UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C.  20549





FORM
10-Q





x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934





For the
Quarterly Period Ended March 31, 2008





or





o
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934





For the
transition period from _____________ to _______________





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 incorporation or organization)
            
            (I.R.S.
      Employer Identification No.)5600
      Cox Road
              Glen
      Allen, Virginia
            
            23060(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.





YesxNoo





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.





Large accelerated
      filerx
              Accelerated
      fileroNon-accelerated
      filero
              Smaller reporting
      companyo


Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


YesoNox





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
            15,478,019
      shares
            
            April
      25, 2008





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES








INDEXPage No.PART
      I.  FINANCIAL INFORMATIONITEM
      1.
            CONSOLIDATED
      FINANCIAL STATEMENTS:Consolidated
      Balance Sheets
            3Consolidated
      Statements of Operations
            5Consolidated
      Statements of Cash Flows
            6Consolidated
      Statements of Changes in Shareholders’ Equity
            7Notes
      to Consolidated Financial Statements
            8ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS
            20ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            36ITEM
      4.
            CONTROLS
      AND PROCEDURES
            37PART
      II.  OTHER INFORMATIONITEM
      1.
            LEGAL
      PROCEEDINGS
            37ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            38ITEM
      6.
            EXHIBITS
            38SIGNATURE
            39





2
 PART
I.  FINANCIAL INFORMATION
 
 ITEM
      1.CONSOLIDATED FINANCIAL STATEMENTS


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
millions)





March
      31,
              2008
            
            
            December
      31,
              2007(Unaudited)ASSETSINVESTMENTS:Fixed
      maturities available-for-sale - at fair value
      (amortized cost:  2008 - $1,005.2; 2007 -
      $1,005.3)
            
            $
            1,017.6
            
            
            $
            1,019.1Equity
      securities available-for-sale - at fair value
      (cost:  2008 - $85.2; 2007 -
    $85.6)
            
            
            76.0
            
            
            
            81.1Fixed
      maturities trading – at fair value
            
            
            119.8
            
            
            
            124.5Federal
      funds sold
            
            
            16.4
            
            
            
            59.6Short-term
      investments
            
            
            105.6
            
            
            
            160.3Total
      Investments
            
            
            1,335.4
            
            
            
            1,444.6CASH
            
            
            71.2
            
            
            
            98.2LOANS
      RECEIVABLE
            
            
            645.7
            
            
            
            638.4ACCRUED
      INTEREST RECEIVABLE
            
            
            15.8
            
            
            
            16.8NOTES
      AND ACCOUNTS RECEIVABLE;Notes
      (less allowance for doubtful accounts:  2008 - $1.8; 2007 -
$1.8)
            
            
            22.6
            
            
            
            22.7Trade
      accounts receivable (less allowance for doubtful accounts:  2008
      - $10.8; 2007
      -
      $11.1)
            
            
            134.0
            
            
            
            127.9Total
      Notes and Accounts Receivable
            
            
            156.6
            
            
            
            150.6INCOME
      TAXES RECEIVABLE
            
            
            46.9
            
            
            
            22.7PROPERTY
      AND EQUIPMENT -
      at cost (less accumulated depreciation and amortization:  2008
      - $245.1; 2007
      -
      $233.6)
            
            
            125.1
            
            
            
            133.4TITLE
      PLANTS
            
            
            102.3
            
            
            
            102.4GOODWILL
            
            
            809.1
            
            
            
            809.9INTANGIBLE
      ASSETS (less accumulated amortization:  2008 - $106.4; 2007 -
    $100.1)
            
            
            87.9
            
            
            
            94.4DEFERRED
      INCOME TAXES
            
            
            117.0
            
            
            
            120.1OTHER
      ASSETS
            
            
            235.7
            
            
            
            222.2Total
      Assets
            
            $
            3,748.7
            
            
            $
            3,853.7


See Notes
to Consolidated Financial Statements.
 3


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
millions, except share amounts)








March
      31,
              2008
            
            
            December
      31,
              2007(Unaudited)LIABILITIESPOLICY
      AND CONTRACT CLAIMS
            
            $
            887.0
            
            
            $
            876.5DEPOSITS
            
            
            521.8
            
            
            
            564.5ACCOUNTS
      PAYABLE AND ACCRUED LIABILITIES
            
            
            307.2
            
            
            
            365.3NOTES
      PAYABLE
            
            
            584.0
            
            
            
            579.5DEFERRED
      SERVICE ARRANGEMENTS
            
            
            196.5
            
            
            
            199.9OTHER
      LIABILITIES
            
            
            81.8
            
            
            
            67.3Total
      Liabilities
            
            
            2,578.3
            
            
            
            2,653.0SHAREHOLDERS’
      EQUITYCommon
      stock, no par value, 45,000,000 shares authorized, shares issued and
      outstanding:  2008 - 15,478,019; 2007 –
      15,351,550
            
            
            337.1
            
            
            
            335.4Accumulated
      other comprehensive loss
            
            
            (29.4
            )
            
            
            (26.2
            )Retained
      earnings
            
            
            862.7
            
            
            
            891.5Total
      Shareholders’ Equity
            
            
            1,170.4
            
            
            
            1,200.7Total
      Liabilities and Shareholders’ Equity
            
            $
            3,748.7
            
            
            $
            3,853.7





See Notes
to Consolidated Financial Statements.
 4


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS


THREE
MONTHS ENDED MARCH 31, 2008 AND 2007


(In
millions, except per share amounts)


(Unaudited)





2008
            
            
            2007REVENUEOperating
      revenue
            
            $
            656.2
            
            
            $
            911.3Investment
      and other income
            
            
            30.3
            
            
            
            30.3Net
      realized investment (losses) gains
            
            
            (0.1
            )
            
            
            7.0686.4
            
            
            
            948.6EXPENSESAgents’
      commissions
            
            
            259.8
            
            
            
            340.4Salaries
      and employee benefits
            
            
            228.8
            
            
            
            307.8General,
      administrative and other
            
            
            152.4
            
            
            
            186.8Provision
      for policy and contract claims
            
            
            57.1
            
            
            
            56.0Depreciation
      and amortization
            
            
            16.0
            
            
            
            16.8Interest
      expense
            
            
            12.3
            
            
            
            12.7Impairment
      of intangible and long-lived assets
            
            
            -
            
            
            
            20.8726.4
            
            
            
            941.3(LOSS)
      INCOME BEFORE INCOME TAXES
            
            
            (40.0
            )
            
            
            7.3INCOME
      TAX (BENEFIT) EXPENSE
            
            
            (15.8
            )
            
            
            2.6NET
      (LOSS) INCOME
            
            $
            (24.2
            )
            
            $
            4.7NET
      (LOSS) INCOME PER SHARE
            
            $
            (1.60
            )
            
            $
            0.27WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
            
            
            15.1
            
            
            
            17.2NET
      (LOSS) INCOME PER SHARE ASSUMING DILUTION
            
            $
            (1.60
            )
            
            $
            0.26WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING ASSUMING DILUTION
            
            
            15.1
            
            
            
            18.0CASH
      DIVIDENDS DECLARED PER SHARE
            
            $
            0.30
            
            
            $
            0.22





See Notes
to Consolidated Financial Statements.
 5


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


THREE
MONTHS ENDED MARCH 31, 2008 AND 2007


(In
millions)


(Unaudited)





2008
            
            
            2007Cash
      flows from operating activities:Net (loss)
income
            
            $
            (24.2
            )
            
            $
            4.7Adjustments
      to reconcile net (loss) income to cash provided by operating
      activities:Depreciation
      and amortization
            
            
            16.0
            
            
            
            16.8Amortization
      of bond premium
            
            
            1.2
            
            
            
            1.5Impairment
      of intangible and long-lived assets
            
            
            -
            
            
            
            20.8Net
      realized investment losses (gains)
            
            
            0.1
            
            
            
            (7.0
            )Net
      change in fair value of trading securities
            
            
            4.2
            
            
            
            (9.6
            )Deferred
      income tax expense (benefit)
            
            
            2.5
            
            
            
            (7.5
            )Change
      in assets and liabilities, net of businesses acquired:Accounts
      and notes receivable
            
            
            (5.6
            )
            
            
            10.2Income
      taxes receivable/payable
            
            
            (22.3
            )
            
            
            47.0Accounts
      payable and accrued expenses
            
            
            (57.0
            )
            
            
            11.6Pending
      trades of trading securities, net
            
            
            2.3
            
            
            
            27.1Policy
      and contract claims
            
            
            10.5
            
            
            
            11.3Deferred
      service arrangements
            
            
            (3.4
            )
            
            
            (12.3
            )Other
            
            
            0.3
            
            
            
            4.6Net
      cash (used in) provided by operating activities
            
            
            (75.4
            )
            
            
            119.2Cash
      flows from investing activities:Purchases
      of title plant, property and equipment
            
            
            (3.4
            )
            
            
            (6.7
            )Purchases
      of businesses, net of cash acquired
            
            
            -
            
            
            
            (5.8
            )Change
      in short-term investments
            
            
            54.7
            
            
            
            142.3Cost
      of investments acquired:Fixed
      maturities available-for-sale
            
            
            (57.0
            )
            
            
            (82.5
            )Equity
      securities available-for- sale
            
            
            (3.2
            )
            
            
            (21.0
            )Proceeds
      from investment sales or maturities:Fixed
      maturities available-for-sale
            
            
            59.6
            
            
            
            128.9Equity
      securities available-for-sale
            
            
            6.2
            
            
            
            27.3Net
      change in federal funds sold
            
            
            43.2
            
            
            
            (227.7
            )Change
      in loans receivable
            
            
            (7.5
            )
            
            
            (26.7
            )Other
            
            
            (1.4
            )
            
            
            (0.8
            )Net
      cash provided by (used in) investing activities
            
            
            91.2
            
            
            
            (72.7
            )Cash
      flows from financing activities:Net
      change in deposits
            
            
            (42.7
            )
            
            
            157.6Proceeds
      from the exercise of stock options and incentive plans
            
            
            -
            
            
            
            1.0Tax
      benefit of stock options exercised
            
            
            -
            
            
            
            0.6Cost
      of shares repurchased
            
            
            -
            
            
            
            (39.9
            )Dividends
      paid
            
            
            (4.6
            )
            
            
            (3.9
            )Proceeds
      from issuance of notes payable
            
            
            54.0
            
            
            
            0.2Payments
      on notes payable
            
            
            (49.5
            )
            
            
            (114.4
            )Net
      cash (used in) provided by financing activities
            
            
            (42.8
            )
            
            
            1.2Net
      (decrease) increase in cash
            
            
            (27.0
            )
            
            
            47.7Cash
      at beginning of period
            
            
            98.2
            
            
            
            82.5Cash
      at end of period
            
            $
            71.2
            
            
            $
            130.2Supplemental
      cash flow information:Non-cash investing activities –
      transfer of fixed maturities from available-for-sale to
      trading
            
            $
            -
            
            
            $
            142.6Pending purchases of fixed
      maturities available-for-sale
            
            
            13.9
            
            
            
            17.0Pending sales of fixed maturities
      available-for-sale
            
            
            8.2
            
            
            
            16.6


See Notes
to Consolidated Financial Statements.
 6


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


THREE
MONTHS ENDED MARCH 31, 2008 AND 2007


(In
millions, except per share amounts)


(Unaudited)











Common Stock
            
            
            Accumulated
      Other Comprehensive
            
            
            Retained
            
            
            Total
      Shareholders’Shares
            
            
            Amounts
            
            
            Income (Loss)
            
