**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-Q**





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





For
      the
      Quarterly Period Ended March 31, 2007





or





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





F or
      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.





**Yes** x **No** o





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


**Large
      accelerated filer** x  **Accelerated
      filer** o  **Non-accelerated
      filer** o





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


**Yes** o **No** x





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
            17,107,356
                shares
            
            April
                25, 2007










**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
            19ITEM
                3.
            QUANTITATIVE
                AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
            34ITEM
                4.
            CONTROLS
                AND PROCEDURES
            36PART
                II. OTHER INFORMATIONITEM
                1.
            LEGAL
                PROCEEDINGS
            36ITEM
                2.
            UNREGISTERED
                SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
            37ITEM
                6.
            EXHIBITS
            37SIGNATURE
            38







2





**LANDAMERICA
      FINANCIAL GROUP, INC. AND SUBSIDIARIES**





CONSOLIDATED
      BALANCE SHEETS


(In
      millions)





March
                31,
            
            December
                31,2007
            
            2006(Unaudited)ASSETSINVESTMENTS:Fixed
                maturities available-for-sale-at
                fair value (amortized cost: 2007-$1,076.9; 2006-$1,267.2)
            
            $
            1,085.8
            
            $
            1,275.8Equity
                securities available-for-sale-at
                fair value (cost: 2007-$109.9; 2006-$111.3)
            
            
            124.4
            
            
            129.8Fixed
                maturities trading-at
                fair value
            
            
            154.0
            
            
            -Federal
                funds sold
            
            
            278.2
            
            
            50.4Short-term
                investments
            
            
            260.6
            
            
            403.0Total
                Investments
            
            
            1,903.0
            
            
            1,859.0CASH
            
            
            130.2
            
            
            82.5LOANS
                RECEIVABLE
            
            
            557.3
            
            
            535.8ACCRUED
                INTEREST RECEIVABLE
            
            
            17.0
            
            
            20.2NOTES
                AND ACCOUNTS RECEIVABLE:Notes
                (less allowance for doubtful accounts: 2007-$1.2; 2006-$1.5)
            
            
            23.4
            
            
            19.3Trade
                accounts receivable (less allowance for doubtful accounts: 2007-$10.2; 2006-$10.2)
            
            
            130.8
            
            
            139.2Total
                Notes and Accounts Receivable
            
            
            154.2
            
            
            158.5INCOME
                TAXES RECEIVABLE
            
            
            13.3
            
            
            60.4PROPERTY
                AND EQUIPMENT-at
                cost (less accumulated depreciation and amortization: 2007-$231.7; 2006-$224.5)
            
            
            160.3
            
            
            164.2TITLE
                PLANTS
            
            
            105.8
            
            
            105.0GOODWILL
            
            
            789.1
            
            
            783.4INTANGIBLE
                ASSETS (less accumulated amortization: 2007-$84.2; 2006-$78.2)
            
            
            107.4
            
            
            135.2DEFERRED
                INCOME TAXES
            
            
            92.6
            
            
            84.1OTHER
                ASSETS
            
            
            227.1
            
            
            186.5Total
                Assets
            
            $
            4,257.3
            
            $
            4,174.8







See
          Notes
          to Consolidated Financial Statements.
 3


**LANDAMERICA
      FINANCIAL GROUP, INC. AND SUBSIDIARIES**





CONSOLIDATED
      BALANCE SHEETS


(In
      millions, except share amounts)








March
                31,
            
            December
                31,2007
            
            2006(Unaudited)LIABILITIESPOLICY
                AND CONTRACT CLAIMS
            
            $
            800.3
            
            $
            789.1DEPOSITS
            
            
            775.9
            
            
            618.2ACCOUNTS
                PAYABLE AND ACCRUED LIABILITIES
            
            
            410.3
            
            
            400.0NOTES
                PAYABLE
            
            
            571.5
            
            
            685.3DEFERRED
                SERVICE ARRANGEMENTS
            
            
            206.2
            
            
            218.6OTHER
            
            
            132.4
            
            
            67.8Total
                Liabilities
            
            
            2,896.6
            
            
            2,779.0COMMITMENTS
                AND CONTINGENCIESSHAREHOLDERS’
                EQUITYCommon
                stock, no par value, 45,000,000 shares authorized, shares issued
                and
                outstanding: 2007 - 17,193,342; 2006-17,604,632
            
            
            430.7
            
            
            465.3Accumulated
                other comprehensive loss
            
            
            (33.5
            )
            
            (32.2
            )Retained
                earnings
            
            
            963.5
            
            
            962.7Total
                Shareholders’ Equity
            
            
            1,360.7
            
            
            1,395.8Total
                Liabilities and Shareholders’ Equity
            
            $
            4,257.3
            
            $
            4,174.8





See
          Notes
          to Consolidated Financial Statements.
 4


**LANDAMERICA
      FINANCIAL GROUP, INC. AND SUBSIDIARIES**





CONSOLIDATED
      STATEMENTS OF OPERATIONS


THREE
      MONTHS ENDED MARCH 31, 2007 AND 2006


(In
      millions, except per common share amounts)


(Unaudited)








2007
            
            2006REVENUEOperating
                revenue
            
            $
            911.3
            
            $
            902.3Investment
                and other income
            
            
            30.3
            
            
            29.7Net
                realized investment gains
            
            
            7.0
            
            
            0.9948.6
            
            
            932.9EXPENSESAgents’
                commissions
            
            
            340.4
            
            
            383.1Salaries
                and employee benefits
            
            
            307.8
            
            
            276.7General,
                administrative and other
            
            
            187.5
            
            
            168.2Provision
                for policy and contract claims
            
            
            56.0
            
            
            50.4Premium
                taxes
            
            
            10.1
            
            
            10.4Interest
                expense
            
            
            12.7
            
            
            9.6Amortization
                of intangibles
            
            
            6.0
            
            
            6.3Impairment
                of intangible and long-lived assets
            
            
            20.8
            
            
            9.7941.3
            
            
            914.4INCOME
                BEFORE INCOME TAXES
            
            
            7.3
            
            
            18.5INCOME
                TAX EXPENSE
            
            
            2.6
            
            
            4.8NET
                INCOME
            
            $
            4.7
            
            $
            13.7NET
                INCOME PER COMMON SHARE
            
            $
            0.27
            
            $
            0.81WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
            
            
            17.2
            
            
            17.0NET
                INCOME PER COMMON SHARE ASSUMING DILUTION
            
            $
            0.26
            
            $
            0.78WEIGHTED
                AVERAGE NUMBER OF COMMON SHARES OUTSTANDING ASSUMING DILUTION
            
            
            18.0
            
            
            17.5CASH
                DIVIDENDS DECLARED PER COMMON SHARE
            
            $
            0.22
            
            $
            0.18





See
          Notes
          to Consolidated Financial Statements.
 5


**LANDAMERICA
      FINANCIAL GROUP, INC. AND SUBSIDIARIES**





CONSOLIDATED
      STATEMENTS OF CASH FLOWS


THREE
      MONTHS ENDED MARCH 31, 2007 AND 2006


(In
      millions)


(Unaudited)


2007
            
            2006Cash
                flows from operating activities:Net
                income
            
            $
            4.7
            
            $
            13.7Adjustments
                to reconcile net income to cash provided by operating
                activities:Depreciation
                and amortization
            
            
            16.8
            
            
            14.1Amortization
                of bond premium
            
            
            1.5
            
            
            1.1Impairment
                of intangible and long-lived assets
            
            
            20.8
            
            
            9.7Net
                realized investment gains
            
            
            (7.0
            )
            
            (0.9
            )Net
                change in fixed maturities trading
            
            
            (9.6
            )
            
            -Deferred
                income tax benefit
            
            
            (7.5
            )
            
            (5.6
            )Change
                in assets and liabilities, net of businesses acquired:Accounts
                and notes receivable
            
            
            10.2
            
            
            11.9Income
                taxes receivable/payable
            
            
            47.0
            
            
            (21.7
            )Accounts
                payable and accrued expenses
            
            
            11.6
            
            
            (80.9
            )Pending
                trades of fixed maturities trading, net
            
            
            27.1
            
            
            -Policy
                and contract claims
            
            
            11.3
            
            
            4.5Deferred
                service arrangements
            
            
            (12.3
            )
            
            2.7Other
            
            
            4.6
            
            
            7.6Net
                cash provided by (used in) operating activities
            
            
            119.2
            
            
            (43.8
            )Cash
                flows from investing activities:Purchases
                of title plant, property and equipment, net
            
            
            (6.5
            )
            
            (11.2
            )Purchases
                of businesses, net of cash acquired
            
            
            (5.8
            )
            
            (8.4
            )Investments
                in unconsolidated affiliates
            
            
            (0.1
            )
            
            (0.7
            )Change
                in cash surrender value of life insurance
            
            
            (0.9
            )
            
            (0.4
            )Change
                in short-term investments
            
            
            142.3
            
            
            99.9Cost
                of investments acquired:Fixed
                maturities available-for-sale
            
            
            (82.5
            )
            
            (168.6
            )Equity
                securities available-for- sale
            
            
            (21.0
            )
            
            (8.6
            )Proceeds
                from investment sales or maturities:Fixed
                maturities available-for-sale
            
            
            128.9
            
            
            132.5Equity
                securities available-for-sale
            
            
            27.3
            
            
            5.0Net
                change in federal funds sold
            
            
            (227.7
            )
            
            (1.2
            )Change
                in loans receivable
            
            
            (26.7
            )
            
            (1.6
            )Net
                cash (used in) provided by investing activities
            
            
            (72.7
            )
            
            36.7Cash
                flows from financing activities:Net
                change in deposits
            
            
            157.6
            
            
            2.3Proceeds
                from the exercise of stock options
            
            
            1.0
            
            
            1.3Tax
                benefit of stock options exercised
            
            
            0.6
            
            
            0.5Common
                shares repurchased
            
            
            (39.9
            )
            
