Insurer stops writing policies

Penn Treaty American Corp., an Allentown long-term-care insurance company, said yesterday that its primary insurance subsidiary will be considered insolvent unless it can raise at least $100 million by Jan. 1.

The insurer said it would stop issuing new policies, and will consider "strategic alternatives."

The company will accept letters of interest from prospective investors and purchasers through mid-October and decide on a course by the end of the year.

The company needs $100 million to $120 million to cover reinsurance agreements it intentionally dropped "because the cost to keep them was more than the value of the agreements," Cameron Waite, executive vice president of strategic operations, said in an interview.

If a cash infusion is not found, Penn Treaty said it would voluntarily enter into a "rehabilitation plan" with the Pennsylvania Insurance Department on Jan. 1. That means the state would run the company, analyze its finances and surplus shortfall, and pay policyholder claims with available company assets.

Under Pennsylvania law, insurers must maintain an adequate statutory minimum surplus to pay claims.

Rosanne Placey, spokeswoman for the Pennsylvania Insurance Department, said the "priority will be to marshal all available assets" to pay policyholder claims and determine whether the company's financial problems can be corrected. "Claims payment becomes a prime focus," she said.

The company would hope to reemerge from state oversight in a few years.

Penn Treaty shares fell 69 percent in the summer quarter, a decline accelerated when it announced in August that it was in a dispute with a reinsurer of policies it issued before 2002. Also in August, it said an actuarial error would delay reporting of the company's first- and second-quarter results.

Separately, the New York Stock Exchange said the company's stock will no longer be traded in light of the company's announcement of an economic restructuring and the uncertainty about timing and the outcome for shareholders. The NYSE said the company's ticker symbol, PTA, would be suspended.

The shares immediately began trading on the over-the-counter market, where they lost 92 cents yesterday to close at 40 cents a share.