Penn Treaty American Corp. says it has asked regulators in all 50 states for permission to raise premiums on old long term care insurance policies by an average of 50%.
Penn Treaty, Allentown, Pa., started filing for the rate increases last year on policies issued before 2002 to offset higher projected benefit costs, according Penn Treaty Chief Executive William Hunt Jr.
The effort to increase rates will continue through 2008, and it affects policies that generate about $190 million of Penn Treaty’s $307 million in annual LTC insurance revenue, Hunt said during an investor conference call.
“Policies that fall within our preferred and premier underwriting classes have unlimited benefits and inflation protection and are primarily driving the need for these rate increases,” Hunt said.
Penn Treaty already has won approvals for requested increases from 27 states, for policies that generate about $87 million in annual premiums, Hunt said.
“We anticipate that more approvals will be granted through the end of 2007 and into 2008,” Hunt said.
In some cases, Penn Treaty has received a smaller rate increase than it had requested, Hunt said.
Increases approved so far have averaged about 30% and will take effect anywhere from a month to a year following approval, Hunt said.
Hunt predicted Penn Treaty will net an average 35% to 40% increase once state regulators have acted on all of the company’s increase requests.
To make the increases more palatable to regulators and clients, the company will stagger most of them over 1 or 2 years following approval, Hunt said.
The company is offering affected policyholders alternatives to rate increases, such as moves to reduce lifetime benefits to 5 years, change benefit triggers and freeze inflation protection provisions.
“We are pleased with the rate increase approval activity experienced over the past 6 weeks as more regulators are recognizing the need to approve rate increases in order to bolster reserves for future claims,” Hunt said.
The recent move by Genworth Financial Inc., Richmond, Va., to ask for premium increases of 8% to 12% on its older LTC insurance business may have made it easier for Penn Treaty to get state approvals, Hunt said.
Genworth’s bid for higher rates helped “bring credibility back to the whole industry,” Hunt said.
“Only one or two” states have flatly rejected Penn Treaty’s requests for increases, while one approved an increase of only 15%, Hunt said, declining to name specific states.
Penn Treaty plans to refile and continue negotiations in states that, in its view, fail to grant an adequate increase, Hunt said.
Cameron Waite, Penn Treaty’s executive vice president of strategic operations, said the company expects to restate earnings for the 2002-2005 period, largely due to “incorrect assumptions” about reserves required for that period.
The restatement, which should be completed in 2 or 3 weeks, would cut earnings by less than $2 million for the period, Waite said.
On Tuesday, the company announced the New York Stock Exchange has extended the deadline for filing the company’s 10-K to Jan. 2, 2008, from 2006.