NU Online News Service, Nov. 13, 4:39 p.m. – Penn Treaty American Corp., Allentown, Pa., is reporting a $24 million net loss for the third quarter on $161 million in revenue, compared with $4.1 million in net income on $90 million in revenue for the third quarter of 2001.
Penn Treaty, a company that helped create the modern long-term care insurance market, has been working to overcome regulators’ concerns about the adequacy of the capital reserves backing its obligations to policyholders.
Results for the latest quarter include the cost of setting aside an additional $83 million in claims reserves. Although the cost cut the company’s net income, it did not require any cash expenditures, the company says.
Penn Treaty says it hopes to sell $25 million in new stock by Dec. 31 to come up with the capital it needs to meet regulators’ requirements and support new sales of long-term care coverage. The company first reported plans for the stock sale in early October.
The company also notes that it has worked with regulators to improve its procedures for predicting claims costs. Penn Treaty actuarial models once treated home care and nursing home care claims as separate claims, even though many policyholders owned policies that paid both for home care and nursing home care.
Penn Treaty now has models that recognize that many policyholders will file claims that combine charges for both types of care. Now that the models provide a separate category for mixed claims, Penn Treaty expects to end up with a smaller number of longer-lasting claims.
Penn Treaty is also expecting claims resulting from cognitive impairment to last longer than it had originally thought.