e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


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


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

For the Quarter Ended June 30, 2005

Commission File Number 1-9396

FIDELITY NATIONAL FINANCIAL, INC.

(Exact name of registrant as specified in its charter)


Delaware		86-0498599

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

601 Riverside Avenue, Jacksonville, Florida		32204

(Address of principal executive offices)		(Zip Code)

(904) 854-8100

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

YES þ NO o

As of June 30, 2005, 172,951,047 shares of the Registrant’s Common Stock were outstanding.

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)


	June 30,			December 31,
	2005			2004
	(Unaudited)
ASSETS
Investments:
Fixed maturities available for sale, at fair value, at June 30, 2005 includes $295,114 and $153,623 of pledged fixed maturities related to secured trust deposits and the securities lending program, respectively and at December 31, 2004 includes $265,639 of pledged fixed maturity securities related to secured trust deposits	$	3,036,541		$	2,332,231
Equity securities, at fair value at June 30, 2005 includes $1,699 of pledged equities related to the securities lending program		165,228			135,465
Other long-term investments		156,302			190,456
Short-term investments at June 30, 2005 includes $393,286 and at December 31, 2004 includes $280,351 of pledged short-term investments related to secured trust deposits		956,167			688,124

Total investments		4,314,238			3,346,276
Cash and cash equivalents, at June 30, 2005 includes $370,771 and at December 31, 2004 includes $195,200 of pledged cash related to secured trust deposits		715,643			331,222
Trade and notes receivables, net of allowance of $35,050 in 2005 and $36,254 in 2004		620,031			562,864
Goodwill		2,744,968			2,798,249
Prepaid expenses and other assets		500,883			431,756
Capitalized software		474,642			440,780
Other intangible assets		658,804			672,185
Title plants		307,827			302,201
Property and equipment, net		349,995			385,002

	$	10,687,031		$	9,270,535

LIABILITIES AND STOCKHOLDERS’ EQUITY

Liabilities:
Accounts payable and accrued liabilities	$	1,142,246		$	948,882
Deferred revenue		443,686			394,811
Notes payable		3,198,432			1,370,556
Reserve for claim losses		1,011,865			998,170
Secured trust deposits		1,057,166			735,295
Deferred tax liabilities		188,423			103,167
Income taxes payable		16,994			689

		7,058,812			4,551,570
Minority interests and preferred stock of subsidiary		170,859			18,874
Stockholders’ equity:
Preferred stock, $.0001 par value; authorized, 3,000,000 shares; issued and outstanding, none		—			—
Common stock, $.0001 par value; authorized, 250,000,000 shares issued; 180,972,554 as of June 30, 2005 and 178,321,790 as of December 31, 2004		18			18
Additional paid-in capital		3,500,225			3,424,261
Retained earnings		295,974			1,515,215

		3,796,217			4,939,494
Accumulated other comprehensive loss		(59,396	)		(27,353	)
Unearned compensation		(14,974	)		(18,437	)
Treasury stock, 8,021,507 shares as of June 30, 2005 and 5,765,846 as of December 31, 2004, at cost		(264,487	)		(193,613	)

		3,457,360			4,700,091

	$	10,687,031		$	9,270,535

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(In thousands, except per share data)


	Three months ended				Six months ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Unaudited)				(Unaudited)

REVENUE:
Direct title insurance premiums	$	583,035	$	601,444	$	1,060,855	$	1,066,392
Agency title insurance premiums		750,166		680,492		1,260,946		1,286,825
Escrow and other title related fees		298,812		295,255		540,966		513,840
Financial institution software and services		405,015		296,347		785,579		539,568
Lender outsourcing solutions (excludes title premiums of $19.4 million, $33.0 million, $37.7 million and $65.6 million in the three month and six month periods ended June 30, 2005 and 2004, respectively, included in title premiums above)		77,775		88,187		148,971		162,303
Information services		176,366		147,817		331,171		289,840
Specialty insurance		77,320		58,418		152,828		107,088
Interest and investment income		31,290		16,024		57,714		30,551
Realized gains and losses, net		21,699		8,678		25,582		21,151
Non—operating gain on issuance of subsidiary stock		—		—		318,209		—
Other income		13,413		11,576		23,708		23,498

Total revenue		2,434,891		2,204,238		4,706,529		4,041,056
EXPENSES:
Personnel costs		808,115		721,537		1,555,192		1,358,133
Other operating expenses		449,707		422,357		843,524		758,083
Agent commissions		576,205		529,974		967,671		1,004,338
Depreciation and amortization		105,232		79,306		202,559		149,916
Provision for claim losses		110,802		79,581		197,966		148,316
Interest expense		47,028		11,445		71,535		19,377

Total expenses		2,097,089		1,844,200		3,838,447		3,438,163

Earnings before income taxes and minority interest		337,802		360,038		868,082		602,893
Income tax expense		130,053		136,814		210,388		229,099

Earnings before minority interest		207,749		223,224		657,694		373,794
Minority interest		17,707		1,171		23,155		1,500

Net earnings	$	190,042	$	222,053	$	634,539	$	372,294

Basic earnings per share	$	1.10	$	1.29	$	3.67	$	2.19

Weighted average shares outstanding, basic		172,404		171,551		172,773		169,981

Diluted earnings per share	$	1.07	$	1.26	$	3.58	$	2.12

Weighted average shares outstanding, diluted		176,873		176,754		177,109		175,331

Cash dividends paid per share	$	0.25	$	0.18	$	10.50	$	0.36

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS
(In thousands)


	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)

Net earnings	$	190,042		$	222,053		$	634,539		$	372,294
Other comprehensive earnings (loss):
Unrealized gain (loss) on investments and other financial instruments, net (1)		8,525			(8,989	)		(9,294	)		(4,589	)
Unrealized loss on foreign currency translation(2)		(4,603	)		—			(13,251	)		—
Reclassification adjustments for gains included in net earnings (3)		(8,805	)		(17,895	)		(9,498	)		(23,658	)

Other comprehensive loss		(4,883	)		(26,884	)		(32,043	)		(28,247	)

Comprehensive earnings	$	185,159		$	195,169		$	602,496		$	344,047


(1)		Net of income tax (benefit) expense of $5.2 million and $(6.0) million and $(5.7) million and $(3.1) million for the three months and six months ended June 30, 2005 and 2004, respectively.

(2)		Net of income tax (benefit) expense of $0.3 million and $(0.7) million for the three months and six months ended June 30, 2005, respectively.

(3)		Net of income tax expense of $5.4 million and $11.9 million and $5.8 million and $15.8 million for the three months and six months ended June 30, 2005 and 2004, respectively.

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)


										Accumulated
					Additional					Other
	Common Stock				Paid - in		Retained			Comprehensive			Unearned			Treasury Stock
	Shares		Amount		Capital		Earnings			Loss			Compensation			Shares		Amount
Balance, December 31, 2004		178,321	$	18	$	3,424,261	$	1,515,215		$	(27,353	)	$	(18,437	)		5,766	$	(193,613	)

Purchase of treasury stock		—		—		—		—			—			—			2,256		(70,874	)
Exercise of stock options		2,615		—		34,128		—			—			—			—		—
Tax benefit associated with the exercise of stock options		—		—		26,339		—			—			—			—-		—
Acquisition of Hansen Quality Loan Services, Inc.		37		—		1,625		—			—			—			—		—
Other comprehensive loss—unrealized loss on investments and other financial instruments		—		—		—		—			(18,770	)		—			—		—
Other comprehensive loss—unrealized loss on foreign currency		—		—		—		—			(13,273	)		—			—		—
Amortization of unearned compensation		—		—		—		—			—			3,463			—		—
Stock based compensation		—		—		13,872		—			—			—			—		—
Cash dividends declared ($10.50 per share)		—		—		—		(1,853,780	)		—			—			—		—
Net earnings		—		—		—		634,539			—			—			—		—

Balance, June 30, 2005		180,973	$	18	$	3,500,225	$	295,974		$	(59,396	)	$	(14,974	)		8,022	$	(264,487	)

See Notes to Condensed Consolidated Financial Statements

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Six months ended
	June 30,
	2005			2004
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	634,539		$	372,294
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization		202,559			149,916
Net increase in reserve for claim losses		13,695			16,041
Gain on issuance of subsidiary stock		(318,209	)		—
Gain on sales of assets		(25,582	)		(21,151	)
Stock-based compensation cost		17,335			10,005
Tax benefit associated with the exercise of stock options		26,339			29,174
Minority interest		15,857			(1,796	)
Change in assets and liabilities, net of effects from acquisitions:
Net (increase) decrease in leases and lease securitization residual interests		(3,308	)		12,996
Net decrease in secured trust deposits		2,190			(411	)
Net increase in trade receivables		(57,738	)		(62,588	)
Net increase in prepaid expenses and other assets		(42,642	)		(72,881	)
Net decrease in accounts payable, accrued liabilities		(20,810	)		(59,534	)
Net increase in income taxes		128,778			151,536

Net cash provided by operating activities		573,003			523,601

Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		1,588,011			1,016,735
Proceeds from maturities of investment securities available for sale		157,621			99,664
Proceeds from sale of assets		11,186			5,178
Net proceeds from sale of equity interest in subsidiary		454,337			—
Cash received as collateral on loaned securities, net		5,170			—
Collections of notes receivable		3,378			3,221
Additions to title plants		(5,975	)		(398	)
Additions to property and equipment		(52,245	)		(71,761	)
Additions to capitalized software		(72,108	)		(40,111	)
Purchases of investment securities available for sale		(2,184,532	)		(1,515,546	)
Net proceeds (purchases) of short-term investment securities		(155,108	)		225,740
Issuance of notes receivable		(5,414	)		(4,575	)
Acquisitions of businesses, net of cash acquired		(9,724	)		(422,353	)

Net cash used in investing activities		(265,403	)		(704,206	)


				(Continued)

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Six months ended
	June 30,
	2005			2004
	(Unaudited)
Cash flows from financing activities:
Borrowings	$	2,820,011		$	256,854
Debt issuance costs		(34,155	)		—
Debt service payments		(994,080	)		(79,674	)
Dividends paid		(1,853,780	)		(61,407	)
Stock options exercised		34,128			46,955
Purchases of treasury stock		(70,874	)		(16,502	)

Net cash provided by financing activities		98,750			146,226

Net increase in cash and cash equivalents, excluding pledged cash related to secured trust deposits		208,850			(34,379	)
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at beginning of period		136,022			228,513

Cash and cash equivalents, excluding pledged cash related to secured trust deposits at end of period	$	344,872		$	194,134

Supplemental cash flow information:
Income taxes paid	$	64,499		$	45,200

Interest paid	$	59,400		$	19,285

Noncash investing and financing activities:
Dividends declared and unpaid	$	—		$	—

Issuance of restricted stock	$	—		$	192

Fair value of shares issued in connection with acquisitions	$	1,625		$	225,448

Liabilities assumed in connection with acquisitions:
Fair value of assets acquired	$	16,708		$	808,082
Total purchase price	$	(9,724	)	$	(685,686	)

Liabilities assumed	$	6,984		$	122,396

See Notes to Condensed Consolidated Financial Statements

Fidelity National Financial, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements

Note A — Basis of Financial Statements

The unaudited financial information included in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, the “Company”) prepared in accordance with generally accepted accounting principles and the instructions to Form 10-Q and Article 10 of Regulation S-X. All adjustments considered necessary for a fair presentation have been included. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Certain reclassifications have been made in the 2004 Condensed Consolidated Financial Statements to conform to current period classification.

Note B — Acquisitions

The results of operations and financial position of the entities acquired during any year are included in the Consolidated Financial Statements from and after the date of acquisition. The Company employs an outside third party valuation firm to value the identifiable intangible and tangible assets and liabilities of each of its acquisitions. Based on this valuation, any differences between the fair value of the identifiable assets and liabilities and the purchase price paid are recorded as goodwill.

InterCept, Inc.