            (12.1
            )Dividends
                paid
            
            
            (3.9
            )
            
            (3.1
            )Proceeds
                from issuance of notes payable
            
            
            0.2
            
            
            2.8Payments
                on notes payable
            
            
            (114.4
            )
            
            (8.8
            )Net
                cash provided by (used in) financing activities
            
            
            1.2
            
            
            (17.1
            )Net
                increase (decrease) in cash
            
            
            47.7
            
            
            (24.2
            )Cash
                at beginning of period
            
            
            82.5
            
            
            89.1Cash
                at end of period
            
            $
            130.2
            
            $
            64.9Non-cash
                investing activities:Transfer
                of fixed maturities from available-for-sale to trading
            
            $
            142.6
            
            $
            -Pending
                purchases of fixed maturities available-for-sale
            
            
            17.0
            
            
            2.5Pending
                sales of fixed maturities available-for-sale
            
            
            16.6
            
            
            2.0







See
          Notes
          to Consolidated Financial Statements.
 6





**LANDAMERICA
      FINANCIAL GROUP, INC. AND SUBSIDIARIES**





CONSOLIDATED
      STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY


THREE
      MONTHS ENDED MARCH 31, 2007 AND 2006


(In
      millions, except per share amounts)


(Unaudited)











Common
                Stock
            
            Accumulated
                Other Comprehensive
            
            Retained
            
            Total
                Shareholders’Shares
            
            Amounts
            
            Income
                (Loss)
            
            Earnings
            
            EquityBALANCE-
                December 31, 2005
            
            
            17.3
            
            $
            443.1
            
            $
            (42.3
            )
            $
            877.7
            
            $
            1,278.5Comprehensive
                income:Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            13.7
            
            
            13.7Other
                comprehensive loss:Net
                unrealized loss on securities - net of tax benefit of $3.0
            
            
            -
            
            
            -
            
            
            (5.7
            )
            
            -
            
            
            (5.7
            )8.0Common
                stock retired
            
            
            (0.2
            )
            
            (12.1
            )
            
            -
            
            
            -
            
            
            (12.1
            )Stock
                options and incentive plans
            
            
            0.1
            
            
            4.9
            
            
            -
            
            
            -
            
            
            4.9Common
                dividends ($0.18/share)
            
            
            -
            
            
            -
            
            
            -
            
            
            (3.1
            )
            
            (3.1
            )BALANCE
                - March 31, 2006
            
            
            17.2
            
            $
            435.9
            
            $
            (48.0
            )
            $
            888.3
            
            $
            1,276.2BALANCE-
                December 31, 2006
            
            
            17.6
            
            $
            465.3
            
            $
            (32.2
            )
            $
            962.7
            
            $
            1,395.8Comprehensive
                income:Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            4.7
            
            
            4.7Other
                comprehensive (loss) income:Net
                unrealized loss on securities - net of tax benefit of $1.3
            
            
            -
            
            
            -
            
            
            (2.2
            )
            
            -
            
            
            (2.2
            )Amortization
                of minimum pension liability - net of tax expense of $0.5
            
            
            -
            
            
            -
            
            
            0.9
            
            
            -
            
            
            0.93.4Common
                stock retired
            
            
            (0.6
            )
            
            (39.9
            )
            
            -
            
            
            -
            
            
            (39.9
            )Stock
                options and incentive plans
            
            
            0.2
            
            
            5.3
            
            
            -
            
            
            -
            
            
            5.3Common
                dividends ($0.22/share)
            
            
            -
            
            
            -
            
            
            -
            
            
            (3.9
            )
            
            (3.9
            )BALANCE
                -March
                31, 2007
            
            
            17.2
            
            $
            430.7
            
            $
            (33.5
            )
            $
            963.5
            
            $
            1,360.7








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, 2006.
      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. Operating results for the interim periods
      are
      not necessarily indicative of results for a full year.





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.





**Recent
      Accounting Pronouncements**





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 postretirement benefit related to a collateral assignment split-dollar
      life
      insurance arrangement in accordance with either Statement of Financial
      Accounting Standards (“SFAS”) No. 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. EITF No. 06-10 is effective for fiscal years beginning
      after December 15, 2007 with early adoption permitted. We are evaluating the
      impact that the adoption of EITF No. 06-10 will have on our financial
      statements.





In
      February 2007, FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities* *-* *Including an amendment of FASB Statement No. 115* (“SFAS
      No. 159”). SFAS No. 159 provides companies with an option to report selected
      financial assets and liabilities at fair value. Unrealized gains and losses
      on
      items for which the fair value option has been elected are reported in earnings.
      SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year
      that begins after November 15, 2007 with early adoption permitted. We are
      evaluating the impact that the adoption of SFAS No. 159 will have on our
      financial statements.


8





In
      September 2006, FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106 and 132(R)* (“SFAS
      No. 158”). This standard requires employers to recognize the underfunded or
      overfunded status of a defined benefit postretirement plan as an asset or
      liability in its statement of financial position and to recognize changes in
      the
      funded status in the year in which the changes occur through accumulated other
      comprehensive income. Additionally, SFAS No. 158 requires employers to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position. The new reporting requirement and related new footnote
      disclosure rules of SFAS No. 158 are effective for fiscal years ending after
      December 15, 2006 and have been adopted. See Note 6, “Pensions and Other
      Post-Retirement Benefits.” The new measurement date requirement applies for
      fiscal years ending after December 15, 2008.





In
      September 2006, FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007
      with earlier application encouraged. We are evaluating the impact that the
      adoption of SFAS No. 157 will have on our financial statements.





**2.** **EARNINGS
      PER SHARE**





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




Three
                Months Ended March 31,2007
            
            2006(In
                millions, except per common share amounts)Numerator:Net
                income - numerator for basic and diluted earnings per common
                share
            
            $
            4.7
            
            $
            13.7Denominator:Weighted
                average shares - denominator for basic earnings per common
                share
            
            
            17.2
            
            
            17.0Effect
                of dilutive securities:Convertible
                debt
            
            
            0.6
            
            
            0.4Employee
                stock options and restricted stock
            
            
            0.2
            
            
            0.1Denominator
                for diluted earnings per common share
            
            
            18.0
            
            
            17.5Basic
                earnings per common share
            
            $
            0.27
            
            $
            0.81Diluted
                earnings per common share
            
            $
            0.26
            
            $
            0.78





9


In
      connection with the issuance of the 3.25 percent Convertible Senior Debt due
      2034 (the “2004 debentures”), we entered into a call option designed to mitigate
      the potential dilution from the conversion of the 2004 debentures. Under the
      ten-year term of the call option, we may require a counterparty to deliver
      shares of our common stock to us at a price which approximates the conversion
      price of the 2004 debentures. At March 31, 2007, we had the option to purchase
      approximately 460,800 shares of our common stock under this agreement; however,
      these shares were not included in the calculation of diluted earnings per common
      share because the effect would be anti-dilutive.





**3.**
            **MERGERS
                AND ACQUISITIONS**





We
      completed no material acquisitions in first quarter 2007.





On
      September 8, 2006, we completed the merger with Capital Title Group, Inc.
      (“Capital Title”) whereby Capital Title became a wholly-owned subsidiary of
      LandAmerica. Capital Title consists of a title insurance underwriter, several
      title and escrow agency operations, a property appraisal company, a settlement
      services provider, and other related companies. Capital Title services customers
      primarily in Arizona, California and Nevada in addition to providing lender
      services on a national basis. We believe that our merger with Capital Title
      has
      strengthened our presence in key western states and added scale to the services
      we provide to our mortgage lending customers.





The
      merger with Capital Title was accounted for using the purchase method in
      accordance with FASB SFAS No. 141, *Business
      Combinations* (“SFAS
      No. 141”) *.* Under
      the
      terms of the merger agreement, we acquired 100 percent of Capital Title’s common
      stock for approximately $252.6 million which consisted of $202.9 million of
      cash, including direct transaction costs of $3.6 million, and $49.7 million
      of
      our common stock, which represented 775,576 shares. In recording the merger,
      the
      value of the 775,576 shares issued was determined based on the measurement
      criteria in EITF 99-12, *Determination
      of the Measurement Date for the Market Price of Acquirer Securities Issued
      in a
      Purchase Business Combination* .





In
      accordance with SFAS No. 141, the cost of the merger was preliminarily allocated
      to the assets acquired and liabilities assumed based on their fair values as
      of
      the close of the merger, with the amounts exceeding the fair value being
      recorded as goodwill. As the values of certain assets and liabilities are
      preliminary in nature, they are subject to adjustment as additional information
      is obtained, including, but not limited to, valuation of separately identifiable
      intangibles, property, plant and equipment, title plants, deferred taxes,
      exiting certain contractual arrangements, and the expected plans to rationalize
      the combined workforce. The valuations will be finalized within 12 months of
      the
      close of the merger. When the valuations are finalized, any changes to the
      preliminary valuation of assets acquired or liabilities assumed may result
      in
      adjustments to separately identifiable intangibles and goodwill. The results
      of
      operations of Capital Title have been included in our consolidated financial
      statements since the merger date.





10


Selected
      unaudited pro forma results of operations, assuming the merger had occurred
      as
      of January 1, 2006, are set forth below:





Three
                Months EndedMarch
                31, 2006(In
                millions, except per common share amounts)Total
                revenue
            
            $
            1,012.1Net
                income
            
            
            9.3Net
                income per common share
            
            
            0.52Net
                income per common share assuming dilution
            
            
            0.51





The
      above
      pro forma results include consultant fees of $3.3 million related to the merger,
      and do not include any synergies we expect to realize. The pro forma results
      are
      presented for information purposes only and may not be indicative of the
      operating results that would have occurred had this merger been consummated
      as
      of the beginning of 2006.





