Fidelity National Financial, Inc.

We are the largest title insurance and diversified real estate information services and solutions 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 29% of all title insurance policies issued nationally during 2002. We provide title insurance in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, and in Canada and Mexico. We have leveraged our national network of 1,500 direct offices and 9,500 agents to secure the leading market share (based on net premiums written) in three out of the four states that account for approximately 50% of the real estate activity in the country. Our acquisition of American Pioneer Title Insurance Company (see “Recent Developments”) will put us in the number one market position in the state of Florida, thereby securing the leading market share in all four states that account for approximately 50% of the real estate activity in the country.

Through our subsidiary, Fidelity Information Services, Inc. (“FIS”), which we acquired on April 1, 2003, we are a worldwide provider and one of the largest providers of information-based technology solutions and processing services to financial institutions and the mortgage and financial services industries in the United States. FIS applications process nearly 50% of all residential mortgage loans by dollar value in the United States, with balances exceeding $3.6 trillion. FIS has processing and technology relationships with 45 of the top 50 banks in the United States and has clients in more than 50 countries who rely on its processing and outsourcing products and services.

We have six reporting segments: title insurance; financial institution software and services; lender outsourcing solutions; information services; specialty insurance; and corporate and other. 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 including collection and trust activities, trustee’s sales guarantees, recordings and reconveyances. The financial institution software and services segment consists primarily of the operations of FIS, which was acquired on April 1, 2003 (see “Recent Developments”) and subsequent acquisitions of WebTone, Aurum and Sanchez. This segment focuses on two primary markets, financial institution processing and mortgage loan processing, as well as our Empower and Softpro software products. 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, and which 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. The information services segment offers real estate information related 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. The specialty insurance segment, consisting of our various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies. The corporate and other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses the operations of our wholly-owned equipment-leasing subsidiary and other small operations.

All dollars presented in this document are in thousands, except share and per share amounts and unless indicated otherwise.

Our strategy is to maximize operating profits by increasing our market share in the title insurance business and by aggressively and effectively managing operating expenses throughout the real estate business cycle. In addition, we plan to grow our non-title revenue and earnings stream to provide a more balanced financial profile. To accomplish our goals, we intend to:


	•	Continue to operate each of our five title brands independently. We believe that in order to maintain and strengthen our title insurance revenue base, we must leave the Fidelity Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title brands intact and operate them independently. Entrepreneurship and close customer relationships are an integral part of the culture at each of our title brands. We believe this culture of independence aids in employee retention, which is critical to the operating success of each brand.

	•	Consistently deliver high quality products with superior customer service. We believe customer service and consistent product delivery are the most important factors in attracting and retaining customers. We continue


		to focus our marketing efforts and distribution network to serve our customers in the residential, institutional, commercial, financial and mortgage market sectors.


	•	Continue to expand the scope and breadth of the financial institution software and services, lender outsourcing solutions and information services we offer. We plan to continue to improve and broaden the products and services we offer to financial institutions and the real estate industry. We will strive to provide a comprehensive, integrated suite of products and services that enable real estate transaction participants to streamline their production processes, operate more profitable businesses and enhance their customers’ experiences.

On February 27, 2004, we acquired the remaining 44% interest in Hansen Quality Loan Services, LLC (“Hansen”) that we did not already own for approximately $34.0 million, consisting of approximately $25.5 million in cash and $8.5 million of our common stock. The stock portion of the purchase price resulted in the issuance of 220,396 shares of our common stock, which is restricted from sale to the public. Hansen provides collateral risk assessment and valuation services for real estate mortgage financing.

On March 11, 2004, we acquired Aurum Technology, Inc. (“Aurum”) for approximately $305.0 million, composed of approximately $185.0 million in cash and $120.0 million in shares of our common stock. Aurum is a leading provider of outsourced and in-house information technology solutions for the community bank and credit union markets.

On January 27, 2004, we signed a merger agreement with Sanchez Computer Associates, Inc. (“Sanchez” — NASDAQ:SCAI), pursuant to which FNF will acquire all of the outstanding common stock of Sanchez for approximately $175.0 million. Under the terms of the merger agreement, total consideration for each share of Sanchez common stock will be $6.50, composed of $3.25 in cash and $3.25 in shares of our common stock. Sanchez stockholders will have the option to elect any combination of cash and stock, subject to proration such that the overall limitation for the consideration in the transaction will be 50% cash compensation and 50% compensation in the form of our common stock. We have entered into voting agreements to support the transaction with Sanchez stockholders holding in excess of 40% of the common stock vote. The transaction is expected to close in the second quarter of 2004, subject to the approval by Sanchez’ shareholders and customary regulatory and other conditions.

Sanchez develops and markets scalable and integrated software and services that provide banking, customer integration, outsourcing and wealth management solutions to financial institutions in various countries. Sanchez’ primary product offering is Sanchez Profile ^TM, a real-time, multi-currency, strategic core banking deposit and loan processing system that can be utilized on both an outsourced and in-house basis.

On October 27, 2003, we signed a definitive agreement to acquire American Pioneer Title Insurance Company (“APTIC”) for an estimated cash purchase price of $115.0 million, subject to certain equity adjustments. The transaction is subject to regulatory approvals and is expected to close in the first quarter of 2004. APTIC is a 45-state licensed title insurance underwriter with significant agency operations and computerized title plant assets in the state of Florida. APTIC will operate under our Ticor Title brand.

On October 9, 2003, we acquired LandCanada, the second largest provider of title insurance and related mortgage document production in Canada, for approximately $17.6 million in cash.

On September 30, 2003, we acquired the outstanding minority interest of Fidelity National Information Solutions, Inc. (“FNIS”), our majority-owned real estate related services public subsidiary, whereby FNIS became a wholly-owned subsidiary. In the acquisition, each share of FNIS common stock (other than FNIS common stock we already owned) was exchanged for 0.83 shares of our common stock. We issued 14,292,858 shares of our common stock to FNIS stockholders in the acquisition. We allocated $154.8 million of the purchase price to goodwill and $88.9 million of the purchase price to other intangible assets and capitalized software based on preliminary studies and valuations that are being finalized. Such purchase accounting adjustments may be refined as additional information becomes available.

On September 2, 2003, we acquired WebTone Technologies, Inc. (“WebTone”) for approximately $90.0 million in cash. WebTone is the developer of the TouchPoint® suite of customer interactive management solutions for financial services organizations.

On May 2, 2003, we acquired the flood insurance business of Mutual of Omaha’s subsidiary, Omaha Property and Casualty Insurance Company (“OPAC”), for approximately $18.0 million in cash. This acquisition, along with the Bankers Insurance Group acquisition (described below) expands our presence in the flood insurance business.

On January 28, 2003, we entered into a stock purchase agreement with ALLTEL Corporation, Inc., a Delaware corporation (“ALLTEL”), to acquire from ALLTEL its financial services division, ALLTEL Information Services, Inc. (“AIS”). On April 1, 2003, we closed the acquisition and subsequently renamed the division Fidelity Information Services (“FIS”). FIS is one of the largest providers of information-based technology solutions and processing services to the mortgage and financial services industries.

We acquired FIS for approximately $1,069.6 million (including the payment for certain working capital adjustments and estimated transaction costs), consisting of $794.6 million in cash and $275.0 million of our common stock. We funded the cash portion of the purchase price through the issuance of $250.0 million aggregate principal amount of 5.25% notes due March 15, 2013, and $544.6 million in available cash. The stock portion of the purchase price resulted in the issuance of 11,206,692 shares of our common stock to ALLTEL.

In connection with the closing of the acquisition, we entered into a stockholder’s agreement, a non-competition agreement and certain transition agreements with ALLTEL. The stockholder’s agreement: (1) restricts the sale by ALLTEL of our common stock received in the transaction for a period of one year unless we consent to such sale or transfer or certain events set forth in the stockholder’s agreement with ALLTEL and us occur prior to the expiration of the one-year lock-up, (2) grants ALLTEL the right to designate one nominee to our Board of Directors, so long as it continues to hold at least 50% of the shares of our common stock received in the transaction, and (3) grants ALLTEL certain registration rights with respect to our common stock it receives in the transaction. The non-competition agreement prohibits, with certain exceptions, ALLTEL and its affiliates from engaging in the business relating to the assets acquired by us for a period of two years after the transaction. We allocated the purchase price as follows: $450.7 million to goodwill; $348.0 million to other intangible assets, namely acquired customer relationship intangibles; and $95.0 million to capitalized software based on studies and valuations that are currently being finalized. Such purchase accounting adjustments may be refined as additional information becomes available. We are amortizing the other intangible assets using an accelerated method that takes into consideration expected customer attrition rates over a 10-year period. The acquired software is amortized over a seven-year period using an accelerated method that contemplates the period of expected economic benefit and future enhancements to the underlying software. Under the terms of the stock purchase agreement, we made a joint election with ALLTEL to treat the acquisition as a sale of assets in accordance with Section 338 (h) (10) of the Internal Revenue Code, which resulted in the revaluation of the assets acquired to fair value. As such, the fair value assignable to the

On March 31, 2003, we acquired Key Title Company (“Key Title”) for approximately $22.5 million in cash. Key Title operates in 12 counties in the state of Oregon under the Ticor Title brand.

On March 26, 2003, we merged with ANFI, Inc. (“ANFI”), which is predominately a California underwritten title company, and ANFI became our wholly-owned subsidiary. In the merger, each share of ANFI common stock (other than ANFI common stock we already owned) was exchanged for 0.454 shares of our common stock. We issued 5,183,103 shares of our common stock to the ANFI stockholders in the merger.

On February 10, 2003, we acquired Lenders Service, Inc., a Delaware corporation (“LSI”), for approximately $75.0 million in cash. LSI is a leading provider of appraisal, title and closing services to residential mortgage originators.

On January 9, 2003, we acquired certain assets of Bankers Insurance Group (“Bankers”) for approximately $41.6 million in cash. The assets include the right to issue new and renewal flood insurance policies underwritten by Bankers and its subsidiaries, Bankers Insurance Company, Bankers Security Insurance Company and First Community Insurance Company (“FCIC”). As part of the transaction, we also acquired FCIC, a fifty-state licensed insurance carrier, to act as the underwriter for the policies. FCIC has subsequently been renamed Fidelity National Property and Casualty Insurance, Inc.

As the foregoing discussion illustrates, a significant portion of our historical growth has resulted from acquisitions. With assistance from our advisors, on an ongoing basis we actively evaluate possible strategic transactions, such as acquisitions and dispositions (by sale, distribution to stockholders or otherwise) of business units and operating assets and business combination transactions, as well as possible alternative means of financing the growth and operations of our business units. There can be no assurance, however, that any suitable opportunities will arise or that any particular transaction will be effected.

Market for title insurance. The title insurance market in the United States is large and growing. According to Corporate Development Services, Inc., total operating income for the entire U.S. title insurance industry grew from $4.8 billion in 1995 to $12.7 billion in 2002. Growth in the industry is closely tied to various macroeconomic factors, including, but not limited to, growth in the gross national product, inflation, interest rates and sales of new and existing homes, as well as the refinancing of previously issued mortgages.

Virtually every real estate transaction consummated in the U.S. requires the use of title insurance by a lending institution before a transaction can be finalized. Generally, revenues from title insurance policies are directly correlated with the value of the property underlying the title policy, and appreciation in the overall value of the real estate market drives growth in total industry revenues. Industry revenues are also driven by swings in interest rates, which affect demand for new mortgage loans and refinancing transactions.

The U.S. title insurance industry is concentrated among a handful of industry participants. According to Corporate Development Services, Inc., the top five title insurance companies accounted for 88% of net premiums collected in 2002. Over 40 independent title insurance companies accounted for the remaining 12% of net premiums collected in 2002. Over the years, the title insurance industry has been consolidating, beginning with the merger of Lawyers Title Insurance and Commonwealth Land Title Insurance in 1998 to create LandAmerica Financial Group, Inc., followed by our acquisition of Chicago Title in March 2000. Consolidation has created opportunities for

Title Insurance Policies. Generally, real estate buyers and mortgage lenders purchase title insurance to insure good and marketable title to real estate. Today, virtually all real property mortgage lenders require their borrowers to obtain a title insurance policy at the time a mortgage loan is made. Title insurance premiums are based upon either the purchase price of the property insured or the amount of the mortgage loan. Title insurance premiums are due in full at the closing of the real estate transaction, and the policy generally terminates upon the resale or refinancing of the property.

Prior to issuing policies, underwriters can reduce or eliminate future claim losses by accurately performing searches and examinations. A title company’s predominant expense relates to such searches and examinations, the preparation of preliminary title reports, policies or commitments and the maintenance of title “plants,” which are indexed compilations of public records, maps and other relevant historical documents. Claim losses generally result from errors or mistakes made in the title search and examination process and from hidden defects such as fraud, forgery, incapacity, missing heirs or refinancing of the property.

Commercial real estate title insurance policies insure title to commercial real property, and generally involve higher coverage amounts and yield higher premiums. Prior to the Chicago Title merger, we issued primarily residential real property title insurance policies. In the Chicago Title merger, we acquired Chicago Title’s National Commercial & Industrial business group, which specializes in meeting the needs of clients involved in large commercial transactions. As discussed later under the heading “Economic Factors Affecting Title Industry,” the volume of commercial real estate transactions is affected primarily by fluctuations in local supply and demand conditions for office space, while residential real estate transaction volume is primarily affected by macroeconomic and seasonal factors. Thus, we believe the addition of Chicago Title’s commercial real estate title insurance base helps in maintaining more uniform revenue levels throughout the seasons.

Losses and Reserves. While most other forms of insurance provide for the assumption of risk of loss arising out of unforeseen events, title insurance serves to protect the policyholder from risk of loss from events that predate the issuance of the policy. As a result, claim losses associated with issuing title policies are less expensive when compared to other insurance underwriters. The maximum amount of liability under a title insurance policy is usually the face amount of the policy plus the cost of defending the insured’s title against an adverse claim.

Reserves for claim losses are established based upon known claims, as well as losses we expect to incur based upon historical experience and other factors, including industry trends, claim loss history, legal environment, geographic considerations, expected recoupments and the types of policies written. We also reserve for losses arising from escrow, closing and disbursement functions due to fraud or operational error.

A title insurance company can minimize its losses by having strict quality control systems and underwriting standards in place. These controls increase the likelihood that the appropriate level of diligence is conducted in completing a title search so that the possibility of potential claims is significantly mitigated. In the case of independent agents, who conduct their own title searches, the agency agreement between the agent and the title insurance underwriter gives the underwriter the ability to proceed against the agent when a loss arises from a flawed title search.

Courts and juries sometimes award damages against insurance companies, including title insurance companies, in excess of policy limits. Such awards are typically based on allegations of fraud, misrepresentation, deceptive trade practices or other wrongful acts commonly referred to as “bad faith.” Although we have not experienced damage awards materially in excess of policy limits, the possibility of such bad faith damage awards may cause us to experience increased costs and difficulty in settling title claims.

The maximum insurable amount under any single title insurance policy is determined by statutorily calculated net worth. The highest self-imposed single policy maximum insurable amounts for any of our title insurance subsidiaries is $250.0 million.

Direct and Agency Operations. We provide title insurance services through our direct operations and wholly-owned underwritten title companies, and additionally through independent title insurance agents who issue title


	•	higher margins because we retain the entire premium from each transaction instead of paying a commission to an agent;

	•	continuity of service levels to a broad range of customers; and

	•	additional sources of income through escrow and other real estate information services, such as collection and trust activities, trustee’s sales guarantees, recordings and reconveyances, property appraisal services, credit reporting, flood certification and monitoring, real estate tax services, exchange intermediary services in connection with real estate transactions, property data and disclosure services, relocation services, multiple listing services and mortgage loan fulfillment services.

Economic Factors Affecting Title Industry. Title insurance revenue is closely related to the level of real estate activity and the average price of real estate sales. Real estate sales are directly affected by the availability of funds to finance purchases, predominantly mortgage interest rates. Other factors affecting real estate activity include, but are not limited to, demand for housing, employment levels, family income levels and general economic conditions. In addition to real estate sales, mortgage refinancing is an important source of title insurance revenue. We have found that residential real estate activity generally decreases in the following situations:


	•	when mortgage interest rates are high or increasing;

	•	when the mortgage funding supply is limited; and

	•	when the United States economy is weak.

Because commercial real estate transactions tend to be driven more by supply and demand for commercial space and occupancy rates in a particular area rather than by macroeconomic events, our commercial real estate title insurance business can generate revenues which help offset the industry cycles discussed above.

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.

Title Insurance Operations. Our direct operations are divided into approximately 200 profit centers consisting of more than 1,500 direct offices. Each profit center processes title insurance transactions within its geographical area, which is usually identified by a county, a group of counties forming a region, or a state, depending on the management structure in that part of the country. We also transact title insurance business through a network of approximately 9,500 agents, primarily in those areas in which agents are the more accepted title insurance provider.

The following table sets forth the approximate dollars and percentages of our title insurance premium revenue by state.

For the entire title insurance industry, 13 states accounted for approximately 75.0% of title premiums written in the United States in 2002. California represented the single largest state with 21.3%.

We also analyze our business by examining the level of premiums generated by direct and agency operations. The following table presents the percentages of title insurance premiums generated by direct and agency operations:

Our relationship with each agent is governed by an agency agreement defining how the agent issues a title insurance policy on our behalf. The agency agreement also prescribes how the agent may be liable to us for policy losses attributable to the agent’s errors. The agency agreement is usually terminable without cause upon 30 days’ notice or immediately for cause. In determining whether to engage or retain an independent agent, we consider the agent’s experience, financial condition, and loss history. For each agent with whom we enter into an agency agreement, we maintain financial and loss experience records. We also conduct periodic audits of our agents.

Escrow and Other Title Related Fees. In addition to fees for underwriting title insurance policies, we derive a significant amount of our revenues from escrow and other title related fees. A title insurance company in a real estate transaction generally acts as an intermediary completing all the necessary documentation and services required for closing the real estate transaction.

In a typical residential transaction, a title insurance order is received from a realtor, lawyer, developer, mortgage lender or independent escrow or closing company. When a title order is received by the title insurance company or agent, the title search begins and the title order is considered “open.” Once documentation has been prepared and signed, mortgage lender payoff demands are in hand and documents have been ordered and the transaction has been recorded, the title order is considered “closed.” A lawyer, an escrow company or a title insurance company or agent performs the closing function, most commonly referred to as an “escrow” in the western United States. The entity providing the closing function (the “closer”) holds the seller’s deed of trust and the buyer’s mortgage until all issues relating to the transaction have been settled. After these issues have been cleared, the closer delivers the transaction documents, records the appropriate title documents in the county recorder’s office and arranges the transfer of funds to pay off prior loans and extinguish the liens securing such loans. Title policies are then issued. The lender’s policy insures the lender against any defect affecting the priority of the mortgage in an amount equal to the outstanding balance of the related mortgage loan. The buyer’s policy insures the buyer against defects in title in an amount equal to the purchase price.

Reinsurance. In the ordinary course of business, we limit our maximum loss exposure by reinsuring certain risks with other title insurers. We also earn additional income by assuming reinsurance for certain risks of other title insurers. In addition, we cede a portion of certain policy and other liabilities under agent fidelity, excess of loss and case-by-case reinsurance agreements. Reinsurance agreements provide generally that the reinsurer is liable for loss and loss adjustment expense payments exceeding the amount retained by the ceding company. However, the ceding company remains primarily liable in the event the reinsurer does not meet its contractual obligations.

The applications and services in our financial institution software and services segment focus on two primary markets, financial institution processing and mortgage loan processing.

Our 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 banks use to process and service mortgage loans. We also provide a number of complementary applications and services that interact directly with the core processing applications, including applications that facilitate interactions between our financial institution customers and their clients.

While many of our customers obtain all or a majority of their key applications from us, the modular design of many of our applications allows our customers to start with one application, such as a lending application, and gradually add applications or services as needed. We provide our customers with additional flexibility by offering our applications through a range of delivery and service models, including on-site outsourcing and remote processing arrangements, as well as on a stand-alone, in-house, licensed software basis for installation on customer-owned systems. Because of our ability to integrate and customize the applications and services we provide to our customers, we often refer to our applications and services as business solutions.

Customers. Over 2,400 financial institutions use our applications and services, including banks, credit unions, savings banks and auto finance companies. The processing needs of our customers in the financial institution processing market vary significantly across the size and type of institutions we serve. These institutions include:


	•	Large Banks. We define the large bank market as banks and other financial institutions in North America with assets in excess of $5 billion. Of the 100 largest U.S. banks, our customers include 32 banks that use our deposit-related core processing applications, 34 banks that use our lending-related core processing applications and 20 banks that use our various retail delivery applications. Our customers in this market include Harris Bank/Bank of Montreal, Citizens Bank, and Bank of the West.

	•	Small to Mid-tier Banks. We provide our applications and services in the small to mid-tier banking market to more than 1,700 customers consisting primarily of U.S. community banks, credit unions and savings banks. Our customers in this market typically seek a fully integrated and broad suite of applications. As a result, our core processing applications sold to this market have various add-on modules or applications that integrate into our core processing applications, providing a broad processing solution. Our customers in this market include Hudson City Savings Bank, Sterling Bank and VyStar Credit Union.

	•	International Banks. We offer applications and services to financial institutions located outside of North America. Our international business utilizes existing bank processing applications and services and customizes them for the specific business needs of our customers in targeted international markets. Our customers include CitiBank Asia Pacific and CEEMEA, ING Group and China Construction Bank. Revenues from our international business were derived principally from 48 customers in the Asia-Pacific market, 38 customers in the European-Middle East-Africa market and 17 customers in the Mexico-Latin American market.

	•	Automotive Finance Institutions. In our automotive finance processing business, we offer loan and lease servicing solutions for the automotive finance industry. In 2003, over 20 million automotive loans and leases were processed on our automotive finance processing applications. Ten of the top 20 U.S. automotive finance companies utilize our applications and services, including the finance companies of Honda, Ford and DaimlerChrysler.

	•	Commercial Lenders. We also provide business solutions that allow clients to automate and manage their entire commercial lending and loan trading businesses. Our customers include more than 70 financial institutions, including 8 of the top 10 and 25 of the top 50 as ranked by capital. Our customers include Bank of America, JPMorgan Chase, Barclays Capital, Bank of Scotland and Rabobank.

Applications and Services. Our primary applications and services include the following:


	•	Core Processing Applications. Our core processing software applications are designed to run critical banking processes of our financial institution customers. These critical banking processes include deposit and lending systems and most other core banking systems that a bank must utilize to manage the products it provides to its customers.

	•	Retail Delivery Applications. While our core processing applications support all aspects of a bank’s internal recordkeeping and reconciliations, our retail delivery applications facilitate direct interactions between a bank and its customers through applications that allow for the delivery of services to these customers. Our retail delivery applications include TouchPoint, an application suite that supports call centers, branch and teller environments, and retail and commercial Internet channels.

	•	Integration Applications. Our integration applications access data on our own and third-party core processing systems and transport information to our customers’ retail delivery channels. Our integration applications provide transaction routing and settlement. These applications facilitate tightly integrated systems and efficient software delivery that reduces technology costs for our customers.

	•	Syndicated Loan Applications. Our syndicated loan applications are designed to support wholesale and commercial banking requirements necessary for all aspects of syndicated commercial loan origination and management.

	•	Automotive Finance Applications. Our primary applications include an application suite that assists automotive finance institutions in evaluating loan applications and credit risk, and allows automotive finance institutions to manage their loan and lease portfolios.

	•	Item Processing and Imaging Services. Our item processing and imaging services provide our customers with a complete range of outsourcing services relating to the imaging and processing of checks, statements and other transaction records. These services are performed at one of our 29 processing centers located throughout the U.S.

	•	Electronic Payments Services. We provide electronic payments solutions, which include ATM infrastructure support, electronic funds transfer, or EFT, services provided through our EFT network called the DASH network, telephone banking services and various card support services, such as card production and fraud prevention.

Delivery of Applications. We have developed several models of providing our customers with applications and services. While we typically deliver the highest value to our customers when we combine our software applications and deliver them in one of several types of outsourcing arrangements, we also are able to deliver individual applications through a software licensing arrangement. The examples below represent the typical delivery models that we utilize in providing our applications:


	•	Software Licensing. In this traditional license and maintenance model, our customers purchase a license and maintenance contract for our software. We may also provide these customers with professional support services on either a time and materials or fixed-price basis to assist them with the implementation of, or conversion to, the licensed software, or with other IT projects.

	•	Application Management. In this service deployment model, we provide applications that are run by the customer at its processing facility, with a dedicated staff of our application programmers and business analysts assisting the customer in managing day-to-day technology-related activities. Our support staff may be located on-site at the customer’s facility, off-site at one of our facilities, or at a combination of both sites. In many cases, our staff supports the customer’s third-party applications, as well as our own software applications.

	•	Application Service Provider or ASP. In this service model, we utilize one of our off-site technology facilities to provide the user of ASP services with computing and application management facilities and support. Our support personnel are generally located off-site in one of our technology facilities, which communicates through online data transmission connections with remote devices on-site at the customer’s location. The ASP customer generally uses a suite of our applications and services in its business. Our customers may arrange to utilize our facilities infrastructure in a shared capacity with other customers, or they may contract with us to have dedicated computing capacity available solely for the operation of their applications, sometimes referred to as remote outsourcing.

	•	Facilities Management Processing or FM. In the FM service model, we provide our customers with a computing and application management function similar to that provided under ASP services. However, in the case of FM services, our personnel are located on-site at the location of the customer and act as the customer’s on-site IT staff in connection with FM services, generally also supporting the customer’s third-party software applications. When we enter into one of these arrangements, we generally hire the customer’s IT staff, which we supplement with our own employees.

We also have developed an additional service business, which we refer to as managed operations, in which we use our off-site technology and processing infrastructure to offer computing facilities to customers, without providing any of our software applications. Unlike our other service customers, our managed operations customers often include customers that are not financial institutions. We are able to profitably leverage our computing capacity and technical expertise to compete in this type of outsourcing business.

Customers. Our mortgage loan processing customers include 7 of the top 10 and 24 of the top 50 mortgage loan originators in the U.S., 21 of the top 30 loan servicers in the U.S., and 11 of the top 20 sub-prime loan servicers in the U.S. Our mortgage loan processing customers include Bank of America, National City Mortgage and U.S. Bank Home Mortgage. Our customer relationships are typically long-term relationships that generally provide relatively consistent annual revenues based on the dollar volume of mortgages processed on our applications. Our mortgage loan servicing platforms, including MSP, are used to process nearly 50% of all residential mortgages by dollar volume in the U.S., representing balances exceeding $3.6 trillion.

Applications and Services. We sell the most widely used mortgage loan servicing system in the U.S. Our primary applications and services include:


	•	MSP. Our Mortgage Servicing Platform, or MSP, is an application that automates all areas of loan servicing, including loan setup and ongoing processing, customer service, accounting and reporting to the secondary mortgage market, and federal regulatory reporting. MSP processes a wide range of loan products, including fixed-rate mortgages, adjustable-rate mortgages, construction loans, equity lines of credit and daily simple interest loans.

	•	Empower! Empower! is a mortgage loan origination software system used by banks, savings & loans, mortgage bankers and sub-prime lenders. This application fully automates every phase of making loans, providing seamless credit bureau access and interfacing with automated underwriting systems used by Freddie Mac and Fannie Mae, as well as with vendors providing servicing, flood certifications, appraisals and title insurance.

Delivery of Applications and Services. While our mortgage servicing applications can be purchased on a stand-alone, licensed basis, the substantial majority of our MSP customers by both number of customers and loan volume choose to use us as their processing partner and engage us to perform all data processing functions in our technology center in Jacksonville, Florida. Customers determine whether to process their loan portfolio data under an ASP arrangement in which multiple clients share the same computing and personnel resources or to have their own dedicated resources within our facility.

Economic Factors Affecting our Financial Institution Software and Services Segment. Revenues from our mortgage loan processing, financial institution processing and auto processing services are closely related to transactional volume of our customers. We typically earn a negotiated charge or fee for each transaction processed on our systems. The long-term nature of the contracts, the recurring revenue stream and the lack of correlation to the mortgage origination cycle leads to this business being significantly less cyclical than our title insurance and real estate information services business.

