FORM 10-Q
                       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 June 30, 2000

                                       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                      (IRS Employer
incorporation of organization)                     Identification 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 August 11, 2000 was 7,809,384.



<PAGE>

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

Penn Treaty  American  Corporation is one of the leading  providers of long-term
nursing home and home health care insurance.  Our Unaudited Consolidated Balance
Sheets, Statements of Operations and Comprehensive Income and Statements of Cash
Flows and Notes  thereto  required  under  this  item are  contained  on pages 3
through 8 of this report. Our financial  statements  represent the consolidation
of our operations and our  subsidiaries,  Penn Treaty Network America  Insurance
Company ("Penn Treaty Network"),  American Network Insurance Company  ("American
Network"), American Independent Network Insurance Company of New York ("American
Independent"),   Penn  Treaty   (Bermuda)   Ltd.   ("Penn   Treaty   (Bermuda)")
(collectively  "the  Insurers"),  United Insurance Group Agency,  Inc.  ("United
Insurance Group"), Network Insurance Senior Health Division ("NISHD") and Senior
Financial Consultants (collectively "the Agencies"),  which are underwriters and
marketers of long-term care insurance  products.  Penn Treaty Network is also an
underwriter of life insurance products.


                                       2
<PAGE>
<TABLE>

                        PENN TREATY AMERICAN CORPORATION
                                AND SUBSIDIARIES
                           Consolidated Balance Sheets
                             (amounts in thousands)
<CAPTION>
                                                                                       June 30,      December 31,
                                                                                         2000           1999
                                                                                         ----           ----
                                                                                      (unaudited)
<S>                                                                                    <C>            <C>
                    ASSETS
Investments:
  Bonds, available for sale at market (cost of $406,714 adn $365,701, respectively)    $390,109       $353,688
  Equity securities at market value (cost of $18,557 and $17,853, respectively)          20,543         19,163
  Policy loans                                                                              163            150
                                                                                       --------       --------
Total investments                                                                       410,815        373,001
Cash and cash equivalents                                                                13,063         17,347
Property and equipment, at cost, less accumulated depreciation of
  $5,024 and $4,515, respectively                                                        11,833         10,614
Unamortized deferred policy acquisition costs                                           231,499        208,519
Receivables from agents, less allowance for
  uncollectable amounts of $199 and $199, respectively                                    2,509          2,713
Accrued investment income                                                                 6,568          5,918
Federal income tax recoverable                                                              223          1,616
Cost in excess of fair value of net assets acquired, less
  accumulated amortization of $2,578 and $2,021, respectively                            27,800         22,357
Present value of future profits acquired                                                  2,559          2,767
Receivable from reinsurers                                                               14,969         15,070
Other assets                                                                             37,781         37,717
                                                                                       --------       --------
    Total assets                                                                       $759,619       $697,639
                                                                                       ========       ========
                  LIABILITIES
Policy reserves:
  Accident and health                                                                  $306,043       $260,046
  Life                                                                                   12,530         12,167
Policy and contract claims                                                              148,246        137,534
Accounts payable and other liabilities                                                   10,823         12,887
Long-term debt                                                                           82,006         82,861
Deferred income taxes                                                                    33,530         33,459
                                                                                       --------       --------
    Total liabilities                                                                   593,178        538,954
                                                                                       --------       --------
Commitments and contingencies
             SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00; 5,000 shares authorized,none outstanding                    -              -
Common stock, par value $.10; 25,000 shares authorized, 8191 and 8,191 shares issued        819            819
Additional paid-in capital                                                               53,716         53,655
Accumulated other comprehensive income                                                   (9,648)        (7,064)
Retained earnings                                                                       128,259        117,980
                                                                                       --------       --------
                                                                                         73,146        165,390
Less 915 and 915, respectively, common shares held in treasury, at cost                  (6,705)        (6,705)
                                                                                       --------       --------
                                                                                        166,441        158,685
                                                                                       --------       --------
    Total liabilities and shareholders' equity                                         $759,619       $697,639
                                                                                       ========       ========

          See accompanying notes to consolidated financial statements.
</TABLE>


                                       3
<PAGE>
<TABLE>


                        PENN TREATY AMERICAN CORPORATION
                                AND SUBSIDIARIES
         Consolidated Statements of Operations and Comprehensive Income
                                   (unaudited)
                  (amounts in thousands, except per share data)