**4.** **INVESTMENTS**





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.
      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.” Trading and
      available-for-sale investments are recorded at fair market value. Unrealized
      holding gains and losses on trading investments are included in earnings.
      Unrealized holding gains and losses on available-for-sale investments are
      excluded from earnings and are reported as a separate component of accumulated
      other comprehensive income (loss), net of income taxes, until realized. Realized
      gains and losses from the sale of available-for-sale investments are determined
      on a specific-identification basis. Dividend and interest income are recognized
      when earned.





On
      January 1, 2007, we adopted the provisions of SFAS No. 155, *Accounting
      for Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
      133 and 140* (“SFAS
      No. 155”). SFAS No. 155 permits remeasurement for certain financial instruments,
      clarifies which financial instruments are not subject to the requirements of
      Statement No. 133, establishes a requirement to evaluate certain interests
      in
      securitized financial assets, and makes certain amendments to Statement No.
      140
      regarding a qualifying special-purpose entity’s ability to hold certain types of
      financial instruments. Our adoption of the provisions of SFAS No. 155 did not
      have an impact on our financial statements for first quarter
      2007.


11





**5.** **INCOME
      TAXES**





Our
      effective income tax rate was 36.1% for first quarter 2007 and 25.9% for first
      quarter 2006. The difference in the effective tax rate was due primarily to
      changes in the mix of state tax rates relative to state tax income or loss
      related to our non-insurance subsidiaries.





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 that we are required to estimate the income
      and
      commissions associated with the sale of policies by agents during the tax year.
      We have estimated our maximum tax exposure with respect to this matter to be
      approximately $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 that we will prevail in any dispute with the IRS related to
      this
      matter. Accordingly, no interest or penalties have been accrued for this
      proposed IRS adjustment as of March 31, 2007. We expect to defend the matter
      vigorously through the IRS appeal process and, if necessary, through litigation.
      We do not expect the ultimate resolution of this matter will have a material
      adverse effect on our financial condition or results of operations.





On
      January 1, 2007, we adopted the provisions of FASB Interpretation No.
      48 *,
      Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement
      No. 109* (“FIN
      48”). FIN 48 prescribes a recognition threshold and measurement attribute for
      the financial statement recognition and measurement of a tax position taken
      or
      expected to be taken in a tax return. At January 1, 2007, the balance of the
      unrecognized tax benefits was $4.0 million. If recognized, this amount would
      affect our effective tax rate. We have elected to treat any interest and
      penalties as tax expense in accordance with the provisions of FIN
      48.





We
      file
      tax returns in the US federal jurisdiction and various state and foreign
      jurisdictions. For federal and most state and local taxes, the statute of
      limitations has expired and we are no longer subject to examinations by tax
      authorities for years prior to 2003.





Since
      December 31, 2006, there have been no events that have had a material impact
      on
      our tax accounts.





It
      is
      reasonably possible that within the next twelve months the amount of
      unrecognized tax benefits will increase as a result of tax positions taken
      during the current period, the nature of which are consistent with those
      unrecognized tax benefits at January 1, 2007. The estimated range of the
      increase is from $1.5 million to $1.7 million.





12


**6.** **PENSIONS
      AND OTHER POST-RETIREMENT BENEFITS**





The
      following presents the estimated net pension expense recorded in the financial
      statements for each of the quarters ending March 31, 2007 and 2006. The 2007
      information is based on preliminary data provided by our consulting
      actuaries.





The
      amounts are as follows:





Three
                Months Ended March 31,Pension
                Benefits
            
            Other
                Benefits2007
            
            2006
            
            2007
            
            2006(In
                millions)Components
                of net pension (income) expense:Service
                cost
            
            $
            -
            
            $
            -
            
            $
            0.3
            
            $
            0.3Interest
                cost
            
            
            3.6
            
            
            3.6
            
            
            0.7
            
            
            0.9Expected
                return on plan assets
            
            
            (4.7
            )
            
            (4.5
            )
            
            -
            
            
            -Amortization
                of unrecognized transition obligation
            
            
            -
            
            
            -
            
            
            -
            
            
            0.3Recognized
                prior service cost
            
            
            -
            
            
            -
            
            
            -
            
            
            0.1Recognized
                loss
            
            
            1.5
            
            
            1.8
            
            
            -
            
            
            0.1Loss
                due to settlement or curtailment
            
            
            -
            
            
            1.0
            
            
            -
            
            
            -Net
                pension expense
            
            $
            0.4
            
            $
            1.9
            
            $
            1.0
            
            $
            1.7








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





**7.**
            **COMMITMENTS
                AND CONTINGENCIES**





**Pending
      Legal Proceedings**





***General***





We
      are
      involved in certain litigation arising in the ordinary course of our businesses.
      Although the ultimate outcome of these matters cannot be ascertained at this
      time and the results of legal proceedings cannot be predicted with certainty,
      we
      believe, based on current knowledge, that the resolution of these matters will
      not have a material adverse effect on our financial position or results of
      operations.





***Litigation
      Not in the Ordinary Course of Business***





On
      June
      22, 2004, Gateway Title Company, Inc. (“Gateway”), Commonwealth Land Title
      Company, Inc. and LandAmerica Financial Group, Inc. (collectively, “Plaintiffs”)
      filed a Complaint, subsequently amended by a First Amended Complaint filed
      June
      25, 2004, in the Superior Court of California, County of Los Angeles, Central
      District (the “Court”), against the Mercury Company and its affiliates Financial
      Title, Alliance Title, Investors Title and various


13


individuals
      including Joseph DiChiacchio, a former manager of LandAmerica (Case No. BC
      317441) (collectively, “Defendants”). The lawsuit claims substantial monetary
      and punitive damages for unfair competitive business practices in conjunction
      with Plaintiffs’ loss of over 300 employees in California, most of which appears
      to have occurred within an approximately twenty-four month period. On August
      12,
      2004, the Court granted a Temporary Restraining Order, followed by a Preliminary
      Injunction granted September 27, 2004, against Defendants based upon a showing
      of significant likelihood of Plaintiffs prevailing on the merits combined with
      irreparable harm to Plaintiffs if injunctive relief did not issue. The
      injunctive relief generally prohibited the solicitation of Plaintiffs’
employees. The preliminary injunctive relief has now expired. On December 13,
      2004, Alliance Title Company, Inc., Financial Title Company, Inc., Roberto
      Olivera and Ray Arias filed a Cross-Complaint for unfair competitive business
      practices. On December 13, 2004, Mr. DiChiacchio also filed a Cross-Complaint
      alleging similar claims, including back wages and additional bonus payments.
      Plaintiffs are disputing and intend to vigorously defend the Cross-Complaints.
      A
      mandatory settlement conference was held on August 1, 2005 and voluntary
      mediation on September 7, 2005. After completion of discovery, a jury trial
      began in early May 2006 and resulted in a verdict for Gateway of approximately
      $8.3 million. Judgment has not been entered pending resolution of the
      Cross-Complaints and could be appealed. As a result of voluntary mediation
      beginning on April 4, 2007, the parties agreed to a framework for resolving
      all
      claims, including but not limited to cross claims, post trial motions and
      appeals, in this case and the First California Title Company case described
      below, but no final settlement has been achieved (the “Resolution”). Trial on
      the Cross-Complaints has been continued to May 15, 2007 to allow for
      negotiations regarding the terms of a definitive settlement agreement to
      continue.





On
      January 14, 2005, First California Title Company, New Century Title Company
      (“New Century”) and United Title Company (collectively, “Plaintiffs”) filed a
      Complaint in the Superior Court of the State of California, County of Los
      Angeles, against Financial Title Company, Mercury Companies, Inc. (“Mercury”),
      Stacy Neves, Stephanie Howard, George Willard and Tony Becker (Case No. BC
      327332) (collectively, “Defendants”). On September 8, 2006, we completed the
      merger with Plaintiffs. The lawsuit claims substantial monetary and punitive
      damages for unfair competitive business practices in conjunction with
      Plaintiffs’ loss of approximately 80 employees in California to Defendants over
      an approximately eight month period. The complaint was later amended to include
      Alliance Title Company and Christine De’Martini as named Defendants. A jury
      trial began on October 17, 2006. On December 28, 2006, the jury returned its
      verdict for Plaintiffs in the approximate amount of $2 million. The punitive
      damages phase of the bifurcated trial was held on January 2, 2007 and resulted
      in a punitive damages award for Plaintiffs in the approximate amount of $14.6
      million. Judgment was entered on March 8, 2007. Defendants filed several
      post-trial motions including motions for a new trial on the issue of punitive
      damages. On March 22, 2007, the trial court granted Mercury’s motion for new
      trial on the issue of punitive damages. Having found that the punitive damages
      awarded by the jury in favor of plaintiff New Century violated due process,
      the
      trial court reduced the amount of the punitive damages awarded against Mercury
      from $11.6 million to $2.9 million. On April 18, 2007, the trial court issued
      a
      Minute Order modifying the previous judgment entered in favor of New Century
      to
      reflect this reduction of punitive damages. The trial court denied similar
      motions for new trial brought by other Defendants. Accordingly, the


14


total
      amount of punitive damages awarded against Defendants, after the March 22,
      2007
      order, is $5.9 million.  The parties have until May 18, 2007 to file an
      appeal of the trial court’s orders granting or denying Defendants’ post-trial
      motions, including the motions for new trial. As a result of participation
      in
      voluntary mediation beginning on April 4, 2007, the claims in this case were
      included in the Resolution described above.





