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 September 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	(I.R.S. Employer
incorporation or organization)	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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES o NO þ

As of September 30, 2005, 173,526,846 shares of the Registrant’s Common Stock were outstanding.

Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)


	September 30,			December 31,
	2005			2004
	(Unaudited)
ASSETS
Investments:
Fixed maturities available for sale, at fair value, at September 30, 2005 includes $310,860 and $166,138 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	$	2,971,983		$	2,332,231
Equity securities, at fair value at September 30, 2005 includes $2,331 of pledged equities related to the securities lending program		162,476			135,465
Other long-term investments		169,372			190,456
Short-term investments, at fair value, at September 30, 2005 includes $398,422 and at December 31, 2004 includes $280,351 of pledged short-term investments related to secured trust deposits		1,032,857			688,124

Total investments		4,336,688			3,346,276
Cash and cash equivalents, at September 30, 2005 includes $301,794 and $174,360 of pledged cash related to secured trust deposits and the securities lending program, respectively, and at December 31, 2004 includes $195,200 of pledged cash related to secured trust deposits		637,977			331,222
Trade and notes receivables, net of allowance of $35,309 in 2005 and $36,254 in 2004		623,288			562,864
Goodwill		2,876,782			2,798,249
Prepaid expenses and other assets		589,656			431,756
Capitalized software		509,174			440,780
Other intangible assets		651,552			672,185
Title plants		310,280			302,201
Property and equipment, net		374,382			385,002

	$	10,909,779		$	9,270,535

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	1,234,001		$	948,882
Deferred revenue		453,433			394,811
Notes payable		3,114,003			1,370,556
Reserve for claim losses		1,061,321			998,170
Secured trust deposits		1,004,121			735,295
Deferred tax liabilities		123,497			103,167
Income taxes payable		96,548			689

		7,086,924			4,551,570
Minority interests and preferred stock of subsidiary		185,243			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 181,548,353 shares as of September 30, 2005 and 178,321,790 shares as of December 31, 2004		18			18
Additional paid-in capital		3,520,925			3,424,261
Retained earnings		467,128			1,515,215

		3,988,071			4,939,494
Accumulated other comprehensive loss		(72,691	)		(27,353	)
Unearned compensation		(13,281	)		(18,437	)
Treasury stock, 8,021,507 shares as of September 30, 2005 and 5,765,846 as of December 31, 2004, at cost		(264,487	)		(193,613	)

		3,637,612			4,700,091

	$	10,909,779		$	9,270,535

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands, except per share data)


	Three months ended					Nine months ended
	September 30,					September 30,
	2005		2004			2005		2004
	(Unaudited)					(Unaudited)
REVENUE:
Direct title insurance premiums	$	641,542	$	524,829		$	1,702,397	$	1,591,221
Agency title insurance premiums		763,242		744,193			2,024,188		2,031,018
Escrow and other title related fees		323,506		265,192			864,472		779,032
Financial institution software and services		371,665		306,829			1,157,244		846,397
Lender outsourcing solutions (excludes title premiums of $22.9 million, $23.5 million, $60.6 million and $104.9 million in the three month and nine month periods ended September 30, 2005 and 2004, respectively, included in title premiums above)		80,594		79,057			229,565		241,360
Information services		194,188		144,119			525,359		433,959
Specialty insurance		95,448		64,161			248,276		171,249
Interest and investment income		38,706		18,919			96,420		49,470
Realized gains and losses, net		8,699		(2,025	)		34,281		19,126
Non—operating gain on issuance of subsidiary stock		—		—			318,209		—
Other income		12,937		14,605			36,645		38,103

Total revenue		2,530,527		2,159,879			7,237,056		6,200,935
EXPENSES:
Personnel costs		841,051		700,308			2,396,243		2,058,441
Other operating expenses		444,643		403,541			1,288,167		1,161,624
Agent commissions		590,876		580,241			1,558,547		1,584,579
Depreciation and amortization		95,619		82,674			298,178		232,590
Provision for claim losses		135,354		82,373			333,320		230,689
Interest expense		48,466		11,116			120,001		30,493

Total expenses		2,156,009		1,860,253			5,994,456		5,298,416

Earnings before income taxes and minority interest		374,518		299,626			1,242,600		902,519
Income tax expense		144,189		104,833			354,577		333,932

Earnings before minority interest		230,329		194,793			888,023		568,587
Minority interest		15,926		991			39,081		2,491

Net earnings	$	214,403	$	193,802		$	848,942	$	566,096

Basic earnings per share	$	1.24	$	1.12		$	4.92	$	3.33

Weighted average shares outstanding, basic		172,515		173,369			172,686		170,187

Diluted earnings per share	$	1.21	$	1.09		$	4.79	$	3.23

Weighted average shares outstanding, diluted		177,540		177,976			177,254		175,287

Cash dividends paid per share	$	0.25	$	.18		$	10.75	$	.54

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

(In thousands)


	Three months ended						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
	(Unaudited)						(Unaudited)
Net earnings	$	214,403		$	193,802		$	848,942		$	566,096
Other comprehensive earnings (loss):
Unrealized gain (loss) on investments and other financial instruments, net (1)		(15,636	)		(1,413	)		(24,930	)		(4,857	)
Unrealized loss on foreign currency translation(2)		(518	)		—			(13,770	)		—
Reclassification adjustments for (gains) losses included in net earnings (3)		2,859			(1,809	)		(6,638	)		(26,612	)

Other comprehensive loss		(13,295	)		(3,222	)		(45,338	)		(31,469	)

Comprehensive earnings	$	201,108		$	190,580		$	803,604		$	534,627


(1)		Net of income tax (benefit) expense of $(9.5) million and $(0.8) million and $(15.2) million and $(2.9) million for the three months and nine months ended September 30, 2005 and 2004, respectively.

(2)		Net of income tax expense of $1.9 million and $0.2 million for the three months and nine months ended September 30, 2005, respectively.

(3)		Net of income tax (benefit) expense of $(1.7) million and $1.1 million and $4.1 million and $15.7 million for the three months and nine months ended September 30, 2005 and 2004, respectively.

See Notes to Condensed Consolidated Financial Statements

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		3,191		—		44,393		—			—			—			—		—
Tax benefit associated with the exercise of stock options		—		—		31,069		—			—			—			—		—
Acquisition of Hansen Quality Loan Services, Inc.		37		—		1,625		—			—			—			—		—
Other comprehensive loss—unrealized loss on investments and other financial instruments		—		—		—		—			(31,560	)		—			—		—
Other comprehensive loss—unrealized loss on foreign currency		—		—		—		—			(13,778	)		—			—		—
Amortization of unearned compensation		—		—		—		—			—			5,156			—		—
Stock based compensation		—		—		19,577		—			—			—			—		—
Cash dividends declared ($10.75 per share)		—		—		—		(1,897,029	)		—			—			—		—
Net earnings		—		—		—		848,942			—			—			—		—

Balance, September 30, 2005		181,549	$	18	$	3,520,925	$	467,128		$	(72,691	)	$	(13,281	)		8,022	$	(264,487	)

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Nine months ended
	September 30,
	2005			2004
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	848,942		$	566,096
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization		298,178			232,590
Net increase in reserve for claim losses		62,104			22,190
Gain on issuance of subsidiary stock		(318,209	)		—
Gain on sales of assets		(34,281	)		(19,126	)
Stock-based compensation cost		24,547			15,745
Tax benefit associated with the exercise of stock options		31,069			33,606
Minority interest		39,081			2,491
Change in assets and liabilities, net of effects from acquisitions:
Net decrease in secured trust deposits		1,344			1,217
Net increase in trade receivables		(55,238	)		(77,244	)
Net increase in prepaid expenses and other assets		(122,165	)		(75,149	)
Net increase (decrease) in accounts payable, accrued liabilities		106,907			(24,998	)
Net increase in income taxes		157,710			247,763

