Fitch Comments on LandAmerica's Write-Down of Customer Intangible
October 11, 2005
CHICAGO--(BUSINESS WIRE)-- Fitch said that LandAmerica Financial Group's (LFG) recent write-down of customer intangible increases Fitch's concerns about LFG's ability to profitably execute its acquisition strategy and maintain adequate margins and returns on capital in weakening market conditions.
Historically, Fitch noted that LFG's acquisition strategy resulted in lower surplus at the title companies, increased intangible equity, and modestly aggressive financial leverage. The recent write-down of customer intangible, which was outside of expectations, contributes to weakening balance sheet fundamentals and financial flexibility trends, adding negative pressure to the company's ratings.
Going forward, Fitch expects no additional write-down of intangible equity or significant acquisitions, market share to remain at current levels, and enterprise-wide margins and earnings to be slightly below national peer averages. Fitch also expects LFG's debt-to-capital ratio to be managed over the long term at approximately 25%. Fitch will continue to closely monitor LFG's results relative to expectations and any significant divergence would have negative rating implications.
LFG is the third largest provider of title insurance in the United States with a market share of approximately 18%. The organization has a strong market position in residential and commercial title insurance, and its title operations are well diversified geographically. LFG, a publicly traded holding company, with GAAP assets and shareholder's equity of $3.4 billion and $1.2 billion, respectively at June 30, 2005, provides title insurance and real estate products in the U.S., Canada, and the Caribbean.
Source: Fitch Ratings