<PAGE>


                                     FORM 10-Q/A
                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, DC   20549

   [X]  Quarterly Report pursuant to Section 13 or 15(d) of the Securities 
Exchange Act of 1934

For the quarterly period ended September 30, 1996

                                          or
                                           
[  ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
            ______________________________  to  __________________________

Commission file number 0-13972

                           PENN TREATY AMERICAN CORPORATION
                (Exact name of registrant as specified in its charter)

       PENNSYLVANIA                            23-1664166          
(State or other jurisdiction of      (I.R.S. Employer Identifi-
incorporation of organization)       cation No.)

                      3440 LEHIGH STREET, ALLENTOWN, PA   18103
            (Address, including zip code, of principal executive offices)

                                    (610) 965-2222
                 (Registrant's telephone number, including area code)

                                    NOT APPLICABLE
   (Former name, former address and former fiscal year, if change since
                                      last report)
                                           
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d)  of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  YES X   NO
                                       ---    ---

The number of shares outstanding on the Registrant's common stock, par value
$.10 per share, as of December 6, 1996 was 7,505,373. 

<PAGE>

PART I      FINANCIAL INFORMATION
                                           
ITEM 1.  Financial Statements

The registrant's Unaudited Consolidated Balance Sheets, Statements of Income and
Statements of Cash Flows and Notes thereto required under this item are
contained on pages 3 through 9 of this report, respectively.  These financial
statements represent the consolidation of the operations of the registrant, and
its subsidiaries, American Network Insurance Company (ANIC), Senior Financial
Consultants Company and Penn Treaty Life Insurance Company (PTLIC).  ANIC, PTLIC
and its subsidiary, Network America Life Insurance Company (the "Insurers"), are
underwriters of long-term care insurance products.  PTLIC and its subsidiary are
also underwriters of life insurance products. 

                                       2


<PAGE>

<TABLE>
<CAPTION>
                                           PENN TREATY AMERICAN CORPORATION
                                                   AND SUBSIDIARIES

                                              CONSOLIDATED BALANCE SHEETS

                                               SEPTEMBER 30,       DECEMBER 31,
                                                   1996               1995
                                               -------------       ------------
                                                (UNAUDITED)

<S>                                             <C>                <C>
                ASSETS
INVESTMENTS:
  Bonds, available for sale at market,
    (amortized cost $167,552,583 and
    $136,600,775, respectively)                 $167,883,832       $142,243,341
  Equity securities at market value, (cost of
    $5,145,703 and $2,102,529, respectively)       6,401,816          2,605,612
  Policy loans                                        81,461             79,404
                                                ------------       ------------
    Total Investments                            174,367,109        144,928,357
                                                ------------       ------------
Cash and cash equivalents                          9,258,285          8,881,061
Property and equipment, at cost, less
  accumulated depreciation of $2,118,965
  and $1,854,065, respectively                     8,161,225          5,740,353
Unamortized policy acquisition costs              76,742,702         63,133,759
Receivables from agents, less allowance for
  uncollectable amounts of $231,226                1,613,175          1,275,481
Accrued investment income                          2,689,463          2,436,435
Cost in excess of net assets acquired, less
  accumulated amortization of $258,637 and
  $231,826, respectively                           5,341,622          1,197,574
Receivable from reinsurers                         9,972,221          7,730,828
Present value of future profits acquired           4,959,000             --
Other assets                                       4,167,740          2,420,422
                                                ------------       ------------
    Total Assets                                $297,272,542       $237,744,270



               LIABILITIES

Policy reserves:
  Accident and health                           $ 93,227,927       $ 62,007,433
  Life                                             7,855,817          7,118,848
Unearned premium reserve                             511,610             26,503
Policy and contract claims                        57,716,263         50,206,608
Accounts payable and other liabilities             4,589,672          2,681,499
Mortgages and other debts                          2,082,926          2,206,117
Federal income taxes payable                         243,586            183,249
Deferred income taxes                             16,856,168         16,206,959
                                                ------------       ------------
    Total Liabilities                            183,083,969        140,637,216
                                                ------------       ------------
Commitments and contingencies
              SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00; 5,000,000         --                  --
  shares authorized, none outstanding
Common stock, par value $.10; 10,000,000
  shares authorized, 8,111,002 and
  7,576,913 shares issued, respectively              811,100            757,691
Additional paid-in capital                        52,474,377         41,146,594
Net unrealized appreciation of securities          1,047,659          4,055,788
Retained earnings                                 61,561,311         52,852,855
                                                ------------       ------------
                                                 115,894,447         98,812,928
Less 605,629 common shares held in
treasury,  at cost                                (1,705,874)        (1,705,874)
                                                ------------       -------------
    Total Shareholders' Equity                   114,188,573         97,107,054
                                                ------------       -------------
    Total Liabilities and Shareholders'
Equity                                          $297,272,542       $237,744,270
                                                ============       ============
</TABLE>

           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                       3
<PAGE>