            
            Earnings
            
            
            EquityBALANCE
      – December 31, 2006
            
            
            17.6
            
            
            $
            465.3
            
            
            $
            (32.2
            )
            
            $
            962.7
            
            
            $
            1,395.8Comprehensive
      income:Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            4.7
            
            
            
            4.7Other
      comprehensive (loss) income:Net
      unrealized loss on securities – net of tax benefit of $1.3
            
            
            -
            
            
            
            -
            
            
            
            (2.2
            )
            
            
            -
            
            
            
            (2.2
            )Amortization
      of minimum pension liability – net of tax expense of $0.5
            
            
            -
            
            
            
            -
            
            
            
            0.9
            
            
            
            -
            
            
            
            0.93.4Common
      stock retired
            
            
            (0.6
            )
            
            
            (39.9
            )
            
            
            -
            
            
            
            -
            
            
            
            (39.9
            )Stock
      options and incentive plans
            
            
            0.2
            
            
            
            5.3
            
            
            
            -
            
            
            
            -
            
            
            
            5.3Common
      dividends ($0.22/share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (3.9
            )
            
            
            (3.9
            )BALANCE
      – March 31, 2007
            
            
            17.2
            
            
            $
            430.7
            
            
            $
            (33.5
            )
            
            $
            963.5
            
            
            $
            1,360.7BALANCE
      – December 31, 2007
            
            
            15.3
            
            
            $
            335.4
            
            
            $
            (26.2
            )
            
            $
            891.5
            
            
            $
            1,200.7Comprehensive
      loss:Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (24.2
            )
            
            
            (24.2
            )Other comprehensive (loss)
      income:Net unrealized loss on
      securities, net of tax benefit of $2.1
            
            
            -
            
            
            
            -
            
            
            
            (4.0
            )
            
            
            -
            
            
            
            (4.0
            )Postretirement benefits liability
      adjustment, net of tax expense of $0.4
            
            
            -
            
            
            
            -
            
            
            
            0.7
            
            
            
            -
            
            
            
            0.7Foreign currency
      translation
            
            
            -
            
            
            
            -
            
            
            
            0.1
            
            
            
            -
            
            
            
            0.1(27.4
            )Stock
      options and incentive plans
            
            
            0.2
            
            
            
            1.7
            
            
            
            -
            
            
            
            -
            
            
            
            1.7Common
      dividends ($0.30/share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (4.6
            )
            
            
            (4.6
            )BALANCE
      – March 31, 2008
            
            
            15.5
            
            
            $
            337.1
            
            
            $
            (29.4
            )
            
            $
            862.7
            
            
            $
            1,170.4











See Notes
to Consolidated Financial Statements.
 7


LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS








1.
            INTERIM
      FINANCIAL INFORMATION





The accompanying unaudited consolidated
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial information and
with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X.  They do not include all information and notes required by
generally accepted accounting principles for complete financial
statements.  These statements should be read in conjunction with the
Consolidated Financial Statements and notes thereto included in the Annual
Report on Form 10-K of LandAmerica Financial Group, Inc. for the year ended
December 31, 2007.  In the opinion of management, all adjustments
(consisting of normal and recurring adjustments) considered necessary for a fair
presentation of this information have been reflected.  Due to the
seasonal nature of our business, operating results for the interim periods are
not necessarily indicative of results for a full year.  Certain
prior year amounts have been reclassified to conform to the current year
presentation.





When used in these notes, the terms
“LandAmerica,” “we,” “us” or “our” means LandAmerica Financial Group, Inc. and
all entities included in our Consolidated Financial Statements.





Recently
Adopted Accounting Standards





In March 2007, the Financial Accounting
Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No.
06-10, Accounting for
Collateral Assignment Split-Dollar Life Insurance Arrangements (“EITF No.
06-10”).  EITF No. 06-10 requires an employer to recognize a liability
for the post-retirement benefit related to a collateral assignment split-dollar
life insurance arrangement in accordance with either Statement of Financial
Accounting Standard (“SFAS”) 106 or Accounting Principles Board (“APB”) Opinion
No. 12 if the employer has agreed to maintain a life insurance policy during the
employee’s retirement or provide the employee with a death
benefit.  EITF No. 06-10 also requires an employer to recognize and
measure an asset based on the nature and substance of the collateral assignment
split-dollar life insurance arrangement.  We adopted EITF No. 06-10 as
of January 1, 2008 which did not have a material effect on our financial
statements.





In September 2006, FASB issued SFAS No.
157, Fair Value Measurements(“SFAS 157”).  SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. We adopted the provisions
of SFAS 157 for financial assets and liabilities, as well as for any other
assets and liabilities that are carried at fair value on a recurring basis in
the financial statements as of January 1, 2008.  For further
discussion see, Note 3, “Investments.”  In February 2008, the FASB
issued Staff Position No. 157-2, Effective Date of FASB Statement No.
157 (“FSP 157-2”).  FSP 157-2 delayed the effective date of
SFAS 157 for all non financial assets


8


and
liabilities to January 1, 2009.  We are evaluating the effect of
adopting SFAS 157 on our financial statements for non financial assets and
liabilities.





Recently
Issued Accounting Standards





In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities(“SFAS 161”).  SFAS 161
amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”).  It requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments and disclosures about credit-risk-related contingent
features in derivative agreements.  This statement is effective for us
beginning after January 1, 2009.  We do not believe the effect of
adopting SFAS 161 will have a material effect on our financial
statements.





2.
            EARNINGS
      PER SHARE





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




Three
      Months Ended March 31,2008
              
              
              2007(In
      millions, except per share amounts)Numerator:Net
      (loss) income for basic and diluted earnings per share
              
              $
              (24.2
              )
              
              $
              4.7Denominator:Weighted average shares for
      basic earnings per share
              
              
              15.1
              
              
              
              17.2Effect of dilutive
      securities:Convertible
debt
              
              
              -
              
              
              
              0.6Employee stock options and
      restricted stock
              
              
              -
              
              
              
              0.2Denominator for diluted
      earnings per share
              
              
              15.1
              
              
              
              18.0Basic
      (loss) earnings per share
              
              $
              (1.60
              )
              
              $
              0.27Diluted
      (loss) earnings per share
              
              $
              (1.60
              )
              
              $
              0.26





For the three months ended March 31,
2008, 0.1 million shares, representing all potential dilutive shares for the
period, were excluded from the diluted share total due to the net loss for the
period.





9


3.           INVESTMENTS





In September 2006, FASB issued SFAS No.
157, Fair Value Measurements(“SFAS 157”).  SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. We adopted the provisions
of SFAS 157 for financial assets and liabilities, as well as for any other
assets and liabilities that are carried at fair value on a recurring basis in
the financial statements as of January 1, 2008.





Under SFAS 157, fair value is defined
as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date.  In accordance with SFAS 157, we have categorized
our financial instruments, based on the quality and reliability of inputs to the
valuation, into the following fair value hierarchy:





·
            Level
      1 – inputs to the valuation methodology are quoted prices (unadjusted) for
      identical assets or liabilities in active
  markets





·
            Level
      2 – inputs to the valuation methodology include observable market based
      inputs or unobservable inputs that are corroborated by market data (quoted
      prices for similar assets and liabilities in active markets; quoted prices
      for identical or similar instruments in markets that are not active;
      market-corroborated inputs, etc)





·
            Level
      3 – inputs to the valuation methodology are
  unobservable





A financial instrument’s categorization
within the valuation hierarchy is based upon the lowest level of input that is
significant to the fair value measurement. Changes in the observable or
unobservable attributes of valuation inputs may result in a future
reclassification between hierarchy levels.





Our financial instruments in Level 1
generally include U.S. treasuries and equities listed in active
markets.  Level 2 generally includes U.S. government corporations and
agency bonds, municipal bonds, certain corporate debt, mandatory redeemable
preferred stock and certain mortgage and asset-backed
securities.  Level 2 financial instruments are valued based on
relevant factors, including dealer price quotations, price activity for
equivalent instruments and valuation pricing models.  Valuation
pricing models are primarily industry-standard models that consider various
assumptions, including time value, yield curve, benchmark yields, volatility
factors, prepayment speeds, default rates, loss severity, current market and
contractual prices for the underlying or similar financial instruments, as well
as other relevant economic measures.  Substantially all of these
assumptions are observable in the marketplace or can be derived or supported by
observable market data.  We do not have any Level 3 financial
instruments as of March 31, 2008.





10


The following table presents the fair
value hierarchy for financial instruments measured at fair value on a recurring
basis as of March 31, 2008.




Fair
      Value Measurements
                at March 31, 2008 UsingTotal
              
              
              Level 1
              
              
              Level 2(In
      millions)Assets:Fixed
      maturities trading
              
              $
              119.8
              
              
              $
              -
              
              
              $
              119.8Available-for-sale
      securitiesFixed
    maturities
              
              
              1,017.6
              
              
              
              41.6
              
              
              
              976.0Equity
              
              
              76.0
              
              
              
              76.0
              
              
              
              -Total
              
              $
              1,213.4
              
              
              $
              117.6
              
              
              $
              1,095.8







Holding losses of $0.8 million on
trading fixed maturities were recorded in net realized investment gains within
the statement of operations for the period ended March 31, 2008.





4.           INCOME
TAXES





Our effective income tax rate was 39.5%
for first quarter 2008 and 36.1% for first quarter 2007. The difference in the
effective tax rate was due primarily to favorable permanent differences relative
to the pretax loss and an increase in the state tax rate.





As a result of an audit of the 2003 to
2004 tax years, the Internal Revenue Service (“IRS”) has proposed certain
adjustments relating to our tax treatment of agency
revenue.  Currently, revenue from title policies issued through
independent agents is recognized when the policies are reported by the agent for
book and tax purposes.  The IRS believes we are required to estimate
the income and commissions associated with the sale of policies by agents during
the tax year.  The effect of this proposed adjustment would be an
increase in the current tax liability and an increase in deferred tax assets of
$35 million.  However, we are disputing the proposed adjustment as we
continue to believe that our tax treatment of these transactions is correct and
we believe we will prevail in any dispute with the IRS related to this
matter.  Accordingly, no interest or penalties have been accrued for
this proposed IRS adjustment as of March 31, 2008.  We expect to
defend the matter vigorously through the IRS appeal process and, if necessary,
through litigation.  We do not expect that the ultimate resolution of
this matter will have a material adverse effect on our financial condition or
results of operations.





Since December 31, 2007, there have
been no events that have had a material impact on our tax accounts.





11


5.
            POLICY
      AND CONTRACT CLAIMS





A summary of our policy and contract
claims, broken down into its components of known claims and incurred but not
reported claims (“IBNR”) follows:





March 31, 2008
            
            
            December 31, 2007(Dollars
      in millions)Known
      claims
            
            $
            178.1
            
            
            
            20.1
            %
            
            $
            165.8
            
            
            
            18.9
            %IBNR
            
            
            708.9
            
            
            
            79.9
            
            
            
            710.7
            
            
            
            81.1Total
      policy and contract claims
            
            $
            887.0
            
            
            
            100.0
            %
            
            $
            876.5
            
            
            
            100.0
            %





We review
our claims experience quarterly and evaluate the adequacy of our claims
reserve.  We consider factors such as historical timing of reported
claims and historical timing of claims payments against actual experience by
year of policy issue to determine the amount of claims liability required for
each policy year.  We also consider the impact of current trends in
marketplace activity, including refinance activity (which may shorten the time
period a policy is outstanding), bankruptcies and individual large claims
attributable to any particular period in determining the expected liability
associated with each year.





