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ASU 2018-12 Transition (Tables) | 9 Months Ended
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Sep. 30, 2023
Accounting Changes and Error Corrections [Abstract] |
Summary of Changes in FPB, VOBA, DAC, DSI, URL and MRB | Impacts of adoption of ASU 2018-12 on Financial Statements The following tables summarize the impacts of the adoption of ASU 2018-12 on our accompanying unaudited Condensed Consolidated Balance Sheet and unaudited Condensed Consolidated Statement of Earnings. Condensed Consolidated Balance Sheet
| December 31, 2022
| As Previously Reported |  | Adjustments |  | As adjusted
|  |  | (Unaudited) |  | (Unaudited)
| (In millions)
ASSETS
Reinsurance recoverable, net of allowance for credit losses | $ | 5,588 |  |  | $ | (170) |  |  | $ | 5,418 |
Goodwill | 4,642 |  |  | (7) |  |  | 4,635 |
Prepaid expenses and other assets | 2,231 |  |  | (163) |  |  | 2,068 |
Market risk benefits asset | — |  |  | 117 |  |  | 117 |
Other intangible assets, net | 4,034 |  |  | (223) |  |  | 3,811 |
Total | $ | 16,495 |  |  | $ | (446) |  |  | $ | 16,049 |
LIABILITIES AND EQUITY
Liabilities: |  |  |  |  |
Contractholder funds | $ | 41,233 |  |  | $ | (390) |  |  | $ | 40,843 |
Future policy benefits | 5,923 |  |  | (902) |  |  | 5,021 |
Accounts payable and accrued liabilities | 2,352 |  |  | (26) |  |  | 2,326 |
Market risk benefits liability | — |  |  | 282 |  |  | 282 |
Total | $ | 49,508 |  |  | $ | (1,036) |  |  | $ | 48,472 |
Equity: |  |  |  |  |
Additional paid-in capital | $ | 5,876 |  |  | $ | (6) |  |  | $ | 5,870 |
Retained earnings | 4,714 |  |  | 511 |  |  | 5,225 |
Accumulated other comprehensive (loss) earnings | (2,862) |  |  | (8) |  |  | (2,870) |
Non-controlling interests | 360 |  |  | 93 |  |  | 453 |
Total | $ | 8,088 |  |  | $ | 590 |  |  | $ | 8,678 |
Condensed Consolidated Statement of Earnings
| Three months ended September 30, 2022 |  | Nine months ended September 30, 2022
| As Previously Reported |  | Adjustments |  | As adjusted |  | As Previously Reported |  | Adjustments |  | As adjusted
| (Unaudited) |  | (Unaudited)
Revenues: | (In millions) |  | (In millions)
Escrow, title-related and other fees | $ | 1,372 |  |  | $ | (1) |  |  | $ | 1,371 |  |  | $ | 3,444 |  |  | $ | 5 |  |  | $ | 3,449 |
Expenses: |  |  |  |  |  |  |  |  |  |  |
Benefits and other changes in policy reserves | $ | 592 |  |  | $ | (22) |  |  | $ | 570 |  |  | $ | 382 |  |  | $ | 14 |  |  | $ | 396 |
Market risk benefit gains | — |  |  | (68) |  |  | (68) |  |  | — |  |  | (187) |  |  | (187) |
Depreciation and amortization | 131 |  |  | (5) |  |  | 126 |  |  | 474 |  |  | (113) |  |  | 361 |
Income tax expense | 115 |  |  | 21 |  |  | 136 |  |  | 434 |  |  | 60 |  |  | 494 |
Net earnings attributable to Fidelity National Financial, Inc. common shareholders | $ | 289 |  |  | $ | 73 |  |  | $ | 362 |  |  | $ | 1,068 |  |  | $ | 231 |  |  | $ | 1,299 |
Earnings per share |  |  |  |  |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |  |  |  |  |
Net earnings per share attributable to common shareholders, basic | $ | 1.06 |  |  | $ | 0.27 |  |  | $ | 1.33 |  |  | $ | 3.86 |  |  | $ | 0.83 |  |  | $ | 4.69 |
Diluted |  |  |  |  |  |  |  |  |  |  |
Net earnings per share attributable to common shareholders, diluted | $ | 1.05 |  |  | $ | 0.27 |  |  | $ | 1.32 |  |  | $ | 3.83 |  |  | $ | 0.83 |  |  | $ | 4.66 |
The following table summarizes the balance of and changes in the FPB on January 1, 2021 due to adoption of ASU 2018-12:
| Immediate annuities |  | Traditional Life |  | Total (3)
| (In millions)
Balance, December 31, 2020 | $ | 1,861 |  |  | $ | 2,144 |  |  | $ | 4,005 |
Cumulative effect of retrospective adoption (1) | 201 |  |  | (279) |  |  | (78) |
Effect of remeasurement of liability at current discount rate (2) | 113 |  |  | 88 |  |  | 201 |
Balance, January 1, 2021 | $ | 2,175 |  |  | $ | 1,953 |  |  | $ | 4,128 |
Less: Reinsurance Recoverable | 322 |  |  | 793 |  |  | 1,115 |
Balance, January 1, 2021, net of reinsurance | $ | 1,853 |  |  | $ | 1,160 |  |  | $ | 3,013 |
(1) Adjustments for the cumulative effect of adoption of the new measurement guidance under the full retrospective method for contract issue years from the FNF Acquisition Date through December 31, 2020, net of the effects of any change in the DPL.
