(2) During 1997 and 1996, we acquired certain real estate related service companies in various transactions. The selected consolidated financial data above includes the balance sheet accounts of the acquired companies as of December 31 of the year acquired and all subsequent years presented; and the results of their operations for the periods from the date of acquisition through December 31 of the acquisition year and for the years ended December 31 for all subsequent years presented.
(6) Cash and cash equivalents as of December 31, 2000 includes cash pledged to secure trust deposits of $132.1 million.
(2) In the first quarter of 2000, we recorded certain non-recurring charges totaling $13.4 million, after applicable income taxes.
Factors Affecting Comparability. Our Condensed Consolidated Statements of Earnings include the results of operations of Chicago Title for the period from March 20, 2000, the merger date, through December 31, 2000. As a result, year over year comparisons may not be meaningful. Excluding the effect of the Chicago Title merger, our title insurance premiums for the year ended December 31, 2000 were $834.7 million. We have also reviewed our existing non-title operations in connection with the merger and related transition and integration. As a result, during the first quarter of 2000 we recorded certain non-recurring charges totaling $13.4 million, after applicable taxes. These charges primarily relate to the revaluation of non-title assets, including our investment in Express Network, Inc., which was sold in the second quarter of 2000, and existing goodwill associated with Express Network and the write-off of obsolete software.
diluted share, as compared with net earnings for the corresponding periods in 1999 and 1998 of $70.9 million, or $2.27 per diluted share and $105.7 million, or $3.23 per diluted share.
Title insurance revenue is closely related to 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, which shifted the real estate market from a refinance-driven market to a more traditional market driven by new home purchases and resales. As a result of the shift in mix of business along with the steady increases in interest rates, total title premiums, on a pro forma basis (assuming the Chicago Title merger occurred on January 1, 1999) have decreased in 2000 as compared with pro forma 1999 title insurance premiums.
Revenues from real estate related services generally trend closely with the level and mix of business, as well as the performance of our title related subsidiaries. During 1996 and 1997, we acquired real estate related service companies in various separate transactions. Our strategy in making the real estate related service company acquisitions was to acquire previously existing entities in businesses we believed to be complementary to our core title and escrow businesses. Revenues from real estate related services in 2000, 1999 and 1998 were $166.7 million, $67.8 million and $70.0 million, respectively. The increase in revenues from real estate related services in 2000 is primarily the result of the acquisition of Chicago Title as well as increases in revenue from our credit reporting, flood certification, home warranty insurance and tax qualifying property exchange services.
Interest and investment income levels are primarily a function of securities markets, interest rates and the amount of cash available for investment. In 2000, interest and investment income was $87.2 million, compared with $32.0 million in 1999. The increase in interest and investment income earned during 2000 is primarily due to an increase in average invested assets, excluding real estate, from $547.4 million in 1999 to $1,650.0 million in 2000, primarily as a result of the Chicago Title acquisition. The tax equivalent yield in 2000, excluding realized losses, was 6.1%. Included in interest and investment income in 2000 is $201 of net
Other income represents revenue generated by Micro General, our majority-owned information-services subsidiary, FNF Capital, our equipment-leasing subsidiary and Express Network. Other income was $82.8 million in 2000, $109.9 million in 1999 and $53.4 million in 1998. The decrease in other income in 2000 is due to the sale of Express Network in the second quarter of 2000 as well as decreases in externally generated revenue by Micro General. Other income increased in 1999 from 1998 as a result of including Micro General in our results of operations beginning in May 1998 as well as increases in externally generated revenue by Micro General in 1999 as compared with 1998.
conditions, we have implemented aggressive cost control programs in order to maintain operating expenses at levels consistent with the levels of revenue. However, certain fixed costs are incurred regardless of revenue levels, resulting in period-over-period fluctuations. Our cost control programs are designed to evaluate expenses, both current and budgeted, relative to existing and projected market conditions. Other operating expenses decreased as a percentage of total revenue to 22.8% in 2000 from 24.5% in 1999. The decrease in other operating expenses in 2000 is attributable to the change in our cost structure as a result of the addition of the Chicago Title operations, which are primarily title and real estate related. Other operating expenses increased as a percentage of total revenue to 24.5% in 1999 from 20.0% in 1998 as a result of the impact of Micro General's business expansion, increased data processing and information technology costs and normal year over year price increases including rent escalations, travel and other general and administrative costs. Total other operating expenses totaled $626.3 million, $332.3 million and $258.9 million in 2000, 1999 and 1998, respectively.
