LandAmerica Financial Group, Inc.

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LandAmerica Financial Group, Inc.

101 Gateway Centre Parkway
Richmond, Virginia 23235-5153
U.S.A.
Telephone: (804) 267-8000
Toll Free: (800) 446-7086
Fax: (804) 267-8836
Web site: http://www.landam.com

Public Company
Incorporated: 1991 as Lawyers Title Corporation
Employees: 13,250
Sales: $3.96 billion (2005)
Stock Exchanges: New York
Ticker Symbol: LFG
NAIC: 524127 Direct Title Insurance Carriers

Listed on the New York Stock Exchange, LandAmerica Financial Group, Inc., is one of the United States' leading providers of title insurance, required for all home-buyers to protect them and lenders against loss due to defective deeds. In addition to homebuyers, Land-America serves mortgage lenders, real estate developers, brokers, and attorneys. Subsidiaries owned by the Richmond, Virginia-based company include Commonwealth Land Title Insurance Company, Lawyers Title Insurance Corporation, Transnation Title Insurance Company, and Title Insurance Company of America. Beyond title insurance, LandAmerica also offers other services related to real estate transactions, such as title search, examination, escrow, and closing. Specialized services for commercial real estate transactions include property appraisal and valuation, due diligence services, survey coordination, multistate transactions, construction disbursement, and tax deferred real property exchanges. To serve mortgage lending customers, Land-America provides real estate tax processing, flood zone certification, consumer mortgage credit reporting, default management services, and mortgage loan subserving. In all, LandAmerica maintains more than 900 branch offices in the United States, Canada, Mexico, the Caribbean, Central and South America, and Europe.

19TH-CENTURY ROOTS

LandAmerica was created in 1998 when Lawyers Title Corporation acquired Commonwealth Land Title Insurance Company and Transnation Title Insurance Company from Reliance Insurance Company. The oldest of these companies was Commonwealth Land, established in Pennsylvania where the concept of title insurance grew out of the 1868 Pennsylvania Supreme Court decision of Watson v. Muirhead. In that case a Mr. Watson purchased property that he was led to believe by a conveyer named Muirhead held a clear title. When a prior outstanding lien came to light, Watson lost the property at a sheriff's sale to satisfy the debt. Watson sued Muirhead, but because the conveyer issued no guarantees and had operated within the bounds of professionalism, the court ruled against Watson. Although Watson lost the property, his suit resulted in the Pennsylvania State Legislature examining the issue of problematic property titles. In 1874 it passed legislation permitting the issuance of title insurance. Two years later in Philadelphia, a group of conveyers joined together to found the predecessor to Commonwealth Land, The Real Estate Title Insurance Company, thereby establishing the title insurance industry.

Transnation was launched as Transamerica Title Insurance Company in 1910, but it was not until the 1920s that title insurance became more common. In 1925 Lawyers Title was established in Richmond to participate in the field. Title insurance proved to be a profitable business, especially during the economic boom that followed World War II, when title insurance became required and the housing market exploded. The large insurance companies took notice of the money to be made in title insurance and looked to enter the field. According to a 2006 Forbes profile of the title insurance industry, "The title firms found a clever way to fight back—not by lowering prices but with state laws that walled off the industry from outside competition." Because during the Great Depression a large number of insurers, some of which offered title insurance, had gone out of business, the title industry argued that companies that sold a variety of insurance products were more likely to have problems, fold, and leave policy holders with unpaid title claims. "Many states responded by passing laws dictating that only dedicated title insurers could sell home buyers title policies."

Over the years title insurance companies began to consolidate. In 1968 Lawyers Title merged with the Life Insurance Company of Virginia to create a holding company, Richmond Corporation. Commonwealth Land became part of Reliance Group Holdings in 1975. Two years later, Richmond Corporation merged with Continental Group, Inc., resulting in a new entity called Richmond Company, which in 1979 changed its name to Continental Financial Services Company. Five years later Lawyers Title and its subsidiary, Continental Land Title, were sold to Universal Leaf Tobacco Company.