Net cash provided by operating activities		1,039,989			925,181

Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		2,438,505			1,879,823
Proceeds from maturities of investment securities available for sale		270,787			163,040
Proceeds from sale of assets		21,343			5,751
Net proceeds from sale of equity interest in subsidiary		454,337			—
Cash received as collateral on loaned securities, net		3,388			—
Collections of notes receivable		3,973			4,469
Additions to title plants		(8,720	)		(613	)
Additions to property and equipment		(112,516	)		(107,664	)
Additions to capitalized software		(119,818	)		(64,130	)
Purchases of investment securities available for sale		(3,144,828	)		(2,851,060	)
Net proceeds (purchases) of short-term investment securities		(229,795	)		272,541
Issuance of notes receivable		(6,145	)		(6,140	)
Acquisitions of businesses, net of cash acquired		(191,257	)		(580,415	)

Net cash used in investing activities		(620,746	)		(1,284,398	)

(Continued)

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Nine months ended
	September 30,
	2005			2004
	(Unaudited)
Cash flows from financing activities:
Borrowings	$	2,829,584		$	496,872
Debt issuance costs		(34,155	)		—
Debt service payments		(1,091,001	)		(173,098	)
Dividends paid		(1,897,029	)		(92,699	)
Stock options exercised		44,393			58,916
Purchases of treasury stock		(70,874	)		(16,502	)

Net cash (used in) provided by financing activities		(219,082	)		273,489

Net increase (decrease) in cash and cash equivalents, excluding pledged cash related to secured trust deposits		200,161			(85,728	)
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	$	336,183		$	142,785

Supplemental cash flow information:
Income taxes paid	$	177,300		$	43,200

Interest paid	$	104,353		$	38,396

Noncash investing and financing activities:
Dividends declared and unpaid	$	—		$	43,639

Issuance of restricted stock	$	—		$	(380	)

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

Liabilities assumed in connection with acquisitions:
Fair value of assets acquired	$	209,363		$	1,051,402
Total purchase price		189,354			843,746

Liabilities assumed	$	20,009		$	207,656

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 the average closing prices over the five day period beginning two days before and ending two days 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 the average closing prices over the five day period beginning two days before and ending two days 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. 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. On September 30, 2005, the Company purchased the remaining 25.1% of Kordoba that it did not already own for $39.7 million.

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


Tangible assets acquired at fair value	$	127,582
Intangible assets acquired at fair value		35,372
Goodwill		105,665
Liabilities assumed at fair value		(105,372	)

Total purchase price	$	163,247

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 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

Pro Forma Results

Selected unaudited pro forma combined results of operations for the nine months ended September 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:


	Nine Months
	Ended September 30,
	2004
Total revenue	$	6,550,452
Net earnings	$	554,568
Basic earnings per share	$	3.16
Diluted earnings per share	$	3.07

Other Transactions:

Certegy Inc.

On September 14, 2005, the Company’s majority owned subsidiary, Fidelity National Information Services, Inc. (“FIS”) entered into a merger agreement with Certegy Inc. (“Certegy”) headquartered in St. Petersburg, Florida. Certegy is a leading provider of credit, debit, check risk management and cash access services to over 6,500 financial institutions and 100,000 retailers. Certegy maintains a global presence with operations in the United States, the United Kingdom, Ireland, France, Chile, Brazil, Australia, New Zealand, Thailand, Canada and the Caribbean. Under the terms of the merger agreement, FIS and Certegy will be combined in a tax-free, stock-for-stock merger under which each share of FIS common stock will be exchanged for 0.6396 shares of Certegy common stock. After the issuance of Certegy stock to FIS shareholders, current Certegy shareholders will own approximately 32.5% and FIS shareholders will own approximately 67.5% of the combined entity, with FNF directly owning approximately 50.3%. Additionally, Certegy will pay a $3.75 per share special cash dividend to its shareholders prior to the closing of the merger. Upon closing of the merger, Certegy will change its name to Fidelity National Information Services, Inc. and will trade on the NYSE under the ticker symbol FIS. The Company expects this merger to close in the first quarter of 2006.

Service Link, L.P.

On August 1, 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.

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 warrants are considered derivative instruments and therefore the Company’s investment in the warrants was 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.

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 of 2005, the Company issued an additional 36,838 shares to the prior owners 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 was completed on March 9, 2005 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 (“ the Revolver”). FIS fully drew upon the entire $2.8 billion in Term Loan Facilities while the Revolver remained undrawn at the closing. 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 September 30, 2005 has increased to $185.2 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				Nine months ended
	September 30,				September 30,
	2005		2004		2005		2004
	(In thousands, except				(In thousands, except
	Per share amounts)				per share amounts)
Net earnings, basic and diluted	$	214,403	$	193,802	$	848,942	$	566,096

Weighted average shares outstanding during the period, basic		172,515		173,369		172,686		170,187
Plus: Common stock equivalent shares assumed from conversion of options		5,025		4,607		4,568		5,100

Weighted average shares outstanding during the period, diluted		177,540		177,976		177,254		175,287

Basic earnings per share	$	1.24	$	1.12	$	4.92	$	3.33

Diluted earnings per share	$	1.21	$	1.09	$	4.79	$	3.23

Options to purchase 2,301,852 shares and 2,988,274 shares of the Company’s common stock for the three and nine months ended September 30, 2005 and 1,155,827 shares and 595,206 shares for the three and nine months ended September 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 September 30, 2005, the Company had security loans outstanding with a fair value of $168.5 million included in accounts payable and accrued liabilities and the Company held cash in the amount of $174.4 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 September 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	$	685,633	$	(11,574	)	$	265,779	$	(3,432	)	$	951,412	$	(15,006	)
States and political subdivisions		651,511		(6,118	)		138,420		(3,182	)		789,931		(9,300	)
Corporate securities		343,868		(4,661	)		262,220		(6,126	)		606,088		(10,787	)
Equity securities		121,442		(18,924	)		31		(39	)		121,473		(18,963	)

Total temporarily impaired securities	$	1,802,454	$	(41,277	)	$	666,450	$	(12,779	)	$	2,468,904	$	(54,056	)

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. During the third quarter of 2005, the Company did record an impairment on two investments that it considered to be other-than-temporarily impaired, which resulted in a charge of $8.2 million. In the third quarter of 2004, the Company recorded a similar charge of $8.0 million.

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						Nine months ended
	September 30,						September 30,
	2005			2004			2005			2004
	(In thousands, except						(In thousands, except
	per share amounts)						per share amounts)
Net earnings, as reported	$	214,403		$	193,802		$	848,942		$	566,096

Add: Stock-based compensation expense included in reported net earnings, net of related tax effects		4,918			3,530			15,483			9,806
Deduct: Total stock-based compensation expense determined under fair value based methods for all awards, net of related tax effects		(5,215	)		(3,844	)		(16,448	)		(11,403	)

Pro forma net earnings	$	214,106		$	193,488		$	847,977		$	564,499

Earnings per share:
Basic — as reported	$	1.24		$	1.12		$	4.92		$	3.33
Basic — pro forma	$	1.24		$	1.12		$	4.91		$	3.32
Diluted — as reported	$	1.21		$	1.09		$	4.79		$	3.23
Diluted — pro forma	$	1.20		$	1.09		$	4.77		$	3.21

Note G — Notes Payable

Notes payable consist of the following:


	September 30,		December 31,
	2005		2004
Term Loan A Facility, secured, interest payable at LIBOR plus 1.50% (5.23% at September 30, 2005), .25% quarterly principal amortization, due March, 2011	$	796,000	$	—
Term Loan B Facility, secured, interest payable at LIBOR plus 1.75% (5.48% at September 30, 2005), .25% quarterly principal amortization, due March, 2013		1,765,000		—
Syndicated credit agreement, secured, interest due quarterly at LIBOR plus 1.50%, undrawn, unused portion of $400 million at September 30, 2005		—		—
Syndicated credit agreement, unsecured, interest due quarterly at LIBOR plus 0.925%, undrawn, unused portion of $700 million at September 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		249,362		249,337
Unsecured notes net of discount, interest payable semi-annually at 5.25%, due March 2013		248,510		248,462
Other promissory notes with various interest rates and maturities		55,131		62,757

	$	3,114,003	$	1,370,556

Subsequent to September 30, 2005, on October 17, 2005, the Company entered into a new Credit Agreement, dated as of October 17, 2005, with Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the other financial institutions party thereto (the “Credit Agreement”). This Credit Agreement replaces the Company’s prior $700.0 million, 5-year revolving credit facility which was due November 4, 2008 and was terminated on October 17, 2005.

requirement. Revolving loans under the credit facility bear interest at a variable rate based on either (i) the higher of (a) a rate per annum equal to one-half of one percent in excess of the Federal Reserve’s Federal Funds rate, or (b) Bank of America’s “prime rate;” or (ii) a rate per annum equal to the British Bankers Association LIBOR rate plus a margin of between .525%-1.875%, depending on the Company’s then current public debt credit rating from the rating agencies.

