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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549


FORM 10-Q


QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended June 30, 2003


COMMISSION FILE NO. 1-13990


LANDAMERICA FINANCIAL GROUP, INC.

(Exact name of registrant as specified in its charter)



Virginia                                                        54-1589611

(State or other jurisdiction of

                           (I.R.S. Employer

incorporation or organization)                                    Identification No.)



101 Gateway Centre Parkway

Richmond, Virginia

  23235-5153

(Address of principal executive offices)

   (Zip Code)


(804) 267-8000

(Registrant's telephone number, including area code)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes   X        No  ___


Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).


Yes   X        No  ___


Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.


        Common Stock, No Par Value       18,619,755                          August 8, 2003     






LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES



INDEX



Page No.


PART I.   FINANCIAL INFORMATION



Item 1.

Consolidated Financial Statements:


Consolidated Balance Sheets

3


Consolidated Statements of Operations

5


Consolidated Statements of

Cash Flows

6


Consolidated Statements of Changes in

Shareholders’ Equity

7


Notes to Consolidated

Financial Statements

8


Item 2.

Management's Discussion and

Analysis of Financial Condition

and Results of Operations

11


Item 3.

Quantitative and Qualitative Disclosures

about Market Risk

14


Item 4.

Controls and Procedures

14


PART II.  OTHER INFORMATION


Item 1.

Legal Proceedings

15


Item 4.

Submission of Matters to a Vote of Security Holders

15


Item 6.

Exhibits and Reports on Form 8-K

16


Signatures

17




2




LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

(Unaudited)


ASSETS

 

June 30,

2003

 

December 31,

2002

     

INVESTMENTS:

    

Fixed maturities available-for-sale - at fair value (amortized cost:  2003 - $1,002,771; 2002 - $937,159)

 

$1,071,484

 

$ 991,494

Equity securities – at fair value (cost:  2003 - $24,403; 2002 - $23,395)

 

27,588

 

23,669

Mortgage loans (less allowance for doubtful accounts: 2003 - $97; 2002 - $119

 

1,575

 

1,172

Invested cash

 

246,113

 

183,517

     

Total Investments

 

1,346,760

 

1,199,852

     

CASH

 

44,728

 

42,363

     

NOTES AND ACCOUNTS RECEIVABLE:

    

Notes (less allowance for doubtful accounts:  2003 - $4,365; 2002 - $4,454)

 

12,377

 

10,109

Accounts receivable (less allowance for doubtful accounts:  2003 - $6,311; 2002 - $6,102)

 

73,940

 

69,549

     

Total Notes and Accounts Receivable

 

86,317

 

79,658

     

PROPERTY AND EQUIPMENT - at cost (less accumulated depreciation and amortization:  2003 - $138,902; 2002 - $136,438)

 

64,753

 

60,851

     

TITLE PLANTS

 

99,216

 

96,995

     

GOODWILL

 

214,134

 

201,658

     

DEFERRED INCOME TAXES

 

105,085

 

111,883

     

OTHER ASSETS

 

137,535

 

117,572

     

Total Assets

 

$2,098,528

 

$1,910,832

     


See Notes to Consolidated Financial Statements




3





LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands of dollars)

(Unaudited)



LIABILITIES

 

June 30,

2003

 

December 31,

2002

     

POLICY AND CONTRACT CLAIMS

 

$606,841 

 

$574,467 

     

ACCOUNTS PAYABLE AND ACCRUED EXPENSES

 

245,788 

 

243,284 

     

FEDERAL INCOME TAXES

 

48,932 

 

17,549 

     

NOTES PAYABLE

 

189,555 

 

188,476 

     

OTHER

 

25,558 

 

23,436 

     

Total Liabilities

 

1,116,674 

 

1,047,212 

     

COMMITMENTS AND CONTINGENCIES (Note 4)

    
     

SHAREHOLDERS’ EQUITY

    
     

