OREANDA-NEWS. Stewart Information Services Corp. (Stewart) today announced a proposal to reclassify all Class B Common Stock as Common Stock for purposes of aligning economic and capital allocation interests of all shareholders and to instill corporate governance practices that are more in line with market norms.

Under the proposed plan, the Class B stockholders will exchange Class B shares for common shares on a one-for-one basis plus a $12 million cash payment, and all common shares will then be entitled to one vote per share on stockholder issues going forward. While the deal still needs to be approved by both classes of stockholders, Class B stockholders have already agreed to vote their shares in favor of the reclassification, and it is expected that all shares will be converted in the second quarter of 2016.

The interests in the Class B shares are held by members of the Morris family, including Stewart CEO Matthew Morris, and grant the ability to elect four of the nine Stewart board members. Following the conversion of the shares, all board members will be elected by stockholders of outstanding common shares, with the Morris family's ownership changing from 100% of Class B shares and 1.0% of common shares to 5.5% of common shares.

The proposed common stock reclassification is not anticipated to affect Stewart's Issuer Default Rating (IDR) at 'BBB' and the Insurer Financial Strength (IFS) ratings of Stewart's insurance subsidiaries at 'A-', or the Stable Rating Outlook. Fitch currently views Stewart's corporate governance and management as adequate and neutral to the rating. However, Fitch has made note in the past of the weakness of the Board of Directors' independence given the Class B Common Stock, as only three of the nine members of the board are considered independent by Fitch, and considers this a positive development that will lay the foundation for a better alignment of interests between the board and the stockholders.