The Credit Agreement contains certain affirmative and negative 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 limitations on restricted payments and transactions with affiliates. The Credit Agreement also contains customary financial covenants regarding net worth, fixed charge coverage, total debt to total capitalization and a minimum unencumbered cash balance. The Credit Agreement includes customary events of default for facilities of this type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, the interest rate on all outstanding obligations will be increased and payments of all outstanding loans may be accelerated and/or the lenders’ commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Credit Agreement shall automatically become immediately due and payable, and the lenders’ commitments will automatically terminate. The Credit Agreement also requires a pledge of subsidiary stock at certain below investment grade credit ratings.

Also on October 17, 2005, Fidelity National Title Group, Inc. (“FNT”), a subsidiary of the Company, which serves as a holding company for its title insurance operations, entered into a Credit Agreement, dated as of October 17, 2005, with Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the other financial institutions party thereto (the “FNT Credit Agreement”).

The FNT Credit Agreement provides for a $400 million unsecured revolving credit facility maturing on the fifth anniversary of the closing date. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed by the borrower thereunder from time to time until the maturity of the revolving credit facility. Voluntary prepayment of the revolving credit facility under the FNT Credit Agreement is permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. Revolving loans under the credit facility bear interest at a variable rate based on either (i) the higher of (a) a rate per annum equal to one-half of one percent in excess of the Federal Reserve’s Federal Funds rate, or (b) Bank of America’s “prime rate;” or (ii) a rate per annum equal to the British Bankers Association LIBOR rate plus a margin of between .35%-1.25%, all in, depending on FNT’s then current public debt credit rating from the rating agencies. On October 24, 2005, FNT borrowed $150 million under its $400 million credit facility at a rate per annum equal to LIBOR + 0.625% in order to satisfy a $150 million intercompany note issued by one of FNT’s subsidiaries to the Company in August 2005

The FNT Credit Agreement contains 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 limitations on restricted payments and transactions with affiliates. The FNT Credit Agreement requires FNT to maintain investment grade debt ratings, certain financial ratios related to liquidity and statutory surplus and certain levels of capitalization. The FNT Credit Agreement also includes customary events of default for facilities of this type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, the interest rate on all outstanding obligations will be increased and payments of all outstanding loans may be accelerated and/or the lenders’ commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the FNT Credit Agreement shall automatically become immediately due and payable, and the lenders’ commitments will automatically terminate.

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 the Company, entered into a Credit Agreement, dated as of March 9, 2005, with Bank of America, as Administrative Agent and other financial institutions (the “FIS Credit Agreement”). The Company is not a party nor a guarantor to this agreement.

The FIS 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 FIS 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 FIS 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 FIS 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.

On April 11, 2005, the Company, through FIS, entered into interest rate swap agreements which effectively fixed the interest rate at approximately 6.1% through April 2008 on $350 million of the Term B Loans and at approximately 5.9% through April 2007 on an additional $350.0 million of the Term B Loans. The Company 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 are recorded as an asset of the Company of $2.1 million as of September 30, 2005 which is included in the accompanying condensed consolidated balance sheet in prepaid expenses and other assets 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 B Loans. 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 September 30, 2005, are as follows (dollars in thousands):


2005	$	27,971
2006		43,503
2007		39,808
2008		31,621
2009		29,719
Thereafter		2,941,381

	$	3,114,003

Note H — Segment Information

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

For the three months ended September 30, 2005:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total
Title premiums	$	1,404,784	$	—		$	22,891		$	—		$	—	$	—		$	(22,891	)	$	1,404,784
Other revenues		323,506		393,046			80,594			209,712			95,448		12,937			(36,905	)		1,078,338
Intersegment revenue		—		(21,381	)		(22,891	)		(15,524	)		—		—			59,796			—

Revenues from external customers	$	1,728,290	$	371,665		$	80,594		$	194,188		$	95,448	$	12,937		$	—		$	2,483,122
Interest and investment income, including realized gains and (losses)		34,733		4,863			595			414			2,387		4,413			—			47,405

Total revenues	$	1,763,023	$	376,528		$	81,189		$	194,602		$	97,835	$	17,350		$	—		$	2,530,527

Depreciation and amortization		23,653		56,415			3,399			10,943			963		246			—			95,619
Interest expense		1,319		112			3			14			145		46,873			—			48,466
Earnings (loss) before income tax and minority interest		274,789		59,958			22,929			62,996			15,409		(61,563	)		—			374,518
Income tax expense		104,357		23,427			8,887			24,548			6,007		(23,037	)		—			144,189
Minority interest		700		—			—			—			—		15,226			—			15,926
Net earnings (loss)		169,732		36,531			14,042			38,448			9,402		(53,752	)		—			214,403
Assets		5,111,864		3,030,083			307,955			592,157			346,784		1,520,936			—			10,909,779
Goodwill		1,053,004		1,313,956			85,667			379,299			44,856		—			—			2,876,782

For the three months ended September 30, 2004:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total
Title premiums	$	1,265,424	$	—		$	23,485		$	—		$	—	$	—		$	(19,887	)	$	1,269,022
Other revenues		265,192		323,990			79,057			158,621			64,161		14,605			(31,663	)		873,963
Intersegment revenue		—		(17,161	)		(19,887	)		(14,502	)		—		—			51,550			—

Revenues from external customers	$	1,530,616	$	306,829		$	82,655		$	144,119		$	64,161	$	14,605		$	—		$	2,142,985
Interest and investment income, including realized gains and (losses)		12,994		(198	)		146			290			945		2,717			—			16,894

Total revenues	$	1,543,610	$	306,631		$	82,801		$	144,409		$	65,106	$	17,322		$	—		$	2,159,879

Depreciation and amortization		25,154		43,418			2,312			11,498			475		(183	)		—			82,674
Interest expense		159		215			6			53			—		10,683						11,116
Earnings (loss) before income tax and minority interest		209,605		45,248			18,884			33,102			8,177		(15,390	)		—			299,626
Income tax expense		73,090		16,007			6,413			11,689			2,893		(5,259	)		—			104,833
Minority interest		188		311			520			—			—		(28	)		—			991
Net earnings (loss)		136,327		28,930			11,951			21,413			5,284		(10,103	)		—			193,802
Assets		5,949,366		1,626,800			314,631			740,230			200,085		167,188			—			8,998,300
Goodwill		942,233		1,079,809			86,210			372,586			20,669		7,678			—			2,509,185

For the nine months ended September 30, 2005:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total
Title premiums	$	3,726,585	$	—		$	60,577		$	—		$	—	$	—		$	(60,577	)	$	3,726,585
Other revenues		864,472		1,212,520			229,565			564,278			248,276		36,645			(94,195	)		3,061,561
Intersegment revenue		—		(55,276	)		(60,577	)		(38,919	)		—		—			154,772			—