                                             PENN TREATY AMERICAN CORPORATION 
                                                   AND SUBSIDIARIES

                                          CONSOLIDATED STATEMENTS OF OPERATIONS
                                                     (UNAUDITED) 

<TABLE>
<CAPTION>
                                       THREE MONTHS ENDED             NINE MONTHS ENDED 
                                         SEPTEMBER 30,                   SEPTEMBER 30,
                              -----------------------------       -----------------------
                                    1996           1995           1996           1995
                                   ------         ------          -----          -----
<S>                             <C>            <C>               <C>            <C>
 Revenue:
   Accident and health
    premiums                   $ 31,510,960   $ 25,509,433   $ 92,378,776   $ 72,966,691
   Life premiums                    873,634        746,164      2,685,953      2,387,984
                               ------------   ------------   ------------   ------------
                                 32,384,594     26,255,597     95,064,729     75,354,675

  Net investment income           2,601,980      2,177,418      7,493,143      5,666,792
  Net realized capital gains
   (losses)                           (218)          2,996         92,665         16,254
   Other income                     88,637         124,601        269,929        256,429
                               ------------   ------------    -----------   ------------
                                35,074,993      28,560,612    102,920,466     81,294,150

 Benefits and expenses:
   Benefits to policyholders    20,161,328      16,387,215     61,779,767     47,498,682
   Commissions                  10,658,991       9,261,009     31,529,578     26,032,354
   Net policy acquisition
    costs deferred              (4,053,954)     (3,508,846)   (13,526,533)   (10,134,069)
   General and administrative    3,850,155       3,033,698     10,643,236      8,827,055
   Interest                         36,696          40,702        106,651        286,893
                               -----------     -----------     ----------   ------------
                                30,653,216      25,213,778     90,532,699     72,510,915
                               -----------     -----------     ----------   ------------

 Income before federal
  income taxes                   4,421,777       3,346,834     12,387,767      8,783,235
 Provision for federal
  income taxes                   1,324,276       1,004,000      3,714,276      2,635,000
                               -----------     -----------     ----------    -----------
     Net Income               $  3,097,501    $  2,342,834   $  8,673,491   $  6,148,235

 Earnings per share                  $0.43           $0.35          $1.23          $1.15

 Weighted average number
  of shares Outstanding          7,178,976       6,736,501      7,057,317      5,367,255

</TABLE>

             SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




                                    4

<PAGE>
                                           
                          PENN TREATY AMERICAN CORPORATION
                                  AND SUBSIDIARIES
                                          
                        CONSOLIDATED STATEMENTS OF CASH FLOW
                                    (UNAUDITED)
                                          
<TABLE>
<CAPTION>
                                                         NINE MONTHS ENDED
                                                           SEPTEMBER 30,
                                                   ----------------------------
                                                        1996           1995
                                                   ------------   -------------
<S>                                                <C>            <C>
Net cash flow from operating activities:
  Net income                                       $  8,673,491   $  6,148,235
  Adjustments to reconcile net income to
cash provided by operations:                           
    Amortization of intangible assets                    76,477         26,820
    Policy acquisition costs, net                   (13,526,533)   (10,134,069)
    Deferred income taxes                             1,801,308      1,233,194
    Depreciation expense                                271,939        198,390
    Net realized capital (gains) losses                 (92,665)       (16,254)
  Increase (decrease) due to change in:                
    Receivables from agents                            (325,255)      (122,697)
    Receivable from reinsurers                         (791,562)      (950,540)
    Policy and contract claims                        7,062,544      7,357,312
    Policy and unearned premium reserves             20,926,785     13,864,199
    Accounts payable and other liabilities            1,426,719        751,560
    Federal income tax payable                           79,711      1,358,886
    Accrued investment income                           (71,863)      (572,558)
    Other, net                                       (1,047,739)      (593,263)
                                                   ------------   ------------
     Cash provided by operations                     24,463,357     18,549,215
                                                       
Cash flow from (used in) investing activities:
  Acquisition of business, net of cash
received                                             (1,518,102)             0
  Proceeds from sales of investments                  8,701,987      3,844,760
  Maturities of investments                           7,851,943      4,320,808
  Purchase of investments                           (37,432,259)   (43,445,886)
  Acquisition of property and equipment              (2,076,888)      (641,974)
                                                   ------------   ------------
      Cash used in investing                        (24,473,319)   (35,922,292)

Cash flow from (used in) financing activities:
  Net proceeds of public offering                             0     26,065,000
  Proceeds from exercise of stock options               510,377              0
  Repayments of mortgages and other debts              (123,191)    (4,113,098)
                                                   ------------   ------------
      Cash provided by/(used in) financing              387,186     21,951,902
                                                   ------------   ------------
Increase in cash                                        377,224      4,578,825

Cash balances:
  Beginning of period                                 8,881,061      7,226,769
                                                   ------------   ------------
  End of period                                    $  9,258,285   $ 11,805,594
                                                   ------------   ------------
                                                   ------------   ------------
</TABLE>




           SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       5
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 1996
                                   (unaudited)

    The Consolidated Financial Statements should be read in conjunction with 
these notes and with the Notes to Consolidated Financial Statements included 
in the Annual Report on Form 10-K for the year ended December 31, 1995 of 
Penn Treaty American Corporation ("the Company").
                                           
    In the opinion of management, the summarized financial information 
reflects all adjustments (consisting only of normal recurring adjustments) 
which are necessary for a fair presentation of the financial position and 
results of operations for the interim periods. Certain prior period amounts 
have been reclassified to conform with current period presentation.