Common stock, no par value, 45,000,000 shares authorized, shares issued and outstanding:  2003 – 18,599,255; 2002 – 18,348,944

 

515,123 

 

509,540 

     

Accumulated other comprehensive income (loss)

 

11,042 

 

(198)

     

Retained earnings

 

455,689 

 

354,278 

     

Total Shareholders’ Equity

 

981,854 

 

863,620 

     

Total Liabilities and Shareholders’ Equity

 

$2,098,528 

 

$1,910,832 

     


See Notes to Consolidated Financial Statements


4




LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002

(In thousands of dollars except per share amounts)

(Unaudited)


 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

2003

 

2002

 

2003

 

2002

REVENUES

       

Title and other operating revenues:

       

Direct operations

$382,888

 

$254,618 

 

$692,926 

 

$494,038 

Agency operations

451,438 

 

349,400 

 

837,848 

 

661,238 

 

834,326 

 

604,018 

 

1,530,774 

 

1,155,276 

Investment income

12,993 

 

12,984 

 

26,375 

 

25,813 

Gain (loss) on sale of investments

983 

 

(193)

 

3,171 

 

(23)

 

848,302 

 

616,809 

 

1,560,320 

 

1,181,066 

EXPENSES

       

Salaries and employee benefits

211,881 

 

158,916 

 

403,146 

 

323,303 

Agents’ commissions

362,011 

 

276,680 

 

670,761 

 

523,955 

Provision for policy and contract claims

49,301 

 

24,346 

 

83,609 

 

46,439 

Interest expense

3,038 

 

3,074 

 

6,048 

 

6,291 

Exit and termination costs

(532)

 

14,132 

 

(532)

 

17,322 

General, administrative and other

126,472 

 

99,982 

 

236,549 

 

197,319 

 

752,171 

 

577,130 

 

1,399,581 

 

1,114,629 

INCOME BEFORE INCOME TAXES

96,131 

 

39,679 

 

160,739 

 

66,437 

        

INCOME TAX EXPENSE (BENEFIT)

       

Current

38,329 

 

16,445 

 

56,096 

 

23,246 

Deferred

(4,201)

 

(2,557)

 

64 

 

 

34,128 

 

13,888 

 

56,741 

 

23,253 

NET INCOME

$62,003 

 

$25,791 

 

$103,998 

 

$43,184 

        

NET INCOME PER COMMON SHARE

$3.38 

 

$1.39 

 

$5.68 

 

$2.33 

        

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING

18,370 

 

18,536 

 

18,320 

 

18,532 

        

NET INCOME PER COMMON SHARE ASSUMING DILUTION

$3.33 

 

$1.38 

 

$5.62 

 

$2.31 

        

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ASSUMING DILUTION

18,593 

 

18,719 

 

18,509 

 

18,688 


See Notes to Consolidated Financial Statements


5




LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

SIX MONTHS ENDED JUNE 30, 2003 AND 2002

(In thousands of dollars)

(Unaudited)


  

2003

 

2002

Cash flows from operating activities:

    

Net income

 

$103,998 

 

$43,184 

Depreciation and amortization

 

9,293 

 

9,693 

Amortization of bond premium

 

2,917 

 

1,365 

Realized investment (gains) losses

 

(3,171)

 

23 

Deferred income tax

 

645 

 

Change in assets and liabilities, net of businesses acquired:

    

Notes receivable

 

(2,230)

 

(315)

Premiums receivable

 

(4,391)

 

8,337 

Income taxes receivable/payable

 

31,383 

 

12,640 

Policy and contract claims

 

32,374 

 

6,663 

Accounts payable and accrued expenses

 

(3,597)

 

(1,861)

Other

 

(2,216)

 

(5,510)

Net cash provided by operating activities

 

165,005 

 

74,226 

Cash flows from investing activities:

    

Purchase of property and equipment, net

 

(11,952)

 

(9,100)