Based on
our quarterly review of the underlying claims data and trends therein, we have
provided for claims losses using approximately 9.7 percent and 6.5 percent of
operating revenue from the Title Operations segment for the first quarters of
2008 and 2007, respectively.  The increase in the claims provision
ratio in first quarter 2008 was primarily due to approximately $12 million of
increased individual claims over $1 million (“large claims”).  This
large claims activity related primarily to the 2004, 2006 and 2007 policy
years.  Since we are subject to liability on claims for an extended
period of time, slight changes in current claims experience can have a
significant effect on the amount of liability required for potential IBNR
claims.  We believe that we have reserved appropriately for all
reported and IBNR claims at March 31, 2008 based on the results of our
evaluation of claims data and any known trend.





12


6.
            PENSIONS
      AND OTHER POST-RETIREMENT BENEFITS





The following presents the estimated
net pension expense recorded in the financial statements for the three months
ended March 31, 2008 and 2007.





The amounts are as
follows:





Three
      Months Ended March 31,Pension
      Benefits
            
            
            Other
      Benefits2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      millions)Components
      of net pension (income) expense:Service
      cost
            
            $
            -
            
            
            $
            -
            
            
            $
            0.2
            
            
            $
            0.3Interest
      cost
            
            
            3.4
            
            
            
            3.6
            
            
            
            0.7
            
            
            
            0.7Expected
      return on plan assets
            
            
            (4.2
            )
            
            
            (4.7
            )
            
            
            -
            
            
            
            -Recognized
      loss
            
            
            1.1
            
            
            
            1.5
            
            
            
            -
            
            
            
            -Net
      pension expense
            
            $
            0.3
            
            
            $
            0.4
            
            
            $
            0.9
            
            
            $
            1.0





On
December 31, 2004, we froze the accumulation of benefits available under our
principal pension plan.





7.
            COMMITMENTS
      AND CONTINGENCIES





General





We
believe that the pending legal proceedings listed below are the only ones we are
involved in that depart from customary actions arising in the ordinary course of
our business.  Pending legal proceedings are subject to many
uncertainties and complexities, including but not limited to: the underlying
facts of each matter; variations between jurisdictions in which matters are
being litigated; differences in applicable laws and judicial interpretations;
the length of time before many of these matters might be resolved by settlement
or through litigation; the timing and structure of their resolution relative to
other similar cases brought against other companies; the fact that many of these
matters are putative class actions in which a class is not clearly defined and
has not been certified; the fact that many of these matters involve multi-state
class actions in which the applicable laws for the claims at issue are in
dispute and therefore unclear; and the current challenging legal environment
faced by large corporations and insurance companies.  For the reasons
specified herein, at this stage of the litigation, the amount or range of loss
that could result from an unfavorable outcome cannot be reasonably estimated,
except with respect to a reserve of $10 million established during third quarter
2007 in connection with the “Henderson Suit” and the “Alberton Suit” (both as
hereinafter defined).





Litigation
Not in the Ordinary Course of Business





On January 25, 2002, Miles R. Henderson
and Patricia A. Henderson (“Plaintiffs in the Henderson Suit”) filed a putative
class action suit (the “Henderson Suit”) against Lawyers Title


13


Insurance
Corporation (“Lawyers Title”) in the Court of Common Pleas for Cuyahoga County,
Ohio.  Lawyers Title removed the case to the District Court for the
Northern District of Ohio on March 6, 2002 and Plaintiffs in the Henderson Suit
amended the complaint on March 8, 2002.  On June 28, 2002, the
District Court remanded the case to the Court of Common Pleas for Cuyahoga
County, Ohio.  A similar putative class action suit was filed against
Commonwealth, by Rodney P. Simon and Tracy L. Simon (“Plaintiffs in the Simon
Suit”) in the Court of Common Pleas for Cuyahoga County, Ohio on March 5,
2003.  Plaintiffs’ complaints in both suits alleged that the
defendants charged original rates for owners’ title insurance policies instead
of a lower, reissue rate for which the customers were eligible.  Both
defendants moved to compel arbitration of the Plaintiffs’ claims, but lost the
motion in both the trial court and on appeal to the Ohio Supreme
Court.  On remand to the trial court, Plaintiffs in the Henderson Suit
are now seeking to have the case certified as a class action on behalf of all
sellers and buyers of residential property in Ohio who paid the higher original
rate from 1992 to the present.  Plaintiffs in the Simon Suit are
seeking to have the case certified as a class action on behalf of all sellers of
residential property in Ohio, who paid the original rate from 1993 to the
present, as requested in the original complaint.  Plaintiffs’
complaints in both cases demand an unspecified amount of compensatory damages,
declaratory and injunctive relief, punitive damages and attorneys’ fees and
costs.  In December 2007, a voluntary mediation was held in the
Henderson Suit and the parties agreed in principle on several key terms of a
settlement that is within the reserve established during third quarter
2007.  The parties are attempting to finalize their
agreement.  A class certification hearing will be scheduled should
they be unable to do so.  No hearing date on the Motion for Class
Certification filed by the Plaintiffs in the Simon Suit has been
scheduled.  Should further litigation prove necessary, defendants
believe that they have meritorious defenses.





On September 20, 2004, Kenneth and
Deete Higgins (“Plaintiffs in the Higgins Suit”) filed a putative class action
suit (the “Higgins Suit”) against Commonwealth Land Title Insurance Company
(“Commonwealth”) in the Circuit Court of Nassau County, Florida.  On
February 3, 2005, Plaintiffs in the Higgins Suit filed an Amended Class Action
Complaint.  Plaintiffs in the Higgins Suit allege that Commonwealth
charged refinance borrowers higher basic rates for title insurance, rather than
the lower reissue rates for which they are alleged to have
qualified.  The Amended Class Action Complaint also states that
Commonwealth failed to disclose the potential availability of the lower rates to
customers.  Plaintiffs in the Higgins Suit seek to have the case
certified as a class action on behalf of all Florida persons or entities who
refinanced their mortgages or fee interests on the identical premises from July
1, 1999 to the present where there was no change in the fee ownership and who
were charged a premium in excess of the reissue premium.  Plaintiffs’
complaints in the Higgins Suit demand an unspecified amount of compensatory
damages, declaratory relief, attorneys’ fees, costs and pre-judgment
interest.  Initial discovery has been exchanged between the
parties.  Commonwealth objected to discovery requests made by
Plaintiffs in the Higgins Suit on the basis that they were overly broad and
burdensome.  Commonwealth also objected to answering interrogatories
and producing documents in the possession of its agents.  Plaintiffs
in the Higgins Suit moved to compel this discovery, which motion was granted by
the trial court.  Commonwealth filed a Petition for Writ of Certiorari
to the First District Court of Appeal to overturn the trial court’s
ruling.  On March 6, 2008, the appellate court vacated the trial
court’s order compelling discovery.  It held that a defendant could
not be required to produce such burdensome discovery prior to certification of
a


14


class.  The
parties are currently negotiating the scope of discovery in light of the
appellate court’s ruling. No motion for class certification has been filed to
date and Commonwealth believes it has meritorious defenses.





On July 24, 2006, A. D. Alberton
(“Plaintiff in the Alberton Suit”) filed a putative class action suit (the
“Alberton Suit”) against Commonwealth which is currently pending in the United
States District Court for the Eastern District of Pennsylvania.  A
similar putative class action suit was filed against Lawyers Title by Shariee L.
De Cooman (“Plaintiff in the De Cooman Suit”) in the Court of Common Pleas of
Allegheny County, Pennsylvania on or about August 12, 2005.  On
November 1, 2005, Plaintiff in the De Cooman Suit filed an Amended
Complaint.  Plaintiff’s complaint in the Alberton Suit alleges that
Commonwealth charged rates for title insurance in excess of statutorily mandated
rates and/or failed to disclose to consumers that they were entitled to reduced
title insurance premiums.  The Alberton Suit seeks to certify a class
on behalf of all consumers who paid premiums for the purchase of title insurance
on Pennsylvania properties from Commonwealth at any time from January 2000 until
August 2005 and did not receive a discounted refinance or reissue rate for which
they qualified.  Plaintiff’s complaint in the De Cooman Suit alleges
that Lawyers Title charged the basic rate rather than a reissue or discounted
rate to certain consumers.  The DeCooman Suit seeks to certify a class
on behalf of all owners of residential real estate in Pennsylvania who, at any
time during the ten years prior to August 12, 2005 paid premiums for the
purchase of title insurance from Lawyers Title, qualified for a reissue or other
discounted rate and did not receive such rate.  A class certification
hearing in the Alberton Suit was held on October 16, 2007.  On January
31, 2008, the court issued an order granting in part the motion of Plaintiff in
the Alberton Suit for class certification and certifying a class of all persons
who from July 25, 2000 until August 1, 2005 paid premiums for the purchase of
title insurance from Commonwealth in connection with a refinance of a mortgage
or fee interest on Pennsylvania properties that were insured by a prior title
insurance policy within ten years of the refinance transaction and were not
charged the applicable reissue rate or refinance rate discount for title
insurance on file with the Pennsylvania Insurance Commissioner.  A
class certification hearing in the De Cooman Suit was held on October 9,
2007.  Plaintiff’s complaint in the Alberton Suit demands an
unspecified amount of compensatory damages, declaratory relief, triple damages,
restitution, pre-judgment and post-judgment interest and expert fees, attorneys’
fees and costs.  Plaintiff’s complaint in the De Cooman Suit demands
an unspecified amount of compensatory damages, punitive damages, triple damages,
prejudgment interest and attorneys’ fees, litigation expenses and
costs.  The defendants believe they have meritorious
defenses.





We are defendants in a number of other
purported class action cases pending in various states that include allegations
that certain consumers were overcharged for title insurance and/or related
services. We are also defendants in multiple purported class action cases
pending in federal district courts around the country alleging various federal
antitrust violations, additional claims for violations of the Real Estate
Settlement Procedures Act, unfair and deceptive trade practices and unjust
enrichment as well as other causes of action related to the ratemaking
activities of title insurance companies, with a motion for consolidation of
those actions to the Southern District of New York currently pending before the
Judicial Panel on Multi-District


15


Litigation.  The
dollar amount of damages sought has generally not been specified in these cases
except for jurisdictional limits.  We intend to vigorously defend
these actions.





Regulatory
Proceedings





We have
received certain information requests and subpoenas from various regulatory
authorities relating to our business practices and those of the title insurance
industry.  We may receive additional subpoenas and/or requests for
information in the future from state or federal government
agencies.  We will evaluate, and we intend to cooperate in connection
with, all such subpoenas and requests.





Various
government entities are studying the title insurance product, market, pricing,
business practices and potential regulatory and legislative
changes.  On March 14, 2008, the Department of Housing and Urban
Development published, subject to a 60-day public comment period, proposed
modifications to the Real Estate Settlement Procedures Act that could increase
the title insurance industry’s cost of doing business.  Multiple
states, including California, Florida, New Mexico, New York, Texas and
Washington, are examining pricing levels and/or title insurance
regulations.  If it is determined that prices are not justified, rate
changes may be implemented, including potential rate reductions.





Some of
the pricing examinations, like those conducted in Texas and New Mexico, are
conducted annually or biannually and usually result in adjustments to the prices
we can charge.  The Texas Commissioner of Insurance issued a Consent
Order on February 25, 2008 agreeing to settle the ratemaking phase of the 2006
Texas Title Insurance Biennial Hearing with no change to current
rates.





