Shenandoah Life, in Receivership since 2009, Targeted by United Prosperity

United Prosperity Life Insurance Co. will acquire Shenandoah Life Insurance Co., which had been placed in receivership and suffered financial problems due to impairments in its investment portfolio.

"The sale of Shenandoah to United Prosperity is an important step in restoring the financial soundness of Shenandoah, which is an important Virginia institution with a rich history of nearly 100 years," said Jacqueline K. Cunningham, the Virginia commissioner of insurance and the deputy receiver of the company, in a statement.

Shenandoah has been in receivership since February 2009. In July 2010, the parties had announced they had reached a negotiating agreement (BestWire, July 2, 2010) that initially provided a 90-day window to reach a definitive agreement.

Cunningham said the transaction would allow the company to eventually emerge from receivership.

Shenandoah would become a wholly owned subsidiary of United Prosperity upon closing of the transaction and following regulatory and policyholder approval for a demutualization. United Prosperity would invest at least $60 million in Shenandoah. Other terms of the transaction were not disclosed.

Shenandoah had experienced financial difficulties due to impairments in its investment portfolio (BestWire, July 2, 2010). It lost about $50 million when the value of its equity position in Fannie Mae and Freddie Mac preferred stock plunged. An announced proposal to merge with OneAmerica Financial Partners of Indianapolis in November 2008, prior to the receivership went into effect, fell through. Before it ceased issuing policies, Shenandoah wrote life insurance, annuities and dental insurance. It wrote business in 31 states and the District of Columbia.

During the acquisition process, a moratorium put into effect at the time of the receivership will remain in place, according to the announcement. It affects the payment of claims and benefits except for accident and health claims, death claims, periodic annuity payments and hardship claims. Also, Shenandoah will not resume issuance of insurance policies until the acquisition is complete.

United Prosperity Life Insurance Co., domiciled in Arizona, is a wholly owned subsidiary of Prosperity Life Insurance Group LLC. It is licensed in 29 states and the District of Columbia.

Shenandoah Life, based in Roanoke, Va., has a Best's Financial Strength Rating of E (under regulatory supervision).

(By Ron Panko, senior associate editor, Best's Review: Ronald.Panko@ambest.com)