On
      January 25, 2002, Miles R. Henderson and Patricia A. Henderson (the “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 the Plaintiffs amended
      the
      complaint on March 8, 2002. On June 28, 2002, the District Court remanded the
      case to the Court of Common Pleas for Cuyahoga County, Ohio. A similar putative
      class action suit was filed against Commonwealth, by Rodney P. Simon and Tracy
      L. Simon (the “Plaintiffs in the Simon Suit”) in the Court of Common Pleas for
      Cuyahoga County, Ohio on March 5, 2003. The Plaintiffs in both suits alleged
      that the defendants had a practice of charging original rates for owners title
      insurance policies when lower, reissue rates should have been charged. Both
      defendants initially responded by demanding that the actions be arbitrated,
      but
      on final appeal to the Ohio Supreme Court, the Court ruled that arbitration
      was
      not required for either suit. On remand to the trial court, the 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. The court has set a hearing
      date
      of August 29, 2007. The 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, although no hearing date on the class
      certification has been scheduled. The Plaintiffs in both cases have demanded
      an
      unspecified amount of compensatory damages, declaratory and injunctive relief,
      punitive damages, and attorneys’ fees and costs. These cases are in the early
      stages, there have been no class certifications, and the defendants believe
      that
      they have meritorious defenses. At this stage of the litigation, the amount
      or
      range of loss that could result from an unfavorable outcome cannot be reasonably
      estimated.





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





***Regulatory
      Proceedings***





We
      have
      received certain information requests and subpoenas from various regulatory
      authorities relating to our business practices and those of the title insurance
      industry.





The
      Government Accountability Office released its final report on the title
      insurance industry on April 17, 2007 (the “Report”). The Report makes
      recommendations regarding federal and state oversight of the title insurance
      industry, including but not limited to, better


15


consumer
      information, consideration of the need for modification to the Real Estate
      Settlement Procedures Act and increased cooperation among regulators.





Various
      states are studying the title insurance product, market, pricing, business
      practices, and potential regulatory and legislative changes. Multiple states,
      including California, Florida, Nevada, 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 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 Texas title rate case in August 2006, the Texas Commissioner
      of
      Insurance ordered a rate reduction of 3.2 percent effective February 1, 2007.
      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, the 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. LandAmerica and other title companies doing
      business in the California market continue to engage in discussions with the
      CA
      DOI regarding alternative approaches to the proposed regulations, but the CA
      DOI
      may determine to correct the technical defects identified by OAL along with
      any
      other changes and resubmit the regulations to OAL.





In
      addition, a number of state inquiries have focused on captive reinsurance.
      Captive reinsurance involves the provision of reinsurance by a reinsurance
      company that is owned by another entity, typically a lender, developer or other
      party that is a provider of real estate-related services. From the inception
      of
      our captive reinsurance programs in 1997 through 2004, reinsurance premiums
      paid
      by us to captive reinsurers totaled approximately $12.0 million. The revenues
      from these programs were not material to our results of operations. We
      voluntarily terminated our captive reinsurance arrangements as of February
      2005,
      notwithstanding our belief that we had operated the programs in accordance
      with
      applicable law. We settled these investigations with six states, representing
      approximately 81.4 percent of our captive reinsurance business, without
      admitting any liability.





In
      June
      2005, we established reserves of $19.0 million to cover anticipated exposure
      to
      regulatory matters nationwide, an amount which includes settlements with the
      California, Arizona, Nevada, Virginia, Colorado, and North Carolina departments
      of insurance. Based on these settlements and the status of inquiries, we
      released $6.7 million of this reserve back into earnings in fiscal year 2005
      and
      $0.8 million in fiscal year 2006. The remaining reserve at March 31, 2007 was
      approximately $4.9 million.





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.


16


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 $2.3 million at March
      31,
      2007 and $3.4 million at December 31, 2006.





**8.**
            **SHAREHOLDERS’
                EQUITY**





In
      October 2005, the Board of Directors approved a share repurchase program
      expiring in July 2007 (the “2005 Program”) that authorized us to repurchase 1.25
      million shares of our common stock. Under the 2005 Program, we repurchased
      186,000 shares during the first three months of 2006 for $12.1 million, at
      an
      average cost of $64.89 per share, and 569,000 shares during the first three
      months of 2007 for $39.9 million, at an average cost of $70.18 per share. As
      of
      March 31, 2007, there were no authorized shares remaining under the 2005
      Program.





In
      February 2007, the Board of Directors approved a share repurchase program
      expiring in October 2008 (the “2007 Program”) that authorized us to repurchase
      1.5 million shares of our common stock. As of March 31, 2007, no shares had
      been
      repurchased under the 2007 Program.





Effective
      April 1, 2007, our 3.25 percent convertible senior debentures due 2034 became
      convertible to common stock during the second quarter of 2007 through and
      including June 30, 2007. The 2004 debentures are convertible into shares of
      our
      common stock at a current conversion rate of 18.6487 shares per $1,000 principal
      amount of the 2004 debentures, which is equivalent to a conversion price of
      approximately $53.62 per share of common stock. The conversion rate is subject
      to adjustment upon the occurrence of certain specified events. Upon conversion,
      we will deliver cash equal to the lesser of the aggregate principal amount
      of
      2004 debentures to be converted and our total conversion obligation and common
      stock or cash in respect of the remainder, if any, of our conversion obligation.
      We have established a reserve of 2,797,305 authorized and unissued shares,
      subject to adjustment, that is available for issuance upon conversion of the
      debentures.





**9.**
            **IMPAIRMENT
                OF INTANGIBLE AND OTHER LONG-LIVED
                ASSETS**





We
      became
      aware that one of our tax and flood processing customers, Freemont 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 this probable loss of business from this customer,
      we
      conducted an impairment test of LandAmerica Tax and Flood Services, Inc.’s
      customer relationship intangible asset in accordance with SFAS No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets.* On April
      10, 2007, we


17


determined
      it was probable that LandAmerica Tax and Flood Services, Inc.’s customer
      relationship intangible was impaired. Additionally, the Company conducted an
      impairment test of the Lender Services segment’s goodwill balance in accordance
      with SFAS No. 142, *Goodwill
      and Other Intangible Assets,* before
      its annual testing date of October 1, 2007, as the probable loss of business
      was
      deemed to be an indicator of potential impairment. The customer relationship
      intangible impairment charge of $20.8 million, or $12.5 million net of taxes,
      was reflected in our results of operations for the three months ended March
      31,
      2007. It is not expected that the impairment charge will result in any future
      cash expenditures. In addition, we have concluded that the Lender Services
      segment’s goodwill balance was not impaired.





In
      January 2006, we announced our plan to relocate and consolidate our corporate
      offices and shared resources operations. As a result, we wrote down the existing
      corporate offices and related assets to fair value less cost to sell. For the
      three months ended March 31, 2006, the impairment charge for the write down
      was
      approximately $9.7 million, or $6.3 million net of taxes, which was reflected
      in
      our consolidated results of operations.





**10.** **SEGMENT
      INFORMATION**





We
      are
      engaged in the business of providing title insurance as well as a broad array
      of
      real estate transaction-related 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 and commercial title insurance business, escrow
      and closing services, commercial real estate services, and other real estate
      transaction management services.





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





Financial
      Services consists of Orange County Bancorp and its wholly-owned subsidiary,
      Centennial Bank, a California industrial bank primarily engaged in the business
      of providing real estate loans in the Southern California market and, to a
      lesser degree, in Arizona and Nevada.





Corporate
      and Other includes home warranty, residential property inspection, commercial
      property valuations and assessment businesses, and due diligence services as
      well as the unallocated portion of the corporate expenses related to our
      corporate offices and unallocated interest expense.


18


We
      provide real estate transaction services through direct operations and agents
      throughout the United States, Mexico, Canada, the Caribbean, Latin America,
      Europe, and Asia. The international operations account for less than 1 percent
      of our income before income taxes.





The
      following tables provide selected financial information about our operations
      by
      segment for the three months ended March 31, 2007 and 2006:





Three
                Months Ended March 31,Operating
              Revenue
            
            PersonnelCost
            
            Depreciation
            
            Amortization
                of IntangibleAssets
            
            Income
                Before
              Taxes(In
                millions)2007Title
                Operations
            
            $
            791.4
            
            $
            254.8
            
            $
            7.2
            
            $
            2.0
            
            $
            34.1Lender
                Services
            
            
            82.9
            
            
            28.0
            
            
            1.5
            
            
            2.1
            
            
            (8.7
            )Financial
                Services
            
            
            0.2
            
            
            0.9
            
            
            -
            
            
            -
            
            
            5.1Corporate
                and Other
            
            
            36.8
            
            
            24.1
            
            
            2.1
            
            
            1.9
            
            
            (23.2
            )Total
            
            $
            911.3
            
            $
            307.8
            
            $
            10.8
            
            $
            6.0
            
            $
            7.32006Title
                Operations
            
            $
            819.0
            
            $
            228.2
            
            $
            5.6
            
            $
            2.4
            
            $
            50.6Lender
                Services
            
            
            57.8
            
            
            24.6
            
            
            1.1
            
            
            2.6
            
            
            2.3Financial
                Services
            
            
            0.2
            
            
            0.6
            
            
            -
            
            
            -
            
            
            4.0Corporate
                and Other
            
            
            25.3
            
            
            23.3
            
            
            1.1
            
            
            1.3
            
            
            (38.4
            )Total
            
            $
            902.3
            
            $
            276.7
            
            $
            7.8
            
            $
            6.3
            
            $
            18.5








**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 should be read in conjunction with our Annual Report on Form 10-K
      for
      the year ended December 31, 2006 as filed with the Securities and Exchange
      Commission on February 28, 2007. For information on risks and uncertainties
      related to our business that may make past performances not indicative of future
      results, or cause actual results to differ materially from any forward-looking
      statements made by us, see “Forward-Looking and Cautionary
      Statements.”




**Overview**





Our
      long-term goal is to improve our position as one of the largest providers of
      real estate transaction services. To accomplish this objective, we have expanded
      our operations through internal growth and selective strategic mergers and
      acquisitions. Our business operations are organized under three primary business
      segments: Title Operations, Lender Services and Financial Services. Other
      business operations not required to be reported separately are reported in
      a
      category called Corporate and Other. 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, 2006.






