Fidelity National Financial, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Note A — Basis of Financial Statements

     The unaudited financial information included in this report includes the accounts of Fidelity National Financial, Inc. and its subsidiaries (collectively, the “Company” or “FNF”) 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, 2005.

     The Company made a reclassification adjustment to the Consolidated Statements of Income, included within this Quarterly Report on Form10-Q, with regard to the presentation of interest and investment income and other operating expenses. This adjustment was necessary to properly reflect certain credits earned as a reduction of other operating expenses as opposed to an increase in investment income. The adjustment resulted in a reduction of interest and investment income of $2.6 million for the quarter ended September 30, 2005 and $10.3 million and $5.9 million for the nine month periods ended September 30, 2006 and 2005, respectively, and a corresponding reduction of other operating expenses. This adjustment had no effect on net income.

     Certain other reclassifications have been made in the 2006 Condensed Consolidated Financial Statements to conform to current period classification.

Recent Accounting Pronouncements

     In September 2006, the Securities and Exchange Commission (SEC) issued Staff Accounting Bulletin No. 108 (Topic 1N), “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (SAB 108). This SAB addresses how the effects of prior-year uncorrected misstatements should be considered when quantifying misstatements in current-year financial statements. SAB 108 requires registrants to quantify misstatements using both the balance sheet and income statement approaches and to evaluate whether either approach results in quantifying an error that is material in light of relevant quantitative and qualitative factors. When the effect of initial adoption is determined to be material, the SAB allows registrants to record that effect as a cumulative effect adjustment to beginning-of-year retained earnings. SAB 108 is effective for annual financial statements covering the first fiscal year ending after November 15, 2006. Management is currently evaluating the impact of SAB 108 on the Company’s statements of financial position and operations.

     In September 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Post Retirement Plans” (“SFAS 158”). SFAS 158 requires entities to recognize on their balance sheets the funded status of pension and other postretirement benefit plans. Entities are required to recognize actuarial gains and losses, prior service cost, and any remaining transition amounts from the initial application of Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions,” and Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits Other Than Pensions,” when recognizing a plan’s funded status, with the offset to accumulated other comprehensive income. SFAS 158 will not change the amounts recognized in the income statement as net periodic benefit cost. All of the requirements of SFAS 158 are effective as of December 31, 2006 for calendar-year public companies, except for a requirement for fiscal-year-end measurements of plan assets and benefit obligations with which the Company is already in compliance. Management is currently evaluating the impact on the Company’s statements of financial position and operations.

     In June 2006, the FASB issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 requires an evaluation to determine the likelihood that an uncertain tax position will be sustained upon examination, including resolution of any related appeals or litigation processes. If it is determined that it is more likely than not that an uncertain tax position will be sustained upon examination, the next step is to determine the amount to be recognized. FIN 48 prescribes recognition of the largest amount of tax benefit that is greater than 50 percent likely of being recognized upon ultimate settlement of an uncertain tax position. Such amounts are to be recognized as of the first financial reporting period during which the

more-likely-than-not recognition threshold is met. Similarly, an amount that has previously been recognized will be derecognized as of the first financial reporting period during which the more-likely-than-not recognition threshold is not met. FIN 48 is effective for fiscal years beginning after December 15, 2006. Management is currently evaluating the impact on the Company’s statements of financial position and operations.

Recent Developments

     On June 25, 2006, the Company entered into a Securities Exchange and Distribution Agreement (the “SEDA”) with Fidelity National Title Group, Inc. (“FNT”) and a merger agreement with Fidelity National Information Services, Inc. (“FIS”) (both amended and restated as of September 18, 2006), providing for the elimination of FNF’s holding company structure, the sale of certain of FNF’s assets and liabilities to FNT in exchange for shares of FNT stock, and the distribution of FNF’s ownership stake in FNT to FNF shareholders. Pursuant to the SEDA, on October 24, 2006, FNT completed the acquisition of substantially all of the assets and liabilities of FNF (other than FNF’s interests in FIS and in FNF Capital Leasing, Inc., a small leasing subsidiary) in exchange for 45,265,956 shares of FNT’s Class A common stock (the “Asset Contribution”). The assets transferred included FNF’s specialty insurance business, its interest in certain claims management operations, certain timber and real estate holdings and certain smaller operations, together with all cash and certain investment assets held by FNF as of October 24, 2006. In connection with the Asset Contribution, FNF converted all of the FNT Class B common stock held by FNF into FNT Class A common stock and distributed the shares acquired by FNF from FNT, together with the converted shares, to holders of record of FNF common stock as of October 17, 2006 in a tax-free distribution (the “2006 Distribution”). As a result of the 2006 Distribution, FNF no longer owns any common stock of FNT and FNT is now a stand alone public company with all of its approximately 218.7 million shares held by the public. Also, on November 9, 2006, FNF will merge with and into FIS, after which FNT will legally change its name to Fidelity National Financial, Inc. (“New FNF”). Beginning on November 10, 2006, FNT’s common stock will trade on the New York Stock Exchange under the trading symbol FNF. FNF’s current chairman of the board and chief executive officer has assumed the same positions in New FNF and the position of executive chairman of the board of FIS. Other key members of FNF’s senior management will also continue their involvement in both New FNF and FIS in executive capacities.

