Wednesday, January 07, 2009

Penn Treaty Insurers under PA Rehabilitation

On January 6, 2009, the Pennsylvania Insurance Department announced in a Press Release entitled "Insurance Department Takes Control of Struggling Allentown-based Insurer & Subsidiary" that the PA Commonwealth Court approved the Department's petition to place Penn Treaty Network America Insurance Co. and its subsidiary, American Network Insurance Co., into a "rehabilitation" conducted under the Department's statutory control.

Penn Treaty was an aggressive issuer of long-term care insurance policies over the past decade.

The very name "Penn Treaty" invoked a powerful, historical, moral compact known as Penn's Treaty -- an exchange of promises made early in the history of Pennsylvania by the Commonwealth's founder, William Penn:

In 1682, along the gentle banks of the Delaware River, under the shade of a great elm tree in an area then known as Shackamaxon, William Penn is believed to have made a Treaty of Friendship with the Native Americans.

Few events in American history are noted for the just and fair treatment of peoples from different cultures.

The legend of William Penn's Treaty with the Indians became a universal symbol of religious and civil liberties. Voltaire made reference to the event in 1764, and artists throughout Europe recreated the scene first painted by Benjamin West in 1771.

Drawings of the transaction were used to promote commercial interest in the emerging land. American painter Edward Hicks created numerous depictions of the treaty meeting to promote social change.

In the pre-Civil War era, artistic renderings of Penn's Treaty were used to encourage political movements, religious agendas and social reforms. * * *

Penn's Treaty was never written, only spoken. Voltaire said it was "never broken."

William Penn’s “memorable treaty with Tamanend and other Delaware chiefs, of the Turtle Clan, under the great elm at Shackamaxon, within the limits of Philadelphia," is full of romantic interest. Unarmed, clad in his somber Quaker garb, he addressed the assembled Native Americans, uttering the following which will be admired throughout the ages:

“We meet on the broad pathway of good faith and good-will; no advantage shall be taken on either side, but all shall be openness and love. We are the same as if one man’s body was to be divided into two parts; we are of one flesh and one blood.”

The reply of Tamanend, is equally noble:

“We will live in love with William Penn and his children as long as the creeks and rivers run, and while the sun, moon, and stars endure.”

There is no actual record of the “Great Treaty,” the treaty made familiar to many by Benjamin West’s painting and Voltaire’s allusion to it “as the only treaty never sworn to and never broken.” * * *
As a modern-day insurance company, Penn Treaty, instead wrote and swore to its contractual arrangements with approximately 126,000 policyholders located in Pennsylvania and every other state.

But now, due to financial distress, the company requires "rehabilitation" by the Commonwealth to protect parties in interest. The necessity for such rehabilitation is distressing news for many Pennsylvanians who rely upon the company for their long-term care coverage. But this is not an outright bankruptcy, and that is some good news.

This is the text of the Insurance Commissioner's Press Release:


Insurance Department Takes Control
of Struggling Allentown-based Insurer & Subsidiary

HARRISBURG -- Insurance Commissioner Joel Ario announced today that the Commonwealth Court approved his petition for an Order of Rehabilitation for Penn Treaty Network America Insurance Co. and its subsidiary, American Network Insurance Co.

The order places the company under the statutory control of the Pennsylvania Insurance Department. It also grants the commissioner direct authority to preserve the company’s assets and oversee its current financial situation and operations, while continuing to pay policyholder claims.

“It is the Insurance Department’s responsibility to take action when a company is in financially hazardous condition,” Ario said. “Placing Penn Treaty into rehabilitation will make certain that long-term care policyholder claims are paid, helping to ensure continuity of care for a community in need.

“We gave Penn Treaty time to find a buyer and infuse new capital. To date, the company has been unable to raise enough capital, so we must protect the company’s assets and put policyholder protections into place. I want to assure policyholders that their policies remain in effect during this rehabilitation and that their premiums should continue to be paid in order for coverage to remain in place.”

This rehabilitation is the first receivership action the department has taken in more than four years.

Penn Treaty, headquartered in Allentown, provides long-term care insurance to more than 126,000 policyholders. Together, Penn Treaty Network America Insurance Co. and its subsidiary, American Network Insurance Co., write long-term care insurance in all 50 states and the District of Columbia.