- --------------- (1) In connection with the Chicago Title merger on March 20, 2000, we assumed Chicago Title's then outstanding reserve for claim losses.
Income tax expense as a percentage of earnings before income taxes for 2000, 1999 and 1998 was 44.2%, 39.9% and 39.7%, respectively. The fluctuation in income tax expense as a percentage of earnings before income taxes is attributable to our estimate of ultimate income tax liability, the impact of the non-recurring charges and the non-deductible goodwill recorded pursuant to the Chicago Title merger and the characteristics of net earnings -- i.e., operating income versus investment income.
On March 20, 2000, we acquired Chicago Title. Pursuant to the terms of the merger agreement, Chicago Title stockholders received aggregate merger consideration valued at approximately $1.1 billion. The merger consideration was paid in the form of 1.7673 shares of our common stock and $26.00 in cash for each share of Chicago Title common stock, resulting in the issuance of approximately 38.8 million shares of our common stock valued at an average price during the applicable period of $13.1771 per share and the payment of approximately $570.2 million in cash.
- $250.0 million, 6 year revolving credit facility due March 19, 2006; and
The credit agreement bears interest at a variable rate of interest based on the debt ratings assigned to us by certain independent agencies, and is unsecured. The current interest rate is LIBOR plus 1.125%. Amounts borrowed under the credit agreement were used to pay the cash portion of the merger consideration, to
refinance previously existing indebtedness, to pay fees and expenses incurred in connection with the merger and to fund other general corporate purposes.
Our cash requirements include debt service, operating expenses, lease fundings, lease securitizations, taxes and dividends on our common stock. We believe that all anticipated cash requirements for current operations will be met from internally generated funds, through cash dividends from subsidiaries, cash generated by investment securities and bank borrowings through existing credit facilities. Our short-and long-term liquidity requirements are monitored regularly to match cash inflows with cash requirements. We forecast the daily needs of all of our subsidiaries and periodically review their short- and long-term projected sources and uses of funds, as well as the asset, liability, investment and cash flow assumptions underlying these projections.
Our two significant sources of our funds are dividends and distributions from our subsidiaries. As a holding company, we receive cash from our subsidiaries in the form of dividends and as reimbursement for operating and other administrative expenses we incur. The reimbursements are executed within the guidelines of management agreements among us and our subsidiaries. Our insurance subsidiaries are restricted by state regulation in their ability to pay dividends and make distributions. Each state of domicile regulates the extent to which our title underwriters can pay dividends or make other distributions to us. Our underwritten title companies, real estate related service companies, Micro General and FNF Capital, collect revenue and pay operating expenses. However, they are not regulated to the same extent as our insurance subsidiaries. Positive cash flow from these subsidiaries are invested primarily in cash and cash equivalents.
recognizing interest income on all credit-sensitive mortgage and asset-backed securities and certain prepayment-sensitive securities including agency Interest-only strips, whether purchased or retained in securitization, and determining when these securities must be written down to fair value because of impairment. EITF 99-20 is effective for all fiscal quarters beginning after March 15, 2001. Early adoption is permitted. We have decided not to early adopt EITF 99-20. Application of provisions of the EITF are to be adopted prospectively. Adoption of EITF 99-20 will require impairments to the valuation of residual interest in securitizations to be recorded as a reduction to the carrying value of the residual interests through a charge to earnings. The initial potential impact of adoption would be a charge to earnings of approximately $3.2 million in 2001.
In our opinion, the Consolidated Financial Statements referred to above present fairly, in all material respects, the consolidated financial position of Fidelity National Financial, Inc. and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000 in conformity with accounting principles generally accepted in the United States of America.
- --------------- (1) Net of income tax expense (benefit) of $5.8 million, ($11.3) million and ($1.1) million for 2000, 1999 and 1998, respectively.