(2) The remeasurement of the liability at the current discount rate is reflected as an adjustment to opening AOCI upon the adoption of ASU 2018-12.
(3) PRT was not written as of the transition date, January 1, 2021, and as a result is not presented in the transition adjustment roll forward.
The following table summarizes the balance of and changes in VOBA on January 1, 2021 due to adoption of ASU 2018-12:
| FIA |  | Fixed rate annuities |  | Immediate annuities |  | Universal Life |  | Traditional Life |  | Total
| (In millions)
Balance, December 31, 2020 | $ | 1,208 |  |  | $ | 15 |  |  | $ | 86 |  |  | $ | 139 |  |  | $ | 18 |  |  | $ | 1,466 |
Adjustment for reversal of AOCI adjustments (1) | 208 |  |  | 24 |  |  | — |  |  | 29 |  |  | (29) |  |  | 232 |
Cumulative effect of retrospective adoption (2) | (14) |  |  | 7 |  |  | (5) |  |  | (9) |  |  | (1) |  |  | (22) |
Transition opening balance adjustment | 69 |  |  | 2 |  |  | 145 |  |  | 5 |  |  | 43 |  |  | 264 |
Balance, January 1, 2021 | $ | 1,471 |  |  | $ | 48 |  |  | $ | 226 |  |  | $ | 164 |  |  | $ | 31 |  |  | $ | 1,940 |
(1) Prior period "shadow" adjustments in AOCI have been reversed upon the adoption of ASU 2018-12 from opening AOCI.
(2) Adjustments for the cumulative effect of adoption of the simplified amortization methodology under the full retrospective method for contract issue years from the FNF acquisition date through December 31, 2020.
(3) Adjustments for the change in VOBA due to the full retrospective adjustment of carrying amounts of acquired contracts as of the FNF Acquisition Date due to the adoption of ASU 2018-12.
The following table summarizes the balance of and changes in DAC on January 1, 2021 due to adoption of ASU 2018-12:
| FIA |  | Fixed rate annuities |  | Universal Life |  | Total
| (In millions)
Balance, December 31, 2020 | $ | 167 |  |  | $ | 14 |  |  | $ | 41 |  |  | $ | 222 |
Adjustment for reversal of AOCI adjustments (1) | 15 |  |  | 2 |  |  | 8 |  |  | 25 |
Cumulative effect of retrospective adoption (2) | (1) |  |  | — |  |  | (1) |  |  | (2) |
Balance, January 1, 2021 | $ | 181 |  |  | $ | 16 |  |  | $ | 48 |  |  | $ | 245 |
(1) Prior period "shadow" adjustments in AOCI have been reversed upon the adoption of ASU 2018-12 from opening AOCI.
(2) Adjustments for the cumulative effect of adoption of the simplified amortization methodology under the full retrospective method for contract issue years from the FNF acquisition date through December 31, 2020.
