LandAmerica Financial Group Inc. (LFG)
reported that weak mortgage activity drove a quarterly net loss of $599.6 million, or $39.45 per share, in its third-quarter earnings statement, released Monday morning. Total revenue decreased by 30.3 percent, and direct revenue from title and non-title commercial operations declined by 40.1 percent -- in other words, it was a pretty bad quarter.
The company reported that it had responded to staggering losses with 60 office closures in the third quarter, bringing the total number of closures to 420 since the beginning of 2007. LandAm also reported cutting its staff levels by 940 full-time employees in the third quarter, bringing the total head count to 5,260 job losses since the beginning of 2007. Read the report.
"We are also further strengthening our reserves by approximately $90 million to account for adverse claims development," said CEO Theodore Chandler Jr. "We continue to aggressively reduce our cost infrastructure to adjust for these exceptionally difficult real estate and credit markets and, as a result, incurred $12 million of exit and termination charges this quarter."
The title operations segment of the company suffered a decline in residential real estate transactions, lower property values and a $19.6 million non-cash impairment of certain securities. The title segment's $217.9 million in non-cash charges included goodwill impairments and other intangibles totaling $137.8 million. Decreased volume of mortgage origination business and loan servicing business also affected LandAm's lender services segment, which reported $74.9 million in non-cash charges for the third quarter.
While the company cut operating and employee costs in the third quarter, the claims provision as a percentage of the title segment's operating revenue totaled 23.5 percent. LandAm obviously needed help, and it came in the form of a mega-merger announced last week with Fidelity National Financial, Inc. (FNF)
Ahead of the merger announcement LandAm had last week delayed the release of its third-quarter earnings report
and canceled the investor call. At the time, the title insurer said it delayed the release "to allow LandAmerica additional time to complete the preparation and review of its financial statements,” but the details did not surface until the next day, when LandAm announced the merger agreement.
“The unprecedented credit freeze and depressed real estate market have negatively impacted our business to the point that it has become increasingly difficult for LandAmerica to remain an independent public company,” Chandler said in a in a press statement Thursday regarding the merger
Diana Golobay at email@example.com
Disclosure: The authors held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.