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 June 30, 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
            15,481,284
      shares
            
            July
      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
            22ITEM
      3.
            QUANTITATIVE
      AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            42ITEM
      4.
            CONTROLS
      AND PROCEDURES
            44PART
      II.  OTHER INFORMATIONITEM
      1.
            LEGAL
      PROCEEDINGS
            44ITEM
      2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            45ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
              HOLDERS
            45ITEM
      6.
            EXHIBITS
            46SIGNATURE
            47








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





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
millions)





June
      30,
              2008
            
            
            December
      31,
              2007(Unaudited)ASSETSINVESTMENTS:Fixed
      maturities available-for-sale - at fair value
      (amortized cost:  2008 - $985.6; 2007 -
      $1,005.3)
            
            $
            982.2
            
            
            $
            1,019.1Equity
      securities available-for-sale - at fair value
      (cost:  2008 - $85.8; 2007 -
    $85.6)
            
            
            73.8
            
            
            
            81.1Fixed
      maturities trading - at fair
      value
            
            
            119.8
            
            
            
            124.5Federal
      funds sold
            
            
            65.6
            
            
            
            59.6Short-term
      investments
            
            
            110.9
            
            
            
            160.3Total
      Investments
            
            
            1,352.3
            
            
            
            1,444.6CASH
            
            
            62.6
            
            
            
            98.2LOANS
      RECEIVABLE
            
            
            670.9
            
            
            
            638.4ACCRUED
      INTEREST RECEIVABLE
            
            
            16.2
            
            
            
            16.8NOTES
      AND ACCOUNTS RECEIVABLE;Notes
      (less allowance for doubtful accounts:  2008 - $1.7; 2007 -
$1.8)
            
            
            21.6
            
            
            
            22.7Trade
      accounts receivable (less allowance for doubtful accounts:  2008
      - $10.9; 2007
      -
      $11.1)
            
            
            127.6
            
            
            
            127.9Total
      Notes and Accounts Receivable
            
            
            149.2
            
            
            
            150.6INCOME
      TAXES RECEIVABLE
            
            
            61.0
            
            
            
            22.7PROPERTY
      AND EQUIPMENT -
      at cost (less accumulated depreciation and amortization:  2008
      - $248.1; 2007
      -
      $233.6)
            
            
            120.1
            
            
            
            133.4TITLE
      PLANTS
            
            
            102.3
            
            
            
            102.4GOODWILL
            
            
            811.5
            
            
            
            809.9INTANGIBLE
      ASSETS (less accumulated amortization:  2008 - $110.6; 2007 -
    $100.1)
            
            
            83.2
            
            
            
            94.4DEFERRED
      INCOME TAXES
            
            
            133.4
            
            
            
            120.1OTHER
      ASSETS
            
            
            224.2
            
            
            
            222.2Total
      Assets
            
            $
            3,786.9
            
            
            $
            3,853.7





See Notes
to Consolidated Financial Statements.
 3





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
BALANCE SHEETS


(In
millions, except share amounts)








June
      30,
              2008
            
            
            December
      31,
              2007(Unaudited)LIABILITIESPOLICY
      AND CONTRACT CLAIMS
            
            $
            919.9
            
            
            $
            876.5DEPOSITS
            
            
            617.1
            
            
            
            564.5ACCOUNTS
      PAYABLE AND ACCRUED LIABILITIES
            
            
            296.3
            
            
            
            365.3NOTES
      PAYABLE
            
            
            586.8
            
            
            
            579.5DEFERRED
      SERVICE ARRANGEMENTS
            
            
            193.2
            
            
            
            199.9OTHER
      LIABILITIES
            
            
            65.5
            
            
            
            67.3Total
      Liabilities
            
            
            2,678.8
            
            
            
            2,653.0SHAREHOLDERS’
      EQUITYCommon
      stock, no par value, 45,000,000 shares authorized, shares issued and
      outstanding:  2008 - 15,482,386; 2007 –
      15,351,550
            
            
            338.1
            
            
            
            335.4Accumulated
      other comprehensive loss
            
            
            (38.1
            )
            
            
            (26.2
            )Retained
      earnings
            
            
            808.1
            
            
            
            891.5Total
      Shareholders’ Equity
            
            
            1,108.1
            
            
            
            1,200.7Total
      Liabilities and Shareholders’ Equity
            
            $
            3,786.9
            
            
            $
            3,853.7








See Notes
to Consolidated Financial Statements.
 4





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF OPERATIONS


THREE
MONTHS AND SIX MONTHS ENDED JUNE 30, 2008 AND 2007


(In
millions, except per share amounts)


(Unaudited)





Three
      Months Ended
              June 30,
            
            
            Six
      Months Ended
              June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007REVENUEOperating
      revenue
            
            $
            687.8
            
            
            $
            971.5
            
            
            $
            1,344.0
            
            
            $
            1,882.8Investment
      and other income
            
            
            26.7
            
            
            
            32.1
            
            
            
            57.0
            
            
            
            62.4Net
      realized investment (losses) gains
            
            
            (2.1
            )
            
            
            1.4
            
            
            
            (2.2
            )
            
            
            8.4712.4
            
            
            
            1,005.0
            
            
            
            1,398.8
            
            
            
            1,953.6EXPENSESAgents’
      commissions
            
            
            288.0
            
            
            
            364.6
            
            
            
            547.8
            
            
            
            705.0Salaries
      and employee benefits
            
            
            210.9
            
            
            
            316.0
            
            
            
            439.7
            
            
            
            623.8General,
      administrative and other
            
            
            159.5
            
            
            
            197.3
            
            
            
            311.9
            
            
            
            384.1Provision
      for policy and contract claims
            
            
            98.9
            
            
            
            85.2
            
            
            
            156.0
            
            
            
            141.2Depreciation
      and amortization
            
            
            15.4
            
            
            
            19.0
            
            
            
            31.4
            
            
            
            35.8Interest
      expense
            
            
            12.0
            
            
            
            11.2
            
            
            
            24.3
            
            
            
            23.9Impairment
      of intangible and long-lived assets
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            20.8784.7
            
            
            
            993.3
            
            
            
            1,511.1
            
            
            
            1,934.6(LOSS)
      INCOME BEFORE INCOME TAXES
            
            
            (72.3
            )
            
            
            11.7
            
            
            
            (112.3
            )
            
            
            19.0INCOME
      TAX (BENEFIT) EXPENSE
            
            
            (22.3
            )
            
            
            3.8
            
            
            
            (38.1
            )
            
            
            6.4NET
      (LOSS) INCOME
            
            $
            (50.0
            )
            
            $
            7.9
            
            
            $
            (74.2
            )
            
            $
            12.6NET
      (LOSS) INCOME PER SHARE
            
            $
            (3.29
            )
            
            $
            0.48
            
            
            $
            (4.88
            )
            
            $
            0.74WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
            
            
            15.2
            
            
            
            16.7
            
            
            
            15.2
            
            
            
            17.0NET
      (LOSS) INCOME PER SHARE ASSUMING DILUTION
            
            $
            (3.29
            )
            
            $
            0.42
            
            
            $
            (4.88
            )
            
            $
            0.68WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING ASSUMING DILUTION
            
            
            15.2
            
            
            
            19.0
            
            
            
            15.2
            
            
            
            18.6CASH
      DIVIDENDS DECLARED PER SHARE
            
            $
            0.30
            
            
            $
            0.22
            
            
            $
            0.60
            
            
            $
            0.44








See Notes
to Consolidated Financial Statements.
 5





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CASH FLOWS


SIX
MONTHS ENDED JUNE 30, 2008 AND 2007


(In
millions)


(Unaudited)





2008
            
            
            2007Cash
      flows from operating activities:Net (loss)
income
            
            $
            (74.2
            )
            
            $
            12.6Adjustments
      to reconcile net (loss) income to cash provided by operating
      activities:Depreciation
      and amortization
            
            
            31.4
            
            
            
            35.8Amortization
      of bond premium
            
            
            2.2
            
            
            
            3.0Impairment
      of intangible and long-lived assets
            
            
            -
            
            
            
            20.8Net
      realized investment losses (gains)
            
            
            2.2
            
            
            