The ability to grow our mortgage loan processing business is directly correlated to the total population of mortgage debt outstanding. The total population of residential mortgage debt has been growing approximately 8 to 10% per year in recent years, regardless of the volatility of refinance activity. Specific economic factors relating to mortgage debt growth include housing starts and new home sales.

Revenue volumes for our financial institution processing business are closely tied to total transactional volume of our customers. Increases in deposit and lending transactions can positively impact our business and thus the condition of the overall economy can have an impact on our growth. However, even when the economy is weak, there is a base level of transactional volume.

We are also impacted by the decision of financial institutions to outsource the services we provide versus performing them “in-house”. These decisions generally are based on the size of the institution, consideration of our pricing structure and level of support for our products along with general economic factors that exist at the time.

Our lender outsourcing solutions segment offers customized outsourced business process and information solutions to national lenders and loan servicers. We provide loan facilitation services, which allow our 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, we perform 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. We also provide default management services, which allow our 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. We utilize our own resources and networks we have established with independent contractors to provide our outsourcing solutions. We frequently offer our outsourcing solutions to lenders in combination with services of our information services segment.

We work with our customers to set specific parameters regarding the type and quality of services they require and provide a single point of contact with us for these services no matter where the property is located. As a result, our customers are able to utilize our outsourcing services in a manner that we believe provides a greater level of consistency in service, pricing and quality than if these customers were to contract separately for similar services.

Customers. Our customers are financial institutions involved in the first mortgage, refinance, home equity and sub-prime lending markets. Customers of our title agency and closing services delivered under traditional outsourcing arrangements are typically large, national institutions, and include Wells Fargo, Washington Mutual, and Bank of America. Our automated title process and ancillary services are targeted at the top 20 U.S. mortgage lenders, although we believe that the benefits provided by our automated services may be attractive to other national lenders, as well as regional lenders with significant lending operations. Customers of our homebuilders’ services described below are U.S. homebuilders, including Beazer Homes, Inland Homes and Cambridge Homes.


	•	Title Agency Services. Our centralized financial institution title agency services include arranging for the issuance of a title insurance policy by a title insurer, by conducting title searches and preparing an abstract of title, reviewing the status of title in a title commitment, resolving any title exceptions, verifying the payment of existing loans secured by a subject property and verifying the amount of prorated expenses. We perform these services on a national basis, both in the traditional manner and through our centralized production facilities that incorporate automated processes, as described more fully below. Additionally, we typically prepare checks, deeds and affidavits and record appropriate documents in connection with the closing. In 2003, all title insurance policies issued as a result of our agency services were issued by title insurance companies owned by the Company.

	•	Closing Services. Our closing management services are currently available in 43 states and the District of Columbia. We maintain a network of independent closing agents who are trained to close loans in accordance with the lender’s instructions. Our closing management services cover a variety of types of closings, including purchases and refinancings, and provide a variety of types of services.

	•	Homebuilders’ Services. We offer mortgage loan fulfillment and processing services to U.S. homebuilders. We enter into partnership and management arrangements with homebuilders to establish and manage captive mortgage finance businesses that originate, underwrite, process and place first mortgages with unaffiliated wholesale lenders that make loans on newly constructed homes.

In addition, the title and closing services described above can be combined and customized with many of our offerings in our information services segment to meet the specific requirements of our customers. We have a common sales force for the services described above and our information services segment.

Automated Process. The work of title agents has traditionally been very labor-intensive and has required significant manual intervention and individual decision-making. Although a portion of our title agency business is performed in the standard manner, we have also developed an automated process for quickly determining whether a title policy should be issued on a particular property. This process combines an automated title plant with an application that contains a customizable set of decision rules. Although this process largely automates the work of a traditional title agency, we still perform a manual review of title in cases where adequate records are not available online, where certain types of borrowers or properties are involved or where certain exceptions to good title exist. Our automated process permits us to deliver our services in a substantially shorter period of time compared to the delivery of traditional services in the industry.

We began entering into these automated outsourcing arrangements in 2003 with a limited number of our lending customers. Current customers of our automated process are utilizing the services to more efficiently and uniformly outsource the underwriting and settlement of loan refinancings with their existing borrowers that meet certain criteria. We are in the process of adding automated title services that are capable of supporting lenders’ requirements with respect to home equity lines of credit. We also plan to expand the range of services available through automated service delivery. We have recently introduced credit reporting as an additional service that can be delivered with the automated title services we provide, and we are planning to introduce additional integrated services in the future, including flood certifications.

Customers. We primarily provide our default management services to national mortgage lenders and loan servicers, many of which performed default management services in-house prior to entering into outsourcing arrangements with us. Our customers include each of the top 25 residential mortgage servicers, 23 of the top 25 subprime servicers, and 21 of the top 25 subservicers. Our major customers include Washington Mutual and Bank of America.

Services. Based in part on the range and quality of default management services we offer and our focus on customer service, our default management business has grown significantly and we are now one of the two largest default management outsourced service providers in the U.S. We offer a full spectrum of outsourcing services relating to the management of defaulted loans, from initial property inspection to recording the final release of a mortgage lien.


	•	At the onset of a loan default, our services are designed to assess and preserve the value of the property securing the loan. For example, through a nationwide network of independent inspectors, we provide inspection services nationwide, including daily reports on vacant properties, occupancy inspections and disaster and insurance inspections. Through a national network of independent contractors, we perform property preservation and maintenance services, such as lock changes, window replacement, lawn service and debris removal.

	•	As our lender and servicing customers proceed toward the foreclosure of properties securing defaulted loans, our services facilitate completing the foreclosure process. For example, we offer comprehensive posting and publication of foreclosure and auction notices and conduct mandatory title searches, in each case as necessary to meet state statutory requirements for foreclosure. We provide document preparation and recording services, including mortgage assignment and release preparation, and due diligence and research services. We also provide various other title services in connection with the foreclosure process.

	•	After a property has been foreclosed, we provide services that aid our customers in managing their real estate owned, or REO, properties. We offer property preservation field services that assist the lender in managing its REO properties. We offer a variety of title services relating to the lender’s ownership and eventual sale of REO properties. We also offer nationwide advisory and management services to facilitate a lender’s REO sales.

Delivery of Services. Based on a customer’s needs, our services can be provided individually or, more commonly, as part of a business process outsourcing solution that includes some or all of those services. We can also offer default management services as part of a package with MSP, which may lead to additional cost savings for our customers.

We provide electronic access for all our default management customers that allows them to monitor the status of our services over the Internet. We can also create an automated interface between MSP and the information systems we use in providing default management services. This interface allows default services pre-selected by our customers to automatically begin at a pre-determined stage in the default of any loan which is serviced by our MSP application.

Our property data and 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. We offer a comprehensive suite of services spanning the entire home purchase and ownership life cycle, from purchase through closing, refinancing, and resale.

Customers. Customers of our property data business include loan servicers, banks and consumers, as well as other participants in the real estate, lending and title insurance industries. Our customers include ABN Amro, Bank of America, Freddie Mac, New Century Mortgage and Washington Mutual.


	•	Property Information. We provide property information and document and map images to title insurers and agents through a regional network of offices engaged in data collection, research and electronic data delivery. Our services help our customers quickly locate, assemble and analyze information needed to assure the safe transfer and financing of real property. These services include providing automated title plant indexes describing the chain of ownership, images of recorded land records, real estate tax assessment information, real property parcel map images, and images and electronic abstracts of court judgments.

	•	Real Estate Tax Services. We offer lenders a monitoring service that will notify them of any change in tax status during the life of a loan. We also provide complete outsourcing of tax escrow services, including the establishment of a tax escrow account that is integrated with the lender’s mortgage servicing system and the processing of tax payments to taxing authorities.

	•	Flood Zone Certifications. We offer flood zone certifications through a proprietary automated system that accesses and interprets Federal Emergency Management Agency, or FEMA, flood maps and certifies whether a property is in a federally designated flood zone. Additionally, we offer lenders a life-of-loan flood zone determination service that monitors previously issued certificates for any changes, such as FEMA flood map revisions, for as long as that loan is outstanding.

	•	Credit Reporting. We provide credit information reports and related services to meet the needs of the mortgage industry and help commercial banks, mortgage companies and consumer lenders make loan decisions. Our services include providing a merged credit report that contains credit history data on individual or joint credit applicants acquired from the combined databases of three credit bureaus (Experian, Trans Union and Equifax) for national coverage. We consolidate and organize information from these credit bureaus and deliver a concise report to our customers.

Delivery of Services. Many of the property data services discussed above can be combined together to meet the specific needs of our customers.

Customers. Customers of our real estate-related services include loan servicers, banks and consumers as well as other participants in the real estate, lending and title insurance industries. Our customers include Bank of America, U.S. Bancorp and Washington Mutual.


	•	Valuation and Appraisal Services. We have developed a broad suite of valuation applications, which include automated valuation models, traditional appraisals, broker price opinions, collateral scores and appraisal reviews utilized by participants in the secondary mortgage markets. We have developed innovative new hybrid valuation offerings such as collateral valuation insurance, which combine a traditional valuation with an insurance policy issued by an unaffiliated third party that guarantees the accuracy of a valuation within certain parameters. We have also developed processes and technologies that allow our lender customers to outsource their valuation management functions to us. When our customers outsource these functions to us, we utilize various technologies to allow our lenders to automatically select a valuation service from our suite of offerings that delivers the best service/cost solution for each individual situation.

	•	Multiple Listing Services. We provide services that are used to operate multiple listing services in the U.S. serving over 300,000 real estate brokers and agents. We have acquired and developed reliable data base management tools and provide central hosting of MLS systems in our data centers for local MLS organizations, enabling realtors to search for available homes using a potential buyer’s criteria.

	•	1031 Exchange Intermediary Services. We act as a qualified exchange intermediary for those customers who seek to engage in qualified exchanges under Section 1031 of the Internal Revenue Code, which allows capital gains tax deferral on the sale of certain investment assets. Through our nationwide network of regional offices, we provide our customers with direct access to a full-time staff of exchange professionals, one-third of whom are attorneys specializing in tax deferred exchange solutions.


	•	Home warranty insurance. We issue one-year, renewable insurance policies that protect homeowners against defects in household systems and appliances.

	•	Flood insurance. We issue new and renewable flood insurance policies in conjunction with the National Flood Insurance Program.

	•	Homeowners insurance. We offer and underwrite homeowners insurance in various states.

We market and distribute our title, escrow, real estate information, loan facilitation, default management and specialty insurance products and services to customers in the residential, institutional lender, and commercial market sectors of the real estate industry and to financial institutions through customer solicitation by sales personnel. We actively encourage our sales personnel to develop new business relationships with persons in the real estate community, such as real estate sales agents and brokers, financial institutions, independent escrow companies and title agents, real estate developers, mortgage brokers and attorneys. While our smaller, local clients remain important, large customers, such as national residential mortgage lenders, real estate investment trusts and developers have become an increasingly important part of our business. The buying criteria of locally based clients differ from those of large, geographically diverse customers in that the former tend to emphasize personal relationships and ease of transaction execution, while the latter generally place more emphasis on consistent product delivery across diverse geographical regions and ability of service providers to meet their information systems requirements for electronic product delivery.

The primary markets for the financial institution software and services segment are the nation’s commercial banks and saving institutions and financial institutions throughout the world. Financial software and services are also marketed to credit unions and to financial institutions originating or servicing single-family mortgage loans. These financial institutions, which include many of the nation’s largest servicers of residential mortgages, are located throughout the United States.

We believe customer service and consistent product delivery are the most important factors in attracting and retaining customers, and we measure customer service in terms of quality, consistency and timeliness in the delivery of services.

The title insurance industry is highly competitive. According to Corporate Development Services, Inc., the top five title insurance companies accounted for 88% of net premiums collected in 2002. Over 40 independent title insurance companies accounted for the remaining 12% of the market. The number and size of competing companies varies in the different geographic areas in which we conduct our business. In our principal markets, competitors include other major title underwriters such as The First American Corporation, LandAmerica Financial Group, Inc., Old Republic International Corporation and Stewart Information Services Corporation, as well as numerous smaller title insurance companies and independent agency operations at the regional and local level. These smaller companies may expand into other markets in which we compete. Also, the removal of regulatory barriers might result in new competitors entering the title insurance business, and those new competitors may include diversified financial services companies that have greater financial resources than we do and possess other competitive advantages. Competition among the major title insurance companies, expansion by smaller regional companies and any new entrants with alternative products could affect our business operations and financial condition.

Competition in the title insurance industry is based primarily on expertise, service and price. In addition, the financial strength of the insurer has become an increasingly important factor in decisions relating to the purchase of title insurance, particularly in multi-state transactions and in situations involving real estate related investment vehicles such as real estate investment trusts and real estate mortgage investment conduits.

The market for information technology products and services within the financial industry is highly competitive. The primary competition for FIS comes from “in-house” bank information processing departments and other companies engaged in active competition for financial institution outsourcing contracts. Numerous large financial institutions provide information processing for smaller institutions in their respective geographic areas, along with other companies that perform such services for small institutions. We rely upon and enforce contract and trade secret laws and internal non-disclosure safeguards to protect the proprietary nature of our computer software and service methodologies.

Our lender outsourcing solutions, information services, and specialty insurance businesses face significant competition from other similar service providers.

Our insurance subsidiaries, including underwriters, underwritten title companies and independent agents, are subject to extensive regulation under applicable state laws. Each of the insurance underwriters is subject to a holding company act in its state of domicile, which regulates, among other matters, the ability to pay dividends and investment policies. The laws of most states in which we transact business establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business, regulating trade practices, licensing agents, approving policy forms, accounting practices, financial practices, establishing reserve and capital and surplus as regards policyholders (“capital and surplus”) requirements, defining suitable investments for reserves and capital and surplus and approving rate schedules.

Pursuant to statutory accounting requirements of the various states in which our title insurance subsidiaries are licensed, those subsidiaries must defer a portion of premiums earned as an unearned premium reserve for the protection of policyholders and must maintain qualified assets in an amount equal to the statutory requirements. The level of unearned premium reserve required to be maintained at any time is determined by statutory formula based upon either the age, number of policies, and dollar amount of policy liabilities underwritten, or the age and dollar amount of statutory premiums written. As of December 31, 2003, the combined statutory unearned premium reserve required and reported for our title insurance subsidiaries was $1,012.2 million.

The insurance commissioners of their respective states of domicile regulate our title insurance subsidiaries. Regulatory examinations usually occur at three-year intervals, and certain of these examinations are currently ongoing.

Our insurance subsidiaries are subject to regulations that restrict their ability to pay dividends or make other distributions of cash or property to their immediate parent company without prior approval from the Department of Insurance of their respective states of domicile. As of December 31, 2003, $1,522.3 million of our net assets are restricted from dividend payments without prior approval from the Departments of Insurance. During 2004, our title insurance subsidiaries can pay dividends or make other distributions to us of approximately $247.3 million.

The combined statutory capital and surplus of our title insurance subsidiaries was $930.3 million, $614.8 million and $514.7 million as of December 31, 2003, 2002 and 2001, respectively. The combined statutory earnings of our title insurance subsidiaries were $480.0 million, $162.6 million and $162.5 million for the years ended December 31, 2003, 2002 and 2001, respectively.

As a condition to continued authority to underwrite policies in the states in which our title insurance subsidiaries conduct their business, they are required to pay certain fees and file information regarding their officers, directors and financial condition. In addition, our escrow and trust business is subject to regulation by various state banking authorities.

Pursuant to statutory requirements of the various states in which our title insurance subsidiaries are domiciled, they must maintain certain levels of minimum capital and surplus. Each of our title underwriters has complied with the minimum statutory requirements as of December 31, 2003.

Our underwritten title companies are also subject to certain regulation by insurance regulatory or banking authorities, primarily relating to minimum net worth. Minimum net worth of $7.5 million, $2.5 million, $3.0 million and $400 is required for Fidelity National Title Company, Fidelity National Title Company of California, Chicago Title Company and Ticor Title Company of California, respectively. All of our companies are in compliance with their respective minimum net worth requirements at December 31, 2003.

Our financial institution software and services operations are not directly subject to federal or state regulations specifically applicable to financial institutions such as banks, thrifts and credit unions. However, as a provider of services to these financial institutions, our FIS subsidiary is examined on a regular basis by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the National Credit Union Administration and various state regulatory authorities. In addition, independent auditors annually review several of our operations to provide reports on internal controls for our clients’ auditors and regulators.

Beginning July 1, 2001, financial institutions were required to comply with privacy regulations imposed under the Gramm-Leach-Bliley Act. These regulations place restrictions on financial institutions’ use of non-public personal information. All financial institutions must disclose detailed privacy policies to their customers and offer them the opportunity to direct the financial institution not to share information with third parties. The new regulations, however, permit financial institutions to share information with non-affiliated parties who perform services for the financial institutions. As a provider of services to financial institutions, we are required to comply with the privacy regulations and are bound by the same limitations on disclosure of the information received from our customers as apply to the financial institutions themselves.

Our title insurance subsidiaries are regularly assigned ratings by independent agencies designed to indicate their financial condition and/or claims paying ability. The ratings agencies determine ratings by quantitatively and qualitatively analyzing financial data and other information. Our title subsidiaries include Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title. Ratings of our principal title insurance subsidiaries, individually and collectively, are listed below:

Our investment policy is designed to maintain a high quality portfolio, maximize income, minimize interest rate risk and match the duration of our portfolio to our liabilities. We also make investments in certain equity securities in order to take advantage of perceived value and for strategic purposes. Various states regulate what types of assets qualify for purposes of capital and surplus and unearned premium reserves. Our subsidiaries’ investments are restricted by the state insurance regulations of their domiciliary states and are limited primarily to cash and cash equivalents, federal and municipal governmental securities, mortgage loans, certain investment grade debt securities, equity securities and real estate.

As of December 31, 2003 and 2002, the carrying amount, which approximates the fair value, of total investments was $2,689.8 million and $2,565.8 million, respectively.

We purchase investment grade fixed maturity securities, selected non-investment grade fixed maturity securities and equity securities. The securities in our portfolio are subject to economic conditions and normal market risks and uncertainties.

The following table presents certain information regarding the investment ratings of our fixed maturity portfolio at December 31, 2003 and 2002.


(1)	Ratings as assigned by Standard & Poor’s Ratings Group and Moody’s Investors Service.

The following table presents certain information regarding contractual maturities of our fixed maturity securities at December 31, 2003:

Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Fixed maturity securities with an amortized cost of $151.1 million and a fair value of $155.7 million were callable at December 31, 2003.

Our equity securities at December 31, 2003 and 2002 consisted of investments in various industry groups as follows:

Our investment results for the years ended December 31, 2003, 2002 and 2001 were as follows:


(1)	Net investment income as reported in our Consolidated Statements of Earnings has been adjusted in the presentation above to provide the tax equivalent yield on tax exempt investments.

As of December 31, 2003, we had approximately 28,600 full-time equivalent employees. We believe that our relations with employees are generally good.

In addition to the normal risks of business, we are subject to significant risks and uncertainties, including those listed below and others described elsewhere in this Annual Report on Form 10-K or incorporated herein. Any of the risks described herein could result in a significant or material adverse effect on our results of operations or financial condition.

Our revenues may decline during periods when the demand for our products decreases.

Title insurance revenue is closely related to the level of real estate activity and the average price of real estate sales. Real estate sales are directly affected by the availability of funds to finance purchases, predominantly mortgage interest rates. Other factors affecting real estate activity include, but are not limited to, demand for housing, employment levels, family income levels and general economic conditions. In addition to real estate sales, mortgage refinancing is an important source of title insurance revenue. We have found that residential real estate activity generally decreases in the following situations:


	•	when mortgage interest rates are high or increasing;

	•	when the mortgage funding supply is limited; and

	•	when the United States economy is weak.

Our revenues in future periods will continue to be subject to these and other factors which are beyond our control and, as a result, are likely to fluctuate.

As a holding company, we depend on distributions from our subsidiaries, and if distributions from our subsidiaries are materially impaired, our ability to declare and pay dividends may be adversely affected.

We are a holding company whose primary assets are the securities of our operating subsidiaries. Our ability to pay dividends is dependent on the ability of our subsidiaries to pay dividends or repay funds to us. If our operating subsidiaries are not able to pay dividends or repay funds to us, we may not be able to declare and pay dividends to you.

Our title insurance and specialty insurance subsidiaries must comply with state and federal laws which require them to maintain minimum amounts of working capital, surplus and reserves, and place restrictions on the amount of dividends that they can distribute to us. Compliance with these laws will limit the amounts our regulated subsidiaries can dividend to us. As of December 31, 2003, $1,522.3 million of our net assets are restricted from dividend payments without prior approval from the Departments of Insurance. During 2004, our title insurance subsidiaries can pay dividends or make distributions to us of approximately $247.3 million.

Our rate of growth could be adversely affected if we are unable to acquire suitable acquisition candidates.

As part of our growth strategy, we have made numerous acquisitions and we plan to continue to acquire complementary businesses, products and services. This strategy depends on our ability to identify suitable acquisition candidates and, assuming we find them, to finance such acquisitions on acceptable terms. We have historically used, and in the future may continue to use, a variety of sources of financing to fund our acquisitions, including, cash from operations, debt and equity. Our ability to finance our acquisitions is subject to a number of risks, including adequate cash reserves from operations, acceptable financing terms and variability in our stock price. Each of these factors may inhibit our ability to pursue attractive acquisition targets. If we are unable to acquire suitable acquisition candidates, we may experience slower growth.

The expansion of our business, particularly in new industry segments, subjects us to associated risks, such as the diversion of management’s attention and lack of experience in operating such businesses.

We have acquired, and may in the future acquire, businesses in industries with which management is less familiar than we are with the title insurance industry. For example, since April 1, 2003, we have acquired FIS, Webtone and Aurum, and in April 2004, we expect to close our acquisition of Sanchez, each of which operates in the financial services industry. Also, in the last three years, we have expanded the range and amount of real estate information services we provide, expanded our home warranty insurance business, expanded our commercial title insurance business and acquired underwriters of other lines of insurance products. These activities involve risks that could adversely affect our operating results, such as diversion of management’s attention and lack of substantial experience in operating such businesses.

We may encounter difficulties managing our growth, which could adversely affect our results of operations.

We have historically achieved growth through a combination of developing new products and services, increasing our market share for existing products, and acquisitions. Part of our strategy is to pursue opportunities to diversify and expand our operations by acquiring or making investments in other companies. The success of each acquisition will depend upon:


	•	our ability to integrate the acquired business’ operations, products and personnel;

	•	our ability to retain key personnel of the acquired businesses;

	•	our ability to expand our financial and management controls and reporting systems and procedures;

	•	our ability to maintain the customers and goodwill of the acquired businesses; and

	•	any unexpected cost or unforeseen liabilities associated with the acquired businesses.

Our subsidiaries that engage in insurance related businesses must comply with additional regulations. These regulations may impede, or impose burdensome conditions on, our rate increases or other actions that we might want to take to increase the revenues of our subsidiaries.

Our insurance businesses are subject to extensive regulation by state insurance authorities in each state in which we operate. These agencies have broad administrative and supervisory power relating to the following, among other matters:


	•	licensing requirements;

	•	trade and marketing practices;

	•	accounting and financing practices;

	•	capital and surplus requirements;

	•	the amount of dividends and other payments made by insurance subsidiaries;

	•	investment practices;

	•	rate schedules;


	•	deposits of securities for the benefit of policyholders;

	•	establishing reserves; and

	•	regulation of reinsurance.

Most states also regulate insurance holding companies like us with respect to acquisitions, changes of control and the terms of transactions with our affiliates. These regulations may impede or impose burdensome conditions on our rate increases or other actions that we may want to take to enhance our operating results, and could affect our ability to pay dividends on our common stock. In addition, we may incur significant costs in the course of complying with regulatory requirements. We cannot assure you that future legislative or regulatory changes will not adversely affect our business operations.

We face competition in our title business from traditional title insurers and from new entrants with alternative products.

Technological changes in the financial institution software and services segment of our business may reduce the demand for our products and services.

We expect our competitors to enhance their existing products and services and to introduce new products and services that may render existing products and services obsolete. To be successful, we must anticipate industry trends, apply advances in technology and continue to enhance our own products and services and introduce new products and services to meet the demands of our customers. We may be unsuccessful and we may incur substantial expense in developing, acquiring or marketing new or enhanced products or services that respond to technological change or evolving customer needs. If we fail to adapt to changes in technologies, we could lose customers and revenue, and fail to attract new customers.

Consolidation in the banking and financial services industry could adversely impact our business by eliminating a number of our existing and potential clients.

There has been and continues to be merger, acquisition and consolidation activity in the banking and financial services industry. Mergers or consolidations of banks and financial institutions in the future could reduce the number of our clients and potential clients. In addition, it is possible that the larger banks or financial institutions resulting from mergers or consolidations could decide to perform for themselves some or all of the services that we currently provide or could provide. A smaller market for our services could have a material adverse impact on our business and results of operations.

Security breaches and computer viruses could harm our business by disrupting our delivery of services and damaging our reputation.

As part of our transaction processing business, we electronically receive, process, store and transmit sensitive business information of our customers. Unauthorized access to our computer systems could result in the theft or publication of confidential information, the deletion or modification of records or otherwise cause interruptions in

Misappropriation of our intellectual property and proprietary rights could impair our competitive position

Our ability to compete depends upon proprietary systems and technology. While we rely on trademark, trade secret and copyright law, confidentiality agreements and technical measures to protect proprietary rights, we believe that the technical and creative skills of personnel, continued development of proprietary systems and technology, brand name recognition and reliable web site maintenance are more essential in establishing and maintaining a leadership position and strengthening our brands. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of our services or to obtain and use information that we regard as proprietary. Policing unauthorized use of our proprietary rights is difficult.

We cannot assure that the steps taken by us will prevent misappropriation of technology or that the agreements entered into for that purpose will be enforceable. Misappropriation of our intellectual property or potential litigation could have a material adverse effect on our business, results of operations and financial condition. Effective trademark, service mark, copyright and trade secret protection may not be available in every country in which our products and services are made available online. In addition, litigation may be necessary in the future to enforce or protect our intellectual property rights or to defend against claims of infringement or invalidity. As part of our confidentiality procedures, we generally enter into agreements with our employees and consultants and limit access to trade secrets and technology.

If others claim that we have infringed their intellectual property rights, we could be liable for significant damages.

We do not believe that any of our products infringe the proprietary rights of third parties. We cannot be sure, however, that others will not make infringement claims, and we have agreed to indemnify many of our customers against those claims. Any infringement claim, whether with or without merit, could be time consuming, result in costly litigation and may not be resolved on terms favorable to us.

If we fail to comply with privacy regulations imposed on providers of services to financial institutions, our business could be harmed.

As a provider of services to financial institutions, we are bound by the same limitations on disclosure of the information we receive from our customers as apply to the financial institutions themselves. If we fail to comply with these regulations we could damage our customer relationships, harm our reputation and inhibit our ability to obtain new customers.

The information contained in this Form 10-K contains forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about our beliefs and expectations, are forward-looking statements. Forward-looking statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management. Because such statements are based on expectations as to future economic performance and are not statements of fact, actual results may differ materially from those projected. We undertake no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise.

Important factors that may affect these projections or expectations include, but are not limited to:


	•	general political, economic and business conditions, including the possibility of intensified international hostilities, acts of terrorism, 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;

	•	changes in, or the failure to comply with, government regulations; and

	•	other risks detailed elsewhere in this document (including in the Risk Factors section which precedes this section) and in our filings with the Securities and Exchange Commission.

All of these factors are difficult to predict and many are beyond our control. Accordingly, while we believe these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that expectations derived from them will be realized. When used in our documents or oral presentations, the words “anticipate,” “believe,” “estimate,” “objective,” “projection,” “forecast,” “goal,” or similar words are intended to identify forward-looking statements.

Our website address is www.fnf.com. We make available free of charge on or through our website our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. However, the information found on our website is not part of this or any other report.

