Fitch Ratings Downgrades LandAmerica

Business Wire, Sept 8, 2006

CHICAGO -- Fitch Ratings has downgraded LandAmerica Financial Group (LFG) and its insurance subsidiaries following LFG's consummation of the Capital Title Group Inc. (CTGI) acquisition. The Rating Outlook is Stable. (See complete list of ratings below).

The downgrade reflects Fitch's ongoing concerns about LFG's ability to profitably execute its acquisition strategy and the size of the purchase price premium relative to earnings and reported book value. Further, the timing of the acquisition comes as the title insurance industry enters a downturn, and would weaken LFG's balance sheet by adding to financial leverage and significantly increasing intangibles, which lowers the quality of capital.

The $251 million purchase price appears high relative to CTGI's annualized 2006 net earnings of $6.4 million and tangible stockholders' equity of $70 million. It should be noted, however, that CTGI's earnings over the most recent 4 quarters was better at $15 million. Financial leverage at LFG associated with the acquisition of CTGI is expected to increase to approximately 33%, from 27% at June 30, 2006, while interest coverage is expected to trend closer to 5 times (x) compared to 7x coverage currently. This level of debt and interest coverage is at the low end of the normal range for the rating category.

Recently, LFG redomesticated several underwriters to Nebraska, where reserving and dividend formulas are less restrictive. LFG is planning to release reserves to surplus, which would make funds available to dividend to the parent holding company. Although Fitch estimates reserves at LFG remain redundant, the level of redundancy compared to other national underwriter peers will be significantly lower after these actions. Fitch gives consideration for reserve redundancy in its Risk Adjusted Capital (RAC) ratio. A reserve release could result in LFG's RAC ratio declining, which is a concern since LFG already trails the title insurance industry aggregate by 28 percentage points.

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 $3.7 billion and $1.3 billion, respectively at June 30, 2006, provides title insurance and real estate products in the U.S., Canada and the Caribbean.

The following ratings have been downgraded one notch:

LandAmerica Financial Group, Inc.

-- Long-term issuer default rating (IDR) 'BBB';

-- Senior debt 'BBB-'.

Commonwealth Land Title Insurance Company

Commonwealth Land Title Insurance Company of New Jersey

Land Title Insurance Company of Pasadena

Lawyers Title Insurance Corporation

Title Insurance Company of America

Transnation Title Insurance Company

-- Insurer financial strength 'A-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.