Revenues from external customers	$	4,591,057	$	1,157,244		$	229,565		$	525,359		$	248,276	$	36,645		$	—		$	6,788,146
Interest and investment income, including realized gains and (losses)		101,757		6,663			1,482			1,102			5,532		332,374			—			448,910

Total revenues	$	4,692,814	$	1,163,907		$	231,047		$	526,461		$	253,808	$	369,019		$	—		$	7,237,056

Depreciation and amortization		72,900		173,164			16,884			31,801			2,930		499			—			298,178
Interest expense		1,380		3,187			6			233			168		115,027			—			120,001
Earnings (loss) before income tax and minority interest		664,190		174,371			42,800			161,227			40,418		159,594			—			1,242,600
Income tax expense		254,399		67,133			16,478			62,072			15,561		(61,066	)		—			354,577
Minority interest		1,992		3,265			743			246			—		32,835			—			39,081
Net earnings (loss)		407,799		103,973			25,579			98,909			24,857		187,825			—		$	848,942
Assets		5,111,864		3,030,083			307,955			592,157			346,784		1,520,936			—			10,909,779
Goodwill		1,053,003		1,313,956			85,667			379,299			44,856		—			—			2,876,781

For the nine months ended September 30, 2004:


			Financial
			Institution			Lender								Corporate
	Title		Software and			Outsourcing			Information			Specialty		and
	Insurance		Services			Solutions			Services			Insurance		Other			Eliminations			Total
Title premiums	$	3,602,820	$	—		$	104,877		$	—		$	—	$	—		$	(85,458	)	$	3,622,239
Other revenues		779,032		892,664			241,360			469,916			171,249		38,103			(82,224	)		2,510,100
Intersegment revenue		—		(46,267	)		(85,458	)		(35,957	)		—		—			167,682			—

Revenues from external customers	$	4,381,852	$	846,397		$	260,779		$	433,959		$	171,249	$	38,103		$	—		$	6,132,339
Interest and investment income, including realized gains and (losses)		57,585		(432	)		493			3,137			2,371		5,442			—			68,596

Total revenues	$	4,439,437	$	845,965		$	261,272		$	437,096		$	173,620	$	43,545		$	—		$	6,200,935

Depreciation and amortization		69,077		120,887			7,412			32,236			2,644		334			—			232,590
Interest expense		827		425			24			169			1		29,047			—			30,493
Earnings (loss) before income tax and minority interest		638,637		126,887			82,624			95,183			22,879		(63,691	)		—			902,519
Income tax expense		236,296		46,948			30,571			35,218			8,465		(23,566	)		—			333,932
Minority interest		644		311			1,536			—			—		—			—			2,491
Net earnings (loss)		401,697		79,628			50,517			59,965			14,414		(40,125	)		—			566,096
Assets		5,949,366		1,626,800			314,631			740,230			200,085		167,188			—			8,998,300
Goodwill		942,233		1,079,809			86,210			372,586			20,669		7,678			—			2,509,185

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 October 25, 2005, the Company’s Board of Directors declared a cash dividend of $0.25 per share, payable on November 16, 2005, to stockholders of record as of November 7, 2005.

On April 24, 2002, the Company’s Board of Directors approved a three-year stock repurchase program, under which the Company devoted a portion of its annual cash flow from operations to the systematic repurchase of shares of its common stock. 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. Under the terms of the repurchase plan, purchases may be made by the Company from time to time in the open market, in block purchases or in privately negotiated transactions.

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 September 30,
	2005			2004			2005			2004
	Pension Benefits						Postretirement Benefits
	(In thousands, except per share amounts)
Service cost	$	291		$	—		$	38		$	52
Interest cost		2,295			2,163			296			297
Expected return on assets		(1,959	)		(2,113	)		—			—
Amortization of prior service cost		—			—			(384	)		(676	)
Amortization of actuarial loss		2,212			1,751			137			19

Total net periodic (income) expense	$	2,839		$	1,801		$	87		$	(308	)


	For the Nine Months Ended September 30,
	2005			2004			2005			2004
	Pension Benefits						Postretirement Benefits
	(In thousands, except per share amounts)
Service cost	$	921		$	—		$	114		$	155
Interest cost		6,919			6,488			888			959
Expected return on assets		(5,877	)		(5,678	)		—			—
Amortization of prior service cost		—			—			(1,152	)		(2,028	)
Amortization of actuarial loss		6,636			5,253			411			248

Total net periodic (income) expense	$	8,599		$	6,063		$	261		$	(666	)

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 and its subsidiaries are 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. As background to the disclosure below, please note the following:

	•		These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including but not limited to the underlying facts of each matter, novel legal issues, variations between jurisdictions in which matters are being litigated, differences in applicable laws and judicial interpretations, the length of time before many of these matters might be resolved by settlement or through litigation and, in some cases, the timing of their resolutions relative to other similar cases brought against other companies, the fact that many of these matters are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined, the fact that many of these matters involve multi-state class actions in which the applicable law for the claims at issue is in dispute and therefore unclear, and the current challenging legal environment faced by large corporations and insurance companies.

	•		In these matters, plaintiffs seek a variety of remedies including equitable relief in the form of injunctive and other remedies and monetary relief in the form of compensatory damages. In most cases, the monetary damages sought include punitive or treble damages. Often more specific information beyond the type of relief sought is not available because plaintiffs have not requested more specific relief in their court pleadings. In general, the dollar amount of damages sought is not specified. In those cases where plaintiffs have made a specific statement with regard to monetary damages, they often specify damages just below a jurisdictional limit regardless of the facts of the case. This represents the maximum they can seek without risking removal from state court to federal court. In our experience, monetary demands in plaintiffs’ court pleadings bear little relation to the ultimate loss, if any, we may experience.

	•		For the reasons specified above, it is not possible to make meaningful estimates of the amount or range of loss that could result from these matters at this time. The Company reviews these matters on an on-going basis and follows the provisions of SFAS No. 5, “Accounting for Contingencies” when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, the Company bases its decision on its assessment of the ultimate outcome following all appeals.

•

In the opinion of the Company’s management, while some of these matters may be material to the Company’s operating results for any particular period if an unfavorable outcome results, none will have a material adverse effect on its overall financial condition.

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. The Company has petitioned the Supreme Court of Ohio for review. The Company intends to vigorously defend the actions.

A class action in California alleges that subsidiaries of the Company and FNT violated the Real Estate Settlement Procedures Act (“RESPA”) and state law by giving favorable discounts or rates to builders and developers for escrow fees and requiring purchasers to use Chicago Title Insurance Company for escrow services. 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 officers 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, have responded to the amended complaint. 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. FNT has agreed to indemnify the Company in connection with this matter under the separation agreement that was entered into in connection with the distribution of FNT common stock (see Note L) and the Company intends to vigorously defend this action.

None of the cases described above includes a statement as to the dollar amount of damages demanded. Instead, each of the cases includes a demand in an amount to be proved at trial. Two of the Ohio cases state that the damages per class member are less than the jurisdictional limit for removal to federal court.

The Company and its subsidiaries FIS and Fidelity Information Services (“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.

The Company gets inquiries and requests for information from state insurance departments, attorneys general and other regulatory agencies from time to time about various matters relating to its business. Sometimes these take the form of civil investigative subpoenas. The Company attempts to cooperate with all such inquiries. From time to time, the Company is assessed fines for violations of regulations or other matters or enters into settlements with such authorities which require the Company to pay money or take other actions.

Department of Insurance as part of its investigation. This investigation paralleled similar inquiries of the National Association of Insurance Commissioners, which began earlier in 2004. The investigations have focused on arrangements in which title insurers would write title insurance generated by realtors, developers and lenders and cede a portion of the premiums to a reinsurance company affiliate of the entity that generated the business.