The information set forth below should be read in conjunction with the consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this Form 8-K. Share and per share data has been retroactively adjusted for stock dividends and splits since our inception, including the 10% stock dividend in February 2004. Certain reclassifications have been made to the prior year amounts to conform with the 2003 presentation.


(1)	Our financial results for the year ended December 31, 2003 include the results of FIS for the period from April 1, 2003, the acquisition date, through December 31, 2003, and include the results of operations of various other entities acquired on various dates during 2003, as discussed in “Recent Developments” and Note B of Notes to Consolidated Financial Statements.

(2)	During the third quarter of 2003, we recorded $26.3 million in pre-tax expenses relating to the migration of data center operations from FNIS to FIS and $12.9 million in pre-tax expenses relating to the relocation of our corporate headquarters to Jacksonville, Florida. In addition, in the third quarter of 2003, we recorded a pre-tax expense of $7.9 million relating to the write-off of intangible assets, software and license fees. See Notes A and B of Notes to Consolidated Financial Statements. 2003 also includes a realized gain of $51.7 million as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of our InterActive Corp common stock in the third quarter and a realized gain of $25.0 million on the sale of New Century Financial Corporation common stock. During the third quarter of 2003, we adopted the fair value recognition provisions 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, as discussed in Note L of Notes to Consolidated Financial Statements. 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. Net income, as a result of the adoption of SFAS No. 123, for the year ended December 31, 2003 reflects an expense of $3.9 million, which is included in the reported financial results.

(3)	Our financial results for the year ended December 31, 2001 include the results of the former operations of Vista Information Solutions, Inc. (“Vista”) for the period from August 1, 2001, the acquisition date, through December 31, 2001. In the fourth quarter of 2001, we recorded certain charges totaling $10.0 million, after applicable taxes, relating to the discontinuation of small-ticket lease origination at FNF Capital and the wholesale international long distance business at Micro General Corporation.

(4)	During 2001, we recorded a $5.7 million, after-tax charge, reflected as a cumulative effect of a change in accounting principle, as a result of adopting Emerging Issues Task Force No. 99-20, “Recognition of Interest Income and Impairment on Purchased and Retained Beneficial Interests in Securitized Financial Assets”, (“EITF 99-20”).

(5)	Our financial results for the year ended December 31, 2000 include the operations of Chicago Title for the period from March 20, 2000, the merger date, through December 31, 2000. In the first quarter of 2000, we recorded certain charges totaling $13.4 million, after applicable taxes, relating to the revaluation of non-title assets and the write-off of obsolete software.


(6)	Investments as of December 31, 2003, 2002, 2001 and 2000 include securities pledged to secure trust deposits of $448.1 million, $474.9 million, $319.1 million and $459.4 million, respectively.

(7)	Cash and cash equivalents as of December 31, 2003, 2002, 2001 and 2000 include cash pledged to secure trust deposits of $231.1 million, $295.1 million, $367.9 million and $132.1 million, respectively.

(8)	Book value per share is calculated as stockholders’ equity at December 31 of each year presented divided by actual shares outstanding at December 31 of each year presented.

(9)	Includes title insurance premiums and escrow and other title related fees.


(1)	Our financial results for the year ended December 31, 2003 include the results of FIS for the period from April 1, 2003, the acquisition date, through December 31, 2003, and include the results of operations of various other entities acquired on various dates during 2003, as discussed in “Recent Developments” and Note B of Notes to Consolidated Financial Statements.

(2)	During the third quarter of 2003, we adopted the fair value recognition provisions 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, as discussed in Note L of Notes to Consolidated Financial Statements. 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. Net income, as a result of the adoption of SFAS No. 123, for the year ended December 31, 2003 reflects an expense of $3.9 million, which is included in the reported financial results. The adoption of SFAS 123 increased compensation cost by $5.8 million for the three months ended March 31, 2003, which resulted in a reduction of the reported net earnings of $3.6 million, or $.03 per diluted per share. Compensation cost decreased by $47,000 for the three months ended June 30, 2003, which resulted in an increase in reported net earnings of $29,000, which had no change to diluted earnings per share. Amounts for the first and second quarters of 2003 are presented as if we adopted SFAS 123 in the first quarter of 2003.

(3)	During the third quarter of 2003, we recorded $26.3 million in pre-tax expenses relating to the migration of data center operations from FNIS to FIS and $12.9 million in pre-tax expenses relating to the relocation of our corporate headquarters to Jacksonville, Florida. In addition, in the third quarter of 2003, we recorded a pre-tax expense of $7.9 million relating to the write-off of intangible assets, software and license fees. The third quarter of 2003 also includes a realized gain of $51.7 million as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of our InterActive Corp common stock.

The following discussion should be read in conjunction with the Consolidated Financial Statements and the Notes thereto and Selected Financial Data included elsewhere in this Form 10-K.

Business. We are the largest title insurance and diversified real estate information services and solutions 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 29% of all title insurance policies issued nationally during 2002. Through our subsidiary, Fidelity Information Services, Inc. (“FIS”), which we acquired on April 1, 2003 (see “Recent Developments”), we are a worldwide provider and one of the largest providers of information-based technology solutions and processing services to financial institutions and the mortgage and financial services industries in the United States. FIS applications process nearly 50% of all residential mortgage loans by dollar value in the United States, with balances exceeding $3.6 trillion. FIS has processing and technology relationships with 45 of the top 50 banks in the United States and has clients in more than 50 countries who rely on its processing and outsourcing products and services.

We have six reporting segments: title insurance; financial institution software and services; lender outsourcing solutions; information services; specialty insurance; and corporate and other. 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 including collection and trust activities, trustee’s sales guarantees, recordings and reconveyances. The financial institution software and services segment consists primarily of the operations of FIS, which was acquired on April 1, 2003 (see “Recent Developments”) and subsequent acquisitions of WebTone, Aurum and Sanchez. This segment focuses on two primary markets, financial institution processing and mortgage loan processing, as well as our Empower and Softpro software products. 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, and which 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. The information services segment offers real estate information related 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. The specialty insurance segment, consisting of our various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies. The corporate and other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, the operations of our wholly-owned equipment-leasing subsidiary and other small operations.


	•	when mortgage interest rates are high or increasing;

	•	when the mortgage funding supply is limited; and

	•	when the United States economy is weak.

Economic Factors Affecting the Financial Institution Software and Services segment. Revenues from our mortgage loan processing, financial institution processing and auto processing services are closely related to transactional volume of our customers. We typically earn a negotiated charge or fee for each transaction processed on our systems. The long-term nature of the contracts, the recurring revenue stream and the lack of correlation to the mortgage origination cycle leads to this business being significantly less cyclical than our title insurance and real estate transaction business.

Revenue Recognition. The following describes our revenue recognition policies as it pertains to each of our segments:

Title Segment. Our direct title insurance premiums and escrow and other title related fees are recognized as revenue at the time of closing of the related transaction as the earnings process is considered complete. Our agency title insurance premiums are recognized as revenue when policies are reported to us and are recorded as revenue on a gross basis (before the deduction of agent commissions). In addition, we accrue for unreported agency title insurance premiums based on historical reporting patterns of our agents and current trends.

Financial Institution Software and Services. In this segment, we recognize revenues relating to bank processing services and mortgage processing services along with software licensing and services. Several of our contracts include a software license and one or more of the following services: data processing, development, implementation, conversion, programming, maintenance and application management. In some cases, these services are offered in combination with one another and in other cases we offer them individually. Revenues from bank and mortgage processing services are typically volume-based depending on factors such as the estimated number of accounts, transactions processed and computer resources utilized.

The substantial majority of our revenues in this segment are from outsourced data processing and application management arrangements. Revenues from these arrangements are recognized as services are performed. Revenue and incremental direct costs related to implementation, conversion and programming services associated with our data processing and application management agreements are deferred during the implementation phase and subsequently recognized over the term of the related agreement. At each reporting period, each contract with related deferred costs is evaluated for impairment, and if impairment is evident, deferred costs are adjusted accordingly.

In other revenue producing transactions, we use several different accounting policies related to revenue recognition, depending on the type of transaction. We recognize software license and maintenance fees as well as associated development, implementation, conversion and programming fees, in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2, or SOP 97-2, entitled “Software Revenue Recognition,” and SOP 98-9, entitled “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.” Initial license fees are recognized when a contract exists, the fee is fixed or determinable, software delivery has occurred and collection of the receivable is deemed probable, provided that vendor-specific objective evidence, or VSOE, has been established for each element or for the undelivered elements. We determine the fair value of each element or the undelivered elements in multi-element software arrangements based on VSOE. If the arrangement is subject to accounting under SOP 97-2, VSOE for each element is based on either the price charged when the same element is sold separately or in the case of maintenance, using a substantive renewal rate. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of fair value does not exist for one or more undelivered elements of a contract, then all revenue is deferred until all elements are delivered or fair value is determined for all remaining undelivered elements. Revenue from maintenance and support is recognized ratably over the term of the agreement. We record deferred revenue for maintenance amounts invoiced prior to revenue recognition.

With respect to a small percentage of our revenues, we use contract accounting, as required by SOP 97-2, when the arrangement with the customer includes significant customization, modification, or production of software. For elements accounted for under contract accounting, revenue is recognized in accordance with SOP 81-1, “Accounting for Performance of Construction Type and Certain Production-Type Contracts,” using the percentage-of-completion method since reasonably dependable estimates of revenues and contract hours applicable to various elements of a contract can be made. Revenue in excess of billings on these agreements is recorded as unbilled receivables and is included in accounts receivable. Billings in excess of revenue recognized on these agreements are recorded as deferred revenue until revenue recognition criteria are met. Changes in estimates for revenues, costs and profits are recognized in the period in which they are determinable. When our estimates indicate that the entire contract will be performed at a loss, a provision for the entire loss is recorded in that accounting period.

Lender Outsourcing Solutions. In this segment, we recognize revenues from loan facilitation services and default management services. Loan facilitation services include centralized title agency and closing services for various types of lenders. Revenues relating to centralized title agency and closing services are recognized at the time of closing of the related real estate transaction. Ancillary service fees are recognized when the service is provided. Default management services consist of services provided to assist customers through the default and foreclosure process, including property preservation and maintenance services (such as lock changes, window replacement, debris removal and lawn service), posting and publication of foreclosure and auction notices, title searches, document preparation and recording services, and referrals for legal and property brokerage services. Revenues from default management services are recognized upon completion of the underlying service.

Information Services. In this segment, we record revenue from providing data or data-related services. These services principally include appraisal and valuation services, property records information, real estate tax services, borrower credit and flood zone information and multiple listing software and services.

Our flood and tax units provide various services including life-of-loan monitoring services. Revenue for life-of-loan services is deferred and recognized ratably over the estimated average life of the loan service period, which is determined based on our historical experience. We evaluate our historical experience on a quarterly basis, and adjust the estimated life of the loan service period prospectively. Revenue derived from software and service arrangements is recognized in accordance with SOP 97-2 as further described above. Revenues from other services in this segment are recognized as the services are performed.

Specialty Insurance Segment. Revenues from home warranty and homeowners insurance policies are recognized over the life of the policy, which is one year. Revenues and commissions related to the sale of flood insurance are recognized when the policy is reported.

Year ended December 31, 2003. Our Consolidated Statements of Earnings for 2003 include the results of operations of FIS, which we acquired on April 1, 2003, and various other entities acquired on various dates during 2003, as discussed in Note B of Notes to Consolidated Financial Statements. Net earnings from our financial institution software and services segment, which includes FIS for the period from April 1, 2003 through December 31, 2003, represented 8.3% of our total net earnings for 2003 as compared with 0.5% of our total net earnings in 2002. The increase in net earnings from our financial institution software and services segment in 2003 is primarily due to the acquisition of FIS. We expect our percentage of net earnings in our financial institution software and services segment as a percentage of our total net earnings to increase in 2004 as a result of including a full year of FIS operating results in 2004, organic growth we are experiencing within FIS and the acquisitions of WebTone in the third quarter of 2003, Aurum in the first quarter of 2004, and Sanchez, which we expect to close in April 2004. During the third quarter of 2003, we adopted the fair value recognition provisions 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, as discussed in Note L of Notes to Consolidated Financial Statements. 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. Net income, as a result of the adoption of SFAS No. 123, for the year ended December 31, 2003 reflects an expense of $3.9 million, which is included in the reported financial results. Also during the third quarter of 2003, we recorded $26.3 million in pre-tax expenses relating to the migration of data center operations from FNIS to FIS and $12.9 million in pre-tax expenses relating to the relocation of our corporate headquarters to Jacksonville, Florida. In addition, during 2003, we recorded a pre-tax expense of $7.9 million relating to the write-off of intangible assets, software and license fees. See Notes A and B of Notes to Consolidated Financial Statements. In addition, we realized a gain of $51.7 million as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of our InterActive Corp common stock in the third quarter and we realized a gain of $25.0 million on the sale of New Century Financial Corporation common stock.

Year ended December 31, 2001. Our Consolidated Statements of Earnings for 2001 include the former operations of Vista Information Solutions, Inc. for the period from August 1, 2001, the acquisition date, through December 31, 2001. Also, in 2001, we recorded a $5.7 million, after-tax charge, reflected as a cumulative effect of a change in accounting principle, as a result of adopting EITF 99-20 and we recorded certain charges totaling $10.0 million, after applicable taxes relating to the discontinuation of small-ticket lease origination at FNF Capital and the wholesale international long distance business at Micro General Corporation.

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

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


	Year Ended December 31,
	2003		2002		2001
	(Dollars in thousands)
Direct title insurance premiums	$	2,400,870	$	1,610,792	$	1,291,276
Agency title insurance premiums		2,337,381		1,936,937		1,403,203
Escrow and other title related fees		1,056,448		789,730		651,851
Financial institution software and services		700,392		12,428		2,432
Lender outsourcing solutions (excludes title premiums of $288.2 million, $46.7 million and $34.0 million in 2003, 2002 and 2001 respectively that are included in title premiums above)		316,211		167,492		90,154
Information services		545,158		369,477		247,414
Specialty insurance		135,231		46,061		34,678
Interest and investment income		60,345		74,577		89,649
Realized gains and losses, net		106,385		15,459		9,805
Other income		56,794		59,687		53,645

Total revenue	$	7,715,215	$	5,082,640	$	3,874,107

Orders opened by direct title operations		4,820,700		3,228,300		2,635,200
Orders closed by direct title operations		3,694,000		2,290,300		1,770,600

Title insurance revenue is closely related to the level of real estate activity and the average price of real estate sales on both a national and local basis. Real estate sales are directly affected by changes in the cost of financing purchases of real estate, predominantly mortgage interest rates. Other macroeconomic factors affecting real estate activity include, but are not limited to, demand for housing, employment levels, family income levels and general economic conditions. Because these factors can change dramatically, revenue levels in the title insurance industry can also change dramatically. For example, beginning in the second half of 1999 and through 2000, steady interest rate increases caused by actions taken by the Federal Reserve Board resulted in a significant decline in refinancing transactions. As a result, the market shifted from a refinance-driven market in 1998 to a more traditional market driven by new home purchases and resales in 1999 and 2000. However, beginning in January 2001 and continuing through June of 2003, the Federal Reserve Board reduced interest rates by 550 basis points, bringing interest rates down to their lowest level in recent history, which again has significantly increased the volume of refinance activity. Beginning in mid-June 2003 and continuing through December 2003, the ten-year treasury bond yield steadily increased from a low of nearly 3.0% to more than 4.5%, causing mortgage interest rates to rise, which has decreased the volume of refinance activity.

Total revenue in 2003 increased $2,632.6 million to $7,715.2 million, an increase of 51.8% over 2002. Total revenue in 2002 increased $1,208.5 million, or 31.2% to $5,082.6 million from $3,874.1 million in 2001. The increase in total revenue in 2003 and 2002 is due in part to increases in real estate and refinance activity as a result of decreasing interest rates. Further, the acquisitions of financial institution processing and outsourcing service companies, real estate information service companies and specialty insurance companies and the integration of these operations into our core businesses in 2003 and increased realized gains on investments, also contributed to increased revenue in 2003.

Including title insurance premiums that are part of the lender outsourcing solutions segment, premiums were $4,738.3 million in 2003, $3,547.7 million in 2002 and $2,694.5 million in 2001. These increases in 2003 and 2002 are due primarily to increases in resale and refinance activity as a result of the decline in interest rates through mid-year 2003. The increase in resale and refinance activity in 2003 and 2002 has been partially offset by a decrease in the average fee per file. The decrease in fee per file is consistent with the overall increased level of refinance activity experienced during 2003 and 2002. However, the overall decrease in fee per file was partially offset by increases in the fee per file in the second half of 2003 as mortgage interest rates rose, and the mix of business changed from a predominately refinance driven market to more of a resale driven market.

The following table presents the percentages of title insurance premiums generated by our direct and agency operations:


	Year Ended December 31,
	2003					2002					2001
	Amount		%			Amount		%			Amount		%
	(Dollars in thousands)
Direct(1)	$	2,400,870		50.7	%	$	1,610,792		45.4	%	$	1,291,276		47.9	%
Agency(1)		2,337,381		49.3			1,936,937		54.6			1,403,203		52.1

Total title insurance premiums	$	4,738,251		100.0	%	$	3,547,729		100.0	%	$	2,694,479		100.0	%

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

Our mix of direct and agency title insurance premiums changed in 2003 primarily as a result of our acquisition of ANFI in March 2003, and the inclusion of ANFI’s title insurance premiums as direct title insurance premiums in 2003 and the acquisitions of LSI and Key Title in 2003. In 2002 and 2001, ANFI’s title insurance premiums were included in agency title insurance premiums.

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 three-year period ended December 31, 2003, fluctuated in a pattern generally consistent with the fluctuation in direct title insurance premiums and order counts. Escrow and other title related fees were $1,056.4 million, $789.7 million and $651.9 million, respectively, during 2003, 2002 and 2001.

Revenues from financial institution software and services relate primarily to revenues from Fidelity Information Services, Inc. (“FIS”), which we acquired on April 1, 2003. As such, the results of operations of FIS are included in the Consolidated Financial Statements for the period from April 1, 2003, through December 31, 2003. See Note B of Notes to Consolidated Financial Statements. Also included are revenues from our Empower and SoftPro software. Revenues from financial software and services in 2003, 2002 and 2001 were $700.4 million, $12.4 million and $2.4 million, respectively. The 2003 increase in revenues is largely attributable to our acquisition of FIS on April 1, 2003, which generated $663.4 million in revenues from April 1, 2003 to December 31, 2003. The increase in 2003 revenue is also the result of including a full year of revenue from Empower, which was acquired during November 2002. Revenues from financial institution software and services increased $10.0 million in 2002 over 2001. The increase in 2002 revenues is primarily the result of the sales of our Softpro software.

Revenues from our lender outsourcing solutions primarily relate to our loan facilitation services and revenues from our default management services. Including title premiums reported as part of this segment, revenues from lender outsourcing solutions were $604.4 million, $214.2 million and $124.1 million in 2003, 2002 and 2001, respectively. Loan facilitation services contributed $343.6 million of the increase in 2003 and a substantial portion of this growth was attributable to the successful launch of a new automated process for performing title agency services in connection with loan refinancings for borrowers who meet specific criteria. This segment earned $188.7 million in revenues from this automated process in 2003, benefiting from the favorable interest rate environment that contributed to a large volume of refinance activity. In addition, default management revenue in 2003 increased $46.6 million to $152.3 million as a result of organic growth in the majority of our default businesses. The revenue increase in 2002 from 2001 was primarily the result of internal growth in our default management businesses.

Revenues from information services generally trend closely with the level and mix of business, as well as the performance, of our title related subsidiaries. Revenues from information services in 2003, 2002 and 2001 were $545.2 million, $369.5 million and $247.4 million, respectively. Revenues in this segment have benefited from the increased levels of real estate activity over the past few years due partially to the favorable interest rate environment. The 2003 increase in revenue of $175.7 million resulted primarily from acquisitions made in 2003 and 2002 and organic growth in our real estate tax services, flood services, property data and disclosure services. The increase in revenues from 2002 to 2001 was primarily a result of our acquisition of Vista in August 2001 and acquisitions of other businesses and organic growth due to the favorable interest rate environment.

Revenues from specialty insurance were $135.2 million, $46.1 million and $34.7 million in 2003, 2002 and 2001, respectively, and include revenues from the issuance of flood, home warranty and homeowners

insurance policies. Specialty insurance revenue increased in 2003 as compared with 2002 as a result of our January 2003 acquisition of Bankers and FCIC, which gave us the ability to issue new and renewal flood insurance policies. The increase in revenue in 2002 as compared with 2001 is due to an increase in our home warranty revenue.

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 2003 was $60.3 million, compared with $74.6 million in 2002, a decrease of $14.3 million, or 19.1%. Average invested assets increased 14.7% to $3,101.5 million, from $2,704.9 million in 2002. The tax equivalent yield in 2003, excluding realized gains and losses was 2.4% as compared with 3.4% in 2002 and 4.8% in 2001. Interest and investment income decreased $15.1 million, or 16.8% in 2002 to $74.6 million from $89.6 million in 2001. Average invested assets increased 23.1% in 2002 from $2,196.9 million in 2001. The decrease in interest and investment income in 2003 and 2002, despite the increase in average invested assets in both years, is due to a decrease in interest income reflecting lower interest rates in 2003 as compared with 2002 and 2002 as compared with 2001.

Net realized gains and losses for 2003, 2002 and 2001 were $106.4 million, $15.5 million and $9.8 million, respectively. Net realized gains in 2003 includes a $51.7 million realized gain as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of our Interactive Corp. common stock and a realized gain of $25.0 million on the sale of New Century Financial Corporation common stock. Also included in net realized gains for 2003 is an $8.9 million loss as a result of the disposal of assets in connection with the migration of data center operations from FNIS to FIS. See Note B of Notes to Consolidated Financial Statements.

Net realized gains in 2002 includes a $3.1 million gain recognized on our investment in Santa Barbara Restaurant Group, Inc. (“SBRG”) common stock as a result of the merger between SBRG and CKE Restaurants, Inc. (“CKE”) and a $3.4 million gain on the sale of a portion of our CKE common stock in the second quarter of 2002. Net realized gains in 2002 were partially offset by other-than-temporary impairment losses of $11.3 million on CKE recorded during the fourth quarter of 2002 and $3.3 million recorded on MCI WorldCom bonds in the second quarter of 2002.

Other income represents revenue generated by other smaller business, including our leasing business, that are not included in a specific business segment. Other income was $56.8 million in 2003, $59.7 million in 2002 and $53.6 million in 2001.

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



		Year Ended December 31,

		2003		2002		2001


		(Dollars in thousands)
Personnel costs		$	2,465,026	$	1,476,430	$	1,187,177
Other operating expenses			1,707,512		1,021,893		829,433
Agent commissions			1,823,241		1,521,573		1,098,328
Provision for claim losses			255,694		177,391		134,724
Goodwill amortization			—		—		54,155
Interest expense			43,103		34,053		46,569

	Total expenses	$	6,294,576	$	4,231,340	$	3,350,386

Our operating expenses consist primarily of personnel costs, other operating expenses and agent commissions, which are incurred as orders are received and processed. Title insurance premiums, escrow and other title related fees are generally recognized as income at the time the underlying transaction closes. As a result, 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. These costs generally fluctuate with the level of orders opened and closed and with the mix of revenue. Personnel costs totaled $2,465.0 million, $1,476.4 million and $1,187.2 million for the years ended December 31, 2003, 2002 and 2001, respectively. Personnel costs, as a percentage of total revenue, were 32.0% in 2003, and remained relatively consistent in 2002 and 2001 at 29.1% and 30.6%, respectively. The increase in personnel costs as a percentage of total revenue in 2003 can be attributed to the substantial increase in open order volumes and the incremental personnel costs associated with our acquisition of FIS and our various other acquisitions made during 2003, which have higher personnel costs as a percentage of revenue. In addition, during 2003, personnel costs include $7.9 million of relocation expenses. See Note A of Notes to Consolidated Financial Statements. Further, as a result of adopting SFAS No. 123 during 2003, included in personnel costs for 2003 is approximately $6.2 million in compensation cost. See Note L of Notes to Consolidated Financial Statements. 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. As such, with the decline in open orders on refinance transactions resulting from the increase in mortgage interest rates during the second half of 2003, we began reducing personnel costs with the reduction of approximately 22% of the title and escrow workforce from July to December of 2003. This reduction in title and escrow workforce partially offset the increase in personnel costs in 2003 over 2002. Personnel costs by segment as a percentage of total personnel costs for 2003 were as follows: 67.5% for title; 17.0% for financial institution software and services; 5.9% for lender outsourcing solutions; 6.6% for information services, .8% for specialty insurance and 2.3% for corporate and other. We will continue to monitor prevailing market conditions and will adjust personnel costs in accordance with activity.

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 (including personnel costs associated with information technology support), professional services, advertising expenses, general insurance, depreciation and trade and notes receivable allowances. Other operating expenses increased as a percentage of total revenue to 22.1% in 2003 from 20.1% in 2002 and decreased in 2002 from 21.4% in 2001. The increase in other operating expenses as a percentage of total revenue in 2003 is consistent with the increase in personnel costs as a percentage of total revenue. In addition, during 2003, other operating expenses include $17.4 million and $5.0 million of data center migration costs and relocation expenses, respectively; and $7.9 million in expenses relating to the write-off of assets. See Notes A and B of Notes to Consolidated Financial Statements. Other operating expenses by segment as a percentage of total other operating expenses for 2003 were as follows: 48.8% for title; 10.8% for financial institution software and services; 13.1% for lender outsourcing solutions; 19.1% for information services, 5.7% for specialty insurance and 2.6% for corporate and other. The decrease in other operating expenses as a percentage of total revenue in 2002 from 2001 is primarily the result of efficiencies gained due to the change in our cost structure following the addition of the Chicago Title operations.

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:

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. During the second quarter of 2003, we increased our claim loss provision as a percentage of total title premiums to 5.5% to cover the expanded variety of title insurance products we offer. Our claim loss provision as a percentage of total title premiums was 5.4% in 2003 and 5.0% in 2002 and 2001.


(1)	We assumed LSI’s and ANFI’s outstanding reserve for claim losses in connection with their acquisitions in 2003.

The unfavorable development on the prior years’ loss reserves during 2003 reflects the slight increase in loss payments during 2003 on previous policy years, resulting in an increase in estimated ultimate losses in previous policy years. The favorable development on prior years’ loss reserves during 2002 and 2001 was attributable to lower than expected payment levels on recent issue years, which included periods of increased resale activity as well as a high proportion of refinance business. As a result, title policies issued in prior years have been replaced by the more recently issued policies, therefore generally terminating much of the loss exposure on the previously issued policies.

Interest expense for the years ended December 31, 2003, 2002 and 2001 was $43.1 million, $34.1 million and $46.6 million, respectively. The increase in interest expense in 2003 is attributable to the increase in outstanding notes payable as a result of the issuance of $250.0 million, aggregate principal amount of 5.25% notes in March 2003 (see Note G of Notes to Consolidated Financial Statements), which was partially offset by the decline in interest

As a result of adopting SFAS No. 142, we did not record goodwill amortization in 2003 and 2002. See Note A of Notes to Consolidated Financial Statements. Goodwill amortization was $54.2 million in 2001 and includes an $8.0 million pretax write-off associated with the discontinuance of two businesses in the fourth quarter of 2001.

Income tax expense as a percentage of earnings before income taxes for 2003, 2002 and 2001 was 38.0%, 36.0% and 40.1%, respectively. The fluctuation in income tax expense as a percentage of earnings before income taxes is attributable to our estimate of ultimate income tax liability, and the characteristics of net earnings — i.e., the acquisition of FIS, operating income versus investment income, as well as the elimination of goodwill amortization consistent with SFAS No. 142. The increase in 2003 as compared with 2002 is due to an increase in the state income tax rate and the effect of foreign taxes as a result of our various acquisitions in 2003.

Minority interest for 2003, 2002 and 2001 was $19.0 million, $13.1 million and $3.0 million, respectively. The increase in minority interest in 2003 and 2002 is primarily attributable to increased earnings of our majority-owned subsidiaries. A substantial part of our minority interest expense was as a result of the former minority interest in FNIS, which we acquired on September 30, 2003.

