On October 31, 2011, we completed the sale of our flood insurance business to WRM America Holdings LLC for $135.0 million in cash and dividends, and a $75.0 million seller note. The seller note has an eight percent annual interest coupon, with interest payable quarterly and principal payable in full eighteen months subsequent to closing. Accordingly, the results of the flood insurance business for all periods presented are reflected as discontinued operations. The flood insurance business sale resulted in a pre-tax gain of approximately $154.1 million. See note A of the Notes to Consolidated Financial Statements for further details on this transaction.
Accounting for Income Taxes. As part of the process of preparing the consolidated financial statements, we are required to determine income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax expense together with assessing temporary differences resulting from differing recognition of items for income tax and accounting purposes. These differences result in deferred income tax assets and liabilities, which are included within the Consolidated Balance Sheets. We must then assess the likelihood that deferred income tax assets will be recovered from future taxable income and, to the extent we believe that recovery is not likely, establish a valuation allowance. To the extent we establish a valuation allowance or increase this allowance in a period, we must reflect this increase as an expense within income tax expense in the Consolidated Statement of Earnings. Determination of income tax expense requires estimates and can involve complex issues that may require an extended period to resolve. Further, the estimated level of annual pre-tax income can cause the overall effective income tax rate to vary from period to period. We believe that our tax positions comply with applicable tax law and that we adequately provide for any known tax contingencies. We believe the estimates and assumptions used to support our evaluation of tax benefit realization are reasonable. However, final determination of prior-year tax liabilities, either by settlement with tax authorities or expiration of statutes of limitations, could be materially different than estimates reflected in assets and liabilities and historical income tax provisions. The outcome of these final determinations could have a material effect on our income tax provision, net income or cash flows in the period that determination is made.
Interest and investment income levels are primarily a function of securities markets, interest rates and the amount of cash available for investment. Interest and investment income was $142.7 million, $135.0 million, and $143.9 million for the years ended December 31, 2011, 2010, and 2009, respectively. The increase in 2011 as compared to 2010 is due to an overall increase in the fixed maturity security portfolio book value during 2011 as well as dividend income received on our preferred stock which was not held during 2010. The decrease in 2010 compared to 2009 is due to overall declines in bond interest income on our fixed maturity securities in 2010. Average invested assets were $3,792.2 million, $3,928.7 million, and $3,972.1 million for the years ended December 31, 2011, 2010, and 2009, respectively. Effective return on average invested assets, excluding realized gains and losses, was 4.3%, 4.0%, and 4.1% for the years ended December 31, 2011, 2010, and 2009, respectively.
Effective March 5, 2010, we entered into an agreement to amend and extend our credit agreement (the “Credit Agreement”)
We have audited the accompanying Consolidated Balance Sheets of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2011 and 2010, and the related Consolidated Statements of Earnings, Comprehensive Earnings, Equity and Cash Flows for each of the years in the three-year period ended December 31, 2011. These Consolidated Financial Statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these Consolidated Financial Statements based on our audits.
In February 2009, we transferred our ownership interest in FNRES Holdings, Inc. (“FNRES”) to Lender Processing Services, Inc. ("LPS"), a related party at the time, in exchange for all of the outstanding shares of Investment Property Exchange Services, Inc. (“IPEX”), a company that facilitates real estate exchanges under Section 1031 of the Internal Revenue Code. The purchase price of IPEX was approximately $43.0 million, which was the fair value of FNF’s 61% holdings in FNRES. The results of operations of FNRES are reflected as discontinued operations in the Consolidated Statements of Earnings for the year ending December 31, 2009. Discontinued operations included revenues from FNRES operations of $3.5 million for the year ending December 31, 2009. Discontinued operations included pre-tax losses related to FNRES operations of $0.5 million for the year ending December 31, 2009.
Title plants are recorded at the cost incurred to construct or obtain and organize historical title information to the point it can be used to perform title searches. Costs incurred to maintain, update and operate title plants are expensed as incurred. Title plants are not amortized as they are considered to have an indefinite life if maintained. Sales of title plants are reported at the amount received net of the adjusted costs of the title plant sold. Sales of title plant copies are reported at the amount received. No cost is allocated to the sale of copies of title plants unless the carrying value of the title plant is diminished or impaired. Title plants are reviewed for impairment whenever events or circumstances indicate that the carrying amounts may not be recoverable. We reviewed title plants for impairment in the years ending December 31, 2011, 2010, and 2009 and identified and recorded impairment expense of $2.6 million, $4.3 million and $2.2 million, respectively.
and 2009 was a net (decrease) increase of $(1.6) million, $(3.8) million, and $36.2 million, respectively. There were no significant investments in banks, trust and insurance companies at December 31, 2011 or 2010.
Included in our other long-term investments are fixed-maturity structured notes purchased in the third quarter of 2009. The structured notes are carried at fair value (see note B) and changes in the fair value of these structured notes are recorded as realized gains and losses in the Consolidated Statements of Earnings. The carrying value of the structured notes was $40.8 million and $90.1 million as of December 31, 2011 and 2010, respectively, and we recorded a net (loss) gain of $(4.4) million, $11.4 million, and $3.7 million related to the structured notes in the years ended December 31, 2011, 2010 and 2009, respectively.
Summarized financial information for the periods included in our Consolidated Financial Statements for Ceridian is presented below.
(1) Other accrued liabilities includes $145.6 million in liabilities related to the at-risk insurance business that have been reclassed in to accounts payable and other accrued liabilities on the Consolidated Balance Sheet as they are considered held for sale as of December 31, 2011.
At December 31, 2011, the estimated fair value of our outstanding notes payable was approximately $927.8 million or $12.0 million higher than its carrying value. The fair value of our notes payable was approximately $957.6 million or $5.6 million higher than its estimated carrying value at December 31, 2010. The fair values of our unsecured notes payable are based on established market prices for the securities on December 31, 2011 and 2010. The fair value of our revolving credit facility is estimated using a discounted cash flow analysis based on current market interest rates and comparison of interest rates being paid to our current incremental borrowing rates for similar types of borrowing arrangements.
Effective March 5, 2010, we entered into an agreement to amend and extend our credit agreement dated September 12, 2006 (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and swing line lender (the “Administrative Agent”), and the other financial institutions party thereto, and an agreement to change the aggregate size of the credit facility under the Credit Agreement. These agreements reduced the total size of the credit facility from $1.1 billion to $951.2 million, with an option
The $236.4 million aggregate principal amount of 5.25% notes due March 2013 contain customary covenants and events of default for investment grade public debt. The indenture governing the 5.25% notes also contains customary events of default. These events of default include a cross default provision, with respect to any other debt of the Company in an aggregate amount exceeding $20.0 million for all such debt, arising from (i) failure to make a principal payment when due or (ii) the occurrence of an event which results in such debt being due and payable prior to its scheduled maturity.
The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2011:
customers make up our customer base, thus spreading the trade receivables credit risk. We control credit risk through monitoring procedures.
Summarized financial information concerning our reportable segments is shown in the following table. As a result of the close on the sale of the flood insurance business in October 2011 and the announcement of the agreement in December 2011 to sell our at-risk insurance business, we reorganized our reporting segments to reflect the disposition of these business and the realignment of the remaining specialty businesses. Prior period segment information has been restated to conform to the current segment presentation.