<CAPTION>
                                                                         Three Months Ended June 30,  Six Months Ended June 30,
                                                                         --------------------------   ------------------------
                                                                               2000        1999          2000        1999
                                                                               ----        ----          ----        ----
<S>                                                                          <C>         <C>           <C>         <C>
 Revenue:
   Premium revenue                                                           $ 86,825    $ 72,142      $172,863    $139,201
   Net investment income                                                        6,636       5,571        12,797      10,754
   Net realized capital gains                                                  (1,414)      3,227           741       3,843
   Other income                                                                 2,222       1,657         4,360       3,097
                                                                             --------    --------      --------    --------
                                                                               94,269      82,597       190,761     156,895
 Benefits and expenses:
   Benefits to policyholders                                                   59,488      49,305       119,399      94,709
   Commissions                                                                 26,086      23,872        51,372      45,480
   Net policy acquisition costs deferred                                      (12,090)    (12,388)      (22,980)    (23,458)
   General and administrative expense                                          12,261       9,805        23,334      19,647
   Loss due to impairment of property and equipment                                 -       2,799             -       2,799
   Reserve for claim litigation                                                     -           -         1,500           -
   Interest expense                                                             1,281       1,383         2,562       2,578
                                                                             --------    --------      --------    --------
                                                                               87,026      74,776       175,187     141,755
                                                                             --------    --------      --------    --------

 Income before federal income taxes                                             7,243       7,821        15,574      15,140
 Provision for federal income taxes                                             2,455       2,581         5,295       4,996
                                                                             --------    --------      --------    --------
     Net income                                                                 4,788       5,240        10,279      10,144
                                                                             --------    --------      --------    --------

  Other comprehensive income:
     Unrealized holding gain (loss) arising during period                      (5,134)     (5,692)       (3,175)    (13,045)
     Income (tax) benefit from unrealized holdings                              1,746       1,936         1,080       4,435
     Reclassification adjustment for (gain) loss included in net income         1,414      (3,227)         (741)     (3,843)
     Income (tax) benefit from reclassification adjustment                       (481)      1,097           252       1,307
                                                                             --------     --------      --------    --------

     Comprehensive income                                                    $  2,333    $  (646)      $  7,695    $ (1,002)
                                                                             ========    ========      ========    ========


 Basic earnings per share                                                    $   0.66    $   0.69      $   1.41    $   1.34
 Diluted earnings per share                                                  $   0.56    $   0.59      $   1.20    $   1.14


 Weighted average number of shares outstanding                                  7,277       7,585         7,277       7,584
 Weighted average number of shares outstanding (diluted)                        9,976      10,382         9,963      10,369

          See accompanying notes to consolidated financial statements.
</TABLE>


                                       4
<PAGE>
<TABLE>

                        PENN TREATY AMERICAN CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                        for the Six Months Ended June 30,
                                   (unaudited)
                             (amounts in thousands)
<CAPTION>
                                                               2000        1999
                                                               ----        ----
<S>                                                          <C>         <C>
Net cash flow from operating activities:
  Net income                                                 $ 10,279    $ 10,144
  Adjustments to reconcile net income to cash
    provided by operations:
    Amortization of intangible assets                             855         882
    Policy acquisition costs, net                             (22,980)    (23,458)
    Deferred income taxes                                       1,402       2,178
    Depreciation expense                                          509         304
    Net realized capital gains                                   (741)     (3,843)
    Realized loss on disposal of property and equipment             -       2,799
  Increase (decrease) due to change in:
    Receivables from agents                                       204         754
    Receivable from reinsurers                                    101        (833)
    Policy and contract claims                                 10,712      10,590
    Policy reserves                                            46,360      38,209
    Accounts payable and other liabilities                     (2,064)      2,349
    Federal income taxes recoverable                            1,393       1,385
    Accrued investment income                                    (650)       (289)
    Other, net                                                    (28)     (1,432)
                                                             --------    --------
      Cash provided by operations                              45,352      39,739
Cash flow from (used in) investing activities:
  Net cash purchase of subsidiary                              (6,000)     (9,194)
  Proceeds from sales of bonds                                 57,671      34,525
  Proceeds from sales of equity securities                     15,527      16,412
  Maturities of investments                                     7,976       2,897
  Purchase of bonds                                          (105,684)    (61,226)
  Purchase of equity securities                               (16,550)    (15,093)
  Acquisition of property and equipment                        (1,728)     (1,088)
                                                             --------    --------
      Cash used in investing                                  (48,788)    (32,767)
Cash flow (used in) from financing activities:
  Proceeds from exercise of stock options                           7          31
  Repayments of long-term debt                                   (855)        (23)
                                                             --------    --------
      Cash (used in) from financing                              (848)          8
                                                             --------           -
(Decrease) increase in cash and cash equivalents               (4,284)      6,980
Cash balances:
  Beginning of period                                          17,347      38,402
                                                             --------    --------
  End of period                                              $ 13,063    $ 45,382
                                                             ========    ========
  Acquisition of subsidiary with note payable                $      -    $ (7,167)
                                                             ========    ========

