The insurance subsidiaries of collapsed financial conglomerate Metropolitan Mortgage & Securities will be sold rather than spun out or liquidated.

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The insurance subsidiaries of collapsed financial conglomerate Metropolitan Mortgage & Securities will be sold rather than spun out or liquidated, potentially raising millions of dollars to repay investors in the failed company.

Insurance Commissioner Mike Kreidler said yesterday that he and his counterparts in Idaho and Arizona had agreed to offer the three insurers, probably in a package deal, with a goal of finding a buyer or buyers by the end of June.

Already, Kreidler said, a half-dozen well-established companies — “in some cases quite well known” — have expressed interest in bidding .

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The three companies are Western United Life Assurance, a Spokane-based indirect subsidiary of Met Mortgage; Old Standard Life Insurance, an Idaho-based subsidiary of Met’s sister company Summit Securities; and Old West Annuity & Life, an Arizona-based subsidiary of Old Standard.

The main business of all three companies is selling life-insurance annuities. Western is by far the largest of the trio, with $1.4 billion in assets as of Sept. 30, 2004, and some 35,000 policyholders.

The insurers were taken over by insurance regulators in their respective states just over a year ago after bankruptcy filings by Met and Summit.

The Met Mortgage and Summit, both controlled by C. Paul Sandifur Jr. of Spokane, owe an estimated $583 million, mostly to thousands of small investors who bought their notes and preferred stock.

Their original reorganization plan anticipated paying investors 10 to 15 cents on the dollar; they plan to file an amended plan Friday.

Maggie Lyons, acting head of both Met and Summit, called the planned sale “the best news the creditors have heard since the (bankruptcy) filing.”

At the time he took over Western in March 2004, Kreidler said, there “absolutely” was a chance it would wind up liquidated rather than fixed up and sold.

Its books were riddled with overvalued assets, nonperforming loans and murky transactions with Met Mortgage; there were fears policyholders would rush to pull out their money.

“At the start, it was good for stomach-acid pills,” he said, adding that if his office had moved to sell the company then, “it would have been a fire sale.”

Since then, he said, the books have been cleaned up and the business stabilized, to the point where several potential buyers have emerged. One of them, he said, has expressed interest in using the companies as the base for a West Coast expansion.

The three companies are so interrelated that they will most likely be sold together, Kreidler said, though there’s a possibility Old West could stand on its own.

Neither Kreidler nor Lyons would speculate on how much the companies might fetch at sale.

Qualified bidders will have until May 27 to examine the insurers’ books and operations and submit offers.

The three regulators will look over the bids during the National Association of Insurance Commissioners’ summer meeting in Boston, June 11-14.

The insurers have between 150 and 180 employees in the Spokane area, Kreidler said, and a combined annual payroll of $10.8 million. By contrast, Lyons said, Met and Summit are down to 12 employees between them.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com