Ticor Mortgage Division Put in Conservatorship
California insurance regulators put the mortgage insurance arm of Ticor in conservatorship Thursday, saying the operations face possible losses of $200 million over the next five to seven years in connection with the collapse of an East Coast real estate investment company last year.
In a related action, Ticor said it has agreed to pump $30 million into the ailing subsidiary, known as TMIC Insurance, over the next four years as part of a “rehabilitation” plan to keep the operation in business and meet obligations to policyholders.
Insurance regulators said the actions together were taken to protect the interest of 364,000 TMIC policyholders nationwide, including 59,000 in California.
California Insurance Commissioner Bruce Bunner has been named conservator of TMIC, which had been facing insolvency from the fallout at Equity Programs Investment Corp.
EPIC is the Virginia firm that defaulted on $1.4 billion in mortgage loans last August, affecting about 20,000 properties around the country. TMIC was the mortgage insurer on 46% of those properties.
Largest in Nation
Winston V. Morrow, president and chief executive of Ticor, hailed the steps as a major move forward in solving the problems of TMIC and EPIC and in lifting the cloud of uncertainty over the parent company.
Ticor is a major Los Angeles financial services company whose title insurance operation is the largest in the country. Ticor was taken private several years ago by a group of investors that included Morrow and Harold S. Geneen, former chairman of ITT Corp.
Though California insurance regulators have been taking over or liquidating problem companies with increasing frequency, this action is one of the largest that the state Department of Insurance has ever undertaken, spokesman Jorge Sandoval said. He said the Department of Insurance has taken over or liquidated eight insurance companies so far this year.
Morrow, in an interview, said the immediate task is to give TMIC the capital it needs to handle present obligations.
“Whether it ever gets back into business . . . again is another question,” he said.
Last year, insurance regulators barred TMIC from issuing new mortgage insurance policies.
A key benefit of the Ticor infusion of funds is that it’s expected to allow TMIC to participate in the reorganization of EPIC, which is now being drawn up in a bankruptcy court in Virginia.
TMIC had previously been unable to participate in the liquidation plan because of a lack of funds. A hearing on the reorganization plan is set for next week.
“We are especially pleased that this will enable TMIC to participate in the proposed EPIC plan of reorganization,” Morrow said in a statement. “Success of that plan is a matter of great economic importance to the nation, and the EPIC workout program cannot proceed without the participation of TMIC.”
Morrow also said in his statement that “it has always been our intention that TMIC would pay all policyholders’ valid claims in full. Under the current plan, we are confident this will be true for both EPIC and non-EPIC policyholders.”