SCC approves sale of 15% of Roanoke insurer

The State Corporation Commission has approved selling 15 percent of Shenandoah Life Insurance's business to beef up the troubled insurer's shrinking surplus of capital.

The commission put the Roanoke-based company into receivership in February, after the insurer was hit hard by declines in the value of some of the assets it used to back its promises to pay claims.

Now, the commission will let Shenandoah sell its group insurance business, which has been accounting for 15 percent of the company's revenue in recent years, to Assurant Inc., a $24.8 billion insurer active in that market.

The deal will boost Shenandoah's surplus by about $500,000. It will also move millions of dollars of potential claims off Shenandoah's books, easing pressure on the company's finances.

Shenandoah's surplus had tumbled to just $4.4 million as of June 30, down from $29.2 million as of Dec 31 and $125.8 million at the end of 2007. The filing disclosing the $4.4 million was declared confidential this week and removed from the commission's public records.

Its surplus in September was after accounting for funds it had set aside as a $1.28 billion reserve to pay claims. Neither the company nor the commission had updated its reserve figures.

Under the receivership, in order to conserve its funds, Shenandoah has stopped paying dividends to policyholders, making policy loans and cashing in policies when policyholders surrender them, to slow the flow of cash out. It also stopped selling new policies, to avoid taking on new potential claims on its shrinking assets.

Shenandoah was hit hard by the troubles at Fannie Mae and Freddie Mac, the housing finance agencies the government took over last year during the mortgage market meltdown. As of the end of 2008, it was holding $195.9 million in bonds from the two entities and $1.4 million in preferred stock. It estimated it had lost $48.9 million on the preferred stock.

Contact David Ress at (804-649-6051 or dress @timesdispatch.com.