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LandAmerica Reports Fourth Quarter and Full Year 2006 Results

February 22, 2007

LandAmerica Financial Group, Inc. (NYSE: LFG), announced preliminary operating results for the fourth quarter and the year ended December 31, 2006.

 

Fourth Quarter 2006

  Fourth Quarter 2005

Operating revenue

$1,057.6 Million

$1,071.3 Million

Net income

$34.3 Million

$59.8 Million

Net income per  diluted share

$1.95

$3.40

 

 

 

 

Year 2006

Year 2005

Operating revenue

$3,885.2 Million

$3,853.6 Million

Net income

$98.8 Million

$165.6 Million

Net income per diluted share

$5.61

 $9.29



FINANCIAL HIGHLIGHTS

  • Consolidated operating revenue decreased by $13.7 million, or 1.3%, in fourth quarter 2006 from fourth quarter 2005 due to a continued softening of the residential real estate market. The decline was offset, in part, by additional revenue as the result of the Company's merger with Capital Title Group, Inc. ("Capital Title") and continued strong commercial revenues. Total estimated mortgage originations as reported by the Mortgage Bankers Association ("MBA") declined 19.9% in fourth quarter 2006 from fourth quarter 2005 and 17.1% for the full year 2006 from the full year 2005.
  • Direct operating revenue per direct closed order was approximately $2,100 in fourth quarter 2006 compared to approximately $1,700 in
    fourth quarter 2005, an increase of 23.5%.
  • Consolidated direct commercial revenue increased by $23.8 million to $142.1 million in fourth quarter 2006 from fourth quarter 2005.
  • Direct commercial revenue for the Title Operations segment increased by $14.0 million to $118.1 million in fourth quarter 2006 from fourth quarter 2005.
  • Direct orders opened were 275,100 in fourth quarter 2006 compared to 267,400 in fourth quarter 2005, an increase of 2.9%.
  • Claims provision as a percentage of operating revenue for the Title Operations segment was 5.4% in fourth quarter 2006, down from 8.0% in third quarter 2006. In fourth quarter 2005, the claims provision ratio was 4.8%.
  • Operating revenue for the Lender Services segment increased from $62.4 million in fourth quarter 2005 to $75.6 million in fourth quarter 2006 primarily due to the impact of acquisitions.
  • Net income decreased by $25.5 million, or 42.6%, in fourth quarter 2006 from $59.8 million in fourth quarter 2005. Net income was negatively impacted by lower volumes in the residential business, duplicate staffing and other costs related to the integration of Capital Title, a higher claims provision ratio in the Title Operations segment and a write-down in the value of certain title plants. The decrease in net income was partially offset by an increase in direct operating revenue per direct closed order due to strong commercial business quarter over quarter.
  • Combined statutory earnings for the full year 2006 were $227 million after taxes. The Company uses the 2006 statutory earnings as the basis for calculating the amount of dividends available from the Company's insurance subsidiaries to the Company in 2007 and 2008. The excess of statutory claims reserve over GAAP claims reserves as of year end 2006 was approximately $161 million on a pretax basis.
  • During fourth quarter 2006, the Company repurchased approximately 189,000 of its shares for $12.0 million, at an average cost of $63.56
    per share, which brings the program-to-date share repurchases to approximately 681,000 shares. At December 31, 2006, the Company had approximately 569,000 shares remaining in its authorized repurchase program.
  • In February 2007, the Board of Directors approved a repurchase program expiring in October 2008 that authorized the Company to repurchase up to 1.5 million shares.


"I am pleased to report record operating revenue for LandAmerica in 2006, despite a challenging residential housing market," said Chairman and Chief Executive Officer Theodore L. Chandler, Jr. "We attribute this growth to the strength of our commercial operations and improved market share. Excluding the impact of the merger with Capital Title, our national market share position, which is reported on a quarter lag, improved from 18.2% in third quarter 2005 to 18.6% in third quarter 2006. The addition of Capital Title increased our national market share to 19.5% in third quarter 2006 and strengthened our presence in critical western states.

"We remain confident in our ability to realize synergies from Capital Title, which are now expected to generate annual cost savings of approximately $16 million beginning in 2007, compared to the $14 million previously reported.

"We are also focused on improving return on equity and we took important steps in 2006 to affect this key metric in 2007. These actions included reducing headcount, redomesticating our primary insurance subsidiaries to provide additional cash dividend capacity to our parent company in 2007 and 2008 and implementing our Project Fusion initiative to reduce the number of the Company's operating systems."



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