The Company recently negotiated a settlement with the California Department of Insurance with respect to that department’s inquiry into these arrangements, which the Company refers to as captive reinsurance arrangements. 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 pay a penalty of $5.6 million. The Company also recently entered into similar settlements with 15 other states, in which the Company agreed to refund a total of approximately $2 million to policyholders. Other state insurance departments and attorneys general and the U.S. Department of Housing and Urban Development (“HUD”) also have made formal or informal inquiries of the Company regarding these matters.

The Company has been cooperating and intends to continue to cooperate with the other ongoing investigations. The Company has discontinued all captive reinsurance arrangements. The total amount of premiums the Company ceded to reinsurers was approximately $10 million over the existence of these agreements. The remaining investigations are continuing and the Company currently is unable to give any assurance regarding their consequences for the industry or for FNF.

Additionally, the Company has received inquiries from regulators about its business involvement with title insurance agencies affiliated with builders, realtors and other traditional sources of title insurance business, some of which the Company participated in forming as joint ventures with its subsidiaries. These inquiries have focused on whether the placement of title insurance with the Company through these affiliated agencies is proper or an improper form of referral payment. Like most other title insurers, the Company participates in these affiliated business arrangements in a number of states. The Company recently entered into a settlement with the Florida Department of Financial Services under which it agreed to refund approximately $3 million in premiums received though these types of agencies in Florida and pay a fine of $1 million. The other pending inquiries are at an early stage and as a result the Company can give no assurance as to their likely outcome.

Since 2004 the Company’s subsidiaries also have received civil subpoenas and other inquiries from the New York State Attorney General, requesting information about their arrangements with agents and customers and other matters relating to, among other things, rates, calculation practices, use of blended rates in multi-state transactions, rebates and referral fees. These inquiries are at an early stage and as a result the Company can give no assurance as to their likely outcome.

Finally, the California Department of Insurance has recently announced its intent to examine levels of pricing and competition in the title insurance industry in California, with a view to determining whether prices are too high and if so, implementing rate reductions. New York and Colorado insurance regulators have also announced similar inquiries and other states could follow. At this stage, the Company is unable to predict what the outcome will be of this or any similar review.

Note L — Subsequent Events

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 on October 17, 2005, a pro rata distribution of shares representing 17.5% of the outstanding common stock of FNT was 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 Company will record a tax liability and expense of approximately $100 million in the fourth 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 October 17, 2005, a pro rata distribution of shares representing 17.5% of the outstanding common stock of Fidelity National Title Group, Inc. (“FNT”), a holding company for our title insurance operations, was made to our shareholders of record as of October 6, 2005. This distribution is taxable to our shareholders. Following the distribution, FNT is a majority-owned subsidiary of FNF and is a separate registrant reporting its results on a stand-alone basis. We are continuing to consolidate FNT in our results and we began recording minority interest liabilities and expense relating to the 17.5% minority interest in the fourth quarter of 2005. This distribution is also a taxable transaction to FNF. We will record a tax liability and expense of approximately $100 million in the fourth quarter of 2005.

On September 14, 2005, our majority owned subsidiary, Fidelity National Information Services, Inc. (“FIS”) entered into a merger agreement with Certegy Inc.(“Certegy”) headquartered in St. Petersburg, Florida. Certegy is a leading provider of credit, debit, check risk management and cash access services to over 6,500 financial institutions and 100,000 retailers. Certegy maintains a global presence with operations in the United States, the United Kingdom, Ireland, France, Chile, Brazil, Australia, New Zealand, Thailand, Canada and the Caribbean. Under the terms of the Merger Agreement, FIS and Certegy will be combined in a tax-free, stock-for-stock merger under which each share of FIS common stock will be exchanged for 0.6396 shares of Certegy common stock. After the issuance of Certegy stock to FIS shareholders, current Certegy shareholders will own approximately 32.5% and FIS shareholders will own approximately 67.5% of the combined entity, with FNF directly owning approximately 50.3%. Additionally, Certegy will pay a $3.75 per share special cash dividend to its shareholders prior to the closing of the transaction. Upon closing of this transaction, Certegy will change its name to Fidelity National Information Services, Inc. and will trade on the NYSE under the ticker symbol FIS. We expect this merger to close early in the first quarter of 2006.

Factors Affecting Comparability

Our Condensed Consolidated Statements of Earnings for the nine months ended September 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 which is included in the title segment, are reported.

Results of Operations

Consolidated Results of Operations

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands,				(Dollars in thousands,
	except per share data)				except per share data)
Total revenue	$	2,530,527	$	2,159,879	$	7,237,056	$	6,200,935

Total expenses	$	2,156,009	$	1,860,253	$	5,994,456	$	5,298,416

Net earnings	$	214,403	$	193,802	$	848,942	$	566,096

Basic net earnings per share	$	1.24	$	1.12	$	4.92	$	3.33

Diluted net earnings per share	$	1.21	$	1.09	$	4.79	$	3.23

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


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2005		2004			2005		2004
	(Dollars in thousands)					(Dollars in thousands)
Direct title insurance premiums	$	641,542	$	524,829		$	1,702,397	$	1,591,221
Agency title insurance premiums		763,242		744,193			2,024,188		2,031,018
Escrow and other title related fees		323,506		265,192			864,472		779,032
Financial institution software and services		371,665		306,829			1,157,244		846,397
Lender outsourcing solutions (excludes title premiums of $22.9 million, $23.5 million, $60.6 million and $104.9 million in the three month and nine month periods ended September 30, 2005 and 2004, respectively, that are included in title premiums above)		80,594		79,057			229,565		241,360
Information services		194,188		144,119			525,359		433,959
Specialty insurance		95,448		64,161			248,276		171,249
Interest and investment income		38,706		18,919			96,420		49,470
Realized gains and losses, net		8,699		(2,025	)		34,281		19,126
Gain on issuance of subsidiary stock		—		—			318,209		—
Other income		12,937		14,605			36,645		38,103

Total revenue	$	2,530,527	$	2,159,879		$	7,237,056	$	6,200,935

Orders opened by direct title operations (1)		976,600		873,900			2,843,600		2,854,700
Orders closed by direct title operations (1)		694,000		604,700			1,891,100		2,019,700


(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 third quarter of 2005 increased $370.6 million or 17.2% to $2,530.5 million. This increase in consolidated revenue in the third quarter of 2005 was primarily due to the increases of $194.1 million in title related revenues, $64.9 million in the financial institution software and services segment, $50.1 million in the information services segment, $31.3 million in the specialty insurance segment, $19.8 million in interest and investment income and $10.7 million in realized gains and losses. 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 $81.6 million of the increase offset by a decrease in organic revenue of $16.7 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 nine months of 2005 increased $1,036.1 million to $7,237.1 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 $717.9 million or 11.6% as compared to the prior year nine-month period.

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


	Three months ended September 30,										Nine months ended September 30,
	2005		%			2004		%			2005		%			2004		%
	(Dollars in thousands)										(Dollars in thousands)
Title premiums from direct operations (1)	$	641,542		45.7	%	$	524,829		41.4	%	$	1,702,397		45.7	%	$	1,591,221		43.9	%
Title premiums from agency operations (1)		763,242		54.3	%		744,193		58.6	%		2,024,188		54.3	%		2,031,018		56.1	%

Total	$	1,404,784		100.0	%	$	1,269,022		100.0	%	$	3,726,585		100.0	%	$	3,622,239		100.0	%


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

Title insurance premiums increased 10.7% to $1,404.8 million in the third quarter of 2005 as compared with the third quarter of 2004. The increase was made up of a $116.7 million or 22.2% increase in direct premiums and a $19.0 million or 2.6% increase in premiums from agency operations. The increased level of direct title premiums is the result of an increase in closed order levels during the current year quarter as compared to the prior year period and we also experienced increase in the average fee per file as compared with the prior year. The increase in closed order levels reflects an increased refinance market and a strong stable purchase market. The increase in fee per file is the result of the stronger purchase market in 2005 as compared with the third quarter of 2004, as purchase transactions typically have higher fees as well as the appreciation of home prices over the past year. 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 of 2005 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.