On November 8, 2004, the Company acquired all of the outstanding stock of InterCept, Inc. (“InterCept”) for $18.90 per share. The total purchase price was $419.4 million and was paid by $407.3 million of cash with the remaining purchase price relating to the issuance of Company options for vested InterCept options. InterCept provides both outsourced and in-house, fully integrated core banking solutions for community banks, including loan and deposit processing and general ledger and financial accounting operations. InterCept also operates significant item processing and check imaging operations, providing imaging for customer statements, clearing and settlement, reconciliation and automated exception processing in both outsourced and in-house relationships for customers.

The assets acquired and liabilities assumed in the InterCept acquisition were as follows (dollars in thousands):


Tangible assets acquired at fair value	$	84,497
Intangible assets acquired at fair value		125,795
Goodwill		264,713
Liabilities assumed at fair value		(55,646	)

Total purchase price	$	419,359

Aurum Technology, Inc.

On March 11, 2004, the Company acquired Aurum Technology, Inc. (Aurum) for $306.4 million, comprised of $185.0 million in cash and the issuance of 3,144,390 shares of the Company’s common stock valued using closing prices two days before and after the valuation date, which was $121.4 million. Aurum is a provider of outsourced and in-house information technology solutions for the community bank and credit union markets.

The assets acquired and liabilities assumed in the Aurum acquisition were as follows (dollars in thousands):


Tangible assets acquired at fair value	$	64,301
Intangible assets acquired at fair value		44,803
Goodwill		255,399
Liabilities assumed at fair value		(58,134	)

Total purchase price	$	306,369

Sanchez Computer Associates, Inc.

On April 14, 2004, the Company acquired Sanchez Computer Associates, Inc. (Sanchez) for $183.7 million, comprised of $88.1 million in cash and the issuance of 2,267,290 shares of the Company’s common stock valued using closing prices two days before and after the valuation date, which was approximately $88.1 million with the remaining purchase price of $7.5 million relating to the issuance of the Company’s stock options for vested Sanchez stock options. Sanchez develops and markets scalable and integrated software and services that provide banking, customer integration, outsourcing and wealth management solutions to financial institutions in several countries.

The assets acquired and liabilities assumed in the Sanchez acquisition were as follows (dollars in thousands):


Tangible assets acquired at fair value	$	57,993
Intangible assets acquired at fair value		19,638
Goodwill		121,057
Liabilities assumed at fair value		(15,018	)

Total purchase price	$	183,670

Kordoba

On September 30, 2004, FNF acquired a 74.9% interest in KORDOBA Gesellschaft fur Bankensoftware mbH & Co. KG, Munich, or Kordoba, a provider of core processing software and outsourcing solutions to the German banking market, from Siemens Business Services GmbH & Co. OHG (Siemens). The acquisition price was $123.6 million in cash. The Company recorded the Kordoba acquisition based on its proportional share of the fair value of the assets acquired and liabilities assumed on the purchase date.

The assets acquired and liabilities assumed in the Kordoba acquisition were as follows (dollars in thousands):


Tangible assets acquired at fair value	$	113,692
Intangible assets acquired at fair value		26,834
Goodwill		88,430
Liabilities assumed at fair value		(105,372	)

Total purchase price	$	123,584

American Pioneer Title Insurance Company

On March 22, 2004, the Company acquired American Pioneer Title Insurance Company (“APTIC”) for $115.2 million in cash. APTIC is a 45-state licensed title insurance underwriter with significant agency operations and computerized title plant assets in the state of Florida. APTIC operates under the Company’s Ticor Title brand.

The assets acquired and liabilities assumed in the APTIC acquisition were as follows (dollars in thousands):


Tangible assets acquired at fair value	$	114,746
Intangible assets acquired at fair value		10,600
Goodwill		34,505
Liabilities assumed at fair value		(44,663	)

Total purchase price	$	115,188

Selected unaudited pro forma combined results of operations for the six months ended June 30, 2004 of the Company assuming the above acquisitions had occurred as of January 1, 2004, and using actual general and administrative expenses prior to the acquisition, are set forth below:


	Six Months
	Ended June 30,
	2004
Total revenue	$	4,308,234
Net earnings	$	351,822
Basic earnings per share	$	2.01
Diluted earnings per share	$	1.94

Other Transactions:

ClearPar

On December 13, 2004, the Company acquired ClearParSM, LLC (“ClearPar”), a provider of a web-based commercial loan settlement system servicing the primary syndication and secondary loan trading markets. The acquisition price was $24.5 million in cash.

Covansys Corporation

On September 15, 2004, the Company acquired 11 million shares of common stock and warrants to purchase 4 million additional shares of Covansys Corporation (Covansys), a publicly traded U.S.-based provider of application management and offshore outsourcing services with India based operations, for $121.0 million in cash. The Company owns approximately 29% of Covansys and accounts for the investment in common stock using the equity method of accounting and, until March 25, 2005, accounted for the warrants under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”. Under SFAS No. 133, the investment in warrants are considered derivative instruments and were recorded at a fair value of approximately $23.5 million on the date of acquisition. During the first quarter of 2005, the Company recorded a loss of $4.4 million on the decrease in fair value of the warrants through March 25, 2005 which is reflected in the Consolidated Statement of Earnings in realized gains and losses. On March 25, 2005, the terms of the warrants were amended such that the accounting for the investment in the warrants is now governed by the provisions of Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities”, and changes in the fair value of the warrants are recorded in other comprehensive earnings.

The Company also entered into a master service provider agreement with Covansys which requires the Company to purchase a minimum of $150 million in services over a five year period expiring June 30, 2009 or be subject to certain penalties if certain spending thresholds are not met. The Company is subject to penalties aggregating $8.0 million in the event that certain annual thresholds are not met and a final penalty equal to 6.67% of the unattained commitments.

Geotrac, Inc.

On July 2, 2004, the Company acquired 100% of Geotrac, Inc. (“Geotrac”), a flood zone monitoring services provider for $40 million in cash.

Bankware

On April 7, 2004, the Company acquired Bankware, a provider of check imaging solutions for financial institutions for $47.7 million in cash.

Hansen Quality Loan Services, LLC

On February 27, 2004, the Company acquired an additional 44% interest in Hansen Quality Loan Services, LLC (“Hansen”) that it did not already own for $33.7 million, consisting of $25.2 million in cash and $8.5 million of the Company’s common stock. The stock portion of the purchase price resulted in the issuance of 220,396 shares of the Company’s common stock. Hansen provides collateral risk assessment and valuation services for real estate mortgage financing. On March 26, 2004, the Company acquired the remaining 1% interest in Hansen for $.3 million in cash. In the first quarter 2005, the Company issued an additional 36,838 shares to the prior management of Hansen valued at $1.6 million in satisfaction of an earn-out provision in the purchase agreement.

Note C — Recapitalization of Fidelity National Information Services, Inc. (“FIS”) and Minority Interest Sale Resulting in a Gain on issuance of Subsidiary Stock

The recapitalization of FIS on March 9, 2005 was accomplished through $2.8 billion in borrowings under new senior credit facilities consisting of an $800 million Term Loan A facility, a $2.0 billion Term Loan B facility (collectively, the “Term Loan Facilities”) and an undrawn $400 million revolving credit facility (“Revolver”). FIS fully drew upon the entire $2.8 billion in Term Loan Facilities to consummate the recapitalization while the Revolver remained undrawn at the closing of the recapitalization. The current interest rate on both the Term Loan Facilities and the Revolver is LIBOR +1.75%. Bank of America, JP Morgan Chase, Wachovia Bank, Deutsche Bank and Bear Stearns led a consortium of lenders providing the new senior credit facilities.

The minority equity interest sale was accomplished through FIS selling an approximately 25% minority equity interest in the common stock of FIS to an investment group led by Thomas H. Lee Partners (“THL”) and Texas Pacific Group (“TPG”). FIS issued a total of 50 million shares of the common stock of FIS to the investment group for a total purchase price of $500 million. The minority equity interest sale resulted in a non-operating gain of $318.2 million. This gain was calculated under the provisions of Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Topic 5H (“SAB Topic 5H”) and relates to the issuance of securities of a non-wholly owned subsidiary. The gain represents the difference between the Company’s book value investment in FIS immediately prior to the transaction and its book value investment in FIS immediately following the transaction. No deferred income taxes were recorded in connection with this transaction as the tax basis of the investment was greater than the book basis on the date of the sale. Primarily as a result of this transaction, the minority interest liability on the condensed consolidated balance sheet as June 30, 2005 has increased to $170.9 million from a balance of $18.9 million at December 31, 2004.

Note D — Earnings Per Share

The Company presents “basic” earnings per share, representing net earnings divided by the weighted average shares outstanding (excluding all common stock equivalents), and “diluted” earnings per share, representing the dilutive effect of all common stock equivalents. The following table illustrates the computation of basic and diluted earnings per share:


	Three months ended				Six months ended
	June 30,				June 30,
	2005		2004		2005		2004
	(In thousands, except				(In thousands, except
	per share amounts)				per share amounts)

Net earnings, basic and diluted	$	190,042	$	222,053	$	634,539	$	372,294

Weighted average shares outstanding during the period, basic		172,404		171,551		172,773		169,981
Plus: Common stock equivalent shares assumed from conversion of options		4,469		5,203		4,336		5,350

Weighted average shares outstanding during the period, diluted		176,873		176,754		177,109		175,331

Basic earnings per share	$	1.10	$	1.29	$	3.67	$	2.19

Diluted earnings per share	$	1.07	$	1.26	$	3.58	$	2.12

Options to purchase 2,002,885 shares and 3,331,485 shares of the Company’s common stock for the three and six months ended June 30, 2005 and 620,548 shares and 314,895 shares for the three and six months ended June 30, 2004, respectively, were not included in the computation of diluted earnings per share because they were antidilutive.

Note E — Investments

During the second quarter of 2005, the Company began lending fixed maturity and equity securities to financial institutions in short-term security lending transactions. The Company’s security lending policy requires that the cash received as collateral be 102% or more of the fair value of the loaned securities. These short-term security lending arrangements increase investment income with minimal risk. At June 30, 2005, the Company had security loans outstanding with a fair value of $155.3 million included in accounts payable and accrued liabilities and the Company held cash in the amount of $160.5 million as collateral for the loaned securities.

Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2005 were as follows:


	Less than 12 Months					12 Months or Longer					Total
			Unrealized					Unrealized					Unrealized
	Fair Value		Losses			Fair Value		Losses			Fair Value		Losses

U.S. government and agencies	$	471,477	$	(3,128	)	$	435,832	$	(2,594	)	$	907,309	$	(5,722	)
States and political subdivisions		211,988		(1,118	)		224,978		(3,008	)		436,966		(4,126	)
Corporate securities		138,758		(1,380	)		283,997		(4,823	)		422,755		(6,203	)
Equity securities		69,290		(5,364	)		64,400		(6,802	)		133,690		(12,166	)

Total temporarily impaired securities	$	891,513	$	(10,990	)	$	1,009,207	$	(17,227	)	$	1,900,720	$	(28,217	)

A substantial portion of the Company’s unrealized losses relate to its holdings of equity securities. The unrealized losses relating to these securities were caused by market changes that the Company considers to be temporary. Unrealized losses relating to U.S. government, state and political subdivision holdings were primarily caused by interest rate increases. Since the decline in fair value of these investments is attributable to changes in interest rates and not credit quality, and the Company has the intent and ability to hold these securities, the Company does not consider these investments other-than-temporarily impaired.