            (8.4
            )Net
      change in fair value of trading securities
            
            
            1.8
            
            
            
            2.7Deferred
      income tax (benefit)
            
            
            0.8
            
            
            
            (17.0
            )Change
      in assets and liabilities, net of businesses acquired:Accounts
      and notes receivable
            
            
            1.6
            
            
            
            (6.1
            )Income
      taxes receivable/payable
            
            
            (45.7
            )
            
            
            55.4Accounts
      payable and accrued expenses
            
            
            (62.9
            )
            
            
            (38.2
            )Pending
      trades of trading securities, net
            
            
            2.3
            
            
            
            16.0Policy
      and contract claims
            
            
            43.4
            
            
            
            43.3Deferred
      service arrangements
            
            
            (6.7
            )
            
            
            (11.0
            )Other
            
            
            5.5
            
            
            
            3.8Net
      cash (used in) provided by operating activities
            
            
            (98.3
            )
            
            
            112.7Cash
      flows from investing activities:Purchases
      of title plant, property and equipment
            
            
            (10.5
            )
            
            
            (12.7
            )Purchases
      of businesses, net of cash acquired
            
            
            (3.7
            )
            
            
            (5.9
            )Change
      in short-term investments
            
            
            49.4
            
            
            
            177.0Cost
      of investments acquired:Fixed
      maturities available-for-sale
            
            
            (107.7
            )
            
            
            (181.7
            )Equity
      securities available-for- sale
            
            
            (12.1
            )
            
            
            (47.3
            )Proceeds
      from investment sales or maturities:Fixed
      maturities available-for-sale
            
            
            126.7
            
            
            
            212.7Equity
      securities available-for-sale
            
            
            11.1
            
            
            
            53.9Net
      change in federal funds sold
            
            
            (6.0
            )
            
            
            43.0Change
      in loans receivable
            
            
            (32.8
            )
            
            
            (54.7
            )Other
            
            
            (1.8
            )
            
            
            (1.9
            )Net
      cash provided by investing activities
            
            
            12.6
            
            
            
            182.4Cash
      flows from financing activities:Net
      change in deposits
            
            
            52.6
            
            
            
            (94.0
            )Proceeds
      from the exercise of stock options and incentive plans
            
            
            -
            
            
            
            2.8Tax
      benefit of stock options exercised
            
            
            -
            
            
            
            1.8Cost
      of shares repurchased
            
            
            -
            
            
            
            (81.9
            )Dividends
      paid
            
            
            (9.2
            )
            
            
            (7.6
            )Proceeds
      from issuance of notes payable
            
            
            101.3
            
            
            
            10.2Payments
      on notes payable
            
            
            (94.0
            )
            
            
            (122.5
            )Deferred financing
      costs
            
            
            (0.6
            )
            
            
            -Net
      cash provided by (used in) financing activities
            
            
            50.1
            
            
            
            (291.2
            )Net
      (decrease) increase in cash
            
            
            (35.6
            )
            
            
            3.9Cash
      at beginning of period
            
            
            98.2
            
            
            
            82.5Cash
      at end of period
            
            $
            62.6
            
            
            $
            86.4Supplemental
      cash flow information:Non-cash investing activities –
      transfer of fixed maturities from available-for-sale to
      trading
            
            $
            -
            
            
            $
            142.6





See Notes
to Consolidated Financial Statements.
 6





LANDAMERICA
FINANCIAL GROUP, INC. AND SUBSIDIARIES





CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


SIX
MONTHS ENDED JUNE 30, 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
      loss:Net
      income
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            12.6
            
            
            
            12.6Other
      comprehensive (loss) income:Net
      unrealized loss on securities – net of tax benefit of $9.4
            
            
            -
            
            
            
            -
            
            
            
            (17.2
            )
            
            
            -
            
            
            
            (17.2
            )Amortization
      of minimum pension liability – net of tax expense of $2.2
            
            
            -
            
            
            
            -
            
            
            
            3.7
            
            
            
            -
            
            
            
            3.7(0.9
            )Common
      stock retired
            
            
            (1.0
            )
            
            
            (81.9
            )
            
            
            -
            
            
            
            -
            
            
            
            (81.9
            )Stock
      options and incentive plans
            
            
            0.2
            
            
            
            11.5
            
            
            
            -
            
            
            
            -
            
            
            
            11.5Common
      dividends ($0.44/share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (7.6
            )
            
            
            (7.6
            )BALANCE
      – June 30, 2007
            
            
            16.8
            
            
            $
            394.9
            
            
            $
            (45.7
            )
            
            $
            967.7
            
            
            $
            1,316.9BALANCE
      – December 31, 2007
            
            
            15.3
            
            
            $
            335.4
            
            
            $
            (26.2
            )
            
            $
            891.5
            
            
            $
            1,200.7Comprehensive
      loss:Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (74.2
            )
            
            
            (74.2
            )Other comprehensive (loss)
      income:Net unrealized loss on
      securities, net of tax benefit of $8.8
            
            
            -
            
            
            
            -
            
            
            
            (15.9
            )
            
            
            -
            
            
            
            (15.9
            )Postretirement benefits liability
      adjustment, net of tax expense of $2.3
            
            
            -
            
            
            
            -
            
            
            
            3.9
            
            
            
            -
            
            
            
            3.9Foreign currency
      translation
            
            
            -
            
            
            
            -
            
            
            
            0.1
            
            
            
            -
            
            
            
            0.1(86.1
            )Stock
      options and incentive plans
            
            
            0.2
            
            
            
            2.7
            
            
            
            -
            
            
            
            -
            
            
            
            2.7Common
      dividends ($0.60/share)
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (9.2
            )
            
            
            (9.2
            )BALANCE
      – June 30, 2008
            
            
            15.5
            
            
            $
            338.1
            
            
            $
            (38.1
            )
            
            $
            808.1
            
            
            $
            1,108.1














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 June 2008, FASB ratified EITF Issue
No. 08-3, Accounting by
Lessees for Nonrefundable Maintenance Deposits(“EITF No. 08-3”). 
EITF No. 08-3 requires that all nonrefundable maintenance deposits be accounted
for as a deposit with the deposit expensed or capitalized in accordance with the
lessee's maintenance accounting policy when the underlying maintenance is
performed. Once it is determined that an amount on deposit is not probable of
being used to fund future maintenance expense, it is to be recognized as
additional expense at the time such determination is made. EITF No. 08-3 is
effective for us beginning after January 1, 2009.  We are evaluating the
effect of adopting EITF No. 08-3 on our financial statements.





In June 2008, FASB ratified EITF Issue
No. 08-4, Transition Guidance
for Conforming Changes to Issue No. 98-5 (“EITF No. 08-4”).  Per
EITF No. 08-4, conforming changes made to EITF Issue No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, that result from EITF Issue No. 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments, and SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, shall be
effective for us beginning after January 1, 2009.  We are evaluating
the effect of adopting EITF No. 08-4 on our financial statements.





In May
2008, FASB issued FSP Accounting Principles Board No. 14−1 Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (“FSP APB 14−1”).  FSP APB 14−1 requires the issuer
of certain convertible debt instruments that may be settled in cash (or other
assets) on conversion (including partial cash settlement) to separately account
for the liability and equity components of the instrument in a manner that
reflects the issuer's non−convertible debt borrowing rate when interest cost is
recognized in subsequent periods.  FSP APB 14−1 is effective for us
beginning after January 1, 2009.  We are evaluating the effect of
adopting FSP APB 14−1 on our financial statements.