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 third 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 $323.5 million and $265.2 million for the third quarters of 2005 and 2004, respectively and $864.5 million and $779.0 million for the first nine 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 third quarter of 2005 was $38.7 million, compared with $18.9 million in the third quarter of 2004, an increase of $19.8 million, or 104.8%. The increase in interest and investment income in the third quarter and first nine 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 third quarter were $8.6 million compared with net realized losses of $2.0 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 third quarter of 2005, which were offset by charges of approximately $8.2 million relating to the other than temporary impairment of two investments. The prior year quarter also had other than temporary impairment charges of approximately $8.0 million. Net realized gains for the first nine months of 2005 were $34.3 million as compared to $19.1 million for the same period of the prior year.

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


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Personnel costs	$	841,051	$	700,308	$	2,396,243	$	2,058,441
Other operating expenses		444,643		403,541		1,288,167		1,161,624
Agent commissions		590,876		580,241		1,558,547		1,584,579
Depreciation and amortization		95,619		82,674		298,178		232,590
Provision for claim losses		135,354		82,373		333,320		230,689
Interest expense		48,466		11,116		120,001		30,493

Total expenses	$	2,156,009	$	1,860,253	$	5,994,456	$	5,298,416

Our operating expenses consist primarily of personnel costs, other operating expenses, agent commissions, depreciation and amortization, provision for claim losses and interest expense. 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 $841.1 million and $700.3 million for the third quarters of 2005 and 2004, respectively. Personnel costs as a percentage of total revenue were 33.2% in the third quarter of 2005, and 32.4% for the third quarter of 2004. The increase of $140.7 million in personnel costs principally resulted from increases of $83.7 million in the title segment and $37.8 million in the financial institution software and services segment. Personnel costs as a percentage of total revenue (excluding the $318.2 million gain on issuance of subsidiary stock), were 34.6% for the first nine months of 2005, and 33.2% for the first nine 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 $444.6 million and $403.5 million for the third quarter of 2005 and 2004, respectively and $1,288.2 million and $1,161.6 million for the first nine months of 2005 and 2004, respectively. The increase in the first nine months of 2005 as compared to 2004 was primarily the result of increases in the title operations and the inclusion of a full nine months of operating expenses in 2005 for acquisitions made in 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 September 30,										Nine months ended September 30,
	2005		%			2004		%			2005		%			2004		%
	(Dollars in thousands)										(Dollars in thousands)
Agent premiums	$	763,242		100.0	%	$	744,193		100.0	%	$	2,024,188		100.0	%	$	2,031,018		100.0	%
Agent commissions		590,876		77.4	%		580,241		78.0	%		1,558,547		77.0	%		1,584,579		78.0	%

Net	$	172,366		22.6	%	$	163,952		22.0	%	$	465,641		23.0	%	$	466,439		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 $95.6 million in the third quarter of 2005 as compared to $82.7 million in the third quarter of 2004. The increase in depreciation and amortization of $12.9 million is primarily due to increased amortization of intangible assets and software acquired during 2004 by the financial institution software and services segment. The increase of $65.6 million for the nine month period in 2005 as compared to 2004 is due to the increased amortization and

also includes an impairment charge of approximately $9.3 million relating to customer relationship intangible assets in our lender outsourcing solutions segment that was recorded in the second quarter of 2005.

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 $103.4 million in the third quarter of 2005 as compared to $69.8 million in the third quarter of 2004. Our claim loss provision as a percentage of total title premiums was 7.4% and 5.6% in the third quarter of 2005 and 2004, respectively. The increase is attributable to higher than expected loss development, 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 $31.7 million and $12.6 million in the third 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 nine months of 2005 and 2004 was $ 333.3 million and $230.7 million, respectively.

Interest expense was $48.5 million and $11.1 million in the third quarter of 2005 and 2004, respectively. The increase of $37.4 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 $120.0 million and $30.5 million for the first nine months of 2005 and 2004, respectively.

Income tax expense as a percentage of earnings before income taxes was 38.5% for the third quarter of 2005 and 35.0% for the third 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 nine months of 2005 and 37.0% for the first nine 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 third quarter of 2005 was $15.9 million as compared with $1.0 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 nine months of 2005 was $39.1 million as compared with $2.5 million for the corresponding prior year period.

Net earnings were $214.4 million and $193.8 million for the third quarters of 2005 and 2004, respectively and $848.9 million ($530.7 million excluding the $318.2 million gain on sale of subsidiary stock) and $566.1 million for the first nine months of 2005 and 2004, respectively.

Segment Results of Operations

Title Segment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	1,763,023	$	1,543,610	$	4,692,814	$	4,439,437

Personnel costs		505,331		421,664		1,393,576		1,247,803
Other operating expenses		240,243		220,905		686,805		633,789
Agent commissions		614,317		597,501		1,619,674		1,654,804
Depreciation and amortization		23,653		25,154		72,900		69,077
Provision for claim losses		103,371		68,622		254,289		194,500
Interest expense		1,319		159		1,380		827

Total expenses		1,488,234		1,334,005		4,028,624		3,800,800

Earnings before income taxes and minority interest	$	274,789	$	209,605	$	664,190	$	638,637

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 $505.3 million and $421.7 million in the third 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 environment. 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 $1,393.6 million and $1,247.8 million in the first nine months of 2005 and 2004, respectively.

Other operating expenses were $240.2 million and $220.9 million in the third quarters of 2005 and 2004, respectively. Other operating expenses were $686.8 million and $633.8 million in the first nine months of 2005 and 2004, respectively.

Agent commissions were $614.3 million and $597.5 million in the third quarters of 2005 and 2004, respectively and $1,619.6 million and $1,654.8 million in the first nine months of 2005 and 2004, respectively and as noted in the consolidated results of operations discussion, fluctuate with agent premiums.

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				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	97,835	$	65,106	$	253,808	$	173,620

Personnel costs		10,492		7,965		28,044		22,281
Other operating expenses		39,241		35,912		103,638		90,806
Depreciation and amortization		963		475		2,930		2,644
Provision for claim losses		31,730		12,577		78,778		35,010

Total expenses		82,426		56,929		213,390		150,741

Earnings before income taxes and minority interest	$	15,409	$	8,177	$	40,418	$	22,879

Revenues

Revenues from specialty insurance include revenues from the issuance of flood, home warranty and homeowners insurance policies and were $97.8 million and $65.1 million for the third 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 $253.8 million and $173.6 million for the first nine months of 2005 and 2004, respectively.

Expenses

Personnel costs were $10.5 million and $8.0 million in the third quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 10.7% and 12.2% in the third 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 $28.0 million and $22.3 million in the first nine months of 2005 and 2004 respectively.

Other operating expenses in the specialty insurance segment were $39.2 million and $35.9 million in the third quarters of 2005 and 2004, respectively. As a percentage of revenues, other operating expenses were 40.1% and 55.2% in the third 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 $103.6 million and $90.8 million in the first nine months of 2005 and 2004 respectively.

The provision for claim loss was $31.7 million and $12.6 million in the third 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 $78.8 million and $35.0 million in the first nine 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				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	397,909	$	323,792	$	1,219,183	$	892,232

Personnel costs		220,836		182,996		671,776		507,911
Other operating expenses		60,588		51,915		196,685		136,122
Depreciation and amortization		56,415		43,418		173,164		120,887
Interest expense		112		215		3,187		425

Total expenses		337,951		278,544		1,044,812		765,345

Earnings before income taxes and minority interest	$	59,958	$	45,248	$	174,371	$	126,887

Revenues

Revenues from financial institution software and services were $397.9 million and $323.8 million in the third quarters of 2005 and 2004, respectively. The $74.1 million increase in revenues in the 2005 third 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 $81.6 million of the increase in the 2005 period as compared with the prior year quarter which was offset by a $17.9 million decrease in results from existing businesses owned during both periods. Included in the 2005 and 2004 third quarters are $21.4 million and $17.2 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 $1,219.2 million and $892.2 million for the first nine months of 2005 and 2004, respectively, with the $ 327.0 million increase resulting from the above mentioned 2004 acquisitions.

