Back to GetFilings.com

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

FORM 10-K

Commission File No. 1-9396

FIDELITY NATIONAL FINANCIAL, INC.

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ  No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes þ  No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K, or any amendment to this Form 10-K.     o

      As of March 18, 2003, 95,921,397 shares of Common Stock ($.0001 par value) were outstanding.

      The aggregate market value of the shares of the Common Stock held by non-affiliates of the registrant as of June 30, 2002 was $2,886,812,378.

      The information in Part III hereof is incorporated herein by reference to the registrant’s Proxy Statement on Schedule 14A for the fiscal year ended December 31, 2002, to be filed within 120 days after the close of the fiscal year that is the subject of this Report.

      The index to exhibits is contained in Part IV herein on Page 78.

Table of Contents

TABLE OF CONTENTS

FORM 10-K

i

Table of Contents

PART I

Item 1. Business

      We are the largest title insurance and diversified real estate related services 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 2001. 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. Since acquiring Chicago Title Corporation in March 2000, we have leveraged our national network of 1,100 direct offices and 8,800 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.

      In addition, we provide a broad array of escrow and other title related services, as well as real estate related products and services, including:

	•	collection and trust activities
	•	trustee’s sales guarantees
	•	recordings
	•	reconveyances
	•	property appraisal services
	•	credit reporting
	•	exchange intermediary services in connection with real estate transactions
	•	real estate tax services
	•	home warranty insurance
	•	foreclosure posting and publishing services
	•	loan portfolio services
	•	flood certification
	•	field services
	•	property data and disclosure services
	•	multiple listing services
	•	mortgage loan fulfillment services
	•	flood insurance
	•	homeowners insurance

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

Market for Title Insurance

      The title insurance market in the United States is large and growing. According to Corporate Development Services, Inc., total revenues for the entire U.S. title insurance industry grew from $4.8 billion in 1995 to $9.7 billion in 2001. 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.

1

Table of Contents

      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, the top five title insurance companies accounted for 88% of net premiums collected in 2001. Over 40 independent title insurance companies accounted for the remaining 12% of net premiums collected in 2001. Over the last few 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 increased financial and operating efficiencies for the industry’s largest participants and should continue to drive profitability and market share in the industry.

Strategy

      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 broaden our market penetration by focusing on our real estate related products and services. 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 and commercial market sectors.
	•	Continue to expand the scope and breadth of the real estate related products and services we offer. We plan to maximize the value of the Fidelity brand through the penetration of our real estate related products and services into our large, diverse customer base. These products and services that Fidelity offers include: exchange intermediary services, home warranty insurance, foreclosure posting and publishing, loan portfolio services, field services, flood insurance, mortgage loan fulfillment services and homeowners insurance. In addition, we own approximately 66.1% of the outstanding common stock of Fidelity National Information Solutions, Inc. (NASDAQ: FNIS) (“FNIS”), a publicly traded real estate services company. FNIS provides: (i) data and valuations services, including flood certification, credit reporting, real estate tax services, property data and disclosure services, and automated valuation and appraisal services; (ii) technology solutions, including multiple listing services; and (iii) services, including litigation support and risk management. Together with FNIS, 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.

Recent Developments

      On March 11, 2003, we issued $250.0 million aggregate principal amount of 5.25% notes. We received proceeds of approximately $246.1 million, after expenses, which will be used to pay a portion of the $1,050.0 million purchase price of ALLTEL Information Services, Inc. (see below). Interest is payable semiannually and the notes are due in March 2013.

2

Table of Contents

      On January 28, 2003, we entered into a stock purchase agreement with ALLTEL Corporation, Inc., a Delaware corporation (“ALLTEL”), pursuant to which we will acquire from ALLTEL its financial services division, ALLTEL Information Services, Inc. (“AIS”), an Arkansas corporation and wholly-owned subsidiary of ALLTEL. As a result of the acquisition, AIS will become our wholly-owned subsidiary. AIS is one of the world’s largest providers of information-based technology solutions and processing services to the mortgage and financial services industries. The transaction is expected to close by the end of the first quarter of 2003. Under the terms of the stock purchase agreement, all of the issued and outstanding shares of AIS common stock will be purchased by us for consideration consisting of $775.0 million in cash and $275.0 million in our common stock. Consummation of the acquisition is subject to customary closing conditions. In connection with the stock purchase agreement, prior to closing we will enter into a stockholder’s agreement, a non-competition agreement and certain transition agreements with ALLTEL. The stockholder’s agreement will: (1) restrict the sale by ALLTEL of our common stock received in the transaction for up to one year, (2) grant 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) grant ALLTEL certain registration rights with respect to our common stock it receives in the transaction. The non-competition agreement will prohibit, 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. In accordance with the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS No. 142”), any goodwill recorded as a result of the acquisition of AIS will not be amortized. See Note A of Notes to Consolidated Financial Statements.