Cash Requirements. Our cash requirements include debt service, operating expenses, taxes, capital expenditures, systems development, treasury stock repurchases, lease securitizations, 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 bank borrowings through public debt offerings and existing credit facilities. Our short-term and long-term liquidity requirements are monitored regularly to match cash inflows with cash requirements. We forecast the daily needs of all of our subsidiaries and periodically review their short-term and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying these projections.

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

Our two significant sources of internally generated funds are dividends and distributions 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, 2003, $1,522.3 million of our net assets are restricted from dividend payments without prior approval from the Departments of Insurance. During 2004, our title subsidiaries can pay or make distributions to us of approximately $247.3 million. Our underwritten title companies, financial institution processing and outsourcing companies and real estate information service 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.

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.

On March 11, 2003, we issued $250.0 million aggregate principal amount of 5.25% notes. We received proceeds of approximately $246.2 million, after expenses, which was used to pay a portion of the $1,069.6 million purchase price for FIS (see “Recent Developments”). Interest is payable semiannually and the notes are due in March 2013.

Contractual Obligations. Our financing obligations generally include our credit agreement and other debt facilities and operating lease payments on certain of our premises and equipment. Our purchase obligations for business acquisitions relate to the acquisition of Hansen and Aurum in the first quarter of 2004 for approximately $34.0 million and $305.0 million, respectively, the definitive agreement we entered into for the purchase of APTIC for approximately $115.0 million and the merger agreement we entered into with Sanchez for approximately $175.0 million (see “Recent Developments”). As of December 31, 2003, our required annual payments relating to these contractual obligations are as follows:

Capital Stock Transactions. On April 24, 2002, our Board of Directors approved a three-year stock repurchase program. Purchases were made by us from time to time in the open market, in block purchases or in privately negotiated transactions. From May 15, 2002, through December 31, 2002, we repurchased a total of 2,798,358 shares of common stock for $61.2 million, or an average price of $21.87. The amount repurchased includes 604,546 shares of common stock purchased from certain of our officers and directors during the third quarter of 2002, of which 228,181 shares were accepted as full payment for certain notes receivable, including accrued interest. In December 2002, we retired 774,908 of these shares held as treasury stock, totaling $14.3 million. For the year ended December 31, 2003, we repurchased 1,775,400 shares of common stock for $45.4 million, or an average price of $25.60. In the fourth quarter of 2003, we retired 989,450 treasury shares, totaling $27.3 million. As a result of an increase in our cash dividend per share we decided to suspend this stock repurchase program effective July 23, 2003, however effective December 18, 2003, we reinstated the stock repurchase program.

On March 26, 2003, we issued 5,183,103 shares of our common stock in connection with the acquisition of ANFI, Inc. See Note B of Notes to Consolidated Financial Statements.

On April 1, 2003, we issued 11,206,692 shares of our common stock to ALLTEL in connection with our acquisition of FIS. The common stock issued to ALLTEL is restricted for resale until April 1, 2004. See Note B of Notes to Consolidated Financial Statements.

On September 30, 2003, we issued 14,292,858 shares of our common stock in connection with the acquisition of FNIS. See Note B of Notes to Consolidated Financial Statements.

On January 27, 2004, our Board of Directors declared a 10% stock dividend to stockholders of record as of February 12, 2004, payable on February 26, 2004. On April 22, 2003, our Board of Directors declared a five-for-four (5:4) stock split payable May 23, 2003 to stockholders of record as of May 9, 2003. On April 24, 2002, our Board of Directors declared a 10% stock dividend to stockholders of record as of May 9, 2002, payable on May 23, 2002. All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Consolidated Financial Statements and Notes thereto have been retroactively adjusted to reflect the stock split and stock dividends.

Additional Minimum Pension Liability Adjustment. Discount rates that are used in determining our December 31, 2003 projected benefit obligation and 2004 net periodic pension costs were based on prevailing interest rates as of December 31, 2003. Similar to prior years, we looked at the Moody’s Aa corporate bond index at that date as an appropriate basis in determining the discount rate. A decrease in the discount rate used at December 31, 2003 resulted in an additional minimum pension liability adjustment. As such, we recorded a net-of-tax charge of $10.0 million to accumulated other comprehensive earnings (loss) in 2003 in accordance with Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions”.

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. We do not have any material off-balance sheet arrangements.

The accounting policies described below are those we consider critical in preparing our Consolidated Financial Statements. Certain of these policies require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of certain contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. See Note A of Notes to the Consolidated Financial Statements for a more detailed description of our significant accounting policies that have been followed in preparing our Consolidated Financial Statements.

Valuation of Investments. We regularly review our investment portfolio for factors that may indicate that a decline in fair value of an investment is other-than-temporary. Some factors considered in evaluating whether or not a decline in fair value is other-than-temporary include: (i) our ability and intent to retain the investment for a period of time sufficient to allow for a recovery in value; (ii) the duration and extent to which the fair value has been less than cost; and (iii) the financial condition and prospects of the issuer. Such reviews are inherently uncertain and the value of the investment may not fully recover or may decline in future periods resulting in a realized loss.

Goodwill Recoverability. We have made acquisitions in the past that have resulted in a significant amount of goodwill. As of December 31, 2003 and 2002 goodwill was $1,926.5 million and $996.6 million, respectively. The majority of our goodwill as of December 31, 2002 relates to goodwill recorded in connection with the Chicago Title merger in 2000. The increase in goodwill from 2002 to 2003 is primarily from our acquisition of ANFI in March 2003, FIS in April 2003, and the acquisition of the minority interest of FNIS in September 2003. In connection with the acquisitions of Hansen and Aurum, which were completed in first quarter of 2004, APTIC, which we expect to close in the first quarter of 2004, and Sanchez, which we expect to close in April 2004, we anticipate that additional goodwill will be recorded. The process of determining whether or not an asset, such as goodwill, is impaired or recoverable relies on projections of future cash flows, operating results and market conditions. Such projections are inherently uncertain and, accordingly, actual future cash flows may differ materially from projected cash flows. In evaluating the recoverability of goodwill, we perform an annual goodwill impairment test on our reporting units based on an analysis of the discounted future cash flows generated by the reporting units’ underlying assets. We have completed our annual goodwill impairment test on our reporting units at December 31, 2003 and have determined that each of our reporting units has a fair value in excess of its carrying value. Accordingly, no goodwill impairment has been recorded. Such analyses are particularly sensitive to changes in discount rates and investment rates. Changes to these rates might result in material changes in the valuation and determination of the recoverability of goodwill.

Long-Lived Assets. We review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If indicators of impairment are present, we estimate the future cash flows expected to be generated from the use of those assets and their eventual disposal. We would recognize an impairment loss if the future cash flows were less than the carrying amount. In 2003, we

Reserve for Claim Losses. Our claim loss provision as a percentage of total title premiums was 5.4% in 2003 and 5.0% in 2002 and 2001. During 2003, we experienced unfavorable development of the prior years’ loss reserves as a result of a slight increase in loss payments during 2003 on previous policy years, resulting in an increase in estimated ultimate losses in previous policy years. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” and Note I of Notes to Consolidated Financial Statements for a summary of our reserve for claim losses at December 31, 2003, 2002 and 2001. Our reserve for claim losses includes known claims as well as losses we expect to incur, net of recoupments. Each known claim is reserved based on our review as to the estimated amount of the claim and the costs required to settle the claim. Reserves for claims that are incurred but not reported are established at the time premium revenue is recognized based on historical loss experience and other factors, including industry trends, claim loss history, current legal environment, geographic considerations and type of policy written. Loss provision rates are reviewed periodically and adjusted by management as experience develops or new information becomes known. Our independent actuaries perform projections of required reserves periodically during the year and at year-end. We compare these projections to the recorded reserves to evaluate their adequacy. Our reserves for claim losses are within the range projected by our independent actuaries.

Revenue Recognition. Certain of our revenue recognition policies that pertain to our title and financial institution processing and outsourcing segments involve estimates. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” for a discussion of our revenue recognition policies as it pertains to each of our segments.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of Statement of Financial Accounting Standard No. 123” (“SFAS No. 148”). This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of Statement of Financial Accounting Standard No. 123 and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. In 2003, we have voluntarily adopted the fair value recognition provisions of SFAS No. 123, under the prospective method of transition as permitted by SFAS No. 148. See Note L of Notes to Consolidated Financial Statements.

During 2002, the FASB Emerging Issues Task Force reached a consensus on Issue No. 00-21, “Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”). EITF 00-21 provides an accounting model for an approach to determine whether a vendor should divide an arrangement with multiple deliverables into separate units of accounting. EITF 00-21 requires an analysis of whether a delivered item has stand-alone value to the customer, whether there is objective and reliable evidence of fair value for the undelivered items, and whether delivery of the undelivered items is probable and substantially in control of the vendor if the arrangement includes a general right of return relative to the delivered item. Companies are required to adopt EITF 00-21 for fiscal periods beginning after June 15, 2003. Companies may apply EITF 00-21 prospectively to new arrangements initiated after the date of adoption or as a cumulative-effect adjustment. The adoption of EITF 00-21 did not have a material effect on our financial statements.

In December 2003, Financial Accounting Standards Board Statement No. 132 (revised), “Employees’ Disclosures about Pensions and Other Postretirement Benefits,” (“SFAS No. 132”) was issued. SFAS No. 132 (revised) prescribes employers’ disclosures about pension plans and other postretirement benefit plans; it does not change the measurement or recognition of those plans. SFAS No. 132 (revised) retains and revises the disclosure requirements contained in the original Statement 132. It also requires additional disclosures about the assets, obligations, cash flows and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. SFAS No. 132 (revised) is effective for fiscal years ending after December 15, 2003. Our disclosures in Note L of Notes to Consolidated Financial Statements incorporate the requirements of SFAS No. 132 (revised).

As of December 31, 2003, we adopted the disclosure provisions of Emerging Issues Task Force No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF No. 03-1”), which resulted in additional disclosures regarding our evaluation of impairment of debt and equity securities. Our disclosures in Note C of Notes to Consolidated Financial Statements incorporate the requirements of EITF No. 03-1.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Fidelity National Financial, Inc.:

We have audited the accompanying Consolidated Balance Sheets of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2003 and 2002 and the related Consolidated Statements of Earnings, Comprehensive Earnings, Stockholders’ Equity and Cash Flows for each of the years in the three-year period ended December 31, 2003. These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the consolidated financial position of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note A to the Consolidated Financial Statements, effective January 1, 2002, Fidelity National Financial, Inc. fully adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets,” which resulted in a change to the method of accounting for goodwill and other intangible assets after they have been initially recognized in the financial statements.

The Consolidated Financial Statements for 2002 and 2001 were prepared using Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” to record stock-based employee compensation. As discussed in Note L to the Consolidated Financial Statements, effective January 1, 2003, the Company adopted the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation”, to record stock-based employee compensation, applying the prospective method of adoption in accordance with SFAS No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure.”

KPMG LLP

Jacksonville, Florida
February 27, 2004, except as to Note B
to the Consolidated Financial Statements,
which is as of March 11, 2004,
and except as to Note O to the Consolidated Financial Statements,
which is as of November 19, 2004


(1)	Net of income tax expense of $36.9 million, $12.0 million and $3.8 million for 2003, 2002 and 2001, respectively.

(2)	Net of income tax expense (benefit) of $(45.0) million, $3.5 million and $5.5 million for 2003, 2002 and 2001, respectively.

(3)	Net of income tax benefit of $(6.4) million, $(10.2) million and $(7.6) million in 2003, 2002 and 2001, respectively.

The following describes the significant accounting policies of Fidelity National Financial, Inc. and its subsidiaries (collectively, the “Company”) which have been followed in preparing the accompanying Consolidated Financial Statements.

Fidelity National Financial, Inc., through its principal subsidiaries (collectively, the “Company”), is the largest title insurance and diversified real estate information services and solutions company in the United States. The Company’s title insurance underwriters — Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title — together issue all of the Company’s title insurance policies in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, and in Canada and Mexico.

Through its subsidiary, Fidelity Information Services, Inc. (“FIS”), which was acquired on April 1, 2003 (see Note B), the Company is a worldwide provider and one of the largest providers of information-based technology solutions and processing services to financial institutions and the mortgage and financial services industries in the United States.

The Company has six reporting segments: title insurance; financial institution software and services; lender outsourcing solutions; information services; specialty insurance; and corporate and other. The title insurance segment consists of the Company’s title insurance underwriters and its wholly-owned title insurance agencies. The title segment provides core title insurance and escrow and other title related services including collection and trust activities, trustee’s sales guarantees, recordings and reconveyances. The financial institution software and services segment consists primarily of the operations of FIS, which was acquired on April 1, 2003 (see “Recent Developments”) and subsequent acquisitions of WebTone, Aurum and Sanchez. This segment focuses on two primary markets, financial institution processing and mortgage loan processing, as well as its Empower and Softpro software products. The lender outsourcing solutions segment includes the Company’s loan facilitation services, which consist of centralized, customized title agency and closing services, which the Company offers to first mortgage, refinance, home equity and sub-prime lenders, and the Company’s default management services, which include foreclosure posting and publishing services, loan portfolio services, field services and property management, and which allow the Company’s 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. The information services segment offers real estate information related 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. The specialty insurance segment, consisting of the Company’s various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies. The corporate and other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, and the operations of the Company’s wholly-owned equipment-leasing subsidiary and other small operations.

The Company’s principal title subsidiaries consist of Fidelity National Title Insurance Company, Fidelity National Title Insurance Company of New York, Chicago Title Insurance Company, Chicago Title Insurance Company of Oregon, Ticor Title Insurance Company, Security Union Title Insurance Company and Alamo Title Insurance. The Company’s principal underwritten title company subsidiaries consist of Fidelity National Title Company, Fidelity National Title Company of California, Chicago Title Company and Ticor Title of California, formerly American Title Company, which was acquired in connection with the Company’s acquisition of ANFI, Inc.

The Company includes the accounts of its wholly-owned real estate information services subsidiary, Fidelity National Information Solutions, Inc. (“FNIS”), which was a majority-owned public subsidiary of the Company (NASDAQ: FNIS) until September 30, 2003. FNIS was formerly VISTA Information Solutions, Inc. (“Vista”), which merged with the Company’s majority-owned information services subsidiary, Micro General Corporation (“Micro General”), on July 9, 2002 (see Note B).

The Company also originates, funds, purchases, sells, securitizes and services equipment leases for a broad range of businesses through its wholly-owned leasing subsidiary. In the fourth quarter of 2001, the Company discontinued its small-ticket lease origination business.

The accompanying Consolidated Financial Statements include the accounts of the Company and its wholly-owned and its former majority-owned subsidiaries. All intercompany profits, transactions and balances have been eliminated. The Company’s investments in non-majority-owned partnerships and affiliates are accounted for on the equity method until such time that they became wholly-or majority owned.

All dollars presented in the accompanying Consolidated Financial Statements are in thousands, except per share amounts and unless indicated otherwise.

Fixed maturity securities are purchased to support the investment strategies of the Company, which are developed based on many factors including rate of return, maturity, credit risk, tax considerations and regulatory requirements. Fixed maturity securities which may be sold prior to maturity to support the Company’s investment strategies are carried at fair value and are classified as available for sale as of the balance sheet dates. Fair values for fixed maturity securities are principally a function of current interest rates and are based on quoted market prices. Included in fixed maturities are mortgage-backed securities, which are recorded at purchase cost. Discount or premium is recorded for the difference between the purchase price and the principal amount. The discount or premium is amortized using the interest method and is recorded as an adjustment to interest and investment income. The interest method results in the recognition of a constant rate of return on the investment equal to the prevailing rate at the time of purchase or at the time of subsequent adjustments of book value. Changes in prepayment assumptions are accounted for prospectively.

Equity securities are considered to be available for sale and carried at fair value as of the balance sheet dates. Fair values are based on quoted market prices.

Other long-term investments consist primarily of equity investments accounted for under the equity method of accounting.

Short-term investments, which consist primarily of securities purchased under agreements to resell, commercial paper and money market instruments, which have an original maturity of one year or less, are carried at amortized cost, which approximates fair value.

Realized gains and losses on the sale of investments are determined on the basis of the cost of the specific investments sold and are credited or charged to income on a trade date basis. Unrealized gains or losses on fixed maturity and equity securities which are classified as available for sale, net of applicable deferred income taxes (benefits), are excluded from earnings and credited or charged directly to a separate component of stockholders’ equity. If any unrealized losses on fixed maturity or equity securities are deemed other-than-temporary, such unrealized losses are recognized as realized losses.

For purposes of reporting cash flows, highly liquid instruments purchased with original maturities of three months or less are considered cash equivalents. The carrying amounts reported in the Consolidated Balance Sheets for these instruments approximate their fair value.

The fair values of financial instruments presented in the applicable notes to the Company’s Consolidated Financial Statements are estimates of the fair values at a specific point in time using available market information and appropriate valuation methodologies. These estimates are subjective in nature and involve uncertainties and significant judgment in the interpretation of current market data. Therefore, the fair values presented are not

necessarily indicative of amounts the Company could realize or settle currently. The Company does not necessarily intend to dispose of or liquidate such instruments prior to maturity.

Leases and residual interests in securitizations includes direct financing leases, direct financing leases assigned to lender and residual interests in lease securitizations, related to the Company’s lease origination business.

The Company’s leases are accounted for as direct financing leases. Under this method, the amount by which gross lease rentals exceed the cost of the related assets, less the estimated recoverable residual value at the expiration of the lease, is recognized as income from direct financing leases over the life of the lease using the interest method. Interest is accrued only if deemed collectible.

Direct financing leases which the Company has both the intent and ability to hold to maturity are classified as held to maturity. Direct financing leases originated principally for the purpose of selling in the near term are classified as available for sale and are stated at the lower of amortized cost or market as determined by outstanding commitments from investors or current investor-yield requirements calculated on an aggregate basis.

The Company establishes an allowance for credit losses to provide for expected losses in the Company’s existing portfolio of leases and leases transferred on a recourse basis. The allowance for credit losses is based on the Company’s historical and expected loss experience, industry knowledge and other economic factors. The ultimate obligation for defaults and delinquencies related to leases transferred on a recourse basis is measured and recorded at the time of transfer.

Leases are collateralized by equipment. In addition, lessees generally are required to personally guarantee lease payments. The Company’s risk of loss is partially mitigated by recovering collateral and enforcing guarantees. However, the resale value of leased equipment generally declines at a rate greater than the principal of the lease. As a result, full recovery on defaulted leases is not usually possible.

The carrying values reported in the Consolidated Balance Sheets for trade and notes receivables approximate their fair value. Included in trade receivables at December 31, 2003 are unbilled receivables totaling $61.6 million. The Company did not have any unbilled receivables at December 31, 2002. Notes receivable at December 31, 2003 and 2002 include $911 and $2.8 million, respectively, of notes from related parties.

Statement of Financial Accounting Standards No. 142, “Goodwill and Intangible Assets” (“SFAS No. 142”), which the Company fully adopted on January 1, 2002, requires that an intangible asset that is acquired shall be initially recognized and measured based on its fair value. The statement also provides that goodwill and other intangible assets with indefinite useful lives should not be amortized, but shall be tested for impairment annually, or more frequently if circumstances indicate potential impairment, through a comparison of fair value to its carrying amount.

Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS No. 144”), which the Company adopted on January 1, 2002, requires that long-lived assets and intangible assets with definite useful lives be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

As required by SFAS No. 142, the Company has completed an annual goodwill impairment test on its reporting units and has determined that each of its reporting units has a fair value in excess of its carrying value. Accordingly, no goodwill impairment has been recorded.

During 2003, in accordance with SFAS No. 144, the Company determined that the carrying value of certain of its intangible assets, software and license fees may not be recoverable and recorded a pre-tax expense of $7.9 million relating to the write-off of these assets. These expenses are included in other operating expenses in the Consolidated Statements of Earnings for the year ended December 31, 2003.

Beginning on January 1, 2002, the Company ceased recording goodwill amortization in accordance with SFAS No. 142. The following table reconciles reported net earnings and net earnings per share to adjusted net earnings and net earnings per share:

Prior to the adoption of SFAS No. 142, goodwill was amortized on a straight-line basis over the expected periods to be benefited, generally 7 to 20 years, and assessed for recoverability by an analysis of the undiscounted future cash flows generated by the underlying assets. In 2001, the Company recorded pre-tax asset impairment losses totaling $16.6 million, of which $13.5 million related to the Company’s decision to discontinue its small-ticket lease origination business and $3.1 million related to Micro General’s decision to discontinue its wholesale international long distance business. These amounts are included as part of the $10.0 million after tax charges the Company recorded in the fourth quarter of 2001.

Computer software development costs are accounted for in accordance with either SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed,” or with SOP No. 98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use.” After the technological feasibility of the software has been established (for SFAS No. 86 software) or at the beginning of application development (for SOP 98-1 software), material software development costs, which include salaries and related payroll costs incurred during development, are capitalized. Purchased software is recorded at cost. Research and development costs incurred prior to the establishment of technological feasibility (for SFAS No. 86 software) or prior to application development (for SOP 98-1 software) of a product are expensed as incurred. The cost of capitalized software is amortized on a product-by-product basis commencing on the date of general release of the products for internally developed software and the date of purchase for purchased software.

At December 31, 2003 and December 31, 2002, capitalized software costs were $344.0 million, less accumulated amortization of $53.9 million and $127.7 million, less accumulated amortization of $19.2 million, respectively. The increase in capitalized software costs is due to our acquisition of FIS in April 2003 (see Note B).

Title plants are recorded at the cost incurred to construct or obtain and organize historical title information to the point it can be used to perform title searches. Costs incurred to maintain, update and operate title plants are expensed as incurred. Title plants are not amortized as they are considered to have an indefinite life if maintained. Sales of title plants are reported at the amount received net of the adjusted costs of the title plant sold. Sales of title plant copies are reported at the amount received. No cost is allocated to the sale of copies of title plants unless the carrying value of the title plant is diminished or impaired.

Property and equipment are recorded at cost, less depreciation. Depreciation is computed primarily using the straight-line method based on the estimated useful lives of the related assets which range from 3 to 30 years. Leasehold improvements are amortized on a straight-line basis over the lesser of the term of the applicable lease or the estimated useful lives of such assets.

The Company’s reserve for claim losses includes known claims as well as losses the Company expects to incur, net of recoupments. Each known claim is reserved based on a review by the Company as to the estimated amount of the claim and the costs required to settle the claim. Reserves for claims which are incurred but not reported are established at the time premium revenue is recognized based on historical loss experience and other factors, including industry trends, claim loss history, current legal environment, geographic considerations and type of policy written.

The reserve for claim losses also includes reserves for losses arising from the escrow, closing and disbursement functions due to fraud or operational error.

If a loss is related to a policy issued by an independent agent, the Company may proceed against the independent agent pursuant to the terms of the agency agreement. In any event, the Company may proceed against third parties who are responsible for any loss under the title insurance policy under rights of subrogation. See Note I.

In the state of Illinois, a trust company is permitted to commingle and invest customers’ assets with those of the Company, pending completion of real estate transactions. Accordingly, the Company’s Consolidated Balance Sheets reflects a secured trust deposit liability of $671.9 million and $750.9 million at December 31, 2003 and 2002, respectively, representing customers’ assets held by us and corresponding assets including cash and investments pledged as security for those trust balances.

The Company recognizes deferred tax assets and liabilities for temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities and expected benefits of utilizing net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The impact on deferred taxes of changes in tax rates and laws, if any, are applied to the years during which temporary differences are expected to be settled and reflected in the financial statements in the period enacted.

In the ordinary course of business, the Company limits its maximum loss exposure by reinsuring certain risks with other insurers. The Company also earns additional income by assuming reinsurance for certain risks of other insurers. The Company also cedes a portion of certain policy and other liabilities under agent fidelity, excess of loss and case-by-case reinsurance agreements. Reinsurance agreements provide that in the event of a loss (including costs, attorneys’ fees and expenses) exceeding the retained amounts, the reinsurer is liable for the excess amount assumed. However, the ceding company remains primarily liable in the event the reinsurer does not meet its contractual obligations.

Title Segment. Direct title insurance premiums and escrow and other title related fees are recognized as revenue at the time of closing of the related transaction as the earnings process is considered complete. Agency title insurance premiums are recognized as revenue when policies are reported to the Company and are recorded as revenue on a gross basis (before the deduction of agent commissions). In addition, the Company accrues for unreported agency title insurance premiums based on historical reporting patterns of its agents and current trends.

Financial Institution Software and Services. In this segment, the Company recognizes revenues relating to bank processing services and mortgage processing services along with software licensing and services. Several of the Company’s contracts include a software license and one or more of the following services: data processing, development, implementation, conversion, programming, maintenance and application management. In some cases, these services are offered in combination with one another and in other cases the Company offers them individually. Revenues from bank and mortgage processing services are typically volume-based depending on factors such as the estimated number of accounts, transactions processed and computer resources utilized.

The substantial majority of the Company’s revenues in this segment are from outsourced data processing and application management arrangements. Revenues from these arrangements are recognized as services are performed. Revenue and incremental direct costs related to implementation, conversion and programming services associated with the Company’s data processing and application management agreements are deferred during the implementation phase and subsequently recognized over the term of the related agreement. At each reporting period, each contract with related deferred costs is evaluated for impairment, and if impairment is evident, deferred costs are adjusted accordingly.

In other revenue producing transactions, the Company uses several different accounting policies related to revenue recognition, depending on the type of transaction. The Company recognizes software license and maintenance fees as well as associated development, implementation, conversion and programming fees, in accordance with the American Institute of Certified Public Accountants’ Statement of Position 97-2, or SOP 97-2, entitled “Software Revenue Recognition,” and SOP 98-9, entitled “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.” Initial license fees are recognized when a contract exists, the fee is fixed or determinable, software delivery has occurred and collection of the receivable is deemed probable, provided that vendor-specific objective evidence, or VSOE, has been established for each element or for the undelivered elements. The Company determines the fair value of each element or the undelivered elements in multi-element software arrangements based on VSOE. If the arrangement is subject to accounting under SOP 97-2, VSOE for each element is based on either the price charged when the same element is sold separately or in the case of maintenance, using a substantive renewal rate. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue. If evidence of fair value does not exist for one or more undelivered elements of a contract, then all revenue is deferred until all elements are delivered or fair value is determined for all remaining undelivered elements. Revenue from maintenance and support is recognized ratably over the term of the agreement. The Company records deferred revenue for maintenance amounts invoiced prior to revenue recognition.

With respect to a small percentage of revenues, the Company uses contract accounting, as required by SOP 97-2, when the arrangement with the customer includes significant customization, modification, or production of software. For elements accounted for under contract accounting, revenue is recognized in accordance with SOP 81-1, “Accounting for Performance of Construction Type and Certain Production-Type Contracts,” using the percentage-of-completion method since reasonably dependable estimates of revenues and contract hours applicable to various elements of a contract can be made. Revenue in excess of billings on these agreements is recorded as unbilled receivables and is included in accounts receivable. Billings in excess of revenue recognized on these agreements are recorded as deferred revenue until revenue recognition criteria are met. Changes in estimates for revenues, costs and profits are recognized in the period in which they are determinable. When the Company’s estimates indicate that the entire contract will be performed at a loss, a provision for the entire loss is recorded in that accounting period.

Lender Outsourcing Solutions. In this segment, the Company recognizes revenues from loan facilitation services and default management services. Loan facilitation services include centralized title agency and closing services for various types of lenders. Revenues relating to centralized title agency and closing services are recognized at the time of closing of the related real estate transaction. Ancillary service fees are recognized when the service is provided. Default management services consist of services provided to assist customers through the default and foreclosure process, including property preservation and maintenance services (such as lock changes, window replacement, debris removal and lawn service), posting and publication of foreclosure and auction notices, title searches, document preparation and recording services, and referrals for legal and property brokerage services. Revenues from default management services are recognized upon completion of the underlying service.

Information Services. In this segment, the Company records revenue from providing data or data-related services. These services principally include appraisal and valuation services, property records information, real estate tax services, borrower credit and flood zone information and multiple listing software and services.

