Shenandoah Life Is Resurrected With a Former Aviva Life CEO at the Helm
May 10, 2012 by Fran Matso Lysiak
Best’s News Service – May 08, 2012 04:48 PM
ROANOKE, Va. – After a $60 million capital infusion, a Virginia life insurance company has come back to life—successfully exiting receivership, a rare occurrence in the industry and something its new chief executive officer calls a “remarkable achievement.”
The transaction, finalized May 8 by order of the Virginia State Corporation Commission, means Shenandoah Life Insurance Co. will resume normal operations.
“I’ve been told I can count on one hand the number of life insurance companies that have gone into receivership and come out as a free-standing operating entity,” Hans Carstensen, the new president and chief executive officer of Shenandoah Life, and the president and CEO of Aviva Life Insurance Co. from 1996-2007, told Best’s News Service. Most are liquidated or they become very small parts of much larger operating entities, he said.
Shenandoah Life had been in receivership since February 2009. The life insurer, founded in 1914, had experienced financial difficulties due to impairments in its investment portfolio. It got into trouble after it lost $50 million when the value of its Fannie Mae and Freddie Mac preferred stock plunged (Best’s News Service, Dec. 21, 2009).
Before it stopped issuing new policies, in addition to life insurance, Shenandoah wrote annuities and dental insurance and did business in 31 states and the District of Columbia (Best’s News Service, July 2, 2010).
“We will be approaching asset management very thoughtfully and carefully going forward,” he said. The problem was not in the life insurance operations; they had been “sound” throughout the receivership process, he said. The difficulty was, before receivership, there was an over-concentration in certain asset classes, and when the downturn in the financial markets hit, its investments deteriorated and threatened the surplus of the entire enterprise, putting it in receivership, Carstensen said.
In May 2011, it was announced that United Prosperity Life Insurance Co. would acquire Shenandoah Life (Best’s News Service, May 10, 2011). United Prosperity is a subsidiary of Prosperity Life.
Shenandoah Life will continue to be based in Roanoke as a subsidiary of the privately held Prosperity Life Insurance Group, which was chosen to sponsor the rehabilitation, conversion and acquisition of Shenandoah Life. Prosperity Life is led by a group of insurance and investment professionals, including Jose Montemayor, president of Prosperity Life, and a former three-term commissioner of the Texas Department of Insurance. He joins Shenandoah’s newly appointed board of directors.
The priorities now will be on refocusing the entire employee base on the future and on continuing to serve policyholders, and “all of us working together toward a brand new strategy for the company,” Carstensen said, referring to products and distribution, among others. “We will be working over the next several months to do just that.”
In November 2006, Aviva plc, the U.K.-based financial services giant, completed its $2.9 billion acquisition of Iowa-based life insurer AmerUs Group Co. as Aviva expanded into the United States (Best’s News Service, Nov. 16, 2006). Before leaving Aviva USA., the U.S. operations of Aviva plc, Carstensen helped Aviva acquire the AmerUs companies, subsequently combining the two organizations, according to a statement.
Shenandoah Life says it specializes in life insurance, annuities and specialty health insurance to the middle-income market across the United States. It has more than 175,000 insurance policies in-force, and more than $1.4 billion in assets.
“Very few insurance companies have emerged from receivership to resume business,” said Montemayor, in a statement. “We sincerely appreciate the patience and loyalty of our policyholders and agents throughout the nation as we worked throughout legal and regulatory process.”
Aviva plc said May 8 Andrew Moss, CEO, will be leaving the group immediately and his interim successor is promising a good hard look at the company’s businesses. Chairman-designate John McFarlane will become interim executive deputy chairman immediately, and executive chairman on July 1 pending the appointment of a new CEO (Best’s News Service, May 8, 2012).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com) BN-NJ-05-08-2012 1648 ET #