9





2.
            EARNINGS
      PER SHARE





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





Three
      Months Ended
              June 30,
            
            
            Six
      Months Ended
              June 30,2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      millions, except per share amounts)Numerator:Net
      (loss) income for basic and diluted earnings per share
            
            $
            (50.0
            )
            
            $
            7.9
            
            
            $
            (74.2
            )
            
            $
            12.6Denominator:Weighted
      average shares for basic earnings per share
            
            
            15.2
            
            
            
            16.7
            
            
            
            15.2
            
            
            
            17.0Effect
      of dilutive securities:Convertible
      debt
            
            
            -
            
            
            
            2.1
            
            
            
            -
            
            
            
            1.5Employee
      stock options and restricted stock
            
            
            -
            
            
            
            0.2
            
            
            
            -
            
            
            
            0.1Denominator
      for diluted earnings per share
            
            
            15.2
            
            
            
            19.0
            
            
            
            15.2
            
            
            
            18.6Basic
      (loss) earnings per share
            
            $
            (3.29
            )
            
            $
            0.48
            
            
            $
            (4.88
            )
            
            $
            0.74Diluted
      (loss) earnings per share
            
            $
            (3.29
            )
            
            $
            0.42
            
            
            $
            (4.88
            )
            
            $
            0.68





Due to the loss attributable to common
shareholders for the three and six months ended June 30, 2008,  no
potentially dilutive shares were included in the loss per share calculation as
including such shares would be anti-dilutive.





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






10





·
            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 June 30, 2008.





The following table presents the fair
value hierarchy for financial instruments measured at fair value on a recurring
basis as of June 30, 2008.





Fair
      Value Measurements
              at June 30, 2008 UsingTotal
            
            
            Level 1
            
            
            Level 2(In
      millions)Assets:Fixed
      maturities trading
            
            $
            119.8
            
            
            $
            6.0
            
            
            $
            113.8Available-for-sale
      securitiesFixed
    maturities
            
            
            982.2
            
            
            
            41.2
            
            
            
            941.0Equity
            
            
            73.8
            
            
            
            73.8
            
            
            
            -Total
            
            $
            1,175.8
            
            
            $
            121.0
            
            
            $
            1,054.8





Holding losses of $3.0 million on
trading fixed maturities were recorded in net realized investment gains within
the statement of operations for the period ended June 30, 2008.





11





During first quarter 2007, we began
actively trading $142.6 million of our fixed maturity securities previously
classified as available-for-sale securities.  We classify our
fixed-maturity and equity investments as trading or
available-for-sale.  Trading investments are bought and held
principally for the purpose of selling them in the near term.  All
fixed-maturity and equity investments not classified as trading are classified
as available-for-sale.





Our investment portfolio is managed by
professional investment advisors under guidelines that govern the types of
permissible investments, investment quality, maturity, duration, and
concentration of issuer to comply with the various state regulatory requirements
while maximizing net after-tax yield.  These guidelines and our
investment strategies are established and periodically reexamined by the
Investment Funds Committee of our Board of Directors.  In the first
quarter of 2007, we decided to modify our investment strategy and engage a new
investment advisor for a portion of our investment portfolio with the intent to
actively trade these securities for the purpose of profit taking and maximizing
the total return of the portfolio.  Although the market value of our
trading securities may be similar to past statements, the individual securities
may be significantly different from period to period.  Because of the
investment advisor’s style of active and frequent trading, the securities under
their management were reclassified from available-for-sale to
trading.  During first quarter 2007, we transferred $142.6 million of
our fixed-maturity securities from available-for-sale securities to trading
securities.  Additionally $2.3 million of unrealized gains on these
available-for-sale securities which were previously included in accumulated
other comprehensive income (loss) were reclassified and recorded in the
consolidated statement of operations caption “Net realized investment gains.” We
did not transfer any of our securities between investment categories during the
remainder of 2007.  For further details, see our Annual Report on Form
10-K for the year ended December 31, 2007.





4.
              INCOME
      TAXES


Our effective income tax rate was 34.0%
for the first half of 2008 and 33.5% for the first half of 2007.





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 June 30, 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.





12





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





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:





June 30, 2008
            
            
            December 31, 2007(Dollars
      in millions)Known
      claims
            
            $
            187.5
            
            
            
            20.4
            %
            
            $
            165.8
            
            
            
            18.9
            %IBNR
            
            
            732.4
            
            
            
            79.6
            
            
            
            710.7
            
            
            
            81.1Total
      policy and contract claims
            
            $
            919.9
            
            
            
            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
provided for claims losses using approximately 15.9 percent and 9.3 percent of
operating revenue from the Title Operations segment for the second quarters of
2008 and 2007, respectively, and approximately 12.9 percent and 7.9 percent of
operating revenue from the Title Operations segment for the first half of 2008
and 2007, respectively.  The claims provision ratio included
individual claims over $1 million (“large claims”) incurred of approximately $22
million and $33 million in second quarter and the first half of 2008,
respectively.  Additionally, second quarter 2008 reflected an increase
in the frequency of claims reported primarily for policy years 2005 and 2006
which resulted in upward development in the estimated provision for these policy
years.  There were no significant large claims incurred in second
quarter 2007 or the first half of 2007.  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 June 30, 2008 based on the
results of our evaluation of claims data and any known trend.





6.
            CREDIT
      ARRANGEMENTS





On June
30, 2008, we entered into an amendment (“Second Amendment to the Note Purchase
Agreement”) to our Note Purchase Agreement.  The material terms of the
Second





13


Amendment
to the Note Purchase Agreement suspended the interest charges coverage ratio
covenant through December 31, 2009 and during the suspension, the covenant was
replaced with a covenant setting forth a fixed charge coverage ratio of 1.15:1.0
for the fiscal quarter ending June 30, 2008, 1.20:1.0 for the fiscal quarter
ending September 30, 2008, and 1.50:1.0 for each fiscal quarter ending
thereafter, with both covenants applicable after December 31, 2009; and
increased the interest rate on the Series D and Series E notes by 50 basis
points from 6.66% to 7.16% and 6.70% to 7.20%, respectively.  In
addition, the Second Amendment to the Note Purchase Agreement added, among other
terms, certain covenants and defaults that were included in the revolving credit
facility with SunTrust Bank and restrictions on dividends in the event our
senior debt is downgraded to below investment grade.


On June
30, 2008, we entered into an amendment (“Second Amendment”) to our Credit
Agreement.  The material terms of the Second Amendment eliminated the
consolidated net worth covenant; replaced the interest coverage ratio covenant
with a covenant setting forth a fixed charge coverage ratio of 1.15:1.0 for the
fiscal quarter ending June 30, 2008, 1.20:1.0 for the fiscal quarter ending
September 30, 2008, and 1.50:1.0 for each fiscal quarter ending thereafter;
reduced the principal amount available under the facility from $200 million to
$150 million; added as an event of default a material insurance subsidiary of
ours becoming subject to a regulatory prohibition that results in a loss of our
ability to write or underwrite further business representing more than 10% of
our total annual consolidated revenue; increased the interest rate pricing grid
by 50 basis points; and provided for an interest rate increase of 50 basis
points in the event our senior debt rating is downgraded to below investment
grade.





7.
            PENSIONS
      AND OTHER POST-RETIREMENT BENEFITS





The following presents the estimated
net pension expense recorded in the financial statements for the three and six
months ended June 30, 2008 and 2007.





The amounts are as
follows:


Three
      Months Ended June 30,Pension
      Benefits
            
            
            Other
      Benefits2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      millions)Components
      of net pension expense (income):Service
      cost
            
            $
            -
            
            
            $
            -
            
            
            $
            0.2
            
            
            $
            0.3Interest
      cost
            
            
            3.4
            
            
            
            3.7
            
            
            
            0.7
            
            
            
            0.7Expected
      return on plan assets
            
            
            (4.3
            )
            
            
            (4.7
            )
            
            
            -
            
            
            
            -Recognized
      loss
            
            
            1.1
            
            
            
            1.4
            
            
            
            -
            
            
            
            -Gain
      or loss due to settlement or curtailment
            
            
            1.9
            
            
            
            3.0
            
            
            
            (2.3
            )
            
            
            -Net
      pension expense (income)
            
            $
            2.1
            
            
            $
            3.4
            
            
            $
            (1.4
            )
            
            $
            1.0








14








Six
      Months Ended June 30,Pension
      Benefits
            
            
            Other
      Benefits2008
            
            
            2007
            
            
            2008
            
            
            2007(In
      millions)Components
      of net pension expense (income):Service
      cost
            
            $
            -
            
            
            $
            -
            
            
            $
            0.4
            
            
            $
            0.6Interest
      cost
            
            
            6.8
            
            
            
            7.3
            
            
            
            1.4
            
            
            
            1.4Expected
      return on plan assets
            
            
            (8.5
            )
            
            
            (9.4
            )
            
            
            -
            
            
            
            -Recognized
      loss
            
            
            2.2
            
            
            
            2.9
            
            
            
            -
            
            
            
            -Gain
      or loss due to settlement or curtailment
            
            
            1.9
            
            
            
            3.0
            
            
            
            (2.3
            )
            
            
            -Net
      pension expense (income)
            
            $
            2.4
            
            
            $
            3.8
            
            
            $
            (0.5
            )
            
            $
            2.0





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





8.
            COMMITMENTS
      AND CONTINGENCIES





General





We
believe that the pending legal proceedings listed below are the only material
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 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





15





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 that resulted in a settlement that is within the reserve
established during third quarter 2007.  The settlement has been
preliminarily approved by the court and a fairness hearing set for March 10,
2009 after notice to the class. 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
class.  The appellate court remanded the case to the trial court to
craft a less burdensome order.  No motion for class certification has
been filed to date and Commonwealth believes it has meritorious
defenses.





