NU Online News Service, May 16, 12:05 p.m. – Penn Treaty American Corp., Allentown, Pa., is reporting a $14 million net loss for the first quarter on $85 million in revenue, compared with a $2.3 million net loss on $102 million in revenue for the first quarter of 2001.

The insurer helped create the modern U.S. long-term care insurance industry, but it has had to struggle over the past year to ease regulators’ concerns about the adequacy of its capital.

The company addressed those concerns by setting up a reinsurance arrangement with Centre Solutions (Bermuda) Ltd., an affiliate of Zurich Financial Services A.G., Zurich. Penn Treaty says it transferred most of its investment portfolio to Centre Solutions in February.

The Centre Solutions arrangement includes a “notional experience account” that generates income when investment benchmark indices do well but generates losses when the indices do poorly. The experience account produced a $17 million loss for the first quarter.

Penn Treaty executives said at the company’s first-quarter earnings conference that they are studying the reasons for the loss and looking for ways to reduce the volatility of the experience account.

Executives also reported that the percentage of Penn Treaty policyholders who kept their policies was close to 90%, in spite of the bad publicity the company faced during the quarter.

A recording of the conference call will be available until May 21 at 800-475-6701, with access code 639343.

The company’s official first-quarter earnings report, or Form 10-Q, is available on the Web at http://sec.freeedgar.com/displayText.asp?ID=1875968