The Insurance Department will perform an independent, comprehensive evaluation of the company's finances. Based upon this review and analysis, the department then will determine the viability of a rehabilitation plan. Any plan will give payment priority to policyholder claims.

Policyholders and other interested parties will receive further information about the rehabilitation in the future. In the interim, policyholders with questions on claims or non-claim matters may use the following toll-free number: 800-362-0700, ext. 3190.
For original documents, see: Rehabilitation Order: Penn Treaty Network America Insurance Company; and Rehabilitation Order: American Network Insurance Company. See also: "Penn Treaty Insurance Subsidiaries Enter Rehabilitation" (01/08/09) posted by PRWire.

How fortunes can change.

The Google search engine reports that, after the issuance of the Department's Press Release, "errors" occurred while indexing Penn Treaty websites, including, which are unavailable online presently.

However, another website, XOM Reviews, still references information previously posted on a Penn Treaty website ( as follows:
Welcome To Penn Treaty Network America

Description: Long term care insurance company provides rates and quotes online . . . information on the company, nursing home and home health care coverage, benefits, and policies.

Penn Treaty Network America -- America's Long Term Care Insurance Superstore
On November 20, 2000, a BusinessWeek article, entitled "Long-Term Care Policies That Will Last -- Built-in inflation protection is an invaluable feature" by Ellen Hoffman, referenced a recommended inflation feature of long-term care coverage, using Penn Treaty's policy as an example:
For a 55-year-old male with no health problems, two years of coverage at that level through Penn Treaty runs $340 without inflation protection or $600 with it.
The conclusion of that article, however, offered a general warning to consumers:
Long-term-care insurance is a relatively new product, so companies do not have decades of experience on which to base their premiums.

And regulators continually question how best to protect consumers against some insurers' aggressive marketing.

That's why it's critical to define your long-term-care needs and shop around until you find a policy that really meets them.
The Pennsylvania Insurance Department examined Penn Treaty as of year-end 1999 and 2003. See: Department's Examination Report, stated as of 12/31/03 (PDF, 28 pages; Examination Warrant Number 03-LH-359-Z). The 2003 Examination Report's first recommendation was: "[T]hat the Company secure an infusion of surplus to bring it into compliance with The Pennsylvania Insurance Company Law, NILS 40-5-106 (40 P.S. § 386)."

Nevertheless, on July 8, 2004, a
Business Wire article entitled "S&P Announces: Penn Treaty Network America Insurance Co. and Penn Treaty American Corp. Ratings Affirmed; Outlook Positive" stated "the outlook remains positive" for Penn Treaty. Yet the article noted "PTNA continues to have the characteristics of a start-up company."

But, on February 20, 2008, Reuters reported that "A.M. Best Downgrades Ratings of Penn Treaty American Corporation". In the article, the position of that rating agency was made clear:
If there are any unanticipated negative events, material charges or write-downs as Penn Treaty works to become current on its Securities and Exchange Commission filings, an additional downgrade could occur.

Even if no unexpected items are found during this period, A.M. Best will not give consideration to an outlook change until Penn Treaty files audited GAAP financials on time. * * *
On October 3, 2008, Penn Treaty announced that it would no longer issue new policies. The New York Stock Exchange then suspended trading in Penn Treaty's shares. See: "NYSE suspends trading in Penn Treaty shares" (10/03/08) posted on a blog by

The New York Stock Exchange today suspended trading of the common stock of Penn Treaty American Corp.

That decision had nothing to do with today's PhillyInc. column, and everything to do with the Allentown insurers' announcement today that it is suspending the issuance of new policies and entering a rehabilitation plan with the Pennsylvania Insurance Department as of Jan. 1 [, 2009]. * * *

Now, by consent and with court approval, the PA Insurance Department has placed the Penn Treaty entities into a state-run "rehabilitation."

Holders of long-term care insurance policies issued by Penn Treaty and its affiliates should be vigilant, and should respond when contacted by the Department. In the meanwhile, read the Department's "Questions and Answers concerning the Penn Treaty and American Network Rehabilitations" (Word, 10 pages).

Don't rely on that familiar name alone, even though it resonates.