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The financially troubled long-term care insurer said it received a nonbinding letter of intent last December, which allowed for completing due diligence and preparing documentation by Feb. 13. Penn Treaty said it extended until Feb. 28 the "exclusivity period" for the transaction.
Pennsylvania Insurance Commissioner Joel Ario last month received court approval for placing two of the company's subsidiaries, Penn Treaty Network America Insurance Co. and its subsidiary, American Network Insurance Co., into rehabilitation under the control of the insurance department (BestWire, Jan. 8, 2009).
According to A.M. Best Co., Penn Treaty announced that it entered into a nonbinding letter of intent to sell a majority interest in American Network Insurance Co. and its business operations, including substantially all of its long-term care insurance policies issued after Dec. 31, 2001 (NewCo). Penn Treaty Network America would retain ownership of all long-term care insurance policies issued before 2002 (OldCo) (BestWire, Jan. 8, 2009).
The deal would need approval from the Pennsylvania insurance department and the Commonwealth Court of Pennsylvania, Penn Treaty (Pink Sheets: PTYA | Quote | Chart | News | PowerRating) said. The company said it won't disclose the buyer or the terms of the offer until the deal is finalized.
The Allentown-based Penn Treaty has more than 126,000 policyholders, including 18,000 in Pennsylvania, according to the insurance department. Along with subsidiary American Network Insurance Co., it writes long-term care insurance in all 50 U.S. states and the District of Columbia (BestWire, Jan. 8, 2009).
Last month, Ario said the department would conduct a top-to-bottom evaluation of the company's finances before determining the viability of a rehabilitation plan. Liquidation remains a possibility, he said (BestWire, Jan. 8, 2009).
The New York Stock Exchange delisted Penn Treaty's common stock last October.
In January, A.M. Best Co. downgraded the financial strength rating to E (Under Regulatory Supervision) from D (Poor) and issuer credit ratings to rs from c of Penn Treaty Network America Insurance Co. and American Network Insurance Co. A.M. Best also downgraded the issuer credit rating to d from c of the holding company, Penn Treaty American Corp. (BestWire, Jan. 8, 2009).
(By Fran Matso Lysiak, senior associate editor, BestWeek: fran.lysiak@ambest.com)
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