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Financial Problems for #2 LTC Insurer Penn Treaty

Wed, 04/04/2001 - 11:00pm — Karen Stevenson
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Penn Treaty, a leading provider of long term care insurance, announced that its auditors have expressed doubts about the company's future based on its 2000 financial statement, and the company has hired two investment banks to help explore its strategic options. The company's auditors said they will include a going concern qualification on its 2000 financial statement because Penn Treaty's surplus to pay for insurance claims has fallen below the regulatory level. The company said they believe they have sufficient reserves, and are in the process of filing actuarial reports with state regulators to support their claim, but admit that it is possible they will be required by reglators to increase reserves. In that event, the company will need to find additional capital. In their annual report filed with the SEC they estimate that we may need to generate at least $40 million of additional capital in order to provide sufficient funding for their liquidity and statutory surplus needs during 2001.

Penn Treaty derives most of its revenue from the sale of long term care policies. About $355 million of the total $357 million premium revenue they reported in 2000 was from long term care policies. LifePlans, Inc. reports that Penn Treaty is the second largest writer of long-term care insurance in terms of new policies and among the five largest writers of individual long-term care insurance in terms of annualized premiums. Penn Treaty has been writing long term care insurance since 1972.

Penn Treaty, a leading provider of long term care insurance, announced that its auditors have expressed doubts about the company's future based on its 2000 financial statement, and the company has hired two investment banks to help explore its strategic options. The company's auditors said they will include a going concern qualification on its 2000 financial statement because Penn Treaty's surplus to pay for insurance claims has fallen below the regulatory level. The company said they believe they have sufficient reserves, and are in the process of filing actuarial reports with state regulators to support their claim, but admit that it is possible they will be required by reglators to increase reserves. In that event, the company will need to find additional capital. In their annual report filed with the SEC they estimate that we may need to generate at least $40 million of additional capital in order to provide sufficient funding for their liquidity and statutory surplus needs during 2001.

Penn Treaty derives most of its revenue from the sale of long term care policies. About $355 million of the total $357 million premium revenue they reported in 2000 was from long term care policies. LifePlans, Inc. reports that Penn Treaty is the second largest writer of long-term care insurance in terms of new policies and among the five largest writers of individual long-term care insurance in terms of annualized premiums. Penn Treaty has been writing long term care insurance since 1972.