      On February 10, 2003 we acquired Lender’s 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. In accordance with the provisions of SFAS No. 142, goodwill recorded in the LSI transaction will not be amortized. See Note A of Notes to Consolidated Financial Statements.

      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. In accordance with the provisions of SFAS No. 142, goodwill recorded in the Bankers transaction will not be amortized. See Note A of Notes to Consolidated Financial Statements.

      On January 3, 2001, we acquired International Data Management Corporation (“IDM”), a leading provider of real estate information services, for $20.8 million in cash. IDM’s real estate information databases contain over 100 million real property ownership and sales records from the continental United States. The databases are updated daily to reflect new sales, mortgage information and other changes in real property ownership.

      On June 19, 2001 we acquired Risco, Inc. (“Risco”), the third largest multiple listing service vendor in the United States, for approximately $12.0 million in cash.

      On August 1, 2001, we acquired approximately 80% of the outstanding common stock of Fidelity National Information Solutions, Inc. (NASDAQ: FNIS — “FNIS”), formerly VISTA Information Solutions, Inc. (“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, we contributed our wholly-owned tax, credit, flood, appraisal, property records (IDM) and multiple listing

3

Table of Contents

      On April 30, 2002, FNIS announced a tender offer for all of the outstanding shares of Micro General Corporation (“Micro General”), our majority-owned public subsidiary, whereby each share of Micro General common stock would be exchanged for shares of FNIS common stock. On July 9, 2002, the tender offer and subsequent short form merger was completed and Micro General became a wholly-owned subsidiary of FNIS. Under the terms of the tender offer and merger, each share of Micro General common stock was exchanged for .696 shares of FNIS common stock. FNIS issued approximately 12.9 million shares of common stock to Micro General stockholders, resulting in approximately 38.3 million outstanding shares of FNIS common stock. As of December 31, 2002, we own approximately 66.1% of the outstanding common stock of FNIS. In our Consolidated Financial Statements, this transaction is accounted for in accordance with Statement of Financial Accounting Standards No. 141, “Business Combinations” (“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 us 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 our interest in Micro General (the “controlled equity interest”) is not considered a business combination and, therefore, we 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 our carrying amount per share of FNIS common stock, resulting in an increase of $98.7 million to our consolidated equity and an increase in net assets, the majority of which was goodwill. We have recorded certain preliminary purchase accounting adjustments, which are based on estimates utilizing available information. Such purchase accounting adjustments may be refined as additional information becomes available.

      In July 2002, we purchased 883,178 shares of the common stock of ANFI, Inc. (“ANFI”), a publicly traded California corporation, formerly known as American National Financial, Inc. (NASDAQ: ANFI), of which 98,200 shares were purchased in the open market at an average price of $11.51, and the remaining shares were purchased from certain executive officers of ANFI for a negotiated price of $12.00 per share. As a result of these purchases, we increased our ownership percentage of ANFI to approximately 28.0%. As of December 31, 2002 we account for our investment in ANFI under the equity method of accounting.

      On January 9, 2003, we entered into an Agreement and Plan of Merger with ANFI. The merger agreement was subsequently amended on February 21, 2003. Pursuant to the merger agreement, ANFI will merge with and into our wholly-owned merger subsidiary. In the merger, each share of ANFI common stock (other than ANFI common stock we already own) will be exchanged for 0.454 of a share of our common stock. The consummation of the transaction is subject to the approval of ANFI stockholders. The ANFI stockholder meeting is currently scheduled to be held on March 26, 2003 and we currently anticipate closing the merger on March 27, 2003. We anticipate that we will issue approximately 3.2 million shares of our common stock to the ANFI stockholders in the merger.

      On May 23, 2002, we acquired a 75% interest in Homebuilders Financial Network, Inc. (“HFN”), a provider of outsource mortgage loan fulfillment services to homebuilders, for approximately $21.0 million in cash. In accordance with the provisions of SFAS No. 142, goodwill recorded in the HFN transaction will not be amortized. See Note A of Notes to Consolidated Financial Statements.

