Update: Since I wrote this post, Fidelity is back on with the LandAmerica merger (11/26/2008).
LandAmerica has released a statement to the public regarding this recent debacle which has many wondering what will happen to this large title insurance underwriter. As I write this post, their stock is sitting at $0.54 a share. LandAm’s 52 week high is $53.
From Inman News:
The deal was announced on a Friday. The following Monday, LandAmerica detailed record third-quarter losses and said the company was in violation of financial debt covenants of its note-purchase agreement and credit agreement (see story).
LandAmerica said it was in discussion with creditors to obtain waivers. If not waived, the covenant violations “constitute an event of default under the agreements, giving the lenders the right to declare all principal and accrued interest payable immediately,” LandAmerica said at the time.
LandAmerica’s public statement, which is in a question and answer format clearly states that their ability to pay claims is adequately covered by the reserves. Locally, LandAmerica has joint ventures with Commonwealth of the Puget Sound (Windermere), Rainier Title (John L. Scott and Coldwell Bank Bain) and Northpoint Title. From the statement:
“What about other LandAmerica entities?
LandAmerica is comprised of many separate legal subsidiaries with separate profit and loss statements. Some entities are performing well and others are not performing well. We are working closely with the Nebraska Department of Insurance, which is where major underwriters are domiciled, to resolve our situation in a way that benefits our policyholders.”
This leaves a bigger question of what percentage of ownership does LandAmerica have in these joint ventures and what will happen to these ownership shares?
“What is the financial viabililty of LandAmerican underwriters?
The LandAmerica underwriters, Lawyers Title and Commonwealth have over $300 million in combined statutory surplus. And we have some of the industry’s most stringent requirements for reserves in place to protect our policyholders. The LandAmerica underwriters’ claims reserves are backed by over $1.1 billion in cash and investments.”
Reserves are mandetory…what about operating expenses?