Subsequent
to a hearing of the New Mexico title rate case for 2006, which concluded on
January 18, 2007, the New Mexico Superintendent of Insurance (the
“Superintendent”) issued an order on July 20, 2007 (the “Final Order”) mandating
a rate reduction of 6.36 percent and a change in the agent/underwriter split
from 80/20 to 84.2/15.8 effective September 1, 2007.  The New Mexico
Land Title Association (the “NMLTA”) filed a Motion for Reconsideration with the
Superintendent on August 3, 2007.  The NMLTA also filed a Request for
Review of Superintendent’s Final Order, a stay and hearing by the New Mexico
Public Regulatory Commission (the “Commission”).  Various underwriters
also filed an appeal to the Commission.  On August 28, 2007, the
Superintendent issued an Order denying the NMLTA’s Motion for Reconsideration
and granting the stay request until the Commission completed its review of the
case with a requirement that the rate differential be escrowed during the stay
and a notice of potential refund be provided to consumers.  The
Commission upheld the Final Order on March 6, 2008.  On April 4, 2008,
the NMLTA and various underwriters jointly filed a notice of appeal to the New
Mexico district court, with further appellate review available up to the New
Mexico Supreme Court.  Prior to the notice of appeal, the Commission
granted an order continuing the stay of the Final Order and the escrow of the
rate differential.  On March 5, 2008, the Superintendent issued an
order on the completed title rate case for 2007 which ordered a 3.1% decrease
from the rates ordered in July 2006 and restored the agent/underwriter split to
80/20.  Although an appeal of a portion of the order was filed, no
appeal was filed to the rate decrease or


16


the
change in the split, which will take effect July 1, 2008.  The New
Mexico Division of Insurance has also called a hearing on May 14, 2008 to
consider expanding its statistical plan to gather additional information on
title insurers and agents for rate-making purposes.





The California Department of Insurance
(“CA DOI”) submitted to the Office of Administrative Law (“OAL”) proposed
regulations governing the rating of title insurance and related services that
could impose future rate reductions and filing of mandated statistical plans
that impose substantially higher costs on title insurance operations in
California.  On February 21, 2007, OAL disapproved the regulatory
action for failure to comply with certain standards and requirements and on
February 28, 2007 issued a written decision detailing the reasons for
disapproval. On June 28, 2007, CA DOI submitted revised regulations to OAL that
were approved by OAL on July 25, 2007 and subsequently released by the
California Secretary of State.  The date for compliance with the
requirements of the regulations varies by provision during 2009 and
2010.  LandAmerica and other title companies doing business in the
California market have been engaged in discussions with CA DOI regarding
alternative approaches to the regulations but may pursue an appeal if such
discussions are unsuccessful.  The Commissioner of CA DOI has agreed
to propose substantial changes to the data call (i.e. a request to submit
information for the insurance experience) and statistical plan portion of the
regulations to simplify them and minimize compliance costs, including delaying
the effective dates by one year, through a new rulemaking file.  The
Commissioner has committed further to (i) eliminate the interim rate reduction
if the industry helps CA DOI obtain an alternative method to enforce the data
call and (ii) eliminate the maximum rate formula if the industry works with CA
DOI to enact substantive alternate reforms.  An External Title
Insurance Working Group is working directly with CA DOI on these
matters.





Based on the information known to
management at this time, it is not possible to predict the outcome of any of the
currently pending governmental inquiries and investigations into the title
insurance industry’s market, business practices, pricing levels and other
matters, or the market’s response thereto.  However, any material
change in our business practices, pricing levels, or regulatory environment may
have an adverse effect on our business, operating results and financial
condition.





Other
Commitments and Guarantees





We had guarantees of indebtedness of
others of approximately $2.0 million at March 31, 2008 and approximately $2.1
million at December 31, 2007.





Like-Kind
Exchanges





We facilitate tax-deferred property
exchanges for customers pursuant to Section 1031 of the Internal Revenue Code
(“like-kind” exchanges).  As a facilitator and intermediary, we hold
the proceeds from sales transactions until a qualified property acquisition
occurs.  These deposits totaled $1,862.0 million and $863.2 million at
March 31, 2008 and December 31, 2007, respectively.  Like-kind
exchange funds held on deposit at Centennial and included in
the


17


accompanying
consolidated balance sheet were $74.3 million and $131.9 million at March 31,
2008 and December 31, 2007, respectively.  Due to the structure
utilized to facilitate these transactions, reverse exchanges and like-kind
exchanges not held at Centennial are not considered our assets and are not
included in the accompanying consolidated balance sheets; however, we remain
obligated for the disbursement of proceeds and the return on the proceeds at the
agreed upon interest rate.





Like-kind exchange funds not held at
Centennial are invested in short-term treasury funds or in high quality,
short-term commercial paper, including $290.5 million of auction rate securities
(“ARS”) at March 31, 2008.  ARS are structured to provide liquidity
through a Dutch auction process by allowing existing investors to either
rollover their holdings, whereby they would continue to own their respective
securities, or liquidate their holdings by selling such securities at
par.  Historically, the fair value of auction rate securities
approximated par value due to the frequent resets through the auction rate
process.  As a result of liquidity issues in the global credit and
capital markets, the auctions for our ARS failed beginning February 2008 when
sell orders exceeded buy orders. Our portfolio of ARS is comprised entirely of
student loan ARS of which 99.1% is guaranteed by government-sponsored
enterprises. As of March 31, 2008, these investments were rated “A” or
higher.  We believe the failures of these auctions do not affect the
value of the collateral underlying the ARS and we continue to earn and receive
interest on our ARS at contractually set rates. However, we have liquidity
exposure to these securities to the extent that we would be required to utilize
these securities to satisfy the purchase of properties.  Based on the
credit quality of the underlying securities and the amount of funds we have
historically held, we believe the risk of loss will not have a material adverse
effect on our financial position or results of operations.





8.
            IMPAIRMENT
      OF INTANGIBLE AND LONG-LIVED ASSETS





In first quarter 2007, we became aware
that one of our tax and flood processing customers, Fremont General Corporation,
received a cease and desist order from the Federal Deposit Insurance Corporation
relating to lending practices in its mortgage origination
business.  As a result of the probable loss of business from this
customer, we conducted an impairment test of LandAmerica Tax and Flood Services,
Inc.’s (“Tax & Flood”) customer relationship intangible asset in accordance
with SFAS No. 144, Accounting
for the Impairment or Disposal of Long-Lived Assets, and we determined it
was impaired.  We recorded a customer relationship intangible
impairment charge of $20.8 million which was reflected in our first quarter 2007
results of operations.





9.           SEGMENT
INFORMATION





We are engaged in the business of
providing title insurance as well as a broad array of real estate transaction
services through our subsidiaries.  We have three reporting segments
that fall within three primary business segments: Title Operations, Lender
Services and Financial Services.  The remaining immaterial businesses
have been combined into a category called Corporate and Other.


18


Title Operations includes residential
and commercial title insurance business, escrow and closing services, commercial
real estate services and other real estate transaction management
services.





Lender Services provides services to
national and regional mortgage lenders consisting primarily of mortgage
origination (e.g. real estate transaction management services, consumer mortgage
credit reporting, flood zone determinations, residential appraisal and valuation
services, etc.), loan servicing (e.g. real estate tax processing and default
management) and loan subservicing.





Financial Services consists of
Centennial, a California industrial bank.





Corporate and Other includes the
following businesses:  residential home warranty, residential property
inspection, commercial property valuation and commercial assessment, as well as
the unallocated portion of the corporate expenses related to our corporate
offices in Richmond, Virginia and unallocated interest expense.





We provide title services through
direct operations and agents throughout the United States.  We also
offer title insurance in Mexico, Europe, Canada, the Caribbean, Latin America
and Asia.  Tax related services and appraisal services are offered
nationwide.





The following tables provide selected
financial information about our operations by segment for the three months ended
March 31, 2008 and 2007:





Three
      Months Ended March 31,Operating
              Revenue
            
            
            Personnel
      Cost
            
            
            Depreciation
      and Amortization
            
            
            Income
      (Loss) Before Taxes(In
      millions)2008Title
      Operations
            
            $
            556.0
            
            
            $
            178.4
            
            
            $
            9.0
            
            
            $
            (27.9
            )Lender
      Services
            
            
            71.4
            
            
            
            23.4
            
            
            
            3.1
            
            
            
            10.1Financial
      Services
            
            
            0.7
            
            
            
            1.0
            
            
            
            0.1
            
            
            
            4.7Corporate
      and Other
            
            
            28.1
            
            
            
            26.0
            
            
            
            3.8
            
            
            
            (26.9
            )Total
            
            $
            656.2
            
            
            $
            228.8
            
            
            $
            16.0
            
            
            $
            (40.0
            )2007Title
      Operations
            
            $
            791.4
            
            
            $
            254.8
            
            
            $
            9.2
            
            
            $
            34.1Lender
      Services
            
            
            82.9
            
            
            
            28.0
            
            
            
            3.6
            
            
            
            (8.7
            )Financial
      Services
            
            
            0.2
            
            
            
            0.9
            
            
            
            -
            
            
            
            5.1Corporate
      and Other
            
            
            36.8
            
            
            
            24.1
            
            
            
            4.0
            
            
            
            (23.2
            )Total
            
            $
            911.3
            
            
            $
            307.8
            
            
            $
            16.8
            
            
            $
            7.3





19


ITEM
      2.
            MANAGEMENT'S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
      OPERATIONS





The following discussion and analysis
of financial condition and results of operations updates and should be read in
conjunction with our Annual Report on Form 10-K for the year ended December 31,
2007 as filed with the Securities and Exchange Commission on February 28,
2008.  A description of our business segments and certain key factors
that affect these businesses are provided in Note 9 to Consolidated Financial
Statements included herein and in our Annual Report on Form 10-K for the year
ended December 31, 2007.  For information on risks and uncertainties
related to our business that may make past performances not indicative of future
results, or cause actual results to differ materially from any forward-looking
statements made by us, see “Forward-Looking and Cautionary
Statements.”





Overview





Our long-term goal is to be the premier
provider of integrated real estate transaction services while maximizing our
profitability throughout the real estate market cycle.  To accomplish
this objective, we have expanded our operations through internal growth and
selective strategic acquisitions.  Our business operations are
organized under three primary business segments: Title Operations, Lender
Services and Financial Services.  Other operating business segments
not required to be reported separately are combined with unallocated corporate
expenses and reported in a category called Corporate and Other.





Operations





As estimated by the Mortgage Bankers
Association, home sales volume declined by approximately 1.7 million, or 23.4
percent, in first quarter 2008 from the comparable period in 2007.





Operating
revenues were $656.2 million and $911.3 million for the three months ended March
31, 2008 and 2007, respectively.  Pretax operating loss in first
quarter 2008 was $40.0 million compared to pretax operating income of $7.3
million for the comparable period in 2007.





The
overall decrease in residential sales and property values resulted in a decline
in our operating revenues in first quarter 2008 in the Title Operations segment
and declines in certain lines of the mortgage originations and loan servicing
businesses in the Lender Services segment.  Additionally, revenue for
our home warranty and property inspection businesses which are dependent on
existing home sales volume, declined in first quarter 2008 when compared with
first quarter 2007.  These declines were offset in part by growth in
the default management services business.  Our title and non-title
commercial revenue declined in first quarter 2008 when compared to first quarter
2007 as a result of the continued tight credit market.