Note F — Stock-Based Compensation Plans

The Company accounts for stock-based compensation using the fair value recognition provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”). Under the fair value method of accounting, compensation cost is measured based on the fair value of the award at the grant date and recognized over the service period. The Company has elected to use the prospective method of transition, as permitted by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS No. 148”). Under this method, stock-based employee compensation cost is recognized from the beginning of 2003 as if the fair value method of accounting had been used to account for all employee awards granted, modified, or settled in years beginning after December 31, 2002. In December 2004, the FASB issued Statement No. 123R “Share Based Payments”. The Company will be required to adopt the provisions of this statement in the first quarter of 2006 and does not believe that it will have a material effect on earnings since all options granted prior to January 1, 2003 will be fully vested as of that date.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to all outstanding and unvested awards in each period:


	Three months ended						Six months ended
	June 30,						June 30,
	2005			2004			2005			2004
	(In thousands, except						(In thousands, except
	per share amounts)						per share amounts)

Net earnings, as reported	$	190,042		$	222,053		$	634,539		$	372,294
Add: Stock-based compensation expense included in reported net earnings, net of related tax effects		6,162			2,403			10,569			6,276
Deduct: Total stock-based compensation expense determined under fair value based methods for all awards, net of related tax effects		(6,457	)		(2,785	)		(11,233	)		(7,559	)

Pro forma net earnings	$	189,747		$	221,671		$	633,875		$	371,011

Earnings per share:
Basic — as reported	$	1.10		$	1.29		$	3.67		$	2.19
Basic — pro forma	$	1.10		$	1.29		$	3.67		$	2.18
Diluted — as reported	$	1.07		$	1.26		$	3.58		$	2.12
Diluted — pro forma	$	1.07		$	1.25		$	3.57		$	2.11

Note G — Notes Payable

Notes payable consist of the following:


	June 30,		December 31,
	2005		2004
	(Dollars in thousands)

Term Loan A Facility, secured, interest payable at LIBOR plus 1.75% (4.96% at June 30, 2005), .25% quarterly principal amortization, due March, 2011	$	798,000	$	—
Term Loan B Facility, secured, interest payable at LIBOR plus 1.75% (4.96% at June 30, 2005), .25% quarterly principal amortization, due March, 2013		1,845,000		—
Syndicated credit agreement, secured, interest due quarterly at LIBOR plus 1.75%, undrawn, unused portion of $400 million at June 30, 2005		—		—
Syndicated credit agreement, unsecured, interest due quarterly at LIBOR plus 0.925%, undrawn, unused portion of $700 million at June 30, 2005		—		400,000
Syndicated credit agreement, paid in full and terminated on March 9, 2005		—		410,000
Unsecured notes, net of discount, interest payable semi-annually at 7.30%, due August 2011		249,387		249,337
Unsecured notes net of discount, interest payable semi-annually at 5.25%, due March 2013		248,557		248,462
Other promissory notes with various interest rates and maturities		57,488		62,757

	$	3,198,432	$	1,370,556

On March 9, 2005, Fidelity National Information Solutions, Inc. and Fidelity National Tax Service, Inc., (collectively the “borrowers”), both direct subsidiaries of FIS and indirect subsidiaries of Fidelity National Financial, Inc., entered into a Credit Agreement, dated as of March 9, 2005, with Bank of America, as Administrative Agent and other financial institutions (the “Credit Agreement”). Fidelity National Financial, Inc. is not a party nor a guarantor to this agreement.

The Credit Agreement replaces a $500 million Revolving Credit Agreement, dated as of November 8, 2004, among FIS, as borrower, and Wachovia Bank, National Association, as Administrative Agent and Swing Line Lender, Bank of America, as Syndication Agent and the other financial institutions party thereto (the “Wachovia Credit Agreement”), which was repaid and terminated on March 9, 2005, prior to its scheduled expiration date of November 8, 2007. On the date of its termination, approximately $410.2 million was outstanding under the Wachovia Credit Agreement and no early termination penalties were incurred.

The Credit Agreement provides for a $800 million six-year term facility (“Term A Loans”), a $2.0 billion eight-year term facility (“Term B Loans”) and a $400 million revolving credit facility maturing on the sixth anniversary of the closing date. The term facilities were fully drawn on the closing date while the revolving credit facility was undrawn on the closing date. FIS has provided an unconditional guarantee of the full and punctual payment of the Borrowers’ obligations under the Credit Agreement and related loan documents.

Fidelity National Information Solutions, Inc. has granted the Administrative Agent a first priority (subject to certain exceptions) security interest in substantially all of its personal property, including shares of stock and other ownership interests.

Amounts under the revolving credit facility may be borrowed, repaid and reborrowed by the Borrowers from time to time until the maturity of the revolving credit facility. The term facilities are subject to quarterly amortization of principal in equal installments of 0.25% of the principal amount with the remaining balance payable at maturity. In addition to the scheduled amortization, and with certain exceptions, the term loans are subject to mandatory prepayment from excess cash flow, issuance of additional equity and debt and certain sales of assets. Voluntary prepayments of both the term loans and revolving loans and commitment reductions of the revolving credit facility under the Credit Agreement are permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. Revolving credit borrowings and Term A Loans bear interest at a floating rate, which will be, at the Borrowers’ option, either the British Bankers Association LIBOR or a base rate plus, in both cases, an applicable margin, which is subject to adjustment based on the performance of the Borrowers. The Term B Loans bear interest at either the British Bankers Association LIBOR plus 1.75% per annum or, at the Borrowers’ option, a base rate plus 0.75% per annum.

approximately 5.9% through April 2007 on an additional $350.0 million of the Term Loan B Facility. The Company has designated these interest rate swaps as cash flow hedges in accordance with SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended. The estimated fair value of the cash flow hedges results in a liability to the Company of $6.1 million, as of June 30, 2005 which is included in the accompanying condensed consolidated balance sheet in accounts payable and accrued liabilities and as a component of accumulated other comprehensive earnings, net of deferred taxes. The amount included in accumulated other comprehensive earnings will be reclassified into interest expense as a yield adjustment as future interest payments are made on the Term Loan B Facility. The Company’s existing cash flow hedges are highly effective and there is no current impact on earnings due to hedge ineffectiveness. It is the policy of the Company to execute such instruments with credit-worthy banks and not to enter into derivative financial instruments for speculative purposes.

Principal maturities of notes payable at June 30, 2005, are as follows (dollars in thousands):


2005	$	37,445
2006		44,322
2007		40,550
2008		30,477
2009		29,309
Thereafter		3,016,329

	$	3,198,432

Note H — Segment Information

Summarized financial information concerning the Company’s reportable segments is shown in the following table.

For the three months ended June 30, 2005:


				Financial
				Institution			Lender								Corporate
	Title			Software and			Outsourcing			Information			Specialty		and
	Insurance			Services			Solutions			Services			Insurance		Other			Eliminations			Total

Title premiums	$	1,333,201		$	—		$	19,415		$	—		$	—	$	—		$	(19,415	)	$	1,333,201
Other revenues		298,812			423,045			77,775			189,046			77,320		13,413			(30,710	)		1,048,701
Intersegment revenue		—			(18,030	)		(19,415	)		(12,680	)		—		—			50,125			—

Revenues from external customers	$	1,632,013		$	405,015		$	77,775		$	176,366		$	77,320	$	13,413		$	—		$	2,381,902
Interest and investment income, including realized gains and (losses)		43,112			2,977			428			511			1,770		4,191			—			52,989

Total revenues	$	1,675,125		$	407,992		$	78,203		$	176,877		$	79,090	$	17,604		$	—		$	2,434,891

Depreciation and amortization		24,418			57,837			11,535			10,363			948		131			—			105,232
Interest expense		(136	)		(1,017	)		1			162			23		47,995			—			47,028
Earnings (loss) before income tax and minority interest		258,646			67,903			8,091			55,438			11,500		(63,776	)		—			337,802
Income tax expense		99,815			25,939			3,091			21,177			4,393		(24,362	)		—			130,053
Minority interest		946			1,982			451			175			—		14,153			—			17,707
Net earnings (loss)	$	157,885		$	39,982		$	4,549		$	34,086		$	7,107	$	(53,567	)		—			190,042
Assets		5,537,426			2,956,820			278,313			721,314			273,180		919,978			—			10,687,031
Goodwill		959,921			1,296,928			82,312			379,299			23,842		2,666			—			2,744,968

For the three months ended June 30, 2004:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total

Title premiums	$	1,274,696	$	—		$	40,202		$	—		$	—	$	—		$	(32,962	)	$	1,281,936
Other revenues		295,103		314,578			88,187			159,359			58,418		11,728			(29,773	)		897,600
Intersegment revenue		—		(18,231	)		(32,962	)		(11,542	)		—		—			62,735			—

Revenues from external customers	$	1,569,799	$	296,347		$	95,427		$	147,817		$	58,418	$	11,728		$	—		$	2,179,536
Interest and investment income, including realized gains and (losses)		20,430		(15	)		174			2,492			707		914			—			24,702

Total revenues	$	1,590,229	$	296,332		$	95,601		$	150,309		$	59,125	$	12,642		$	—		$	2,204,238

Depreciation and amortization		23,734		40,927			2,410			10,786			1,031		418			—			79,306
Interest expense		300		205			8			54			1		10,877						11,445
Earnings (loss) before income tax and minority interest		261,283		43,075			35,097			32,785			7,983		(20,185	)		—			360,038
Income tax expense		99,461		16,287			13,273			12,396			3,019		(7,622	)		—			136,814
Minority interest		525		—			618			—			—		28			—			1,171
Net earnings (loss)	$	161,297	$	26,788		$	21,206		$	20,389		$	4,964	$	(12,591	)		—		$	222,053
Assets		5,766,572		1,514,362			325,263			674,251			192,665		101,872			—			8,574,985
Goodwill		968,615		998,966			86,188			350,546			20,669		7,666			—			2,432,650

For the six months ended June 30, 2005:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total

Title premiums	$	2,321,801	$	—		$	37,686		$	—		$	—	$	—		$	(37,686	)	$	2,321,801
Other revenues		540,966		819,474			148,971			354,566			152,828		23,708			(57,290	)		1,983,223
Intersegment revenue		—		(33,895	)		(37,686	)		(23,395	)		—		—			94,976			—

Revenues from external customers	$	2,862,767	$	785,579		$	148,971		$	331,171		$	152,828	$	23,708		$	—		$	4,305,024
Interest and investment income, including realized gains and (losses)		67,024		1,800			887			688			3,145		327,961			—			401,505

Total revenues	$	2,929,791	$	787,379		$	149,858		$	331,859		$	155,973	$	351,669		$	—		$	4,706,529

Depreciation and amortization		49,247		116,749			13,485			20,858			1,967		253			—			202,559
Interest expense		61		3,075			3			219			23		68,154			—			71,535
Earnings (loss) before income tax and minority interest		389,401		114,413			19,871			98,231			25,009		221,157			—			868,082
Income tax expense		150,042		43,706			7,591			37,524			9,553		(38,028	)		—			210,388
Minority interest		1,292		3,265			743			246			—		17,609			—			23,155
Net earnings (loss)	$	238,067	$	67,442		$	11,537		$	60,461		$	15,456	$	241,576			—		$	634,539
Assets		5,537,426		2,956,820			278,313			721,314			273,180		919,978			—			10,687,031
Goodwill		959,921		1,296,928			82,312			379,299			23,842		2,666			—			2,744,968

For the six months ended June 30, 2004:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total
Title premiums	$	2,337,396	$	—		$	81,392		$	—		$	—	$	—		$	(65,571	)	$	2,353,217
Other revenues		513,688		568,674			162,303			311,295			107,088		23,650			(50,561	)		1,636,137
Intersegment revenue		—		(29,106	)		(65,571	)		(21,455	)		—		—			116,132			—

Revenues from external customers	$	2,851,084	$	539,568		$	178,124		$	289,840		$	107,088	$	23,650		$	—		$	3,989,354
Interest and investment income, including realized gains and (losses)		44,743		(234	)		347			2,847			1,426		2,573			—			51,702

Total revenues	$	2,895,827	$	539,334		$	178,471		$	292,687		$	108,514	$	26,223		$	—		$	4,041,056

Depreciation and amortization		43,923		77,469			5,100			20,738			2,169		517			—			149,916
Interest expense		668		210			18			116			1		18,364			—			19,377
Earnings (loss) before income tax and minority interest		429,032		81,639			63,740			62,081			14,702		(48,301	)		—			602,893
Income tax expense		163,206		30,941			24,157			23,529			5,572		(18,306	)		—			229,099
Minority interest		456		—			1,016			—			—		28			—			1,500
Net earnings (loss)	$	265,370	$	50,698		$	38,567		$	38,552		$	9,130	$	(30,023	)		—			372,294
Assets		5,766,572		1,514,362			325,263			674,251			192,665		101,872			—			8,574,985
Goodwill		968,615		998,966			86,188			350,546			20,669		7,666			—			2,432,650

Title Insurance

This segment, consisting of title insurance underwriters and wholly-owned title insurance agencies, provides core title insurance and escrow services, and other title related products and services arising from the real estate closing process. During the second quarter of 2005, the Company re-evaluated its method of estimation for accruing agency title revenues and commissions and refined the method to take into account trends in direct premiums in addition to the historical information about agency premiums and commissions previously considered. This refinement resulted in the Company recording approximately $50 million in additional agency revenue in the second quarter of 2005 than it would have under its prior method. After related accruals for commissions and other associated expenses, the impact on net earnings of this adjustment was approximately $2 million.

