NU Online News Service, Nov. 11, 2003, 10:36 a.m. EST – Penn Treaty American Corp., Allentown, Pa., says a $35 million loss on the market value of a notional experience account contributed to a net loss for the third quarter.
The long term care insurer is reporting a $25 million net loss for the latest quarter on $59 million in revenue, compared with a net loss of $24 million on $161 million in revenue for the third quarter of 2002.
Penn Treaty has resumed selling new LTC policies 36 states, but premium revenue fell to $81 million, from $84 million.
The notional experience account, which is set up so that decreases in interest rates produce a gain and increases produce a loss, generated $63 million in gains in the third quarter of 2002.
Penn Treaty helped created the modern LTC insurance market, but it ran into trouble in 2001 when regulators questioned whether it had enough capital to back its obligations to policyholders. Penn Treaty suspended new LTC policy sales that year while it set up a reinsurance arrangement to support its existing LTC policies. One component of the arrangement is the notional experience account, which gives Penn Treaty the ability to share in the effects of investment market shifts on the assets that back the old LTC policies.