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Penn Treaty Faces Policyholder Rate Suit

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NU Online News Service, Jan. 23, 10:15 a.m. – Penn Treaty American Corp., Allentown, Pa., says it has extended the end of its latest rights offering to Jan. 24, from Jan. 22 because of reports that three policyholders have filed a suit contesting the company’s premium rate increases.

“Although the company has not yet been served, it has obtained a copy of the complaint,” Penn Treaty says in a statement about the suit. “Based upon its review, it believes the allegations in the complaint are baseless and without merit.”

Penn Treaty helped develop the modern LTC insurance market, but it ran into trouble in 2001 because of regulators’ concerns that its LTC insurance sales were outstripping its capital reserves. The company has been working since then to raise capital.

Penn Treaty is now trying to raise $45 million by selling convertible subordinated notes that pay an annual interest rate of 6.25% and are due in 2008.

The original expiration date was Jan. 20, but the company reserved the right to extend it to Jan. 31. The company extended the expiration date to Jan. 22 because of the Martin Luther King Jr. Day holiday and now is extending the expiration date a second time.