Expenses

Personnel costs were $220.8 million and $183.0 million in the third 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 55.5% and 56.5% in the third quarters of 2005 and 2004, respectively. Personnel costs were $671.8 million and $507.9 million for the first nine months of 2005 and 2004, respectively with the increase also consistent with the increase in revenue for the same periods.

Other operating expenses were $60.6 million and $51.9 million in the third 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 $196.7 million and $136.1 million for the first nine months of 2005 and 2004, respectively.

Depreciation and amortization costs were $56.4 million and $43.4 million in the third quarters of 2005 and 2004, respectively. The increase of $13.0 million relates primarily to the amortization of intangible assets and computer software acquired in the 2004 acquisitions.

Lender Outsourcing Solutions Segment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	104,080	$	102,688	$	291,624	$	346,730

Personnel costs		37,344		36,110		106,022		114,162
Other operating expenses		40,405		45,376		125,912		142,508
Depreciation and amortization		3,399		2,312		16,884		7,412
Interest expense		3		6		6		24

Total expenses		81,151		83,804		248,824		264,106

Earnings before income taxes and minority interest	$	22,929	$	18,884	$	42,800	$	82,624

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 $104.1 million and $102.7 million in the third quarters of 2005 and 2004, respectively. Revenues were fairly flat in both our loan facilitation and default management units when comparing the third quarter of 2005 to the third quarter of 2004. Revenues were $291.6 million and $346.7 million for the first nine months of 2005 and 2004, respectively caused by the reduction in loan facilitation services in the first six months of 2005 as compared with the first six months of 2004.

Expenses

Personnel costs were $37.3 million and $36.1 million in the third quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 35.9% and 35.1% in the 2005 and 2004 periods. Personnel costs were $106.0 million and $114.2 million in the first nine months of 2005 and 2004, respectively, which were 36.4% and 32.9% of revenues, respectively. The increase in the 2005 nine-month period as a percentage of revenues 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.

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 $40.4 million and $45.4 million in the third quarters of 2005 and 2004, respectively. Other operating expenses were $125.9 million and $142.5 million for the first nine months of 2005 and 2004, respectively.

Information Services Segment


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2005		2004		2005		2004
	(Dollars in thousands)				(Dollars in thousands)
Revenues	$	210,126	$	158,911	$	565,380	$	473,053

Personnel costs		49,506		40,907		138,349		123,864
Other operating expenses		86,667		73,351		233,770		221,601
Depreciation and amortization		10,943		11,498		31,801		32,236
Interest expense		14		53		233		169

Total expenses		147,130		125,809		404,153		377,870

Earnings before income taxes and minority interest	$	62,996	$	33,102	$	161,227	$	95,183

Revenues

Revenues from information services relate primarily to revenues from our property data and real estate related services. Revenues from information services in the third quarters of 2005 and 2004 were $210.1 million and $158.9 million, respectively, an increase of 32.2%. The increase was primarily attributable to increased revenues in our valuation services, tax monitoring and 1031 transaction services businesses which are experiencing growth in market share in the continued strong real estate environment. Revenues were $565.4 million and $473.1 million for the first nine months of 2005 and 2004, respectively.

Expenses

Personnel costs were $49.5 million and $40.9 million for the third quarters of 2005 and 2004, respectively. As a percentage of revenues, personnel costs were 23.6% and 25.7% in the 2005 and 2004 periods, respectively. Personnel costs were $138.3 million and $123.9 million in the first nine 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 $86.7 million and $73.4 million for the third quarters of 2005 and 2004, respectively. As a percentage of revenues, other operating expenses were 41.3% and 46.2% in the third 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 $233.8 million and $221.6 million in the first nine 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 $17.4 million and $17.3 million for the third quarters of 2005 and 2004, respectively. Operating expenses were $78.9 million and $32.7 million for the third quarters of 2005 and 2004, respectively. The increase in operating expense primarily relates to the increased interest expense of $36.2 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 nine months of 2005 and 2004, revenues were $50.8 million (excluding the $318.2 million gain on sale of subsidiary stock) and $43.5 million. Operating expenses were $209.4 million and $107.2 million in the first nine 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 such forecasts.

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 2005, we received dividends of $295.0 million from FNT, of which $150.0 million was initially paid in the form of a note which was subsequently repaid with the proceeds of new borrowings at FNT that will increase debt on a consolidated basis and $145.0 million was paid in cash 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. Following the merger with Certegy, this aspect of the agreement will be amended, as described below.

Prior to the distribution, on September 30, 2005, FNT issued two $250 million intercompany notes payable to us, with terms that mirror our existing $250 million 7.30% public debentures due in August 2011 and $250 million 5.25% public debentures due in March 2013. Interest on each mirror note accrues from the last date on which interest on our corresponding notes was paid and at the same rate. The mirror notes mature on the maturity dates of our corresponding notes. Upon any acceleration of maturity of our notes, whether upon redemption or an event of default of our notes, FNT must repay the corresponding mirror note. Following issuance of these intercompany notes, through the filing of a Registration Statement on Form S-4, pursuant to which FNT proposes to make an exchange offer in which FNT would offer to exchange our outstanding notes for notes FNT would issue having substantially the same terms and reduce the debt under the intercompany notes.

Financing. Subsequent to September 30, 2005, on October 17, 2005, we entered into a new Credit Agreement, dated as of October 17, 2005, with Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the other financial institutions party thereto . This credit agreement replaces our prior $700.0 million, 5-year revolving credit facility which was due November 4, 2008 which was terminated on October 17, 2005.

The Credit Agreement provides for a $250 million unsecured revolving credit facility maturing on the fifth anniversary of the closing date. 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. Voluntary prepayment of the revolving credit facility under the Credit Agreement is permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. Revolving loans under the credit facility bear interest at a variable rate based on either (i) the higher of (a) a rate per annum equal to one-half of one percent in excess of the Federal Reserve’s Federal Funds rate, or (b) Bank of America’s “prime rate;” or (ii) a rate per annum equal to the British Bankers Association LIBOR rate plus a margin of between .625%-2.25%, depending on the Company’s then current public debt credit rating from the rating agencies.

Also on October 17, 2005, FNT entered into a Credit Agreement, dated as of October 17, 2005, with Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the other financial institutions party thereto (the “FNT Credit Agreement”).

The FNT Credit Agreement provides for a $400 million unsecured revolving credit facility maturing on the fifth anniversary of the closing date. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed by the borrower from time to time until the maturity of the revolving credit facility. Voluntary prepayment of the revolving credit facility under the FNT Credit Agreement is permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. Revolving loans under the credit facility bear interest at a variable rate based on either (i) the higher of (a) a rate per annum equal to one-half of one percent in excess of the Federal Reserve’s Federal Funds rate, or (b) Bank of America’s “prime rate;” or (ii) a rate per annum equal to the British Bankers Association LIBOR rate plus a margin of between .35%-1.25%, all in, depending on FNT’s then current public debt credit rating from the rating agencies. On October 24, 2005, FNT borrowed $150 million under its $400 million credit facility at a rate per annum equal to LIBOR + 0.625% in order to satisfy a $150 million intercompany note issued by on of FNT’s subsidiaries to the Company in August 2005.

levels of capitalization. The FNT Credit Agreement also includes customary events of default for facilities of this type (with customary grace periods, as applicable) and provides that, upon the occurrence of an event of default, the interest rate on all outstanding obligations will be increased and payments of all outstanding loans may be accelerated and/or the lenders’ commitments may be terminated. In addition, upon the occurrence of certain insolvency or bankruptcy related events of default, all amounts payable under the Credit Agreement shall automatically become immediately due and payable, and the lenders’ commitments will automatically terminate.