16








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.  A motion for consolidation
of those actions to the Southern District of New York was denied by the Judicial
Panel on Multi-District Litigation and defendants are now seeking the
consolidation of the multiple cases before one judge within each
state.  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.





17





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 and then received public comments on, 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.





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 the change in the split, which took
effect July 1, 2008.  The New Mexico Division of Insurance held a
hearing on June 27, 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





18





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.   On June 18, 2008, CA DOI submitted
new regulations to OAL addressing controlled business, financial data reporting,
rebates and commissions and repealing the interim rate reduction and maximum
rate formula in the previously approved regulations.  Hearings on the
new regulations will be held August 12-15, 2008.





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 $2.9 million at June 30, 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 $1,674.5 million and $863.2 million at
June 30, 2008 and December 31, 2007, respectively.  Funds related to
like-kind exchange transactions held on deposit at Centennial and included in
the accompanying consolidated balance sheets were $23.5 million and $131.9
million at June 30, 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.





At June 30, 2008, like-kind exchange
funds not held at Centennial were invested in high quality, short-term
instruments and $290.5 million of auction rate securities
(“ARS”).  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.  Beginning February 2008, the auctions for ARS failed when
sell orders exceeded buy orders as a result of liquidity issues in the global
credit and capital markets.  The portfolio of ARS is comprised
entirely of student loan ARS of which 99.1% is guaranteed by
government-sponsored





19





enterprises.
We believe the failures of these auctions do not affect the value of the
collateral underlying the ARS. 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.  In the unlikely event we may
need to provide liquidity to the like-kind exchange funds, we may purchase a
portion of the ARS for our investment portfolio.  Depending on the
fair value of the ARS at the time of purchase, we may incur an impairment
charge.  As of June 30, 2008, we estimate that the ARS were valued at
discounts up to 25% of par value based on discounted cash flow models and
other available information.  Based on 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.





9.
            IMPAIRMENT
      OF INTANGIBLE AND LONG-LIVED ASSETS





There
were no material impairments of intangible and long-lived assets for the three
and six months ended June 30, 2008.





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 in first quarter 2007 which was reflected in
our results of operations.  There were no impairments of intangible
and long-lived assets for second quarter 2007.





10.           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.





Title Operations includes residential
(direct and agency operations) 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.





20





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 Glen Allen, 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 and six
months ended June 30, 2008 and 2007:





Three
      Months Ended June 30,Operating
              Revenue
            
            
            Personnel
              Cost
            
            
            Depreciation
              and
              Amortization
            
            
            Income
      (Loss) Before Taxes(In
      millions)2008Title
      Operations
            
            $
            595.2
            
            
            $
            160.6
            
            
            $
            8.6
            
            
            $
            (52.6
            )Lender
      Services
            
            
            64.3
            
            
            
            25.1
            
            
            
            2.9
            
            
            
            3.4Financial
      Services
            
            
            1.3
            
            
            
            0.9
            
            
            
            0.1
            
            
            
            5.3Corporate
      and Other
            
            
            27.0
            
            
            
            24.3
            
            
            
            3.8
            
            
            
            (28.4
            )Total
            
            $
            687.8
            
            
            $
            210.9
            
            
            $
            15.4
            
            
            $
            (72.3
            )2007Title
      Operations
            
            $
            863.3
            
            
            $
            262.0
            
            
            $
            10.4
            
            
            $
            30.4Lender
      Services
            
            
            68.9
            
            
            
            26.3
            
            
            
            4.0
            
            
            
            1.7Financial
      Services
            
            
            0.2
            
            
            
            0.8
            
            
            
            0.1
            
            
            
            5.0Corporate
      and Other
            
            
            39.1
            
            
            
            26.9
            
            
            
            4.5
            
            
            
            (25.4
            )Total
            
            $
            971.5
            
            
            $
            316.0
            
            
            $
            19.0
            
            
            $
            11.7








21








Six
      Months Ended June 30,Operating
              Revenue
            
            
            Personnel
              Cost
            
            
            Depreciation
              and
              Amortization
            
            
            Income
      (Loss) Before Taxes(In
      millions)2008Title
      Operations
            
            $
            1,151.2
            
            
            $
            339.0
            
            
            $
            17.6
            
            
            $
            (80.5
            )Lender
      Services
            
            
            135.7
            
            
            
            48.5
            
            
            
            6.0
            
            
            
            13.5Financial
      Services
            
            
            2.0
            
            
            
            1.9
            
            
            
            0.2
            
            
            
            10.0Corporate
      and Other
            
            
            55.1
            
            
            
            50.3
            
            
            
            7.6
            
            
            
            (55.3
            )Total
            
            $
            1,344.0
            
            
            $
            439.7
            
            
            $
            31.4
            
            
            $
            (112.3
            )2007Title
      Operations
            
            $
            1,654.7
            
            
            $
            516.8
            
            
            $
            19.6
            
            
            $
            64.5Lender
      Services
            
            
            151.8
            
            
            
            54.3
            
            
            
            7.6
            
            
            
            (7.0
            )Financial
      Services
            
            
            0.4
            
            
            
            1.7
            
            
            
            0.1
            
            
            
            10.1Corporate
      and Other
            
            
            75.9
            
            
            
            51.0
            
            
            
            8.5
            
            
            
            (48.6
            )Total
            
            $
            1,882.8
            
            
            $
            623.8
            
            
            $
            35.8
            
            
            $
            19.0





The
      following table represents segment
assets:





June
      30,
              2008
            
            
            December
      31,
              2007(In
      millions)Title
      Operations
            
            $
            2,316.6
            
            
            $
            2,383.4Lender
      Services
            
            
            375.9
            
            
            
            380.3Financial
      Services
            
            
            790.8
            
            
            
            734.6Corporate
      and Other
            
            
            303.6
            
            
            
            355.4Total
            
            $
            3,786.9
            
            
            $
            3,853.7








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 10 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.”





22





Overview





We are a leading provider of integrated
real estate transaction services.  One of our goals is to grow our
business while maximizing our profitability throughout the real estate market
cycles.  To accomplish this objective, we have expanded our operations
through internal growth and selective strategic
acquisitions.  Additionally, we are actively engaged in a number of
strategic initiatives to maximize our operating efficiency by transforming
LandAmerica into a unified operating company.  We call these strategic
initiatives “Fusion.”  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 (“MBA”), mortgage originations declined by approximately $176
billion, or 25.1%, in second quarter 2008 from second quarter 2007 and declined
to just under $219 billion, or 16.9%, in the first half of 2008 from the
comparable period in 2007.  Also, home sales volume, as estimated by
the MBA, declined by approximately 1.3 million, or 19.4%, in second quarter 2008
from the comparable period in 2007 and declined by roughly 3.0 million, or
21.5%, in the first half of 2008 from the comparable period in
2007.





Operating
revenues were $687.8 million and $971.5 million for the three months ended June
30, 2008 and 2007, respectively, and $1,344.0 million and $1,882.8 million for
the first six months ended June 30, 2008 and 2007,
respectively.  Pretax operating loss in second quarter 2008 was
$(72.3) million compared to pretax operating income of $11.7 million for the
comparable period in 2007.  Pretax operating loss for the first half
of 2008 was $(112.3) million compared to pretax operating income of $19.0
million for the comparable period in 2007.





