EX-99.1 6 exhibit991fnfcore2q2015.htm EXHIBIT 99.1 Exhibit 99.1 FNF Core 2Q2015
EXHIBIT 99.1

Unaudited Attributed Financial Information for Fidelity National Financial Group Tracking Stock

The following tables present our assets, liabilities, revenues, expenses and cash flows that are attributed to our FNF core business, known as FNF Core Operations (“we,” “our,” or "FNF Group"). The financial information in this Exhibit should be read in conjunction with our unaudited condensed consolidated financial statements for the period ended June 30, 2015 included in this Quarterly Report on Form 10-Q.
FNF Core Operations is comprised of three operating segments as follows:
Title
This segment consists of the operations of our title insurance underwriters and related businesses. This segment provides core title insurance and escrow and other title related services including collection and trust activities, trustee sales guarantees, recordings and reconveyances, and home warranty insurance. This segment also includes the transaction services business acquired from LPS, now combined with our ServiceLink business. Transaction services include other title related services used in production and management of mortgage loans, including mortgage loans that go into default.
Black Knight
This segment consists of the operations of Black Knight. This segment provides core technology and data and analytics services through leading software systems and information solutions that facilitate and automate many of the business processes across the life cycle of a mortgage.
FNF Core Corporate and Other
The FNF Core Corporate and Other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, and other smaller real estate and insurance related operations.
We have adopted certain expense allocation policies, each of which will be reflected in the attributed financial information of the FNF Core Operations and the FNFV Group (see Exhibit 99.2). In general, corporate overhead will be allocated to each group based upon the use of services by that group where practicable. Corporate overhead primarily includes costs of personnel and employee benefits, legal, accounting and auditing, insurance, investor relations and stockholder services and services related to FNF’s board of directors. We will allocate in a similar manner a portion of costs of administrative shared services, such as information technology services. Where determinations based on use alone are not practical, we will use other methods and criteria that we believe are equitable and that provide a reasonable estimate of the cost attributable to each group.

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FIDELITY NATIONAL FINANCIAL GROUP OPERATIONS
Balance Sheet Information
(In millions)
 
June 30,
2015
 
December 31,
2014
 
(Unaudited)
ASSETS
 
 
Investments:
 

 
 
Fixed maturity securities available for sale, at fair value, at June 30, 2015 and December 31, 2014 includes pledged fixed maturity securities of $349 and $499, respectively, related to secured trust deposits
$
2,826

 
$
3,025

Preferred stock available for sale, at fair value
300

 
223

Equity securities available for sale, at fair value
289

 
145

Investments in unconsolidated affiliates
89

 
15

Other long-term investments
83

 
120

Short-term investments
89

 
170

Total investments
3,676

 
3,698

Cash and cash equivalents, at June 30, 2015 and December 31, 2014 includes $406 and $136, respectively, of pledged cash related to secured trust deposits
1,336

 
661

Trade and notes receivables, net of allowance of $32 at both June 30, 2015 and December 31, 2014
534

 
464

Due from affiliates
2

 

Income taxes receivable

 
60

Goodwill
4,536

 
4,515

Prepaid expenses and other assets
497

 
408

Capitalized software, net
554

 
557

Other intangible assets, net
881

 
934

Title plant
393

 
393

Property and equipment, net
249

 
254

Total assets
$
12,658

 
$
11,944

 
 
 
 
LIABILITIES AND EQUITY
 
 
Liabilities:
 

 
 
Accounts payable and other accrued liabilities
$
906

 
$
917

Income taxes payable
81

 

Deferred revenue
173

 
136

Reserve for title claim losses
1,612

 
1,621

Secured trust deposits
784

 
622

Notes payable
2,608

 
2,702

Due to affiliates

 
1

Deferred tax liability
674

 
673

Total liabilities
6,838

 
6,672

Commitments and Contingencies:
 
 
 
Redeemable non-controlling interest by 35% minority holder of ServiceLink Holdings, LLC as of June 30, 2015 and 33% minority holder of Black Knight Financial Services, LLC and 35% minority holder of ServiceLink Holdings, LLC as of December 31, 2014
344

