Penn Treaty Announces Reverse Stock Split, New Product

Penn Treaty American Corp. says it will be giving shareholders 1 share of common stock July 8 for each share that they own.[@@]

Penn Treaty, Allentown, says it is implementing the exchange, called a “1-for-4 reverse stock split,” to boost the recovery of its long term care insurance operations by increasing the company’s appeal to investors.

Penn Treaty helped create the modern LTC insurance industry, but it ran into problems in 2001, when regulators decided that it had too little capital to support all of the LTC business it was selling.

Since then, the company has obtained new reinsurance and set about rebuilding its operations.

The company’s stock now sells for about $2.46 per share.

The Penn Treaty board decided to increase the price of each share with a reverse stock split – which will have no effect on the total value of all outstanding shares – because many investors refuse to invest in companies with share prices under $5 and many securities sellers refuse to recommend shares with such low prices, Penn Treaty says.