In 1991 Lawyers Title Insurance was spun off by Universal Corporation to its shareholders as Lawyers Title Corporation. In 1995 the company gained a listing on the New York Stock Exchange. The firm gained a reputation as an innovator, speeding up the title process while assembling a combined package of services it could deliver in addition to title insurance, including tax and credit reports, appraisals, surveys, home inspections, and warranties. Lawyers Title also used high technology to replace the tedious work of poring through land records at the county courthouse. Subsidiary Datarace Information Services Company looked to digitize millions of title records, while Elliptus Software Solutions developed user-friendly software to make that information available electronically. More importantly, Lawyers Title and other title insurance companies were embracing the Internet, taking steps to one day make all the information needed to close a real estate transaction available online. In 1996 the firm began developing a wide area network to better connect its offices, and a year later took steps to make the back office systems compatible with the Internet.

EMERGENCE OF LANDAMERICA: 1998

While the delivery of title insurance business was changing with the times, further consolidation was also sweeping the industry. In the first few years of the 1990s Lawyers Title made a handful of small acquisitions. Then, in order to keep pace with First American Title and Chicago Title, the firm in the summer of 1997 engineered the $478 million cash-and-stock acquisition of the title insurance operations owned by Reliance, which was looking to sell assets to pay down debt. When the deal closed in February 1998, the combined company took the name LandAmerica Financial Group, Inc., its net worth exceeding $500 million and annual sales totaling some $1.3 billion. It was essentially the same size as Chicago Title and First American Title, and together they formed the big three of the title insurance industry.

Serving as LandAmerica's chairman and chief executive officer was Charles H. Foster, Jr., a longtime Lawyers Title executive. After receiving a degree in engineering from Princeton University he earned a master's of business administration from the University of Virginia. He then joined Lawyers Title in 1979. A year later he was named chief financial officer, and in 1988 he became president of the company. When Lawyers Title was spun off in 1991 he became CEO.

COMPANY PERSPECTIVES

Our vision is to establish LandAmerica as the premier provider of real estate transaction services while maintaining our commitment to our Guiding Principles as we grow.

LandAmerica devoted much of 1998 integrating its new holdings and developing a coordinated operation. The company continued to operate locally under the Commonwealth Land, Transnation, and Lawyers Title brands familiar to the market, but overall LandAmerica was organized along regional lines, with five units headed by senior executives. Although the firm was not ready to entertain any further major acquisitions, it did pick up a pair of companies—Insured Land Title Agency, based in Cincinnati, and Atlantic Title and Abstract Company, based in Delaware—both of which continued to operate under their own names. When 1998 came to a close, LandAmerica reported revenues of nearly $1.85 billion and net income of $93 million.

Business fell off in 1999 due to three interest rate increases implemented by the Federal Reserve Board to ward off inflation, a move that curtailed the refinancing binge that had taken place in the late 1990s. To shield profits, LandAmerica took cost-cutting measures, including a staff reduction. Nevertheless, the firm remained on the lookout for acquisition opportunities, and in 1999 added assets of former agencies in Colorado, Pennsylvania, Ohio, and Texas. Also of note, the company began rolling out TitleQuest 2000, a title production and escrow closing software system. For the year, LandAmerica experienced a modest rise in revenues, topping $2 billion, while net income dipped to $54.3 million.

LandAmerica furthered its commitment to technology in 2000, forging alliances with Internet portals CloseYourDeal.com, Homebytes.com, FreeMortgageSite.com, and RealEC to make its escrow and closing services available online. LandAmerica also teamed up with some software developers to develop TitleWave, a program that allowed people to order, track, and receive title evidence online. In addition, the firm became involved in an e-commerce joint venture called RapidTract, which used real-time property information to generate ownership and encumbrance and deed reports.

The slowing economy had an adverse impact on LandAmerica in 2000. Housing starts declined as did employment, followed by consumer confidence. As a result, fewer homes were bought and there was less need for the firm's services. To make matters worse, the mortgage refinance market continued to peter out. LandAmerica experienced a 10 percent drop in revenues to $1.8 billion and a net loss of $80.8 million, reflecting a change in accounting policy, without which the firm would have posted earnings of $35.5 million. Nevertheless, LandAmerica continued to pursue external growth. It acquired Primis Inc., a web-based provider of real estate services, and also added a pair of title insurance companies: Lorain County Title Company, serving several Ohio counties, and Title Services, Inc., to beef up LandAmerica's presence in the Denver market.