The Company’s flood and tax units provide various services including life-of-loan monitoring services. Revenue for life-of-loan services is deferred and recognized ratably over the estimated average life of the loan service period, which is determined based on our historical experience. The Company evaluates its historical experience on a quarterly basis, and adjusts the estimated life of the loan service period prospectively. Revenue derived from software and service arrangements is recognized in accordance with SOP 97-2 as further described above. Revenues from other services in this segment are recognized as the services are performed.

Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net earnings available to common stockholders plus the impact of assumed conversions of dilutive potential securities. The Company has granted certain options, warrants and restricted stock, which have been treated as common share equivalents for purposes of calculating diluted earnings per share.

The following table presents the computation of basic and diluted earnings per share before cumulative effect of a change in accounting principle:

Options to purchase 1,759,782 shares, 93,665 shares and 285,615 shares of the Company’s common stock for the years ended December 31, 2003, 2002 and 2001, respectively, were not included in the computation of diluted earnings per share because they were anti-dilutive.

Prior to 2003, the Company accounted for its stock-based compensation plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations. All options granted under those plans had an exercise price equal to the market value of the underlying common stock on the date of grant; therefore no stock-based compensation cost had been reflected in net earnings.

During 2003, the Company adopted the fair value recognition provisions 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. 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. Prior year financial statements were not restated.

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 (see Note L):

On January 27, 2004, the Company declared a 10% stock dividend to stockholders of record on February 12, 2004, payable on February 26, 2004. On April 22, 2003, the Company declared a five-for-four (5:4) stock split payable May 23, 2003 to stockholders of record on May 9, 2003. On April 24, 2002, the Company declared a 10% stock dividend to stockholders of record on May 9, 2002, payable on May 23, 2002. On July 24, 2001, the Company declared a 10% stock dividend to stockholders of record on August 9, 2001, payable on August 23, 2001. The fair value of the additional shares of common stock issued in connection with the 10% stock dividends was credited to additional paid-in capital and a like amount charged to retained earnings during 2002 and 2001. Fractional shares were paid in cash.

All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Consolidated Financial Statements and Notes thereto have been retroactively adjusted to reflect the stock split and the stock dividends.

The preparation of these Consolidated Financial Statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the Consolidated Financial Statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Certain reclassifications have been made in the 2002 and 2001 Consolidated Financial Statements to conform to the classifications used in 2003.

During the third quarter of 2003, the Company relocated its corporate headquarters to Jacksonville, Florida. As a result of the relocation the Company incurred a pre-tax expense in accordance with SFAS No. 146 of $12.9 million relating to relocation costs and lease abandonment costs. $7.9 million of these expenses are included in personnel costs and $5.0 million are included in other operating expenses in the Consolidated Statement of Earnings for the year ended December 31, 2003. As of December 31, 2003, the Company had a remaining payable of $1.3 million related to these costs, the majority of which will be paid in the first quarter of 2004.

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.

On January 28, 2003, the Company entered into a stock purchase agreement with ALLTEL Corporation, Inc., a Delaware corporation (“ALLTEL”), to acquire from ALLTEL its financial services division, ALLTEL Information Services, Inc. (“AIS”). On April 1, 2003, the Company closed the acquisition and subsequently renamed the division Fidelity Information Services (“FIS”). FIS is one of the largest providers of information-based technology solutions and processing services to the mortgage and financial services industries.

The Company acquired FIS for approximately $1,069.6 million (including the payment for certain working capital adjustments and estimated transaction costs), consisting of $794.6 million in cash and $275.0 million of the Company’s common stock. The Company funded the cash portion of the purchase price through the issuance of $250.0 million aggregate principal amount of 5.25% notes due March 15, 2013 (See Note G, and $544.6 million in available cash. The stock portion of the purchase price resulted in the issuance of 11,206,692 shares of the Company’s common stock to ALLTEL.

In connection with the closing of the acquisition, the Company entered into a stockholder’s agreement, a non-competition agreement and certain transition agreements with ALLTEL. The stockholder’s agreement: (1) restricts the sale by ALLTEL of the Company’s common stock received in the transaction for a period of one year unless the Company consents to such sale or transfer or certain events set forth in the stockholder’s agreement with ALLTEL and the Company occur prior to the expiration of the one-year lock-up, (2) grants ALLTEL the right to designate one nominee to the Company’s Board of Directors, so long as it continues to hold at least 50% of the shares of the Company’s common stock received in the transaction, and (3) grants ALLTEL certain registration rights with respect to the Company’s common stock it receives in the transaction. The non-competition agreement prohibits, with certain exceptions, ALLTEL and its affiliates from engaging in the business relating to the assets acquired by the Company for a period of two years after the transaction.

The Company allocated the purchase price as follows: $450.7 million to goodwill; $348.0 million to other intangible assets, namely acquired customer relationship intangibles; and $95.0 million to capitalized software based on studies and valuations that are currently being finalized. Such purchase accounting adjustments may be refined as additional information becomes available. The Company is amortizing the other intangible assets using an accelerated method which takes into consideration expected customer attrition rates over a 10-year period. The acquired software is amortized over a seven-year period using an accelerated method that contemplates the period of

expected economic benefit and future enhancements to the underlying software. Under the terms of the stock purchase agreement, the Company made a joint election with ALLTEL to treat the acquisition as a sale of assets in accordance with Section 338 (h) (10) of the Internal Revenue Code, which resulted in the revaluation of the assets acquired to fair value. As such, the fair value assignable to the historical assets, as well as intangible assets and goodwill, will be deductible for federal and state income tax purposes.

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

Selected unaudited pro forma combined results of operations for the years ended December 31, 2003 and 2002, assuming the acquisition had occurred as of January 1, 2002, and using actual general and administrative expenses prior to the acquisition, are set forth below:

On February 27, 2004, the Company acquired the remaining 44% interest in Hansen Quality Loan Services, LLC (“Hansen”) that it did not already own for approximately $34.0 million, consisting of approximately $25.5 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, which is restricted from sale to the public. Hansen provides collateral risk assessment and valuation services for real estate mortgage financing.

On March 11, 2004, the Company acquired Aurum Technology, Inc. (“Aurum”) for approximately $305.0 million, composed of approximately $185.0 million in cash and $120.0 million in shares of its common stock. Aurum is a provider of outsourced and in-house information technology solutions for the community bank and credit union markets.

On January 27, 2004, the Company signed a merger agreement with Sanchez Computer Associates, Inc. (“Sanchez” — NASDAQ:SCAI), pursuant to which the Company will acquire all of the outstanding common stock of Sanchez for approximately $175.0 million. Under the terms of the merger agreement, total consideration for each share of Sanchez common stock will be $6.50, composed of $3.25 in cash and $3.25 in shares of the Company’s common stockSanchez stockholders will have the option to elect any combination of cash and stock, subject to proration such that the overall limitation for the consideration in the transaction will be 50% cash compensation and 50% compensation in the form of our common stock. The Company has entered into voting agreements to support the transaction with Sanchez stockholders holding in excess of 40% of the common stock vote. The transaction is

expected to close in the second quarter of 2004, subject to the approval by Sanchez shareholders and customary regulatory and other conditions.

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. Sanchez’ primary product offering is Sanchez Profile ^TM, a real-time, multi-currency, strategic core banking deposit and loan processing system that can be utilized on both an outsourced and in-house basis.

On October 27, 2003, the Company signed a definitive agreement to acquire American Pioneer Title Insurance Company (“APTIC”) for an estimated cash purchase price of $115.0 million, subject to certain equity adjustments. The transaction is subject to regulatory approvals and is expected to close in the first quarter of 2004. APTIC is a 45-state licensed title insurance underwriter with significant agency operations and computerized title plant assets in the state of Florida. APTIC will operate under the Company’s Ticor Title brand.

On October 9, 2003, the Company acquired LandCanada, a provider of title insurance and related mortgage document production in Canada, for approximately $17.6 million in cash.

On September 30, 2003, the Company acquired the outstanding minority interest of FNIS, its majority-owned real estate information services public subsidiary, whereby FNIS became a wholly-owned subsidiary of the Company. In the acquisition, each share of FNIS common stock (other than FNIS common stock the Company already owned) was exchanged for 0.83 shares of the Company’s common stock. The Company issued 14,292,858 shares of its common stock to FNIS stockholders in the acquisition. The Company has allocated $154.8 million of the purchase price to goodwill and $88.9 million of the purchase price to other intangible assets and capitalized software based on preliminary studies and valuations that are being finalized. Such purchase accounting adjustments may be refined as additional information becomes available.

The acquisition of the minority interest of FNIS on September 30, 2003 allowed the Company to more fully capitalize on the significant technology resources of FIS, which the Company acquired on April 1, 2003, by combining all technology resources within one integrated organization. The Company’s data center activities have historically been managed by FNIS. However, with the acquisition of the minority interest of FNIS, the Company has migrated all of its data center activities from FNIS to the existing FIS platforms as of September 30, 2003. As a result of this decision to transfer all data center operations and projects from FNIS to FIS, the Company incurred a pre-tax expense in accordance with Statement of Financial Accounting Standards No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“SFAS No. 146”), of $26.3 million relating to hardware/software and leasehold improvement write-offs and contract termination costs; $8.9 million of these expenses are included in realized gains, net and $17.4 million are included in other operating expenses in the Consolidated Statements of Earnings for the year ended December 31, 2003.

On September 2, 2003, the Company acquired WebTone Technologies, Inc. (“WebTone”) for approximately $90.0 million in cash. WebTone is the developer of the TouchPoint® suite of customer interactive management solutions for financial services organizations.

On May 2, 2003, the Company acquired the flood insurance business of Mutual of Omaha’s subsidiary, Omaha Property and Casualty Insurance Company (“OPAC”), for approximately $18.0 million in cash. This acquisition, along with the Bankers Insurance Group acquisition (described below) expands the Company’s presence in the flood insurance business.

On March 31, 2003, the Company acquired Key Title Company (“Key Title”) for approximately $22.5 million in cash. Key Title operates in 12 counties in the state of Oregon.

On March 26, 2003, the Company merged with ANFI, Inc. (“ANFI”), which is predominately a California underwritten title company, and ANFI became a wholly-owned subsidiary of the Company. In the merger, each share of ANFI common stock (other than ANFI common stock the Company already owned) was exchanged for 0.454 shares of the Company’s common stock. The Company issued 5,183,103 shares of its common stock to the ANFI stockholders in the merger.

On February 10, 2003, the Company acquired Lenders Service, Inc., a Delaware corporation (“LSI”), for approximately $75.0 million in cash. LSI is a provider of appraisal, title and closing services to residential mortgage originators.

On January 9, 2003, the Company acquired certain assets of Bankers Insurance Group (“Bankers”) for approximately $41.6 million in cash. The assets include the right to issue new and renewal flood insurance policies underwritten by Bankers and its subsidiaries, Bankers Insurance Company, Bankers Security Insurance Company and First Community Insurance Company (“FCIC”). As part of the transaction, the Company also acquired FCIC, a fifty-state licensed insurance carrier, to act as the underwriter for the policies. FCIC has been subsequently renamed Fidelity National Property and Casualty Insurance, Inc.

On July 9, 2002, FNIS acquired Micro General, the Company’s majority-owned public subsidiary, through a tender offer and subsequent short-form merger. Under the terms of the tender offer and merger, each share of Micro General common stock was exchanged for 0.696 shares of FNIS common stock. FNIS issued approximately 12.9 million shares of common stock to Micro General stockholders. In the Company’s Consolidated Financial Statements, this transaction is accounted for in accordance with SFAS No. 141 and FASB Technical Bulletin 85-5. Accordingly, FNIS’s acquisition of the minority stockholders’ interest in Micro General (the “noncontrolled equity interest”) was recognized by the Company as the acquisition of shares from a minority interest, which is accounted for by the purchase method under SFAS No. 141. FNIS’s acquisition of the Company’s interest in Micro General (the “controlled equity interest”) is not considered a business combination and, therefore, the Company recognized the related assets and liabilities transferred from the controlled equity interest in Micro General to FNIS at their historical carrying values. The market price per share of FNIS common stock that was issued to Micro General minority stockholders in this transaction exceeded the Company’s carrying amount per share of FNIS common stock, resulting in an increase of $100.4 million to the Company’s consolidated equity and an increase in net assets, the majority of which was goodwill.

On May 23, 2002, the Company acquired a 75% interest in Homebuilders Financial Network, Inc., a provider of outsource mortgage loan fulfillment services to homebuilders, for approximately $21.0 million in cash.

On August 1, 2001, the Company acquired approximately 80% of the outstanding common stock of FNIS, formerly VISTA, a provider of real estate information products and services, including multiple listing services and environmental data and disclosure information businesses. In consideration for this acquisition, the Company contributed its wholly-owned tax, credit, flood, appraisal, property records (IDM) and multiple listing service (Risco) businesses to the former Vista entity and as a result, immediately following the consummation of the transaction, the Company owned approximately 80% of the combined entity. For the period from August 1, 2001, the acquisition date, through December 31, 2003, the results of the former operations of Vista are included in the Company’s Consolidated Financial Statements.

On June 19, 2001 the Company acquired Risco, Inc. (“Risco”), a multiple listing service vendor in the United States, for approximately $12.0 million in cash. The acquisition was accounted for as a purchase.

On January 3, 2001, the Company acquired International Data Management Corporation (“IDM”), a provider of real estate information services, for $20.8 million in cash. IDM’s real estate information databases contain real property ownership and sales records from the continental United States. The acquisition was accounted for as a purchase.

The carrying amounts and fair values of the Company’s fixed maturity securities at December 31, 2003 and 2002 are as follows:

The change in unrealized gains (losses) on fixed maturities for the years ended December 31, 2003, 2002, and 2001 was $(22.4) million, $27.3 million and $2.6 million, respectively.

The following table presents certain information regarding contractual maturities of the Company’s fixed maturity securities at December 31, 2003:

Fixed maturity securities valued at approximately $79.8 million and $61.3 million were on deposit with various governmental authorities at December 31, 2003 and 2002, respectively, as required by law.

Expected maturities may differ from contractual maturities because certain borrowers have the right to call or prepay obligations with or without call or prepayment penalties.

Equity securities at December 31, 2003 and 2002 consist of investments in various industry groups as follows:

The carrying value of the Company’s investment in equity securities is fair value. As of December 31, 2003, gross unrealized gains and gross unrealized losses on equity securities were $13.0 million and $0.3 million,

respectively. Gross unrealized gains and gross unrealized losses on equity securities were $15.4 million and $3.2 million, respectively, as of December 31, 2002.

The change in unrealized gains (losses) on equity securities for the years ended December 31, 2003, 2002 and 2001 was $0.5 million, $9.0 million and $16.2 million, respectively.

Net realized gains (losses) amounted to $106.4 million, $15.5 million and $9.8 million for the years ended December 31, 2003, 2002 and 2001, respectively. Included in 2003 net realized gains is a $51.7 million realized gain as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of the Company’s InterActive Corp common stock and a realized gain of $25.0 million on the sale of New Century Financial Corporation common stock. Included in 2002 net realized gains are other-than-temporary impairment losses of $11.3 million recorded on CKE Restaurants, Inc. during the fourth quarter of 2002 and $3.3 million recorded on MCI WorldCom bonds in the second quarter of 2002. Included in 2001 net realized gains is an other-than-temporary impairment loss of $4.4 million recorded on Enron Corporation bonds. All amounts are before applicable income taxes.

During the years ended December 31, 2003, 2002 and 2001, gross realized gains on sales of fixed maturity securities considered available for sale were $18.5 million, $26.1 million and $16.5 million, respectively; and gross realized losses were $2.2 million, $7.7 million and $7.3 million, respectively. Gross proceeds from the sale of fixed maturity securities considered available for sale amounted to $1,451.7 million, $776.9 million and $516.5 million during the years ended December 31, 2003, 2002 and 2001, respectively.

During the years ended December 31, 2003, 2002 and 2001, gross realized gains on sales of equity securities considered available for sale were $104.1 million, $26.6 million and $18.4 million, respectively; and gross realized losses were $8.1 million, $53.9 million and $36.1 million, respectively. Gross proceeds from the sale of equity securities amounted to $793.4 million, $351.4 million and $376.3 million during the years ended December 31, 2003, 2002 and 2001, respectively.

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 December 31, 2003 were as follows:

The majority of the Company’s unrealized losses relate to its portfolio of corporate debt securities. The unrealized losses on corporate debt securities were caused by interest rate increases. Since the decline in fair value 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.

Amortization expense for amortizing intangible assets was $71.2 million, $6.1 million and $2.6 million for the years ended December 31, 2003, 2002 and 2001, respectively, and is amortized over a period of 5 to 20 years. Estimated amortization expense for the next five years is $103.8 million in 2004, $92.9 million in 2005, $82.4 million in 2006, $70.5 million in 2007 and $57.8 million in 2008.

The carrying value of the Company’s notes payable, excluding lease-backed notes payable, was approximately $31.4 million lower than its estimated fair value at December 31, 2003. At December 31, 2002, the carrying value of

the Company’s outstanding notes payable, excluding lease-backed notes, approximated estimated fair value. The fair value of the Company’s unsecured notes payable is based on established market prices for the securities on December 31, 2003 and 2002. The fair value of the Company’s remaining fixed rate and variable rate notes payable is estimated using discounted cash flow analyses based on current market interest rates and comparison of interest rates being paid to the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

During 2003, the Company entered into a new credit agreement providing for a $700.0 million, 5-year revolving credit facility due November 4, 2008. The new credit agreement bears interest at a variable rate based on the debt ratings assigned to the Company by certain independent agencies, and is unsecured. The current interest rate under the new credit agreement is LIBOR plus 0.50%. In addition, the Company pays a 0.15% facility fee on the entire facility.

On November 5, 2003, the Company terminated its prior credit agreement, which provided for two distinct credit facilities:


	•	$250.0 million, 6 year revolving credit facility due March 19, 2006; and

	•	$450.0 million term loan facility with a 6 year amortization period, due March 19, 2006.

The prior credit agreement bore interest at a variable rate of interest based on the debt ratings assigned to the Company by certain independent agencies, and was unsecured. The interest rate on the prior credit agreement was LIBOR plus 1.00%. The prior credit agreement was paid in full on October 31, 2003.

The new credit agreement and other debt facilities impose certain affirmative and negative covenants on the Company relating to current debt ratings, certain financial ratios related to liquidity, net worth, capitalization, investments, acquisitions and restricted payments, and certain dividend restrictions. The Company is in compliance with all of its debt covenants as of December 31, 2003.

On August 20, 2001, the Company completed a public offering of $250.0 million aggregate principal amount of 7.3% notes due August 15, 2011. The notes were priced at 99.597% of par to yield 7.358% annual interest. As such, the Company recorded a discount of $1.0 million, which is netted against the $250.0 million aggregate principal amount of notes. The discount is amortized to interest expense over 10 years, the term of the notes. The Company received net proceeds of $247.0 million, after expenses, which were used to pay down a portion of the $450.0 million, 6-year term loan facility under our prior credit agreement.

On March 11, 2003, the Company issued $250.0 million aggregate principal amount of 5.25% notes, which are unsecured. The notes were priced at 99.247% of par to yield 5.433% annual interest. As such, the Company recorded a discount of $1.9 million, which is netted against the $250.0 million aggregate principal amount of notes. The discount is amortized to interest expense over 10 years, the term of the notes. The Company received net proceeds of approximately $246.2 million, after expenses, which was used to pay a portion of the $1,069.6 million purchase price for FIS. See Note B. Interest is payable semiannually and the notes are due in March 2013.

Principal maturities at December 31, 2003, are as follows (dollars in thousands):

A reconciliation of the federal statutory rate to the Company’s effective tax rate is as follows:

The significant components of deferred tax assets and liabilities at December 31, 2003 and 2002 consist of the following:

Management believes that based on its historical pattern of taxable income, the Company will produce sufficient income in the future to realize its net deferred tax assets or realization of its deferred tax assets will coincide with the turnaround in its deferred tax liabilities. A valuation allowance will be established for any portion of a deferred tax asset that management believes may not be realized. Adjustments to the valuation allowance will be made if there is a change in management’s assessment of the amount of deferred tax asset that is realizable.

At December 31, 2003, the Company has a net operating loss carryforward of $45.2 million and a foreign tax credit carryforward of $2.8 million, against which there is a full valuation allowance. The net operating losses expire between 2019 and 2023 and the foreign tax credit expires in 2008.

Tax benefits of $18.9 million, $21.3 million and $8.8 million associated with the exercise of employee stock options were allocated to stockholders’ equity for the years ended December 31, 2003, 2002 and 2001, respectively.


(1)	The Company assumed LSI’s and ANFI’s outstanding reserve for claim losses in connection with their acquisitions in 2003.

The unfavorable development on the prior years’ loss reserves during 2003 reflects the slight increase in loss payments during 2003 on previous policy years, resulting in an increase in estimated ultimate losses in previous policy years. The favorable development on prior years’ loss reserves during 2002 and 2001 was attributable to lower than expected payment levels on recent issue years which included periods of increased resale activity as well as a high proportion of refinance business. As a result, title policies issued in prior years have been replaced by the more recently issued policies, therefore generally terminating much of the loss exposure on the previously issued policies.

The Company’s title insurance underwriting subsidiaries are, in the ordinary course of business, subject to claims made under, and from time-to-time are named as defendants in legal proceedings relating to, policies of insurance they have issued or other services performed on behalf of insured policyholders and other customers. The Company believes that the reserves reflected in its Consolidated Financial Statements are adequate to pay losses and loss adjustment expenses which may result from such claims and proceedings; however, such estimates may be more or less than the amount ultimately paid when the claims are settled.

The Company has entered into various employment agreements with officers of the Company. These agreements provide for a specified salary to be paid to the officers and include incentive compensation arrangements. The agreements contain non-compete provisions. The terms of the agreements range from three to five years and normally contain extension provisions.

that the resolution of all pending and threatened litigation will not have a material effect on the Company’s results of operations, financial position or liquidity.

The Company was named in five class action lawsuits alleging irregularities and violations of law in connection with title and escrow practices. All of these lawsuits are currently pending, although three of them have been conditionally settled, subject only to verification of certain factual representations made during settlement negotiations. The remaining two lawsuits have been stayed pending final disposition of the conditionally settled lawsuits. The Company believes that the two stayed lawsuits will be dismissed upon the final disposition of the three conditionally settled lawsuits.

Three class action lawsuits were filed in June 2003 alleging breach of FNIS’ fiduciary duties in connection with the Company’s acquisition of the outstanding minority interest of FNIS. These actions have recently been consolidated and are pending in the Chancery Court of Delaware. FNIS has retained counsel to represent them and the named members of their board of directors, three of whom are also directors of the Company. These actions are not being actively prosecuted and the Company and FNIS believe the lawsuits are without merit.

Several class actions are pending alleging improper rates were charged for title insurance. Three class action cases were filed in New York and have been consolidated for further proceedings. 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. Similar allegations have been made in class actions filed in Minnesota, Ohio and Pennsylvania. Two class actions, one in California and one in Michigan allege the company violated the Real Estate Settlement Procedures Act (“RESPA”) and state law by giving favorable discounts or rates to builders and developers. The actions seek refunds of the premiums charged and additional damages. The Company intends to vigorously defend these actions.

Several class actions are pending alleging that the Company imposed improper charges in closing real estate transactions. A class action pending in New Jersey alleges the company has charged twice for fees to record satisfactions of mortgages, and charged for satisfactions that were not recorded. Two other class actions pending in Indiana allege the Company overcharged recording fees. A class action in Pennsylvania alleges overcharges of notary fees. Another in Illinois alleges an improper markup of courier fees, and although the trial court recently dismissed this case, the plaintiff may appeal. The actions seek refunds of the charges. The Company intends to vigorously defend these actions.

A California class action alleges the Company takes “rebates and kickbacks” in outsourcing its trustee foreclosure business. The Company intends to vigorously defend this action.

A class action is pending in California alleging that the Company violated the Telephone Consumer Protection Act by sending unsolicited facsimile advertising. Plaintiffs seek statutory damages. The Company intends to vigorously defend this action.

In conducting its operations, the Company routinely holds 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 accompanying Consolidated Balance Sheets. The Company has a contingent liability relating to proper disposition of these balances for our customers, which amounted to $7.6 billion at December 31, 2003. As a result of holding these customers’ assets in escrow, the Company has 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 December 31, 2003 related to these arrangements.

The Company leases certain of its premises and equipment under leases which expire at various dates. Several of these agreements include escalation clauses and provide for purchases and renewal options for periods ranging from one to five years.

Rent expense incurred under operating leases during the years ended December 31, 2003, 2002 and 2001, was $165.9 million, $126.0 million and $108.8 million, respectively.

Our insurance subsidiaries, including underwriters, underwritten title companies and independent agents, are subject to extensive regulation under applicable state laws. Each of the insurance underwriters is subject to a holding company act in its state of domicile which regulates, among other matters, the ability to pay dividends and investment policies. The laws of most states in which the Company transacts business establish supervisory agencies with broad administrative powers relating to issuing and revoking licenses to transact business, regulating trade practices, licensing agents, approving policy forms, accounting principles, financial practices, establishing reserve and capital and surplus as regards policyholders (“capital and surplus”) requirements, defining suitable investments for reserves and capital and surplus and approving rate schedules.

Pursuant to statutory accounting requirements of the various states in which the Company’s title insurance subsidiaries are licensed, they must defer a portion of premiums earned as an unearned premium reserve for the protection of policyholders and must maintain qualified assets in an amount equal to the statutory requirements. The level of unearned premium reserve required to be maintained at any time is determined by statutory formula based upon either the age, number of policies and dollar amount of policy liabilities underwritten or the age and dollar amount of statutory premiums written. As of December 31, 2003, the combined statutory unearned premium reserve required and reported for the Company’s title insurance subsidiaries was $1,012.2 million.

The insurance commissioners of their respective states of domicile regulate the Company’s title insurance subsidiaries. Regulatory examinations usually occur at three-year intervals, and certain of these examinations are currently ongoing.

The Company’s insurance subsidiaries are subject to regulations that restrict their ability to pay dividends or make other distributions of cash or property to their immediate parent company without prior approval from the Department of Insurance of their respective states of domicile. As of December 31, 2003. $1,522.3 million of the Company’s net assets are restricted from dividend payments without prior approval from the Departments of Insurance. During 2004, the Company’s title insurance subsidiaries can pay or make distributions to the Company of approximately $247.3 million.

The combined statutory capital and surplus of the Company’s title insurance subsidiaries was $930.3 million, $614.8 million and $514.7 million as of December 31, 2003, 2002 and 2001, respectively. The combined statutory earnings of the Company’s title insurance subsidiaries were $480.0, $162.6 million and $162.5 million for the years ended December 31, 2003, 2002 and 2001, respectively.

As a condition to continued authority to underwrite policies in the states in which the Company’s title insurance subsidiaries conduct their business, they are required to pay certain fees and file information regarding their officers, directors and financial condition. In addition, the Company’s escrow and trust business is subject to regulation by various state banking authorities.

Pursuant to statutory requirements of the various states in which the Company’s title insurance subsidiaries are domiciled, they must maintain certain levels of minimum capital and surplus. Each of the Company’s title underwriters has complied with the minimum statutory requirements as of December 31, 2003.

The Company’s underwritten title companies are also subject to certain regulation by insurance regulatory or banking authorities, primarily relating to minimum net worth. Minimum net worth of $7.5 million, $2.5 million, $3.0 million and $400 is required for Fidelity National Title Company, Fidelity National Title Company of California, Chicago Title Company and Ticor Title Company of California, respectively. The Company is in compliance with all of its respective minimum net worth requirements at December 31, 2003.

On January 24, 2001, the Company issued 13,393,188 shares of its common stock at a public offering price of $20.14 per share. Proceeds from this offering, net of underwriting discounts and commissions and other related expenses, were $256.3 million. Net proceeds were primarily used to pay down existing indebtedness.