1.  INVESTMENTS

    Management has categorized all of its investment securities as available
    for sale since they may be sold in response to changes in interest rates,
    prepayments, and similar factors.  Investments in this classification are
    reported at their current market value with net unrealized gains and
    losses, net of the applicable deferred income tax effect, being added to
    or deducted from the Company's total shareholders' equity on the balance
    sheet.  As of September 30, 1996, shareholders' equity was increased by
    $1,047,659 due to unrealized gains of $1,587,362 in the investment
    portfolio.  As of December 31, 1995, shareholders' equity was increased by
    $4,055,788 due to unrealized gains of $6,145,649 in the investment
    portfolio.

                                       6

<PAGE>

    The amortized cost and estimated market value of investments available for
    sale as of September 30, 1996 and December 31, 1995 are as follows:

                                SEPTEMBER 30, 1996        DECEMBER 31, 1995
                            ------------------------- -------------------------
                             AMORTIZED    ESTIMATED    AMORTIZED    ESTIMATED
                                COST     MARKET VALUE     COST     MARKET VALUE
                            ------------ ------------ ------------ ------------

U.S. Treasury securities
 and obligations of U.S 
 Government corporations
 and agencies               $138,155,892 $137,677,532 $103,119,270 $107,160,841

Obligations of states and
 political sub-divisions      24,952,467   25,803,588   24,952,467   26,147,000

Debt securities issued by
 foreign governments             424,055      440,286      449,055      480,500

Corporate securities           4,020,169    3,962,426    5,619,499    5,820,000

Other debt securities                  0            0    2,460,484    2,635,000

Equities                       5,145,703    6,401,816    2,102,529    2,605,612

Policy Loans                      81,461       81,461       79,404       79,404
                            ------------ ------------ ------------ ------------

Total Investments            172,779,747  174,367,109  138,782,708  144,928,357
                            ------------ ------------ ------------ ------------
                            ------------ ------------ ------------ ------------

Net unrealized gain (loss)     1,587,362                 6,145,649
                            ------------              ------------

                            $174,367,109              $144,928,357
                            ------------              ------------
                            ------------              ------------

                                       7
<PAGE>

2.          MERGER AGREEMENTS
                                           
            On August 30, 1996, the Company, consummated its acquisition of 
            Health Insurance of Vermont ("HIVT") as a reverse triangular 
            merger with its newly formed subsidiary, Mayfly, Inc. ("Mayfly"). 
            The resultant wholly-owned subsidiary of the Company was 
            incorporated under the laws of the state of Vermont as American 
            Network Insurance Company ("ANIC"). Pursuant to the merger, HIVT 
            shareholders received stock consideration consisting of 472,644 
            shares of the Company's common stock and cash consideration of 
            $2,200,380.  Using the market value of the Company's common stock 
            at the date of closing, the value of the shares of Company common 
            stock issued on the merger was $10,959,433.   As of September 30, 
            1996, ANIC had a total of 16,488 disability policies in-force and 
            approximately $6,945,000 of in-force annualized premiums.  For 
            the one-month period ended September 30, 1996, ANIC generated 
            premiums of $547,012 and net income of $84,996.  
                                               
            On June 25, 1996, the Company signed a letter of intent to 
            purchase 100% of the outstanding common stock of Merrion 
            Insurance Company, Inc. ("Merrion"), a licensed New York 
            domiciled company.  On August 23, 1996, the Company rescinded its 
            intention to purchase Merrion.

3.          SUBSEQUENT EVENTS
                                               
            On November 26, 1996, the Company sold $65,000,000 aggregate 
            principal amount of 6-1/4% Convertible Subordinated Notes due 
            2003 (the "Notes"). The Company granted to the initial purchasers 
            the option to purchase up to an additional $9,750,000 principal 
            amount of the notes solely to cover over-allotments, which option 
            was excercised in full.  The Notes will be convertible into 
            shares of common stock of the Company at any time after February 
            24, 1996, until the close of business November 28, 2003, subject 
            to prior redemption or repurchase, at an initial conversion price 
            of $28.44 per share, subject to adjustment in certain 
            circumstances.  The notes will be redeemable by the Company at 
            declining redemption prices commencing in December 1999.  The 
            purpose of the offering is to provide funds to support future 
            growth.  The Company intends to register the Notes and the 
            underlying Common Stock within 90 days of the first issuance of 
            the notes.
                                           
            The Notes were offered through initial purchasers in the United 
            States only to qualified institutional buyers in reliance on Rule 
            144A under the Securities Act of 1933, as amended (the "act") and 
            to a limited number of institutional "accredited investors" as 
            defined in the act.  The remainder of the Notes will be offered 
            by the initial purchasers outside the United States in reliance 
            on Regulation S under the Act.