BRANDING EFFORT: 2002

Although the U.S. economy slipped into recession in 2001, LandAmerica greatly benefited from a series of interest rate reductions that buoyed home sales and created a surge in refinancing activity. Hence, revenues rebounded to $2.17 billion while net income totaled $60.3 million. The trend continued in 2002 when revenues approached $2.6 million and net income soared to $149.4 million. The firm also launched a new division, LandAmerica Default Services, to provide an outsourcing solution of default services and reconveyance processing to lenders and mortgage servicers. Because LandAmerica was becoming involved in such a wide range of non-title related businesses, it also launched a branding campaign in 2002 to make people aware of the LandAmerica name around the country. Local offices continued to operate as Commonwealth Land, Lawyers Title, or Transnation, but they incorporated the LandAmerica name into their identity and added the corporate logo to their marketing materials.

Low interest rates continued to fuel LandAmerica's growth in 2003, as revenues ballooned to more than $3.4 billion and net income increased to $192.1 million. Moreover, the firm returned to the acquisition path, bringing a number of title insurance companies into the fold, including Gateway Title (which brought with it 33 offices in southern California), and other companies located in California, Colorado, Michigan, Missouri, New Jersey, New York, Texas, and Utah. Furthermore, LandAmerica continued to expand beyond title insurance. It paid $47 million for INFO1 Holding Co., an Atlanta mortgage–credit reporting provider, and another $210 million on Covina, California-based Lereta Corp., a leading tax and flood services provider in the United States.

KEY DATES

1991:: Lawyers Title Corporation is spun off from Universal Corporation.
1995:: Company is listed on the New York Stock Exchange.
1998:: Lawyers Title merges with two Reliance Insurance Company units to form LandAmerica Financial Group, Inc.
2003:: Lereta Corp. is acquired.
2004:: Chairman and CEO posts are divided.

In 2004 LandAmerica was included among the illustrious Fortune 500 group of companies. Business conditions were not as favorable as they had been in the previous two years, but the firm was still able to grow revenues to more than $3.5 billion, while net income remained a healthy $146.3 million (a number that would ultimately be restated upward). LandAmerica, along with its other top competitors, was also taking steps to expand overseas, both to provide title guarantees to U.S. investors, but to also tap into new markets where title insurance was a new concept. The year also saw a reorganization in an effort to bring more focus on Residential, Commercial, Agency, and Lender Service customers. Further, there was a change at the top ranks of management, as the board of directors at the end of the year decided to split the chairmanship and CEO posts. As a result, at the start of 2005 Foster, who remained chairman, turned over day-to-day control of LandAmerica to the new CEO, Theodore L. Chandler, Jr., who had joined the company in 2000 and had served as president since 2002.

Financially, 2005 was another banner year for LandAmerica. Revenues approached the $4 billion mark and the firm reported net income of $165.6 million. Yet whatever success the firm achieved in the year was overshadowed by controversy that enveloped the entire industry. In more than a dozen states investigations were conducted to look into charges of kickbacks paid for business referrals. It was hardly a new issue in the industry. According to Forbes, "The title industry's perennial protectionism has had a predictable side effect: corruption. Shielded by law from having to compete on price, insurers resort to bribes and gifts to real estate agents and mortgage brokers for steering business their way, deceptive front companies, phony 'reinsurance' deals and other creative chicanery." For its part, Land-America, according to Forbes, "allegedly arranged for sales agents, mortgage brokers and developers around the country to start their own 'reinsurance' companies. Then, every time one of them sent a customer to Land-America, it would pay his newly formed shop to reinsure the policy, a subtle and tidy little kickback…. Rivals copied LandAmerica's premium-sharing scheme."

LandAmerica and other title insurance companies would pay close to $40 million in consumer refund and penalties to settle charges that they paid kickbacks, although according to the agreements they did not admit to guilt. Rather, LandAmerica maintained that it settled because it was simply in the best interest of its customers and employees.

While still prosperous, the title insurance business faced challenges, making the efforts of LandAmerica to diversify even more important. The product, in the words of Forbes, was "outdated" and "largely unneeded." In 2004 the industry fended off an attempt to allow lenders to sell title insurance along with a mortgage, finding an ally in Alabama Senator Richard Shelby, the chairman of the Senate Banking, Housing & Urban Affairs Committee, and a man well familiar with the title insurance field because he owned Tuscaloosa Title Co. There was also a movement among county recorders across the country to agree to standards on the storing of property records online. Should that succeed, much of what a title insurance company had to offer would no longer be needed. "But even if they succeed," opined Forbes, "most state legislatures would have to lift a thicket of creaky old laws that have enriched the title industry for decades—and bilked home buyers out of billions of dollars."

Ed Dinger