Purchase of business, net of cash acquired

 

(29,743)

 

Change in cash surrender value of life insurance

 

(1,738)

 

2,848 

Cost of investments acquired:

    

Fixed maturities – available-for-sale

 

(323,665)

 

(245,008)

Equity securities

 

(4,866)

 

Proceeds from investment sales or maturities:

    

Fixed maturities – available-for-sale

 

264,341 

 

208,201 

Equity securities

 

3,907 

 

Change in mortgage loans

 

(403)

 

508 

Net cash used in investing activities

 

(104,119)

 

(42,551)

Cash flows from financing activities:

    

Proceeds from sale of common shares

 

8,283 

 

1,473 

Cost of common shares repurchased

 

(2,700)

 

(4,753)

Repayment of cash surrender value loan

 

 

(6,966)

Dividends paid

 

(2,587)

 

(1,857)

Proceeds from issuance of notes payable

 

2,873 

 

472 

Payments on notes payable

 

(1,794)

 

(21,354)

Net cash provided by (used in) financing activities

 

4,075 

 

(32,985)

Net increase (decrease) in cash and invested cash

 

64,961 

 

(1,310)

Cash and invested cash at beginning of period

 

225,880 

 

168,770 

Cash and invested cash at end of period

 

$290,841 

 

$167,460 

Cash and invested cash at end of period

 

 

 

 

See Notes to Consolidated Financial Statements


6




LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

SIX MONTHS ENDED JUNE 30, 2003 AND 2002

(In thousands of dollars except per share amounts)

(Unaudited)


   

Accumulated

  
   

Other

 

Total

 

Common Stock

Comprehensive

Retained

Shareholders’

 

Shares

Amounts

Income (Loss)

Earnings

Equity

      

BALANCE – December 31, 2001

18,583,937 

$521,795 

$(3,647)

$209,345 

$727,493 

      

Comprehensive income:

     

Net income

43,184 

43,184 

Other comprehensive income, net of tax of $4,887

     

Net unrealized gain on securities

9,075 

9,075 

     

52,259

Common stock retired

(154,600)

(4,753)

(4,753)

Stock options and incentive plans

53,497 

1,473 

1,473 

Common dividends ($0.10/share)

(1,857)

(1,857)

      

BALANCE – June 30, 2002

18,482,834 

$518,515 

$5,428 

$250,672 

$774,615 

      

BALANCE – December 31, 2002

18,348,944 

$509,540 

$(198) 

$354,278 

$863,620 

      

Comprehensive income:

     

Net income

103,998 

103,998 

Other comprehensive income, net of tax of $6,052

     

Net unrealized gains on securities

11,240 

11,240 

     

115,238

Common stock retired

(62,000)

(2,700)

(2,700)

Stock options and incentive plans

312,311 

8,283 

8,283 

Common dividends ($0.14/share)

(2,587)

(2,587)

      

BALANCE – June 30, 2003

18,599,255 

$515,123 

$11,042 

$455,689 

$981,854 

      

See Notes to Consolidated Financial Statements


7





LANDAMERICA FINANCIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In thousands of dollars except per share amounts)



1.

Interim Financial Information


The unaudited consolidated financial information included in this report has been prepared in conformity with the accounting principles and practices reflected in the consolidated financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2002 filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. This report should be read in conjunction with the aforementioned Form 10-K.  In the opinion of management, all adjustments (consisting of normal recurring accruals) neces­sary for a fair presentation of this infor­mation have been made.  The results of operations for the interim periods are not necessarily indicative of results for a full year.


2.