The
overall decrease in residential real estate transactions and property values has
negatively affected our operating revenues in second quarter 2008 and the first
six months of 2008 in the Title Operations segment.  Additionally, the
downturn in the residential real estate market has resulted in lower revenue in
certain lines of the mortgage originations and loan servicing businesses in the
Lender Services segment.  These declines were offset in part by growth
in the default management services business.  Revenue for our home
warranty and property inspection businesses, which are dependent on existing
home sales volume, also declined in second quarter 2008 and for the first six
months of 2008 from the comparable periods in 2007.  Our title and
non-title commercial revenue declined in second quarter 2008 and for the first
six months of 2008 from the comparable periods in 2007 as a result of the
tighter credit markets.





As
conditions in the real estate market have become increasingly difficult, we have
aggressively reduced our operating costs while remaining focused on activities
designed to improve our underlying fundamentals.  We reviewed our
operating performance and related





23





staffing
requirements in each of the local markets we serve.  Based on this
review, we reduced full-time equivalent (“FTE”) counts by approximately 4,000 or
28.4%, since December 31, 2006. Salary and employee benefit costs have decreased
by 33.3% during second quarter 2008 and by 29.5% in the first half of 2008 from
the comparable periods in 2007.


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 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 9, “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.





24





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 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 June 2008, FASB ratified EITF Issue
No. 08-3, Accounting by
Lessees for Nonrefundable Maintenance Deposits(“EITF No. 08-3”). 
EITF No. 08-3 requires that all nonrefundable maintenance deposits be accounted
for as a deposit with the deposit expensed or capitalized in accordance with the
lessee's maintenance accounting policy when the underlying maintenance is
performed. Once it is determined that an amount on deposit is not probable of
being used to fund future maintenance expense, it is to be recognized as
additional expense at the time such determination is made. EITF No. 08-3 is
effective for us beginning after January 1, 2009.  We are evaluating the
effect of adopting EITF No. 08-3 on our financial statements.





In June 2008, FASB ratified EITF Issue
No. 08-4, Transition Guidance
for Conforming Changes to Issue No. 98-5 (“EITF No. 08-4”).  Per
EITF No. 08-4, conforming changes made to EITF Issue No. 98-5, Accounting for Convertible
Securities with Beneficial Conversion Features or Contingently Adjustable
Conversion Ratios, that result from EITF Issue No. 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments, and SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity, shall be
effective for us beginning after January 1, 2009.  We are evaluating
the effect of adopting EITF No. 08-4 on our financial statements.





In May
2008, FASB issued FSP Accounting Principles Board No. 14−1 Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (“FSP APB 14−1”).  FSP APB 14−1 requires the issuer
of certain convertible debt instruments that may be settled in cash (or other
assets) on conversion (including partial cash settlement) to separately account
for the liability and equity components of the instrument in a manner that
reflects the issuer's non−convertible debt borrowing rate when interest cost is
recognized in subsequent periods.  FSP APB 14−1 is effective for us
beginning after January 1, 2009.  We are evaluating the effect of
adopting FSP APB 14−1 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






25




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.





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.  Residential refinancing activity is dependent upon mortgage
interest rate changes.  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.  Agency revenue trends with the policy reporting
patterns of independent agents.





We typically report our lowest level of
agency and commercial revenue in the first quarter and our highest level of
agency and commercial revenue in the fourth quarter.  We typically
report our highest level of direct residential revenue in the second and third
quarters.  However, because of falling home prices and the significant
decline in the availability of mortgage financing, operating revenue has not
reflected the typical seasonal pattern during the past four
quarters.





Results
of Operations





Operating Revenue





The following table providesa summary of our
operating revenue for the three and six months ended June 30, 2008 and
2007:





Three Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      OperationsDirect
      Operations
            
            $
            240.1
            
            
            
            34.9
            %
            
            $
            410.1
            
            
            
            42.2
            %Agency
      Operations
            
            
            355.1
            
            
            
            51.6
            
            
            
            453.2
            
            
            
            46.7595.2
            
            
            
            86.5
            
            
            
            863.3
            
            
            
            88.9Lender
      Services
            
            
            64.3
            
            
            
            9.4
            
            
            
            68.9
            
            
            
            7.1Financial
      Services
            
            
            1.3
            
            
            
            0.2
            
            
            
            0.2
            
            
            
            -Corporate
      and Other
            
            
            27.0
            
            
            
            3.9
            
            
            
            39.1
            
            
            
            4.0Total
            
            $
            687.8
            
            
            
            100.0
            %
            
            $
            971.5
            
            
            
            100.0
            %








26








Six Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      OperationsDirect
      Operations
            
            $
            475.7
            
            
            
            35.4
            %
            
            $
            779.4
            
            
            
            41.4
            %Agency
      Operations
            
            
            675.5
            
            
            
            50.3
            
            
            
            875.3
            
            
            
            46.51,151.2
            
            
            
            85.7
            
            
            
            1,654.7
            
            
            
            87.9Lender
      Services
            
            
            135.7
            
            
            
            10.1
            
            
            
            151.8
            
            
            
            8.1Financial
      Services
            
            
            2.0
            
            
            
            0.1
            
            
            
            0.4
            
            
            
            -Corporate
      and Other
            
            
            55.1
            
            
            
            4.1
            
            
            
            75.9
            
            
            
            4.0Total
            
            $
            1,344.0
            
            
            
            100.0
            %
            
            $
            1,882.8
            
            
            
            100.0
            %





Title Operations-Operating revenue from
direct title operations decreased by $170.0 million, or 41.4%, in second quarter
2008 from second quarter 2007 and decreased by $303.7 million, or 39.0%, in
the first half of 2008 over the comparable period in 2007. During second
quarter 2008, direct operating revenue was negatively affected by the
decline in residential real estate 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 more heavily concentrated, and
in New York.  As of June 11, 2008, Moody’s Economy.com reports that
mortgage originations in these states are down a collective 28.1% in second
quarter 2008 from second quarter 2007 and down a collective 28.2% in the first
half of 2008 from the comparable period in 2007.  Revenue from direct
title commercial operations was $68.8 million in second quarter 2008,
compared to $127.5 million in second quarter 2007, a decrease of 46.0% from
second quarter 2007, and $142.4 million in the first half of 2008, compared
to $219.7 million in the first half of 2007, a decrease of 35.2%.





Closed
orders from our direct title operations were approximately 118,300 and
176,500 in the second quarters of 2008 and
2007, respectively, a decline of 33.0%, while direct operating revenue per
direct order closed decreased approximately 11.7% in second quarter 2008 from
second quarter 2007.  Closed orders from direct title operations for
the first half of 2008 were approximately 232,200 compared to approximately
346,000 for the first half of 2007, while direct revenue per direct
order closed decreased approximately 13.6%, from approximately $2,200 in the
first half of2007 to
approximately $1,900 in the first half of2008.





Operating
revenue from agency title operations for second quarter 2008 decreased
by $98.1 million, or 21.6%, from second quarter 2007, and operating
revenue from agency title operations for the first half of 2008
decreased by $199.8 million, or 22.8%, from the first half of 2007 due
to the decline in market conditions across most regions, particularly in certain
southeastern and northeastern markets.





27








Lender Services-Operating revenue
decreased by $4.6 million, or 6.7%, in second quarter 2008 compared to second
quarter 2007, and decreased by $16.1 million, or 10.6%, for the first half of
2008 compared to the first half of 2007.  Revenue for second
quarter and the first half of 2008 was negatively 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.  Revenue in the first half of
2007 was positively affected by the acceleration of deferred revenue in the loan
servicing business in first quarter 2007.





Corporate and Other- Operating revenue
for Corporate and Other decreased by $12.1 million, or 30.9%, in second
quarter 2008 from second quarter 2007, and decreased by $20.8
million, or 27.4%, in the first half of 2008 from the first half
of 2007.  Before the international acquisition that closed during
third quarter 2007, operating revenues decreased by $18.0 million. The
decrease in operating revenue in second quarter 2008 from second
quarter 2007 was primarily due to declines in the commercial operations.
 Revenue from non-title commercial operations was $16.8 million in second
quarter 2008 compared to $24.6 million in second quarter 2007, and $33.9 million
in the first half of 2008 compared to $44.0 million in the first half of
2007.  The home warranty and property inspection businesses, which are
dependent on existing home sale volumes, also experienced declines in operating
revenues in second quarter 2008 from second quarter 2007.