 
715

Equity:
 

 
 
FNF Group common stock, $0.0001 par value; authorized 487,000,000 shares as of June 30, 2015 and December 31, 2014; outstanding of 279,565,496 and 279,443,239 as of June 30, 2015 and December 31, 2014, respectively, and issued of 281,041,158 and 279,825,796 as of June 30, 2015 and December 31, 2014, respectively

 

Additional paid-in capital
3,601

 
3,514

Retained earnings
1,199

 
1,060

Accumulated other comprehensive earnings
36

 
53

Less: treasury stock, 1,475,662 and 375,662 shares as of June 30, 2015 and December 31, 2014, respectively
(52
)
 
(12
)
Total Fidelity National Financial shareholders’ equity
4,784

 
4,615

Noncontrolling interests
692

 
(58
)
Total equity
5,476

 
4,557

Total liabilities, redeemable noncontrolling interest and equity
$
12,658

 
$
11,944

 

See Notes to Unaudited Attributed Financial Information for FNF Core Operations

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FIDELITY NATIONAL FINANCIAL GROUP OPERATIONS
Statements of Operations Information
(In millions)
 
Three months ended June 30,
 
Six months ended June 30,
 
 
2015
 
2014
 
2015
 
2014
 
(Unaudited)
 
(Unaudited)
Revenues:
 
 
 
 
 
 
 
Direct title insurance premiums
$
547

 
$
433

 
$
964

 
$
784

Agency title insurance premiums
597

 
518

 
1,038

 
922

Escrow, title related and other fees
827

 
689

 
1,522

 
1,307

Interest and investment income
32

 
33

 
62

 
61

Realized gains and losses
(8
)
 

 
(8
)
 
2

Total revenues
1,995

 
1,673

 
3,578

 
3,076

Expenses:
 
 
 
 
 
 
 
Personnel costs
652

 
587

 
1,237

 
1,200

Agent commissions
451

 
395

 
784

 
702

Other operating expenses
453

 
386

 
825

 
785

Depreciation and amortization
87

 
68

 
170

 
169

Claim loss expense
69

 
57

 
120

 
110

Interest expense
31

 
31

 
60

 
61

Total expenses
1,743

 
1,524

 
3,196

 
3,027

Earnings from continuing operations before income taxes and equity in losses of unconsolidated affiliates
252

 
149

 
382

 
49

Income tax expense
95

 
55

 
142

 
18

Earnings from continuing operations before equity in losses of unconsolidated affiliates
157

 
94

 
240

 
31

Equity in earnings of unconsolidated affiliates

 
2

 
2

 
2

Net earnings from continuing operations
157

 
96

 
242

 
33

Earnings (loss) from discontinued operations, net of tax

 
(1
)
 

 
(1
)
Net earnings
157

 
95

 
242

 
32

Less: Net loss attributable to non-controlling interests
(3
)
 
(14
)
 
(4
)
 
(71
)
Net earnings attributable to FNF Group common shareholders
$
160

 
$
109

 
$
246

 
$
103

 
 
 
 
 
 
 
 
Earnings Per Share
 
 
 
 
 
 
 
Basic
 
 
 
 
 
 
 
Net earnings per share attributable to Old FNF common shareholders
$

 
$
0.40

 
$

 
$
0.37

 
 
 
 
 
 
 
 
Net earnings per share attributable to FNF Group common shareholders
$
0.57

 
$

 
$
0.88

 
$

Diluted
 
 
 
 
 
 
 
Net earnings per share attributable to Old FNF common shareholders
$

 
$
0.39

 
$

 
$
0.37

 
 
 
 
 
 
 
 
Net earnings per share attributable to FNF Group common shareholders
$
0.56

 
$

 
$
0.86

 
$

 
 
 
 
 
 
 
 
Weighted average shares outstanding Old FNF common stock, basic basis

 
275

 

 
275

 
 
 
 
 
 
 
 
Weighted average shares outstanding Old FNF common stock, diluted basis

 
283

 

 
282

 
 
 
 
 
 
 
 
Weighted average shares outstanding FNF Group common stock, basic basis
279

 