                                       8
<PAGE>

            The Notes issued and sold in reliance on Rule 144A are eligible 
            for trading on the PORTAL Market of the National Association of 
            Securities Dealers, Inc.
                                               
   ITEM 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations.
                                           
THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:
                                           
            ACCIDENT AND HEALTH PREMIUMS.  First year accident and health 
premiums earned in the three month period ended September 30, 1996 (the "1996 
quarter"), including long-term care and Medicare supplement, increased 11.1% 
to $10,974,991, compared to $9,877,625 in the same period in 1995 (the "1995 
quarter"). First year long-term care premiums earned in the 1996 quarter 
increased 10.7% to $10,864,391, compared to $9,815,629 in the 1995 quarter. 
This increase was primarily attributable to increased sales of home health 
care policies, which increased to $4,851,993 for the 1996 quarter from 
$3,968,734 for the 1995 quarter.  Premiums from sales of nursing home care 
policies increased from $5,846,895 in the 1995 quarter to $6,012,398 in the 
1996 quarter.  These results reflect increased market demand for the 
Company's home health care policies, particularly its Independent Living 
policy first introduced in the fourth quarter of 1994, relative to its 
nursing home policies.  Management believes this trend indicates more nursing 
home care insurance is being purchased by policyholders as riders to home 
health care policies, rather than as a stand-alone or lead policy.  First 
year Medicare supplement premiums earned by the Company in the 1996 quarter 
increased to $110,600 from $61,996 in the 1995 quarter.  Total new business 
for this product remains low due to the Company's continued reduced emphasis 
of its Medicare supplement products because of lower profit margins 
associated with this line of business.
                                           
    Renewal accident and health premiums earned by the Company in the 1996 
quarter including long-term care and Medicare supplement, increased 27.9% to 
$19,988,957, compared to $15,631,808 in the 1995 quarter.  Renewal long-term 
care premiums earned in the 1996 quarter increased 29.3% to $19,386,718, 
compared to $14,989,221 in the 1995 quarter.  This increase reflects renewals 
of a larger base of in-force policies, as well as the effect of rate 
increases the Company received in various states.  The Company believes that 
this increase also reflects an increase in persistency, or renewals as a 
percentage of total prior year business.  Renewal Medicare supplement 
premiums in the 1996 quarter decreased 6.3% to $602,239, compared to $642,587 
in the 1995 quarter.  This trend is consistent with the Company's decision 
not to actively pursue Medicare supplement business.
                                           
     In addition, ANIC, which the Company acquired on August 30, 1996, 
generated Accident and Health premiums, comprised primarily of long-term 
disability coverage, of $547,012 during the 1996 quarter.
                                           
            LIFE PREMIUMS.  First year life premiums earned by the Company in 
the 1996 quarter decreased 9.5% to $345,040, compared to $381,391 in the 1995 
quarter. The 

                                       9
<PAGE>

Company's life business has remained stable as the Company is focusing its 
marketing efforts on its Independent Living policy and its other long-term 
care products.  Renewal life premiums earned by the Company in the 1996 
quarter increased to $528,594, compared to $364,773 in the 1995 quarter.  
This increase was primarily the result of renewals of first-year policies 
written in 1995.
                                           
            NET INVESTMENT INCOME.  Net investment income earned by the 
Company, excluding ANIC, for the 1996 quarter increased 16.1% to $2,527,870, 
from $2,177,418 for the 1995 quarter.  This increase was primarily the result 
of growth in the Company's investment assets due to continued premium growth, 
which was partially offset by a decrease in the average yield on the 
Company's investments, at cost, to 6.43% for the 1996 quarter from 6.10% for 
the 1995 quarter.  ANIC's average investments of $13,152,621, invested at an 
average yield of 6.87%, produced an additional $74,110 for the 1996 quarter.
                                           
            BENEFITS TO POLICYHOLDERS. Total benefits to policyholders in the 
1996 quarter increased 23.0% to $20,161,328 compared to $16,387,215 in the 
1995 quarter.  
                                           
      Excluding ANIC, accident and health benefits to policyholders in the 
1996 quarter increased 21.2% to $19,416,579 compared to $16,021,632 in the 
1995 quarter.  The Company's accident and health loss ratio (the ratio of 
benefits to policyholders to total accident and health premiums) was 62.7% in 
the 1996 quarter, compared to 62.8% in the 1995 quarter.  The accelerated 
claims reported throughout 1996, due to the Company's offer to waive a policy 
elimination period if the insured agrees to utilize case management, remained 
higher at the start of the quarter, but showed a declining trend by the end 
of the 1996 quarter. Management expects that this acceleration of reported 
claims has all been recognized by the end of the 1996 quarter.  Benefits for 
long-term disability from ANIC totaled $260,320 for the 1996 quarter.
                                           
