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Penn Treaty Trying To Win Back Market

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NU Online News Service, April 3, 11:25 a.m. – Penn Treaty American Corp., Allentown, Pa., is hoping its 2001 financial statements will help it inspire more confidence in long-term care insurance brokers and customers.

Earlier this week, the LTC insurer reported a $49 million net loss for 2001 on $382 million in revenue, compared with $23 million in net income on $393 million in revenue for 2000.

But Penn Treaty says it had net operating income of $129,000 for the fourth quarter and net operating income of $7.1 million for the year.

Net operating income excludes “certain after-tax amounts that occurred as a result of a significant reinsurance transaction entered as a part of the company’s corrective action plan recently filed with and approved by the Pennsylvania Insurance Department,” the company says.

Perhaps more important, the company says it received an unqualified opinion from its independent auditors, attesting to the completeness and accuracy of the results.

Penn Treaty helped establish the modern LTC insurance market, but it ran into trouble with insurance regulators early in 2001, when some officials and some accountants questioned whether the company had enough capital to support its rapidly growing block of LTC insurance business.

For several months later in the year, Penn Treaty agreed to suspend sales of new LTC policies while it addressed the capital concerns.

During 2001, first year premium declined by 55% as a result of the company’s cessation of new business sales. However, renewal premium revenue increased 18%, and the persistency rate, or policy renewal rate, increased to 88%, up from 86% in 2000, the company says.

Thanks to the new reinsurance arrangement, Penn Treaty says it is now able to sell new LTC insurance policies in at least 26 states.

Some agents may be eager to resume selling the Penn Treaty policies, but others are still watching the company carefully.

Stephen R. Eads, owner of LTCiPro/Eads Associates LLC, Tuscaloosa, Ala., says he’ll take a wait-and-see approach before selling a Penn Treaty policy, despite the company’s apparent turn-around.

“We have the responsibility as agents to maintain our own integrity,” Eads says. “We have due diligence responsibilities as well as plain old loyalty to our clients.”


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