     Acquisitions among entities under common control such as the Asset Contribution are not considered business combinations and are to be accounted for at historical cost in accordance with EITF 90-5, Exchanges of Ownership Interests between Enterprises under Common Control. Furthermore, the substance of the proposed transactions and the merger is effectively a reverse spin-off of FIS by FNF in accordance with EITF 02-11, Accounting for Reverse Spinoffs. Accordingly, the historical financial statements of FNF will become those of FNT; however, the criteria to account for FIS as discontinued operations as prescribed by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets will not be met. This is primarily due to the continuing involvement of FNT with and significant influence that FNT will have over FIS subsequent to the merger through common board members, common senior management and continuing business relationships. It is expected that FIS will continue to be included in FNF’s consolidated financial statements through the date of the completion of the SEDA.

Note B — Acquisitions

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

Certegy Inc.

     On September 14, 2005, the Company through Fidelity National Information Services, Inc. (“Former FIS”) entered into a definitive merger agreement with Certegy, Inc. (“Certegy”) under which FIS and Certegy combined operations to form a single publicly traded company called Fidelity National Information Services, Inc. (NYSE:FIS). Certegy was a payment processing company headquartered in St. Petersburg, Florida. On January 26, 2006, Certegy’s shareholders approved the merger which was subsequently consummated on February 1, 2006.

     As a result of the merger, FIS became one of the largest providers of processing services to U.S. financial institutions, with market-leading positions in core processing, card issuing services, check risk management, mortgage processing, and lending services.

     Under the terms of the merger agreement, FIS was merged into a wholly owned subsidiary of Certegy in a tax-free merger, and all of FIS’s outstanding stock was converted into Certegy common stock. As a result of the merger:

	•		FIS’s pre-merger shareholders owned approximately 67.4% of the combined company’s outstanding common stock immediately after the merger, while Certegy’s pre-merger shareholders owned approximately 32.6%,
	•		FNF and its subsidiaries now own approximately 51% of the combined company’s outstanding common stock, and
	•		the combined company’s board of directors was reconstituted so that a majority of the board now consists of directors designated by FIS’s stockholders.

     In connection with the merger, Certegy amended its articles of incorporation to increase the number of authorized shares of capital stock from 400 million shares to 800 million shares, with 600 million shares being designated as common stock and 200 million shares being designated as preferred stock. Additionally, Certegy amended its Stock Incentive Plan to increase the total number of shares of common stock available for issuance by an additional 6 million shares, and to increase the limits on the number of options, restricted shares, and other awards that may be granted to any individual in any calendar year. These changes were approved by Certegy’s shareholders on January 26, 2006.

     As part of the merger transaction, Certegy declared a $3.75 per share special cash dividend that was paid to Certegy’s pre-merger shareholders. This dividend, totaling $236.6 million, was paid by Certegy at the consummation of the merger.

     Generally accepted accounting principles in the U.S. require that one of the two companies in the transaction be designated as the acquirer for accounting purposes. FIS was designated as the accounting acquirer because immediately after the merger its shareholders held more than 50% of the common stock of the combined company. As a result, the merger was accounted for as a reverse acquisition under the purchase method of accounting. Under this accounting treatment, FIS was considered the acquiring entity and Certegy was considered the acquired entity for financial reporting purposes.

     The purchase price was based on the number of outstanding shares of common stock of Certegy on February 1, 2006, the date of consummation of the merger, valued at $33.38 per share (which was the average of the trading price of Certegy common stock two days before and two days after the announcement of the merger on September 15, 2005 of $37.13, less the $3.75 per share special dividend declared prior to closing). The purchase price also included the estimated fair value of Certegy’s stock options and restricted stock units outstanding at the transaction date.

     The total purchase price was as follows (in millions):

Value of Certegy’s common stock		$	2,121.0
Value of Certegy’s stock options			54.2
FIS’s estimated transaction costs			5.9
		$	2,181.1

     The transaction was accounted for by FIS under the purchase method of accounting, and as a result, the purchase price was allocated to Certegy’s tangible and identifiable intangible assets acquired and liabilities assumed based on their fair values as of February 1, 2006. Goodwill was recorded based on the amount that the purchase price exceeds the fair value of the net assets acquired. The purchase price allocation was as follows (in millions):

Tangible assets		$	826.8
Computer software			131.6
Intangible assets			653.5
Goodwill			1,951.7
Liabilities assumed			(1,382.5	)
Total purchase price		$	2,181.1

     The allocation of the purchase price to intangible assets, including computer software, is based on studies and valuations that were finalized as of September 30, 2006. As a result, during the quarter ended September 30, 2006, the Company has adjusted its initial purchase accounting to reflect revalued customer contracts, computer software, deferred income taxes and assumed liabilities which resulted in a net adjustment to goodwill of $56.9 million.

