Standard Life Insurance Company of Indiana Taken Over by Insurance Department

Standard Life Insurance Company of Indiana has been taken over by state regulators after suffering investment losses tied to the credit crisis in the United States.

At the request of the Indiana Department of Insurance, Marion County Circuit Court Judge Theodore Sosin issued an order of rehabilitation for Standard Life and named Insurance Commissioner Jim Atterholt as rehabilitator of the company.

"The quality of Standard Life's investment portfolio, which has a high concentration of subprime debt, has deteriorated under current market conditions to the point that it has become necessary for the department to protect the annuity holders of the company," Atterholt said in a statement.

The department worked with Standard Life during 2008 to try to fix its financial condition but it became clear that rehabilitation was the best option, he said. Unsuccessful attempts to correct its problems included an $18 million capital infusion by existing shareholders of Capital Assurance Corp., its Kentucky-based based parent company. Another included management trying to pursue business ventures throughout 2008 to raise additional money, the department said.

Nearly 39,000 people throughout the United States hold annuities issued by Standard Life, with 4,700 of them in Indiana. In addition to Indiana, Standard Life wrote business primarily in California, Florida, Michigan and Ohio. It stopped writing new business on Dec. 11, the department said.

Last month, A.M. Best Co. removed from under review with negative implications and downgraded the financial strength rating to B (Fair) from B++ (Good) and the issuer credit rating to “bb” from “bbb” of Standard Life Insurance Company of Indiana. Both ratings were assigned negative outlooks (BestWire, Nov. 25, 2008).

Before it was acquired by Capital Assurance, Standard Life sold fixed-deferred annuities, equity-indexed annuities and single-premium immediate annuities. Under ownership by Capital Assurance, its products shifted from annuities with "life contingencies" to deposit-type contracts, the department said.

"Based on information available to the department at this time, we expect payouts on annuities to continue at maturity," Atterholt said. However, "surrender requests will be postponed until they can be dealt with in an orderly manner in the rehabilitation."

The commissioner named Randy Lamberjack, president of Noble Consulting Services Inc., to oversee the rehabilitation. "It is expected that the assets and liabilities of Standard Life can be managed under court-supervised rehabilitation to meet current obligations to policyholders," Atterholt said.

(By Fran Matso Lysiak, senior associate editor, BestWeek: [email protected])