Earnings Per Share


The following table sets forth the computation of basic and diluted earnings per share:


  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

  

2003

 

2002

 

2003

 

2002

Numerator:

        

Net income – numerator for diluted earnings per share

 

$62,003

 

$25,791

 

$103,998

 

$43,184

         

Denominator:

        

Weighted average shares – denominator for basic earnings per share

 

18,370

 

18,536

 

18,320

 

18,532

         

Effect of dilutive securities:

        

Employee stock options

 

223

 

183

 

189

 

156

         

Denominator for diluted earnings per share

 

18,593

 

18,719

 

18,509

 

18,688

         

Basic earnings per common share

 

$3.38

 

$1.39

 

$5.68

 

$2.33

         

Diluted earnings per common share

 

$3.33

 

$1.38

 

$5.62

 

$2.31

         



8




3.

Shareholders’ Equity


Pro forma information regarding net income and earnings per share is required by the Financial Accounting Standards Board (FASB) Statements of Financial Accounting Standards No. (SFAS) 123, as amended by SFAS 148, Accounting for Stock-Based Compensation – Transition and Disclosure, and has been determined as if the Company had accounted for its employee stock options under the fair value method of that statement.


The following pro forma information shows the Company’s net income and earnings per basic and diluted share:


  

Three Months Ended

June 30,

 

Six Months Ended

June 30,

  

2003

 

2002

 

2003

 

2002

         

Net income, as reported

 

$62,003 

 

$25,791 

 

$103,998 

 

$43,184 

Deduct:  Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects

 

(304)

 

(659)

 

(691)

 

(1,440)

         

Pro forma net income

 

$61,699 

 

$25,132 

 

$103,307 

 

$41,744 

         

Earnings per share:

        

Basic – as reported

 

$3.38 

 

$1.39 

 

$5.68 

 

$2.33 

Basic – pro forma

 

$3.36 

 

$1.36 

 

$5.64 

 

$2.25 

         

Diluted – as reported

 

$3.33 

 

$1.38 

 

$5.62 

 

$2.31 

Diluted – pro forma

 

$3.32 

 

$1.34 

 

$5.58 

 

$2.23 



4.

Commitments and Contingencies


For additional information, see Pending Legal Proceedings on pages F-31, F-32 and F-33 and Legal Proceedings on pages 15, 16 and 17 of the Form 10-K for the fiscal year ended December 31, 2002, and Legal Proceedings on page 15 of this Form 10-Q.


5.

Exit and Termination Costs


On June 1, 2002, the Company entered into a joint venture agreement with The First American Corporation and combined its real estate valuation operations.  Under the terms of the agreement, the Company contributed its former Primis residential appraisal production division, which it acquired in 2000, to First American’s eAppraiseIT subsidiary.  In connection with the transaction, the Company exited the residential appraisal production business, which had been unprofitable, and recorded a second quarter charge of $14,132 for exit, termination and other costs. This amount was



9




comprised of $4,635 related to lease termination costs, $2,209 related to employee severance costs and a $7,288 write down to estimated net realizable value of assets determined not to be redeployable and other miscellaneous exit costs. Additionally, in the first quarter of 2002, the Company recorded $3,190 of exit and termination costs related to the closing of certain offices and reduction in workforce of its real estate valuation operations.  The original amount accrued was reduced by $3,952 in the fourth quarter of 2002, and $532 in the first and second quarters of 2003.  These reductions were the result of the favorable settlement of real estate, rental and other obligations.  Of the remaining accrual, $10,256 had been paid as of June 30, 2003, leaving $2,582 which the Company expects to be substantially paid by December 31, 2006.


6.

Variable Interest Entities


In January 2003, FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51 (the Interpretation).  The Interpretation requires the consolidation of entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity.  Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity.


The Company is currently evaluating the effects of the issuance of the Interpretation on the accounting for its ownership interest in joint ventures, partnerships, tax advantaged investments and guaranties but does not expect the Interpretation to have a material effect on the financial statements.




10





Item 2.