19




In
      2007,
      we refined our definition and measurement of commercial revenue and have
      restated our 2006 commercial revenue to be comparable to the 2007
      presentation.





Our 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 the effect that changes in interest
      rates have on the level of real estate activity. Periods of increasing interest
      rates usually have an adverse affect on real estate activity and therefore
      premium and fee revenue. In contrast, real estate activity usually increases
      when interest rates fall. We typically report our lowest revenue in the first
      quarter, with revenue increasing into the second quarter and through the third
      quarter. The fourth quarter customarily may be as strong as the third quarter,
      depending on the level of activity in the commercial real estate market.





Our
      provision for claims as a percentage of operating revenue has trended upward
      recently, primarily due to claims frequency and experience in recent policy
      years. We have noted similar trends 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 experience for more recent policy
      years can result in a significant increase in the amount of liability required
      for potential claims.





We
      completed the merger with Capital Title Group, Inc. (“Capital Title”) on
      September 8, 2006. Capital Title has been integrated into the Title Operations
      and Lender Services segments as of the merger date. As of March 31, 2007, we
      have achieved annualized pretax cost savings of approximately $8 million. We
      expect that within one year after the close of the merger, synergies will
      produce annualized pretax cost savings of approximately $16 million. For further
      details, see Note 3, “Mergers and Acquisitions” of the Notes to Consolidated
      Financial Statements in Part I, Item 1 of this report.





As
      part
      of becoming a unified operating company to maximize our efficiency, we are
      engaged in a number of initiatives to improve return on equity including
      technology initiatives such as “Project Fusion,” the company-wide initiative to
      reduce the complexity and costs of over 300 operating systems to a substantially
      reduced number of applications when completely phased in by the end of year
      2008. We expect that technology initiatives will generate annual cost savings
      of
      approximately $35 million beginning in 2009.





***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, 2006 as filed with the Securities and Exchange
      Commission. Actual results could differ from these estimates.





20


***Recent
      Accounting Pronouncements***





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 postretirement benefit related to a collateral assignment split-dollar
      life
      insurance arrangement in accordance with either Statement of Financial
      Accounting Standards (“SFAS”) No. 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. EITF No. 06-10 is effective for fiscal years beginning
      after December 15, 2007 with early adoption permitted. We are evaluating the
      impact that the adoption of EITF No. 06-10 will have on our financial
      statements.




In
      February 2007, FASB issued SFAS No. 159, *The
      Fair Value Option for Financial Assets and Financial Liabilities* *-* *Including an amendment of FASB Statement No. 115* (“SFAS
      No. 159”). SFAS No. 159 provides companies with an option to report selected
      financial assets and liabilities at fair value. Unrealized gains and losses
      on
      items for which the fair value option has been elected are reported in earnings.
      SFAS No. 159 is effective as of the beginning of an entity’s first fiscal year
      that begins after November 15, 2007 with early adoption permitted. We are
      evaluating the impact that the adoption of SFAS No. 159 will have on our
      financial statements.





In
      September 2006, FASB issued SFAS No. 158, *Employers’
      Accounting for Defined Benefit Pension and Other Postretirement Plans, an
      amendment of FASB Statements No. 87, 88, 106 and 132(R)* (“SFAS
      No. 158”). This standard requires employers to recognize the underfunded or
      overfunded status of a defined benefit postretirement plan as an asset or
      liability in its statement of financial position and to recognize changes in
      the
      funded status in the year in which the changes occur through accumulated other
      comprehensive income. Additionally, SFAS No. 158 requires employers to measure
      the funded status of a plan as of the date of its year-end statement of
      financial position. The new reporting requirement and related new footnote
      disclosure rules of SFAS No. 158 are effective for fiscal years ending after
      December 15, 2006 and have been adopted. See Note 6, “Pensions and Other
      Post-Retirement Benefits” of the Notes to Consolidated Financial Statements in
      Part I, Item 1 of this report. The new measurement date requirement applies
      for
      fiscal years ending after December 15, 2008 and have not yet been
      adopted.





In
      September 2006, FASB issued SFAS No. 157, *Fair
      Value Measurements* (“SFAS
      No. 157”). SFAS No. 157 defines fair value, establishes a framework for
      measuring fair value in generally accepted accounting principles and expands
      disclosures about fair value measurements. SFAS No. 157 is effective for
      financial statements issued for fiscal years beginning after November 15, 2007
      with earlier application encouraged. We are evaluating the impact that the
      adoption of SFAS No. 157 will have on our financial statements.


21


**Results
      of Operations**





***Operating
      Revenue*** **





The
      following table provides ** a
      summary
      of our operating revenue for the three months ended March 31, 2007 and 2006:





Three
                Months Ended March 31,2007
            
            2006(Dollars
                in millions)Title
                OperationsDirect
                Operations
            
            $
            369.3
            
            
            40.5
            %
            $
            340.8
            
            
            37.8
            %Agency
                Operations
            
            
            422.1
            
            
            46.3
            
            
            478.2
            
            
            53.0791.4
            
            
            86.8
            
            
            819.0
            
            
            90.8Lender
                Services
            
            
            82.9
            
            
            9.1
            
            
            57.8
            
            
            6.4Financial
                Services
            
            
            0.2
            
            
            -
            
            
            0.2
            
            
            -Corporate
                and Other
            
            
            36.8
            
            
            4.1
            
            
            25.3
            
            
            2.8Total
            
            $
            911.3
            
            
            100.0
            %
            $
            902.3
            
            
            100.0
            %








*Title
      Operations* *-* ** Operating
      revenue from direct title operations increased by $28.5 million, or 8.4%, in
      first quarter 2007 from first quarter 2006. During first quarter 2007, direct
      operating revenue was positively affected by increased market share as a result
      of the merger with Capital Title, strong commercial revenues, and an increase
      in
      direct operating revenue per direct order closed. These increases were partially
      offset by overall weakness in the residential real estate market.





Closed
      orders from the Company’s direct title operations were approximately 170,000 in
      the first quarters of 2007 and 2006, while direct operating revenue per direct
      order closed increased approximately 8.2%.





Revenue
      from direct title commercial operations was $92.2 million in first quarter
      2007,
      compared to $85.7 million in first quarter 2006, an increase of 7.6% from first
      quarter 2006.




Operating
      revenue from agency title operations for first quarter 2007 decreased by $56.1
      million, or 11.7%, from first quarter 2006 due to softer market conditions
      across most regions, particularly in certain southeastern markets.





*Lender
      Services* *-* ** Operating
      revenue increased by $25.1 million, or 43.4%, in first quarter 2007 compared
      to
      first quarter 2006. Revenue for first quarter 2007 was impacted by


22


increased
      business as a result of the merger with Capital Title and other acquisitions
      and
      by increases in the loan servicing business from deferred revenue and growth
      in
      default management services. These increases were offset in part by lower
      volumes in certain
      product lines in the loan servicing business and in the
      mortgage origination business due to a softer real estate market.





*Corporate
      and Other* *-* ** Operating revenue for Corporate and Other increased by $11.5 million, or 45.5%,
      in first quarter 2007 over first quarter 2006. The increase in operating revenue
      in first quarter 2007 over first quarter 2006 was due to continued strong
      non-title commercial business. Revenue from non-title commercial operations
      was
      $19.4 million in first quarter 2007 compared to $12.3 million in first quarter
      2006.





***Investment
      and Other Income***





Investment
      and other income increased $0.6
      million, or 2.0%, in
      first
      quarter 2007 over first quarter 2006 primarily due to an increase in our
      portfolio of investments and an increase in the interest rate spread.





***Net
      Realized Investment Gains***





Net
      realized investment gains were $7.0 million in first quarter 2007 compared
      to
      $0.9 million in first quarter 2006. The increase was primarily due to gains
      from
      the repositioning of our REIT portfolio and the reclassification of unrealized
      net gains on trading investments from accumulated other comprehensive income
      (loss). For further details, see Note 4, “Investments” of the Notes to
      Consolidated Financial Statements in Part I, Item 1 of this report.





***Salary
      and Employee Benefits***





The
      following table provides a summary of our salary and employee benefit costs
      for
      the three months ended March 31, 2007 and 2006:





Three
                Months Ended March 31,2007
            
            2006(Dollars
                in millions)Title
                Operations
            
            $
            254.8
            
            
            82.8
            %
            $
            228.2
            
            
            82.5
            %Lender
                Services
            
            
            28.0
            
            
            9.1
            
            
            24.6
            
            
            8.9Financial
                Services
            
            
            0.9
            
            
            0.3
            
            
            0.6
            
            
            0.2Corporate
                and Other
            
            
            24.1
            
            
            7.8
            
            
            23.3
            
            
            8.4Total
            
            $
            307.8
            
            
            100.0
            %
            $
            276.7
            
            
            100.0
            %





23


*Title
      Operations -* Title
      Operations salary and employee benefit costs increased by $26.6 million, or
      11.7%, in first quarter 2007 compared to first quarter 2006. Average Full Time
      Equivalent (“FTE”) counts for the Title Operations segment were approximately
      11,500 in first quarter 2007 versus approximately 10,600 in first quarter 2006,
      or an increase of 8.5%. Increases in salary and employee benefit costs and
      FTE
      counts were primarily to service additional business from the merger with
      Capital Title.





*Lender
      Services* -
      Lender
      Services salary and employee benefit costs increased by $3.4 million, or 13.8%,
      in first quarter 2007 compared to first quarter 2006. FTE counts for the Lender
      Services segment were approximately 1,800 in first quarter 2007 versus
      approximately 1,600 in first quarter 2006, or an increase of 12.5%. Increases
      in
      salary and employee benefit costs and FTE counts from first quarter 2006 to
      first quarter 2007 were primarily to service increased business as the result
      of
      the merger with Capital Title. These increases were offset by reductions in
      FTE
      counts in certain product lines in the loan servicing business and in the
      mortgage origination business to adjust to lower business volume.





