HOUSTON (Sept. 25, 2006) - Stewart Title Guaranty Co. is responding to allegations by the California Commissioner of Insurance that some reinsurance previously purchased from insurers under common ownership with title insurance customers may have constituted improper payments for the placement or referral of title business.
California has not issued clear guidance in this regard and Stewart believes the allegations to be the result of a misunderstanding of Stewart's business. It is Stewart's belief that all of its reinsurance purchases were in accordance with guidelines issued by the Department of Housing and Urban Development for reinsuring residential transactions at market rates.
Stewart has already met with representatives of the Commissioner to respond to the department's questions regarding the appropriateness of its reinsurance purchases and is providing additional information to overcome these allegations.
In 2005, the Commissioner leveled rebate charges regarding captive reinsurance programs of three of the Company's competitors in California. However, each of these competitor's programs were dissimilar to the business conducted by Stewart. Reportedly, the Commissioner settled hundreds of millions of dollars of fines in conjunction with such charges. Those were settled for less than five percent of fines sought by the Commissioner and no company's Certificate of Authority was suspended.
With the allegations, the California Department of Insurance has claimed almost $47 million in damages and penalties from Stewart. Stewart believes that such penalties are erroneous and that its reinsurance purchases complied with all federal and California requirements. Stewart intends to vigorously defend the propriety of its reinsurance purchases and is providing information to differentiate them markedly from concerns the Commissioner has raised in his previous reviews of reinsurance programs conducted by its competitors.
Stewart Title Guaranty Co. is a wholly owned subsidiary of Stewart Information Services Corp. (NYSE-STC), a technology-driven, strategically competitive, real estate information and transaction management company. Stewart provides title insurance and related information services required for settlement by the real estate and mortgage industries through more than 9,000 policy-issuing offices and agencies in the United States and international markets. Stewart also provides post-closing lender services, mortgage default management solutions, automated county clerk land records, property ownership mapping, geographic information systems, property information reports, flood certificates, document preparation, background checks and expertise in tax-deferred exchanges. More information can be found at www.stewart.com.