      Life benefits to policyholders in the 1996 quarter increased to 
$484,429, compared to $365,583 for the 1995 quarter.  The life loss ratio 
(the ratio of claims experience and increases in policy reserves to total 
life premium) was 55.4% in the 1996 quarter, compared to 49.0% in the 1995 
quarter, and reflects the actual claims incurred and actuarial reserves 
necessary to support the portfolio mix of business.  
                                           
            COMMISSIONS.  Commissions to agents increased 15.1% to 
$10,658,991 in the 1996 quarter compared to $9,261,009 in the 1995 quarter.  
In addition, ANIC commissions on long-term disability policies generated 
$67,689 in the 1996 quarter.
                                           
    Excluding ANIC, first year commissions on accident and health business in 
the 1996 quarter increased 9.2% to $7,116,404, compared to $6,517,477 in the 
1995 quarter, corresponding to the increase in first year accident and health 
premiums.  The ratio of first year accident and health commissions to first 
year accident and health premiums was 64.8% in the 1996 quarter and 66.0% in 
the 1995 quarter.  First year commissions on life business in the 1996 
quarter decreased 26.3% to $227,598, compared to $308,743 in the 

                                       10
<PAGE>

1995 quarter, directly reflecting the Company's reduction in first year life 
premiums.  The ratio of first year life commissions to first year life 
premiums was 66.0% in the 1996 quarter compared to 81.0% in the 1995 quarter.
                                           
       Renewal commissions on accident and health business in the 1996 
quarter increased 33.2% to $3,182,832, compared to $2,389,987 in the 1995 
quarter, consistent with the increase in renewal premiums discussed above.  
The ratio of renewal accident and health commissions to renewal accident and 
health premiums was 15.9% in the 1996 quarter and 15.3% in the 1995 quarter.  
This ratio fluctuates in relation to the age of the policies in force and the 
rates of commissions paid to the agents.
                                           
            NET POLICY ACQUISITION COSTS DEFERRED.  The net deferred policy 
acquisition costs in the 1996 quarter increased 15.5% to $4,053,954 compared 
to $3,508,846 in the 1995 quarter, consistent with the growth of the 
Company's business.  This deferral is net of amortization, which decreases or 
increases as the Company's actual persistency is higher or lower than the 
persistency assumed for reserving purposes.  The deferral of policy 
acquisition costs has remained consistent with the growth of premiums, and 
the growth in amortization of policy acquisition costs has been modified by 
improved persistency.
                                           
            GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses in the 1996 quarter increased 26.9% to $3,850,155, compared to 
$3,033,698 in the 1995 quarter.  This increase was due to $167,414 related to 
the operating expense and amortization of goodwill of ANIC and to the 
increase in the growth of the Company's business.  The ratio of general and 
administrative expenses to total premiums, excluding ANIC, remained at 11.6% 
in the 1996 quarter.  As the Company utilizes, and expenses, case management 
for claims, expenses increase while claims costs are expected to decrease by 
a greater amount.  
                                           
            PROVISION FOR FEDERAL INCOME TAXES.  The provision for federal 
income taxes recorded by the Company for the 1996 quarter increased 31.9% to 
$1,324,276, compared to $1,004,000 for the 1995 quarter.  The effective tax 
rate of approximately 30% in both the 1996 quarter and in the 1995 quarter 
was below the normal federal corporate rate as a result of credits from the 
small life insurance company deduction as well as the Company's investments 
in tax-exempt bonds.
                                           
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:
                                           
            ACCIDENT AND HEALTH PREMIUMS.  First year accident and health 
premiums earned by the Company in the nine month period ended September 30, 
1996 (the "1996 period"), increased 21.0% to $32,195,941, compared to 
$26,603,300 in the same period in 1995 (the "1995 period"). First year 
long-term care premiums in the 1996 period increased 20.2% to $31,750,676, 
compared to $26,410,217 in the 1995 period. This increase was primarily 
attributable to increased sales of home health care policies, which increased 
to $15,160,511 for the 1996 period from $9,217,563 for the 1995 period. 
Premiums from sales of nursing home care policies decreased from $17,192,654 
in the 1995 period to $16,590,165 in the

                                       11
<PAGE>


1996 period. Management believes that the increase in the sale of home health 
care policies reflects the continued growth in the home health care market. 
Management further believes that the decrease in the sale of nursing home 
policies primarily resulted from nursing home policies increasingly being 
sold as riders to home care policies as opposed to separate stand-alone 
policies. First year Medicare supplement premiums earned by the Company in 
the 1996 period increased to $445,265 from $193,083 in the 1995 period. The 
Company places reduced emphasis upon this product due to reduced 
profitability caused by regulation. 
                                           