*Corporate
      and Other* -
      Corporate and Other salary and employee benefit costs increased $0.8 million,
      or
      3.4%, in first quarter 2007 over first quarter 2006 to support continued strong
      non-title commercial business.





***Agent
      Commissions***





The
      following table provides a summary of agent commissions and related revenue
      in
      the Title Operations segment for the three months ended March 31, 2007 and
      2006:





2007
            
            2006(Dollars
                in millions)Agent
                commissions
            
            $
            340.4
            
            $
            383.1Agent
                revenue
            
            $
            422.1
            
            $
            478.2%
                Retained by agents
            
            
            80.6
            %
            
            80.1
            %








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 percent
      over the past several years.





***Provision
      for Policy and Contract Claims***





We
      review
      our claims experience quarterly, and in conjunction with our outside actuaries,
      evaluate the adequacy of our claims reserve. We consider factors such as
      historical timing of claims reported and historical timing of claims paid over
      the period in which policies are effective against actual experience by year
      of
      policy issue to determine the amount of claims


24


liability
      required for each year for which policies are outstanding. 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 review of the underlying claims data and trends therein, we have provided
      for claims losses using approximately 6.5% and 5.6% of operating revenue from
      the Title Operations segment for the first quarters of 2007 and 2006,
      respectively. The increase in the claims provision ratio was primarily due
      to an
      increase in the frequency of claims reported which resulted in upward
      development in policy years 2004 through 2006. Since we are subject to liability
      on claims for an extended period of time, slight changes in current claims
      experience can have a significant effect on the amount of liability required
      for
      potential Incurred But Not Reported (“IBNR”) claims. We believe that we have
      reserved appropriately for all reported and IBNR claims at March 31, 2007 based
      on the results of the actuarial evaluation and evaluation of any known
      trend.





***Impairment
      of Intangible and Other Long-Lived Assets***





In
      first
      quarter 2007, we recorded an impairment of $20.8 million related to our customer
      relationship intangible asset of our tax and flood business in the Lender
      Services segment. The effect of the impairment is expected to reduce
      amortization expense by approximately $3.2 million on an annual basis. In first
      quarter 2006, we wrote down our existing building and related assets to fair
      value less cost to sell by approximately $9.7 million in connection with the
      relocation and consolidation of our corporate offices and shared resources
      operations. For further details, see Note 9, “Impairment of Intangible and Other
      Long-Lived Assets” of the Notes to Consolidated Financial Statements in Part I,
      Item 1 of this report.





***Amortization***





Amortization
      expense decreased by $0.3 million in first quarter 2007 compared to first
      quarter 2006.





***Interest
      Expense*** ****





Interest
      expense increased by $3.1 million in first quarter 2007 compared to first
      quarter 2006. The increase was primarily due to interest on our senior notes
      and
      credit facility that were used to pay a portion of the purchase price for
      Capital Title. See “Liquidity and Capital Resources” for further details. We
      anticipate that interest expense will continue to exceed prior period levels
      throughout 2007.





***Premium
      Taxes***





Insurance
      companies are generally not subject to state income or franchise taxes. However,
      they are subject to a “premium tax” on certain operating revenue, depending on
      the state. The tax rates and amounts that are subject to tax vary from state
      to
      state. Premium taxes as


25


a
      percentage of total title insurance revenue were approximately 1.2% and 1.3%
      in
      the first quarters of 2007 and 2006, respectively.





***General,
      Administrative and Other***





The
      following table provides a summary of our general, administrative and other
      costs for the three months ended March 31, 2007 and 2006:





Three
                Months Ended March 31,2007
            
            2006(Dollars
                in millions)Title
                Operations
            
            $
            122.0
            
            
            65.1
            %
            $
            115.8
            
            
            68.8
            %Lender
                Services
            
            
            38.7
            
            
            20.6
            
            
            27.9
            
            
            16.6Financial
                Services
            
            
            0.3
            
            
            0.2
            
            
            0.2
            
            
            0.1Corporate
                and Other
            
            
            26.5
            
            
            14.1
            
            
            24.3
            
            
            14.5Total
            
            $
            187.5
            
            
            100.0
            %
            $
            168.2
            
            
            100.0
            %








*Title
      Operations -* Title
      Operations general and administrative expenses increased by $6.2 million, or
      5.4%, in first quarter 2007 from first quarter 2006. The increase in general
      and
      administrative expenses was primarily due to increased expenses to support
      increased market share as a
      result of the merger with Capital Title and was partially offset by declines
      across most regions due to cost reductions to match declines in residential
      business volume .





*Lender
      Services -* Lender
      Services general and administrative expenses increased by $10.8 million, or
      38.7%, in first quarter 2007 from first quarter 2006. The increase in general
      and administrative expenses was primarily due to the merger with Capital Title
      and other acquisitions and increased expenses to support growth in the default
      management services line of the loan servicing business.





*Corporate
      and Other* -
      Corporate and Other general and administrative expenses increased by $2.2
      million, or 9.1%, in first quarter 2007 from first quarter 2006. The increase
      in
      general and administrative expenses in first quarter 2007 from first quarter
      2006 was primarily to support increased 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 36.1% for first quarter
      2007
      and 25.9% for first quarter


26


2006.
      The
      difference in the effective tax rate was due primarily to the mix of state
      taxes
      related to our non-insurance subsidiaries.





***Net
      Income*** ****





Our
      reported net income was $4.7 million or $0.26 per common share on a diluted
      basis for first quarter 2007, compared to net income of $13.7 million or $0.78
      per common share on a diluted basis for first quarter 2006. Net income for
      first
      quarter 2007 reflected an impairment charge for a customer relationship
      intangible asset in the Lender Services segment of $20.8 million, or $12.5
      million net of taxes. Net income for first quarter 2006 included the write
      down
      of the corporate offices to fair value less cost to sell of $9.7 million, or
      $6.3 million net of taxes. For further details, see Note 9, “Impairment of
      Intangible and Other Long-Lived Assets” of the Notes to Consolidated Financial
      Statements in Part I, Item 1 of this report.





**Liquidity
      and Capital Resources**





Cash
      provided by operating activities was $119.2 million for first quarter 2007
      compared to cash used in operating activities of $(43.8) million for first
      quarter 2006. The increase in cash provided by operating activities was due
      to
      the timing of income tax payments and payments for accounts payable and accrued
      expenses. Cash used in investing activities was $(72.7) million for first
      quarter 2007 compared to cash provided by investing activities of $36.7 million
      for first quarter 2006. Cash provided by financing activities was $1.2 million
      for first quarter 2007 compared to cash used in financing activities of $(17.1)
      million for first quarter 2006. The principal non-operating uses of cash for
      the
      first three months of 2007 and 2006 were repayment of debt, additions to the
      investment portfolio, common stock repurchases and increases in loans
      receivable. In addition, we invested a temporary commercial customer deposit
      in
      federal funds sold investments of $269.5 million. At March 31, 2007, we held
      cash of $130.2 million and investments of $1,903.0 million.





Our
      primary uses of funds at our holding company level included pay down of the
      credit arrangement that was used to fund, in part, the merger with Capital
      Title, share repurchases, funding the working capital needs of our subsidiaries,
      and payment of dividends on our common stock. At March 31, 2007, there was
      approximately $111.8 million of cash, short-term investments and marketable
      securities at the holding company level available for general corporate
      purposes, payment of dividends, and share repurchases. The holding company’s
      principal source of funds is dividends from title insurance
      subsidiaries.





In
      June
      2006, we completed the process of redomesticating our three principal title
      insurance subsidiaries, Commonwealth Land Title Insurance Company, Lawyers Title
      Insurance Corporation and Transnation Title Insurance Company from the States
      of
      Pennsylvania, Virginia and Arizona, respectively, to the State of Nebraska.
      The
      redomestication of these title insurance subsidiaries is expected to result
      in
      streamlined regulatory, tax and statutory accounting functions derived from
      having these subsidiaries subject to the same laws and regulations. Under
      Nebraska insurance laws and regulations, approximately $167.0 million of the
      net
      assets of our consolidated insurance subsidiaries are available during the
      remainder of 2007 for ordinary


27


dividends,
      loans or advances to us. The redomestication of these subsidiaries is expected
      to increase the cumulative amount of surplus that is available to pay dividends
      to the holding company by the aggregate amount that these subsidiaries’ total
      statutory reserves exceed GAAP claims reserves, subject to certain annual
      limitations and any approval that may be required by the Nebraska Department
      of
      Insurance. During first quarter 2007, we received approximately $70.0 million
      in
      dividends from our three principal title insurance subsidiaries.





During
      first quarter 2007, we began actively trading $142.6 million of our
      fixed-maturity securities previously classified as available-for-sale
      securities. For further details, see Note 4, “Investments” of the Notes to
      Consolidated Financial Statements in Part I, Item 1 of this report.





On
      September 8, 2006, we completed the merger with Capital Title which consists
      of
      a title insurance underwriter, several title and escrow agency operations,
      a
      property appraisal company, a settlement services provider and other related
      companies. Capital Title services customers primarily in Arizona, California
      and
      Nevada in addition to providing lender services on a national basis. We believe
      that our merger with Capital Title has strengthened our presence in key western
      states and added scale to our Lender Services platform. We acquired 100 percent
      of Capital Title’s common stock for approximately $252.6 million, which
      consisted of $202.9 million of cash, including direct transaction costs of
      $3.6
      million, and $49.7 million of our common stock, which represented 775,576
      shares. Capital Title has been integrated into the Title Operations and Lender
      Services segments as of the merger date. As of March 31, 2007, we have achieved
      annualized pretax cost savings of approximately $8 million. We expect that
      within one year after the close of the merger, synergies will produce annualized
      pretax cost savings of approximately $16 million. For further details, see
      Note
      3, “Mergers and Acquisitions” of the Notes to Consolidated Financial Statements
      in Part I, Item 1 of this report.