Financial Institution Software and Services

The Financial Institution Software and Services segment focuses on two primary markets, financial institution processing and mortgage loan processing. The primary applications are software applications that function as the underlying infrastructure of a financial institution’s processing environment. These applications include core bank processing software, which banks use to maintain the primary records of their customer accounts, and core mortgage processing software, which lenders/servicers use to process and service mortgage loans. This segment also provides a number of complementary applications and services that interact directly with the core processing applications, including applications that facilitate interactions between the segment’s financial institution customers and their clients.

Lender Outsourcing Solutions

The Lender Outsourcing Solutions segment offers customized outsourced business process and information solutions to national lenders and loan servicers. This business provides loan facilitation services, which allows customers to outsource their title and closing requirements in accordance with pre-selected criteria, regardless of the geographic location of the borrower or property. Depending on customer requirements, the Company performs these services both in the traditional manner involving many manual steps, and through more automated processes, which significantly reduce the time required to complete the task. The Company also provides default management services, which allow customers to outsource the business processes necessary to take a loan and the underlying real estate securing the loan through the default and foreclosure process. The Company utilizes its own resources and networks established with independent contractors to provide outsourcing solutions. Included in the second quarter results of this segment in 2005 was an approximate $9.3 million impairment charge relating to the write-down of customer relationship intangibles due to the loss of specific customers.

Information Services

In the Information Services segment, the Company operates a real estate-related information services business. The Company’s real estate-related information services are utilized by mortgage lenders, investors and real estate professionals to complete residential real estate transactions throughout the U.S. The Company offers a comprehensive suite of applications and services spanning the entire home purchase and ownership life cycle, from purchase through closing, refinancing and resale.

Specialty Insurance

This segment, consisting of various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies.

Corporate and Other

The corporate segment consists of the operations of the parent holding company, smaller entities that do not fit in other segment classifications including the Company’s leasing operations, as well as the issuance and repayment of corporate debt obligations.

Note I — Dividends and Stock Repurchase Program

On January 26, 2005, the Company’s Board of Directors declared a cash dividend of $0.25 per share, payable on March 24, 2005, to stockholders of record as of March 10, 2005. On March 9, 2005, the Company’s Board of Directors declared a special cash dividend of $10.00 per share payable on March 28, 2005 to stockholders of record as of March 21, 2005. On April 26, 2005, the Company’s Board of Directors declared a cash dividend of $0.25 per share, payable on June 21, 2005, to stockholders of record as of June 7, 2005. On July 26, 2005, the Company’s Board of Directors declared a cash dividend of $0.25 per share, payable on September 22, 2005, to stockholders of record as of September 8, 2005.

On April 24, 2002, the Company’s Board of Directors approved a three-year stock repurchase program, whereby the Company plans to devote a portion of its annual cash flow from operations to the systematic repurchase of shares of its common stock. Purchases may be made by the Company from time to time in the open market, in block purchases or in privately negotiated transactions. On April 6, 2005, the Company acquired 2,250,000 shares at a purchase price of $31.50 per share of Company’s common stock from ALLTEL.

On April 25, 2005, the Company’s Board of Directors approved another three-year stock repurchase program similar to the 2002 plan which authorizes the repurchase of up to 10 million shares.

Note J — Pension and Postretirement Benefits

The following details the Company’s periodic (income) expense for pension and postretirement benefits:


	For the Three Months Ended June 30,
	2005			2004			2005			2004
	Pension Benefits						Postretirement Benefits
	(In thousands, except per share amounts)
Service cost	$	315		$	—		$	38		$	50
Interest cost		2,312			2,198			296			320
Expected return on assets		(1,959	)		(1,788	)		—			—
Amortization of prior service cost		—			—			(384	)		(674	)
Amortization of actuarial loss		2,212			1,734			137			81

Total net periodic (income) expense	$	2,880		$	2,144		$	87		$	(223	)


	For the Six Months Ended June 30,
	2005			2004			2005			2004
	Pension Benefits						Postretirement Benefits
	(In thousands, except per share amounts)
Service cost	$	630		$	—		$	76		$	103
Interest cost		4,624			4,325			592			662
Expected return on assets		(3,918	)		(3,565	)		—			—
Amortization of prior service cost		—			—			(768	)		(1,352	)
Amortization of actuarial loss		4,424			3,502			274			229

Total net periodic (income) expense	$	5,760		$	4,262		$	174		$	(358	)

There have been no material changes to the Company’s projected benefit payments under these plans since December 31, 2004.

Note K — Legal Proceedings

In the ordinary course of business, the Company is involved in various pending and threatened litigation matters related to its operations, some of which include claims for punitive or exemplary damages. The Company believes that no actions, other than those listed below, depart from customary litigation incidental to its business. The Company has accrued for all probable and estimable losses. The Company believes the resolution of all pending and threatened litigation will not have a material effect on its results of operations, financial position or liquidity.

Several class actions are pending in Ohio, Pennsylvania and Florida alleging improper premiums were charged for title insurance. The cases allege that the named defendant companies failed to provide notice of premium discounts to consumers refinancing their mortgages, and failed to give discounts in refinancing transactions in violation of the filed rates. The actions seek refunds of the premiums charged and punitive damages. Recently, the court’s order denying class certification in one of the Ohio actions was reversed and the case was remanded to the trial court for further proceedings.

A class action in California alleges that the Company violated the Real Estate Settlement Procedures Act (“RESPA”) and state law by giving favorable discounts or rates to builders and developers. The action seeks refunds of the premiums charged and additional damages. The Company intends to vigorously defend this action.

A shareholder derivative action was filed in Florida on February 11, 2005 alleging that the Company’s directors and certain executive officers breached their fiduciary and other duties, and exposed the Company to potential fines, penalties and suits in the future, by permitting so called contingent commissions to obtain business. The Company and the directors and executive offers named as defendants filed Motions to Dismiss the action on June 3, 2005. The plaintiff abandoned his original complaint and responded to the motions by filing an amended Complaint on July 13, 2005, and the Company, along with the directors and executive officers named as defendants, must respond to the amended Complaint by August 29, 2005. The amended complaint repeats the allegations of the original complaint and adds allegations about “captive reinsurance” programs, which the Company continues to believe were lawful. These “captive reinsurance” programs are the subject of investigations by several state departments of insurance and attorney generals. The Company intends to vigorously defend this action.

The Company and its subsidiaries FIS and FI are defendants in a civil lawsuit brought by an organization that formerly acted as a sales agent for Alltel Information Services, the predecessor to FI, in China. The suit, which is pending in state court in Monterey County, CA, seeks to recover damages for an alleged breach of the agency contract. The Company intends to defend this case vigorously. The plaintiff in the case has made allegations that the Company violated the Foreign Corrupt Practices Act (FCPA) in connection with its dealings involving a bank customer in China. The Company is cooperating with the Securities and Exchange Commission and the U.S. Department of Justice in connection with their inquiry into these allegations. The Company and its counsel are in the process of investigating these allegations. Based on the results and extent of the investigations completed to date, the Company does not believe that there have been any violations of the FCPA by the Company, or that the ultimate disposition of these allegations or the lawsuit will have a material adverse impact on the Company’s financial position, results of operations or cash flows.

Several state departments of insurance and attorney generals are investigating so called “captive reinsurance” programs whereby some of the Company’s title insurance underwriters reinsured policies through reinsurance companies owned or affiliated with brokers, builders or bankers. Some investigating agencies claim these programs unlawfully compensated customers for the referral of title insurance business. Although the Company believed and continues to believe the programs were lawful, the programs have been discontinued. The Company negotiated a settlement with the California Department of Insurance with respect to that department’s inquiry into captive reinsurance programs in the title insurance industry. Under the terms of the settlement, the Company will refund approximately $7.7 million to those consumers whose California property was subject to a captive reinsurance arrangement and will also pay a penalty of $5.6 million. As part of the settlement, the Company denied any wrongdoing. The Company continues to cooperate with other investigating authorities, and no other actions have been filed by the authorities against the Company or its underwriters.

Note L — Subsequent Events

Service Link, L.P.

On July 29, 2005, the Company acquired Service Link, L.P. (“Service Link”) a national provider of centralized mortgage and residential real estate title and closing services to major financial institutions and institutional lenders. The acquisition price was approximately $110 million in cash.

Distribution of Fidelity National Title Group, Inc.

On July 6, 2005, the Company’s wholly owned subsidiary, Fidelity National Title Group, Inc. (“FNT”) filed a Form S-1 registration statement with the SEC. The registration statement described a restructuring that will result in FNT becoming the parent company for the Company’s title insurance businesses. In connection with this restructuring, a pro rata distribution of shares representing 17.5% of the outstanding common stock of FNT will be made to the Company’s shareholders. This distribution will be taxable to the Company’s shareholders. Following the distribution, FNT will be a majority-owned subsidiary of FNF and will be a separate registrant reporting its results on a stand-alone basis. The Company will continue to consolidate FNT in our results and the Company will begin recording minority interest liabilities and expense relating to the 17.5% minority interest. This restructuring is also a taxable transaction to the Company. The amount of the taxable gain will not be determinable until the distribution occurs, which the Company currently anticipates will occur in the third quarter of 2005.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements regarding our expectations, hopes, intentions or strategies regarding the future. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. It is important to note that our actual results could vary materially from those forward-looking statements contained herein due to many factors, including, but not limited to: general economic and business conditions, including interest rate fluctuations and general volatility in the capital markets; changes in the performance of the real estate markets; the impact of competitive products and pricing; success of operating initiatives; adverse publicity; the ability to identify businesses to be acquired; availability of qualified personnel; employee benefits costs and changes in, or the failure to comply with, government regulations and other risks detailed in our filings with the Securities and Exchange Commission.

The following discussion should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

Overview

We are the largest title insurance company in the United States. Our title insurance underwriters — Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title — together issued approximately 30.5% of all title insurance policy premiums issued nationally during 2004. We are also a leading provider of technology solutions, processing services, and information services to the financial services and real estate industries. Over 2,400 financial institutions use our services, including 45 of the 50 largest banks in the U.S. Our applications process over 50% of all U.S. residential mortgage loans by dollar volume with balances exceeding $3.6 trillion, and over 235 million deposit accounts and non-mortgage consumer loans and leases are processed on our core bank processing platform. We also provide customized business process outsourcing related to aspects of the origination and management of mortgage loans to national lenders and loan servicers. Our information services, including our property data and real estate-related services, are used by mortgage lenders, mortgage investors and real estate professionals to complete residential real estate transactions throughout the U.S. We provide information services that span the entire home purchase and ownership life cycle, from contact through closing, refinancing and resale.

We have six reporting segments:

• Title Insurance. The title insurance segment consists of our title insurance underwriters and our wholly-owned title insurance agencies. The title segment provides core title insurance and escrow and other title related services.