On April 24, 2001, the Company’s Board of Directors authorized the Company to purchase up to 8,318,750 shares of its common stock. Purchases may be made from time to time by the Company in the open market or in block purchases or in privately negotiated transactions depending on market conditions and other factors. As part of this program, the Company repurchased in 2001 a total of 1,512,500 shares of common stock for $22.9 million, at an average price of $15.15 per share. In May 2002, the Company retired those 1,512,500 shares held as treasury stock.

On April 24, 2002, the Company’s Board of Directors approved a three-year stock repurchase program. Purchases were made by the Company from time to time in the open market, in block purchases or in privately negotiated transactions. From May 15, 2002, through December 31, 2002, the Company repurchased a total of 2,798,358 shares of common stock for $61.2 million, or an average price of $21.87. The amount repurchased includes 604,546 shares of common stock purchased from certain of the Company’s officers and directors during the third quarter of 2002, of which 228,181 shares were accepted as full payment for certain notes receivable, including accrued interest. In December 2002, the Company retired 774,908 of these shares held as treasury stock, totaling $14.3 million. For the year ended December 31, 2003, the Company repurchased 1,775,400 shares of common stock for $45.4 million, or an average price of $25.60. In the fourth quarter of 2003, the Company retired 989,450 of these shares held as treasury stock, totaling $27.3 million. As a result of the increased cash dividend per share, the Company decided to suspend this stock repurchase program effective July 23, 2003; however, effective December 18, 2003, the stock repurchase program was reinstated.

On January 27, 2004, the Company’s Board of Directors declared a 10% stock dividend to stockholders of record as of February 12, 2004, payable on February 26, 2004. On April 22, 2003, the Company’s Board of Directors declared a five-for-four (5:4) stock split payable May 23, 2003, to stockholders of record as of May 9, 2003. On April 24, 2002, the Company’s Board of Directors declared a 10% stock dividend to stockholders of record as of May 9, 2002, payable on May 23, 2002. On July 24, 2001, the Company declared a 10% stock dividend to stockholders of record on August 9, 2001, payable on August 23, 2001. The fair value of the additional shares of common stock issued in connection with the 10% stock dividends was credited to additional paid-in capital and a like amount charged to retained earnings during 2002 and 2001. Fractional shares were paid in cash. All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Consolidated Financial Statements has been retroactively adjusted to reflect the stock split and stock dividends.

In 1987, stockholders approved the adoption of an Employee Stock Purchase Plan (“ESPP”). Under the terms of the ESPP and subsequent amendments, eligible employees may voluntarily purchase, at current market prices, shares of the Company’s common stock through payroll deductions. Pursuant to the ESPP, employees may contribute an amount between 3% and 15% of their base salary and certain commissions. The Company contributes varying amounts as specified in the ESPP. During the years ended December 31, 2003, 2002 and 2001, 1,315,065, 980,837 and 1,094,742 shares, respectively, were purchased and allocated to employees, based upon their contributions, at an average price of $27.46, $20.57 and $16.03 per share, respectively. The Company contributed $9.2 million or the equivalent of 336,234 shares for the year ended December 31, 2003; $7.5 million or the equivalent of 366,765 shares for the year ended December 31, 2002 and $5.3 million or the equivalent of 327,198 shares for the year ended December 31, 2001 in accordance with the employer’s matching contribution.

The Company offers the Fidelity National Financial, Inc. 401(k) Profit Sharing Plan (“401(k) Plan”), a qualified voluntary contributory savings plan, available to substantially all Fidelity employees. Eligible employees may contribute up to 15% of their pretax annual compensation, up to the amount allowed pursuant to the Internal Revenue Code. The Company matches 50% of each dollar of employee contribution up to six percent of the employee’s total compensation. The Company’s cost for the 401(k) Plan for the years ended December 31, 2003, 2002 and 2001 was $22.3 million, $17.5 million and $13.9 million, respectively.

The Company’s 1987 Stock Option Plan expired in December 1997. Options generally had a term of five to 11 years from date of grant, became exercisable at the discretion of the Board of Directors and were priced at not less than the fair market value on the date of grant. A total of 716,916 stock options were outstanding as of December 31, 2003. No further awards may be granted under this plan.

The Company’s 1991 Stock Option Plan (“1991 Plan”) expired in March 2001. Options generally had a term of 12 years from the date of grant and were exercisable subject to the terms and conditions set by the Board of Directors. The price per share was determined at the date of grant and may be less than the fair market value of the common stock at the date of grant to reflect the application of the optionee’s deferred bonus, if applicable. The 1991 Plan allows for exercise prices with a fixed discount from the quoted market price. A total of 1,065,605 stock options were outstanding as of December 31, 2003. No further awards may be granted under this plan.

In 2001, options were granted under the 1991 Plan at an exercise price of $14.34 to key employees of the Company who applied deferred bonuses expensed in 2000 amounting to $4.9 million to the exercise price. The exercise price of these options decreases approximately $.21 per year through 2006 and $.14 per year from 2007 through 2012, at which time the exercise price will be $12.47.

The Company’s 1993 Stock Plan (“1993 Plan”) expired in June 2003. Options generally had a term of 10 years from the date of grant and were exercisable subject to the terms and conditions set by the Board of Directors. The per share option price was determined at the date of grant, provided that the price for incentive stock options shall not be less than 100% of their market value or award stock shares. A total of 774,875 stock options were outstanding as of December 31, 2003. No further awards may be granted under this plan.

In connection with the 1998 acquisition of FNF Capital, Inc. (formerly known as “Granite”), which was accounted for as a pooling-of-interests, the Company assumed 1,140,855 options outstanding under Granite’s existing stock option plan (“Granite Plan”), of which 36,050 stock options were outstanding as of December 31, 2003. The Granite Plan provides that qualified stock options be granted at an exercise price equal to fair market

value on the date of the grant with a term not to exceed 10 years. The Granite Plan provides that non-qualified stock options be granted at an exercise price not less than 85% of the fair market value on the date of grant with a term not to exceed 10 years.

During 1998, stockholders approved the adoption of the 1998 Stock Incentive Plan (“1998 Plan”). The 1998 Plan authorizes up to 9,985,828 shares of common stock, plus an additional 366,025 shares of common stock on the date of each annual meeting of the stockholders of the Company, for issuance under the terms of the 1998 Plan. As of December 31, 2003, there were 5,391,686 options outstanding under this plan. The 1998 Plan provides for grants of “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, non-qualified stock options and rights to purchase shares of common stock (“Purchase Rights”). The term of options may not exceed 10 years from the date of grant (five years in the case of a person who owns or is deemed to own more than 10% of the total combined voting power of all classes of stock of the Company), and the right to exercise such options shall vest equally over three years. The option exercise price for each share granted pursuant to an incentive stock option may not be less than 100% of the fair market value of a share of common stock at the time such option is granted (110% of fair market value in the case of an incentive stock option granted to a person who owns more than 10% of the combined voting power of all classes of stock of the Company). There is no minimum purchase price for shares of common stock purchased pursuant to a Purchase Right, and any such purchase price shall be determined by the Board of Directors.

In connection with the merger of Chicago Title, the Company assumed the options outstanding under Chicago Title’s existing stock option plans: the 1998 Long-Term Incentive Plan and the Director’s Stock Option Plan. Pursuant to the terms of the merger, options under these plans, totaling 5,304,456, became fully vested on March 20, 2000. The options granted in accordance with these two plans generally have a term of five to 10 years. As of December 31, 2003, there were 457,234 options outstanding under these plans.

In 2001, stockholders approved the adoption of the 2001 Stock Incentive Plan (“2001 Plan”). The 2001 Plan authorized up to 4,026,275 shares of common stock, plus an additional 332,750 shares of common stock on the date of each annual meeting of stockholders of the Company, for issuance under the terms of the 2001 Plan. As of December 31, 2003, there were 769,595 options outstanding under this plan. The 2001 Plan provides for grants of “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986, as amended, nonqualified stock options, rights to purchase shares of common stock and deferred shares. The term of options may not exceed 10 years from the date of grant (five years in the case of an incentive stock option granted to a person who owns or is deemed to own more than 10% of the total combined voting power of all classes of stock of the Company), and are exercisable subject to the terms and conditions set by the Board of Directors. The option exercise price for each share granted pursuant to an incentive stock option may not be less than 100% of the fair market value of a share of common stock at the time such option is granted (110% of fair value in the case of an incentive stock option granted to a person who owns more than 10% of the combined voting power of all classes of stock of the Company). The option exercise price for each share granted pursuant to a nonqualified stock option may be less than the fair value of the common stock at the date of grant to reflect the application of the optionee’s deferred bonus, if applicable. The 2001 Plan allows for exercise prices with a fixed discount from the quoted market price. Options were granted in 2003 at an exercise price of $15.36 to key employees of the Company who applied deferred bonuses expensed in 2002 amounting to $4.6 million to the exercise price. Pursuant to the terms of the 2001 Plan, there are no future exercise price decreases to options granted under this Plan in 2003 and beyond. In 2002, options were granted at an exercise price of $11.41 to key employees of the Company who applied deferred bonuses expensed in 2001 amounting to $5.7 million to the exercise price. The exercise price of these options decreases approximately $.35 per year through 2007 and $.22 per year from 2008 through 2013, at which time the exercise price will be $8.33. The Company recorded compensation expense relating to the exercise price decrease in the 1991 and 2001 Plans of $370, $829 and $674, for the years ended December 31, 2003, 2002 and 2001, respectively.

In 2003, the Company issued to its non-employee Directors and to certain of its employees, rights to purchase 879,450 shares of restricted common stock (“Restricted Shares”) of the Company, pursuant to the 2001 Plan. A

portion of the Restricted Shares vest over a five-year period and a portion of the Restricted Shares vest over a four-year period, of which one-fifth vested immediately on the date of grant. The Company recorded compensation expense of $3.3 million and unearned compensation expense of $23.0 million in connection with the issuance of Restricted Stock in 2003. The Company used 769,450 shares of its common stock held as treasury shares and 110,000 newly issued common shares for the sale of Restricted Shares to its employees.

In connection with the acquisition of ANFI, the Company assumed 988,389 options outstanding under ANFI’s existing option plans: the American National Financial, Inc. 1999 Stock Option Plan and the American National Financial, Inc. 1998 Stock Incentive Plan. The options granted under these plans generally had a term of 10 years. As of December 31, 2003, there were 605,527 options outstanding under these plans.

In connection with the acquisition of FNIS, the Company assumed 2,585,387 options outstanding under FNIS’ existing option plans: the Fidelity National Information Solutions 2001 Stock Incentive Plan, the Vista Information Solutions, Inc. 1999 Stock Option Plan, the Micro General Corporation 1999 Stock Incentive Plan and the Micro General Corporation 1998 Stock Incentive Plan. The options granted under these plans generally had a term of 10 years. As of December 31, 2003, there were 2,311,650 options outstanding under these plans.

Transactions under all stock option plans, including stock options granted by the Company’s Board of Directors which are outside of the Company’s stock option plans, are as follows:

The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2003:

Prior to the third quarter of 2003, the Company accounted for its stock option plans under the recognition and measurement principles of APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations.

All options granted under these plans had an exercise price equal to the market value of the underlying common stock on the date of grant; therefore no stock-based compensation cost had been reflected in net earnings.

During the third quarter of 2003, the Company adopted the fair value recognition provisions 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. 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. Prior year financial statements were not restated. Net income, as a result of the adoption of SFAS 123, for the year ended December 31, 2003 reflects an expense of $6.2 million, which is included in personnel costs in the reported financial results.

Pro forma information regarding net earnings and earnings per share is required by SFAS 123, and has been determined as if the Company had accounted for all of its employee stock options under the fair value method of that statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted average assumptions. The risk free interest rates used in the calculation are the rate that corresponds to the weighted average expected life of an option. The risk free interest rate used for options granted during 2003, 2002 and 2001 was 2.0%, 2.0% and 4.3%, respectively. A volatility factor for the expected market price of the common stock of 43%, 44% and 47% were used for options granted in 2003, 2002 and 2001, respectively. The expected dividend yield used for 2003, 2002 and 2001 was 1.4%, 1.3% and 1.5%, respectively. A weighted average expected life of 3.5 years, 3.25 years and 5.0 years was used for 2003, 2002 and 2001, respectively. The weighted average fair value of each option granted during 2003, 2002 and 2001 was $10.57, $6.39 and $6.75, respectively.

For purposes of pro forma disclosures, the estimated fair value of the options is amortized into expense over the options’ vesting period. 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:

In connection with the Chicago Title merger, the Company assumed Chicago Title’s noncontributory defined benefit pension plan (the “Pension Plan”).

The Pension Plan covered certain Chicago Title employees. The benefits are based on years of service and the employee’s average monthly compensation in the highest 60 consecutive calendar months during the 120 months ending at retirement or termination and effective December 31, 2000, the Pension Plan was frozen and there will be no future credit given for years of service or changes in salary.

The following table sets forth the funded status of the Pension Plan as of December 31, 2003, 2002 and 2001:

The accumulated benefit obligation (ABO) is the same as the projected benefit obligation (PBO) due to the pension plan being frozen as of December 31, 2000.

Under Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions,” (“SFAS No. 87”) the measurement date shall be as of the date of the financial statements, or if used consistently from year to year, as of a date not more than three months prior to that date. The Company’s measurement date is December 31.

The net pension liability included in accounts payable and accrued liabilities as of December 31, 2003 and 2002 is $54.2 million and $44.9 million, respectively. The net pension liability at December 31, 2003 and 2002 includes the additional minimum pension liability adjustment of $16.4 million and $26.1 million, respectively, which was recorded as a net of tax charge of $10.0 million and $15.9 million to accumulated other comprehensive earnings (loss) in 2003 and 2002 in accordance with SFAS No. 87.

The components of net periodic (income) expense included in the results of operations for 2003, 2002 and 2001 are as follows:

Weighted-average assumptions used to determine benefit obligations at December 31, are as follows:

Weighted-average assumptions used to determine net expense for years ended December 31 are as follows:

The expected long term rate of return on plan assets was 8.5% in 2003 and 9.0% in 2002 and 2001, derived using the plan’s asset mix, historical returns by asset category, expectations for future capital market performance, and the fund’s past experience. Both the plan’s investment policy and the expected long-term rate of return assumption are reviewed periodically. The Company’s strategy is to focus on a one to three-year investment horizon, maintaining equity securities at 50-55% of total assets while maintaining an average duration in debt securities, extending that duration as interest rates rise and maintaining cash funds at appropriate levels relating to the current economic environment.

The Company’s pension plan asset allocation at December 31, 2003 and 2002 and target allocation for 2004 are as follows:

The Company does not hold any investments in its own equity securities within its pension plan assets.

The Company’s funding policy is to contribute annually at least the minimum required contribution under the Employee Retirement Income Security Act (ERISA). Contributions are intended to provide not only for benefits accrued to date, but also for those expected to be earned in the future. In 2003 and 2002, the Company made contributions of $12.2 million and $13.6 million, respectively. Due to regulatory requirements, the Company is not required to make a contribution to the pension plan in 2004. The Company has not yet determined if a voluntary contribution to the plan will be made in 2004.

The Company assumed certain health care and life insurance benefits for retired Chicago Title employees in connection with the Chicago Title merger. Beginning on January 1, 2001, these benefits were offered to all employees who meet specific eligibility requirements. The costs of these benefit plans are accrued during the periods the employees render service.

The Company is both self-insured and fully insured for its postretirement health care and life insurance benefit plans, and the plans are not funded. The health care plans provide for insurance benefits after retirement and are generally contributory, with contributions adjusted annually. Postretirement life insurance benefits are contributory, with coverage amounts declining with increases in a retiree’s age.

The accrued cost of the accumulated postretirement benefit obligation included in the Company’s Consolidated Balance Sheets at December 31, 2003, 2002 and 2001 is as follows:

In December 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (“the Act”) became law in the United States. The Act introduces a prescription drug benefit under Medicare as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to the Medicare benefit. In accordance with FASB Staff Position FAS 106-1, “Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003,” the Company has elected to defer recognition of the effects of the Act in any measures of the benefit obligation or cost. Specific authoritative guidance on the accounting for the federal subsidy is pending and that guidance, when issued, could require the Company to change previously reported information. Currently, the Company does not believe it will need to amend its plan to benefit from the Act. The measurement date used to determine pension and other postretirement benefit measures for the pension plan and the postretirement benefit plan is December 31.

The Company’s postretirement health care and life insurance costs included in the results of operations for 2003, 2002 and 2001 are as follows:

Weighted-average assumptions used to determine benefit obligations at December 31 are as follows:

Weighted-average assumptions used to determine net expense for years ended December 31 are as follows:

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage-point change in assumed health care cost trend rates would have the following effects:

The following supplemental cash flow information is provided with respect to interest and tax payments, as well as certain non-cash investing and financing activities.

N. Financial Instruments with Off-Balance Sheet Risk and Concentration of Risk

In the normal course of business the Company and certain of its subsidiaries enter into off-balance sheet credit risk associated with certain aspects of its title insurance business and other activities. The Company has various guarantees for agent loans totaling $948 as of December 31, 2003.

The Company generates a significant amount of title insurance premiums in California and Texas. In 2003, 2002 and 2001, California and Texas accounted for 25.0% and 11.1%, 25.2% and 12.1% and 24.8% and 13.4% of total title premiums, respectively.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash equivalents, short-term investments, lease receivables, residual interests in securitizations and trade receivables.

The Company places its cash equivalents and short-term investments with high credit quality financial institutions and, by policy, limits the amount of credit exposure with any one financial institution. Investments in commercial paper of industrial firms and financial institutions are rated investment grade by nationally recognized rating agencies.

Concentrations of credit risk with respect to trade receivables are limited because a large number of geographically diverse customers make up the Company’s customer base, thus spreading the trade receivables credit risk. The Company controls credit risk through monitoring procedures.

During 2004, subsequent to year end, the Company restructured its business segments to more accurately reflect a change in the Company’s current operating structure. All previously reported segment information has been restated to be consistent with the current presentation.

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


			Financial
			Institution			Lender
			Software and			Outsourcing			Information			Specialty		Corporate
	Title Insurance		Services			Solutions			Services			Insurance		and Other			Eliminations			Total
Title premiums	$	4,700,748	$	—		$	288,190		$	—		$	—	$	—		$	(250,687	)		4,738,251
Other revenues		1,056,448		717,816			316,211			584,784			135,231		56,794			(57,050	)		2,810,234
Intersegment revenue		—		(17,424	)		(250,687	)		(39,626	)		—		—			307,737			—

Revenues from external customers	$	5,757,196	$	700,392		$	353,714		$	545,158		$	135,231	$	56,794		$	—		$	7,548,485
Interest and investment income, including realized gains and (losses)		156,747		(243	)		951			1,986			2,192		5,097			—			166,730

Total revenues	$	5,913,943	$	700,149		$	354,665		$	547,144		$	137,423	$	61,891		$	—		$	7,715,215

Depreciation and amortization		78,542		101,577			13,645			29,882			3,186		1,105			—			227,937
Interest expense		1,113		12			(33	)		1,590			—		40,421			—			43,103
Earnings (loss) before income tax and minority interest		1,074,546		115,777			197,795			95,685			15,258		(78,422	)		—			1,420,639
Income tax expense		408,328		43,995			75,162			36,360			5,798		(29,800	)		—			539,843
Minority Interest		848		—			2,659			15,448			—		21			—			18,976
Net earnings (loss)	$	665,370	$	71,782		$	119,974		$	43,877		$	9,460	($	48,643	)		—			861,820
Assets		4,703,987		1,406,958			331,674			500,074			135,478		185,004			—			7,263,175
Goodwill		917,467		563,961			85,833			333,501			18,169		7,547			—			1,926,478

As of and for the year ended December 31, 2002 (dollars in thousands):


			Financial
			Institution			Lender
			Software and			Outsourcing			Information			Specialty		Corporate
	Title Insurance		Services			Solutions			Services			Insurance		and Other			Eliminations			Total
Title premiums	$	3,547,729	$	—		$	46,658		$	—		$	—	$	—		$	(46,658	)		3,547,729
Other revenues		789,730		13,762			167,492			397,445			46,061		59,687			(29,302	)		1,444,875
Intersegment revenue		—		(1,334	)		(46,658	)		(27,968	)		—		—			75,960			—

Revenues from external customers	$	4,337,459	$	12,428		$	167,492		$	369,477		$	46,061	$	59,687		$	—		$	4,992,604
Interest and investment income, including realized gains and (losses)		72,559		24			603			156			1,507		15,187			—			90,036

Total revenues	$	4,410,018	$	12,452		$	168,095		$	369,633		$	47,568	$	74,874		$	—		$	5,082,640

Depreciation and amortization		53,512		988			2,679			15,972			—		1,012			—			74,163
Interest expense		1,336		8			173			806			1		31,729			—			34,053
Earnings (loss) before income tax and minority interest		762,536		4,489			51,962			63,414			5,080		(36,181	)		—			851,300
Income tax expense		272,738		1,706			19,746			24,097			1,930		(13,749	)		—			306,468
Minority Interest		2,240		—			1,962			8,913			—		—			—			13,115
Net earnings (loss)	$	487,558	$	2,783		$	30,254		$	30,404		$	3,150	($	22,432	)		—			531,717
Assets		4,266,363		71,867			139,963			305,709			65,198		396,851			—			5,245,951
Goodwill		806,918		41,623			28,369			107,066			7,944		4,693			—			996,613

As of and for the year ended December 31, 2001 (dollars in thousands):


			Financial
			Institution		Lender
			Software and		Outsourcing			Information			Specialty		Corporate
	Title Insurance		Services		Solutions			Services			Insurance		and Other			Eliminations			Total
Title premiums	$	2,694,479	$	—	$	33,972		$	—		$	—	$	—		$	(33,972	)		2,694,479
Gross revenue		651,851		2,432		90,154			266,226			34,678		53,645			(18,812	)		1,080,174
Intersegment revenue		—		—		(33,972	)		(18,812	)		—		—			52,784			—

Revenues from external customers	$	3,346,330	$	2,432	$	90,154		$	247,414		$	34,678	$	53,645		$	—		$	3,774,653
Interest and investment income, including realized gains and (losses)		85,214		3		82			27			1,258		12,870			—			99,454

Total revenues	$	3,431,544	$	2,435	$	90,236		$	247,441		$	35,936	$	66,515		$	—		$	3,874,107

Depreciation and amortization		89,961		130		2,446			14,780			—		10,965			—			118,282
Interest expense		3,146		—		14			758			—		42,651			—			46,569
Earnings (loss) before income tax and minority interest		524,313		317		21,480			35,483			2,775		(60,647	)		—			523,721
Income tax expense		209,713		120		8,162			13,484			1,055		(23,046	)		—			209,488
Minority Interest		2,453		—		—			595			—		—			—			3,048
Net earnings (loss)	$	312,147	$	197	$	13,318		$	21,404		$	1,720	$	(37,601	)		—			311,185
Assets		3,485,275		10,267		113,218			341,149			52,410		413,679			—			4,415,998
Goodwill		683,838		6,384		11,519			94,199			7,944		4,700			—			808,584

This segment, consisting of title insurance underwriters and wholly-owned title insurance agencies, provides core title insurance and escrow services, including document preparation, collection and trust activities. This segment coordinates its activities with those of the information services segment described below in order to offer the full range of real estate products and services required to execute and close a real estate transaction. Included in the title insurance segment for the year ended December 31, 2003 are $26.3 million in pre-tax expenses relating to the migration of data center operations from FNIS to FIS and $11.3 million related to the relocation of the Company’s corporate headquarters to Jacksonville, Florida pursuant to SFAS No. 146, and $2.0 million in asset impairment charges pursuant to SFAS No. 144. See Notes A and B. In addition, the title insurance segment for 2003 includes a realized gain of $51.7 million as a result of InterActive Corp’s acquisition of Lending Tree Inc. and the subsequent sale of the Company’s InterActive Corp common stock and a realized gain of $25.0 million on the sale of New Century Financial Corporation common stock.

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 banks 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.

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 lender outsourcing solutions segment for the year ended December 31, 2003 is $2.7 million of pre-tax expenses relating to asset impairment charges pursuant to SFAS No. 144. See Notes A and B.

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. Included in the information services segment for the year ended December 31, 2004 is $3.2 million of pre-tax expenses relating to asset impairment charges pursuant to SFAS No. 144. See Notes A and B.

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

The corporate segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, smaller entities that do not fit in our other segment classifications including the Company’s leasing operations, as well as the issuance and repayment of corporate debt obligations. Included in the Corporate and other segment for the year ended December 31, 2003 is $1.6 million in pre-tax expenses relating to the relocation of the Company’s Corporate headquarters to Jacksonville, Florida, pursuant to SFAS No. 146. See Note A.

In December 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 148, “Accounting for Stock-Based Compensation — Transition and Disclosure — an Amendment of Statement of Financial Accounting Standard No. 123” (“SFAS No. 148”). This statement provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. This statement also amends the disclosure requirements of Statement of Financial Accounting Standard No. 123 and Accounting Principles Board Opinion No. 28, “Interim Financial Reporting,” to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. In the third quarter of 2003, the Company has voluntarily adopted the fair value recognition provisions of SFAS No. 123, under the prospective method of transition as permitted by SFAS No. 148. See Note L of Notes to Consolidated Financial Statements.

June 15, 2003. Companies may apply EITF 00-21 prospectively to new arrangements initiated after the date of adoption or as a cumulative-effect adjustment. The adoption of EITF 00-21 did not have a material effect on the Company’s financial statements.

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which addresses consolidation by business enterprises of variable interest entities (“VIEs”) either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB completed deliberations of proposed modifications to FIN 46 (“Revised Interpretations”) resulting in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the Company’s first quarter of 2004. VIEs created after January 1, 2004 must be accounted for under the Revised Interpretations. Special Purpose Entities (SPEs”) created prior to February 1, 2003 may be accounted for under the original or Revised Interpretation’s provision no later than the Company’s fourth quarter of 2003. Non-SPEs created prior to February 1, 2003, should be accounted for under the Revised Interpretation’s provisions no later than the Company’s first quarter of 2004. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

In December 2003, Financial Accounting Standards Board Statement No. 132 (revised), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” (“SFAS No. 132”) was issued. SFAS No. 132 (revised) prescribes employers’ disclosures about pension plans and other postretirement benefit plans; it does not change the measurement or recognition of those plans. The Statement retains and revises the disclosure requirements contained in the original Statement 132. It also requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. SFAS No. 132 (revised) is effective for fiscal years ending after December 15, 2003. The Company’s disclosures in Note L incorporate the requirements of SFAS No. 132 (revised).

As of December 31, 2003, the Company adopted the disclosure provisions of Emerging Issues Task Force No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF No. 03-1”), which resulted in additional disclosures regarding the Company’s evaluation of impairment of debt and equity securities. The Company’s disclosures in Note C incorporate the requirements of EITF No. 03-1.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Fidelity National Financial, Inc.:

Under date of February 27, 2004, except as to Note B to the Consolidated Financial Statements, which is as of March 11, 2004, and except as to Note O to the Consolidated Financial Statements, which is as of November 19, 2004, we reported on the Consolidated Balance Sheets of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2003 and 2002, and the related Consolidated Statements of Earnings, Comprehensive Earnings, Stockholders’ Equity and Cash Flows for each of the years in the three-year period ended December 31, 2003 which are included in the current report on Form 8-K of Fidelity National Financial, Inc. filed herein. In connection with our audits of the aforementioned Consolidated Financial Statements, we also audited the related financial statement schedules. These financial statement schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statement schedules based on our audits.

In our opinion, such schedules, when considered in relation to the basic Consolidated Financial Statements taken as a whole, present fairly, in all material respects, the information set forth therein.

KPMG LLP

Fidelity National Financial, Inc. (the “Company”) transacts substantially all of its business through its subsidiaries. The Parent Company Financial Statements should be read in connection with the aforementioned Consolidated Financial Statements and Notes thereto included elsewhere herein.

Principal maturities at December 31, 2003, are as follows (dollars in thousands):

In the normal course of business the Company enters into off-balance sheet credit risk in the form of guarantees. As of December 31, 2003, subsidiary debt in the amount of $1.4 million was guaranteed by the Company.

The Company has received cash dividends from subsidiaries and affiliates of $421.4 million, $165.2 million and $113.3 million in 2003, 2002 and 2001, respectively.