We
      issued
      $50.0 million of Senior Notes, Series D to the Series D Note purchasers on
      August 31, 2006 and issued $100.0 million of Senior Notes, Series E to the
      Series E Note purchasers on September 7, 2006. In addition, the Note Purchase
      Agreement contained provisions for an uncommitted shelf facility by which we
      may
      issue, on or prior to July 28, 2009, up to $75.0 million of our Shelf Notes
      to
      Prudential Investment Management, Inc., upon mutually acceptable terms and
      conditions as may be agreed upon at the time of issuance. As of March 31, 2007,
      there were no borrowings outstanding under these Shelf Notes.





We
      used
      the proceeds from the sale of the Series D Notes to pay our 7.16% Senior Notes,
      Series A that matured on August 31, 2006. The proceeds from the sale of the
      Series E Notes were used to pay a portion of the purchase price for Capital
      Title. For further details, see Note 3, “Mergers and Acquisitions” of the Notes
      to Consolidated Financial Statements in Part I, Item 1 of this
      report.





On
      July
      28, 2006, we entered into a credit agreement with SunTrust Bank, as
      administrative agent, issuing bank and swingline lender, and the other lenders
      party thereto. The credit agreement established a, $200 million, five-year
      revolving credit arrangement that replaced our previous five-year revolving
      credit arrangement entered into as of November 6, 2003. As of March 31, 2007,
      there were no borrowings outstanding under the credit agreement which was


28


used
      to
      pay a portion of the purchase price for Capital Title. We used short-term
      investments and dividends from our principal title insurance subsidiaries to
      pay
      off borrowings under the credit agreement.





In
      October 2005, the Board of Directors approved a share repurchase program
      expiring in July 2007 (the “2005 Program”) that authorized us to repurchase 1.25
      million shares of our common stock. Under the 2005 Program, we repurchased
      186,000 shares during the first three months of 2006 for $12.1 million, at
      an
      average cost of $64.89 per share, and 569,000 shares during the first three
      months of 2007 for $39.9 million, at an average cost of $70.18 per share. As
      of
      March 31, 2007, there were no authorized shares remaining under the 2005
      Program. For further details, see Note 8, “Shareholders’ Equity” of the Notes to
      Consolidated Financial Statements in Part I, Item 1 of this report.





In
      February 2007, the Board of Directors approved a share repurchase program
      expiring in October 2008 (the “2007 Program”) that authorized us to repurchase
      1.5 million shares of our common stock. As of March 31, 2007, no shares had
      been
      repurchased under the 2007 Program. We began executing under this program in
      April 2007. For further details, see Note 8, “Shareholders’ Equity” of the Notes
      to Consolidated Financial Statements in Part I, Item 1 of this
      report.





Effective
      April 1, 2007, our 3.25 percent convertible senior debentures due 2034 became
      convertible to common stock during the second quarter of 2007 through and
      including June 30, 2007. For further details, see Note 8, “Shareholders’ Equity”
of the Notes to Consolidated Financial Statements in Part I, Item 1 of this
      report.





Our
      industrial bank maintains an allowance for loan losses related to our loans
      receivable. During first quarter 2007, 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.





We
      believe our revolving credit facilities 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,
      2006.





**Pending
      Legal Proceedings**





***General***





We
      are
      involved in certain litigation arising in the ordinary course of our businesses.
      Although the ultimate outcome of these matters cannot be ascertained at this
      time and the results of legal proceedings cannot be predicted with certainty,
      we
      believe, based on current knowledge, that the resolution of these matters will
      not have a material adverse effect on our financial position or results of
      operations.


29


***Litigation
      Not in the Ordinary Course of Business***





On
      June
      22, 2004, Gateway Title Company, Inc. (“Gateway”), Commonwealth Land Title
      Company, Inc. and LandAmerica Financial Group, Inc. (collectively, “Plaintiffs”)
      filed a Complaint, subsequently amended by a First Amended Complaint filed
      June
      25, 2004, in the Superior Court of California, County of Los Angeles, Central
      District (the “Court”), against the Mercury Company and its affiliates Financial
      Title, Alliance Title, Investors Title and various individuals including Joseph
      DiChiacchio, a former manager of LandAmerica (Case No. BC 317441) (collectively,
      “Defendants”). The lawsuit claims substantial monetary and punitive damages for
      unfair competitive business practices in conjunction with Plaintiffs’ loss of
      over 300 employees in California, most of which appears to have occurred within
      an approximately twenty-four month period. On August 12, 2004, the Court granted
      a Temporary Restraining Order, followed by a Preliminary Injunction granted
      September 27, 2004, against Defendants based upon a showing of significant
      likelihood of Plaintiffs prevailing on the merits combined with irreparable
      harm
      to Plaintiffs if injunctive relief did not issue. The injunctive relief
      generally prohibited the solicitation of Plaintiffs’ employees. The preliminary
      injunctive relief has now expired. On December 13, 2004, Alliance Title Company,
      Inc., Financial Title Company, Inc., Roberto Olivera and Ray Arias filed a
      Cross-Complaint for unfair competitive business practices. On December 13,
      2004,
      Mr. DiChiacchio also filed a Cross-Complaint alleging similar claims, including
      back wages and additional bonus payments. Plaintiffs are disputing and intend
      to
      vigorously defend the Cross-Complaints. A mandatory settlement conference was
      held on August 1, 2005 and voluntary mediation on September 7, 2005. After
      completion of discovery, a jury trial began in early May 2006 and resulted
      in a
      verdict for Gateway of approximately $8.3 million. Judgment has not been entered
      pending resolution of the Cross-Complaints and could be appealed. As a result
      of
      voluntary mediation beginning on April 4, 2007, the parties agreed to a
      framework for resolving all claims, including but not limited to cross claims,
      post trial motions and appeals, in this case and the First California Title
      Company case described below, but no final settlement has been achieved (the
      “Resolution”). Trial on the Cross-Complaints has been continued to May 15, 2007
      to allow for negotiations regarding the terms of a definitive settlement
      agreement to continue.





On
      January 14, 2005, First California Title Company, New Century Title Company
      (“New Century”) and United Title Company (collectively, “Plaintiffs”) filed a
      Complaint in the Superior Court of the State of California, County of Los
      Angeles, against Financial Title Company, Mercury Companies, Inc. (“Mercury”),
      Stacy Neves, Stephanie Howard, George Willard and Tony Becker (Case No. BC
      327332) (collectively, “Defendants”). On September 8, 2006, we completed the
      merger with Plaintiffs. The lawsuit claims substantial monetary and punitive
      damages for unfair competitive business practices in conjunction with
      Plaintiffs’ loss of approximately 80 employees in California to Defendants over
      an approximately eight month period. The complaint was later amended to include
      Alliance Title Company and Christine De’Martini as named Defendants. A jury
      trial began on October 17, 2006. On December 28, 2006, the jury returned its
      verdict for Plaintiffs in the approximate amount of $2 million. The punitive
      damages phase of the bifurcated trial was held on January 2, 2007 and resulted
      in a punitive damages award for Plaintiffs in the approximate amount of $14.6
      million. Judgment was entered on March 8, 2007. Defendants filed several
      post-trial motions including motions for


30


a
      new
      trial on the issue of punitive damages. On March 22, 2007, the trial court
      granted Mercury’s motion for new trial on the issue of punitive damages. Having
      found that the punitive damages awarded by the jury in favor of plaintiff New
      Century violated due process, the trial court reduced the amount of the punitive
      damages awarded against Mercury from $11.6 million to $2.9 million. On April
      18,
      2007, the trial court issued a Minute Order modifying the previous judgment
      entered in favor of New Century to reflect this reduction of punitive damages.
      The trial court denied similar motions for new trial brought by other
      Defendants. Accordingly, the total amount of punitive damages awarded against
      Defendants, after the March 22, 2007 order, is $5.9 million.  The parties
      have until May 18, 2007 to file an appeal of the trial court’s orders granting
      or denying Defendants’ post-trial motions, including the motions for new trial.
      As a result of participation in voluntary mediation beginning on April 4, 2007,
      the claims in this case were included in the Resolution described above.





On
      January 25, 2002, Miles R. Henderson and Patricia A. Henderson (the “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
      the Plaintiffs amended the complaint on March 8, 2002. On June 28, 2002, the
      District Court remanded the case to the Court of Common Pleas for Cuyahoga
      County, Ohio. A similar putative class action suit was filed against
      Commonwealth, by Rodney P. Simon and Tracy L. Simon (the “Plaintiffs in the
      Simon Suit”) in the Court of Common Pleas for Cuyahoga County, Ohio on March 5,
      2003. The Plaintiffs in both suits alleged that the defendants had a practice
      of
      charging original rates for owners title insurance policies when lower, reissue
      rates should have been charged. Both defendants initially responded by demanding
      that the actions be arbitrated, but on final appeal to the Ohio Supreme Court,
      the Court ruled that arbitration was not required for either suit. On remand
      to
      the trial court, the 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. The court has set a hearing date of August 29, 2007. The 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, although
      no hearing date on the class certification has been scheduled. The Plaintiffs
      in
      both cases have demanded an unspecified amount of compensatory damages,
      declaratory and injunctive relief, punitive damages, and attorneys’ fees and
      costs. These cases are in the early stages, there have been no class
      certifications, and the defendants believe that they have meritorious defenses.
      At this stage of the litigation, the amount or range of loss that could result
      from an unfavorable outcome cannot be reasonably estimated.





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. 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.





