Fitch Downgrades LandAmerica

In a related move, Fitch Ratings, Chicago, has downgraded the insurer financial strength of LandAmerica's insurance subsidiaries to 'BB' from 'BBB+'. Fitch has also downgraded the issuer default rating to 'B' from 'BBB-' and placed the company on Rating Watch Negative. Fitch said the downgrade "considers LandAmerica's deteriorating financial condition, constrained liquidity and consequences from not meeting the renegotiated covenants of its credit agreements." The rating agency noted LandAmerica has already taken a $225 million write-off of goodwill and could take more in the fourth quarter. "LandAmerica faces serious liquidity constraints now that the acquisition plans have fallen through," said Fitch, pointing to $290 million invested in auction-rate securities. LandAmerica is also believed to be in violation of covenants on its $250 million of bank debt and thus unable to access the remaining $50 million it has on a line of credit. "Lastly, Fitch estimates consolidated statutory surplus at the title underwriting subsidiaries to be $300 million as of Sept. 30, 2008, down from $426 million at year-end 2007. Surplus has been depleted by operating losses and dividends to the holding company and consequently, Fitch's estimate of LandAmerica's risk-adjusted capital ratio is substantially below 100%," the rating agency said.