Our
provision for claims as a percentage of operating revenue has trended upward
recently, primarily due to an increase in claims frequency and dollar amount
(“severity”) for recent policy years.  We have noted a similar upward
trend in provisions for claims occurring


20


throughout
the title insurance industry.  Since we are subject to liability for
claims for an extended period of time, slight increases in claims frequency and
severity for more recent policy years can result in a significant increase in
the amount of liability required for potential claims.





In first quarter 2007, we recorded a
customer relationship intangible impairment charge of $20.8 million, or $12.5
million net of taxes, as a result of the loss of business from Fremont General
Corporation (“Fremont”), one of our tax and flood processing
customers.  Fremont received and consented to a cease and desist order
from the Federal Deposit Insurance Corporation related to lending practices in
its mortgage origination business.  We continue to service the Fremont
loan portfolio that existed at the time the cease and desist order was
issued.  For further details, see Note 8, “Impairment of Intangible
and Long-lived Assets” of the Notes to Consolidated Financial Statements in Part
I, Item 1 of this report.





Critical Accounting
Estimates





The preparation of our financial
statements requires management to make estimates and judgments that affect the
reported amounts of certain assets, liabilities, revenue, expenses and related
disclosures surrounding contingencies and commitments.  A summary of
our significant critical accounting estimates can be found in Management’s
Discussion and Analysis in our Annual Report on Form 10-K for the year ended
December 31, 2007 as filed with the Securities and Exchange
Commission.  Actual results could differ from these
estimates.





Recently
Adopted Accounting Standards





In March 2007, the Financial Accounting
Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No.
06-10, Accounting for
Collateral Assignment Split-Dollar Life Insurance Arrangements (“EITF No.
06-10”).  EITF No. 06-10 requires an employer to recognize a liability
for the post-retirement benefit related to a collateral assignment split-dollar
life insurance arrangement in accordance with either Statement of Financial
Accounting Standard (“SFAS”) 106 or Accounting Principles Board (“APB”) Opinion
No. 12 if the employer has agreed to maintain a life insurance policy during the
employee’s retirement or provide the employee with a death
benefit.  EITF No. 06-10 also requires an employer to recognize and
measure an asset based on the nature and substance of the collateral assignment
split-dollar life insurance arrangement.  We adopted EITF No. 06-10 as
of January 1, 2008 which did not have a material effect on our financial
statements.





In September 2006, FASB issued SFAS No.
157, Fair Value Measurements(“SFAS 157”).  SFAS 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosures about fair value measurements. We adopted the provisions
of SFAS 157 for financial assets and liabilities, as well as for any other
assets and liabilities that are carried at fair value on a recurring basis in
the financial statements as of January 1, 2008.  For further
discussion, see Note 3, “Investments” of the Notes to Consolidated Financial
Statements in Part I, Item 1 of this report.  In February 2008, the
FASB issued Staff Position No. 157-2, Effective Date of FASB Statement No.
157 (“FSP 157-2”).  FSP


21


157-2
delayed the effective date of SFAS 157 for all non financial assets and
liabilities to January 1, 2009.  We are evaluating the effect of
adopting SFAS 157 on our financial statements for non financial assets and
liabilities.




Recently Issued Accounting
Standards


In March
2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities(“SFAS 161”).  SFAS 161
amends and expands the disclosure requirements of SFAS 133, Accounting for Derivative
Instruments and Hedging Activities (“SFAS 133”).  It requires
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of gains and losses on
derivative instruments and disclosures about credit-risk-related contingent
features in derivative agreements.  This statement is effective for us
beginning after January 1, 2009.  We do not believe the effect of
adopting SFAS 161 will have a material effect on our financial
statements.





Cyclicality and Seasonality





The title insurance business is closely
related to the overall level of residential and commercial real estate activity,
which is generally affected by the relative strength or weakness of the United
States economy.  In addition, title insurance volumes fluctuate based
on changes in interest rates and the availability of mortgage
financing.  Periods of increasing interest rates and reduced mortgage
financing availability usually have an adverse effect on residential real estate
activity and decrease our title insurance premiums and fee
revenue.  In contrast, periods of declining interest rates and good
mortgage financing liquidity usually have a positive effect on residential real
estate activity which increases our title insurance premiums and fee
revenue. Commercial
real estate volumes are less sensitive to changes in interest rates, but
fluctuate based on local supply and demand conditions for space and mortgage
financing availability.





The residential title insurance
business tends to be seasonal as well as cyclical.  Residential
buy/sell activity is generally slower in the winter, when fewer families buy or
sell homes, with increased volumes in the spring and summer.  We
typically report our lowest revenue from agency and direct title operations in
the first quarter, with such revenue increasing into the second quarter and
through the third quarter.  The fourth quarter customarily may be as
strong as the third quarter, depending on the level of activity of residential
refinancing and of commercial real estate transactions.  Residential
refinancing activity is generally more uniform throughout the seasons, but is
subject to interest rate variability.





22


Results
of Operations





Operating Revenue





The following table providesa summary of our
operating revenue for the three months ended March 31, 2008 and
2007:





Three
      Months Ended March 31,2008
            
            
            2007(Dollars
      in millions)Title
      OperationsDirect
      Operations
            
            $
            235.6
            
            
            
            35.9
            %
            
            $
            369.3
            
            
            
            40.5
            %Agency
      Operations
            
            
            320.4
            
            
            
            48.8
            
            
            
            422.1
            
            
            
            46.3556.0
            
            
            
            84.7
            
            
            
            791.4
            
            
            
            86.8Lender
      Services
            
            
            71.4
            
            
            
            10.9
            
            
            
            82.9
            
            
            
            9.1Financial
      Services
            
            
            0.7
            
            
            
            0.1
            
            
            
            0.2
            
            
            
            -Corporate
      and Other
            
            
            28.1
            
            
            
            4.3
            
            
            
            36.8
            
            
            
            4.1Total
            
            $
            656.2
            
            
            
            100.0
            %
            
            $
            911.3
            
            
            
            100.0
            %





Title Operations-Operating revenue from
direct title operations decreased by $133.7 million, or 36.2%, in first quarter
2008 from first quarter 2007. During first quarter 2008, direct
operating revenue was negatively affected by the decline in buy/sell residential
transactions, reductions in property values and a decrease in our commercial
revenues.  In particular, the title industry is experiencing
significant weakness in the western states of California, Arizona and Nevada
where our residential operations are heavily concentrated.  As of
March 28, 2008, Moody’s Economy.com DataBuffet reports that mortgage
originations in these states are down a collective 24% in first quarter 2008
from first quarter 2007.  Revenue from direct title commercial
operations was $73.6 million in first quarter 2008, compared to $92.2
million in first quarter 2007, a decrease of 20.2% from first
quarter 2007.





Closed
orders from our direct title operations were approximately 113,900 and
170,000 in the first quarters of 2008 and
2007, respectively, a decline of 33%, while direct operating revenue per
direct order closed decreased approximately 5% in first quarter 2008 from first
quarter 2007.





Operating
revenue from agency title operations for first quarter 2008 decreased
by $101.7 million, or 24.1%, from first quarter 2007 due to the
decline in market conditions across most regions, particularly in certain
southeastern markets.





Lender Services-Operating revenue
decreased by $11.5 million, or 13.9%, in first quarter 2008 compared to first
quarter 2007.  Revenue for first quarter
2008 was negatively


23


affected
by lower volumes in certain product lines of the loan servicing business and the
mortgage origination business.  These declines were offset in part by
growth in default management services.





Corporate and Other- Operating revenue
for Corporate and Other decreased by $8.7 million, or 23.6%, in first
quarter 2008 from first quarter 2007.  Before the
international acquisition that closed during third quarter 2007, operating
revenues decreased by $14.4 million. The decrease in operating revenue in first
quarter 2008 from first quarter 2007 was primarily due to
declines in the commercial operations and in home warranty and property
inspection businesses.  Revenue from non-title commercial operations was
$17.1 million in first quarter 2008 compared to $19.4 million in first quarter
2007.  The home warranty and property inspection businesses are
dependent on existing home sale volumes.





Net Realized Investment (Losses)
Gains





Net realized investment (losses) gains
were $(0.1) million in first quarter 2008 compared to $7.0 million in first
quarter 2007. The decrease was primarily due to gains in first quarter 2007 from
the repositioning of our REIT portfolio and the reclassification of $2.3 million
of unrealized net gains on trading investments from accumulated other
comprehensive income (loss).  In first quarter 2008, net losses in the
trading portfolio and equity portfolio of $1.2 million were offset in part by
gains of $1.1 million in the bond portfolio.





Salary and Employee
Benefits





The following table provides a summary
of our salary and employee benefit costs for the three months ended March 31,
2008 and 2007:





Three
      Months Ended March 31,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            178.4
            
            
            
            78.0
            %
            
            $
            254.8
            
            
            
            82.8
            %Lender
      Services
            
            
            23.4
            
            
            
            10.2
            
            
            
            28.0
            
            
            
            9.1Financial
      Services
            
            
            1.0
            
            
            
            0.4
            
            
            
            0.9
            
            
            
            0.3Corporate
      and Other
            
            
            26.0
            
            
            
            11.4
            
            
            
            24.1
            
            
            
            7.8Total
            
            $
            228.8
            
            
            
            100.0
            %
            
            $
            307.8
            
            
            
            100.0
            %





Title Operations –Title
Operations salary and employee benefit costs decreased by $76.4 million, or 30%,
in first quarter 2008 compared to first quarter 2007.  Average Full
Time Equivalent (“FTE”) counts for the Title Operations segment were
approximately 8,100 in first quarter 2008 versus approximately 11,500 in first
quarter 2007, or a decrease of 29.6%.


24


Decreases
in salary and employee benefit costs and FTE counts were primarily due to
reductions in staffing levels in response to significant declines in mortgage
origination volumes.





Lender Services– Lender
Services salary and employee benefit costs decreased by $4.6 million, or 16.4%,
in first quarter 2008 compared to first quarter 2007. FTE counts for the Lender
Services segment were approximately 1,500 in first quarter 2008 versus
approximately 1,800 in first quarter 2007, or a decrease of
16.7%.  Decreases in salary and employee benefit costs and FTE counts
from first quarter 2007 to first quarter 2008 were primarily in certain product
lines of the loan servicing business and the mortgage origination business to
adjust to lower business volume.





Corporate and Other –
Corporate and Other salary and employee benefit costs increased $1.9 million, or
7.9%, in first quarter 2008 over first quarter 2007 primarily as a result of an
international acquisition that closed during third quarter 2007.





Agent Commissions





The following table provides a summary
of agent commissions and related revenue in the Title Operations segment for the
three months ended March 31, 2008 and 2007:





2008
            
            
            2007(Dollars
      in millions)Agent
      commissions
            
            $
            259.8
            
            
            $
            340.4Agent
      revenue
            
            $
            320.4
            
            
            $
            422.1%
      Retained by agents
            
            
            81.1
            %
            
            
            80.6
            %








The commission rate paid to agents
varies by geographic area in which the commission was paid and by individual
agent agreement and has varied around 80% over the past several
years.  The commission rate for the three months ended March 31, 2008
is slightly higher than 80% due to the decline in agency revenue in regions with
lower commission rates.