31


***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.





The
      Government Accountability Office released its final report on the title
      insurance industry on April 17, 2007 (the “Report”). The Report makes
      recommendations regarding federal and state oversight of the title insurance
      industry, including but not limited to, better consumer information,
      consideration of the need for modification to the Real Estate Settlement
      Procedures Act and increased cooperation among regulators.





Various
      states are studying the title insurance product, market, pricing, business
      practices, and potential regulatory and legislative changes. Multiple states,
      including California, Florida, Nevada, 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 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 Texas title rate case in August 2006, the Texas Commissioner
      of
      Insurance ordered a rate reduction of 3.2 percent effective February 1, 2007.
      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, the 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. LandAmerica and other title companies doing
      business in the California market continue to engage in discussions with the
      CA
      DOI regarding alternative approaches to the proposed regulations, but the CA
      DOI
      may determine to correct the technical defects identified by OAL along with
      any
      other changes and resubmit the regulations to OAL.





In
      addition, a number of state inquiries have focused on captive reinsurance.
      Captive reinsurance involves the provision of reinsurance by a reinsurance
      company that is owned by another entity, typically a lender, developer or other
      party that is a provider of real estate-related services. From the inception
      of
      our captive reinsurance programs in 1997 through 2004, reinsurance premiums
      paid
      by us to captive reinsurers totaled approximately $12.0 million. The revenues
      from these programs were not material to our results of operations. We
      voluntarily terminated our captive reinsurance arrangements as of February
      2005,
      notwithstanding our belief that we had operated the programs in accordance
      with
      applicable law. We settled these investigations with six states, representing
      approximately 81.4 percent of our captive reinsurance business, without
      admitting any liability.





In
      June
      2005, we established reserves of $19.0 million to cover anticipated exposure
      to
      regulatory matters nationwide, an amount which includes settlements with the
      California, Arizona, Nevada, Virginia, Colorado, and North Carolina departments
      of insurance. Based on these settlements and the status of inquiries, we
      released $6.7 million of this reserve back into


32


earnings
      in fiscal year 2005 and $0.8 million in fiscal year 2006. The remaining reserve
      at March 31, 2007 was approximately $4.9 million.





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.





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: (i)
      our results of operations and financial condition are susceptible to changes
      in
      mortgage interest rates and general economic conditions; ** (ii)
      changes to the participants in the secondary mortgage market could affect the
      demand for title insurance products; ** (iii)
      we
      are subject to government regulation; (iv) 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;
      (v)
      we may not be able to fuel our growth through acquisitions; (vi) our inability
      to integrate and manage successfully its acquired businesses could adversely
      affect our business, operating results, and financial condition; (vii)
      regulatory non-compliance, fraud or defalcations by our title insurance agents
      or employees could adversely affect our business, operating results, and
      financial condition; (viii) competition in the our industry affects its revenue;
      (ix) significant industry changes and new product and service introductions
      require timely and cost-effective responses; (x) our litigation risks include
      substantial claims by large classes of claimants; (xi) key accounting and
      essential product delivery systems are concentrated in a few locations; (xii)
      provisions of our articles of incorporation and bylaws, shareholder rights
      plan
      and applicable state corporation and insurance laws could limit another party’s
      ability to


33


acquire
      us and could deprive shareholders of the opportunity to obtain a takeover
      premium for shares of common stock owned by them; (xiii) our future success
      depends on our ability to continue to attract and retain qualified employees;
      (xiv) 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 (xv) 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.
      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, 2006, 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.





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.


34








Principal
                Amount by Expected MaturityAverage
                Interest Rate(Dollars
                in millions)2007
            
            2008
            
            2009
            
            2010
            
            2011
            
            2012
                and
              after
            
            Total
            
            Fair
              ValueAssets:Taxable
                available-for-sale securities:Book
                value
            
            $
            37.4
            
            
            38.8
            
            
            41.0
            
            
            39.9
            
            
            64.0
            
            
            392.2
            
            $
            613.3
            
            $
            614.7Average
                yield
            
            
            5.4
            %
            
            4.6
            %
            
            5.1
            %
            
            5.0
            %
            
            5.4
            %
            
            5.4
            %
            
            5.3
            %Non-taxable
                available-for-sale securities:Book
                value
            
            $
            3.4
            
            
            21.0
            
            
            21.8
            
            
            24.5
            
            
            34.1
            
            
            349.7
            
            $
            454.5
            
            $
            461.9Average
                yield
            
            
            4.2
            %
            
            4.4
            %
            
            3.9
            %
            
            4.0
            %
            
            4.2
            %
            
            4.2
            %
            
            4.2
            %Taxable
                trading securities:Book
                value
            
            $
            0.8
            
            
            1.5
            
            
            2.6
            
            
            2.9
            
            
            6.8
            
            
            83.4
            
            $
            98.0
            
            $
            98.0Average
                yield
            
            
            3.9
            %
            
            5.1
            %
            
            6.0
            %
            
            5.2
            %
            
            4.7
            %
            
            5.2
            %
            
            5.2
            %Non-taxable
                trading securities:Book
                value
            
            $
            0.3
            
            
            3.0
            
            
            2.9
            
            
            0.5
            
            
            4.7
            
            
            44.6
            
            $
            56.0
            
            $
            56.0Average
                yield
            
            
            3.6
            %
            
            4.1
            %
            
            4.2
            %
            
            3.6
            %
            
            4.0
            %
            
            4.2
            %
            
            4.2
            %Preferred
                stock available-for-sale:Book
                value
            
            $
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            9.1
            
            $
            9.1
            
            $
            9.2Average
                yield
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            2.7
            %
            
            2.7
            %Loans
                receivable, excluding reserves, discounts and other costs:Book
                value
            
            $
            0.3
            
            
            1.0
            
            
            3.0
            
            
            0.7
            
            
            10.7
            
            
            545.4
            
            $
            561.1
            
            $
            559.7Average
                yield
            
            
            9.3
            %
            
            8.6
            %
            
            7.6
            %
            
            8.3
            %
            
            7.3
            %
            
            7.0
            %
            
            7.0
            %Liabilities:Interest
                bearing passbook liabilities:Book
                value
            
            $
            368.5
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            $
            368.5
            
            $
            368.5Average
                yield
            
            
            4.5
            %
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            4.5
            %Interest
                bearing certificate of deposit liabilities:Book
                value
            
            $
            97.1
            
            
            58.1
            
            
            33.9
            
            
            20.2
            
            
            5.0
            
            
            1.1
            
            $
            215.4
            
            $
            240.2Average
                yield
            
            
            5.0
            %
            
            5.0
            %
            
            4.5
            %
            
            4.7
            %
            
            5.2
            %
            
            5.0
            %
            
            4.9
            %





Changes
      in maturities and yields from December 31, 2006 to March 31, 2007 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.


35


We
      also
      have non-interest bearing passbook deposit liabilities related to escrow
      balances of $192.0 million. In addition, during first quarter 2007, we
      transferred $142.6 million of our fixed-maturity securities from
      available-for-sale securities to trading securities. This transfer introduced
      incremental interest rate risk into our business. We do not expect the
      incremental interest rate risk to have a material affect on our financial
      statements. For further details, see Note 4, “Investments: of the Notes to
      Consolidated Financial Statements in Part I, Item 1 of this report.





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, 2006.





**ITEM
                4.**
            **CONTROLS
                AND PROCEDURES**





**Evaluation
      of Disclosure Controls and Procedures**





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





Our
      management, under the direction of our Chief Executive Officer and our Chief
      Financial Officer, has evaluated the effectiveness of the design and operation
      of our disclosure controls and procedures (as defined in the Exchange Act Rules
      13a-15(e) and 15d-15(e)) as of March 31, 2007. Based upon this evaluation our
      management, including our Chief Executive Officer and our Chief Financial
      Officer, has concluded that our disclosure controls and procedures were
      effective as of March 31, 2007.





**Changes
      in Internal Controls**





During
      the quarter ended March 31, 2007, we implemented a new investment accounting
      system to record and report transactions related to our fixed maturity and
      equity securities. Other than the item described above, there were no other
      changes in our internal controls over financial reporting that occurred during
      the quarter ended March 31, 2007 that have materially affected, or are
      reasonably likely to materially affect, our internal controls over financial
      reporting.





**PART
      II. OTHER INFORMATION**




**ITEM
                1.**
            **LEGAL
                PROCEEDINGS**





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


36


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





(c)
            The
                following table sets forth the details of purchases of common stock
                under
                our share purchase plans and our Executive Voluntary Deferral Plan
                and
                Outside Directors Deferral Plan that occurred in the first quarter
                of
                2007:





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 ProgramsJanuary
                1 through January 31, 2007
            
            
            60,759
            
            $
            61.94
            
            
            60,000
            
            
            1,093,735February
                1 through February 28, 2007
            
            
            114,930
            
            $
            67.14
            
            
            114,000
            
            
            978,805March
                1 through March 31, 2007
            
            
            410,216
            
            $
            72.27
            
            
            395,000
            
            
            568,589





(1)
            A
                total of 16,905 shares of our common stock were purchased in connection
                with two employee benefit plans during the first quarter 2007. 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
                October 2005, we announced a share repurchase plan providing for
                the
                purchase of up to 1,250,000 shares of our common stock expiring at
                the end
                of July 2007. As of March 31, 2007, we had purchased a total of 1,250,000
                shares authorized under this purchase
                plan.





(3)
            In
                February 2007, we announced an additional share repurchase plan providing
                for the purchase of up to 1,500,000 shares of our common stock expiring
                at
                the end of October 2008. As of March 31, 2007, no shares had been
                repurchased under this purchase
                plan.





**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*


37


**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:
                May 1, 2007
            
            /s/
                Christine R. VlahcevicChristine
                R. VlahcevicSenior
                Vice President-Corporate
                Controller(Principal
                Accounting Officer)











38








**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.








39