Investment and Other
Income





Investment and other income was $26.7
million in second quarter 2008 compared to $32.1 million in second quarter 2007,
a decrease of l6.8%, and was $57.0 million in the first half of 2008 compared to
$62.4 million in the first half of 2007, a decrease of
8.7%.  Investment and other income includes income generated from our
investment and loan portfolios and from our equity interests in unconsolidated
affiliates.  Income from our unconsolidated affiliates declined by
$3.3 million in second quarter 2008 when compared with second quarter 2007, and
declined by $1.4 million in the first half of 2008 when compared with the
comparable period in 2007, following the overall decline in the residential real
estate market.  Investment income declined by $2.1 million in second
quarter 2008 when compared with second quarter 2007 and declined by $4.0 million
in the first half of 2008 when compared with the first half of 2007 primarily as
a result of lower investment balances in second quarter and for the first half
of 2008 from the comparable periods in 2007.





Net Realized Investment (Losses)
Gains





Net realized investment (losses) gains
were $(2.1) million in second quarter 2008 compared to $1.4 million in second
quarter 2007 and $(2.2) million in the first half of 2008 compared to $8.4
million in the first half of 2007.  Realized losses in second quarter
and the first half of 2008 were primarily from the trading
portfolio.  Gains in 2007 were primarily from the repositioning of our
REIT portfolio in second quarter and the first half of 2007 and from
the





28





reclassification
of unrealized net gains on trading investments from accumulated other
comprehensive income (loss) in first quarter 2007.





Salary and Employee
Benefits





The following table provides a summary
of our salary and employee benefit costs for the three and six months ended June
30, 2008 and 2007:





Three Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            160.6
            
            
            
            76.2
            %
            
            $
            262.0
            
            
            
            82.9
            %Lender
      Services
            
            
            25.1
            
            
            
            11.9
            
            
            
            26.3
            
            
            
            8.3Financial
      Services
            
            
            0.9
            
            
            
            0.4
            
            
            
            0.8
            
            
            
            0.3Corporate
      and Other
            
            
            24.3
            
            
            
            11.5
            
            
            
            26.9
            
            
            
            8.5Total
            
            $
            210.9
            
            
            
            100.0
            %
            
            $
            316.0
            
            
            
            100.0
            %








Six Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            339.0
            
            
            
            77.1
            %
            
            $
            516.8
            
            
            
            82.8
            %Lender
      Services
            
            
            48.5
            
            
            
            11.0
            
            
            
            54.3
            
            
            
            8.7Financial
      Services
            
            
            1.9
            
            
            
            0.4
            
            
            
            1.7
            
            
            
            0.3Corporate
      and Other
            
            
            50.3
            
            
            
            11.5
            
            
            
            51.0
            
            
            
            8.2Total
            
            $
            439.7
            
            
            
            100.0
            %
            
            $
            623.8
            
            
            
            100.0
            %





Title Operations –Title
Operations salary and employee benefit costs decreased by $101.4 million, or
38.7%, in second quarter 2008 compared to second quarter
2007.  Average FTE counts for the Title Operations segment were
approximately 7,700 in second quarter 2008 versus approximately 11,300 in second
quarter 2007, or a decrease of 31.9%.  Average FTE counts for the
Title Operations segment decreased to approximately 7,900 in the first half of
2008 from approximately 11,400 in the first half of 2007, or a decrease of
30.7%.  Decreases in salary and employee benefit costs and average FTE
counts were primarily due to reductions in staffing levels in response to
significant declines in mortgage origination volumes.





29





Lender Services– Lender
Services salary and employee benefit costs decreased by $1.2 million, or 4.6%,
in second quarter 2008 compared to second quarter 2007, and decreased by $5.8
million, or 10.7%, in the first half of 2008 compared to the first half of
2007.  Average FTE counts for the Lender Services segment were
approximately 1,600 in second quarter 2008 and 1,550 in the first half of 2008
versus approximately 1,790 in second quarter 2007 and 1,810 in the first half of
2007, or a decrease of 10.6% and 14.4%, respectively.  Decreases in
salary and employee benefit costs and average FTE counts 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 decreased by $2.6 million,
or 9.7%, in second quarter 2008 over second quarter 2007 in response to declines
in business volume.





Agent Commissions





The following table provides a summary
of agent commissions and related revenue in the Title Operations segment for the
three and six months ended June 30, 2008 and 2007:





Three Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Agent
      commissions
            
            $
            288.0
            
            
            $
            364.6Agent
      revenue
            
            $
            355.1
            
            
            $
            453.2%
      Retained by agents
            
            
            81.1
            %
            
            
            80.4
            %








Six Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Agent
      commissions
            
            $
            547.8
            
            
            $
            705.0Agent
      revenue
            
            $
            675.5
            
            
            $
            875.3%
      Retained by agents
            
            
            81.1
            %
            
            
            80.5
            %





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 and six months ended
June 30, 2008 is higher than 80% due to the decline in agency revenue in regions
with lower commission rates.








30





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 effect 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
provided for claims losses using approximately 15.9 percent and 9.3 percent of
operating revenue from the Title Operations segment for the second quarters of
2008 and 2007, respectively, and approximately 12.9 percent and 7.9 percent of
operating revenue from the Title Operations segment for the first half of 2008
and 2007, respectively.  The claims provision ratio included
individual claims over $1 million (“large claims”) incurred of approximately $22
million and $33 million in second quarter and the first half of 2008,
respectively.  Additionally, second quarter 2008 reflected an increase
in the frequency of claims reported primarily for policy years 2005 and 2006
which resulted in upward development in the estimated provision for these policy
years.  There were no significant large claims incurred in second
quarter 2007 or the first half of 2007.  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 June 30, 2008 based on the
results of our evaluation of claims data and any known trend.





Impairment of Intangible and Long-Lived
Assets





There were no material impairments of
intangible and long-lived assets for the three and six months ended June 30,
2008.  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 9, “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 $3.6 million in second quarter 2008 compared to second quarter 2007
and decreased by $4.4 million in the first half of 2008 from the first half of
2007.  Depreciation expense in second quarter and for the first half
of 2008 includes the effects of asset write-offs related to office
closures.  Depreciation expense in second quarter 2007 included an
adjustment related to the relocation of our corporate offices.








31





Interest Expense





Interest expense increased by $0.8
million in second quarter 2008 compared to second quarter 2007, and increased by
$0.4 million in the first half of 2008 compared to the first half of
2007.  The increases were primarily due to increases in interest
incurred on deposit liabilities at Centennial offset in part by lower interest
as a result of the prepayment of certain of our senior notes in fourth quarter
2007.  See “Liquidity and Capital Resources” in our Annual Report on
Form 10-K for the year ended December 31, 2007 for further details.





General, Administrative and
Other





The following table provides a summary
of our general, administrative and other expenses for the three and six months
ended June 30, 2008 and 2007:





Three Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            106.2
            
            
            
            66.6
            %
            
            $
            134.2
            
            
            
            68.0
            %Lender
      Services
            
            
            31.9
            
            
            
            20.0
            
            
            
            35.4
            
            
            
            18.0Financial
      Services
            
            
            0.4
            
            
            
            0.2
            
            
            
            0.2
            
            
            
            0.1Corporate
      and Other
            
            
            21.0
            
            
            
            13.2
            
            
            
            27.5
            
            
            
            13.9Total
            
            $
            159.5
            
            
            
            100.0
            %
            
            $
            197.3
            
            
            
            100.0
            %








Six Months Ended June 30,2008
            
            
            2007(Dollars
      in millions)Title
      Operations
            
            $
            203.5
            
            
            
            65.3
            %
            
            $
            258.5
            
            
            
            67.3
            %Lender
      Services
            
            
            66.2
            
            
            
            21.2
            
            
            
            72.9
            
            
            
            19.0Financial
      Services
            
            
            0.7
            
            
            
            0.2
            
            
            
            0.5
            
            
            
            0.1Corporate
      and Other
            
            
            41.5
            
            
            
            13.3
            
            
            
            52.2
            
            
            
            13.6Total
            
            $
            311.9
            
            
            
            100.0
            %
            
            $
            384.1
            
            
            
            100.0
            %








Title Operations –Title
Operations general, administrative and other expenses decreased by $28.0
million, or 20.9%, in second quarter 2008 from second quarter 2007 and decreased
by





32





$55.0
million, or 21.3%, in the first half of 2008 from the first half of
2007.  The decrease in general, administrative and other expenses
reflected the decline in business volume.





