Standard & Poor’s Ratings Services has announced two major rating actions.
S&P, New York, reduced the counterparty credit and financial strength ratings of Penn Treaty Network America Insurance Company to B minus, from B.
The rating agency also increased the credit and financial strength ratings it has assigned New York Life Insurance Company, New York, and New York Life’s New York Life Insurance & Annuity Corp. subsidiary to AAA, from AA plus.
S&P lowered the ratings on Penn Treaty, a company that helped create the modern long term care insurance market, because Penn Treaty’s parent, Penn Treaty American Corp., Allentown, Pa., failed to “file its year-end 2006 10-K in a timely fashion,” Neal Freedman, an S&P analyst, says in a discussion of the downgrade.
“This continues a pattern of failure to file its [Generally Accepted Accounting Principles] financial statements within the required time frames,” Freedman says. “Standard & Poor’s believes that this indicates a continuing serious lack of control over the company’s financial reporting function.”
Although Penn Treaty’s insurance subsidiary has filed its statutory financial statements on time, the lack of audited GAAP financial statements limits the parent company’s financial flexibility, S&P says.
Once the parent company returns to a standard financial reporting schedule, S&P likely would change its outlook on the company to positive, S&P says.
Penn Treaty says in respond that it has been late with its GAAP filings mainly because it was asking the U.S. Securities and Exchange Commission for advice about how to apply new accounting rules.
Getting the answers took more than 5 months, and “the company is in process of becoming current with all filings following that initial delay,” Penn Treaty says.