(2) Net of income tax expense (benefit) of $198, ($30) and $6.8 million for 2000, 1999 and 1998, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 2000 AND 1999 AND FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
Fidelity National Financial, Inc., through its principal subsidiaries (collectively, the "Company"), is the largest title insurance and diversified real estate related services company in the United States. The Company's title insurance underwriters -- Fidelity National Title, Chicago Title, Ticor Title, Security Union Title and Alamo Title -- together issue all of the Company's title insurance policies in 49 states, the District of Columbia, Guam, Puerto Rico and the U.S. Virgin Islands, and in Canada and Mexico.
In addition, the Company provides a broad array of escrow and other title related services, as well as real estate related services, including: collection and trust activities, trustee's sales guarantees, recordings, reconveyances, property appraisal rights, 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 and field services.
The Company's principal title subsidiaries consist of Fidelity National Title Insurance Company, Fidelity National Title Insurance Company of New York, Chicago Title Insurance Company, Chicago Title Insurance Company of Oregon, Ticor Title Insurance Company, Security Union Title Insurance Company and Alamo Title Insurance. The Company's principle underwritten title company subsidiaries consist of Fidelity National Title Company, Fidelity National Title Company of California and Chicago Title Company.
The Company also originates, funds, purchases, sells, securitizes and services equipment leases for a broad range of businesses through its wholly-owned subsidiary, FNF Capital, Inc. ("FNF Capital").
Fixed maturity securities are purchased to support the investment strategies of the Company, which are developed based on many factors including rate of return, maturity, credit risk, tax considerations and regulatory requirements. Fixed maturity securities which may be sold prior to maturity to support the Company's investment strategies are carried at fair value and are classified as available for sale as of the balance sheet dates. Fair values for fixed maturity securities are principally a function of current interest rates and are based on quoted market prices. Included in fixed maturities are mortgage-backed securities, which are recorded at purchase cost. Discount or premium is recorded for the difference between the purchase price and the principal amount. The discount or premium is amortized using the interest method and is recorded as an adjustment to interest and investment income. The interest method results in the recognition of a constant rate of return on the investment equal to the prevailing rate at the time of purchase or at the time of subsequent adjustments of book value. Changes in prepayment assumptions are accounted for prospectively.
stated at the lower of amortized cost or market as determined by outstanding commitments from investors or current investor-yield requirements calculated on an aggregate basis.
Direct financing leases securitized through the issuance of a debt security prior to the effective date of Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities" ("SFAS 125") are accounted for as collateralized borrowings. The leases collateralizing the debt are recorded as direct financing leases assigned to lenders. The related debt is recorded as notes payable.
At the closing of each securitization that is accounted for as a sale, the Company removes from its Consolidated Balance Sheet the lease receivables held for sale and adds to its Consolidated Balance Sheet (i) the cash received and (ii) the allocated cost of the Residuals which consists of (a) cash collateral account ("Cash Collateral Account") and (b) net excess cash flows. The excess of the cash received by the Company
The Company allocates its basis in the lease receivables between the portion of the lease receivables sold and the portion retained based on the relative fair values of those portions on the date of the sale.
Residuals are recorded at estimated fair value and accounted for as available for sale securities. Changes in the fair value of the Residuals are recorded as unrealized gains or losses, net of applicable deferred income taxes (benefits), and are excluded from earnings and credited or charged directly to a separate component of stockholders' equity. Included in accumulated other comprehensive earnings (loss) at December 31, 2000 and 1999 are net unrealized losses of $3.2 million and $914, respectively, related to Residuals. The Company is not aware of an active market for the purchase or sale of Residuals at this time. Accordingly, the Company estimates the fair value of the Residuals by calculating the present value of the estimated expected future excess cash flows received by the Company after being released by the Trust (cash out method) using a discount rate of approximately 12%, which management believes is commensurate with the risks involved.
In future periods, the Company may increase the carrying value of the Residuals if the actual performance of the lease receivables results in an estimated fair value higher than the original estimate. If the actual performance of the lease receivables results in an estimated fair value that is lower than the original estimate, a decrease in the carrying value of the Residuals may be required.
investors and the securitization trusts have no recourse to the Company's other assets for failure of debtors to pay when due. The Company's retained interests are subordinate to investor's interests. Their value is subject to credit, prepayment and interest rate risks on the transferred financial assets.