 
278

 

 
 
 
 
 
 
 
 
Weighted average shares outstanding FNF Group common stock, diluted basis
287

 

 
287

 


See Notes to Unaudited Attributed Financial Information for FNF Core Operations


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FIDELITY NATIONAL FINANCIAL GROUP OPERATIONS
Statement of Cash Flows Information
(In millions)
 
Six months ended June 30,
 
 
2015
 
2014
 
(Unaudited)
Cash flows from operating activities:
 
 
 

Net earnings
$
242

 
$
32

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
            Depreciation and amortization
170

 
172

            Equity in earnings of unconsolidated affiliates
(2
)
 
(2
)
Loss on sales of investments and other assets, net
(11
)
 
(2
)
Stock-based compensation cost
27

 
21

Tax benefit associated with the exercise of stock options
(11
)
 
(3
)
Changes in assets and liabilities, net of effects from acquisitions:
 
 
 
Net increase in pledged cash, pledged investments, and secured trust deposits
(2
)
 

Net increase in trade receivables
(68
)
 
(30
)
Net increase in prepaid expenses and other assets
(50
)
 
(23
)
Net decrease in accounts payable, accrued liabilities, deferred revenue and other
(47
)
 
(204
)
Net decrease in reserve for title claim losses
(9
)
 
(29
)
Net change in amount due to affiliates
(3
)
 
(16
)
Net change in income taxes
138

 
84

Net cash provided by operating activities
374

 

Cash flows from investing activities:
 
 
 
Proceeds from sales of investment securities available for sale
405

 
454

Proceeds from calls and maturities of investment securities available for sale
159

 
160

Proceeds from sale of other assets

 
2

Additions to property and equipment and capitalized software
(80
)
 
(52
)
Purchases of investment securities available for sale
(606
)
 
(607
)
Net (purchases) sales of short-term investment securities
(6
)
 
4

Purchases of other long-term investments
(21
)
 
(3
)
(Contributions to) distributions from investments in unconsolidated affiliates
(23
)
 
3

Net other investing activities
(1
)
 
(3
)
Acquisition of Lender Processing Services, Inc., net of cash acquired

 
(2,248
)
Acquisition of BPG Holdings, LLC, net of cash acquired
(43
)
 

Other acquisitions/disposals of businesses, net of cash acquired
(12
)
 
2

Net cash used in investing activities
(228
)
 
(2,288
)
Cash flows from financing activities:
 
 
 
Borrowings
1,229

 
1,504

Debt service payments
(1,304
)
 
(578
)
Additional investment in non-controlling interest
(6
)
 

Proceeds from sale of 35% of Black Knight Financial Services, LLC and ServiceLink, LLC to minority interest holder

 
687

Proceeds from BKFS IPO
475

 
 
Dividends paid
(106
)
 
(99
)
Subsidiary dividends paid to non-controlling interest shareholders
(2
)
 
(8
)
Exercise of stock options
14

 
16

Tax benefit associated with the exercise of stock options
11

 
3

Distributions by BKFS to member
(17
)
 
 
Purchases of treasury stock
(35
)
 

Contributions to subsidiaries

 
(172
)
Net cash provided by financing activities
259

 
1,353

Net increase (decrease) in cash and cash equivalents, excluding pledged cash related to secured trust deposits
405

 
(935
)
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at beginning of period
525

 
1,475

Cash and cash equivalents, excluding pledged cash related to secured trust deposits at end of period
$
930