Management's Discussion and Analysis of Financial

Condition and Results of Operations



Results of Operations


Operating Revenues


Operating revenues for the second quarter of 2003 were $834.3 million compared to $604.0 million in the second quarter of 2002, an increase of 38.1%. Direct revenues increased 50.4% and agency revenues increased 29.2% in the second quarter of 2003 compared to the same period in 2002. The direct revenue improvement reflected a continued increase in the second quarter of 2003 from the already high level of refinancing transactions experienced in the second quarter of 2002. The year over year increase in agency revenue is not as high as the increase in direct revenue due to the typical industry time lag in agents’ reporting business they have written.


Year to date operating revenues for the period ended June 30, 2003 increased 32.6% over the comparable period of 2002. The factors discussed under the quarterly discussion above also affected the first six months of 2003 compared to the same period of 2002, with direct revenues increasing 40.2% and agency revenues increasing 26.7%.


Direct orders opened in company offices totaled 453,500 and 827,500 in the second quarter and first half of 2003, respectively, compared to 240,200 and 477,800 in the comparable periods of 2002. Direct orders closed in company offices totaled 320,400 and 577,600 in the second quarter and first half of 2003 compared to 177,300 and 361,300 in the comparable periods of 2002.  The improvement in 2003 compared to 2002 resulted from the favorable mortgage interest rate environment which strengthened residential refinancings.


Investment Income


Investment income reported for the first six months of 2003 and 2002 was $26.4 million and $25.8 million, respectively.  The amount reported in 2003 reflects earnings on a larger average investment base offset by lower yields compared to 2002.  


Operating Expenses


Operating expenses were $752.2 million in the second quarter of 2003 compared to $577.1 million in the second quarter of 2002.  Operating expenses in the 2002 period included a one-time charge of $14.1 million for exit and termination costs.  This increase of $175.1 million was primarily composed of $85.3 million in agents’ commissions resulting from the increase in agency revenue levels and an increase in effective commission rates from 79.2% to 80.2%.  The provision for losses increased $25.0 million.  The increase was due to the increase in revenue and a higher provision rate in the second quarter of 2003.  The higher provision rate resulted from a higher loss development pattern than had been anticipated for the 2000 and 2001 policy years.  Salaries and employee benefits increased $53.0


11





million and general, administrative and other increased $26.0 million in the second quarter of 2003 over 2002.  These increases were largely related to increased business volume in 2003 compared to 2002.


Operating expenses were $1.4 billion in the first half of 2003 compared to $1.1 billion in the first half 2002.  Operating expenses in the 2002 period included one-time charges of $17.3 million for exit and termination costs.  This increase of $285.0 million was composed primarily of an increase of $146.8 million in agents’ commissions.  Salaries and employee benefits increased $79.8 million, the provision for policy and contract claims increased $37.2 million and general, administrative and other increased $38.7 million in the second quarter of 2003 over 2002.  The factors discussed under the quarterly discussion above also affected the first six months of 2003 compared to the same period in 2002.


Effective May 31, 2002, the Company entered into a joint venture with the First American Corporation, contributing its appraisal production division to the venture.  In connection with this transaction, the Company recorded a one-time charge of $14.1 million as discussed in footnote 5 of the Notes to Consolidated Financial Statements above.


Net Income


The Company recorded net income of $62.0 million or $3.33 per diluted share in the second quarter of 2003, compared to $25.8 million or $1.38 per diluted share in the second quarter of 2002.  On a pretax basis, the 2002 quarter was negatively impacted by a $14.1 million charge for exit and termination costs.


For the first six months of 2003 the Company recorded net income of $104.0 million or $5.62 per diluted share, compared to $43.2 million or $2.31 per diluted share recorded in the first six months of 2002.  On a pretax basis, the 2002 period reflected $17.3 million for exit and termination costs.


Liquidity and Capital Resources


Cash provided by operations in the six month periods ended June 30, 2003 and 2002 was $165.0 million and $74.2 million, respectively.  As of June 30, 2003, the Company held cash and invested cash of  $290.8 million, fixed maturity securities of $1.1 billion and equity investments of $27.6 million.