4

Table of Contents

Industry Overview

      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, thereby generating greater profit margins than title policies for residential real estate transactions. 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 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 will help in maintaining 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 averages, 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.

5

Table of Contents

      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 policies on behalf of title underwriters. Title underwriters determine the terms and conditions upon which they will insure title to the real property according to their underwriting standards, policies and procedures. In our direct operations, the title underwriter issues the title insurance policy and retains the entire premium paid in connection with the transaction. In our agency operations, the search and examination function is performed by an independent agent. The agent thus retains the majority of the title premium collected, with the balance remitted to the title underwriter for bearing the risk of loss in the event that a claim is made under the title insurance policy. Independent agents may select among several title underwriters based upon the amount of the premium “split” offered by the underwriter, the overall terms and conditions of the agency agreement and the scope of services offered to the agent. Premium splits vary by geographic region.

      Our direct operations provide the following benefits:

	•	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 related services, such as property appraisal services, collection and trust activities, real estate information and technology services, trustee’s sales guarantees, credit reporting, flood certification, real estate tax services, reconveyances, recordings, foreclosure publishing and posting services and exchange intermediary services in connection with real estate transactions.

      Economic Factors Affecting 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 — i.e., 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. We have found that residential real estate activity generally decreases in the following situations:

	•	when mortgage interest rates are high;
	•	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 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 1,100 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 8,800 agents, primarily in those areas in which agents are the more accepted title insurance provider.

6

Table of Contents

      The following table sets forth the approximate dollars and percentages of title insurance premium revenue by state. The year ended December 31, 2000, includes title insurance premium revenue by state, both in dollars and as a percentage of the total, on a pro forma basis, assuming the Chicago Title merger had been consummated on January 1, 2000.

      For the entire title insurance industry, 13 states accounted for approximately 75.0% of title premiums written in the United States in 2001. California represented the single largest state with 20.7%.

      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 or mortgage lender. 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

7

Table of Contents

      The combination of title insurance premiums and these escrow and other title related services allows us to generate a significant source of revenue.

      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.

Real Estate Related Services

      We, including our majority-owned subsidiaries, also provide many specialized products and services required to execute and close real estate transactions that are not offered by our title insurance subsidiaries. Our real estate related services allow us to diversify from our core title business and yield higher profit margins. These services include the following:

	•	Property appraisal services. We offer property appraisal services through a network of state-licensed contract appraisers. We also provide detailed real estate property evaluation services to lending institutions utilizing artificial intelligence software, detailed real estate statistical analysis and physical property inspections.
	•	Credit reporting. We provide credit information reports to mortgage lenders nationwide, as well as a variety of related products to meet the ever-changing needs of the mortgage industry.
	•	Flood certification. Federal legislation passed in 1994 requires most mortgage lenders to obtain a property’s flood zone status at the time a loan is originated. We provide these required flood zone determination reports to mortgage lenders nationwide.
	•	Real estate tax services. We advise lending and mortgage related institutions throughout the United States of the status of property tax payments that are due on properties securing their loans over the entire life of the loan. We protect lenders against losses from failing to monitor delinquent taxes.
	•	Home warranty insurance. We issue one-year, renewable insurance policies that protect homeowners against defects in household systems and appliances.
	•	Foreclosure posting and publishing. We offer posting and publication of foreclosure and auction notices to the real estate foreclosure industry.
	•	Exchange intermediary services. We provide customers with qualified exchanges under Section 1031 of the Internal Revenue Code, which allows customers to defer the payment of capital gain taxes on the sale of their investment property.
	•	Loan portfolio services. We provide a comprehensive line of document preparation and recording services on a national basis, including computerized tracking services, mortgage assignment and release preparation, due diligence and research services, and verifying chain of title.
	•	Field services. We provide property inspection, preservation and maintenance services to mortgage lenders nationwide.
	•	Property data and disclosure services. We provide records data for over 1,250 counties encompassing over 100 million property ownership, mortgage and sales records, representing 80% of the total property owners in the United States.

8

Table of Contents

	•	Multiple listing services. We provide multiple listing service organizations with systems integration solutions, which combine computer hardware, internally developed and licensed software, telecommunications, security, customer support and maintenance to provide immediate and reliable access to and updating of the property listings database that represents the “shelf stock” of the real estate profession.
	•	Mortgage loan fulfillment services. We partner with large and middle-market homebuilders across the country to establish and manage captive mortgage finance businesses that originate, underwrite, process and place first mortgages on newly constructed homes.
	•	Flood insurance. We issue new and renewal flood insurance policies in conjunction with the National Flood Insurance Program.
	•	Homeowners insurance. We offer and underwrite homeowners insurance in various states.

