Penn Treaty American Corporation Anticipates Positive Net Income Impact of Reserve Additions

Penn Treaty American Corporation (PTAC) has announced its intention to strengthen claims reserves by $10 - $12 million for the period ended December 31, 1997, impacting net income by approximately $7 - $8.5 million. This reserve addition is expected to more than offset anticipated fourth quarter 1997 earnings and will significantly reduce anticipated net income and earnings per share for the year ended December 31, 1997.

Irving Levit, Chairman, President and CEO, stated that "the strengthening of these reserves will more conservatively position us for future growth and will more accurately reflect our current obligations."

The Company determined to add to this reserve after reassessing the assumptions used in the actuarial determination of reserves for current claims liabilities and incurred but unreported liabilities for nursing home and home health care claims. The Company reviewed the assumptions in connection with the recent employment of a new long-term care consulting actuary.

"We are establishing these reserves in anticipation of future claims payments, despite our current claims paid ratio which remains at or near 1996 levels," Levit added. Although PTAC's audited financial results for 1997 are not expected until March 11, the additional reserves will result in a significant reduction from securities analysts' expectations for the fourth quarter of 1997 and the 1997 fiscal year.

Penn Treaty American Corporation is primarily engaged in the underwriting, marketing and sale of individual fixed, defined benefit, accident and health insurance products principally covering long-term care and home health care.