Impairment of intangible assets is monitored on a continual basis, and is assessed based on an analysis of the undiscounted cash flows generated by the underlying assets. In 2000, the Company recorded pre-tax impairment losses totaling $7.0 million, primarily relating to the write off of cost in excess of net assets acquired and capitalized software costs of non-title related businesses. These amounts are included as part of the $13.4 million after tax, non-recurring charges the Company recorded in the first quarter of 2000.
The Company's reserve for claim losses includes known claims as well as losses the Company expects to incur, net of recoupments. Each known claim is reserved for on the basis of a review by the Company as to the estimated amount of the claim and the costs required to settle the claim. Reserves for claims which are incurred but not reported are provided for at the time premium revenue is recognized based on historical loss experience and other factors, including industry averages, claim loss history, current legal environment, geographic considerations and type of policy written.
The reserve for claim losses also includes reserves for losses arising from the escrow, closing and disbursement functions due to fraud or operational error based on historical experience.
the event the reinsurer does not meet its contractual obligations. The Company has a $30.9 million reinsurance recoverable from Lloyds of London on claim loss expense recoverables as of December 31, 2000.
Title insurance premiums and escrow and other title related fees are recognized as revenue at the time of closing of the related transaction as the earnings process is considered complete. Real estate related services and other income are recognized over the period the related services are provided.
On December 13, 1998, the Company declared a 10% stock dividend to stockholders of record on December 28, 1998, distributed January 12, 1999. The par value of the additional shares of common stock issued in connection with the stock dividend was credited to common stock and a like amount charged to retained earnings as of December 31, 1998. Fractional shares were paid in cash.
Basic earnings per share is computed by dividing net earnings available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by dividing net earnings available to common stockholders plus the impact of assumed conversions of dilutive potential securities. The Company has granted certain options and warrants which have been treated as common share equivalents for purposes of calculating diluted earnings per share. The Liquid Yield Option Notes ("LYONs") are considered other dilutive securities for purposes of calculating diluted earnings per share to the extent that they are not antidilutive.
In connection with the merger, the Company entered into a syndicated credit agreement. See Note G. Amounts borrowed under the credit agreement were used to finance the cash portion of the merger consideration, to refinance previously existing indebtedness, to pay fees and expenses incurred in connection with the merger and to fund other general corporate purposes.
The assets acquired, including cost in excess of net assets acquired, which is amortized over a period of 20 years, and liabilities assumed in the Chicago Title merger were as follows (dollars in thousands):
The carrying amounts and fair values of the Company's fixed maturity securities at December 31, 2000 and 1999 are as follows:
The change in unrealized gains (losses) on fixed maturities for the years ended December 31, 2000, 1999, and 1998 was $29.1 million, ($13.9) million and $3.2 million, respectively.
The following table presents certain information regarding the Company's fixed maturity securities at December 31, 2000:
Equity securities at December 31, 2000 and 1999 consist of investments in various industry groups as follows:
The carrying value of the Company's investment in equity securities is fair value. As of December 31, 2000, gross unrealized gains and gross unrealized losses on equity securities were $4.0 million and $17.0 million, respectively. Gross unrealized gains and gross unrealized losses on equity securities were $8.4 million and $9.2 million, respectively, as of December 31, 1999.
During the years ended December 31, 2000, 1999 and 1998, gross realized gains on sales of fixed maturity securities considered available for sale were $1.7 million, $384 and $700, respectively; and gross realized losses were $586, $277 and $268, respectively. Gross proceeds from the sale of fixed maturity securities considered available for sale amounted to $289.6 million, $38.2 million and $64.4 million during the years ended December 31, 2000, 1999 and 1998, respectively.
Direct financing leases at December 31, 2000 and 1999 consist of the following:
At December 31, 2000, the weighted average implicit rate of interest is approximately 12.5%.
The carrying value of the direct financing leases at December 31, 2000 and 1999 approximates fair value because of the short-term period that these leases are held before sale or securitization or, in certain cases, because the interest rate approximates current market rates. The fair value of the direct financing leases assigned to lender at December 31, 2000 and 1999 approximated the carrying value because the interest rate on the related Class A Lease-Backed Term Notes approximates current market rates.
The following table presents certain information related to the Company's securitization facilities at December 31, 2000 and 1999:
The allowance for doubtful receivables is primarily related to certain promissory notes at December 31, 2000 and 1999. Interest income is not recognized on the Company's non-performing notes receivable. There were no non-performing notes receivable at December 31, 2000 or 1999.