Lender Services –Lender
Services general, administrative and other expenses decreased by $3.5 million,
or 9.9%, in second quarter 2008 from second quarter 2007 and decreased by $6.7
million, or 9.2%, in the first half of 2008 from the first half of
2007.  The decrease in general, administrative and other expenses was
primarily due to declines in business volume in certain lines of the mortgage
origination and loan servicing businesses, 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 $6.5
million, or 23.6%, in second quarter 2008 from second quarter 2007 and decreased
by $10.7 million, or 20.5%, in the first half of 2008 from the first half of
2007.  The decrease in general, administrative and other expenses 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 34.0% for the first half of 2008 and 33.5% for the first half
of 2007.





Net (Loss)
Income





Our reported net loss was $(50.0)
million or $(3.29) per share on a diluted basis for second quarter 2008,
compared to net income of $7.9 million or $0.42 per share on a diluted basis for
second quarter 2007.  Our reported net loss was $(74.2) million or
$(4.88) per share on a diluted basis for the first half of 2008 compared to net
income of $12.6 million or $0.68 per share on a diluted basis for the first half
of 2007.  Net loss for second quarter and the first half of 2008
reflected the persistently lower residential mortgage originations, a reduction
in our commercial revenue and a higher claims provision ratio.  Net
income for the first half of 2007 reflected an impairment charge in first
quarter 2007 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 9, “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
$98.3 million for the first half of 2008 compared to cash provided by operating
activities of $112.7 million for the first half of 2007.  Cash used in
operating activities for the first half of 2008 was primarily the result of
lower business volume which led to a decline in net income.  Cash
provided by operating activities for the first half of 2007 included the
favorable effect of the timing of income tax payments.  Cash provided
by





33





investing
activities was $12.6 million and $182.4 for the first half of 2008 and the first
half of 2007, respectively.  Cash provided by investing activities for
the first half of 2008 included lower proceeds from investment sales or
maturities, lower short-term investment balances and an increase in investments
in federal funds sold offset in part by a lower cost of acquired investments
when compared with the first half of 2007.  Cash provided by financing
activities was $50.1 million for the first half of 2008 compared to cash used in
financing activities of $291.2 million for the first half of
2007.  Cash provided by financing activities for the first half of 2008
included higher funds or deposits held by Centennial Bank and an increase in
notes payable, related primarily to FHLB borrowings, offset in part by an
increase in the quarterly dividend rate from $0.22 per share to $0.30 per share
when compared to the first half of 2007.  Cash used in financing
activities in the first half of 2007 reflected repayment of the credit facility
of $100.0 million and common stock repurchases of $81.9 million.  At
June 30, 2008, we held cash of $62.6 million and investments of $1,352.3
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 June 30, 2008, there was approximately
$26.7 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 deterioration in the real
estate market, we paused our share repurchase program and we did not repurchase
any shares during the first half of 2008.




After thorough evaluation of all of our
options, the Board of Directors has decided to reduce the quarterly dividend
level in order to preserve capital in the event lower transactional volumes and
credit instability persist.  We have declared our third quarter cash
dividend on our common stock and set the level at $0.05 per share, a reduction
from the previous $0.30 per share quarterly level.  The new dividend
is payable on September 15, 2008, to holders of record on September 1,
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.








34





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.





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 June
30, 2008, we entered into an amendment (“Second Amendment to the Note Purchase
Agreement”) to our Note Purchase Agreement.  The material terms of the
Second Amendment to the Note Purchase Agreement suspended the interest charges
coverage ratio covenant through December 31, 2009 and during the suspension, the
covenant was replaced with a covenant setting forth a fixed charge coverage
ratio of 1.15:1.0 for the fiscal quarter ending June 30, 2008, 1.20:1.0 for the
fiscal quarter ending September 30, 2008, and 1.50:1.0 for each fiscal quarter
ending thereafter, with both covenants applicable after December 31, 2009; and
increased the interest rate on the Series D and Series E notes by 50 basis
points from 6.66% to 7.16% and 6.70% to 7.20%, respectively.  In
addition, the Second Amendment to the Note Purchase Agreement added, among other
terms, certain covenants and defaults that were included in the revolving credit
facility with SunTrust Bank and restrictions on dividends in the event our
senior debt is downgraded to below investment grade.





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.





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.





On June
30, 2008, we entered into an amendment (“Second Amendment”) to our Credit
Agreement.  The material terms of the Second Amendment eliminated the
consolidated net worth covenant; replaced the interest coverage ratio covenant
with a covenant setting forth a fixed charge coverage ratio of 1.15:1.0 for the
fiscal quarter ending June 30, 2008, 1.20:1.0 for the





35





fiscal
quarter ending September 30, 2008, and 1.50:1.0 for each fiscal quarter ending
thereafter; reduced the principal amount available under the facility from $200
million to $150 million; added as an event of default a material insurance
subsidiary of ours becoming subject to a regulatory prohibition that results in
a loss of our ability to write or underwrite further business representing more
than 10% of our total annual consolidated revenue; increased the interest rate
pricing grid by 50 basis points; and provided for an interest rate increase of
50 basis points in the event our senior debt rating is downgraded to below
investment grade.


We
monitor our compliance with the financial covenants in the Note Purchase
Agreement and Credit Agreement. We were in compliance with these covenants as of
the end of second quarter 2008.




On July
25th, 2008,
Standard & Poor’s® (“S&P”) placed our counterparty credit rating and the
counterparty credit and financial strength rating of our title insurance
operations on “CreditWatch” with negative implications.  S&P states
that this assessment is based on deterioration in profitability in the greater
title insurance sector and macroeconomic factors currently weighing on the
industry.  S&P’s counterparty credit rating assigned to us and to our
title insurance operations remains at “BBB-” and “A-”, respectively.  The
financial strength rating assigned by S&P to our title insurance operations
remains at “A-”.


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.  We classify our
fixed-maturity and equity investments as trading or
available-for-sale.  Trading investments are bought and held
principally for the purpose of selling them in the near term.  All
fixed-maturity and equity investments not classified as trading are classified
as available-for-sale.










36





Our
investment portfolio is managed by professional investment advisors under
guidelines that govern the types of permissible investments, investment quality,
maturity, duration, and concentration of issuer to comply with the various state
regulatory requirements while maximizing net after-tax yield.  These
guidelines and our investment strategies are established and periodically
reexamined by the Investment Funds Committee of our Board of
Directors.  In the first quarter of 2007, we decided to modify our
investment strategy and engage a new investment advisor for a portion of our
investment portfolio with the intent to actively trade these securities for the
purpose of profit taking and maximizing the total return of the
portfolio.  Although the market value of our trading securities may be
similar to past statements, the individual securities may be significantly
different from period to period.  Because of the investment advisor’s
style of active and frequent trading, the securities under their management were
reclassified from available-for-sale to trading.  During first quarter
2007, we transferred $142.6 million of our fixed-maturity securities from
available-for-sale securities to trading securities.  Additionally
$2.3 million of unrealized gains on these available-for-sale securities which
were previously included in accumulated other comprehensive income (loss) were
reclassified and recorded in the consolidated statement of operations caption
“Net realized investment gains.” We did not transfer any of our securities
between investment categories during the remainder of 2007.  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 the
first half of 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 material
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,


37





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,





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  38


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 appellate court remanded the case to the trial court to
craft a less burdensome order.  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.






39





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.  A motion for consolidation
of those actions to the Southern District of New York was denied by the Judicial
Panel on Multi-District Litigation and defendants are now seeking the
consolidation of the multiple cases before one judge within each





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 and then received public comments on, 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.