 
$
540

See Notes to Unaudited Attributed Financial Information for FNF Core Operations

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Notes to Unaudited Attributed Financial Information for Fidelity National Financial Group Operations
Period Ended June 30, 2015
(unaudited)
Note A.    Basis of Presentation
Description of the Business
FNF Group is a leading provider of title insurance, technology and transaction services to the real estate and mortgage industries. FNF Group is the nation’s largest title insurance company through its title insurance underwriters - Fidelity National Title, Chicago Title, Commonwealth Land Title, Alamo Title and National Title of New York Inc. - that collectively issue more title insurance policies than any other title company in the United States. FNF Group also provides industry-leading mortgage technology solutions and transaction services, including MSP®, the leading residential mortgage servicing technology platform in the U.S., through its majority-owned subsidiaries, Black Knight Financial Services, Inc. ("Black Knight") and ServiceLink Holdings, LLC ("ServiceLink").
Recent Developments
On July 20, 2015, we completed the recapitalization of ServiceLink Holdings, LLC through a conversion (the "ServiceLink Conversion") of $505 million of the $566 million aggregate preference amount associated with its Class A1 participating preferred units into slightly more than 67.3 million Class A common units. As a result of the ServiceLink Conversion, our ownership percentage in ServiceLink Holdings, LLC increased from 65% to 79%.
On July 20, 2015, our Board of Directors approved a new FNF Group three-year stock repurchase program, effective August 1, 2015, under which we may repurchase up to 25 million shares of FNF Group common stock. Purchases may be made from time to time by us in the open market at prevailing market prices or in privately negotiated transactions through July 31, 2018.
On May 29, 2015, Black Knight completed a redemption (the "Redemption") of $205 million in aggregate principal of its senior notes ("Black Knight Senior Notes") at a price of 105.750%. Black Knight incurred a charge on the Redemption of $12 million and also reduced the bond premium by $7 million for the portion of the premium that relates to the redeemed Black Knight Senior Notes, resulting in a net charge on the Redemption of $5 million. Following the Redemption, $390 million in aggregate principal of Black Knight Senior Notes remained outstanding.
On May 27, 2015, Black Knight InfoServ, LLC (“BKIS”), a subsidiary of Black Knight, entered into a credit and guaranty agreement (the “BKIS Credit Agreement”) with an aggregate borrowing capacity of $1.6 billion, dated as of May 27, 2015, with JPMorgan Chase Bank, N.A. as administrative agent, the guarantors party thereto, the other agents party thereto and the lenders party thereto. FNF is not a party to and does not provide any guaranty or stock pledge under the BKIS Credit Agreement.
On May 27, 2015, we entered into an amendment to our existing $800 million third amended and restated credit agreement (as previously amended, the “Existing Revolving Credit Agreement”), dated as of June 25, 2013, with Bank of America, N.A., as administrative agent, the other agents party thereto and the financial institutions party thereto as lenders (the “FNF Amended Revolving Credit Agreement”). Among other changes, the FNF Amended Revolving Credit Agreement amends the Existing Revolving Credit Agreement to permit FNF and its subsidiaries to incur the indebtedness and liens in connection with the BKIS Credit Agreement.
On May 26, 2015, Black Knight closed its initial public offering ("IPO") of 20,700,000 shares of Class A common stock at a price to the public of $24.50 per share, which included 2,700,000 shares of Class A common stock issued upon the exercise in full of the underwriters' option to purchase additional shares. Black Knight received net proceeds of $475 million from the offering, after deduction of underwriter discount and expenses. In connection with the IPO, Black Knight amended and restated their certificate of incorporation to authorize the issuance of two classes of common stock, Class A common stock and Class B common stock, which will generally vote together as a single class on all matters submitted for a vote to stockholders. As a result, Black Knight issued shares of Class B common stock to us, and certain Thomas H. Lee Partners affiliates, as the holders of membership interests in Black Knight Operating, LLC prior to the IPO. Class B common stock is not publicly traded and does not entitle the holders thereof to any of the economic rights, including rights to dividends and distributions upon liquidation that would be provided to holders of Class A common stock. Prior to the IPO, we owned 67% of the membership interests in Black Knight Operating LLC. Following the IPO, we own 55% of the outstanding shares of Black Knight in the form of Class B common stock, with a corresponding ownership interest in Black Knight Operating, LLC.
EPS
Included in the calculation of diluted earnings per share are convertible senior notes (the “Notes”) issued on August 2, 2011 by Fidelity National Financial, Inc.  Under the terms of the indenture, if converted, a portion of the settlement may include shares of FNFV common stock.  As the debt is the obligation of FNF Group, if FNF were to settle a portion of the Notes with FNFV common stock, FNF Group would reimburse FNFV Group for the shares issued upon settlement.

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