In February 2003 the board of directors approved a program allocating $40.0 million to repurchase up to 1.25 million shares or 7% of the Company’s outstanding stock over the following twelve months.  Through June 30, 2003, 62,000 shares at a cost of $2.7 million had been repurchased.


On April 25, 2003, the Company entered into an agreement to purchase Orange County Bancorp and its wholly owned subsidiary, Centennial Bank, for $27,600.  The transaction, which is subject to regulatory approval, is anticipated to close in the fourth quarter of 2003.



12





In view of the historic ability of the Company to generate strong, positive cash flows and its strong cash position and relatively conservative capitalization structure, management believes that the Company will have sufficient liquidity and adequate capital resources to meet both its short- and long-term capital needs.  In addition, the Company had $114.5 million available under a credit facility which was unused at June 30, 2003.


Interest Rate Risk


The following table provides information about the Company’s financial instruments that are sensitive to changes in interest rates.  For investment securities, the table presents principal cash flows and related weighted interest rates by expected maturity dates.  Actual cash flows could differ from the expected amounts.






Interest Rate Sensitivity

Principal Amount by Expected Maturity

Average Interest Rate

(dollars in thousands)

  

2003

 

2004

 

2005

 

2006

 

2007

 


2008 and

after

 

Total

 

Fair Value

                 

Assets:

                

Taxable available-for-sale securities:

                

Book value

 

$12,347

 

$20,365

 

$55,717

 

$44,767

 

$52,623

 

$404,980

 

$590,799

 

$629,628

Average yield

 

5.45%

 

5.41%

 

5.68%

 

5.49%

 

5.35%

 

5.17%

 

5.27%

  
                 

Non-taxable available-for-sale securities:

                

Book value

 

4,216

 

20,466

 

21,262

 

14,772

 

18,237

 

327,188

 

406,141

 

435,978

Average yield

 

3.99%

 

3.80%

 

4.40%

 

4.48%

 

4.56%

 

4.49%

 

4.45%

  
                 

Redeemable preferred stock:

                

Book value

 

-

 

-

 

-

 

-

 

-

 

5,831

 

5,831

 

5,878

Average yield

 

-

 

-

 

-

 

-

 

-

 

2.56%

    




The Company also has long-term debt of $189.6 million bearing weighted average interest at 6.46% at June 30, 2003.  A .25% change in the interest rate would affect income before income taxes by approximately $0.5 million annually.


Forward-Looking and Cautionary Statements


Certain information contained in this Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Among other things, these statements relate to the financial condition, results of operation and business of the Company.  In addition, the Company and its representatives may from time to time make written or oral forward-looking statements, including statements contained in other filings with the Securities and Exchange Commission and in its reports to shareholders. These forward-looking statements are generally identified by


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phrases such as “the Company expects,” “the Company believes” or words of similar import.  These forward-looking statements involve certain risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Further, any such statement is specifically qualified in its entirety by the cautionary statements set forth in the following paragraph.


In connection with the title insurance industry in general, factors that may cause actual results to differ materially from those contemplated by such forward-looking statements include the following: (i) the costs of producing title evidence are relatively high, whereas premium revenues are subject to regulatory and competitive restraints; (ii) real estate activity levels have historically been cyclical and are influenced by such factors as interest rates and the condition of the overall economy; (iii) the value of the Company’s investment portfolio is subject to fluctuation based on similar factors; (iv) the title insurance industry may be exposed to substantial claims by large classes of claimants and (v) the industry is regulated by state laws that require the maintenance of minimum levels of capital and surplus and that restrict the amount of dividends that may be paid by the Company’s insurance subsidiaries without prior regulatory appro val.  


The Company cautions that the foregoing list of important factors is not exclusive.  The Company does not undertake to update any forward-looking statement that may be made from time to time by or on behalf of the Company.



Item 3.

Quantitative and Qualitative Disclosures

about Market Risk


The information required by this Item is set forth under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate Risk” in Item 2 of this report.


