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The Quiet Giant
Through acquisitions and internal growth that generated little fanfare, LandAmerica has built its title-insurance business into a $4 billion enterprise.
by Peter Galuszka
Wicked winds from Tropical Storm Ernesto were pelting rain one day in September when LandAmerica Financial Group, the nation’s third largest title insurer, was moving to a roomier office campus in Henrico County.
CEO Theodore L. Chandler vividly recalls the company's IT workers scurrying about to keep the covers from blowing off 400 computer servers. “They didn’t get any of them wet,” he marvels. “They moved the entire data center in those conditions without losing one server.”
To Chandler, that level of commitment speaks volumes about the $4 billion company, which provides financial transaction services to the real estate industry. With roots in the Greater Richmond region dating back to 1925, LandAmerica engenders a sense of loyalty that earned it a spot in this year's Fortune magazine's list of most admired companies. Says Chandler: “We have 16,000 employees dedicated to delivering the American dream."
The move to larger headquarters facilities coincides with a dramatic expansion, much of it through acquisitions, of the company's business. Over the past several years, LandAmerica has added a series of real estate-focused services to its traditional basket of title insurance and other real estate-transaction services. A business acquired in 2003, for instance, certifies flood insurance and consolidates credit information that can be used by mortgage lenders and real estate tax services. In September, LandAmerica shelled out $250 million for Capital Title, a title insurer with a strong presence in the southwestern states.
LandAmerica's strategy generated 12.4 percent sales growth rate last year and yielded net income of $165 million -- nearly triple the 2001 performance. The stock has generally performed well, rising from about $30/share in 2002 to the low $60s/share level now. Save for a dip in mid-2004, the stock rise has been steady. The ratings company Morningstar gives LandAmerica an “A” for profitability and a “B” for growth.
How well LandAmerica can sustain such performance may be an issue as the real estate market takes a hit. Home sales and prices have dropped dramatically in some parts of the U.S. Just one example: In Prince William County, Va., in the Washington suburbs, building permits dropped more than 60 percent early this year. The slowdown directly impacts LandAmerica’s earnings statement: Fewer home sales translate into fewer titles to insure and other services to provide. In the most recent quarter, LandAmerica reported earnings per share of 66 cents, well below some estimates of $2.16.
But some analysts still rate the company a “buy.”
“They’ve benefited very greatly from the housing boom and even though things have slowed, they’ve put in a good, substantial performance,” says Mark Dwelle, senior vice president and equity analyst in the Richmond office of Ferris, Baker Watts, an investment house.
Chandler is sanguine. “We are, at the moment, in a slowdown pattern,” he says. “But we are slower following three unbelievably strong years for real estate.” He characterizes the market as a “soft landing” eased by still-low mortgage rates and a strong economy. Noting a study by the Mortgage Bankers Association, he notes that the market will be slow through the first part of 2008 but should pick up again after that.
Dwelle agrees that a comeback by 2008 seems reasonable. “Keep in mind that even with the downturn, the recent performance is still better than many of the years of the 1990s,” he says.
What should help LandAmerica, which has more than 18.6 percent of the title insurance market nationally, is its presence in strong real estate markets. For instance, the company derives some 16 percent of its title operations from California, 10.7 percent from Florida and 10.4 percent from Texas. Those fast-growing Sun Belt states are likely to sustain strong home sales despite softness in national markets. The reason: baby boomers continue to retire in droves and they, like their parents, prefer to do so in warm climes.
LandAmerica's No. 1 competitor, Fidelity National Financial of Jacksonville, Fla., and No. 2, First American, based in Santa Ana, Calif., benefit from the same demographic trends. LandAmerica’s distinct advantage, says Chandler, is that its products are tightly focused on real estate while its competitors have strayed into unrelated fields.
One of LandAmerica’s predecessor companies introduced the nation’s first title insurance in Philadelphia on June 24, 1876. That firm grew for years as The Real Estate Title Insurance Company of Philadelphia and then as Commonwealth Title. Some years later, in 1925, Lawyers Title Insurance Corporation was founded in Richmond. Seventy-three years later, LandAmerica was formed in Richmond when Lawyers Title bought Commonwealth and a host of other companies.
Not surprisingly, LandAmerica has a strong presence in the Mid-Atlantic states, including Pennsylvania and Virginia, as well as the Sun Belt markets.