• Specialty Insurance. The specialty insurance segment, consisting of our various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies.

• Financial Institution Software and Services. The financial institution software and services segment consists primarily of the operations of Fidelity Information Services, Inc. (“FI”), which was acquired on April 1, 2003 and subsequent acquisitions of WebTone, Inc. (“Webtone”), InterCept, Inc. (“InterCept”), KORDOBA Gesellschaft fur Bankensoftware mbH & Co. KG, Munich (“Kordoba”), Sanchez Computer Associates, Inc. (“Sanchez”) and Aurum Technology, Inc. (“Aurum”). This segment focuses on two primary markets, financial institution processing and mortgage loan processing.

• Lender Outsourcing Solutions. The lender outsourcing solutions segment includes our loan facilitation services, which consist of centralized, customized title agency and closing services, which we offer to first mortgage, refinance, home equity and sub-prime lenders, and our default management services, which include foreclosure posting and publishing services, loan portfolio services, field services and property management. These services allow our customers to outsource the business processes necessary to take a loan and the underlying real estate securing the loan though the default and foreclosure process.

• Information Services. The information services segment offers real estate related information services. Included in the information services we provide are property appraisal and valuation services, property records information, real estate tax services, borrower credit and flood zone information and certification and multiple listing software and services.

• Corporate and Other. The corporate and other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, including the issuance and repayment of corporate debt obligations, the operations of our wholly-owned equipment-leasing subsidiary and other small operations.

Our title insurance and specialty insurance segments make up our insurance underwriting businesses, while our financial institution software and services, lender outsourcing solutions and information services segments make up the technology solutions, processing and information-based services businesses of our subsidiary Fidelity National Information Services, Inc. (“FIS”).

On July 6, 2005, our wholly owned subsidiary, Fidelity National Title Group, Inc. (“FNT”) filed a Form S-1 registration statement with the SEC. The registration statement described a restructuring that will result in FNT becoming the parent company for our title insurance businesses. In connection with this restructuring, a pro rata distribution of shares representing 17.5% of the outstanding common stock of FNT will be made to our shareholders. This distribution will be taxable to our shareholders. Following the distribution, FNT will be a majority-owned subsidiary of FNF and will be a separate registrant reporting its results on a stand-alone basis. We will continue to consolidate FNT in our results and we will begin recording minority interest liabilities and expense relating to the 17.5% minority interest. This restructuring is also a taxable transaction to FNF. The amount of the taxable gain will not be determinable until the distribution occurs, which the Company currently anticipates will occur in the third quarter of 2005.

Factors Affecting Comparability

Our Condensed Consolidated Statements of Earnings for the six months ended June 30, 2005 include the results of operations of InterCept, Kordoba, Sanchez, Aurum and American Pioneer Title Insurance Company, Inc. (“APTIC”), which were acquired on various dates during 2004, as discussed in Note B of Notes to Condensed Consolidated Financial Statements. The acquisitions may affect the comparability of our 2005 and 2004 results of operations, particularly with respect to our financial institution software and services segment in which the operating results of all these acquisitions, with the exception of APTIC, are reported.

Results of Operations

Consolidated Results of Operations

Net Earnings. The following table presents certain financial data for the years indicated:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands,				(Dollars in thousands,
	except per share data)				except per share data)
Total revenue	$	2,434,891	$	2,204,238	$	4,706,529	$	4,041,056

Total expenses	$	2,097,089	$	1,844,200	$	3,838,447	$	3,438,163

Net earnings	$	190,042	$	222,053	$	634,539	$	372,294

Basic net earnings per share	$	1.10	$	1.29	$	3.67	$	2.19

Diluted net earnings per share	$	1.07	$	1.26	$	3.58	$	2.12

Revenue. The following table presents the components of our revenue:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Direct title insurance premiums	$	583,035	$	601,444	$	1,060,855	$	1,066,392
Agency title insurance premiums		750,166		680,492		1,260,946		1,286,825
Escrow and other title related fees		298,812		295,255		540,966		513,840
Financial institution software and services		405,015		296,347		785,579		539,568
Lender outsourcing solutions (excludes title premiums of $19.4 million, $33.0 million, $37.7 million and $65.6 million in the three month and six month periods ended June 30, 2005 and 2004, respectively, that are included in title premiums above)		77,775		88,187		148,971		162,303
Information services		176,366		147,817		331,171		289,840
Specialty insurance		77,320		58,418		152,828		107,088
Interest and investment income		31,290		16,024		57,714		30,551
Realized gains and losses, net		21,699		8,678		25,582		21,151
Gain on issuance of subsidiary stock		—		—		318,209		—
Other income		13,413		11,576		23,708		23,498

Total revenue	$	2,434,891	$	2,204,238	$	4,706,529	$	4,041,056

Orders opened by direct title operations (1)		990,100		925,200		1,867,000		1,980,800
Orders closed by direct title operations (1)		637,700		781,900		1,197,100		1,415,000


(1)		These measures are used by management to judge productivity and are a measure of transaction volume for our title businesses. An order is opened when we receive a customer order and is closed when the related real estate transaction closes, which typically takes 45-60 days from the opening of an order.

Revenues

Total consolidated revenues for the second quarter of 2005 increased $230.7 million or 10.5% to $2,434.9 million. This increase in consolidated revenue in the second quarter of 2005 was primarily due to the increases of $108.7 million in the financial institution software and services segment, $54.8 million in title related revenues, $28.5 million in the information services segment and $18.9 million in the specialty insurance segment. These increases were offset by a decrease of $10.4 million in the lender outsourcing solutions segment operating revenues from loan facilitation services. The increase in the operating revenues of the financial institution software and services segment was due both to the inclusion of the results of numerous 2004 acquisitions in this segment in the 2005 quarter which amounted to $85.8 million of the increase and organic growth of $22.9 million. Descriptions of the increases in the other segments can be found in the segment results section to follow. Total consolidated revenues for the first six months of 2005 increased $665.5 million to $4,706.5 million. Included in this increase was a net $318.2 million non-operating gain relating to the issuance of subsidiary stock in the sale of a minority interest in FIS (see Note C to our condensed consolidated financial statements included in this report). Excluding the net gain, total revenue increased $347.3 million or 8.6% as compared to the prior year six-month period.

Consolidated title insurance premiums for the three and six-month periods were as follows:


	Three months ended June 30,										Six months ended June 30,
	2005		%			2004		%			2005		%			2004		%
	(Dollars in thousands)										(Dollars in thousands)
Title premiums from direct operations (1)	$	583,035		43.7	%	$	601,444		46.9	%	$	1,060,855		45.7	%	$	1,066,392		45.3	%
Title premiums from agency operations (1)		750,166		56.3	%		680,492		53.1	%		1,260,946		54.3	%		1,286,825		54.7	%

Total	$	1,333,201		100.0	%	$	1,281,936		100.0	%	$	2,321,801		100.0	%	$	2,353,217		100.0	%


(1)		Includes premiums reported in the title segment and lender outsourcing solutions segment.

Title insurance premiums increased 4.0% to $1,333.2 million in the second quarter of 2005 as compared with the second quarter of 2004. A decrease of $18.4 million or 3.1% in direct premiums was offset by a $69.7 million or 10.2% increase in premiums from agency operations. During the second quarter of 2005, we re-evaluated our method of estimation for accruing agency title revenues and commissions and refined the method which resulted in the Company recording approximately $50 million in additional agency revenue in the second quarter than it would have under its prior method. The impact on net earnings of this adjustment was approximately $2 million. The increase in agency premiums as compared to an increase in direct premiums has a much smaller effect on profitability as our margins as a percentage of premiums for agency business are significantly lower than the margins realized from our direct operations due to commissions paid to our agents and other costs related to agency business. The decreased level of direct title premiums is the result of a decline in closed order levels during the current year quarter as compared to the prior year period although this decrease was offset by an increase in the average fee per file as compared with the prior year. The drop experienced in closed orders reflects a slowing refinance market reflecting the lower open order volumes of the past three quarters relative to the prior year trend. Although the Mortgage Bankers Association’s (MBA) statistics showed that approximately 41% of new loan originations in the second quarter of 2005 were refinance transactions as compared with approximately 40% in the second quarter of 2004, the current quarter revenue reflects refinance volumes resulting from originations in the first quarter of 2005, which when compared to the first quarter of 2004 were considerably lower at 46% than the 57% of transactions in the first quarter of 2004, according to the MBA. The increase in fee per file is the result of the decreased levels of refinance-driven activity, which typically have lower fees, in the second quarter and first six months of 2005 as compared with the prior year quarter and first six months, as well as the appreciation of home prices over the past year.

Trends in escrow and other title related fees are primarily related to title insurance activity generated by our direct operations. Escrow and other title related fees during the second quarters of 2005 and 2004 fluctuated in a pattern generally consistent with the fluctuation in direct title insurance premiums and order counts. Escrow and other title related fees were $298.8 million and $295.3 million for the second quarters of 2005 and 2004, respectively and $541.0 million and $513.8 million for the first six months of 2005 and 2004, respectively.

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 in the second quarter of 2005 was $31.3 million, compared with $16.0 million in the second quarter of 2004, an increase of $15.3 million, or 95.3%. The increase in interest and investment income in the second quarter and first six months of 2005 is due primarily to an increase in the short-term investment and fixed income asset base during the current year periods compared to the prior year and the increasing interest rate environment.

Net realized gains for the second quarter were $21.7 million compared with net realized gains of $8.7 million for the corresponding period of the prior year. The increase was primarily the result of capital gains realized on a number of securities sold during the second quarter of 2005. Net realized gains for the first six months of 2005 were $25.6 million as compared to $21.2 million for the same period of the prior year.

Expenses. The following table presents the components of our expenses:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Personnel costs	$	808,115	$	721,537	$	1,555,192	$	1,358,133
Other operating expenses		449,707		422,357		843,524		758,083
Agent commissions		576,205		529,974		967,671		1,004,338
Depreciation and amortization		105,232		79,306		202,559		149,916
Provision for claim losses		110,802		79,581		197,966		148,316
Interest expense		47,028		11,445		71,535		19,377

Total expenses	$	2,097,089	$	1,844,200	$	3,838,447	$	3,438,163

Our operating expenses consist primarily of personnel costs and other operating expenses, which in our business are incurred as orders are received and processed. Title insurance premiums, escrow and other title related fees are generally recognized as revenue at the time the underlying transaction closes. As a result, direct title insurance revenue 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 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 does exist in reducing variable costs and certain fixed costs are incurred regardless of revenue levels.

Personnel costs include base salaries, commissions, benefits and bonuses paid to employees, and are one of our most significant operating expenses. Personnel costs totaled $808.1 million and $721.5 million for the second quarters of 2005 and 2004, respectively. Personnel costs as a percentage of total revenue were 33.2% in the second quarter of 2005, and 32.7% for the second quarter of 2004. The increase of $86.6 million in personnel costs principally resulted from increases of $49.0 million in the financial institution software and services segment, $21.6 million in the title segment and $13.8 million in the corporate and other segment, the last of which is primarily the result of increased stock compensation expense relating to stock option grants made in the third and fourth quarters of 2004 and the first quarter of 2005. Personnel costs as a percentage of total revenue (excluding the $318.2 million gain on issuance of subsidiary stock), were 35.4% for the first six months of 2005, and 33.6% for the first six months of 2004.

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), postage and courier services, computer services, professional services, advertising expenses, general insurance and trade and notes receivable allowances. Other operating expenses totaled $449.7 million and $422.4 million for the second quarter of 2005 and 2004, respectively and $843.5 million and $758.1 million for the first six months of 2005 and 2004, respectively. The increase in the first six months of 2005 as compared to 2004 was primarily the result of the inclusion of a full six months of operating expenses in 2005 for acquisitions made by the financial institution software and services segment in 2004.