            Renewal accident and health premiums earned by the Company in the 
1996 period increased 28.6% to $59,635,823, compared to $46,363,391 in the 
1995 period. Renewal long-term care premiums in the 1996 period increased 
30.4% to $57,677,311, compared to $44,241,488 in the 1995 period. This 
increase reflects higher persistency and growth of in-force premiums. Renewal 
Medicare supplement premiums earned by the Company in the 1996 period 
decreased 7.7% to $1,958,512, compared to $2,121,903 in the 1995 period. This 
trend is consistent with the Company's decision not to actively pursue 
Medicare supplement business. 
                                           
            In addition, ANIC, which the Company acquired on August 30, 1996, 
generated accident and health premiums, comprised primarily of long-term 
disability coverage, of $547,012 during the 1996 period. 
                                           
            LIFE PREMIUMS.  First year life premiums earned by the Company 
decreased 13.5% to $1,093,827, in the 1996 period, compared to $1,264,120 in 
the 1995 period. The Company's life business has remained stable as the 
Company is focusing its marketing efforts on its Independent Living policy 
and its other long-term care products. Renewal life premiums in the 1996 
period increased to $1,592,126, compared to $1,123,864 in the 1995 period. 
This increase was primarily the result of renewals of first-year policies 
written in 1995.
                                           
            In order to enhance the marketability of certain products, the 
Company has recently emphasized offering new policyholders a monthly premium 
payment plan. The Company believes that the lower monthly payment is more 
attractive than the historical larger annual premium payment and that 
offering the monthly payment option enables it to sell more policies. 
However, because the Company records premiums when due, and a higher 
percentage of new policyholders opted for the monthly payment option in the 
1996 period compared with the 1995 period, management believes that it has 
experienced a delay in premium recognition of approximately $3,750,000 
throughout the 1996 period. 
                                           
            NET INVESTMENT INCOME.  Net investment income earned by the 
Company for the 1996 period increased 32.2% to $7,493,143 from $5,666,792 for 
the 1995 period. This increase was primarily the result of growth in the 
Company's investment assets due to continued premium growth and additional 
funds of approximately $26,000,000 from the Company's public offering in July 
1995, which were partially offset by a decrease in the 

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<PAGE>

average yield at cost on the Company's investments to 6.67% for the 1996 
period from 6.69% for the 1995 period. 
                                           
            BENEFITS TO POLICYHOLDERS.  Benefits to policyholders in the 1996 
period increased 30.1% to $61,779,767, including ANIC expenses of $260,320, 
compared to $47,498,682 in the 1995 period. Accident and health benefits to 
policyholders in the 1996 period increased 30.1% to $60,274,779 compared to 
$46,314,600 in the 1995 period. The Company's accident and health loss ratio 
was 65.2% in the 1996 period, compared to 63.5% in the 1995 period. This 
increase in loss ratio was due, in part, to the increase in premium and 
policies of the Company's Independent Living policy which is reserved for at 
a higher rate, and also to improved persistency. In addition, management 
believes that claims were reported more quickly throughout the 1996 period 
due to the Company's offer to waive a policy elimination period if the 
insured agreed to utilize a Case Manager. Management expects that this 
acceleration of reported claims will all be recognized by the end of the 1996 
period. 
                                           
            Life benefits to policyholders in the 1996 period increased to 
$1,504,988, compared to $1,184,082 for the 1995 period. The life loss ratio 
was 56.0% in the 1996 period, compared to 49.6% in the 1995 period. This 
increase relates to the maturing of the life products that the Company first 
introduced in 1993. 
                                           
            COMMISSIONS.  Commissions to agents increased 21.1% to 
$31,529,578 in the 1996 period compared to $26,032,354 in the 1995 period. In 
addition, ANIC commissions on long-term disability policies generated $67,689 
of expenses in the 1996 period. 
                                           
            For the Company, excluding ANIC, first year commissions on 
accident and health business in the 1996 period increased 19.7% to 
$21,027,007, compared to $17,562,104 in the 1995 period, corresponding to the 
increase in first year accident and health premiums. The ratio of first year 
accident and health commissions to first year accident and health premiums 
was 65.3% in the 1996 period and 66.0% in the 1995 period. First year 
commissions on life business in the 1996 period decreased 17.3% to $806,627, 
compared to $975,343 in the 1995 period, directly reflecting the Company's 
reduction in first year life premiums. The ratio of first year life 
commissions to first year life premiums was 73.7% in the 1996 period compared 
to 77.2% in the 1995 period. 
                                           
            Renewal commissions on accident and health business in the 1996 
period increased 27.9% to $9,440,753, compared to $7,381,518 in the 1995 
period, remaining consistent with the increase in renewal premiums discussed 
above. The ratio of renewal accident and health commissions to renewal 
accident and health premiums was 15.8% in the 1996 period and 15.9% in the 
1995 period. This ratio fluctuates in relation to the age of the policies in 
force and the rates of commissions paid to the producing agents. 
                                           