     The following table summarizes the liabilities assumed that impact the purchase price allocation (in millions):

Notes payable and capital lease obligations		$	222.8
Deferred income taxes			224.4
Dividends payable			236.6
Dividend bridge loan			239.0
Liabilities associated with pension, SERP, and Postretirement benefit plans			32.6
Estimated severance payments to certain Certegy employees			10.0
Estimated employee relocation and facility closure costs			9.5
Other merger related			28.5
Other operating liabilities			379.1
		$	1,382.5

     In connection with the merger, FIS announced that it will terminate and settle the Certegy U.S Retirement Income Plan (pension plan). The estimated impact of this settlement has been reflected in the purchase price allocation as an increase in the pension liability, less the fair value of the pension plan assets, based on estimates of the total cost to settle the liability through the purchase of annuity contracts or lump sum settlements to the beneficiaries. The final settlement will not occur until after an IRS determination has been obtained. In addition to the pension plan obligation, FIS assumed liabilities for Certegy’s Supplemental Executive Retirement Plan (“SERP”) and Postretirement Benefit Plan. The total liability recorded as part of the purchase price allocation related to all three plans, net of the fair value of plan related assets, was $32.6 million.

     The Company has evaluated the various lease agreements, vendor arrangements, and customer contracts of Certegy. This evaluation has resulted in the recognition of certain liabilities associated with exiting activities of the acquired company.

     Also, the merger triggered the performance criteria relating to FIS’s stock option grant made in March 2005 and these awards vested when the trading value of the Company’s stock remained above $31.27 for 45 days following the Merger. As a result, the Company recorded a charge of $24.5 million in the first nine months of 2006.

     Selected unaudited pro forma combined results of operations for the nine months ended September 30, 2006 and 2005, assuming the Certegy merger had occurred as of January 1, 2005, using actual general and administrative expenses prior to the acquisition are set forth below (in thousands):

		Nine months ended September 30,
		2006				2005(a)
Total revenue		$	7,727,005			$	8,052,394
Net earnings		$	319,940			$	814,200
Pro forma earnings per share — basic		$	1.83			$	4.71
Pro forma earnings per share — diluted		$	1.78			$	4.59

Other Transactions:

     Cascade Timberlands LLC

     The Company began purchasing equity interests in Cascade Timberlands LLC (“Cascade Timberlands”) in March 2006. As of September 30, 2006, the Company had acquired approximately 71% of Cascade Timberlands for $89.2 million. The primary assets of Cascade Timberlands are approximately 293,000 acres of productive timberlands located on the eastern side of the Cascade mountain range extending from Bend, Oregon south on State Highway 20 toward the California border. Cascade Timberlands was created by the secured creditors of Crown Pacific LP upon the conclusion of the bankruptcy case of Crown Pacific LP in December 2004.

     Acquisition of Equity Interest in Sedgwick

     On January 31, 2006, the Company, along with its equity partners, Thomas H. Lee Partners (“THL”) and Evercore Capital Partners, completed an acquisition of an approximately 40% interest in Sedgwick CMS Holdings, Inc. (“Sedgwick”), for approximately $126 million. Sedgwick, headquartered in Memphis, Tennessee, is a leading provider of outsourced insurance claims management services to large corporate and public sector entities.

     Service Link L.P.

     On August 1, 2005, the Company acquired Service Link, L.P. (“Service Link”), a national provider of centralized mortgage and residential real estate title and closing services to major financial institutions and institutional lenders. The initial acquisition price was approximately $110 million in cash. During the third quarter of 2006, the Company paid additional contingent consideration of $57.0 million related to this purchase, based on Service Link’s operations meeting certain performance measures over a 12-month period ending July 2006.

Note C — Recapitalization Transactions

Distribution of Fidelity National Title Group, Inc.

     On October 17, 2005, the Company completed a pro rata distribution of shares, representing 17.5% of the outstanding common stock of FNT, to the Company’s shareholders. This distribution completed a restructuring that resulted in FNT becoming the parent company of the Company’s title insurance businesses. Following the distribution, FNT became a majority-owned subsidiary of FNF and a separate registrant reporting its results on a stand-alone basis. The Company continues to consolidate FNT in its results, and subsequent to the distribution, the Company began recording minority interest liabilities and expense relating to the 17.5% minority interest. This restructuring was a taxable transaction to the Company and the Company’s shareholders. The Company recognized income tax expense of approximately $108 million in the fourth quarter of 2005 relating to this restructuring which was paid in the first quarter of 2006.

