Shenandoah Life prepares to resume sales
The Shenandoah Life building at 2301 Brambleton Avenue SW.
Rebounding after severe financial losses, Shenandoah Life Insurance Co. Inc. expects to resume selling insurance Tuesday.
The company will launch a Medicare supplement policy in up to 11 states, President and CEO Paul Mistretta said. That’s coverage sold by private companies that picks up where Medicare leaves off by paying the policyholder’s copayments, coinsurance, and deductibles in return for a monthly premium. Shenandoah Life will distribute its plan through Florida-based AmeriLife.
A new life insurance product is due out later in the year. These will be the company’s first new products in five years.
Much is riding on consumers once again embracing the company’s product line.
Right now, Shenandoah Life is a bit like a sunflower whacked down by a storm that has stood back up and is about to grow again. Its current block of business of nearly 137,000 policies — sold before worried regulators seized Shenandoah Life and put on the brakes in 2009 — grows smaller as policyholders die, cash out or cancel.
Without growth, the 115-employee private company will become what Mistretta called a “run-off business,” or one that is merely allowing its existing insurance policies to run to their expiration dates. A company in that mode will reach a period of tough going as expenses mount and premiums decline, he said.
Mistretta outlined in a recent interview what he and his bosses see as a better plan: While new products generate organic growth, an upcoming acquisition is expected to expand the enterprise further.
The former head of operations for the financial services giant ING U.S. Inc. arrived at Shenandoah a year ago next month. Mistretta said he and others at the company have worked vigorously toward both goals. He’s kept himself so busy at the office, he hasn’t accepted any outside CEO-type roles, such as a seat on a local community or corporate board.
“My focus has been on Shenandoah, heads down, getting this thing geared up and moving forward,” Mistretta said.
An acquisition and a new-product launch would have been impossible in recent years. In an investment debacle under prior leadership, Shenandoah Life lost most of its reserves in the Great Recession, triggering a three-year period of state oversight that brought significant operating restrictions. One of the restrictions dictated no new policy sales. In 2012, regulators ended Shenandoah Life’s period of receivership and turned the company over to new owners who infused new funds. But it has taken time to resume normal operations.
Now things are happening.
Prosperity Life Insurance Group LLC, the company that bought and recapitalized Shenandoah Life in 2012, plans to buy another insurance company that has had issues, New York-based SBLI USA Mutual Life Insurance Co. Inc. Like Shenandoah, SBLI USA Mutual struggled with investment losses that diminished surplus funds — the essential buffer that ensures assets exceed liabilities. Like Shenandoah, regulators have intervened at SBLI USA Mutual, telling leaders the company needed to recalculate dividends to a certain policyholder group. Like Shenandoah, SBLI USA Mutual had a period of no product sales. And like Shenandoah, it turned to Prosperity for fresh capital.
(SBLI USA Mutual is a different company from the top-rated Savings Bank Life Insurance Co. of Massachusetts, also known as SBLI.)
The deal is scheduled to close within a few months. Mistretta hinted that he believes Shenandoah Life will benefit from its parent company’s purchase of SBLI USA Mutual, but said he couldn’t disclose why just yet.
By fall, with the Medicare product on the market, Shenandoah plans to launch a life insurance plan for 30- to 50-year-olds. Shenandoah Life will then be back in the business of selling life insurance, its core product that dates to the company’s first policy sale in 1916.
Mistretta wishes the return to new product sales could have occurred faster. But he said that, especially with the life insurance product, the company wanted to re-enter the marketplace with something of distinction.
“It was important for us to develop something that was different in the marketplace,” Mistretta said. “For an organization like Shenandoah to try and compete strictly on the price and the [agent] compensation is very difficult because there are so many very good insurance companies that have frankly more pricing power than we do and so we needed to create differentiation. So the creation of the product took longer than what you normally would expect a product to take, because it has some very unique features.”
In another post-receivership initiative, Shenandoah Life has resumed spending corporate dollars in the community. Among the sponsorships it has bought, the company will defray the cost of “1964 The Tribute,” an act modeled after The Beatles, at Festival in the Park later this month. While it’s not intended to advertise a specific product, the sponsorship is a way to place the company brand back before the community, officials said.