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. In addition, we pay a 0.23% facility fee on the entire facility. As of September 30, 2005, the entire $700.0 million was 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 September 30, 2005, we were in compliance with all of our debt covenants. In conjunction with the new credit agreement entered into on October 17, 2005, we terminated this agreement.

Following the recapitalization, FIS is highly leveraged. As of September 30, 2005, it is paying interest on the term loan facilities at a rate of one month LIBOR plus 1.50% to 1.75% (5.23 — 5.48%). At that rate, the annual interest on the remaining $1,861.0 million of debt not swapped into a fixed rate obligation as described below would be $96.3 million. A one percent increase in the LIBOR rate would increase its annual debt service on this portion of the Term Loan Facilities by $18.9 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 an asset of the Company of $2.1 million, as of September 30, 2005 which is included in the accompanying condensed consolidated balance sheet in prepaid expenses and other assets and as a component of accumulated other comprehensive earnings, net of deferred taxes.

As described above, FIS has agreed to merge with Certegy in a transaction in which Certegy will be the surviving company. We will own 50.3% of the common stock of Certegy upon completion of the merger. Certegy currently pays quarterly dividends to its shareholders of $0.05 per share and it is expected to continue to do so following the merger. Upon completion of the merger, Certegy will become a co-borrower under FIS’s senior credit facilities. Following the merger, these facilities will be amended to limit the amount of dividends the combined company can pay on its common stock to $60 million per year, plus certain other amounts, except that dividends on the common stock many not be paid if any event of default under the facilities shall have occurred or be continuing or would result from such payment.

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 September 30, 2005, we had security loans outstanding with a fair value of $168.5 million included in accounts payable and accrued liabilities and we held cash in the amount of $174.4 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 and under the new FNT credit facility, which obligations are described above, there have been no other material changes to our contractual obligations as presented in our 2004 Form 10-K. See Note G to our Condensed Consolidated Financial Statements included in this report for a table showing our principal repayment obligations as of September 30, 2005 on our outstanding debt.

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 September 30, 2005, approximately $30.3 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 September 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 September 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 $1,861.0 million of debt not swapped into a fixed rate as noted below would be $96.3 million. A one percent increase in the LIBOR rate would increase its annual debt service on the Term Loan Facilities by $18.9 million. The credit rating assigned to the Term Loan Facilities and Revolver by Standard & Poor’s is currently BB.

value of the cash flow hedges results in an asset to the Company of $2.1 million as of September 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.

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, 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. As background to the disclosure below, please note the following:

	•		These matters raise difficult and complicated factual and legal issues and are subject to many uncertainties and complexities, including but not limited to the underlying facts of each matter, novel legal issues, variations between jurisdictions in which matters are being litigated, differences in applicable laws and judicial interpretations, the length of time before many of these matters might be resolved by settlement or through litigation and, in some cases, the timing of their resolutions relative to other similar cases brought against other companies, the fact that many of these matters are putative class actions in which a class has not been certified and in which the purported class may not be clearly defined, the fact that many of these matters involve multi-state class actions in which the applicable law for the claims at issue is in dispute and therefore unclear, and the current challenging legal environment faced by large corporations and insurance companies.

	•		In these matters, plaintiffs seek a variety of remedies including equitable relief in the form of injunctive and other remedies and monetary relief in the form of compensatory damages. In most cases, the monetary damages sought include punitive or treble damages. Often more specific information beyond the type of relief sought is not available because plaintiffs have not requested more specific relief in their court pleadings. In general, the dollar amount of damages sought is not specified. In those cases where plaintiffs have made a specific statement with regard to monetary damages, they often specify damages just below a jurisdictional limit regardless of the facts of the case. This represents the maximum they can seek without risking removal from state court to federal court. In our experience, monetary demands in plaintiffs’ court pleadings bear little relation to the ultimate loss, if any, we may experience.

	•		For the reasons specified above, it is not possible to make meaningful estimates of the amount or range of loss that could result from these matters at this time. The Company reviews these matters on an on-going basis and follows the provisions of SFAS No. 5, “Accounting for Contingencies” when making accrual and disclosure decisions. When assessing reasonably possible and probable outcomes, the Company bases its decision on its assessment of the ultimate outcome following all appeals.

	•		In the opinion of the Company’s management, while some of these matters may be material to the Company’s operating results for any particular period if an unfavorable outcome results, none will have a material adverse effect on its overall financial condition.

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 for escrow fees and requiring purchasers to use Chicago Title Insurance Company for escrow services. 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 officers 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, have responded to the amended complaint. 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. FNT has agreed to indemnify the Company in connection with this matter under the separation agreement that was entered into in connection with the distribution of FNT common stock. 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.

We get inquiries and requests for information from state insurance departments, attorneys general and other regulatory agencies from time to time about various matters relating to our business. Sometimes these take the form of civil investigative subpoenas. We attempt to cooperate with all such inquiries. From time to time, we are assessed fines for violations of regulations or other matters or enter into settlements with such authorities which require us to pay money or take other actions.

In the fall of 2004, the California Department of Insurance began an investigation into reinsurance practices in the title insurance industry. In February 2005 FNF was issued a subpoena to provide information to the California Department of Insurance as part of its investigation. This investigation paralleled similar inquiries of the National Association of Insurance Commissioners, which began earlier in 2004. The investigations have focused on arrangements in which title insurers would write title insurance generated by realtors, developers and lenders and cede a portion of the premiums to a reinsurance company affiliate of the entity that generated the business.

We recently negotiated a settlement with the California Department of Insurance with respect to that department’s inquiry into these arrangements, which we refer to as captive reinsurance arrangements. Under the terms of the settlement, we will refund approximately $7.7 million to those consumers whose California property

was subject to a captive reinsurance arrangement and we will pay a penalty of $5.6 million. We also recently entered into similar settlements with 15 other states, in which we agreed to refund a total of approximately $2 million to policyholders. Other state insurance departments and attorneys general and the U.S. Department of Housing and Urban Development (“HUD”) also have made formal or informal inquiries of us regarding these matters.

We have been cooperating and intend to continue to cooperate with the other ongoing investigations. We have discontinued all captive reinsurance arrangements. The total amount of premiums we ceded to reinsurers was approximately $10 million over the existence of these agreements. The remaining investigations are continuing and we are currently unable to give any assurance regarding their consequences for the industry or for us.

Additionally, we have received inquiries from regulators about our business involvement with title insurance agencies affiliated with builders, realtors and other traditional sources of title insurance business, some of which we have participated in forming as joint ventures with our company. These inquiries have focused on whether the placement of title insurance with us through these affiliated agencies is proper or an improper form of referral payment. Like most other title insurers, we participate in these affiliated business arrangements in a number of states. We recently entered into a settlement with the Florida Department of Financial Services under which we agreed to refund approximately $3 million in premiums received though these types of agencies in Florida and pay a fine of $1 million. The other pending inquiries are at an early stage and as a result we can give no assurance as to their likely outcome.

Since 2004 our subsidiaries have received civil subpoenas and other inquiries from the New York State Attorney General, requesting information about our arrangements with agents and customers and other matters relating to, among other things, rates, calculation practices, use of blended rates in multi-state transactions, rebates and referral fees. These inquiries are at an early stage and as a result we can give no assurance as to their likely outcome

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.


	Page
Part I: FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

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

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

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

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

E. Condensed Consolidated Statements of Cash Flows for the nine months ended September 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		23

Item 3. Quantitative and Qualitative Disclosure About Market Risk		36

Item 4. Controls and Procedures		37

Part II: OTHER INFORMATION

Item 1. Legal Proceedings		37

Item 6. Exhibits and Reports on Form 8-K		39
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2


By:	/s/ Alan L. Stinson

	Alan L. Stinson
	Executive Vice President, Chief Financial Officer
	(Principal Financial and Accounting Officer)
		Date: November 9, 2005

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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.