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 premiums and agent commissions:


	Three months ended June 30,										Six months ended June 30,
	2005		%			2004		%			2005		%			2004		%
	(Dollars in thousands)										(Dollars in thousands)
Agent premiums	$	750,166		100.0	%	$	680,492		100.0	%	$	1,260,946		100.0	%	$	1,286,825		100.0	%
Agent commissions		576,205		76.8	%		529,974		77.9	%		967,671		76.7	%		1,004,338		78.0	%

Net	$	173,961		23.2	%	$	150,518		22.1	%	$	293,275		23.3	%	$	282,487		22.0	%

Net margin from agency title insurance premiums in the 2005 periods compared with 2004 increased as a percentage of total agency premiums due to the Company writing a higher percentage of policies in states where we pay lower commission rates.

Depreciation and amortization was $105.2 million in the second quarter of 2005 as compared to $79.3 million in the second quarter of 2004. The increase in depreciation and amortization of $25.9 million is primarily due to increased amortization of intangible assets and software acquired during 2004 by the financial institution software and services segment and an impairment charge of approximately $9.3 million on customer relationship intangibles in our lender outsourcing solutions segment due to the loss of specific customers.

The provision for claim losses includes an estimate of anticipated title and title related claims, escrow losses and homeowners and home warranty claims relating to our specialty insurance segment. 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. We monitor our claims loss experience on a continual basis and adjust the provision for claim losses accordingly. The claim loss provision for title insurance was $86.7 million in the second quarter of 2005 as compared to $67.0 million in the second quarter of 2004. Our claim loss provision as a percentage of total title premiums was 6.5% and 5.2% in the second quarter of 2005 and 2004, respectively. The increase is attributable to higher than expected payment levels, especially for individually significant claims, and a return to a more normalized environment with the volume of resale transactions exceeding the refinance transactions. The claim loss provision of our specialty insurance segment was $24.1 million and $12.6 million in the second quarter of 2005 and 2004, respectively with the increase resulting from the increase in volume of business. Total claim loss expense recorded for the first six months of 2005 and 2004 was $198.0 million and $148.3 million, respectively.

Interest expense was $47.0 million and $11.4 million in the second quarter of 2005 and 2004, respectively. The increase of $35.6 million relates primarily to an increase in average borrowings as compared to the prior year including the $2.8 billion borrowed on March 9, 2005 as part of the FIS recapitalization transaction. Interest expense was $71.5 million and $19.4 million for the first six months of 2005 and 2004, respectively.

Income tax expense as a percentage of earnings before income taxes was 38.5% for the second quarter of 2005 and 38.0% for the second quarter of 2004. Income tax expense as a percentage of earnings before income taxes excluding the gain on the issuance of subsidiary stock, for which no taxes were provided, was 38.3% for the first six months of 2005 and 38.0% for the first six months of 2004. No income taxes were provided for the gain on the issuance of subsidiary stock as the Company’s tax basis in its investment in FIS exceeded the book basis on the date of the sale. Income tax expense as a percentage of earnings before income taxes is attributable to our estimate of ultimate income tax liability, and changes in the characteristics of net earnings year to year.

Minority interest for the second quarter of 2005 was $17.7 million as compared with $1.1 million for the corresponding prior year period. The increase in minority interest expense is attributable to earnings generated following the sale of a 25% interest in FIS and also to the minority interest relating to our Kordoba investment which we acquired in the fourth quarter of 2004. Minority interest for the first six months of 2005 was $23.2 million as compared with $1.5 million for the corresponding prior year period

Net earnings were $190.0 million and $222.1 million for the second quarters of 2005 and 2004, respectively and $634.5 million ($316.3 million excluding the $318.2 million gain on sale of subsidiary stock) and $372.3 million for the first six months of 2005 and 2004, respectively.

Segment Results of Operations

Title Segment


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2005			2004		2005		2004
	(Dollars in thousands)					(Dollars in thousands)
Revenues	$	1,675,125		$	1,590,229	$	2,929,791	$	2,895,827

Personnel costs		470,355			448,802		888,245		826,139
Other operating expenses		239,563			226,216		446,562		400,278
Agent commissions		595,620			562,936		1,005,357		1,069,909
Depreciation and amortization		24,418			23,734		49,247		43,923
Provision for claim losses		86,659			66,958		150,918		125,878
Interest expense		(136	)		300		61		668

Total expenses		1,416,479			1,328,946		2,540,390		2,466,795

Earnings before income taxes and minority interest	$	258,646		$	261,283	$	389,401	$	429,032

Revenue

Revenue for the title insurance segment includes direct and agency title premiums, including those earned from the lender outsourcing solutions segment, as well as escrow and other title related fees, interest and investment income and realized gains and losses. For a discussion of title segment premiums and escrow and other title related fees, see the Condensed Consolidated Results of Operations revenues discussion above.

Expenses

Personnel costs were $470.4 million and $448.8 million in the second quarters of 2005 and 2004, respectively and generally trend with revenues from our direct operations, but have increased in the current quarter primarily due to a recent trend in salary increases relating to increased competition for top employees and the strong real estate cycle. We have taken significant measures to maintain appropriate personnel levels and costs relative to the volume and mix of business while maintaining customer service standards and quality controls. We will continue to monitor prevailing market conditions and will adjust personnel costs in accordance with expected activity. Personnel costs were $888.2 million and $826.1 million in the first six months of 2005 and 2004, respectively.

Other operating expenses were $239.6 million and $226.2 million in the second quarters of 2005 and 2004, respectively. The increase in the second quarter of 2005 was impacted by a $8.3 million additional charge related to the settlement with the California Department of Insurance (see Note K to our Condensed Consolidated financial statements included in this report). Other operating expenses were $446.6 million and $400.3 million in the first six months of 2005 and 2004, respectively.

Agent commissions were $595.6 million and $562.9 million in the second quarters of 2005 and 2004, respectively and $1,005.4 million and $1,069.9 million in the first six months of 2005 and 2004, respectively and as noted in the consolidated results of operations discussion fluctuate with agent commissions.

As noted in the Condensed Consolidated Results of Operations discussion, the provision for 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. We monitor our claims loss experience on a continual basis and adjust the provision for claim losses accordingly.

Specialty Insurance Segment


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	79,090	$	59,125	$	155,973	$	108,514

Personnel costs		9,127		7,795		17,552		14,316
Other operating expenses		33,372		29,698		64,397		54,894
Depreciation and amortization		948		1,031		1,967		2,169
Provision for claim losses		24,143		12,618		47,048		22,433

Total expenses		67,590		51,142		130,964		93,812

Earnings before income taxes and minority interest	$	11,500	$	7,983	$	25,009	$	14,702

Revenues

Revenues from specialty insurance include revenues from the issuance of flood, home warranty and homeowners insurance policies and were $79.1 million and $59.1 million for the second quarters of 2005 and 2004, respectively. Specialty insurance revenue increased in 2005 as compared with 2004 as a result of organic growth in our homeowners insurance and flood renewal insurance businesses. Revenues for this segment were $156.0 million and $108.5 million for the first six months of 2005 and 2004, respectively.

Expenses

Personnel costs were $9.1 million and $7.8 million in the second quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 11.5% and 13.1% in the second quarters of 2005 and 2004, respectively. The decrease as a percentage of revenues in the 2005 period is primarily the result of organic growth of the business lines, which has not required a proportionate increase in personnel. Personnel costs were $17.6 million and $14.3 million in the first six months of 2005 and 2004 respectively.

Other operating expenses in the specialty insurance segment were $33.3 million and $29.7 million in the second quarters of 2005 and 2004, respectively. As a percentage of revenues, other operating expenses were 42.2% and 50.2% in the second quarters of 2005 and 2004, respectively. The decrease as a percentage of revenues in the 2005 period is primarily the result of organic growth of the business lines, which has not required a proportionate increase in these costs. Other operating expenses were $64.4 million and $54.9 million in the first six months of 2005 and 2004 respectively.

The provision for claim loss was $24.1 million and $12.6 million in the second quarters of 2005 and 2004, respectively. The increase was primarily the result of increased activity in the homeowners insurance business. The provision for claim loss was $47.0 million and $22.4 million in the first six months of 2005 and 2004, respectively. We monitor our claims loss experience on a continual basis and adjust the provision for claim losses accordingly.

Financial Institution Software and Services Segment


	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2005			2004		2005		2004
	(Dollars in thousands)					(Dollars in thousands)
Revenues	$	426,022		$	314,563	$	821,274	$	568,440

Personnel costs		225,154			176,219		450,940		324,915
Other operating expenses		76,145			54,137		136,097		84,207
Depreciation and amortization		57,837			40,927		116,749		77,469
Interest expense		(1,017	)		205		3,075		210

Total expenses		358,119			271,488		706,861		486,801

Earnings before income taxes and minority interest	$	67,903		$	43,075	$	114,413	$	81,639

Revenues

Revenues from financial institution software and services were $426.0 million and $314.6 million in the second quarters of 2005 and 2004, respectively. The $111.5 million increase in revenues in the 2005 second quarter compared with the 2004 period relates primarily to recording revenues from the 2004 acquisitions of Kordoba and InterCept, along with a few smaller acquisitions. The 2004 acquisitions of Kordoba and InterCept and other smaller acquisitions contributed $87.3 million of the increase in the 2005 period as compared with the prior year quarter. Approximately $22.5 million of the increase results from organic growth in the businesses owned during both periods. Included in the 2005 and 2004 second quarters are $18.2 million and $18.5 million, respectively, of intersegment revenues that this segment earns relating to IT software and support services that it provides to the remainder of the Company. Revenues for this segment were $821.2 million and $568.4 million for the first six months of 2005 and 2004, respectively, with $224.0 million of the $252.8 increase resulting from 2004 acquisitions.

Expenses

Personnel costs were $225.2 million and $176.2 million in the second quarters of 2005 and 2004, respectively. The increase in the 2005 quarter as compared to the prior year quarter is consistent with the increase in revenue. As a percentage of revenues, personnel costs were 52.8% and 56.0% in the second quarters of 2005 and 2004, respectively. Personnel costs were $450.9 million and $324.9 million for the first six months of 2005 and 2004, respectively with the increase also consistent with the increase in revenue for the same periods.

Other operating expenses were $76.2 million and $54.1 million in the second quarters of 2005 and 2004, respectively. The increase in other operating expenses is also consistent with the increases in revenue in this segment. Other operating expenses were $136.1 million and $84.2 million for the first six months of 2005 and 2004, respectively.

Depreciation and amortization costs were $57.8 million and $40.9 million in the second quarters of 2005 and 2004, respectively. The increase of $16.9 million relates primarily to the amortization of intangible assets and computer software acquired in the 2004 acquisitions.

Lender Outsourcing Solutions Segment


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	97,618	$	128,563	$	187,544	$	244,042

Personnel costs		35,092		38,275		68,678		78,052
Other operating expenses		42,899		52,773		85,507		97,132
Depreciation and amortization		11,535		2,410		13,485		5,100
Interest expense		1		8		3		18

Total expenses		89,527		93,466		167,673		180,302

Earnings before income taxes and minority Interest	$	8,091	$	35,097	$	19,871	$	63,740

Revenues

Revenues from lender outsourcing solutions relate primarily to revenues from both our loan facilitation services and default management services. Revenues from lender outsourcing solutions were $97.6 million and $128.6 million in the second quarters of 2005 and 2004, respectively. The decrease in revenues of $31.0 million, or 24.1%, is largely attributable to a decrease of $34.3 million in revenue from loan facilitation and other services compared with the prior year quarter. This decrease is primarily the result of lower volumes from our automated process for providing title agency services, due to increased mortgage interest rates which in turn reduced refinancing transactions in 2005 as compared with 2004. This decrease was partially offset by an increase of $3.3 million in default management services revenue. Revenues were $187.5 million and $244.0 million for the first six months of 2005 and 2004, respectively and the decrease was similarly impacted by the reduction in loan facilitation services in 2005 as compared with 2004.

