decrease in net change of secured trust deposits of $23 million,
increased dividends paid of $16 million, and increased other financing
activities of $25 million, partially offset by increased exercise of stock
options of $20 million and the payment of the equity portion of debt conversions
settled in cash of $142 million in the 2018 period. The decrease in cash used in
financing activities of $587 million in the 2018 period from the 2017 period is
primarily attributable to a $458 million decrease in net debt service payments,
net of borrowings, in the 2018 period, $109 million in cash transferred in the
BK Distribution and FNFV Split-off in the 2017 period, repurchases of BKFS stock
by Black Knight of $47 million in the 2017 period, and a $22 million decrease in
change in secured trust deposits, partially offset by an increase in cash
dividends paid of $50 million in the 2018 period.
 Financing. For a description of our financing arrangements see Note J Notes
Payable to the Consolidated Financial Statements included in Item 8 of Part II
of this Annual Report, which is incorporated by reference into this Item 7 of
Part II.
Contractual Obligations. Our long term contractual obligations generally include
our loss reserves, our credit agreements and other debt facilities and operating
lease payments on certain of our premises and equipment.
As of December 31, 2019, our required annual payments relating to these
contractual obligations were as follows:
                                      2020     2021     2022     2023     

2024 Thereafter Total


                                                                 (In 

millions)

Notes payable principal repayment $ - $ - $ 400 $ - $

  -    $        450    $   850
Operating lease payments               145      121       93       64       37              23        483

Pension and other benefit payments 15 14 13 12 12

              95        161

Title claim loss estimated payments 220 218 173 138 97

             663      1,509
Interest on fixed rate notes payable    42       42       35       20       20             102        261
Total                                $ 422    $ 395    $ 714    $ 234    $ 166    $      1,333    $ 3,264


As of December 31, 2019, we had title insurance reserves of $1,509 million. The
amounts and timing of these obligations are estimated and are not set
contractually. While we believe that historical loss payments are a reasonable
source for projecting future claim payments, there is significant inherent
uncertainty in this payment pattern estimate because of the potential impact of
changes in:
•      future mortgage interest rates, which will affect the number of real
       estate and refinancing transactions and, therefore, the rate at which
       title insurance claims will emerge;

• the legal environment whereby court decisions and reinterpretations of


       title insurance policy language to broaden coverage could increase total
       obligations and influence claim payout patterns;

• events such as fraud, escrow theft, multiple property title defects,

foreclosure rates and individual large loss events that can substantially


       and unexpectedly cause increases in both the amount and timing of
       estimated title insurance loss payments; and

• loss cost trends whereby increases or decreases in inflationary factors

(including the value of real estate) will influence the ultimate amount of


       title insurance loss payments.



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Based on historical title insurance claim experience, we anticipate the above
payment patterns. The uncertainty and variation in the timing and amount of
claim payments could have a material impact on our cash flows from operations in
a particular period.
We sponsor certain frozen pension and other post-retirement benefit plans. See
Note O. Employee Benefit Plans to our Consolidated Financial Statements included
in Item 8 of Part II of this Annual Report for further information.
Capital Stock Transactions. On July 17, 2018, our Board of Directors approved a
new three-year stock repurchase program effective August 1, 2018 (the "2018
Repurchase Program") under which we can purchase up to 25 million shares of our
FNF common stock through July 31, 2021. We may make repurchases from time to
time in the open market, in block purchases or in privately negotiated
transactions, depending on market conditions and other factors. During the year
ended December 31, 2019, we repurchased a total of 2,120,000 FNF common shares
for an aggregate of $85 million or an average of $40.09 per share. Since the
original commencement of the 2018 Repurchase Program, we have repurchased a
total of 2,780,000 FNF common shares for an aggregate of $106 million, or an
average of $38.24 per share.
Equity and Preferred Security Investments. Our equity and preferred security
investments may be subject to significant volatility. Currently prevailing
accounting standards require us to record the change in fair value of equity and
preferred security investments held as of any given period end within earnings.
Our results of operations in future periods will be subject to such volatility.
Off-Balance Sheet Arrangements. We do not engage in off-balance sheet activities
other than our escrow operations. In conducting our operations, we routinely
hold customers' assets in escrow, pending completion of real estate
transactions, and are responsible for the proper disposition of these balances
for our customers. Certain of these amounts are maintained in segregated bank
accounts and have not been included in the accompanying Consolidated Balance
Sheets, consistent with Generally Accepted Accounting Principles and industry
practice. These balances amounted to $18.7 billion and $13.5 billion at
December 31, 2019 and 2018, respectively. As a result of holding these
customers' assets in escrow, we have ongoing programs for realizing economic
benefits during the year through favorable borrowing and vendor arrangements
with various banks.
Recent Accounting Pronouncements
For a description of recent accounting pronouncements, see Note S Recent
Accounting Pronouncements to our Consolidated Financial Statements included in
Item 8 of Part II of this Annual Report.

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