Provision for Policy and Contract
Claims





We review our claims experience
quarterly and evaluate the adequacy of our claims reserve.  We
consider factors such as historical timing of claims reported and historical
timing of claims payments against actual experience by year of policy issue to
determine the amount of claims liability required for each policy
year.  We also consider the impact of current trends in marketplace
activity, including refinance activity, which may shorten the time period a
policy is outstanding, bankruptcies and individual large claims attributable to
any particular period in determining the expected liability associated with each
year.


25





Based on our review of the underlying
claims data and trends therein, we have provided for claims losses using
approximately 9.7% and 6.5% of operating revenue from the Title Operations
segment for the first quarters of 2008 and 2007,
respectively.  The increase in the claims provision ratio in first
quarter 2008 was primarily due to approximately $12 million of increased
individual claims over $1 million (“large claims”).  This large claims
activity related primarily to the 2004, 2006 and 2007 policy
years.  Since we are subject to liability on claims for an extended
period of time, slight changes in current claims experience can have a
significant effect on the amount of liability required for potential Incurred
But Not Reported (“IBNR”) claims.  We believe that we have reserved
appropriately for all reported and IBNR claims at March 31, 2008 based on the
results of our evaluation of claims data and any known trend.




Impairment of Intangible and Long-Lived
Assets
  In first quarter 2007, we recorded an
impairment of $20.8 million related to our customer relationship intangible
asset of our tax and flood business in the Lender Services
segment.  For further details, see Note 8, “Impairment of Intangible
and Long-Lived Assets” of the Notes to Consolidated Financial Statements in Part
I, Item 1 of this report.





Depreciation
and Amortization





Depreciation and amortization expense
decreased by $0.8 million in first quarter 2008 compared to first quarter
2007.  The decrease was primarily due to the decline in amortization
expense as a result of the impairment of our customer relationship intangible
asset of our tax and flood business in the Lender Services segment.





Interest Expense





Interest expense decreased by $0.4
million in first quarter 2008 compared to first quarter 2007.  The
decrease was primarily due to lower interest as a result of the prepayment of
certain of our senior notes in fourth quarter 2007 offset in part by net
increases in interest incurred on deposit liabilities at
Centennial.  See “Liquidity and Capital Resources” in our Annual
Report on Form 10-K for the year ended December 31, 2007 for further
details.





26


General, Administrative and
Other





The following table provides a summary
of our general, administrative and other expenses for the three months ended
March 31, 2008 and 2007:





Three
      Months Ended March 31,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            97.3
            
            
            
            63.8
            %
            
            $
            124.3
            
            
            
            66.5
            %Lender
      Services
            
            
            34.3
            
            
            
            22.5
            
            
            
            37.5
            
            
            
            20.1Financial
      Services
            
            
            0.3
            
            
            
            0.2
            
            
            
            0.3
            
            
            
            0.2Corporate
      and Other
            
            
            20.5
            
            
            
            13.5
            
            
            
            24.7
            
            
            
            13.2Total
            
            $
            152.4
            
            
            
            100.0
            %
            
            $
            186.8
            
            
            
            100.0
            %





Title Operations –Title
Operations general, administrative and other expenses decreased by $27.0
million, or 21.7%, in first quarter 2008 from first quarter 2007.  The
decrease in general, administrative and other expenses was primarily to match
declines in business volume.





Lender Services –Lender
Services general, administrative and other expenses decreased by $3.2 million,
or 8.5%, in first quarter 2008 from first quarter 2007. The decrease in general,
administrative and other expenses was primarily due to declines in certain lines
of the mortgage origination and loan servicing businesses to match declines in
business volume, offset in part by increases to support growth in the default
management services business.





Corporate and Other –
Corporate and Other general, administrative and other expenses decreased by $4.2
million, or 17.0%, in first quarter 2008 from first quarter 2007.  The
decrease in general, administrative and other expenses in first quarter 2008
from first quarter 2007 was primarily related to a decline in the use of outside
service providers in the non-title commercial business.





Income Taxes





Our effective income tax rate, which
includes a provision for state income and franchise taxes for non-insurance
subsidiaries, was 39.5% for first quarter 2008 and 36.1% for first quarter
2007.  The difference in the effective tax rate was due primarily to
favorable permanent differences relative to the pretax loss and an increase in
the state tax rate.





27


Net (Loss)
Income





Our reported net loss was $(24.2)
million or $(1.60) per share on a diluted basis for first quarter 2008, compared
to net income of $4.7 million or $0.26 per share on a diluted basis for first
quarter 2007.  Net loss for first quarter 2008 reflected the
persistently lower residential mortgage originations, a reduction in our
commercial revenue during the quarter and a higher claims provision
ratio.  Net income for first quarter 2007 reflected an impairment
charge for a customer relationship intangible asset in the Lender Services
segment of $20.8 million, or $12.5 million net of taxes.  For further
details, see Note 8, “Impairment of Intangible and Long-Lived Assets” of the
Notes to Consolidated Financial Statements in Part I, Item 1 of this
report.





Liquidity
and Capital Resources





Consolidated





Cash used in operating activities was
$(75.4) million for first quarter 2008 compared to cash provided by operating
activities of $119.2 million for first quarter 2007.  Cash used in
operating activities for first quarter 2008 was primarily the result of lower
business volume which led to a decline in net income.  Cash provided
by operating activities for first quarter 2007 included the favorable effect of
the timing of income tax payments and payments for accounts payable and accrued
expenses.  Cash provided by investing activities was $91.2 million for
first quarter 2008 compared to cash used in investing activities of $(72.7)
million for first quarter 2007.  Cash used in financing activities was
$(42.8) million for first quarter 2008 compared to cash provided by financing
activities of $1.2 million for first quarter 2007.  At March 31, 2007,
we invested a temporary commercial customer deposit in federal funds sold
investments of $269.5 million which increased cash used in investing activities
and cash provided by financing activities for first quarter
2007.  Other principal non-operating uses of cash for the first three
months of 2008 and 2007 were additions to the investment portfolio and repayment
of debt.  At March 31, 2008, we held cash of $71.2 million and
investments of $1,335.4 million.





Liquidity




We
conduct all our operations through our operating subsidiaries. Dividends from
our subsidiaries and permitted payments to us under our tax sharing arrangements
with our subsidiaries are our principal sources of cash to pay shareholder
dividends, to meet our holding company obligations, including payments of
principal and interest on our outstanding indebtedness and for share repurchases
as well as other items.  At March 31, 2008, there was approximately
$21.4 million of cash and short-term investments at the holding company level
available for general corporate purposes, to service our debt obligations and to
pay dividends to our shareholders.





In August 2007, the Board of Directors
approved a share repurchase program expiring in March 2009 that authorized us to
repurchase 1.5 million shares.  Due to


28


deterioration
in the real estate market, we paused our share repurchase program and we did not
repurchase any shares during first quarter 2008.





We believe our credit facility and
anticipated cash flows from operations will provide us with sufficient liquidity
to meet our operating requirements for the foreseeable future.  For
further information about our borrowings, see our Annual Report on Form 10-K for
the year ended December 31, 2007.





Financing





On July
28, 2006, we entered into a Note Purchase and Master Shelf Agreement (the “Note
Purchase Agreement”) with Prudential Investment Management, Inc. and the other
purchasers thereunder. Under the Note Purchase Agreement, we issued $50.0
million of Senior Notes, Series D (the “Series D Notes”) to the Series D Note
purchasers on August 31, 2006 and we issued $100.0 million of Senior Notes,
Series E (the “Series E Notes”) to the Series E Note purchasers on September 7,
2006. The Note Purchase Agreement contains certain restrictive covenants,
including a minimum debt to capitalization ratio, an interest coverage ratio and
a debt service ratio.





On
November 30, 2007, we entered into an amendment (“First Amendment to the Note
Purchase Agreement”) to our Note Purchase Agreement. The First Amendment to the
Note Purchase Agreement decreased the interest coverage ratio from its then
current level of 3.0:1.0 to 1.5:1.0 through December 31, 2008, after which time
the interest coverage ratio will return to 3.0:1.0. We executed the First
Amendment to the Note Purchase Agreement as a proactive measure given current
market conditions.





On July
28, 2006, we entered into a five-year $200.0 million revolving credit facility
with SunTrust Bank (“Credit Agreement”), as administrative agent for a syndicate
of other banks, issuing bank and swingline lender. The Credit Agreement contains
certain restrictive covenants, including a minimum debt to capital ratio, an
interest coverage ratio and a maintenance of consolidated net worth
requirement.





On
November 29, 2007, we entered into an amendment (“First Amendment”) to our
Credit Agreement. The First Amendment made the following significant changes to
our Credit Agreement: (1) decreased the interest coverage ratio from its then
current level of 3.0:1.0 to 1.5:1.0 through September 30, 2008, after which time
the interest coverage ratio will return to 3.0:1.0 and (2) modified the
consolidated net worth requirement from 85% to 80% of shareholders’ equity as of
December 31, 2005. We executed the First Amendment as a proactive measure given
current market conditions.





We
monitor our compliance with the financial covenants in the Note Purchase
Agreement and Credit Facility. We were in compliance with these covenants as of
the end of first quarter 2008; however, given the uncertainty of future volumes
in the real estate market, more limited mortgage financing availability and
volatility in the severity and frequency of claims, it is difficult to predict
our future financial results.  We have had ongoing discussions with
the lenders


29


under the
Note Purchase Agreement and the Credit Facility.  We believe we will
be able to negotiate acceptable amendments or waivers, if necessary; however,
failure to do so could have a material adverse effect on our financial position
and our liquidity.





For
further information about our borrowings, see Note 10 in our Annual Report on
Form 10-K for the year ended December 31, 2007.





Regulatory





We are
subject to federal and state laws and regulations that are administered and
enforced by insurance regulators and other governmental authorities. These laws
and regulations are generally intended for the protection of policyholders and
consumers rather than security holders. Most states in which we conduct our
title insurance business have established financial condition standards
regarding, among other things, an insurer’s maintenance of a certain ratio of
earnings to surplus. Depending on future market conditions and their impact on
our results, a state insurance regulator may require remedial action that could
include limiting future operations of one or more of our insurance company
subsidiaries based on application of these standards.





Investment Strategy





During first quarter 2007, we began
actively trading $142.6 million of our fixed maturity securities previously
classified as available-for-sale securities.  For further details, see
our Annual Report on Form 10-K for the year ended December 31,
2007.





Other





Our industrial bank maintains an
allowance for loan losses related to our loans receivable.  During
first quarter 2008, we did not experience a significant change in the underlying
components of the allowance for loan losses or the balance in
total.  There have been no significant changes in the underlying
rationale for our provision for loan losses or significant changes in asset
quality.





Pending
Legal Proceedings





General





We
believe that the pending legal proceedings listed below are the only ones we are
involved in that depart from customary actions arising in the ordinary course of
our business.  Pending legal proceedings are subject to many
uncertainties and complexities, including but not limited to: the underlying
facts of each matter; variations between jurisdictions in which matters are
being litigated; differences in applicable laws and judicial interpretations;
the length of time before many of these matters might be resolved by settlement
or through litigation; the timing and structure of their resolution relative to
other similar cases brought against other companies; the fact that many of these
matters are putative class actions in which a class is not
clearly


30


defined
and has not been certified; the fact that many of these matters involve
multi-state class actions in which the applicable laws for the claims at issue
are in dispute and therefore unclear; and the current challenging legal
environment faced by large corporations and insurance companies.  For
the reasons specified herein, at this stage of the litigation, the amount or
range of loss that could result from an unfavorable outcome cannot be reasonably
estimated, except with respect to a reserve of $10 million established during
third quarter 2007 in connection with the “Henderson Suit” and the “Alberton
Suit” (both as hereinafter defined).





