A prospective buyer of an insurance subsidiary of Penn Treaty American Corp. has failed to complete the deal during its exclusivity period, the insurer said.

As a result, the Allentown, Pa.-based insurer said the Pennsylvania Insurance Department, which took over control of the company because of its financial problems, will begin determining the appropriate staffing levels for the rehabilitation of the company by the end of March, Penn Treaty said in a statement.

The non-binding letter of intent was signed Dec. 15, 2008, for the possible sale of Penn Treaty Network America Insurance Co. and American Network Insurance Co. The prospective buyer has not been identified.

A plan for rehabilitation of the insurer is scheduled to go to the Pennsylvania Commonwealth Court by April 6, 2009. That plan, according to Penn Treaty, may include the consideration of future offers for the sale of all or a portion of the assets and operations of PTNA or ANIC.