On March 17, 1999, the Company's Board of Directors approved the adoption of the Fidelity National Financial, Inc. Employee Stock Purchase Loan Plan ("Loan Plan") and the Non-Employee Director Stock Purchase Loan Program ("Loan Program"). The purpose of the Loan Plan and Loan Program is to provide key employees and directors with further incentive to maximize stockholder value. The Company offered an aggregate of $8.7 million in loans. Loan Plan and Loan Program funds must be used to make private or open market purchases of Company common stock through a broker-dealer designated by the Company. All loans are full recourse and unsecured, and have a five-year term. Interest accrues on the loans at a rate of 5.0% per annum, due at maturity. These loans may be prepaid any time without penalty. As of December 31, 1999, loans had been made in the amount of $7.2 million to purchase 484,000 shares of Company common stock at an average purchase price of $15.41 per share. There have been no significant purchases since December 31, 1999. As of December 31, 2000 $6.7 million of loans under these programs were outstanding.
The carrying value and estimated fair values of the Company's notes receivable were as follows at December 31, 2000 and 1999:
Notes payable in the Consolidated Balance Sheet as of December 31, 1999 also included $3.0 million of GFVI Class A Certificates and the $2.8 million Class B Certificates. See Note D. The Class A and Class B Certificates bear interest at 6.20%, and were paid in full in July 2000. The carrying value of the Class A and
The deferred tax assets and liabilities at December 31, 2000 and 1999 consist of the following:
- --------------- (1) In connection with the Chicago Title merger on March 20, 2000, the Company assumed Chicago Title's then outstanding reserve for claim losses.
The Company has entered into various employment agreements with officers of the Company. These agreements provide for a specified salary to be paid to the officers and include incentive compensation FIDELITY NATIONAL FINANCIAL, INC. AND SUBSIDIARIES
In the ordinary course of business, the Company is involved in various pending and threatened litigation matters related to its operations, some of which include claims for punitive or exemplary damages. Management believes that no actions, other than those listed below, depart from customary litigation incidental to the business of the Company and that the resolution of all such litigation will not have a material adverse effect on the Company.
In conducting its operations, the Company routinely holds customers' assets in trust, pending completion of real estate transactions. Certain of these amounts are maintained in segregated bank accounts and have not been included in the accompanying Consolidated Balance Sheets. The Company has a contingent liability relating to proper disposition of these balances for its customers which amounted to $2.9 billion at December 31, 2000.
Rent expense incurred under operating leases during the years ended December 31, 2000, 1999 and 1998 was $86.5 million, $36.2 million and $32.6 million, respectively. Included in rent expense for 2000, 1999 and 1998 is $0, $88 and $485, respectively, paid to related parties.
As a condition to continued authority to underwrite policies in the states in which the Company's 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, the Company's escrow and trust business is subject to regulation by various state banking authorities.
Title Company of California and Chicago Title Company, respectively. The Company is in compliance with all of its respective minimum net worth requirements at December 31, 2000.
On March 17, 1999, the Company's Board of Directors approved an increase to the number of shares of outstanding Company common stock authorized for purchase under the Company's previously announced purchase program. The additional authorization permitted the Company to purchase up to 4.0 million shares. On September 13, 1999, the Company announced that its Board of Directors had approved a second increase of 2.0 million shares, bringing the total number of shares of outstanding Company common stock authorized for purchase to 6.0 million. As of December 31, 1999, the Company had purchased 5.4 million shares at an average purchase price of $15.19 per share totaling $81.9 million. Purchases may be made from time to time by the Company in the open market or in block purchases or in privately negotiated transactions depending on market conditions and other factors.
Subsequent to December 31, 2000, the Company issued 8,050,000 shares of its common stock at a public offering price of $33.50 per share. Proceeds from this offering, net of underwriting discounts and commissions and other related expenses, were $256.2 million. Net proceeds were primarily used to pay down existing indebtedness. See Note G.
The Company offers the Fidelity National Financial, Inc. 401(k) Profit Sharing Plan ("401(k) Plan"), a qualified voluntary contributory savings plan, available to substantially all Fidelity employees. Eligible employees may contribute up to 15% of their pretax annual compensation, up to the amount allowed pursuant to the Internal Revenue Code. Beginning in April 2000, the Company began matching 50% of each dollar of employee contribution up to six percent of the employee's total compensation. The Company's cost for the 401(k) Plan for the year ended December 31, 2000 was $5.0 million.
