A rating agency lowered its assessment of Roanoke-based Shenandoah Life Insurance Co. on Friday, citing the company's "significant exposure" to the fallout from Wall Street's meltdown.

A.M. Best Co. said it downgraded the company's financial strength rating from A-, or excellent, to B++, or good.

Best's issuer credit rating for Shenandoah fell from a- to bbb. The outlook for both ratings is negative, meaning it could go lower, whereas the outlook had been stable, the rating agency said.

"The rating downgrades are based on the significant exposure Shenandoah Life has to Freddie Mac and Fannie Mae perpetual preferred stock," a Best news release said.

Freddie Mac and Fannie Mae lost billions underwriting risky loans and were taken over by the government.

The capital and surplus of Shenandoah are expected to fall to account for dramatic reductions in those stocks. Both issues are down more than 95 percent from their 52-week highs.

A company representative emphasized the positive.

Cynthia Light said the financial strength rating that Shenandoah now carries is still Best's fifth highest.

"It is listed as good, in the secure category," Light said.

Light said the company's ratings are not a determinant of premiums. Nor is any effect on borrowing rates an issue, because the company doesn't routinely borrow, she said.

The ratings do give customers and sales agents an indication of the company's financial stability, she said. And, currently, the company is stable, she said.

"Our core business is sound. Our operating earnings are on pace for a record year in 2008," she said.

There is adequate surplus to meet obligations to policyholders, Light said.

Just how large a bite the stock losses will take out of assets is expected to be known when the company files its next quarterly financial statement with the Virginia State Corporation Commission. The report is due Nov. 15.

Best added in its assessment that the company "continues to maintain a relatively high exposure to commercial mortgages, collateralized debt obligations, other structured securities and borrowing under the Federal Home Loan Bank program."

Best said that following the write-downs, it expects Shenandoah Life to continue to fall below the excellent rating, when measured by Best's Capital Adequacy Ratio.