Investment in Unconsolidated Affiliate

12 Months Ended

Dec. 31, 2019

Equity Method Investments and Joint Ventures [Abstract]

Investments in Unconsolidated Affiliates

Lending Joint Ventures

On March 29, 2018, the Company completed the sale of a 55% controlling interest of each of Fiserv Automotive Solutions, LLC and Fiserv LS LLC, which were subsidiaries of the Company that owned its Lending Solutions business (collectively, the “Lending Joint Ventures”). The Lending Joint Ventures, which were reported within the Financial segment, included all of the Company’s automotive loan origination and servicing products, as well as its LoanServ^™ mortgage and consumer loan servicing platform. The Company received gross sale proceeds of $419 million from the transactions. In 2018, the Company recognized a pre-tax gain on the sale of $227 million, with the related tax expense of $77 million recorded through the income tax provision, in the consolidated statement of income. The pre-tax gain included $124 million related to the remeasurement of the Company’s 45% retained interests based upon the estimated enterprise value of the Lending Joint Ventures. In 2019, the Company recognized a pre-tax gain on the sale of $10 million, with the related tax expense of $2 million recorded through the income tax provision, as contingent special distribution provisions within the transaction agreement were resolved and thereby realized.

Prior to the sale transactions described above, the Lending Joint Ventures entered into variable-rate term loan facilities for an aggregate amount of $350 million in senior unsecured debt and variable-rate revolving credit facilities for an aggregate amount of $35 million with a syndicate of banks, which transferred to the Lending Joint Ventures as part of the sale. The Company has guaranteed this debt of the Lending Joint Ventures and does not anticipate that the Lending Joint Ventures will fail to fulfill their debt obligations. These debt facilities mature in March 2023, and there were no outstanding borrowings on the revolving credit facilities at December 31, 2019 and 2018. The Company recorded an initial $34 million liability as a reduction to the gain on sale transactions for the estimated fair value of its obligations to stand ready to perform over the term of the guarantees, which is reported primarily within other long-term liabilities in the consolidated balance sheets. Such guarantees will be amortized in future periods over the contractual term. The Company recognized $7 million and $5 million in 2019 and 2018, respectively, within other (expense) income in its consolidated statements of income related to its release from risk under the guarantees. The Company has not made any payments under the guarantees, nor has it been called upon to do so. In conjunction with the sale transactions described above, the Company also entered into certain transition services agreements to provide, at fair value, various administration, business process outsourcing, technical and data center related services for defined periods to the Lending Joint Ventures. Amounts transacted through these agreements approximated $36 million and $30 million in 2019 and 2018, respectively, and were primarily recognized as processing and services revenue in the consolidated statements of income.

In August 2019, the Sagent Auto, LLC joint venture formerly known as Fiserv Automotive Solutions, LLC, completed a merger with a third-party, resulting in a dilution of the Company’s ownership interest in the new combined entity, defi SOLUTIONS Group, LLC (“defi SOLUTIONS”). The Company recognized a pre-tax gain of $14 million within income from investments in

unconsolidated affiliates in the consolidated statement of income, with related tax expense of $3 million, in 2019, reflecting the Company’s 31% ownership interest in defi SOLUTIONS. In connection with the merger, Sagent Auto, LLC borrowed in aggregate an additional $50 million on its variable-rate term loan facility and increased the notional amount of its variable-rate revolving credit facility by $10 million. The Company has guaranteed this incremental debt and does not anticipate that the joint venture will fail to fulfill its debt obligations. The Company recorded a $4 million liability for the estimated fair value of its obligations to stand ready to perform over the term of the guarantees. Such guarantees will be amortized in future periods over the contractual term, based upon amounts to be received by the Company for the respective guarantees. The Company has not made any payments under the guarantees, nor has it been called upon to do so.

The Company’s remaining ownership interests in the Lending Joint Ventures are accounted for as equity method investments, with the Company’s share of net income (loss) reported as income from investments in unconsolidated affiliates and the related tax (benefit) expense reported within the income tax provision in the consolidated statements of income. The revenues, expenses and cash flows of the Lending Joint Ventures after the sale transactions described above are not included in the Company’s consolidated financial statements.

Acquisition of First Data

On July 29, 2019, the Company acquired unconsolidated investments in connection with the acquisition of First Data (see Note 4). At December 31, 2019, there were 18 affiliates accounted for as equity method investments, comprised of merchant alliances and strategic investments in companies in related markets. The Company’s share of net income is reported as income from investments in unconsolidated affiliates and the related tax expense reported within the income tax provision in the consolidated statements of income. The most significant of these affiliates are related to the Company’s merchant bank alliance program. A merchant alliance, as it pertains to investments accounted for under the equity method, is an agreement between the Company and a financial institution that combines the processing capabilities and management expertise of the Company with the visibility and distribution channel of the bank. The alliance acquires credit and debit card transactions from merchants. The Company provides processing and other services to the alliance and charges fees to the alliance primarily based on contractual pricing (see Note 20).

StoneRiver Group, L.P.

The Company owns a 49% interest in StoneRiver Group, L.P. (“StoneRiver”), which is accounted for as an equity method investment. The Company reports its share of StoneRiver’s net income as income from investment in unconsolidated affiliates, with the related tax expense reported within the income tax provision, in the consolidated statements of income. In 2019, 2018 and 2017, the Company received cash distributions from StoneRiver of $0 million, $2 million and $45 million, respectively. The distributions, in their entirety, represented returns on the Company’s investment and are reported in cash flows from operating activities.

During 2017, StoneRiver recognized a gain on the sale of a business. The Company’s pre-tax share of the gain was $26 million, with related tax expense of $9 million. During 2017, the Company received cash distributions of $45 million from StoneRiver, which were funded from sale transactions and recorded as reductions in the Company’s investment in StoneRiver. These distributions exceeded the Company’s investment carrying amount, resulting in the reduction of its investment balance to zero, with the excess cash distribution of $6 million recorded as income, and related tax expense of $2 million, in 2017.

Summary of Financial Information

A summary of financial information for the Company’s unconsolidated affiliates accounted for under the equity method of accounting is presented below:



(In millions)
December 31,	2019
Total current assets	$	4,288
Total long-term assets	1
Total assets	$	4,289

Total current liabilities	$	4,243
Total long-term liabilities	—
Total liabilities	$	4,243

The primary components of assets and liabilities are settlement asset and obligation related accounts similar to those described in Note 6 of these consolidated financial statements.



(In millions)
Year ended December 31,	2019
Total revenue	$	467
Total expenses	249
Operating income	$	218
Net income	$	215
Income from investments in unconsolidated affiliates ⁽¹⁾	$	27


⁽¹⁾	Amount reflects the Company’s share of investee’s net income or loss and the amortization basis difference between the estimated fair value and the underlying book value of equity method intangibles.

In 2019, 2018 and 2017, the Company received cash distributions from unconsolidated affiliates of $136 million, $2 million and $45 million, respectively, which were recorded as reductions in the Company’s investments in unconsolidated affiliates.

In addition, the Company holds equity securities without a readily determinable fair value, which are only adjusted for observable price changes in orderly transactions for the same or similar equity securities or any impairment, totaling $167 million at December 31, 2019, and are included within other long-term assets in the Company’s consolidated balance sheet. The equity securities were acquired primarily through the First Data acquisition and were recorded at fair market value at the acquisition date and no adjustments were made during the year ended December 31, 2019.