Recapitalization of Former FIS in 2005

     The recapitalization of Former FIS was completed on March 9, 2005 through $2.8 billion in borrowings under new senior credit facilities consisting of an $800 million Term Loan A facility, a $2.0 billion Term Loan B facility (collectively, the “Term Loan Facilities”) and an undrawn $400 million revolving credit facility (the “Revolver”). Former FIS fully drew upon the entire $2.8 billion in Term Loan Facilities, while the Revolver remained undrawn at the closing. The current interest rate on both the Term Loan Facilities and the Revolver is LIBOR plus 1.25% to 1.75%. Bank of America, JP Morgan Chase, Wachovia Bank, Deutsche Bank and Bear Stearns led a consortium of lenders which provided the new senior credit facilities.

     The minority equity interest sale was accomplished through Former FIS selling an approximately 25% minority equity interest in the common stock of Former FIS to an investment group led by THL and Texas Pacific Group (“TPG”). Former FIS issued a total of 50 million shares of the common stock of Former FIS to the investment group for a total purchase price of $500 million, before certain expenses paid by Former FIS. The minority equity interest sale resulted in a gain of $318.2 million. This gain was calculated under the provisions of Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Topic 5H (“SAB Topic 5H”) and relates to the issuance of securities of a non-wholly owned subsidiary. The gain represented the difference between the Company’s book

value investment in Former FIS immediately prior to the transaction and its book value investment in Former FIS immediately following the transaction. No deferred income taxes were recorded in connection with this transaction as the tax basis of the investment was greater than the book basis on the date of the sale.

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 basic earnings per share adjusted for the dilutive effect of all common stock equivalents. The following table illustrates the computation of basic and diluted earnings per share:

		Three months ended								Nine months ended
		September 30,								September 30,
		2006				2005				2006				2005
		(In thousands, except								(In thousands, except
		per share amounts)								per share amounts)
Net earnings, basic		$	127,571			$	214,403			$	366,563			$	848,942
Dilution relating to common stock equivalents of subsidiary(1)		$	(1,293	)		$	—			$	(2,851	)		$	—
Net earnings, diluted		$	126,278			$	214,403			$	363,712			$	848,942
Weighted average shares outstanding during the period, basic			176,048				172,515				175,119				172,686
Plus: Common stock equivalent shares assumed from conversion of options			4,735				5,025				5,004				4,568
Weighted average shares outstanding during the period, diluted			180,783				177,540				180,123				177,524
Basic earnings per share		$	0.72			$	1.24			$	2.09			$	4.92
Diluted earnings per share		$	0.70			$	1.21			$	2.02			$	4.79

     Options to purchase 1,409,399 shares and 1,945,380 shares of the Company’s common stock for the three and nine months ended September 30, 2006 and 2,301,852 shares and 2,988,274 shares for the three and nine months ended September 30, 2005, respectively, were not included in the computation of diluted earnings per share because they were antidilutive.

Note E — Investments

     During the second quarter of 2005, the Company began lending fixed maturity and equity securities to financial institutions in short-term security lending transactions. The Company’s security lending policy requires that the cash received as collateral be 102% or more of the fair value of the loaned securities. These short-term security lending arrangements increase investment income with minimal risk. At September 30, 2006 and December 31, 2005, the Company had security loans outstanding with values of $305.6 million and $143.4 million, respectively, included in accounts payable and accrued liabilities and the Company held cash in the same amounts as collateral for the loaned securities.

     Gross unrealized losses on investment securities and the fair value of the related securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at September 30, 2006 were as follows (in thousands):

		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		$	29,751			$	(91	)		$	806,961			$	(14,395	)		$	836,712			$	(14,486	)
States and political subdivisions			176,054				(739	)			635,369				(8,820	)			811,423				(9,559	)
Foreign government and agencies			5,978				(17	)			23,508				(414	)			29,486				(431	)
Corporate securities			150,631				(1,349	)			432,408				(12,024	)			583,039				(13,373	)
Equity securities			138,684				(23,074	)			—				—				138,684				(23,074	)
		—
Total temporarily impaired securities		$	501,098			$	(25,270	)		$	1,898,246			$	(35,654	)		$	2,399,344			$	(60,923	)

     A substantial portion of the Company’s unrealized losses relate to its holdings of debt securities. Unrealized losses relating to U.S. government, state and political subdivision and fixed maturity corporate holdings were primarily caused by interest rate increases. Since the decline in fair value of these investments is attributable to changes in interest rates and not credit quality, and the Company has the intent and ability to hold these securities, the Company does not consider these investments other-than-temporarily impaired. The unrealized losses related to equity securities were caused by market changes that the Company considers to be temporary and thus the Company does not consider these investments other-than-temporarily impaired. During the third quarter of 2006, the Company recorded an impairment charge on an equity investment that it considered to be other-than-temporarily impaired, resulting in a charge of $9.1 million. During the third quarter of 2005, the Company recorded an impairment charge on two equity investments that it considered to be other-than-temporarily impaired, which resulted in a charge of $14.9 million.