Item 4.

Controls and Procedures


The Company maintains disclosure controls and procedures that are designed to provide assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods required by the Securities and Exchange Commission.  As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was carried out under the supervision and with the participation of management, including the Company’s Chief Executive Officer and Chief Financial Officer.  Based on and as of the date of such evaluation, the aforementioned officers concluded that the Company’s disclosure controls and procedures were effective.  There have been no significant changes in the Company’s internal controls or in other factors that could materially affect, or are reasonably likely to materially affect, internal controls subsequent to the date of their last evaluation.



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PART II.  OTHER INFORMATION



Item 1.

Legal Proceedings  


With respect to the Attorney General Suit reported in the Company's Form 10-K for the year ended December 31, 2002, the verification process has been completed with no change in the amounts payable by the Company and its subsidiaries under the settlement agreement approved in the final judgment previously entered by the Sacramento Superior Court.


With respect to the Taylor Suit, also reported in the Company's Form 10-K for the year ended December 31, 2002, on May 23, 2003, the parties reached a settlement on materially the same terms as the settlement reached in the Attorney General Suit, but providing for additional cash payments and future discounts to customers and a cash payment of plaintiffs' attorneys' fees and costs.  Management believes the additional amounts payable under the settlement reached in the Taylor Suit are not material.  The parties are in the process of documenting the settlement, which will be subject to court approval.


The settlement of the Attorney General Suit provides, and the settlement of the Taylor Suit will provide, that they do not constitute an admission of liability or wrongdoing by the Company or any of its subsidiaries.


Item 4.

Submission of Matters to a Vote of Security Holders


a)

The Annual Meeting of Shareholders of the Company (the “Meeting”) was held on May 20, 2003.


c)

At the Meeting, the shareholders elected three directors to serve three-year terms. The voting with respect to each nominee was as follows:


     Nominee   

Term

Votes For

Votes Withheld

Broker

Non-Votes

     

Janet A. Alpert

3

15,482,349

373,019

0

Michael Dinkins

3

15,078,598

776,770

0

John P. McCann

3

15,448,036

407,332

0


The terms of office of the following directors continued after the meeting: Robert F. Norfleet, Jr., Julious P. Smith, Jr., Thomas G. Snead, Jr., Eugene P. Trani, Theodore L. Chandler, Jr., Charles H. Foster, Jr., Robert T. Skunda and Marshall B. Wishnack.


No other matters were voted upon at the Meeting or during the quarter for which this report is filed.



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Item 6.

Exhibits and Reports on Form 8-K


a)

Exhibits


Exhibit No.                            Document


10.1

Senior Management Compensation Program Shared Resources for Executive Officers


11

Statement Re:  Computation of Earnings Per Share


31.1

Rule 13a-14(a) Certification of Chief Executive Officer


31.2

Rule 13a-14(a) Certification of Chief Financial Officer


32.1

Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350


32.2

Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350


b)

Reports on Form 8-K


Form 8-K, dated April 23, 2003 and filed April 24, 2003, reporting under Item 12 that the Company issued a press release reporting its financial results for the quarter ended March 31, 2003.




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Signatures


Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




LANDAMERICA FINANCIAL GROUP, INC.    

  (Registrant)






Date:      August 13, 2003

 /s/ Charles H. Foster, Jr.


  Charles H. Foster, Jr.

  Chairman and Chief Executive Officer






Date:       August 13, 2003

 /s/ G. William Evans


  G. William Evans

  Chief Financial Officer







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EXHIBIT INDEX


Exhibit

   No.

Document


10.1

Senior Management Compensation Program Shared Resources for Executive Officers


11

Statement Re: Computation of Earnings Per Share


31.1

Rule 13a-14(a) Certification of Chief Executive Officer


31.2

Rule 13a-14(a) Certification of Chief Financial Officer


32.1

Statement of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350


32.2

Statement of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350





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