Other Income

      Other income represents externally generated revenue by Micro General, which was merged with FNIS on July 9, 2002 (See “Recent Developments”) and FNF Capital, our wholly-owned equipment-leasing subsidiary.

Marketing

      We market and distribute our products and services to customers in the residential, institutional lender, and commercial market sectors of the real estate industry 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 the focus of the smaller, local client remains 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 places 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. 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.

Competition

      The title insurance industry is highly competitive. According to Corporate Development Services, the top five title insurance companies accounted for 88% of net premiums collected in 2001. 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 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.

9

Table of Contents

      Our real estate related service subsidiaries face significant competition from other similar service providers. In addition, these customers may choose to produce these services internally rather than purchase them from outside vendors.

Regulation

      Title insurance companies, including underwriters, underwritten title companies and independent agents, are subject to extensive regulation under applicable state laws. Each insurance underwriter is usually 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. Effective January 2001, our insurance subsidiaries were required to prepare their statutory financial statements in accordance with the National Association of Insurance Commissioners’ Statements of Statutory Accounting Principles (“Codification”), subject to the adoption by their respective domiciliary states. The adoption of Codification did not have a material effect on the statutory capital and surplus of our insurance subsidiaries.

      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, 2002, the combined statutory unearned premium reserve required and reported for our title insurance subsidiaries was $861.4 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 title 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. During 2003, our title insurance subsidiaries can pay dividends or make other distributions to us of $114.9 million.

      The combined statutory capital and surplus of our title insurance subsidiaries was $614.8 million, $514.7 million and $461.4 million as of December 31, 2002, 2001 and 2000, respectively. The combined statutory earnings of our title insurance subsidiaries were $162.6 million, $162.5 million and $87.2 million for the years ended December 31, 2002, 2001 and 2000, 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, 2002.

      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 and $3.0 million is required for Fidelity National Title Company, Fidelity National Title Company of California and Chicago Title Company, respectively. All of our companies are in compliance with their respective minimum net worth requirements at December 31, 2002.

10

Table of Contents

Ratings

      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 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:

Investment Policies and Investment Portfolio

      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, 2002 and 2001, the carrying amount, which approximates the fair value, of total investments was $2,565.6 million and $1,823.5 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.

11

Table of Contents

      The following table presents certain information regarding the investment ratings of our fixed maturity portfolio at December 31, 2002 and 2001.

      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 $65.8 million and a fair value of $68.4 million were callable at December 31, 2002.

      The following table presents certain information regarding our fixed maturity securities at December 31, 2002:

      Our equity securities at December 31, 2002 and 2001 consisted of investments in various industry groups as follows:

12

Table of Contents

      Our investment results for the years ended December 31, 2002, 2001 and 2000 were as follows:

Employees

      As of December 31, 2002, we had approximately 20,800 full-time equivalent employees. We believe that our relations with employees are generally good.

Risk Factors

      The risk factors listed in this section and other factors noted herein or incorporated by reference could cause our actual results to differ materially from those contained in any forward-looking statements.

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

      In the title insurance industry, revenues are directly affected by 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 — i.e., 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 late 1995 and into 1998, the level of real estate activity increased, including refinancing transactions, new home sales and resales, due in part to decreases in mortgage interest rates. Stable mortgage interest rates and strength in the real estate market, especially in California and throughout the West Coast, contributed to very positive conditions for the title insurance industry throughout 1997 and 1998. However, during 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 the fourth quarter of 2002, interest rates have been reduced by 525 basis points, bringing interest rates down to their lowest level in recent history, which again has significantly increased the volume of refinance activity.

      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.

      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.

13

Table of Contents

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 home warranty 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. During 2002, approximately 91.1% of our year-to-date revenues was derived from subsidiaries engaged in these regulated businesses. Compliance with these laws will limit the amounts our regulated subsidiaries can dividend to us. During 2003, our title insurance subsidiaries can pay dividends or make other distributions to us of $114.9 million.