Note F — Stock-Based Compensation Plans

     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 599,802 stock options were outstanding under the 1993 Plan as of September 30, 2006. 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 (the “Granite Plan”), of which 24,524 stock options were outstanding as of September 30, 2006. 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 also 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 for issuance under the terms of the 1998 Plan. As of September 30, 2006, there were 6,276,473 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 its merger with 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 September 30, 2006, there were 317,060 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 for issuance under the terms of the 2001 Plan. As of September 30, 2006, there were 544,656 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 $0.35 per year through 2007 and $.22 per year from 2008 through 2013, at which time the exercise price will be $8.33.

     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 recorded compensation expense of $1.3 million and $1.3 million in the three-month periods ended September 30, 2006 and 2005, respectively, and $ 3.8 million and $3.9 million in the nine-month periods ended September 30, 2006 and 2005, respectively, in connection with these shares. 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 and directors. As of September 30, 2006 and December 31, 2005, 387,310 shares of non-vested restricted common stock were outstanding. Shares issued relating to this plan vest on the anniversary of the grant date which was November 18, 2003.

     In connection with the acquisition of ANFI, Inc. (“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 September 30, 2006, there were 411,655 options outstanding under these plans.

     In connection with the acquisition of Fidelity National Information Solutions, Inc. (“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 September 30, 2006, there were 734,788 options outstanding under these plans.

     In connection with the acquisition of Sanchez Computer Associates, Inc. (“Sanchez”), the Company assumed 1,024,588 options outstanding under Sanchez’ 1995 Stock Incentive Plan. The option granted under this plan generally had a term of 8 years. As of September 30, 2006, there were 280,797 options outstanding under this plan.

     In connection with the acquisition of InterCept, Inc. (“InterCept”), the Company assumed 1,708,155 options outstanding under InterCept’s existing option plans: the 2002 InterCept Stock Option Plan, 1996 InterCept Stock Option Plan, 1994 InterCept Option Plan and the Boggs InterCept Stock Option Plan. The options granted under these plans were fully vested prior to the acquisition and the majority of them had a remaining term of 90 days which expired on February 7, 2005. As of September 30, 2006, there were 315,203 options outstanding under these plans.

     In 2004, stockholders approved the Fidelity National Financial 2004 Omnibus Incentive Plan (the “2004 Plan”). The 2004 Plan authorized up to 12,500,000 shares, plus the number of shares subject to prior plan awards that are outstanding as of the effective date of the 2004 Plan and that are deemed not delivered under the prior plans because of certain conditions. As of September 30, 2006, there were 2,897,300 options outstanding under this plan. The options granted under this plan have a life of 8 years and vest over a three year period. The 2004 Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units and performance shares, performance units, other stock-based awards and dividend equivalents.

     Beginning in 2005, FNT and FIS also both issued stock options and restricted stock through their own plans. The awards outstanding under these plans impact the Company’s diluted earnings per share based on the impact they would have on earnings available to the Company if the options and awards were exercised and diluted the Company’s ownership percentage in the respective subsidiaries. For purposes of computing earnings per diluted share, FNF has to analyze the dilutive impact of outstanding options at its public subsidiaries, Fidelity National Title Group, Inc. and Fidelity National Information Services, Inc., and, if necessary, adjust the net earnings available to FNF shareholders before calculating earnings per diluted share. For the three-month and nine-month periods ended September 30, 2006, net earnings were reduced by $1.3 million and $2.9 million, respectively, resulting in a reduction of $0.01 and $0.02, respectively, in earnings per diluted share for each period.

     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:

						Weighted Average
		Options				Exercise Price				Exercisable
Balance, December 31, 2005			15,890,293			$	18.47				11,480,299
Granted			183,500				39.20
Exercised			2,837,625				13.69
Cancelled/Expired			196,910				38.23
Balance, September 30, 2006			13,039,258			$	18.73				9,935,651

     The aggregate intrinsic value of options exercised in the nine-month periods ended September 30, 2006 and 2005 was $73.4 million and $100.5 million, respectively.

     The following table summarizes information related to stock options outstanding and exercisable as of September 30, 2006:

Options Outstanding																										Options Exercisable
														Weighted								Intrinsic								Weighted
														Average				Weighted				Value at								Average				Weighted				Intrinsic
														Remaining				Average				September 30,								Remaining				Average				Value at
Range of Exercise										Number of				Contractual				Exercise				2006 (in				Number of				Contractual				Exercise				September 30,
Prices										Options				Life				Price				thousands)				Options				Life				Price				2006
$	.02			—			5.97				2,039,668				2.47			$	4.78			$	75,203				2,039,668				2.47			$	4.78			$	75,203
	5.98			—			9.35				1,176,301				4.20				7.71				39,921				1,176,301				4.20				7.71				39,921
	9.36			—			9.52				1,209,402				4.54				9.52				38,854				1,209,402				4.54				9.52				38,854
	9.53			—			11.10				1,297,673				3.22				10.45				40,488				1,297,673				3.22				10.45				40,488
	11.11			—			24.83				1,748,098				5.39				15.61				45,526				1,592,846				5.38				15.56				41,556
	24.84			—			25.32				2,182,677				5.95				25.32				35,644				1,246,746				5.95				25.32				20,360
	25.33			—			32.61				215,293				3.49				29.60				2,593				190,100				3.04				29.29				2,350
	32.62			—			33.03				1,748,246				6.00				33.02				15,082				590,980				5.93				33.02				5,101
	33.04			—			42.02				1,170,614				7.25				35.03				7,745				340,649				7.09				35.02				2,259
	42.03			—			171.86				251,286				4.45				50.39				(2,197	)			251,286				4.45				50.39				(2,197	)
$	.02			—			171.86				13,039,258				4.82			$	18.73			$	298,859				9,935,651				4.35			$	15.09			$	263,895