Expenses

Personnel costs were $35.1 million and $38.3 million in the second quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 35.9% and 29.8% in the 2005 and 2004 periods. The increase in 2005 as a percentage of revenues for the quarter is primarily the result of the reduction in revenues from the automated title agency process in 2005 as compared with 2004 as labor costs relating to these revenues are not as closely related to revenue volumes in this line of business. Personnel costs were $68.8 million and $78.1 million in the first six months of 2005 and 2004, respectively.

Other operating expenses in the lender outsourcing solutions segment consist primarily of professional fees, data processing costs, costs to purchase real estate data and other expenses. Other operating expenses were $42.9 million and $52.8 million in the second quarters of 2005 and 2004, respectively. Other operating expenses were $85.5 million and $97.1 million for the first six months of 2005 and 2004, respectively.

Information Services Segment


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	189,557	$	161,851	$	355,254	$	314,142

Personnel costs		44,705		40,494		88,843		82,957
Other operating expenses		78,889		77,732		147,103		148,250
Depreciation and amortization		10,363		10,786		20,858		20,738
Interest expense		162		54		219		116

Total expenses		134,119		129,066		257,023		252,061

Earnings before income taxes and minority interest	$	55,438	$	32,785	$	98,231	$	62,081

Revenues

Revenues from information services relate primarily to revenues from our property data and real estate related services. Revenues from information services in the second quarters of 2005 and 2004 were $189.6 million and $161.9 million, respectively, an increase of 17.1%. The increase was primarily attributable to increased revenues in our tax monitoring and 1031 transaction services businesses which are experiencing growth in market share in the strong real estate cycle. Revenues were $355.3 million and $314.1 million for the first six months of 2005 and 2004, respectively.

Expenses

Personnel costs were $44.7 million and $40.5 million for the second quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 23.6% and 25.0% in the 2005 and 2004 periods, respectively. Personnel costs were $88.8 million and $83.0 million in the first six months of 2005 and 2004, respectively.

Other operating expenses in the information services segment consist primarily of data processing costs, costs to purchase real estate data and other expenses. Other operating expenses were $78.9 million and $77.7 million for the second quarters of 2005 and 2004, respectively. As a percentage of revenues, other operating expenses were 41.6% and 48.0% in the second quarters of 2005 and 2004, respectively. The decrease as a percentage of revenues is primarily the result of the fact that the businesses that experienced the highest revenue growth do not require a corresponding increase in expenses and thus provide a higher margin. Other operating expenses were $147.1 million and $148.3 million in the first six months of 2005 and 2004, respectively.

Corporate and Other Segment

The corporate and other segment is made up of smaller entities that do not fit in our other segment classifications and certain corporate expenses. Revenues from this segment were $17.6 million and $12.6 million for the second quarters of 2005 and 2004, respectively. Operating expenses were $81.4 million and $32.8 million for the second quarters of 2005 and 2004, respectively. The increase in operating expense primarily relates to the increased interest expense of $37.1 million related to the increased borrowings relating to the recapitalization transaction entered into the first quarter of 2005 and increased stock compensation expense as noted in the consolidated results of operations. For the first six months of 2005

and 2004, revenues were $32.8 million (excluding the $318.9 million gain on sale of subsidiary stock) and $26.2 million. Operating expenses were $130.5 million and $74.5 million in the first six months of 2005 and 2004, respectively with the increase again relating to increased interest expense and stock based compensation expense.

Liquidity and Capital Resources

Cash Requirements. Our cash requirements include debt service, operating expenses, taxes, capital expenditures, systems development, treasury stock repurchases, business acquisitions and dividends on our common stock. 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 and borrowings through public debt offerings and existing credit facilities. Our short-term and long-term liquidity requirements are monitored regularly to match cash inflows with cash requirements. We forecast the daily 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 these projections.

We have $500.0 million of capacity under a shelf registration statement that may be used, subject to market conditions, to issue debt or other securities at our discretion. We presently intend to use the proceeds from the sale of any securities under the shelf registration statement primarily to finance strategic opportunities. While we seek to give ourselves flexibility with respect to meeting such needs, there can be no assurance that market conditions would permit us to sell such securities on acceptable terms at any given time, or at all.

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 executed 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 other distributions to us. As of December 31, 2004, $1,731.3 million of our net assets were restricted from dividend payments without prior approval from the Departments of Insurance. During 2005, our first tier title subsidiaries can pay or make distributions to us of approximately $209.8 million without prior approval. In connection with the restructuring transaction relating to our title insurance businesses we plan to receive cash dividends of approximately $295.0 million from FNT, of which $150.0 million is expected to be funded by new borrowings at FNT that will increase debt on a consolidated basis and $145.0 million by dividends paid by one of our title insurance subsidiaries. Our underwritten title companies, financial institution software and services companies, lender outsourcing businesses and information services companies collect revenue and pay operating expenses. However, they are not regulated to the same extent as our insurance subsidiaries. Positive cash flow from these subsidiaries is invested primarily in cash and cash equivalents. Also, the new FIS credit facility (discussed below) limits FIS’s ability to pay us dividends. The agreement limits cumulative distributions greater than $50 million, except for certain defined distributions and the proceeds of future potential equity and debt offerings. The threshold of $50 million may increase based on changes in FIS’s leverage ratio or achievement of certain cash flow targets.

Financing. On March 9, 2005, we completed a recapitalization plan of FIS (See Note C to our Condensed Consolidated financial statements included in this report.) FIS entered into $3.2 billion in senior credit facilities consisting of a $800.0 million Term Loan A facility, a $2.0 billion Term Loan B facility (collectively, The “Term Loan Facilities”) and a $400.0 million revolving credit facility (“Revolver”) with a consortium of lenders led by Bank of America. FIS fully drew upon the entire $2.8 billion in Term Loan Facilities to consummate the recapitalization. FIS used proceeds from the loans to repay the outstanding principal and interest on a $2.7 billion note it previously paid as a dividend to us. We in turn used these funds to pay $1.8 billion as a special cash dividend of $10.00 per share to our shareholders and $400 million to pay down our existing credit facility. The remainder will be used for general corporate purposes. Revolving credit borrowings and Term A Loans bear interest at a floating rate, which will be, at the Borrowers’ option, either the British Bankers Association LIBOR or base rate plus, in both cases, an applicable margin, which is subject to adjustment based on the senior secured leverage ratio of the Borrowers. The Term B Loans bear interest at either the British Bankers Association LIBOR plus 1.75% per annum or, at the Borrowers’ option, a base rate plus 0.75% per annum. The Borrowers may choose one month, two month, three month, six month, and to the extent available, nine month or one year LIBOR, which then applies for a period of that duration. Interest is due at the end of each interest period provided. For LIBOR loans that exceed three months, the interest is due three months after the beginning of such interest period. The Term Loan A matures in March, 2011, the Term Loan B in March, 2013, and the Revolver in March, 2011. The Term Loan Facilities are subject to quarterly amortization of principal in equal installments of .25% of the original principal amount with the remaining balance payable at maturity. In addition to the scheduled amortization, and with certain exceptions, the Term

Loan Facilities are subject to mandatory prepayment from excess cash flow, issuance of additional equity and debt and sales of certain assets. Voluntary prepayments of both the Term Loan Facilities and revolving loans and commitment reductions of the revolving credit facility are permitted at any time without fee upon proper notice and subject to minimum dollar requirements.

The new credit facilities contain affirmative, negative, and financial covenants customary for financings of this type, including, among other things, limits on the creation of liens, limits on the incurrence of indebtedness, restrictions on investments and dispositions, limitations on dividends and other restricted payments and capital expenditures, a minimum interest coverage ratio, and a maximum secured leverage ratio.

On November 8, 2004, FIS entered into a new credit agreement providing for a $500.0 million, 5-year revolving credit facility due November 8, 2009. The facility provided an option to increase the size of the credit facility an additional $100.0 million. This credit agreement bore interest at a variable rate based on leverage and was unsecured. The interest rate under the new credit agreement during the time it was outstanding was LIBOR plus 0.50%. In addition, FIS was required to pay a 0.15% commitment fee on the entire facility. On November 8, 2004, FIS drew down approximately $410 million to fund the acquisition of InterCept. On March 9, 2005, FIS repaid this facility with a portion of the net proceeds from our sale of a minority interest in FIS to a group of investors and terminated the agreement.

On November 5, 2003 we entered into a new credit agreement providing for a $700.0 million, 5-year revolving credit facility due November 4, 2008. The credit agreement bears interest at a variable rate based on the debt ratings assigned to us by certain independent agencies, and is unsecured. The current interest rate under this credit agreement is LIBOR plus 0.93%. In addition, we pay a 0.23% facility fee on the entire facility. As of June 30, 2005, the entire $700.0 million is available to us. On March 9, 2005, we used a portion of the proceeds received from the FIS note to pay this line down completely although we did not terminate this facility. Our credit agreement imposes certain affirmative and negative covenants on us relating to current debt ratings, certain financial ratios related to liquidity, net worth, capitalization, investments, acquisitions and restricted payments, and certain dividend restrictions. As of June 30, 2005, we were in compliance with all of our debt covenants.

Following the recapitalization, FIS is highly leveraged. As of June 30, 2005, it is paying interest on the term loan facilities at a rate of one month LIBOR plus 1.75% (4.96%). At that rate, the annual interest on the remaining $1,943.0 million of debt not swapped into a fixed rate obligation as described below would be $96.4 million. A one percent increase in the LIBOR rate would increase its annual debt service on this portion of the Term Loan Facilities by $19.4 million. The credit rating assigned to the Term Loan Facilities and Revolver by Standard & Poor’s is currently BB.

On April 11, 2005, the Company, through FIS, entered into interest rate swap agreements which have effectively fixed the interest rate at approximately 6.1% through April 2008 on $350 million of the Term Loan B Facility and at approximately 5.9% through April 2007 on an additional $350.0 million of the Term Loan B Facility. The estimated fair value of the cash flow hedges results in a liability to the Company of $6.1 million, as of June 30, 2005 which is included in the accompanying condensed consolidated balance sheet in accounts payable and accrued liabilities and as a component of accumulated other comprehensive earnings, net of deferred taxes.

During the second quarter of 2005, we began lending fixed maturity and equity securities to financial institutions in short-term security lending transactions. Our security lending policy requires that the cash received as collateral be 102% or more of the fair value of the loaned securities. These short-term security lending arrangements increase investment income with minimal risk. At June 30, 2005, we had security loans outstanding with a fair value of $155.3 million included in accounts payable and accrued liabilities and we held cash in the amount of $160.5 million as collateral for the loaned securities.

Seasonality. Historically, real estate transactions have produced seasonal revenue levels for title insurers. 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 fourth calendar quarter is typically the strongest in terms of revenue due to commercial entities desiring to complete transactions by year-end. Significant changes in interest rates may alter these traditional seasonal patterns due to the effect the cost of financing has on the volume of real estate transactions.

Contractual Obligations. Other than the borrowings and debt repayments related to the recapitalization of FIS, which obligations are described above, there have been no other material changes to our contractual obligations as presented in our 2004 Form 10K. See Note G to our Condensed Consolidated Financial Statements included in this report for a table showing our principal repayment obligations.

Capital Stock Transactions. On April 24, 2002, our Board of Directors approved a three-year stock repurchase program. Purchases are made by us from time to time in the open market, in block purchases or in privately negotiated transactions. From January 1, 2004, through December 31, 2004, we repurchased a total of 430,500 shares of common stock for $16.5 million, or an average price of $38.33. Additionally, on December 13, 2004, we entered into an agreement to repurchase 2,530,346 shares of Company common stock from Willis Stein & Partners (“Willis Stein”) and J.P. Morgan Chase, as escrow agent for the former stockholder of Aurum. We acquired Aurum in March 2004. The purchase price per share of $44.35 was a discount to the closing price of the Company’s common stock on December 13, 2004. On April 6, 2005, we acquired 2,250,000 shares at a purchase price of $31.50 per share of Company’s common stock from ALLTEL. On April 25, 2005, our Board of Directors approved another three-year stock repurchase program similar to the 2002 plan. This plan authorizes us to repurchase up to 10 million shares.