Our entering into new business lines subjects us to associated risks, such as the diversion of management attention, difficulty integrating operations 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, on January 28, 2003, we entered into a stock purchase agreement with ALLTEL whereby we will acquire from ALLTEL its financial services division, AIS. Also, in the last three years, we have expanded the range and amount of real estate related services we provide, began underwriting home warranty policies, invested in restaurant businesses, expanded our commercial title insurance business and considered acquiring 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, integration of the operations, systems and personnel of the new businesses and lack of substantial experience in operating such businesses.

Difficulties we may encounter managing our growth 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; and
	•	our ability to expand our financial and management controls and reporting systems and procedures.

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 title insurance business is 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;

14

Table of Contents

	•	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 industry from traditional title insurers and from new entrants with alternative products.

      The title insurance industry is highly competitive. According to Corporate Development Services, the top five title insurance companies accounted for 88% of net premiums collected in 2001. 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 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.

Statement Regarding Forward-Looking Information

      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;

15

Table of Contents

	•	changes in, or the failure to comply with, government regulations; and
	•	other risks detailed 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.

Additional Information

      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.

Item 2. Properties

      The majority of the branch offices are leased from third parties. We own the remaining branch offices. See Note J to Notes to Consolidated Financial Statements.

      As of December 31, 2002, we leased office and storage space as follows:

16

Table of Contents

Item 3. Legal Proceedings

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

      As previously disclosed in our prior Securities and Exchange Commission filings, we were named in class action lawsuits alleging irregularities and violations of law in connection with title and escrow practices. Three lawsuits are currently pending. Four previously filed lawsuits have been settled or dismissed. The three pending suits are filed by private parties in State court in Los Angeles. On October 8, 2002, we reached a settlement with the Attorney General and the State of California in the defendant class lawsuit filed against us and our principal competitors on behalf of the entire title and escrow industry in California. Under the terms of the settlement, we will pay $5.1 million to the California Attorney General and a total of up to $26.0 million in the form of (i) cash payments to former escrow customers that meet certain eligibility requirements and file timely claims, and (ii) discounts on future escrow and title insurance services to eligible customers as agreed to in the settlement. In reaching the settlement, we denied any liability or wrongdoing. The settlement is contingent upon certain verification procedures which are currently ongoing.

      Three lawsuits, captioned Schneider v. Fidelity National Financial, Inc., et al. (Case No. 03CC00017), Rossi v. Michael C. Lowther, et al. (Case No. 03CC0021) and Miller v. Michael C. Lowther, et al. (Case No. 03CC00018), have been filed in Orange County Superior Court naming as defendants Fidelity and the members of the Board of Directors of ANFI. The complaints seek class action status and allege breach of fiduciary duty in connection with the approval of the merger by ANFI’s directors. We believe the lawsuits are without merit.

Item 4. Submission of Matters to a Vote of Security Holders

      We did not submit any matters to a vote of security holders in the fourth quarter of 2002.

17

Table of Contents

PART II

      Our common stock is traded on the New York Stock Exchange under the symbol “FNF.” The following table shows, for the periods indicated, the high and low sales prices of our common stock, as reported by the New York Stock Exchange, and the amounts of dividends per share declared on our common stock.

      The foregoing amounts have been adjusted to give retroactive effect to a 10% stock dividend in August 2001 and May 2002.

      On March 18, 2003, the last reported sale price of our common stock on the New York Stock Exchange was $33.39 per share. As of March 18, 2003, we had approximately 1,730 stockholders of record.

      Our current dividend policy anticipates the payment of quarterly dividends in the future. The declaration and payment of dividends will be in the discretion of our Board of Directors and will be dependent upon our future earnings, financial condition and capital requirements. Our ability to declare and pay dividends is also subject to our compliance with the financial covenants contained in our existing credit agreement and further described below.

      Since we are a holding company, our ability to pay dividends will depend largely on the ability of our subsidiaries to pay dividends to us, and the ability of our title insurance subsidiaries to do so is subject to, among other factors, their compliance with applicable insurance regulations. During 2003, our title insurance subsidiaries can pay dividends or make other distributions to us of $114.9 million. In addition to regulatory restrictions, our ability to declare dividends is subject to restrictions under our existing credit agreement. We do not believe the restrictions contained in our credit agreement will, in the foreseeable future, adversely affect our ability to pay cash dividends at the current dividend rate.

18

Table of Contents

Item 6. Selected Financial Data

      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 10-K. Share and per share data has been retroactively adjusted for stock dividends and splits since our inception. Certain reclassifications have been made to the prior year amounts to conform with the 2002 presentation.

19

Table of Contents