Litigation Not in the Ordinary Course
of Business





On January 25, 2002, Miles R. Henderson
and Patricia A. Henderson (“Plaintiffs in the Henderson Suit”) filed a putative
class action suit (the “Henderson Suit”) against Lawyers Title Insurance
Corporation (“Lawyers Title”) in the Court of Common Pleas for Cuyahoga County,
Ohio.  Lawyers Title removed the case to the District Court for the
Northern District of Ohio on March 6, 2002 and Plaintiffs in the Henderson Suit
amended the complaint on March 8, 2002.  On June 28, 2002, the
District Court remanded the case to the Court of Common Pleas for Cuyahoga
County, Ohio.  A similar putative class action suit was filed against
Commonwealth, by Rodney P. Simon and Tracy L. Simon (“Plaintiffs in the Simon
Suit”) in the Court of Common Pleas for Cuyahoga County, Ohio on March 5,
2003.  Plaintiffs’ complaints in both suits alleged that the
defendants charged original rates for owners’ title insurance policies instead
of a lower, reissue rate for which the customers were eligible.  Both
defendants moved to compel arbitration of the Plaintiffs’ claims, but lost the
motion in both the trial court and on appeal to the Ohio Supreme
Court.  On remand to the trial court, Plaintiffs in the Henderson Suit
are now seeking to have the case certified as a class action on behalf of all
sellers and buyers of residential property in Ohio who paid the higher original
rate from 1992 to the present.  Plaintiffs in the Simon Suit are
seeking to have the case certified as a class action on behalf of all sellers of
residential property in Ohio, who paid the original rate from 1993 to the
present, as requested in the original complaint.  Plaintiffs’
complaints in both cases demand an unspecified amount of compensatory damages,
declaratory and injunctive relief, punitive damages and attorneys’ fees and
costs.  In December 2007, a voluntary mediation was held in the
Henderson Suit and the parties agreed in principle on several key terms of a
settlement that is within the reserve established during third quarter
2007.  The parties are attempting to finalize their
agreement.  A class certification hearing will be scheduled should
they be unable to do so.  No hearing date on the Motion for Class
Certification filed by the Plaintiffs in the Simon Suit has been
scheduled.  Should further litigation prove necessary, defendants
believe that they have meritorious defenses.





On September 20, 2004, Kenneth and
Deete Higgins (“Plaintiffs in the Higgins Suit”) filed a putative class action
suit (the “Higgins Suit”) against Commonwealth Land Title Insurance Company
(“Commonwealth”) in the Circuit Court of Nassau County, Florida.  On
February 3, 2005, Plaintiffs in the Higgins Suit filed an Amended Class Action
Complaint.  Plaintiffs in the Higgins Suit allege that Commonwealth
charged refinance borrowers higher basic rates for title insurance, rather than
the lower reissue rates for which they are alleged to have
qualified.  The Amended Class Action Complaint also states that
Commonwealth failed to disclose the potential availability of the lower rates to
customers.  Plaintiffs in the Higgins Suit seek to have the case
certified as a class action on behalf of all Florida persons or entities
who


31


refinanced
their mortgages or fee interests on the identical premises from July 1, 1999 to
the present where there was no change in the fee ownership and who were charged
a premium in excess of the reissue premium.  Plaintiffs’ complaints in
the Higgins Suit demand an unspecified amount of compensatory damages,
declaratory relief, attorneys’ fees, costs and pre-judgment
interest.  Initial discovery has been exchanged between the
parties.  Commonwealth objected to discovery requests made by
Plaintiffs in the Higgins Suit on the basis that they were overly broad and
burdensome.  Commonwealth also objected to answering interrogatories
and producing documents in the possession of its agents.  Plaintiffs
in the Higgins Suit moved to compel this discovery, which motion was granted by
the trial court.  Commonwealth filed a Petition for Writ of Certiorari
to the First District Court of Appeal to overturn the trial court’s
ruling.  On March 6, 2008, the appellate court vacated the trial
court’s order compelling discovery.  It held that a defendant could
not be required to produce such burdensome discovery prior to certification of a
class.  The parties are currently negotiating the scope of discovery
in light of the appellate court’s ruling. No motion for class certification has
been filed to date and Commonwealth believes it has meritorious
defenses.





On July 24, 2006, A. D. Alberton
(“Plaintiff in the Alberton Suit”) filed a putative class action suit (the
“Alberton Suit”) against Commonwealth which is currently pending in the United
States District Court for the Eastern District of Pennsylvania.  A
similar putative class action suit was filed against Lawyers Title by Shariee L.
De Cooman (“Plaintiff in the De Cooman Suit”) in the Court of Common Pleas of
Allegheny County, Pennsylvania on or about August 12, 2005.  On
November 1, 2005, Plaintiff in the De Cooman Suit filed an Amended
Complaint.  Plaintiff’s complaint in the Alberton Suit alleges that
Commonwealth charged rates for title insurance in excess of statutorily mandated
rates and/or failed to disclose to consumers that they were entitled to reduced
title insurance premiums.  The Alberton Suit seeks to certify a class
on behalf of all consumers who paid premiums for the purchase of title insurance
on Pennsylvania properties from Commonwealth at any time from January 2000 until
August 2005 and did not receive a discounted refinance or reissue rate for which
they qualified.  Plaintiff’s complaint in the De Cooman Suit alleges
that Lawyers Title charged the basic rate rather than a reissue or discounted
rate to certain consumers.  The DeCooman Suit seeks to certify a class
on behalf of all owners of residential real estate in Pennsylvania who, at any
time during the ten years prior to August 12, 2005 paid premiums for the
purchase of title insurance from Lawyers Title, qualified for a reissue or other
discounted rate and did not receive such rate.  A class certification
hearing in the Alberton Suit was held on October 16, 2007.  On January
31, 2008, the court issued an order granting in part the motion of Plaintiff in
the Alberton Suit for class certification and certifying a class of all persons
who from July 25, 2000 until August 1, 2005 paid premiums for the purchase of
title insurance from Commonwealth in connection with a refinance of a mortgage
or fee interest on Pennsylvania properties that were insured by a prior title
insurance policy within ten years of the refinance transaction and were not
charged the applicable reissue rate or refinance rate discount for title
insurance on file with the Pennsylvania Insurance Commissioner.  A
class certification hearing in the De Cooman Suit was held on October 9,
2007.  Plaintiff’s complaint in the Alberton Suit demands an
unspecified amount of compensatory damages, declaratory relief, triple damages,
restitution, pre-judgment and post-judgment interest and expert fees, attorneys’
fees and costs.  Plaintiff’s complaint in the De Cooman Suit demands
an unspecified


32


amount of
compensatory damages, punitive damages, triple damages, prejudgment interest and attorneys’
fees, litigation expenses and costs.  The defendants believe they have
meritorious defenses.





We are defendants in a number of other
purported class action cases pending in various states that include allegations
that certain consumers were overcharged for title insurance and/or related
services. We are also defendants in multiple purported class action cases
pending in federal district courts around the country alleging various federal
antitrust violations, additional claims for violations of the Real Estate
Settlement Procedures Act, unfair and deceptive trade practices and unjust
enrichment as well as other causes of action related to the ratemaking
activities of title insurance companies, with a motion for consolidation of
those actions to the Southern District of New York currently pending before the
Judicial Panel on Multi-District Litigation.  The dollar amount of
damages sought has generally not been specified in these cases except for
jurisdictional limits.  We intend to vigorously defend these
actions.





Regulatory Proceedings





We have
received certain information requests and subpoenas from various regulatory
authorities relating to our business practices and those of the title insurance
industry.  We may receive additional subpoenas and/or requests for
information in the future from state or federal government
agencies.  We will evaluate, and we intend to cooperate in connection
with, all such subpoenas and requests.





Various
government entities are studying the title insurance product, market, pricing,
business practices and potential regulatory and legislative
changes.  On March 14, 2008, the Department of Housing and Urban
Development published, subject to a 60-day public comment period, proposed
modifications to the Real Estate Settlement Procedures Act that could increase
the title insurance industry’s cost of doing business.  Multiple
states, including California, Florida, New Mexico, New York, Texas and
Washington, are examining pricing levels and/or title insurance
regulations.  If it is determined that prices are not justified, rate
changes may be implemented, including potential rate reductions.





Some of
the pricing examinations, like those conducted in Texas and New Mexico, are
conducted annually or biannually and usually result in adjustments to the prices
we can charge.  The Texas Commissioner of Insurance issued a Consent
Order on February 25, 2008 agreeing to settle the ratemaking phase of the 2006
Texas Title Insurance Biennial Hearing with no change to current
rates.





Subsequent
to a hearing of the New Mexico title rate case for 2006, which concluded on
January 18, 2007, the New Mexico Superintendent of Insurance (the
“Superintendent”) issued an order on July 20, 2007 (the “Final Order”) mandating
a rate reduction of 6.36 percent and a change in the agent/underwriter split
from 80/20 to 84.2/15.8 effective September 1, 2007.  The New Mexico
Land Title Association (the “NMLTA”) filed a Motion for Reconsideration with the
Superintendent on August 3, 2007.  The NMLTA also filed a Request for
Review of Superintendent’s Final Order, a stay and hearing by the New Mexico
Public Regulatory


33


Commission
(the “Commission”).  Various underwriters also filed an appeal to the
Commission. On August 28, 2007, the Superintendent issued an Order denying the
NMLTA’s Motion for Reconsideration and granting the stay request until the
Commission completed its review of the case with a requirement that the rate
differential be escrowed during the stay and a notice of potential refund be
provided to consumers.  The Commission upheld the Final Order on March
6, 2008.  On April 4, 2008, the NMLTA and various underwriters jointly
filed a notice of appeal to the New Mexico district court, with further
appellate review available up to the New Mexico Supreme Court.  Prior
to the notice of appeal, the Commission granted an order continuing the stay of
the Final Order and the escrow of the rate differential.  On March 5,
2008, the Superintendent issued an order on the completed title rate case for
2007 which ordered a 3.1% decrease from the rates ordered in July 2006 and
restored the agent/underwriter split to 80/20.  Although an appeal of
a portion of the order was filed, no appeal was filed to the rate decrease or
the change in the split, which will take effect July 1, 2008.  The New
Mexico Division of Insurance has also called a hearing on May 14, 2008 to
consider expanding its statistical plan to gather additional information on
title insurers and agents for rate-making purposes.





The California Department of Insurance
(“CA DOI”) submitted to the Office of Administrative Law (“OAL”) proposed
regulations governing the rating of title insurance and related services that
could impose future rate reductions and filing of mandated statistical plans
that impose substantially higher costs on title insurance operations in
California.  On February 21, 2007, OAL disapproved the regulatory
action for failure to comply with certain standards and requirements and on
February 28, 2007 issued a written decision detailing the reasons for
disapproval. On June 28, 2007, CA DOI submitted revised regulations to OAL that
were approved by OAL on July 25, 2007 and subsequently released by the
California Secretary of State.  The date for compliance with the
requirements of the regulations varies by provision during 2009 and
2010.  LandAmerica and other title companies doing business in the
California market have been engaged in discussions with CA DOI regarding
alternative approaches to the regulations but may pursue an appeal if such
discussions are unsuccessful.  The Commissioner of CA DOI has agreed
to propose substantial changes to the data call (i.e. a request to submit
information for the insurance experience) and statistical plan portion of the
regulations to simplify them and minimize compliance costs, including delaying
the effective dates by one year, through a new rulemaking file.  The
Commissioner has committed further to (i) eliminate the interim rate reduction
if the industry helps CA DOI obtain an alternative method to enforce the data
call and (ii) eliminate the maximum rate formula if the industry works with CA
DOI to enact substantive alternate reforms.  An External Title
Insurance Working Group is working directly with CA DOI on these
matters.