In connection with the Chicago Title merger, the Company assumed Chicago Title's contributory defined contribution savings and profit sharing plan for eligible Chicago Title employees. Eligible employees may contribute up to 13% of their pretax annual compensation, up to the amount allowed pursuant to the Internal Revenue Code. The Company will match employee contributions from a minimum of $0.25 up to a maximum
In 1994, stockholders approved the adoption of the 1993 Stock Plan ("1993 Plan"). The number of shares of common stock reserved for issuance under the 1993 Plan is 1,098,075. The per share option price is 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. The 1993 Plan also contains an automatic grant of non-qualified stock options to non-employee directors at an exercise price equal to 100% of fair value at date of grant, and the right to exercise such options shall vest equally over three years. Stock options granted under the 1993 plan are exercisable subject to the terms and conditions set by the Board of Directors, however, options shall be exercisable no earlier than six months nor later than 10 years following the grant date.
more stockholder, which may not exceed five years. The Granite Plan 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. The term of all non-qualified stock options granted under the Granite Plan may not exceed 10 years, except the term of non-qualified stock options granted to a 10% or more stockholder, which may not exceed five years.
In connection with the merger of 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 3,175,299, 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.
The following table summarizes information related to stock options outstanding and exercisable as of December 31, 2000:
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that do not have vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options and because changes in the subjective input assumptions can materially affect the value of an estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.
Pro forma information regarding net earnings and earnings per share is required by SFAS 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement. 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 rates used in the calculation is the rate on the date the options were granted. The risk free interest rate used for options granted during 2000, 1999 and 1998 were 5.1%, 6.5% and 5.7%, respectively. A volatility factor for the expected market price of the common stock of 50% was used for options granted in 2000, 1999 and 1998. The expected dividend yield used for 2000, 1999 and 1998 was 1.2%, 2.0% and 1.0%, respectively. A weighted average expected life of five years was used for 2000 and seven years was used in 1999 and 1998. The weighted average fair value of each option granted during 2000, 1999 and 1998 was $7.34, $8.68 and $14.15, respectively.
The components of net periodic pension expense included in the results of operations for 2000 are as follows:
The Company is self-insured for its postretirement health care and life insurance benefit plans, and the plans are not funded. The health care plans provide for insurance benefits after retirement and are generally contributory, with contributions adjusted annually. Postretirement life insurance benefits are noncontributory, with coverage amounts declining with increases in a retiree's age.
The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation was 5.5% in 2000, declining to 5.0% in 2002. The discount rate used was 7.75% in 2000. If the health care cost trend rate assumptions were increased 1.0%, the accumulated postretirement benefit obligation as of December 31, 2000 would increase by $3.3 million. The effect of this change on the sum of the service and interest cost would be an increase of $590. If the health care costs trend rate assumptions were decreased 1.0%, the accumulated post retirement benefit obligation as of December 31, 2000 would decrease by $2.8 million. The effect of this change on the sum of the service and interest cost would be a decrease of $480.
The accrued cost of the accumulated postretirement benefit obligation included in the consolidated balance sheet at December 31, 2000 is as follows:
consistently from year to year, as of a date not more than three months prior to that date. The Company's measurement date is December 31.
FNF Capital approved contingent fundings of approximately $55.3 million and $60.0 million in leases at December 31, 2000 and 1999, respectively.
and foreclosure publishing and posting. These services require specialized expertise and have been centralized for efficiency and management purposes.
SFAS 133 was amended by Statement of Financial Accounting Standards No. 137, "Accounting for Derivative Instruments and Hedging Activities -- Deferral of the Effective Date of FASB No. 133" ("SFAS 137"). SFAS 137 defers the effective date to all fiscal quarters of fiscal years beginning after June 15, 2000. SFAS 133, as amended by SFAS 137 and Statement of Financial Accounting Standards No. 138, "Accounting for Certain Derivative Instruments and Hedging Activities -- an amendment of SFAS 133." ("SFAS 138"), is effective for the Company's first quarter in the fiscal year ending December 31, 2001, and does not have a material effect on the Company's financial position or results of operations.