(1)	Represents payments of claim losses, net of recoupments.

(2)	Represents uncollectible accounts written-off, change in reserve due to reevaluation of specific items and change in reserve due to sale of certain assets.

(3)	Represents intangible assets written-off.

(4)	Represents reserve for claim losses assumed in connection with the Company’s acquisitions of LSI and ANFI in 2003.

Exhibit 99.5

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)


	March 31,			December 31,
	2004			2003
	(Unaudited)
ASSETS
Investments:
Fixed maturities available for sale, at fair value, at March 31, 2004 includes $274,281 and at December 31, 2003 includes $262,193 of pledged fixed maturity securities related to secured trust deposits	$	1,873,835		$	1,696,234
Equity securities, at fair value		109,932			70,618
Other long-term investments		51,240			44,579
Short-term investments at March 31, 2004 includes $190,983 and at December 31, 2003 includes $185,956 of pledged short-term investments related to secured trust deposits		704,011			878,386

Total investments		2,739,018			2,689,817
Cash and cash equivalents, at March 31, 2004 includes $339,467 and at December 31, 2003 includes $231,142 of pledged cash related to secured trust deposits		602,838			491,819
Leases		59,615			67,855
Trade and notes receivables, net of allowance of $36,254 in 2004 and $39,048 in 2003		495,918			446,102
Goodwill		2,214,749			1,926,478
Prepaid expenses and other assets		283,341			249,009
Capitalized software		343,004			290,108
Other intangible assets		581,073			529,940
Title plants		293,324			286,398
Property and equipment, net		342,172			317,813

	$	7,955,052		$	7,295,339

LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	727,803		$	850,828
Deferred revenue		220,276			194,077
Notes payable		910,258			659,186
Reserve for claim losses		977,859			940,217
Secured trust deposits		801,016			671,882
Deferred tax liabilities		82,794			84,224
Income taxes payable		79,267			6,731

		3,799,273			3,407,145
Minority interests and preferred stock of subsidiary		12,588			14,835
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, 172,420,770 as of March 31, 2004 and 167,650,280 as of December 31, 2003		18			17
Additional paid-in capital		3,226,833			2,453,841
Retained earnings		1,030,629			1,517,494

		4,257,480			3,971,352
Accumulated other comprehensive earnings (loss)		(11,253	)		(9,891	)
Unearned compensation		(21,644	)		(23,017	)
Less treasury stock, 3,235,500 shares as of March 31, 2004 and 2,809,400 shares as of December 31, 2003, at cost		(81,392	)		(65,085	)

		4,143,191			3,873,359

	$	7,955,052		$	7,295,339

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
	March 31,
	2004		2003
	(Unaudited)
REVENUE:
Direct title insurance premiums	$	464,948	$	472,230
Agency title insurance premiums		606,333		494,431
Escrow and other title related fees		217,580		217,276
Financial institution software and services		246,216		8,198
Lender outsourcing solutions (excludes title premiums of $41.2 million and $30.2 million in the three month period ended March 31, 2003 and 2002 respectively that are included in title premiums above)		74,116		67,119
Information services		140,033		112,468
Specialty insurance		48,670		27,730
Interest and investment income		14,527		17,057
Realized gains and losses, net		12,473		6,633
Other income		11,922		13,734

Total revenue	$	1,836,818	$	1,436,876
EXPENSES:
Personnel costs		636,596		447,156
Other operating expenses		416,151		315,609
Agent commissions		474,364		387,213
Provision for claim losses		58,920		48,384
Interest expense		7,932		8,060

Total expenses		1,593,963		1,206,422

Earnings before income taxes and minority interest.		242,855		230,454
Income tax expense		92,285		85,209

Earnings before minority interest		150,570		145,245
Minority interest		329		5,272

Net earnings	$	150,241	$	139,973

Basic earnings per share	$	0.91	$	1.06

Weighted average shares outstanding, basic basis		165,605		132,432

Diluted earnings per share	$	0.88	$	1.02

Weighted average shares outstanding, diluted basis		171,103		136,628

Cash dividends per share	$	0.18	$	0.11

See Notes to Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
(In thousands)


												Accumulated
	Common Stock								Additional			Other						Treasury Stock
						Paid-in			Retained			Comprehensive			Unearned
	Shares			Amount		Capital			Earnings			Loss			Compensation			Shares			Amount
Balance, December 31, 2003		167,650		$	17	$	2,453,841		$	1,517,494		$	(9,891	)	$	(23,017	)	$	2,809		$	(65,085	)
Purchase of treasury stock		—			—		—			—			—			—			431			(16,502	)
Retirement of treasury stock		(4	)		—		(195	)		—			—			—			(4	)		195
Issuance of restricted stock		6			—		192			—			—			(192	)		—			—
Exercise of stock options		1,405			—		20,572			—			—			—						—
Tax benefit associated with the exercise of options		—			—		10,827			—			—			—			—			—
Acquisition of Aurum Technology, Inc.		3,144			1		121,369			—			—			—			—			—
Acquisition of Hansen Quality Loan Services, Inc.		220			—		8,500			—			—			—			—			—
Other comprehensive
loss — unrealized loss on investments and other financial instruments		—			—		—			—			(1,362	)		—			—			—
Amortization of unearned compensation		—			—		—			—			—			1,565			—			—
Effect of 10% stock dividend		—			—		607,162			(607,162	)		—			—			—			—
Stock based compensation.		—			—		4,565			—			—			—			—			—
Cash dividends declared ($0.18 per share)		—			—		—			(29,944	)		—			—			—			—
Net earnings		—			—		—			150,241			—			—			—			—

Balance, March 31, 2004		172,421		$	18	$	3,226,833		$	1,030,629		$	(11,253	)	$	(21,644	)		3,236		$	(81,392	)

See Notes Condensed Consolidated Financial Statements

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Three months ended
	March 31,
	2004			2003
	(Unaudited)
Cash flows from operating activities:
Net earnings	$	150,241		$	139,973
Reconciliation of net earnings to net cash provided by operating activities:
Depreciation and amortization		70,610			21,802
Net increase in reserve for claim losses		9,018			4,716
Gain on sales of assets		(12,473	)		(6,633	)
Stock-based compensation cost		6,130			3,606
Tax benefit associated with the exercise of stock options		10,827			8,129
Change in assets and liabilities, net of effects from acquisitions:
Net decrease in leases and lease securitization residual interests		8,240			17,022
Net decrease in secured trust deposits		4,300			15,103
Net increase in trade receivables		(24,539	)		(18,389	)
Net increase in prepaid expenses and other assets		(26,065	)		(8,812	)
Net decrease in accounts payable, accrued liabilities and minority interests		(149,485	)		(49,352	)
Net increase in income taxes		75,628			77,550

Net cash provided by operating activities		122,432			204,715

Cash flows from investing activities:
Proceeds from sales of investment securities available for sale		572,802			440,110
Proceeds from maturities of investment securities available for sale		33,904			73,655
Proceeds from sale of assets		2,402			211
Collections of notes receivable		1,077			1,668
Additions to title plants		(232	)		(1,005	)
Additions to property and equipment		(34,147	)		(29,391	)
Additions to capitalized software		(26,375	)		(5,547	)
Purchases of investment securities available for sale		(765,692	)		(495,683	)
Net proceeds (purchases) of short-term investment securities		201,346			(261,762	)
Additions to notes receivable		(2,986	)		(841	)
Acquisitions of businesses, net of cash acquired		(315,242	)		(102,023	)

Net cash used in investing activities		(333,143	)		(380,608	)

See Notes to Condensed Consolidated Financial Statements.

FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)


	Three months ended
	March 31,
	2004			2003
	(Unaudited)
Cash flows from financing activities:
Borrowings	$	253,495		$	935
Net proceeds from issuance of notes		—			248,118
Debt issuance costs		—			(1,625	)
Debt service payments		(14,216	)		(27,202	)
Dividends paid		(29,944	)		(11,718	)
Stock options exercised		20,572			12,384
Purchases of treasury stock		(16,502	)		(19,745	)

Net cash provided by financing activities		213,405			201,147

Net increase in cash and cash equivalents, excluding pledged cash related to secured trust deposits		2,694			25,254
Cash and cash equivalents, excluding pledged cash related to secured trust deposits at beginning of period		260,677			187,549

Cash and cash equivalents, excluding pledged cash related to secured trust deposits at end of period	$	263,371		$	212,803

Supplemental cash flow information:
Income taxes paid	$	4,900		$	1,500

Interest paid	$	9,166		$	11,759

Noncash investing and financing activities:
Dividends declared and unpaid	$	—		$	15,763

Issuance of restricted stock	$	192		$	—

Fair value of shares issued in connection with acquisitions	$	129,870		$	—
Capital transactions of investees and less than 100% owned subsidiaries	$	—		$	398
Liabilities assumed in connection with acquisitions:
Fair value of assets acquired	$	427,941		$	345,211
Total purchase price	$	(337,295	)	$	(279,001	)

Liabilities assumed	$	90,646		$	66,210

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 financial information included in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, the “Company”) and has been 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, 2003.

Certain reclassifications have been made in the 2003 Condensed Consolidated Financial Statements to conform to classifications used in 2004. In addition, the financial statements for the three months ended March 31, 2003 have been restated to reflect the adoption in the third quarter of 2003 of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”. See Note E.

Note B – Acquisitions

Significant Transaction:

ALLTEL Information Services, Inc.

The Company acquired FIS for approximately $1,069.6 million (including the payment for certain working capital adjustments and estimated transaction costs), consisting of $794.6 million in cash and $275.0 million of the Company’s common stock. The Company funded the cash portion of the purchase price through the issuance of $250.0 million aggregate principal amount of 5.25% notes due March 15, 2013, and $544.6 million in available cash. The stock portion of the purchase price resulted in the issuance of 11,206,692 shares of the Company’s common stock to ALLTEL.

The Company allocated the purchase price to intangible assets as follows: $450.7 million to goodwill; $348.0 million to other intangible assets, namely acquired customer relationship intangibles; and $95.0 million to capitalized software based on studies and valuations that are finalized. The Company is amortizing the other intangible assets using an accelerated method which takes into consideration expected customer attrition rates over a 10-year period. The acquired software is amortized over a seven-year period using an accelerated method that contemplates the period of expected economic benefit and future enhancements to the underlying software. Under the terms of the stock purchase agreement, the Company made a joint election with ALLTEL to treat the acquisition as a sale of assets in accordance with Section 338 (h) (10) of the Internal Revenue Code, which resulted in the revaluation of the assets acquired to fair value. As such, the fair value assignable to the historical assets, as well as intangible assets and goodwill, will be deductible for federal and state income tax purposes.

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


Tangible and amortizable intangible assets acquired at fair value	$	741,960
Goodwill		450,743
Liabilities assumed at fair value		(123,082	)

Total purchase price	$	1,069,621

Selected unaudited pro forma combined results of operations for the three months ended March 31, 2003 assuming the acquisition had occurred as of January 1, 2003, and using actual general and administrative expenses prior to the acquisition, are set forth below:


	Three Months Ended
	March 31, 2003
Total revenue	$	1,647,851
Net earnings	$	157,016
Basic earnings per share	$	1.09
Diluted earnings per share	$	1.06

Other Transactions:

Sanchez Computer Associates, Inc.

On April 14, 2004, the Company acquired Sanchez Computer Associates, Inc. (“Sanchez” — NASDAQ:SCAI) for approximately $175.0 million, composed of approximately $88.1 million in cash and the issuance of approximately 2,267,290 shares of the Company’s common stock.

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. Sanchez’ primary product offering is Sanchez Profile TM, a real-time, multi-currency, strategic core banking deposit and loan processing system that can be utilized on both an outsourced and in-house basis.

American Pioneer Title Insurance Company

On March 22, 2004, the Company acquired American Pioneer Title Insurance Company (“APTIC”) for approximately $115.0 million in cash, subject to certain equity adjustments. APTIC is a 45-state licensed title insurance underwriter with significant agency operations and computerized title plant assets in the state of Florida. APTIC will operate under the Company’s Ticor Title brand.

Aurum Technology, Inc.

On March 11, 2004, the Company acquired Aurum Technology, Inc. (“Aurum”) for approximately $305.0 million, composed of approximately $185.0 million in cash and the issuance of 3,144,390 in shares of its common stock. Aurum is a provider of outsourced and in-house information technology solutions for the community bank and credit union markets.

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 approximately $33.7 million, consisting of approximately $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, which is restricted from sale to the public. Hansen provides collateral risk assessment and valuation services for real estate mortgage financing. On March 26, 2004, we acquired the remaining 1% interest in Hansen for approximately $.3 million in cash.

LandCanada

On October 9, 2003, the Company acquired LandCanada, a provider of title insurance and related mortgage document production in Canada, for approximately $17.6 million in cash.

Fidelity National Information Solutions, Inc.

WebTone Technologies, Inc.

Omaha Property and Casualty Insurance Company

Key Title Company

On March 31, 2003, the Company acquired Key Title Company (“Key Title”) for approximately $22.5 million in cash. Key Title operates in 12 counties in the state of Oregon.

ANFI, Inc.

Lenders Service, Inc.

Bankers Insurance Group

Note C – Issuance of Notes

On March 11, 2003, the Company completed a public offering of $250.0 million aggregate principal amount of 5.25% notes due March 15, 2013. The notes were priced at 99.247% of par to yield 5.433% annual interest, and are unsecured. The Company received net proceeds of approximately $246.2 million, after expenses, which was used to pay a portion of the $1,069.6 million purchase price of FIS on April 1, 2003. See Note B.

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
	March 31,
	2004		2003
	(In thousands, except per share amounts)
Net earnings, basic and diluted basis	$	150,241	$	139,973

Weighted average shares outstanding during the period, basic basis		165,605		132,432
Plus: Common stock equivalent shares assumed from conversion of options		5,498		4,196

Weighted average shares outstanding during the period, diluted basis		171,103		136,628

Basic earnings per share	$	0.91	$	1.06

Diluted earnings per share	$	0.88	$	1.02

Options to purchase 9,242 shares and 863,677 shares of the Company’s common stock for the three months ended March 31, 2004 and 2003, respectively, were not included in the computation of diluted earnings per share because they were antidilutive.

Note E- Stock-Based Compensation Plans

During the third quarter of 2003, the Company adopted the fair value recognition provisions 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. 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. The financial statements for the three months ended March 31, 2003 have been restated to reflect the adoption of SFAS No. 123.


	Three months ended
	March 31,
	2004			2003
	(In thousands, except
	per share amounts)
Net earnings, as reported	$	150,241		$	139,973
Add: Stock-based compensation expense included in reported net earnings, net of related tax effects		3,801			3,606
Deduct: Total stock-based compensation expense determined under fair value based methods for all awards, net of related tax effects		(4,786	)		(5,690	)
Pro forma net earnings	$	149,256		$	137,889

Earnings per share:
Basic – as reported	$	0.91		$	1.06
Basic – pro forma	$	0.90		$	1.04
Diluted – as reported	$	0.88		$	1.02
Diluted – pro forma	$	0.87		$	1.01

Note F – Segment Information

During 2004, the Company restructured its business segments to more accurately reflect a change in the Company’s current operating structure. All previously reported segment information has been restated to be consistent with the current presentation.

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

For the three months ended March 31, 2004


	Title Insurance			Financial Institution Software and Services			Lender Outsourcing Solutions			Information Services			Specialty Insurance		Corporate and Other			Eliminations			Total
Title premiums	$	1,071,281		$	—		$	41,190		$	—		$	—	$	—		$	(41,190	)	$	1,071,281
Other revenues		217,580			258,753			74,116			148,282			48,670		11,922			(20,786	)		738,537
Intersegment revenue		—			(12,537	)		(41,190	)		(8,249	)		—		—			61,976			—

Revenues from external customers	$	1,288,861		$	246,216		$	74,116		$	140,033		$	48,670	$	11,922		$	—		$	1,809,818
Interest and investment income, including realized gains and (losses)		24,312			(217	)		173			354			719		1,659			—			27,000

Total revenues	$	1,313,173		$	245,999		$	74,289		$	140,387		$	49,389	$	13,581		$	—		$	1,836,818

Depreciation and amortization		70,610			—			20,224			36,734			2,690		9,725			—			139,983
Interest expense		368			5			10			62			—		7,487			—			7,932
Earnings (loss) before income tax and minority interest		166,856			39,881			28,241			29,232			6,737		(28,092	)		—			242,855
Income tax expense		63,405			15,155			10,732			11,108			2,560		(10,675	)		—			92,285
Minority interest		(69	)		—			398			—			—		—			—			329
Net earnings (loss)	$	103,520		$	24,726		$	17,111		$	18,124		$	4,177	$	(17,417	)		—			150,241
Assets		4,799,966			1,766,836			333,584			667,071			149,457		202,533			—			7,919,447
Goodwill		826,068			778,893			85,827			495,626			20,669		7,666			—			2,214,749

For the three months ended March 31, 2003


	Title Insurance		Financial Institution Software and Services			Lender Outsourcing Services			Information Services			Specialty Insurance		Corporate and Other			Eliminations			Total
Title premiums	$	967,661	$	—		$	31,257		$	—		$	—	$	—		$	(31,257	)	$	967,661
Other revenues		217,276		8,562			66,119			120,225			27,730		13,734			(8,121	)		453,282
Intersegment revenue		—		(364	)		(31,257	)		(7,757	)		—		—			39,378			—

Revenues from external customers	$	1,184,937	$	8,198		$	66,119		$	112,468		$	27,730	$	13,734		$	—		$	1,413,186
Interest and investment income, including realized gains and (losses)		20,476		2			156			674			918		1,464			—			23,690

Total revenues	$	1,205,413	$	8,200		$	66,275		$	113,142		$	28,648	$	15,198		$	—		$	1,436,876

Depreciation and amortization		13,924		1,403			1,348			4,443			86		598			—			21,802
Interest expense		93		16			(75	)		321			—		7,705			—			8,060
Earnings (loss) before income tax and minority interest		193,140		2,745			23,984			19,816			3,451		(12,682	)		—			230,454
Income tax expense		71,030		1,043			9,114			7,530			1,311		(4,819	)		—			85,209
Minority interest		276		—			451			4,545			—		—			—			5,272
Net earnings (loss)	$	121,834	$	1,702		$	14,419		$	7,741		$	2,140	$	(7,863	)		—			139,973
Assets		4,050,075		71,591			291,666			328,883			93,468		1,028,863			—			5,864,546
Goodwill		925,965		41,776			95,544			107,699			40,517		4,873			—			1,216,374

Title Insurance

Financial Institution Software and Services

Lender Outsourcing Solutions

Information Services

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 our other segment classifications including the Company’s leasing operations, as well as the issuance and repayment of corporate debt obligations.

Note G – Dividends, Stock Repurchase Program and Share and Per Share Restatement

On January 27, 2004, the Company’s Board of Directors declared a cash dividend of $0.18 per share, payable on March 23, 2004, to stockholders of record as of March 9, 2004. On April 28, 2004, the Company’s Board of Directors declared a cash dividend of $0.18 per share, payable on June 18, 2004, to stockholders of record as of June 4, 2004.

On April 24, 2002, the Company’s Board of Directors approved a three-year stock repurchase program, whereby the Company plans to devote a portion of its annual cash flow from operations to the systematic repurchase of shares of its common stock. Purchases may be made by the Company from time to time in the open market, in block purchases or in privately negotiated transactions. From January 1, 2004 through March 31, 2004, the Company repurchased 430,500 shares of common stock for $16.5 million, or an average price of $38.33.

On January 27, 2004, the Company declared a 10% stock dividend to stockholders of record on February 12, 2004, payable on February 26, 2004. On April 22, 2003, the Company’s Board of Directors declared a five-for-four (5:4) stock split payable May 23, 2003, to stockholders of record as of May 9, 2003. All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Condensed Consolidated Financial Statements has been retroactively adjusted to reflect the stock split and stock dividend.

Note H – Pension and Postretirement Benefits

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


	For the Three Months Ended March 31,
	2004			2003			2004			2003
	Pension Benefits						Postretirement Benefits
	(In thousands, except per share amounts)
Service cost	$	—		$	—		$	53		$	55
Interest cost		2,127			1,845			342			375
Expected return on assets		(1,777	)		(1,752	)		—			—
Amortization of prior service cost		—			—			(678	)		(678	)
Amortization of actuarial loss		1,768			580			148			105

Total net periodic (income) expense	$	2,118		$	673		$	(135	)	$	(143	)

There have been no material changes to the Company’s projected benefit payments under either plan since December 31, 2003.

Note I – 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 and that the resolution of all pending and threatened litigation will not have a material effect on the Company’s results of operations, financial position or liquidity.

The Company was named in five class action lawsuits alleging irregularities and violations of law in connection with title and escrow practices. All of these lawsuits are currently pending, although three of them have been conditionally settled, subject only to verification of certain factual representations made during settlement negotiations. The verification process is complete. The State of California, plaintiff in the lead case, believes there was a greater frequency of improper charges for reconveyances than was represented. The parties are discussing how best to resolve this issue. The remaining two lawsuits have been stayed pending final disposition of the conditionally settled lawsuits. The Company believes that the two stayed lawsuits will be dismissed upon the final disposition of the three conditionally settled lawsuits.

Three class action lawsuits were filed in June 2003 alleging breach of fiduciary obligations by FNIS directors in connection with the Company’s acquisition of the outstanding minority interest of FNIS. These actions have recently been consolidated and are pending in the Chancery Court of Delaware. FNIS has retained counsel to represent them and the named members of their board of directors, three of whom are also directors of the Company. These actions are not being actively prosecuted and the Company and FNIS believe the lawsuits are without merit.

Several class actions are pending alleging improper rates were charged for title insurance. Three class action cases were filed in New York and have been consolidated for further proceedings. 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. A class was certified in January 2004 and the class members will shortly be notified of the pending action. Similar allegations have been made in class actions filed in Minnesota, Ohio and Pennsylvania. Two class actions, one in California and one in Michigan allege the company violated the Real Estate Settlement Procedures Act (“RESPA”) and state law by giving favorable discounts or rates to builders and developers. The actions seek refunds of the premiums charged and additional damages. The Company intends to vigorously defend these actions.

Several class actions are pending alleging that the Company imposed improper charges in closing real estate transactions. A class action pending in New Jersey alleges the company has charged twice for fees to record satisfactions of mortgages, and charged for satisfactions that were not recorded. Two other class actions pending in Indiana allege the Company overcharged recording fees. A class action in Pennsylvania that alleged an overchage of notary fees was voluntarily dismissed. The court dismissed another in Illinois alleging an improper markup of courier fees and that judgment is now final. The Company intends to vigorously defend the remaining pending actions.

Three pending class actions in California allege the Company failed to pay overtime charges to its escrow officer employees as required by law and regulation. These actions seek payment of wages allegedly due to the purported class. The court has tentatively approved settlement in one of the actions, and the Company expects final approval in June. The Company believes this settlement will bar the continued prosecution of one of the other actions, and it is discussing settlement of the other. The Company intends to vigorously defend these actions.

A California class action alleges the Company takes “rebates and kickbacks” in outsourcing its trustee foreclosure business. The Company believes it is close to settlement of this action.

A class action is pending in California alleging that the Company violated the Telephone Consumer Protection Act by sending unsolicited facsimile advertising. Plaintiffs seek statutory damages. A class was certified in April 2004. The Company intends to vigorously defend this action.

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

Results of OperationsThe 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, 2003.

Overview

Business. We are the largest title insurance and diversified real estate information services and solutions 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 29% of all title insurance policies issued nationally during 2002. Through our subsidiary, Fidelity Information Services, Inc. (“FIS”), which we acquired on April 1, 2003 (See Note B of Notes to Condensed Consolidated Financial Statements), we are one of the largest providers of information-based technology solutions and processing services to financial institutions and the mortgage industry in the United States. FIS processes nearly 50% of all residential mortgages in the United States, with balances exceeding $3.6 trillion, has processing and technology relationships with 45 of the top 50 banks in the United States and has clients in more than 50 countries who rely on its processing and outsourcing products and services.

We have six reporting segments: title insurance; financial institution software and services; lender outsourcing solutions; information services; specialty insurance; and corporate and other. 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 including collection and trust activities, trustee’s sales guarantees, recordings and reconveyances. The financial institution software and services segment consists primarily of the operations of FIS, which was acquired on April 1, 2003 (see “Recent Developments”) and subsequent acquisitions of WebTone, Aurum and Sanchez. This segment focuses on two primary markets, financial institution processing and mortgage loan processing, as well as our Empower and Softpro software products. 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, and which 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. The information services segment offers real estate information related 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. The specialty insurance segment, consisting of our various non-title insurance subsidiaries, issues flood, home warranty and homeowners insurance policies. The corporate and other segment consists of the operations of the parent holding company, certain other unallocated corporate overhead expenses, and the operations of our wholly-owned equipment-leasing subsidiary and other small operations.

Factors Affecting Comparability

Our Condensed Consolidated Statements of Earnings for 2004 include the results of operations of FIS, which we acquired on April 1, 2003, and various other entities acquired on various dates during the first quarter of 2004 and in 2003, as discussed in Note B of Notes to Condensed Consolidated Financial Statements. Our weighted average shares outstanding have increased in the first quarter of 2004 as compared with the first quarter of 2003 primarily as a result of issuing shares of our common stock to finance the acquisitions of ANFI, FIS, FNIS, Hansen and Aurum. As such, basic and diluted net earnings per share have decreased in the first quarter of 2004 as compared with the first quarter of 2003, despite the increase in net earnings for the same period. Net earnings from our financial institution software and services segment, which includes FIS for the period from January 1, 2004, through March 31, 2004, represented 16.5% of our total net earnings for 2004 as compared with 1.2% of our total net earnings in 2003. The increase in net earnings from our financial institution software and services segment in 2004 is primarily due to the acquisitions of FIS and WebTone. We expect the net earnings of our financial institution software and services segment to increase in 2004 over 2003 as a result of including a full year of FIS and WebTone operating results in 2004, organic growth we are experiencing within FIS and the acquisitions of Aurum in the first quarter of 2004, and Sanchez, in the second quarter of 2004.

Results of Operations

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


	Three Months Ended March 31,
	2004		2003
	(Dollars in thousands)
Total revenue	$	1,836,818	$	1,436,876

Total expenses	$	1,593,963	$	1,206,422

Net earnings	$	150,241	$	139,973

Basic net earnings per share	$	0.91	$	1.06

Diluted net earnings per share	$	0.88	$	1.02

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



		Three Months Ended March 31,

		2004		2003


		(Dollars in thousands)




Title insurance premiums		$	464,948	$	472,230




Agency title insurance premiums			606,333		494,431




Escrow and other title related fees			217,580		217,276




Financial institution software and services			246,216		8,198




Lender outsourcing solutions (excludes title premiums of $41.2 million and $30.2 million in the three month period ended March 31, 2003 and 2002 respectively that are included in title premiums above)			74,116		67,119




Information services			140,033		112,468




Specialty insurance			48,670		27,730




Interest and investment income			14,527		17,057




Realized gains and losses, net			12,473		6,633




Other income			11,922		13,734

	Total revenue	$	1,836,818	$	1,436,876

Orders opened by direct title operations			1,055,600		1,256,300




Orders closed by direct title operations			643,100		746,900

Total revenue for the first quarter of 2004 increased $399.9 million to $1,836.8 million, an increase of 27.8% from the first quarter of 2003. The increase in total revenue in 2004 is primarily due to the acquisitions of financial institution processing and outsourcing service companies, real estate information service companies and specialty insurance companies and the integration of these operations into our core businesses in 2004.

Title insurance revenue is closely related to the level of real estate activity and the average price of real estate sales on both a national and local basis. Real estate sales are directly affected by changes in the cost of financing purchases of real estate, predominantly mortgage interest rates. Other macroeconomic factors affecting real estate activity include, but are not limited to, demand for housing, employment levels, family income levels and general economic conditions. Because these factors can change dramatically, revenue levels in the title insurance industry can also change dramatically. Beginning in January 2001 and continuing through June of 2003, the Federal Reserve Board reduced interest rates by 550 basis points, bringing interest rates down to their lowest level in recent history, which significantly increased the volume of refinance activity. Beginning in mid-June 2003 and continuing through December 2003, the ten-year treasury bond yield steadily increased from a low of nearly 3.0% to more than 4.5%, causing mortgage interest rates to rise, which has decreased the volume of refinance activity. Although mortgage interest rates again dropped during February and March of 2004, causing open orders to increase substantially towards the end of the first quarter of 2004, the majority of those orders will not be closed until the second quarter of 2004.