Based on the information known to
management at this time, it is not possible to predict the outcome of any of the
currently pending governmental inquiries and investigations into the title
insurance industry’s market, business practices, pricing levels and other
matters, or the market’s response thereto.  However, any material
change in our business practices, pricing levels, or regulatory environment may
have an adverse effect on our business, operating results and financial
condition.





34


Forward-Looking
and Cautionary Statements





This Quarterly Report on Form 10-Q
contains “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 our financial
condition, results of operations and future business plans, operations,
opportunities and prospects.  In addition, we and our 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 our reports to shareholders.  These forward-looking
statements are generally identified by the use of words such as we “expect,”
“believe,” “anticipate,” “could,” “should,” “may,” “plan,” “will,” “predict,”
“estimate” and similar expressions or words of similar import.  These
forward-looking statements are based upon our current knowledge and assumptions
about future events and involve risks and uncertainties that could cause our
actual results, prospects, performance or achievements to be materially
different from any anticipated results, prospects, performance or achievements
expressed or implied by such forward-looking statements.  Such risks
and uncertainties include: (1) our results of operations and financial condition
are susceptible to changes in mortgage interest rates, the availability of
mortgage financing and general economic conditions;(2) changes to the
participants in the secondary mortgage market could affect the demand for title
insurance products;(3) we are subject to
government regulation; (4) heightened regulatory scrutiny of us and the title
insurance industry, including any future resulting reductions in the pricing of
title insurance products and services, could materially and adversely affect our
business, operating results and financial condition; (5) we may not be able to
fuel our growth through acquisitions; (6) our inability to integrate and manage
successfully our acquired businesses could adversely affect our business,
operating results and financial condition; (7) regulatory non-compliance, fraud
or defalcations by our title insurance agents or employees could adversely
affect our business, operating results and financial condition; (8) competition
in our industry affects our revenue; (9) significant industry changes and new
product and service introductions require timely and cost-effective responses;
(10) our litigation risks include substantial claims by large classes of
claimants; (11) our claims experience may require us to increase our provision
for title losses or to record additional reserves, either of which may adversely
affect our earnings, (12) key accounting and essential product delivery systems
are concentrated in a few locations; (13) provisions of our articles of
incorporation and bylaws and applicable state corporation, insurance and banking
laws could limit another party’s ability to acquire us and could deprive
shareholders of the opportunity to obtain a takeover premium for shares of
common stock owned by them; (14) our future success depends on our ability to
continue to attract and retain qualified employees; (15) our conduct of business
in foreign markets creates financial and operational risks and uncertainties
that may materially and adversely affect our business, operating results and
financial condition; and (16) various external factors including general market
conditions, governmental actions, economic reports and shareholder activism may
affect the trading volatility and price of our common stock.  For a
description of factors that may cause actual results to differ materially from
such forward-looking statements, see our Annual Report on Form 10-K for the year
ended December 31, 2007 and other reports from time to time filed with or
furnished to the Securities and Exchange Commission.  We caution
investors not to place undue reliance on any forward-looking


35


statements
as these statements speak only as of the date when made.  We undertake
no obligation to update any forward-looking statements made in this
report.





ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Our primary exposure to market risk
relates to interest rate risk and equity price risk.  Interest rate
risk is generally related to certain investment securities, loans receivable,
debt and certain deposits.  We are also subject to equity price risk
through various portfolios of equity securities.  We have operations
in certain foreign countries, but these operations, in the aggregate, are not
material to our financial condition or results of operations.





The
following table provides information about our financial instruments that are
sensitive to changes in interest rates.  Values in the table present
principal cash flows and related weighted-average interest rates by expected
maturity dates. Actual cash flows could differ from the expected
amounts.




Principal
      Amount by Expected MaturityAverage Interest
      Rate(Dollars
      in millions)2008
            
            
            2009
            
            
            2010
            
            
            2011
            
            
            2012
            
            
            2013
      and
              after
            
            
            Total
            
            
            Fair
              ValueAssets:Taxable
      available-for-sale securities:Book
      value
            
            $
            11.9
            
            
            
            29.6
            
            
            
            25.7
            
            
            
            48.7
            
            
            
            49.6
            
            
            
            426.4
            
            
            $
            591.9
            
            
            $
            598.5Average
      yield
            
            
            4.5
            %
            
            
            5.1
            %
            
            
            5.0
            %
            
            
            5.3
            %
            
            
            5.2
            %
            
            
            5.4
            %
            
            
            5.3
            %Non-taxable
      available-for-sale securities:Book
      value
            
            $
            6.7
            
            
            
            15.7
            
            
            
            19.2
            
            
            
            24.8
            
            
            
            22.3
            
            
            
            316.1
            
            
            $
            404.8
            
            
            $
            414.4Average
      yield
            
            
            4.6
            %
            
            
            4.1
            %
            
            
            4.0
            %
            
            
            4.3
            %
            
            
            4.3
            %
            
            
            4.2
            %
            
            
            4.2
            %Taxable
      trading securities:Book
      value
            
            $
            -
            
            
            
            1.8
            
            
            
            2.2
            
            
            
            3.3
            
            
            
            3.8
            
            
            
            74.5
            
            
            $
            85.6
            
            
            $
            85.6Average
      yield
            
            
            -
            
            
            
            5.9
            %
            
            
            5.6
            %
            
            
            6.2
            %
            
            
            5.5
            %
            
            
            5.9
            %
            
            
            5.9
            %Non-taxable
      trading securities:Book
      value
            
            $
            -
            
            
            
            2.3
            
            
            
            0.5
            
            
            
            3.3
            
            
            
            1.7
            
            
            
            26.5
            
            
            $
            34.3
            
            
            $
            34.2Average
      yield
            
            
            -
            
            
            
            4.3
            %
            
            
            3.6
            %
            
            
            3.7
            %
            
            
            4.6
            %
            
            
            4.2
            %
            
            
            4.2
            %Preferred
      stock:Book
      value
            
            $
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5.9
            
            
            $
            5.9
            
            
            $
            4.7Average
      yield
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            5.5
            %
            
            
            5.5
            %Loans
      receivable, excluding reserves, discounts and other costs:Book
      value
            
            $
            0.1
            
            
            
            2.9
            
            
            
            1.8
            
            
            
            2.2
            
            
            
            7.7
            
            
            
            634.2
            
            
            $
            648.9
            
            
            $
            658.7Average
      yield
            
            
            8.6
            %
            
            
            7.3
            %
            
            
            7.2
            %
            
            
            8.1
            %
            
            
            7.4
            %
            
            
            7.1
            %
            
            
            7.1
            %Liabilities:Interest
      bearing passbook liabilities:Book
      value
            
            $
            44.4
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            $
            44.4
            
            
            $
            44.4Average
      yield
            
            
            3.1
            %
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            3.1
            %Interest
      bearing certificate of deposit liabilities:Book
      value
            
            $
            241.3
            
            
            
            89.6
            
            
            
            39.0
            
            
            
            11.4
            
            
            
            5.3
            
            
            
            0.7
            
            
            $
            387.3
            
            
            $
            408.3Average
      yield
            
            
            4.7
            %
            
            
            4.3
            %
            
            
            4.7
            %
            
            
            4.9
            %
            
            
            4.9
            %
            
            
            4.4
            %
            
            
            4.6
            %




36


Changes in maturities and yields from
December 31, 2007 to March 31, 2008 primarily relate to timing of purchases and
sales of securities and the effect that the securities sold or purchased have on
the average portfolio yield, timing of payments received from, and the extension
of loans to, customers in the commercial real estate market and timing of
amounts held for customers.





We also have non-interest bearing
passbook deposit liabilities of $89.8 million at March 31, 2008 that are
included in the accompanying consolidated balance sheets.  For further
details, see our Annual Report on Form 10-K for the year ended December 31,
2007.





There have been no material changes in
other market risks that affect us since the filing of our Form 10-K for the year
ended December 31, 2007.





ITEM
      4.
            CONTROLS
      AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





We maintain disclosure controls and
procedures that are designed to provide assurances that information required to
be disclosed by us in the reports that we file or submit under the Securities
Exchange Act of 1934 (the “Exchange Act”), as amended, is recorded, processed,
summarized and reported within the time periods required by the Securities and
Exchange Commission.





Our management, under the direction of
our Chief Executive Officer and our Chief Financial Officer, has evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in the Exchange Act Rules 13a-15(e) and 15d-15(e)) as of
March 31, 2008.  Based upon this evaluation our management, including
our Chief Executive Officer and our Chief Financial Officer, has concluded that
our disclosure controls and procedures were effective as of March 31,
2008.





Changes in Internal
Controls





There were no changes in our internal
controls over financial reporting that occurred during the quarter ended March
31, 2008 that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.





PART
II.  OTHER INFORMATION





ITEM
      1.
            LEGAL
      PROCEEDINGS





The information contained in Note 7
“Commitments and Contingencies” of the Notes to Consolidated Financial
Statements filed as Part I, Item 1 of this Quarterly Report on Form 10-Q is
incorporated herein by reference.


37


ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





(c)
            The
      following table sets forth the details of purchases of common stock under
      our share purchase plans and our Executive Voluntary Deferral Plan and
      Outside Directors Deferral Plan that occurred in the first quarter of
      2008:





Period
            
            Total
      Number
              of
      Shares
              Purchased
            
            
            Average
      Price
              Paid per Share
            
            
            Total
      Number of SharesPurchased
      as Part ofPublicly
      AnnouncedPlans or Programs
            
            
            Maximum
      Number ofShares
      that May YetBe
      Purchased Under
              the Plans or ProgramsJanuary
      1 through January 31, 2008
            
            
            1,169
            
            
            $
            29.87
            
            
            
            -
            
            
            
            1,651,494February
      1 through February 29, 2008
            
            
            2,286
            
            
            $
            49.45
            
            
            
            -
            
            
            
            1,649,208March
      1 through March 31, 2008
            
            
            7,129
            
            
            $
            37.71
            
            
            
            -
            
            
            
            1,642,079





(1)
            A
      total of 10,584 shares of our common stock were purchased in connection
      with two employee benefit plans during the first quarter
      2008.  These repurchases were made in open-market transactions
      on behalf of a trust maintained by us for the Executive Voluntary Deferral
      Plan and the Outside Directors Deferral
Plan.





(2)
            In
      August 2007, the Board of Directors approved a share repurchase program
      expiring March 2009 that authorized us to repurchase 1,500,000 shares of
      our common stock.  We did not repurchase any shares during the
      first quarter 2008 under this program.  As of March 31, 2008,
      there were approximately 1,109,620 authorized shares remaining under the
      repurchase program.





ITEM
      6.
            EXHIBITS





No.
            Description31.1
            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*


38


SIGNATURE





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:April
      29, 2008
            
            /s/
      Christine R. VlahcevicChristine
      R. VlahcevicSenior
      Vice President – Corporate Controller(Principal
      Accounting Officer)








39


EXHIBIT
INDEX





No.
            Description31.1
            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*





* Filed
herewith.





40