Penn Treaty American Corp. has entered into a nonbinding letter of intent to sell a long term care insurance subsidiary, American Network Insurance Company, and American Network’s business operations to an undisclosed buyer.
Penn Treaty, Allentown, Pa., says the move is part of a rehabilitation plan for the Penn Treaty Network America Insurance Company unit.
In October, the company suspended sales of new policies and agreed to submit a rehabilitation plan to the Pennsylvania Department of Insurance by Jan. 1, 2009.
The company warned at the time of the suspension that its auditors might declare that the company is no longer a going concern if the company could not find a buyer or secure financing.
The company issued the warning after its primary reinsurer, Imagine International Reinsurance Ltd., revoked its agreement to back Penn Treaty LTC insurance policies.
Penn Treaty says the rehabilitation plan calls for it to sell its majority equity interest in American Network, including almost all of the company’s LTC insurance policies issued after Dec. 31, 2001.
American Network will issue new LTC insurance policies “as soon as practical” following the closing of the sale, Penn Treaty says in its announcement.
Penn Treaty says it will retain ownership of all LTC policies it issued before 2002 but that it will transfer essentially all LTC insurance operations to the purchaser.
The company says it will disclose the remaining terms of the offer by Feb. 13, 2009, if the terms are approved by the Pennsylvania department.
Penn Treaty says it expects to enter rehabilitation in its home state Jan. 2, 2009.