The following table presents the percentages of title insurance premiums generated by our direct and agency operations:



		Three Months Ended March 31,


		2004					2003

		Amount		%			Amount		%


		(Dollars in thousands)




Direct(1)		$	464,948		43.4	%	$	473,230		48.9	%




Agency(1)			606,333		56.6			494,431		51.1

	Total title insurance premiums	$	1,071,281		100.0	%	$	967,661		100.0	%

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

Including title insurance premiums that are part of the lender outsourcing solutions segment, title insurance premiums increased 10.7% to $1,071.3 million in the first quarter of 2004 as compared with the first quarter of 2003. The increase in title insurance premiums in 2004 is due primarily to increases in agency title premiums and follows the direct operations trend of recent quarters, as agents remit policies over time. The increase in title insurance premiums was mitigated by a 1.8% decrease in direct title premiums as a result of a 13.9% decline in closed order levels for direct operations in the three months ended March 31, 2004 as compared with the same period of the prior year. The decline in orders closed by direct title operations corresponds to the reduced levels of refinance activity experienced in the first quarter of 2004 as compared with the first quarter of 2003. The 1.8% decrease in direct title premiums in the first quarter of 2004, as compared with the 13.9% decline in closed orders, reflects an increase in the average fee per file. The increase in fee per file is the result of the decreased mix of refinance-driven activity in the first quarter of 2004 as compared with the prior year quarter, as well as the appreciation of home prices over the past year.

Trends in escrow and other title related fees are primarily related to title insurance activity generated by our direct operations. Escrow and other title related fees during the three-month period ended March 31, 2004 and 2003, fluctuated in a pattern generally consistent with the fluctuation in direct title insurance premiums and order counts. Escrow and other title related fees were $217.6 million for the first quarter of 2004 as compared with $217.3 million for the first quarter of 2003.

Revenues from financial institution software and services relate primarily to revenues from Fidelity Information Services, Inc. (“FIS”), which we acquired on April 1, 2003. As such, the results of operations of FIS are included in the Condensed Consolidated Financial Statements for the period from April 1, 2003, through March 31, 2004. See Note B of Notes to Condensed Consolidated Financial Statements. Also included are revenues from our Empower and SoftPro software products Revenues from financial institution software and services services in first quarter of 2004 were $246.2 million as compared with $8.2 million for the corresponding period of the prior quarter. The 2004 increase in revenues is largely attributable to our acquisition of FIS on April 1, 2003, which generated $237.2 million in revenues for the first quarter of 2004.

Revenues from lender outsourcing solutions primarily relate to our loan facilitation services and revenues from our default management services, which include: foreclosure posting and publishing; loan portfolio services; field services; asset management services; electronic invoice management and land records. Revenues from lender outsourcing solutions were $115.3 million in the first quarter of 2004, an increase of $17.9 million as compared to $97.4 million in the same period of 2003. The growth was the result of continued success in loan facilitation services relating to our automated title agency functions that were introduced in 2003 and continued growth from our default management products.

Revenues from information services generally trend closely with the level and mix of business, as well as the performance, of our title related subsidiaries. Revenues from real estate information services were $140.0 million in the first quarter of 2004 compared with $112.5 million for the prior year quarter. The 2004 increase in revenue is primarily the result of increases in revenue from our real estate tax services, flood services, property data and disclosure services.

Revenues from specialty insurance include revenues from the issuance of flood, home warranty and homeowners insurance policies and were $48.7 million for the three months ending March 31, 2004 as compared with $27.7 million for the corresponding period of the prior year. Specialty insurance revenue increased in 2004 as compared with 2003 as a result of our January 2003 acquisition of Bankers and FCIC, which gave us the ability to issue new and renewal flood insurance policies.

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 first quarter of 2004 was $14.5 million, compared with $17.1 million in the first quarter of 2003, a decrease of $2.5 million, or 14.8%. The decrease in interest and investment income in 2004 is due to a decrease in interest income reflecting lower interest rates in 2004 as compared with 2003.

Net realized gains and losses for the three months ending March 31, 2004 increased $5.8 million to $12.5 million as compared with $6.6 million for the corresponding period of the prior year, primarily as a result of realizing higher gains on the sales of various debt and equity securities in the first quarter of 2004 as compared with the first quarter of 2003.

Other income represents revenue generated by other smaller businesses, including our leasing business, that are not included in a specific business segment. Other income was $11.9 million in the first quarter of 2004 as compared with $13.7 million in the first quarter of 2003.

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


	Three Months Ended March 31,
	2004		2003
	(Dollars in thousands)
Personnel costs	$	636,596	$	447,156
Other operating expenses		416,151		315,609
Agent commissions		474,364		387,213
Provision for claim losses		58,920		48,384
Interest expense		7,932		8,060

Total expenses	$	1,593,963	$	1,206,422

Our operating expenses consist primarily of personnel costs, other operating expenses and agent commissions, which are incurred as orders are received and processed. Title insurance premiums and escrow and other title related fees are generally recognized as income at the time the underlying transaction closes. As a result, 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. These costs generally fluctuate with the level of orders opened and closed and with the mix of revenue. Personnel costs totaled $636.6 million and $447.2 million for the three months ended March 31, 2004 and 2003, respectively. Personnel costs, as a percentage of total revenue, were 34.7% in the first quarter of 2004, and 31.1% for the first quarter of 2003. The increase in personnel costs as a percentage of total revenue in 2004 can be attributed to the incremental personnel costs associated with our acquisition of FIS and our various other acquisitions made during 2003 and 2004, which have higher personnel costs as a percentage of revenue. 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. As such, with the decline in open orders on refinance transactions resulting from the increase in mortgage interest rates during the second half of 2003, we began reducing personnel costs with the reduction of approximately 22% of the title and escrow workforce from July to December 2003. This reduction in title and escrow workforce partially offset the increase in personnel costs in 2004 over 2003. Personnel costs by segment as a percentage of total personnel costs for the first quarter of 2004 were as follows: 59.2% for title; 23.6% for financial institution software and services, 6.3% for lender outsourcing solutions; 6.5% for information services, 1.0% for specialty insurance and 3.4% for corporate and other. We will continue to monitor prevailing market conditions and will adjust personnel costs in accordance with activity.

The following table illustrates the relationship of agent premiums and agent commissions:


	Three Months Ended March 31,
	2004					2003
	Amount		%			Amount		%
	(Dollars in thousands)
Agent premiums	$	606,333		100.0	%	$	494,431		100.0	%
Agent commissions		474,364		78.2			387,213		78.3

Premiums we retain	$	131,969		21.8	%	$	107,218		21.7	%

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. During the second quarter of 2003, we increased our claim loss provision as a percentage of total title premiums to 5.5% to cover the expanded variety of title insurance products we offer and due to increases in loss payments on previous policy years. Our claim loss provision as a percentage of total title premiums was 5.5% in the first quarter of 2004 and 5.0% in the first quarter of 2003.

Interest expense for the three months ended March 31, 2004 and 2003 was relatively consistent at $7.9 million and $8.1 million, respectively.

Income tax expense as a percentage of earnings before income taxes was 38.0% for the first quarter of 2004 and 37% for the first quarter of 2003. Income tax expense as a percentage of earnings before income taxes is attributable to our estimate of ultimate income tax liability, and the characteristics of pretax earnings. The acquisition of FIS increased the overall state income tax rates as the ratio of title insurance earnings as a percentage of total earnings decreased.

Minority interest for the first quarter of 2004 was $.3 million as compared with $5.3 million for the corresponding prior year period. A substantial part of our minority interest expense in the first quarter of 2003 was as a result of the former minority interest in FNIS, which we acquired on September 30, 2003.

Liquidity and Capital Resources

Financing. On November 5, 2003 we entered into a new credit agreement providing for a $700.0 million, 5-year revolving credit facility due November 4, 2008. The credit agreement bears interest at a variable rate based on the debt ratings assigned to us by certain independent agencies, and is unsecured. The current interest rate under the credit agreement is LIBOR plus 0.50%. As of March 31, 2004, $325.0 million was outstanding under our credit agreement and we have $375.0 million in borrowings available to us. During the first quarter of 2004, we borrowed $250.0 million on our credit facility, primarily to finance our acquisition of APTIC and Aurum. 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 March 31, 2004, we are in compliance with all of our debt covenants.

On March 11, 2003, we issued $250.0 million aggregate principal amount of 5.25% notes. We received proceeds of approximately $246.2 million, after expenses, which was used to pay a portion of the $1,069.6 million purchase price for FIS. Interest is payable semiannually and the notes are due in March 2013.

Contractual Obligations. There have been no material changes in our annual financial obligations as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2003.

On March 26, 2003, we issued 5,183,103 shares of our common stock in connection with the acquisition of ANFI, Inc. On April 1, 2003, we issued 11,206,692 shares of our common stock to ALLTEL in connection with our acquisition of FIS. The common stock issued to ALLTEL is restricted for resale until April 1, 2004. On September 30, 2003, we issued 14,292,858 shares of our common stock in connection with the acquisition of FNIS. On February 27, 2004, we issued 220,396 shares of our common stock in connection with the acquisition of an additional 44% interest in Hansen. On March 11, 2004, we issued 3,144,390 shares of our common stock in connection with the acquisition of Aurum. On April 14, 2004, we issued approximately 2,267,290 shares of our

common stock in connection with the acquisition of Sanchez. See Note B of Notes to Condensed Consolidated Financial Statements.

On January 27, 2004, our Board of Directors declared a 10% stock dividend to stockholders of record as of February 12, 2004, payable on February 26, 2004. On April 22, 2003, our Board of Directors declared a five-for-four (5:4) stock split payable May 23, 2003 to stockholders of record as of May 9, 2003. All data with respect to earnings per share, dividends per share and share information, including price per share where applicable, in the Consolidated Financial Statements and Notes thereto have been retroactively adjusted to reflect the stock split and stock dividend.

Off-Balance Sheet Arrangements. We do not have any material off-balance sheet 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, 2003.

Recent Accounting Pronouncements

In January 2003, the FASB issued FASB Interpretation No. 46 (“FIN 46”), “Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51,” which addresses consolidation by business enterprises of variable interest entities (“VIEs”) either: (1) that do not have sufficient equity investment at risk to permit the entity to finance its activities without additional subordinated financial support, or (2) in which the equity investors lack an essential characteristic of a controlling financial interest. In December 2003, the FASB completed deliberations of proposed modifications to FIN 46 (“Revised Interpretations”) resulting in multiple effective dates based on the nature as well as the creation date of the VIE. VIEs created after January 31, 2003, but prior to January 1, 2004, may be accounted for either based on the original interpretation or the Revised Interpretations. However, the Revised Interpretations must be applied no later than the Company’s first quarter of 2004. VIEs created after January 1, 2004 must be accounted for under the Revised Interpretations. Special Purpose Entities (“SPEs”) created prior to February 1, 2003 may be accounted for under the original or Revised Interpretation’s provision no later than the Company’s fourth quarter of 2003. Non-SPEs created prior to February 1, 2003, should be accounted for under the Revised Interpretation’s provisions no later than the Company’s first quarter of 2004. The adoption of FIN 46 did not have a material effect on the Company’s financial statements.

In December 2003, Financial Accounting Standards Board Statement No. 132 (revised), “Employers’ Disclosures about Pensions and Other Postretirement Benefits,” (“SFAS No. 132”) was issued. SFAS No. 132 (revised) prescribes employers’ disclosures about pension plans and other postretirement benefit plans; it does not change the measurement or recognition of those plans. The Statement retains and revises the disclosure requirements contained in the original Statement 132. It also requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other postretirement benefit plans. SFAS No. 132 (revised) is effective for fiscal years and interim periods ending after December 15, 2003.

As of December 31, 2003, the Company adopted the disclosure provisions of Emerging Issues Task Force No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF No. 03-1”), which resulted in additional disclosures regarding the Company’s evaluation of impairment of debt and equity securities for annual periods ended after December 15, 2003. Additional disclosures applicable to cost-method investments are required under EITF No. 03-1 for annual periods after June 15, 2004.


Delaware		86-0498599
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification Number)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o		Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o		Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o		Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o		Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


	Item 2.02. Results of Operations and Financial Condition
	Item 9.01. Financial Statements and Exhibits
SIGNATURES
EXHIBIT INDEX
EXHIBIT 23.1
EXHIBIT 99.1
EXHIBIT 99.2
EXHIBIT 99.3
EXHIBIT 99.4
EXHIBIT 99.5


Exhibit 23.1	—	Consent of KPMG LLP
Exhibit 99.1	—	RESTATED ITEM 1. BUSINESS
Exhibit 99.2	—	RESTATED ITEM 6. SELECTED FINANCIAL DATA
Exhibit 99.3	—	RESTATED ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Exhibit 99.4	—	RESTATED ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Exhibit 99.5	—	RESTATED ITEM 1 AND 2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS ENDED MARCH 31, 2004 AND 2003


	FIDELITY NATIONAL FINANCIAL, INC.
Dated: November 23, 2004	By:	/s/ Alan L. Stinson
		Alan L. Stinson
		Executive Vice President and Chief Financial Officer

Table of Contents

Table of Contents

Table of Contents

Table of Contents


Exhibit
Number		Description
23.1		Consent of KPMG LLP
99.1		RESTATED ITEM 1. BUSINESS
99.2		RESTATED ITEM 6. SELECTED FINANCIAL DATA
99.3		RESTATED ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
99.4		RESTATED ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
99.5		RESTATED ITEM 1 AND 2. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE PERIODS ENDED MARCH 31, 2004 AND 2003


Standard and Poor’s (Financial Strength Rating)
FNF Family		A
Moody’s (Financial Strength Rating)
FNF Family		A2
A.M. Best Co. (Financial Strength Rating)
FNF Family		A
Fitch (Claims Paying Ability Rating)
FNF Family		A
Demotech, Inc. (Financial Stability Rating)
Fidelity Title		A’
Fidelity Title New York		A
Chicago Title		A”
Ticor Title		A’
Security Union Title		A’
Alamo Title		A’



	December 31, 2003

	Amortized		% of					% of
Maturity	Cost		Total			Fair Value		Total


	(Dollars in thousands)
One year or less	$	138,013		8.3	%	$	139,354		8.2	%
After one year through five years		906,959		54.4			923,930		54.5
After five years through ten years		315,922		19.0			325,031		19.2
After ten years		242,133		14.5			243,152		14.3
Mortgage-backed securities		63,400		3.8			64,767		3.8

	$	1,666,427		100.0	%	$	1,696,234		100.0	%



			Year Ended December 31,

			2003 (1)(2)		2002		2001 (3)(4)			2000(5)		1999


			(In thousands, except per share and other data)
Operating Data:
Revenue				7,715,215		5,082,640		3,874,107			2,741,994		1,355,854

	Expenses:
		Personnel costs		2,465,026		1,476,430		1,187,177			845,349		407,078
		Other operating expenses		1,707,512		1,021,893		829,433			624,087		334,578
		Agent commissions		1,823,241		1,521,573		1,098,328			884,498		423,675
		Provision for claim losses		255,694		177,391		134,724			97,322		52,713
		Goodwill amortization		—		—		54,155			35,003		6,638
		Interest expense		43,103		34,053		46,569			59,374		15,626

				6,294,576		4,231,340		3,350,386			2,545,633		1,240,308

	Earnings before income taxes, minority interest and cumulative effect of a change in accounting principle			1,420,639		851,300		523,721			196,361		115,546
	Income tax expense			539,843		306,468		209,488			86,624		46,065

	Earnings before minority interest and cumulative effect of a change in accounting principle			880,796		544,832		314,233			109,737		69,481
	Minority interest			18,976		13,115		3,048			1,422		(1,372	)

	Earnings before cumulative effect of a change in accounting principle			861,820		531,717		311,185			108,315		70,853
	Cumulative effect of a change in accounting principle, net of income taxes			—		—		(5,709	)		—		—

		Net earnings	$	861,820	$	531,717	$	305,476		$	108,315	$	70,853

Per Share Data:
	Basic earnings per share before cumulative effect of a change in accounting principle		$	5.81	$	4.05	$	2.41		$	1.11	$	1.43
	Cumulative effect of a change in accounting principle, net of income taxes, basic basis			—		—		(.05	)		—		—

		Basic net earnings per share	$	5.81	$	4.05	$	2.36		$	1.11	$	1.43

	Weighted average shares outstanding, basic basis			148,275		131,135		129,316			97,863		49,599
	Diluted earnings per share before cumulative effect of a change in accounting principle		$	5.63	$	3.91	$	2.34		$	1.07	$	1.36
	Cumulative effect of a change in accounting principle, net of income taxes, diluted basis			—		—		(.05	)		—		—

		Diluted net earnings per share	$	5.63	$	3.91	$	2.29		$	1.07	$	1.36

	Weighted average shares outstanding, diluted basis			153,171		135,871		133,189			101,383		52,135
	Dividends declared per share		$	.54	$	.32	$	.26		$	.24	$	.18



			Year Ended December 31,

			2003(1)(2)			2002			2001(3)(4)			2000(5)			1999


			(In thousands, except per share and other data)
Balance Sheet Data:
	Investments(6)		$	2,689,817		$	2,565,815		$	1,823,512		$	1,685,331		$	506,916
	Cash and cash equivalents(7)			459,655			482,600			542,620			262,955			38,569
	Total assets			7,263,175			5,245,951			4,415,998			3,833,985			1,042,546
	Notes payable			659,186			493,458			565,690			791,430			226,359
	Reserve for claim losses			940,217			887,973			881,053			907,482			239,962
	Minority interests and preferred stock of subsidiary			14,835			131,797			47,166			5,592			4,613
	Stockholders’ equity			3,873,359			2,253,936			1,638,870			1,106,737			432,494
	Book value per share(8)		$	23.50		$	17.13		$	12.65		$	9.57		$	9.56
Other Data:
	Orders opened by direct title operations			4,820,700			3,228,300			2,635,200			1,352,000			743,000
	Orders closed by direct title operations			3,694,000			2,290,300			1,770,600			971,000			551,000
	Provision for claim losses to title insurance premiums			5.4	%		5.0	%		5.0	%		5.0	%		5.6	%
	Title related revenue(9):
		Percentage direct operations		61.0	%		57.1	%		59.0	%		52.8	%		53.6	%
		Percentage agency operations		39.0	%		42.9	%		41.0	%		47.2	%		46.4	%



	Quarter Ended

	March 31,		June 30,		September 30,(3)		December 31,


	(In thousands, except per share data)
2003(1)(2)
Revenue	$	1,436,876	$	2,006,301	$	2,230,411	$	2,041,627
Earnings before income taxes and minority interest		230,454		412,030		460,288		317,867
Net earnings		139,973		248,289		277,342		196,216
Basic earnings per share		1.06		1.67		1.87		1.20
Diluted earnings per share		1.02		1.62		1.81		1.16
Dividends paid per share		.09		.22		.16		.16
2002
Revenue	$	1,066,860	$	1,142,964	$	1,282,847	$	1,589,969
Earnings before income taxes and minority interest		161,543		178,756		230,248		280,753
Net earnings		100,985		112,286		143,511		174,935
Basic earnings per share		.78		.85		1.09		1.33
Diluted earnings per share		.75		.82		1.05		1.29
Dividends paid per share		.07		.07		.07		.09


Item 7.	*Management’s Discussion and Analysis of Financial Condition and Results of Operations*


		2004		2005		2006		2007		2008		Thereafter		Total


		(Dollars in thousands)
Notes payable		$	40,032	$	10,209	$	3,075	$	33,063	$	75,297	$	497,510	$	659,186
Operating lease payments			132,195		105,355		80,125		59,165		36,110		56,554		469,504
Purchase obligations for business acquisitions			629,000		—		—		—		—		—		629,000

	Total	$	801,227	$	115,564	$	83,200	$	92,228	$	111,407	$	554,064	$	1,757,690


Item 8.	*Financial Statements and Supplementary Data*


	Page
	Number

Independent Auditors’ Report		2
Consolidated Balance Sheets as of December 31, 2003 and 2002		3
Consolidated Statements of Earnings for the years ended December 31, 2003, 2002 and 2001		4
Consolidated Statements of Comprehensive Earnings for the years ended December 31, 2003, 2002 and 2001		5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2003, 2002 and 2001		6
Consolidated Statements of Cash Flows for the years ended December 31, 2003, 2002 and 2001		7
Notes to Consolidated Financial Statements		8


Item 1.	*Business*


	*Aurum Technology, Inc.*


	*Sanchez Computer Associates, Inc.*


	*LandCanada*



		December 31, 2003

						Gross		Gross
		Carrying		Amortized		Unrealized		Unrealized
		Value		Cost		Gains		Losses			Fair Value


		(Dollars in thousands)
Fixed maturity investments (available for sale):
	U.S. government and agencies	$	522,376	$	515,149	$	7,339	$	(112	)	$	522,376
	States and political subdivisions		561,337		541,080		20,448		(191	)		561,337
	Corporate debt securities		544,218		543,276		2,178		(1,236	)		544,218
	Foreign government bonds		3,536		3,522		14		—			3,536
	Mortgage-backed securities		64,767		63,400		1,367		—			64,767

		$	1,696,234	$	1,666,427	$	31,346	$	(1,539	)	$	1,696,234



		December 31, 2002

						Gross		Gross
		Carrying		Amortized		Unrealized		Unrealized
		Value		Cost		Gains		Losses			Fair Value


		(Dollars in thousands)
Fixed maturity investments (available for sale):
	U.S. government and agencies	$	643,767	$	625,710	$	18,059	$	(2	)	$	643,767
	States and political subdivisions		609,279		584,436		24,929		(86	)		609,279
	Corporate debt securities		215,702		208,919		8,759		(1,976	)		215,702
	Foreign government bonds		2,665		2,629		36		—			2,665
	Mortgage-backed securities		92,770		90,263		2,507		—			92,770

		$	1,564,183	$	1,511,957	$	54,290	$	(2,064	)	$	1,564,183



		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		$	94,503	$	(112	)	$	—	$	—		$	94,503	$	(112	)
States and political subdivisions			42,539		(191	)		—		—			42,539		(191	)
Mortgage-backed securities			2,782		—			—		—			2,782		—
Corporate debt securities			135,561		(1,225	)		2,712		(11	)		138,273		(1,236	)
Equity securities			33,196		(348	)		—		—			33,196		(348	)

	Total temporary impaired securities	$	308,581	$	(1,876	)	$	2,712	$	(11	)	$	311,293	$	(1,887	)


2004	$	40,032
2005		10,209
2006		3,075
2007		33,063
2008		75,297
Thereafter		497,510

	$	659,186



	Year Ended
	December 31,

	2003			2002			2001

Federal statutory rate		35.0	%		35.0	%		35.0	%
Federal benefit of state taxes		(1.2	)		(0.9	)		(1.1	)
Tax exempt interest income		(0.5	)		(0.8	)		(1.6	)
State income taxes		3.4			2.6			3.1
Goodwill amortization		—			—			3.7
Non-deductible expenses		0.9			0.2			0.7
Foreign taxes, net of credit		0.2			—			—
Other		0.2			(0.1	)		0.3

		38.0	%		36.0	%		40.1	%


					Weighted Average
		Shares			Exercise Price		Exercisable

Balance, December 31, 2000			13,006,802		$	7.90		9,583,548
	Granted		4,022,783			14.17
	Exercised		(1,653,481	)		6.15
	Cancelled		(233,908	)		11.77

Balance, December 31, 2001			15,142,196		$	9.72		12,198,960
	Granted		3,007,064			16.58
	Exercised		(4,799,845	)		8.68
	Cancelled		(27,919	)		14.92

Balance, December 31, 2002			13,321,496		$	11.67		10,332,022
	Options assumed in ANFI acquisition		988,389			5.53
	Options assumed in FNIS acquisition		2,585,387			17.11
	Granted		624,328			17.18
	Exercised		(3,459,189	)		10.37
	Cancelled		(301,983	)		11.30

Balance, December 31, 2003			13,758,428		$	12.84		11,247,929



December 31, 2003


Options Outstanding							Options Exercisable

			Weighted		Weighted				Weighted
			Average		Average				Average
	Number of		Remaining		Exercise		Number of		Exercise
Range of Exercise Prices	Shares		Contractual Life		Price		Shares		Price

$ .02 – 5.70		1,646,824		3.56	$	4.18		1,646,824	$	4.18
5.75 – 7.12		1,407,176		4.14		6.35		1,338,268		6.35
7.29 – 11.05		2,485,549		6.66		9.08		2,359,350		9.10
11.27 – 13.92		1,973,441		7.42		12.86		1,856,654		12.92
14.04 – 14.04		1,475,948		7.29		14.04		1,014,562		14.04
14.14 – 15.36		1,172,774		6.02		14.92		1,145,615		14.94
15.58 – 18.41		1,375,430		7.77		16.99		980,526		17.10
19.18 – 27.18		2,048,466		8.66		22.65		741,102		22.70
27.38 – 181.82		172,820		8.39		28.95		165,028		28.92

$ .02 – 181.82		13,758,428		6.58	$	12.84		11,247,929	$	11.61


(a)		Rate of compensation increase is not applicable due to the pension being frozen at December 31, 2000.



					Percentage of
		Target Allocation			Plan Assets

Asset Category		2004			2003			2002

Equity securities			50-55	%		58.7	%		46.4	%
Debt securities			15-25			18.8			15.2
Insurance annuities			10-20			13.9			16.5
Other(Cash)			5-25	%		8.6			21.9

	Total					100.0	%		100.0	%


Actual Benefit Payments
2002	$	15,803
2003		7,928
Expected Future Payments
2004	$	9,690
2005		9,623
2006		9,323
2007		9,424
2008		9,557
2009-2013		46,808


	2003			2002

Discount rate		6.25	%		6.75	%
Health care cost trend rate assumed for next year		10	%		11	%
Rate that the cost trend rate gradually declines to		5	%		5	%
Year that the rate reaches the rate it is assumed to remain at		2009			2009


	One-Percentage-Point		One-Percentage-Point
(Dollars in thousands)	Increase		Decrease

Effect on total of service and interest cost	$	110	$	(100	)
Effect on postretirement benefit obligation	$	1,420	$	(1,280	)


Benefit Payments
2002	$	1,801
2003		2,236
Expected Future Payments
2004	$	2,027
2005		2,171
2006		2,317
2007		2,455
2008		2,549
2009-2013		11,691



Column A			Column B		Column C					Column D			Column E


					Additions

			Balance at		Charge to								Balance at
			Beginning		Costs and		Other			Deduction			End of
Description			of Period		Expenses		(Described)			(Described)			Period

Year ended December 31, 2003:
	Reserve for claim losses		$	887,973	$	255,694	$	8,622	(4)	$	212,072	(1)	$	940,217
	Allowance on trade and notes receivables			23,240		19,510		—			3,702	(2)		39,048
	Amortization of intangible assets			9,710		71,182		—			754	(3)		80,138
Year ended December 31, 2002:
	Reserve for claim losses		$	881,053	$	177,391	$	—		$	170,471	(1)	$	887,973
	Allowance on trade and notes receivables			31,852		8,033		—			16,645	(2)		23,240
	Amortization of intangible assets			3,763		6,113		—			166	(3)		9,710
Year ended December 31, 2001:
	Reserve for claim losses		$	907,482	$	134,724	$	—		$	161,153	(1)	$	881,053
	Allowance on trade and notes receivables			22,533		11,221		—			1,902	(2)		31,852
		Amortization of intangible assets		1,496		2,596		—			329	(3)		3,763

(1)		Net of income tax expense of $2.9 million and $1.0 million for the three months ended March 31, 2004 and 2003, respectively.

(2)		Net of income tax benefit of $(3.8) million and $(2.2) million for the three months ended March 31, 2004 and 2003, respectively.