            NET POLICY ACQUISITION COSTS DEFERRED.  The net deferred policy 
acquisition costs in the 1996 period increased 33.5% to $13,526,533 compared 
to $10,134,069 in the 1995 period, consistent with the growth of the 
Company's business. This deferral is net of amortization, which decreases or 
increases as the Company's actual persistency is higher or 

                                       13
<PAGE>

lower than the persistency assumed for reserving purposes. The deferral of 
policy acquisition costs has remained consistent with the growth of premiums, 
and the growth in amortization of policy acquisition costs has been modified 
by improved persistency. 
                                           
            GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative 
expenses in the 1996 period increased 20.6% to $10,643,236, compared to 
$8,827,055 in the 1995 period. ANIC expenses accounted for an additional 
$167,414 in the 1996 period. The ratio of general and administrative expenses 
to total revenues decreased to 10.3% in the 1996 period, compared to 10.9% in 
the 1995 period due to increases in investment income and operating 
efficiencies realized with premium growth throughout the 1996 period. 
                                           
            PROVISION FOR FEDERAL INCOME TAXES.  The provision for federal 
income taxes recorded by the Company for the 1996 period increased 41.0% to 
$3,714,276, compared to $2,635,000 for the 1995 period.  The effective tax 
rate of 30.0% in both the 1996 period and in the 1995 period was below the 
normal federal corporate rate as a result of credits from the small life 
insurance company deduction as well as the Company's investments in 
tax-exempt bonds.
                                           
LIQUIDITY AND CAPITAL RESOURCES
                                           
            The Company's consolidated liquidity requirements have 
historically been created and met from the operations of its insurance 
subsidiaries. The Company's primary sources of cash are premiums and 
investment income. The Company has provided, and may continue to provide, 
cash through public offerings of its common stock, capital markets activities 
or debt instruments. The primary uses of cash are policy acquisition costs 
(principally commissions), payments to policyholders, investment purchases 
and general and administrative expenses. 
                                           
            Statutory requirements allow insurers to pay dividends only from 
statutory earnings as approved by the state insurance commissioner. Statutory 
earnings are generally lower than publicly-reported earnings due to the 
immediate or accelerated recognition of all costs associated with premium 
growth and benefit reserves. The Company has not and does not intend to pay 
shareholder dividends in the near future due to these requirements, choosing 
to retain statutory surplus to support continued premium growth.
                                           
            The Company invests in securities and other investments 
authorized by applicable state laws and regulations and follows an investment 
policy designed to maximize yield to the extent consistent with liquidity 
requirements and preservation of assets. On December 31, 1995, the average 
maturity of the Company's bond portfolio was 6.4 years, and its market value 
exceeded cost by 4.1% or approximately $5,643,000. On December 31, 1994, the 
average maturity of the Company's bond portfolio was 6.9 years and its market 
value was below cost by 4.4% or approximately $4,165,000. The Company's 
equity portfolio exceeded cost by $503,083 or 23.9% in 1995 and $52,780 or 
6.0% in 1994. At September 30, 1996, the average maturity of the Company's 
bond portfolio was 6.3 years,

                                       14
<PAGE>

and its market value represented approximately 100.2% of its cost, with a 
current gain of $413,907. 
                                           
            In December 1994, a loan was extended to the Company by a bank in 
the amount of $4,000,000. The proceeds of the loan were contributed to the 
surplus of PTLIC in the form of cash to strengthen its overall capital 
position. The Company repaid this loan as required by the loan agreement, 
with a portion of the proceeds of the Company's public offering of 2,300,000 
shares of Common Stock. The public offering was consummated on July 6, 1995, 
and the Company realized net proceeds of approximately $26,000,000, including 
the proceeds from the exercise of the underwriters' over-allotment option. 
                                           
            On January 1, 1994, the Company adopted SFAS 115. The cumulative 
effect of adoption of SFAS 115 was an increase in shareholders' equity of 
$3,528,512, net of taxes, for unrealized gains of $5,040,731 in the 
investment securities available for sale portfolio. During the year ended 
December 31, 1994, the Company experienced a decrease in unrealized gains of 
$9,205,393. As of December 31, 1994, shareholders' equity was decreased by 
$2,713,842 due to unrealized losses of $4,111,882 in the investment 
portfolio. As of December 31, 1995, shareholders' equity was increased by 
$4,055,788 due to unrealized gains of $6,145,649 in the investment portfolio. 
As of September 30, 1996, shareholders' equity was increased by $1,047,659 
due to unrealized gains of $1,587,362 in the investment portfolio. 
                                           
            During 1993, the Company contributed $2,000,000 in bonds to PTLIC 
and Network America. During 1994, the Company contributed $4,000,000 in cash 
to PTLIC. The capital position of PTLIC and Network America was further 
improved by the contribution of $14,000,000 of the net proceeds of the public 
offering in 1995 to the capital and surplus of PTLIC and Network America 
during the third quarter of 1995. In November 1996, the Company contributed 
an additional $5,000,000 of the net proceeds of the public offering in July 
1995 to Network America. The Company believes that its insurance 
subsidiaries' capital and surplus presently meet or exceed the requirements 
in all jurisdictions in which they are licensed. 
                                           