     During the first quarter of 2006, the Company began accounting for stock based compensation under the provisions of SFAS 123R “Share Based Payment” (“SFAS No. 123R”) issued in December 2004 under the modified prospective method. Previous to this adoption, the Company had 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 in 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. In 2003, the Company 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 the fair value 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 adoption of SFAS 123R using the modified prospective method did not have a material impact on the Company’s financial position or results of operations for the first nine months of 2006 as all options that were previously accounted for under prior methods were fully vested as of December 31, 2005. Net income reflects expenses of $11.1 million and $7.8 million for the quarters ended September 30, 2006 and 2005, respectively, and $56.8 million and $24.9 million for the nine-month periods ended September 30, 2006 and 2005, respectively, which is included in personnel costs in the reported financial results. During the third quarter of 2006 the compensation committee approved the immediate vesting of stock options and restricted stock shares previously granted to a director who retired from the board of directors in the third quarter. Stock based compensation expense for the three-month and nine-month periods ended September 30, 2006 include a $0.3 million charge for this acceleration of vesting. The expense for the first nine months of 2006 included $24.5 million in expense relating to performance based options at FIS for which the performance and market based criteria were met during the first quarter.

     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 rate used in the calculation is the rate that corresponds to the weighted average expected life of an option. The risk free interest rates used for options granted during the first nine months of 2006 and 2005 were 4.88% and 4.1%, respectively. The volatility factors for the expected market price of the common stock of 28.5% and 27.0%, respectively, were used for options granted in the first nine months of 2006 and 2005. The expected dividend yield rates used for the first nine months of 2006 and 2005 were 2.6% and 2.4%, respectively. Weighted average expected lives of 4.1 years and 4.0 years, respectively, were used for the first nine months of 2006 and 2005. The weighted average fair values of each option granted during the first nine months of 2006 and 2005 were $9.25 and $8.56, respectively.

     Pro forma information regarding net earnings and earnings per share is required by SFAS 123R, 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 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 for the three-month and nine-month periods ended September 30, 2005:

		Three months ended				Nine months ended
		September 30, 2005				September 30, 2005
		(In thousands, except
		per share amounts)
Net earnings, as reported		$	214,403			$	848,942
Add: Stock-based compensation expense included in reported net earnings, net of related tax effects			4,918				15,483
Deduct: Total stock-based compensation expense determined under fair value based methods for all awards, net of related tax effects			(5,215	)			(16,448	)
Pro forma net earnings		$	214,106			$	847,977
Earnings per share:
Basic — as reported		$	1.24			$	4.92
Basic — pro forma		$	1.24			$	4.91
Diluted — as reported		$	1.21			$	4.79
Diluted — pro forma		$	1.20			$	4.77

     At September 30, 2006, the total unrecognized compensation cost related to nonvested stock option grants was $20.4 million, which is expected to be recognized in pre-tax income over a weighted average period of 1.2 years and the total unrecognized compensation cost related to nonvested restricted stock grants is $7.4 million, which is expected to be recognized in pre-tax income over a weighted average period of 1.3 years. Also included in our consolidated stock-based compensation costs are stock based compensation at FNT and FIS. At September 30, 2006, the total unrecognized compensation costs related to FNT non-vested stock option grants was $6.8 million, which is

expected to be recognized in pre-tax income over a weighted average period of 3.1 years and the total unrecognized compensation costs related to FNT non-vested restricted stock grants was $12.8 million, which is expected to be recognized in pre-tax income over a weighted average period of 3.0 years. At September 30, 2006, the total unrecognized compensation costs related to FIS non-vested stock option grants is $44.6 million, which is expected to be recognized in pre-tax income over a weighted average period of 2.2 years. There are no outstanding restricted stock grants at FIS.