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







40




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 took
effect July 1, 2008.  The New Mexico Division of Insurance held a
hearing on June 27, 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.   On June 18, 2008, CA DOI submitted
new regulations to OAL addressing controlled business, financial data reporting,
rebates and commissions and repealing the interim rate reduction and maximum
rate formula in the previously approved regulations.  Hearings on the
new regulations will be held August 12-15, 2008.





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.





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


41





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 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.








42





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
                  
                  $
                  4.8
                  
                  
                  
                  30.2
                  
                  
                  
                  26.8
                  
                  
                  
                  47.2
                  
                  
                  
                  49.5
                  
                  
                  
                  426.5
                  
                  
                  $
                  585.0
                  
                  
                  $
                  578.2Average
      yield
                  
                  
                  4.6
                  %
                  
                  
                  5.2
                  %
                  
                  
                  4.9
                  %
                  
                  
                  5.4
                  %
                  
                  
                  5.2
                  %
                  
                  
                  5.3
                  %
                  
                  
                  5.3
                  %Non-taxable
      available-for-sale securities:Book
      value
                  
                  $
                  5.1
                  
                  
                  
                  15.5
                  
                  
                  
                  19.2
                  
                  
                  
                  24.7
                  
                  
                  
                  20.4
                  
                  
                  
                  309.8
                  
                  
                  $
                  394.7
                  
                  
                  $
                  399.5Average
      yield
                  
                  
                  4.6
                  %
                  
                  
                  4.1
                  %
                  
                  
                  4.0
                  %
                  
                  
                  4.3
                  %
                  
                  
                  4.2
                  %
                  
                  
                  4.2
                  %
                  
                  
                  4.2
                  %Taxable
      trading securities:Book
      value
                  
                  $
                  -
                  
                  
                  
                  1.8
                  
                  
                  
                  8.1
                  
                  
                  
                  2.8
                  
                  
                  
                  3.6
                  
                  
                  
                  74.6
                  
                  
                  $
                  90.9
                  
                  
                  $
                  90.9Average
      yield
                  
                  
                  -
                  
                  
                  
                  5.9
                  %
                  
                  
                  3.7
                  %
                  
                  
                  5.6
                  %
                  
                  
                  5.5
                  %
                  
                  
                  5.9
                  %
                  
                  
                  5.7
                  %Non-taxable
      trading securities:Book
      value
                  
                  $
                  -
                  
                  
                  
                  2.3
                  
                  
                  
                  0.5
                  
                  
                  
                  3.2
                  
                  
                  
                  1.6
                  
                  
                  
                  21.3
                  
                  
                  $
                  28.9
                  
                  
                  $
                  28.9Average
      yield
                  
                  
                  -
                  
                  
                  
                  4.3
                  %
                  
                  
                  3.6
                  %
                  
                  
                  3.7
                  %
                  
                  
                  4.6
                  %
                  
                  
                  4.2
                  %
                  
                  
                  4.2
                  %Preferred
      stock:Book
      value
                  
                  $
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5.9
                  
                  
                  $
                  5.9
                  
                  
                  $
                  4.5Average
      yield
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  5.5
                  %
                  
                  
                  5.5
                  %Loans
      receivable, excluding reserves, discounts and other costs:Book
      value
                  
                  $
                  -
                  
                  
                  
                  2.9
                  
                  
                  
                  1.0
                  
                  
                  
                  2.8
                  
                  
                  
                  7.6
                  
                  
                  
                  659.7
                  
                  
                  $
                  674.0
                  
                  
                  $
                  681.3Average
      yield
                  
                  
                  -
                  
                  
                  
                  7.3
                  %
                  
                  
                  7.3
                  %
                  
                  
                  7.6
                  %
                  
                  
                  7.4
                  %
                  
                  
                  7.0
                  %
                  
                  
                  7.0
                  %Liabilities:Interest
      bearing passbook liabilities:Book
      value
                  
                  $
                  67.8
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  $
                  67.8
                  
                  
                  $
                  67.8Average
      yield
                  
                  
                  2.5
                  %
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  2.5
                  %Interest
      bearing certificate of deposit liabilities:Book
      value
                  
                  $
                  128.9
                  
                  
                  
                  208.8
                  
                  
                  
                  42.7
                  
                  
                  
                  51.1
                  
                  
                  
                  33.5
                  
                  
                  
                  22.4
                  
                  
                  $
                  487.4
                  
                  
                  $
                  506.7Average
      yield
                  
                  
                  5.0
                  %
                  
                  
                  3.9
                  %
                  
                  
                  4.6
                  %
                  
                  
                  4.3
                  %
                  
                  
                  4.4
                  %
                  
                  
                  4.4
                  %
                  
                  
                  3.7
                  %


Changes in maturities and yields from
December 31, 2007 to June 30, 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 had debt of $586.8 million bearing
interest at an average rate of 4.4 percent at June 30, 2008.  At
December 31, 2007, we had debt of $579.5 million bearing interest at an average
rate of 4.9 percent.  The decline in the average interest rate on our
debt at June 30, 2008 from December 31, 2007 was primarily as a result of a
decline in market interest rates which resulted in a lower interest rate on our
credit facility.  For further information about our credit facility
and





43





other
borrowings, see “Liquidity and Capital Resources” in Management’s Discussion and
Analysis of Financial Condition and Results of Operations in Part I, Item 2 of
this report.





We also have non-interest bearing
passbook deposit liabilities of $61.9 million at June 30, 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
June 30, 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 June 30,
2008.





Changes in Internal
Controls





During the quarter ended June 30, 2008,
we upgraded the existing version of our general ledger system to enable new
functionality to record and report financial transactions.  Other than
the item described above, there were no other changes in our internal control
over financial reporting that occurred during the quarter ended June 30, 2008
that have materially affected, or are reasonably likely to materially affect,
our internal control 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.








44





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 second quarter 2008:





Period
            
            Total
      Number
              of
      Shares
              Purchased
            
            
            Average
      Price
              Paid per Share
            
            
            Total
      Number of Shares
              Purchased
      as Part of
              Publicly
      Announced
              Plans or Programs
            
            
            Maximum
      Number of
              Shares
      that May Yet
              Be
      Purchased Under
              the Plans or ProgramsApril
      1 through April 30, 2008
            
            
            2,237
            
            
            $
            38.54
            
            
            
            -
            
            
            
            1,639,842May
      1 through May 31, 2008
            
            
            1,552
            
            
            $
            28.77
            
            
            
            -
            
            
            
            1,638,290June
      1 through June 30, 2008
            
            
            11,738
            
            
            $
            26.72
            
            
            
            -
            
            
            
            1,626,552





(1)
            A
      total of 15,527 shares of our common stock were purchased in connection
      with two employee benefit plans during second 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 half of 2008 under this program.  As of June 30, 2008,
      there were approximately 1,109,620 authorized shares remaining under the
      repurchase program.





ITEM
      4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





a)           The
Annual Meeting of Shareholders of the Company (the “Meeting”) was held on May
13, 2008.





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





Nominee
            
            Votes For
            
            
            Votes WithheldRobert
      F. Norfleet, Jr.
            
            
            12,114,320
            
            
            
            334,376Julious
      P. Smith, Jr.
            
            
            11,615,806
            
            
            
            832,890Thomas
      G. Snead, Jr.
            
            
            10,951,658
            
            
            
            1,497,038Eugene
      P. Trani
            
            
            10,929,466
            
            
            
            1,519,230








45





The terms of office for the following
directors continued after the meeting:  Janet A. Alpert, Gale K.
Caruso, Theodore L. Chandler, Jr., Michael Dinkins, Charles H. Foster, Jr., John
P. McCann, Dianne M. Neal, Robert T. Skunda and Marshall B.
Wishnack.





c)           Finally,
at the Meeting the shareholders ratified Ernst & Young LLP as the Company’s
independent registered public accounting firm for the 2008 fiscal year as noted
below:





Appointment of
      Independent Registered Public AccountantsVotes
      For
            
            
            12,385,010Votes
      Against
            
            
            52,404Abstain
            
            
            11,282







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*





46





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











47





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.








48