Equity Investments. Our equity investments are in public companies whose security prices are subject to significant volatility. Should the fair value of these investments fall below our cost bases and/or the financial condition or prospects of these companies deteriorate, we may determine in a future period that this decline in fair value is other-than-temporary, requiring that an impairment loss be recognized in the period such a determination is made.

Off-Balance Sheet Arrangements. Other than facility and equipment leasing arrangements, we do not engage in off-balance sheet financing activities. On June 29, 2004 we entered into an off-balance sheet financing arrangement (commonly referred to as a “synthetic lease”). The owner/lessor in this arrangement acquired land and various real property improvements associated with new construction of an office building in Jacksonville, Florida that will be part of our corporate campus and headquarters. The lease expires on September 28, 2011, with renewal subject to consent of the lessor and the lenders. The lessor is a third-party limited liability company. The synthetic lease facility provides for amounts up to $75.0 million. As of June 30, 2005, approximately $26.8 million had been drawn on the facility to finance land costs and related fees and expenses. The leases include guarantees by us of up to 86.5% of the outstanding lease balance, and options to purchase the facilities at the outstanding lease balance. The guarantee becomes effective if we decline to purchase the facilities at the end of the lease and also decline to renew the lease. The lessor financed the acquisition of the facilities through funding provided by third-party financial institutions. We have no affiliation or relationship with the lessor or any of its employees, directors or affiliates, and our transactions with the lessor are limited to the operating lease agreements and the associated rent expense that will be included in other operating expenses in the Consolidated Statements of Earnings after the end of the construction period.

We do not believe the lessor is a variable interest entity, as defined in FASB Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46”). In addition, we have verified that even if the lessor was determined to be a variable interest entity, we would not have to consolidate the lessor nor the assets and liabilities associated with the assets leased to us. This is because the assets leased by us will not exceed 50% of the total fair value of the lessor’s assets excluding any assets that should be excluded from such calculation under FIN 46, nor did the lessor finance 95% or more of the leased balance with non-recourse debt, target equity or similar funding.

In conducting our operations, we routinely hold customers’ assets in escrow, pending completion of real estate transactions. Certain of these amounts are maintained in segregated bank accounts and have not been included in the Consolidated Balance Sheets. 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. There were no investments or loans outstanding as of June 30, 2005 related to these arrangements.

Critical Accounting Policies

There have been no material changes in our critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2004, other than our refinement of estimation method relating to the accrual of agency revenues and commissions as noted in the results of operations discussion and Note H to our condensed consolidated financial statements.

Recent Accounting Pronouncements

In December 2004, the FASB issued FASB Statement No. 123R (“SFAS No. 123R”), “Share-Based Payment”, which requires that compensation cost relating to share-based payments be recognized in the Company’s financial statements. During 2003, the Company adopted the fair value recognition provision of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), for stock-based employee compensation, effective as of the beginning of 2003. The Company had elected to use the prospective method of transition, as permitted by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure” (“SFAS No. 148”). Under this method, stock-based employee compensation cost is recognized from the beginning of 2003 as if the fair value method of accounting had been used to account for all employee awards granted, modified, or settled in years beginning after December 31, 2002. SFAS No. 123R does not allow for the prospective method, but requires the recording of expense relating to the vesting of all unvested options beginning in the first quarter of 2006. Since we adopted SFAS No. 123 in 2003, the impact of recording additional expense in 2006 under SFAS No. 123R relating to options granted prior to January 1, 2003 is not expected be significant.

Item 3. Quantitative and Qualitative Disclosure about Market Risk

Our fixed maturity investments and borrowings are subject to interest rate risk. Increases and decreases in prevailing interest rates generally translate into decreases and increases in fair values of those instruments. Additionally, fair values of interest rate sensitive instruments may be affected by the creditworthiness of the issuer, prepayment options, relative values of alternative investments, the liquidity of the instrument and other general market conditions. Following the recapitalization, FIS is highly leveraged. As of June 30, 2005, it is paying interest on the term loan facilities at a rate of one month LIBOR plus 1.75%, or 4.96%. At that rate, the annual interest on the remaining $1,943.0 million of debt not swapped into a fixed rate as noted below would be $96.4 million. A one percent increase in the LIBOR rate would increase its annual debt service on the Term Loan Facilities by $19.4 million. The credit rating assigned to the Term Loan Facilities and Revolver by Standard & Poor’s is currently BB.

Other than noted above, there have been no material changes in the market risks described in our Annual Report on Form 10-K for the year ended December 31, 2004.

Item 4. Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are effective to provide reasonable assurance that our disclosure controls and procedures will timely alert them to material information required to be included in our periodic SEC reports.

There have been no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Part II: OTHER INFORMATION

Item 1. Legal Proceedings

In the ordinary course of business, we are involved in various pending and threatened litigation matters related to our operations, some of which include claims for punitive or exemplary damages. We believe that no actions, other than those listed below, depart from customary litigation incidental to our business and that the resolution of all pending and threatened litigation will not have a material effect on our results of operations, financial position or liquidity.

Several class actions are pending alleging improper premiums were charged for title insurance in Ohio (Dubin v. Security Union Title Insurance Company, filed on March 12, 2003, in the Court of Common Pleas, Cuyahoga County, Ohio and Markowitz v. Chicago Title Insurance Company, filed on February 4, 2004 in the Court of Common Pleas, Cuyahoga County, Ohio), Pennsylvania (Patterson v. Fidelity National Title Insurance Company of New York, filed on October 27, 2003 in the Court of Common Pleas of Allegheny County, Pennsylvania) and Florida (Thula v. American Pioneer, filed on September 24, 2004 in the Circuit Court of Seventeenth Judicial Circuit, Broward County; Figueroa v. Fidelity, filed on April 20, 2004 in the Circuit Court of 11th Judicial Circuit, Dade County; Grosso v. Fidelity National Title Insurance Company of New York, filed on August 31, 2004 in the Circuit Court of the Seventeenth Judicial Circuit, Broward County; Chereskin v. Fidelity National Title Insurance Company of New York, filed on September 21, 2004 in the Circuit Court, Fourth Judicial Circuit, Nassau County; and Turner v. Chicago Title Insurance Company, filed September 20, 2004 in the Circuit Court, Fourth Judicial District, in and for Nassau County, Florida). The cases allege that the named defendant companies failed to provide notice of premium discounts to consumers refinancing their mortgages, and failed to give discounts in refinancing transactions in violation of the filed rates. The actions seek refunds of the premiums charged and punitive damages. Recently, the court’s order denying class certification in one of the Ohio actions was reversed and the case was remanded to the trial court for further proceedings. The Company intends to vigorously defend these actions.

A class action in Michigan (Lewrenz v. Chicago Title Insurance Company, filed on May 9, 2000, in the U.S. District Court, Eastern District of Michigan, Southern Division) alleges the Company violated the Real Estate Settlement Procedures Act (“RESPA”) and state law by giving favorable discounts or rates to builders and developers. The actions seek refunds of the premiums charged and additional damages. We intend to continue to vigorously defend the California action.

A purported shareholder derivative action (McCabe v. Fidelity National Financial, Inc., et al.) was filed on February 11, 2005 in the U.S. District Court, Middle District of Florida, Jacksonville Division alleging that the Company’s directors and certain executive officers breached their fiduciary and other duties, and exposed the Company to potential fines, penalties and suits in the future, by permitting so called contingent commissions to obtain business. The Company and the directors and executive offers named as defendants filed Motions to Dismiss the action on June 3, 2005. The plaintiff abandoned his original complaint and responded to the motions by filing an amended Complaint on July 13, 2005, and the Company, along with the directors and executive officers named as defendants, must respond to the amended Complaint by August 29, 2005. The amended complaint repeats the allegations of the original complaint and adds allegations about “captive reinsurance” programs, which we continue to believe were lawful. These “captive reinsurance” programs are the subject of investigations by several state departments of insurance and attorney generals. We intend to vigorously defend this action.

The Company and its subsidiaries FIS and FNIS are defendants in a civil lawsuit (Grace & Digital Information Technology, Ltd. v. Fidelity National Financial, Inc., Fidelity National Information Services, Inc. and Fidelity Information Services, Inc., et al., filed on December 8, 2004 in the Superior Court of the State of California for the County of Monterey) brought by an organization that formerly acted as a sales agent for Alltel Information Services, the predecessor to FI, in China. The suit, which is pending, seeks to recover damages for an alleged breach of the agency contract. The Company intends to defend this case vigorously. The plaintiff in the case also has made allegations that the Company violated the Foreign Corrupt Practices Act (FCPA) in connection with its dealings involving a

bank customer in China. The Company is cooperating with the Securities and Exchange Commission and the U.S. Department of Justice in connection with their inquiry into these allegations. The Company and its counsel are in the process of investigating these allegations. Based on the results and extent of the investigations completed to date, the Company does not believe that there have been any violations of the FCPA by the Company, or that the ultimate disposition of these allegations or the lawsuit will have a material adverse impact on the Company’s financial position, results of operations or cash flows.

Several state departments of insurance and attorney generals are investigating so called “captive reinsurance” programs whereby some of our title insurance underwriters reinsured policies through reinsurance companies owned or affiliated with brokers, builders or bankers. Some investigating agencies claim these programs unlawfully compensated customers for the referral of title insurance business. Although we believed and continue to believe the programs were lawful, the programs have been discontinued. The Company successfully negotiated a settlement with the California Department of Insurance with respect to that department’s inquiry into captive reinsurance programs in the title insurance industry. Under the terms of the settlement, FNF will refund approximately $7.7 million to those consumers whose California property was subject to a captive reinsurance arrangement and will also pay a penalty of $5.6 million. As part of the settlement, FNF denied any wrongdoing. We continue to cooperate with other investigating authorities, and no other actions have been filed by the authorities against us or our underwriters.

Item 6. Exhibits

(a) Exhibits:


31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2		Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.


FIDELITY NATIONAL FINANCIAL, INC. (registrant)

By:	/s/ Alan L. Stinson

	Alan L. Stinson
	Executive Vice President, Chief Financial Officer
	(Principal Financial and Accounting Officer)	Date: August 4, 2005

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	a)		all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b)		any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 4, 2005
	By:	/s/ William P. Foley, II

		William P. Foley, II Chairman of the Board and Chief Executive Officer

	a)		designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b)		designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c)		evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d)		disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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Part I:	FINANCIAL INFORMATION

	Item 1.	Condensed Consolidated Financial Statements

		A.	Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004		3

		B.	Condensed Consolidated Statements of Earnings for the three and six month periods ended June 30, 2005 and 2004		4

		C.	Condensed Consolidated Statements of Comprehensive Earnings for the six months ended June 30, 2005 and 2004		5

		D.	Condensed Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2005		6

		E.	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and 2004		7

		F.	Notes to Condensed Consolidated Financial Statements		9

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations			20

	Item 3.	Quantitative and Qualitative Disclosure About Market Risk			33

	Item 4.	Controls and Procedures			33

Part II:	OTHER INFORMATION

	Item 1.	Legal Proceedings			34

	Item 6.	Exhibits and Reports on Form 8-K			35
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


Exhibit No.		Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification by Chief Executive Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2		Certification by Chief Financial Officer of Periodic Financial Reports pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.


Date: August 4, 2005
	By:	/s/ Alan L. Stinson

		Alan L. Stinson Executive Vice President and Chief Financial Officer

	1.		The periodic report containing financial statements to which this certificate is an exhibit fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934.

	2.		The information contained in the periodic report to which this certificate is an exhibit fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date: 8/4/05				/s/ William P. Foley, II

				William P. Foley, II Chief Executive Officer


Date: 8/4/05				/s/ Alan L. Stinson

				Alan L. Stinson Chief Financial Officer