Note G — Notes Payable

     Notes payable consist of the following:

		September 30,				December 31,
		2006				2005
FIS Term Loan A Facility, secured, interest payable at LIBOR plus 1.25% (6.58% at September 30, 2006), 0.25% quarterly principal amortization, due March, 2011		$	788,000			$	794,000
FIS Term Loan B Facility, secured, interest payable at LIBOR plus 1.75% (7.08% at September 30, 2006), 0.25% quarterly principal amortization, due March, 2013			1,730,000				1,760,000
FIS Syndicated credit agreement, secured, interest due quarterly at LIBOR plus 1.25% (Eurodollar borrowings) and Prime plus 0.25% (Base Rate borrowings) (6.58% and 8.5% at September 30, 2006), unused portion of $285.8 million at September 30, 2006, maturing March 2011			114,200				—
FNT Syndicated credit agreement, unsecured, at LIBOR plus 0.4%(5.72% at September 30, 2006, unused portion of $325 million at September 30, 2006)			75,000				100,000
Syndicated credit agreement, unsecured, interest due quarterly at LIBOR plus 1.25%, undrawn, unused portion of $250 million at September 30, 2006			—				—
Unsecured notes, net of discount, interest payable semi-annually at 4.75%, due September 2008			195,343				—
Unsecured notes, net of discount, interest payable semi-annually at 7.30%, due August 2011			247,481				249,437
Unsecured notes net of discount, interest payable semi-annually at 5.25%, due March 2013			248,818				248,651
Other promissory notes with various interest rates and maturities			125,284				64,931
		$	3,524,126			$	3,217,019

     Through the merger with Certegy, the Company through FIS has an obligation to service $200 million (aggregate principal amount) of unsecured 4.75% fixed-rate notes due in 2008. The notes were recorded in purchase accounting at a discount of $5.7 million, which is being amortized over the term of the notes. The notes accrue interest at a rate of 4.75% per year, payable semi-annually in arrears on each March 15 and September 15. Through this merger, the Company also assumed approximately $22.2 million in other notes payable and as result of the merger FIS borrowed $180.0 million on its line of credit of which $65.8 million was repaid prior to September 30, 2006.

     Effective October 24, 2006, FNT repaid and terminated its $400 million credit agreement and entered into a credit agreement (the “FNT New Credit Agreement”) with Bank of America, N.A. as Administrative Agent and Swing Line Lender, and the other financial institutions party thereto. The FNT New Credit Agreement provides for an $800 million unsecured revolving credit facility maturing on the fifth anniversary of the closing date. FNT has the option to increase the size of the credit facility by an additional $300 million, subject to certain requirements. Amounts under the revolving credit facility may be borrowed, repaid and reborrowed by the borrower thereunder from time to time until the maturity of the revolving credit facility. Voluntary prepayment of the revolving credit facility under the FNT New Credit Agreement is permitted at any time without fee upon proper notice and subject to a minimum dollar requirement. Revolving loans under the credit facility bear interest at a variable rate based on either (i) the higher of (a) a rate per annum equal to one-half of one percent in excess of the Federal Reserve’s Federal Funds rate, or (b) Bank of America’s “prime rate” or (ii) a rate per annum equal to the British Bankers Association London Interbank Offered Rate (“LIBOR”) rate plus a margin of between .23%-.675%, depending on the Company’s then current senior unsecured long-term debt rating from the rating agencies. In addition, FNT will pay a commitment fee between .07%-.175% on the entire facility, also depending on the FNT’s senior unsecured long-term debt rating.

     The FNT New Credit Agreement contains affirmative, negative and financial covenants customary for financings of this type, including, among other things, limits on the creation of liens, sales of assets, the incurrence of indebtedness, restricted payments, transactions with affiliates, and certain amendments. The FNT New Credit

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

     Principal maturities of notes payable at September 30, 2006, are as follows (dollars in thousands):

2006		$	23,904
2007			55,600
2008			249,504
2009			61,590
2010			106,404
Thereafter			3,027,124
		$	3,524,126

Note H — Segment Information

     During 2005, the Company restructured its business segments to more accurately reflect a change in the Company’s current operating structure. Accordingly 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.

     As of and for the three months ended September 30, 2006 (dollars in thousands):

						Fidelity National
		Fidelity National				Information				Specialty				Corporate
		Title Group, Inc.				Services, Inc.				Insurance				and Other				Eliminations				Total
Title premiums		$	1,183,141			$	21,580			$	—			$	3,428			$	(21,573	)		$	1,186,576
Other revenues			281,152				1,059,071				99,619				1,386				(45,916	)			1,395,312
Intersegment revenue			—				(67,489	)			—				—				67,489				—
Revenues from external customers		$	1,464,293			$	1,013,162			$	99,619			$	4,814				—			$	2,581,888
Interest and investment income, including realized gains and (losses)			42,739				1,653				4,017				4,525				—				52,934
Total revenues		$	1,507,032			$	1,014,815			$	103,636			$	9,339			$	—			$	2,634,822
Depreciation and amortization			29,881				111,135				1,706				(552	)			—				142,170
Interest expense			12,762				49,629				398				3,142				—				65,931
Earnings (loss) before income tax and minority interest			161,250				121,447				19,070				(6,284	)			—				295,483
Income tax expense			57,241				42,902				7,343				2,434				—				109,920
Minority interest			610				(35	)			—				57,417				—				57,992
Net earnings (loss)			103,399				78,580				11,727				(66,135	)			—				127,571
Assets			6,143,478				7,432,119				487,861				455,954				—				14,519,412
Goodwill			1,101,761				3,782,225				44,856				(67,108	)			—				4,861,734