The following table summarizes the balance of and changes in DSI on January 1, 2021 due to adoption of ASU 2018-12:
| FIA |  |  |  |  |  | Total
| (In millions)
Balance, December 31, 2020 | $ | 36 |  |  |  |  |  |  | $ | 36 |
Adjustment for reversal of AOCI adjustments (1) | 5 |  |  |  |  |  |  | 5 |
Cumulative effect of retrospective adoption (2) | 4 |  |  |  |  |  |  | 4 |
Balance, January 1, 2021 | $ | 45 |  |  |  |  |  |  | $ | 45 |
(1) Prior period "shadow" adjustments in AOCI have been reversed upon the adoption of ASU 2018-12 from opening AOCI.
(2) Adjustments for the cumulative effect of adoption of the simplified amortization methodology under the full retrospective method for contract issue years from the FNF acquisition date through December 31, 2020.
The following table summarizes the balance of and changes in URL on January 1, 2021 due to adoption of ASU 2018-12:
|  |  |  |  | Universal Life |  | Total
|  |  |  |  | (In millions)
Balance, December 31, 2020 |  |  |  |  | $ | 2 |  |  | $ | 2 |
Adjustment for reversal of AOCI adjustments (1) |  |  |  |  | 25 |  |  | 25 |
Cumulative effect of retrospective adoption (2) |  |  |  |  | 2 |  |  | 2 |
Balance, January 1, 2021 |  |  |  |  | $ | 29 |  |  | $ | 29 |
(1) Prior period "shadow" adjustments in AOCI have been reversed upon the adoption of ASU 2018-12 from opening AOCI.
(2) Adjustments for the cumulative effect of adoption of the simplified amortization methodology under the full retrospective method for contract issue years from the FNF acquisition date through December 31, 2020.
The following table summarizes the balance of and changes in the asset and liability position of MRBs on January 1, 2021 due to adoption of ASU 2018-12:
| FIA |  | Fixed rate annuities |  | Total
| (In millions)
Balance, December 31, 2020 - Carrying amount of MRBs under prior guidance (1) | $ | 531 |  |  | $ | — |  |  | $ | 531 |
Adjustment for reversal of AOCI adjustments (2) | (116) |  |  | — |  |  | (116) |
Cumulative effect of the changes in the instrument-specific credit risk between the original contract issuance date and the transition date (3) | 159 |  |  | — |  |  | 159 |
Remaining cumulative difference (exclusive of the instrument specific credit risk change) between December 31, 2020 carrying amount and fair value measurement for the MRBs (4) | (96) |  |  | 1 |  |  | (95) |
Balance, January 1, 2021 - Market risk benefits at fair value | $ | 478 |  |  | $ | 1 |  |  | $ | 479 |
Less: Reinsurance Recoverable | — |  |  | — |  |  | — |
Balance, January 1, 2021, net of reinsurance | $ | 478 |  |  | $ | 1 |  |  | $ | 479 |
(1) The pre-adoption balance as of December 31, 2020 balance for MRBs represents the contract features that meet the definition of an MRB under ASU 2018-12 and the related carrying amount of those features prior to the ASU. Those contract features were previously accounted for at fair value as a derivative or embedded derivative under ASC 815 or as an additional liability for annuitization benefits or death or other insurance benefits under ASC 944.
(2) Prior period "shadow" adjustments in AOCI have been reversed upon the adoption of ASU 2018-12 from opening AOCI.
(3) The cumulative effective of the change in instrument-specific credit risk between the FNF Acquisition Date or, if later, the original contract issuance date and the transition date to ASU 2018-12, which is recorded as an adjustment to opening AOCI.
(4) The cumulative difference (exclusive of instrument-specific credit risk change) between the pre-adoption carrying amount and the fair value measurement for MRBs is recorded as an adjustment to opening retained earnings.
Effect of Transition Adjustments On Equity | The following table presents the effect of transition adjustments on Equity on January 1, 2021 due to the adoption of ASU 2018-12:
| January 1, 2021
| Retained Earnings |  | AOCI
| (In millions)
Contractholder funds | $ | 101 |  |  | $ | 115 |
MRB | 30 |  |  | (160) |
FPB | (14) |  |  | (159) |
VOBA | (21) |  |  | 233 |
DAC | (1) |  |  | 5 |
Increase to Equity, gross of tax | $ | 95 |  |  | $ | 34 |
Tax impact | 20 |  | 9
Increase to Equity, net of tax | $ | 75 |  |  | $ | 25 |

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