            The Company's debt currently consists primarily of a mortgage 
note in the approximate amount of $2,000,000. This note is currently 
amortized over 12 years, and has a balloon payment due on the remaining 
outstanding balance in September 1998. Although the note carries a variable 
interest rate, the Company has entered into an amortizing swap agreement, 
with a notional amount equal to the outstanding debt, which has the effect of 
converting the note to a fixed rate of interest. 
                                           
            On November 26, 1996, the Company sold $65,000,000 aggregate 
principal amount of 6-1/4% Convertible Subordinated Notes due 2003 (the 
"Notes").  The Company granted to the initial purchasers the option to 
purchase up to an additional $9,750,000 principal amount of the Notes solely 
to cover over-allotments, which option was excercised in full.  The Notes 
will be convertible into shares of common stock of the Company at any time 
after February 24, 1996, until the close of business November 28, 

                                       15
<PAGE>

2003, subject to prior redemption or repurchase, at an initial conversion 
price of $28.44 per share, subject to adjustment in certain circumstances.  
The Notes will be redeemable by the Company at declining redemption prices 
commencing in December 1999.  The purpose of the offering is to provide funds 
to support future growth. The Company intends to register the Notes and the 
underlying Common Stock within 90 days of the first issuance of the Notes.

            The Notes were offered through initial purchasers in the United 
States only to qualified institutional buyers in reliance on Rule 144A under 
the Securities Act of 1933, as amended (the "Act") and to a limited number of 
institutional "accredited investors" as defined in the Act.  The remainder of 
the Notes will be offered by the initial purchasers outside the United States 
in reliance on Regulation S under the Act.
                                               
    The Notes issued and sold in reliance on Rule 144A are eligible for 
trading on the PORTAL Market of the National Association of Securities 
Dealers, Inc.
                                           
       The Company's continued growth is dependent upon its ability to (i) 
continue marketing efforts to expand its historical markets, (ii) continue to 
expand its network of agents and effectively market its products in states 
where its insurance subsidiaries are currently licensed and (iii) fund such 
marketing and expansion while at the same time maintaining minimum statutory 
levels of capital and surplus required to support such growth. Management 
believes that the funds necessary to accomplish the foregoing, including 
funds required to maintain adequate levels of statutory surplus in the 
Company's insurance subsidiaries can be met for the foreseeable future by 
funds generated from this offering, the Company's public offering in 1995 and 
from operations. 
                                           
       In the event (i) the Company fails to maintain minimum loss ratios 
calculated in accordance with statutory guidelines, (ii) the Company fails to 
meet other requirements mandated and enforced by regulatory authorities, 
(iii) the Company has adverse claims experience in the future, (iv) the 
Company is unable to obtain additional financing to support future growth, or 
(v) the economy continues to effect the buying powers of senior citizens, the 
Company's results of operations, liquidity and capital resources could be 
adversely affected. 

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<PAGE>

                             PART II OTHER INFORMATION
                                           
ITEM 1.  Legal Proceedings

The Insurers are parties to various lawsuits generally arising in the normal 
course of their insurance business.  The Company does not believe that the 
eventual outcome of any of the suits to which the Insurers are currently a 
party will have a material effect on the financial condition or result of 
operations of the Company.

ITEM 2.  Changes in Securities

Not Applicable

ITEM 3.  Defaults Upon Senior Securities

Not Applicable

ITEM 4.  Submission of Matters to a Vote of Security Holders

None                       

ITEM 5.  Other Information

                 For information concerning the terms and the manner of the 
offering, see Item 2 of Part I of this report, "Management's Discussion and 
Analysis of Financial Condition and Results of Operations -- Liquidity and 
Capital Resources."

ITEM 6.  Exhibits and Reports on Form 8-K

(a)         Exhibits:  
            
            Exhibit 11 -    Earnings Per Share Calculation
            Exhibit 27 -    Financial Data Schedule

(b)         Reports on Form 8-K:  

            The Company filed one report on Form 8-K during the quarter ended 
September 30, 1996, pursuant to Items 2 and 7 of that form.

            On November 26, 1996, the Company filed a current report on Form 
8-K pursuant to Item 5 of that form.  No financial statements were filed as 
part of that report.

            On December 6, 1996, the Company filed a current report on Form 
8-K pursuant to Item 5 of that form.  No financial statements were filed as 
part of that report.

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<PAGE>

                                  SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the 
Registrant had duly caused this report to be signed on its behalf by the 
undersigned thereunto duly authorized.

                                PENN TREATY AMERICAN CORPORATION
                                                Registrant


Date December 6, 1996           /s/ Irving Levit
     ----------------           ---------------------------------
                                    Irving Levit
                                    President

Date December 6, 1996           /s/ Michael F. Grill
     ----------------           ---------------------------------
                                    Michael F. Grill
                                    Treasurer





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