     As of and for the three months ended September 30, 2005 (dollars in thousands):

						Fidelity National
		Fidelity National				Information				Specialty				Corporate
		Title Group, Inc.				Services, Inc.				Insurance				and Other				Eliminations				Total
Title premiums		$	1,405,295			$	23,998			$	—			$	(1,270	)		$	(23,239	)		$	1,404,784
Other revenues			336,371				674,111				95,448				(9,875	)			(17,717	)			1,078,338
Intersegment revenue			—				(40,956	)			—				—				40,956				—
Revenues from external customers		$	1,741,666			$	657,153			$	95,448			$	(11,145	)			—			$	2,483,122
Interest and investment income, including realized gains and (losses)			32,577				5,878				2,387				3,921				—				44,763
Total revenues		$	1,774,243			$	663,031			$	97,835			$	(7,224	)			—			$	2,527,885
Depreciation and amortization			23,818				70,782				963				56				—				95,619
Interest expense			4,669				37,548				145				6,104				—				48,466
Earnings (loss) before income tax and minority interest			272,571				92,054				15,409				(5,516	)			—				374,518
Income tax expense			102,137				32,245				6,008				3,799				—				144,189
Minority interest			700				1,917				—				13,309				—				15,926
Net earnings (loss)			169,734				57,892				9,401				(22,624	)			—				214,403
Assets			6,042,067				2,887,843				201,140				1,778,729				—				10,909,779
Goodwill			1,074,017				1,354,572				22,669				425,524				—				2,876,782

     As of and for the nine months ended September 30, 2006 (dollars in thousands):

						Fidelity National
		Fidelity National				Information				Specialty				Corporate
		Title Group, Inc.				Services, Inc.				Insurance				and Other				Eliminations				Total
Title premiums		$	3,472,576			$	58,683			$	—			$	4,714			$	(58,441	)		$	3,477,532
Other revenues			845,238				2,944,850				304,070				4,608				(112,212	)			3,986,554
Intersegment revenue			—				(170,653	)			—				—				170,653				—
Revenues from external customers			4,317,814				2,832,880				304,070				9,322			$	—			$	7,464,086
Interest and investment income, including realized gains and (losses)			137,771				6,831				11,410				13,992				—				170,004
Total revenues		$	4,455,585			$	2,839,711			$	315,480			$	23,314			$	—			$	7,634,090
Depreciation and amortization			83,312				318,304				4,678				(1,524	)			—				404,770
Interest expense			36,462				141,930				979				4,165				—				183,536
Earnings (loss) before income tax and minority interest			300,903				183,926				41,043				(15,928	)			—				509,944
Income tax expense			165,610				108,109				25,958				2,392				—				302,069
Minority interest			1,889				(41	)			—				141,533				—				143,381
Net earnings (loss)			299,014				183,967				41,043				(157,461	)			—				366,563
Assets			6,143,478				7,432,119				487,861				455,954				—				14,519,412
Goodwill			1,101,761				3,782,225				44,856				(67,108	)			—				4,861,734

     As of and for the nine months ended September 30, 2005 (dollars in thousands):

						Fidelity National
		Fidelity National				Information				Specialty				Corporate
		Title Group, Inc.				Services, Inc.				Insurance				and Other				Eliminations				Total
Title premiums		$	3,726,891			$	61,290			$	—			$	(306	)		$	(61,290	)		$	3,726,585
Other revenues			899,856				1,997,112				248,276				(8,686	)			(74,997	)			3,061,561
Intersegment revenue			—				(136,287	)			—				—				136,287				—
Revenues from external customers		$	4,626,747			$	1,922,115			$	248,276				(8,992	)			—			$	6,788,146
Gain on issuance of subsidiary stock			—								—				—				—				—
Interest and investment income, including realized gains and (losses)			96,654				9,406				5,532				331,401				—				442,993
Total revenues		$	4,723,401			$	1,931,521			$	253,808			$	322,409			$	—			$	7,231,139
Depreciation and amortization			73,207				221,885				2,930				156				—				298,178
Interest expense			5,393				87,357				168				27,083				—				120,001
Earnings (loss) before income tax and minority interest			663,397				250,374				40,418				288,411				—				1,242,600
Income tax expense			248,774				93,139				15,561				(2,897	)			—				354,577
Minority interest			1,992				6,171				—				30,918				—				39,081
Net earnings (loss)			412,631				151,064				24,857				260,390				—				848,942
Assets			6,042,067				2,887,843				201,140				1,778,729				—				10,909,779
Goodwill			1,074,017				1,354,572				22,669				425,524				—				2,876,782