Booker T. Washington Insurance insolvent: historic firm enters voluntary receivership.

Booker T. Washington Insurance Co. Inc. (No. 4 on the BE INSURANCE COMPANIES list with $56.2 million in assets) agreed to work with regulators in Alabama to save the company from collapsing and being forced to go out of business.

The Birmingham-based company, which had assets of about of $54 million as of March 2005, voluntarily submitted to being placed into receivership earlier this year by the Alabama Department of Insurance after an examination of the company found it had about $4.3 million more m financial obligation than it could afford to pay.

The company has been placed in the hands of Denise Azar, the receiver for the insurance department. She will serve as the court-appointed administrator of the company, overseeing operations until the company is rehabilitated or liquidated. Generally, when a financial institution or company is placed into receivership, its owners lose control and their equity.

"We have and we will continue to work closely with Ms. Azar and her staff for the continuation of the company's operations and for the protection of our policyholders," says Walter Howlett Jr., Booker T. Washington's chairman and CEO.

Azar, who could not say how long the company might be in receivership, said claims are being paid, premiums are being collected, and day-to-day activities continue. She said the company has about 65,000 policyholders and employs about 80 people.

According to court documents, Walter Bell, the insurance department's commissioner, demonstrated to the court's satisfaction that continued operation of Booker T. Washington Insurance Co. would be hazardous to policyholders, creditors, and claimants of the company if relief was not granted.

The court order prevents Booker T. Washington from doing several things, including:

* Transacting any kind of business unless approved by the court.

* Exercising any direction, control, or influence over the company's primary business, its subsidiaries and their assets.

* Disposing of any property or assets of Booker T. Washington that might waste the company's assets.

* Returning any unearned premiums or any money in the company's possession collected as premiums for enrollment contributions to policyholders. In addition, the court ordered all persons to turn over all funds of Booker T. Washington to Azar, who will keep and maintain reports of the receipts and present them to the court.

Andrew Gold, a senior financial analyst at A.M. Best, an insurance-rating and information agency, said he first noticed that the insurer was having financial troubles last spring. He said that's when the company had to write down the market value of its subsidiary, Universal Life Insurance Co., also based in Birmingham. He said Booker T. Washington's cash surplus dropped from $3.2 million on Dec. 31, 2004, to $868,000 on March 31, 2005, reflecting the write down of the subsidiary following several years of capital erosion.

Additionally, A.M. Best said Booker T. Washington has posted operating losses over the last five years. Its net income also has been negative during that period. The insurer had assets of $54 million as of March 2005, down from about $57.8 million in March 2004 and nearly $56.5 million in 2000, A.M. Best reports.

The insurer's actions leave it in a precarious position. "Their problem now is if everybody died tomorrow they would not have enough assets to pay off those claims," Gold said. Booker T. Washington was founded by entrepreneurial legend A.G. Gaston in 1923 with $500. Gaston, who initially offered insurance policies to steel workers, sold his insurance company in 1987 and worked at his bank until six months before his death in 1996. Booker T. Washington Insurance was a financially sound enterprise when Gaston sold the company.