Chandler, who takes the helm as chairman Jan. 1, is a native-born Virginian. He grew up in Southside Virginia and practiced law for 22 years at the Richmond firm of Williams Mullen before joining what is now LandAmerica in 1991.
Chandler is active in a variety of Virginia civic activities, including the Richmond Arts Fund and the Maymont Foundation, and is vice chairman of the Greater Richmond Chamber of Commerce. Prominent Richmond-area directors of the LandAmerica board include Robert Skunda, president of the Virginia Biotechnology Research Park and Eugene P. Trani, president of Virginia Commonwealth University, who became lead director last month.
The move to the new three-building headquarters, which the firm calls a “Shared Resources Center,” is another example of its commitment to the Greater Richmond region. The sprawling, 300,000-square-foot complex in the Innsbrook office district will provide room for roughly 850 employees. Expansion plans call for the addition of another 300 workers -- not including an office in downtown Richmond.
When LandAmerica concluded that it had outgrown its core operations facilities near the Powhite Parkway in Chesterfield County, it never contemplated moving outside of Central Virginia, even though it has 40 offices scattered throughout the U.S. and overseas.
“We could have gone anywhere,” says Chandler, but the company decided to stay put. Overall, the region has an excellent business climate. Plus, the region provides ample access to talented, well-trained, white-collar employees.
The Greater Richmond region is particularly well suited to the financial services sector, notes Gene Winter, senior vice president of the Greater Richmond Partnership, the economic development organization for the region. A number of high-quality business school programs in the immediate area -- including the University of Richmond, ranked as the 25th best undergraduate business program in the country in the 2006 Business Week rankings -- provide a ready supply of entry-level and mid-level employees.
Additionally, contends Winter, the presence of a robust financial sector makes it easier to recruit upper-level executives. Richmond is home to such leading financial firms as Capital One, Wachovia Securities and Genworth Financial, not to mention a dozen Fortune 1000 companies. Says Winter: "Top financial executives can come here knowing that they're joining a sophisticated financial community."
Chandler also notes that the region's main liability in years past, commercial airline service, has been largely alleviated. JetBlue and AirTran, which started operating out of Richmond International Airport over the past two years, have broken the back of high fares and expanded the number of flights.
Although he is a big fan of the Richmond region, Chandler is not blind to its limitations. “We’d like to see a more solidified public sector when it comes time to make regional presentations," he says pointedly. A unified approach would work better than representing the Richmond area as a “collective of local governments.”
Chandler, who replaces Charles H. Foster, Jr., as chairman, says the company will continue to grow through acquisitions and the fine-tuning of recent purchases.
Promising areas for expansion include overseas markets. The firm is active in Latin America, and to a lesser extent, in Europe. Some countries, especially those in emerging markets, want to emulate the sophisticated real estate market in the U.S. Currently, their mortgage companies can absorb a limited number of loans.
Foreign companies could take on more loans, Chandler contends, if they could turn around and sell those mortgages, as it is commonplace in the U.S. But a prerequisite of securitization and syndication is a more advanced system of title insurance that would allow investors to buy the mortgages without fear that the property ownership could come into question.
Dwelle, the equity analyst at Ferris, Baker Watts, however, is leery about overseas possibilities. “You just can’t export the American model,” he says.
But Dwelle may not be reckoning on LandAmerica's gung-ho spirit. The company made Fortune’s list of most admired companies in two of the last three years after a process that entailed interviewing some 10,000 executives, directors and securities analysts.
“Fortune’s designation goes to qualitative factors rather than economics scale,” Chandler says. Such qualities are derived through a company-wide insistence on respect for individuals, be they customers or employees. “Every individual knows our guiding principles," he says, "and that is important to us.”
Just ask the guys moving those computers in the tropical storm.
-- November 29, 2006
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Theodore Chandler, LandAmerica CEO
Useful Links Recent News LandAmerican promotes Theodore L. Chandler, Jr. to Chairman and CEO (October 25, 2006) LandAmerica's eZNetClose(SM) Offers Mortgate Lenders and Borrowers Remote E-Signings for Online Closings (Oct. 16, 2006) LandAmerica Completes Acquisition of Capital Title Group, Inc. (Sept. 8, 2006) LandAmerica Announces Acquisition of Napa Land Title Company, Inc., in Napa, California (August 4, 2006)
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