          See accompanying notes to consolidated financial statements.
</TABLE>


                                       5
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2000
(unaudited)
(amounts in thousands, except per share data)

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, 1999 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 to 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 June 30,
2000,  shareholders'  equity was decreased by $9,648 due to unrealized losses of
$14,619 in the  investment  portfolio.  As of December 31,  1999,  shareholders'
equity  was  decreased  by $7,064  due to  unrealized  losses of  $10,703 in the
investment portfolio.

     The amortized cost and estimated market value of investments  available for
sale as of June 30, 2000 and December 31, 1999 are as follows:

<TABLE>
<CAPTION>
                                               June 30, 2000                        December 31, 1999
                                               -------------                        -----------------
                                          Amortized       Estimated              Amortized       Estimated
                                            Cost         Market Value              Cost         Market Value
                                            ----         ------------              ----         ------------
<S>                                       <C>             <C>                    <C>             <C>
   U.S. Treasury securities
     and obligations of U.S
     Government authorities
     and agencies                         $124,129        $122,613               $118,547        $116,698

   Obligations of states and
     political sub-divisions                   572             573                    571             575

   Mortgage backed securities               14,843          14,198                 20,888          20,126

   Debt securities issued by
    foreign governments                     17,185          17,226                 18,533          17,599

   Corporate securities                    249,985         235,499                207,162         198,690

   Equities                                 18,557          20,543                 17,853          19,163

   Policy Loans                                163             163                    150             150
                                          --------        --------               --------        --------

   Total Investments                      $425,434        $410,815               $383,704        $373,001
                                          ========        ========               ========        ========

   Net unrealized gain (loss)              (14,619)                               (10,703)
                                          --------                               --------

                                         $ 410,815                              $ 373,001
                                         ==========                             =========
</TABLE>

                                       6
<PAGE>

2.   New Accounting Principle:


     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively referred to as "derivatives") and for hedging activities. SFAS No.
133, as amended by SFAS No. 137  "Deferral  of the  Effective  Date of FAS 133",
which is effective for all fiscal  quarters of all fiscal years  beginning after
June 15, 2000,  requires an entity to recognize all derivatives as either assets
or  liabilities  in the  statement  of  financial  position  and  measure  those
instruments  at fair value.  The Company is currently  evaluating  the impact of
SFAS  No.  133 as  relates  to the  embedded  option  values  in its  investment
portfolio.

3.   Statutory Regulation:

     In  1998,  the  NAIC  adopted  the  Codification  of  Statutory  Accounting
Principles  guidance,  which will replace the current  Accounting  Practices and
Procedures  manual as the NAIC's primary guidance on statutory  accounting.  The
Codification  provides  guidance for areas where  statutory  accounting has been
silent and changes current statutory accounting in some areas.

         The  Pennsylvania  Insurance  Department  has adopted the  Codification
guidance, effective January 1, 2001. The New York Insurance Department continues
to evaluate  adoption of sections of Codification  that do not conflict with New
York law. The Company has not estimated the effect of the Codification  guidance
upon its financial condition or results of operations.

4.   Acquisition of Business:

     On January 10, 2000,  PTNA  entered a purchase  agreement to acquire all of
the common stock of Network Insurance Senior Health Division (NISHD),  a Florida
brokerage  insurance agency.  The acquisition was effective January 1, 2000, for
cash of $6,000.  The  acquisition is accounted for as a purchase,  for which the
Company recorded $6,000 of goodwill, to be amortized over 20 years. The proforma
effect of  consolidating  the financial  results of NISHD prior to 2000 would be
immaterial to the Company's financial condition or results of operations.


                                       7
<PAGE>

5.   Reconciliation of Earnings Per Share:

     The following describes the reconciliation of the numerator and denominator
of the basic earnings per share  computation to the numerator and denominator of
the diluted  earnings per share  computation.  Basic earnings per share excludes
dilution and is computed by dividing income available to common  shareholders by
the weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock.

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,  Six Months Ended June 30,
                                                   --------------------------   ------------------------
                                                       2000          1999          2000          1999
                                                       ----          ----          ----          ----
<S>                                                  <C>           <C>           <C>           <C>
Net income                                           $ 4,788       $ 5,240       $10,279       $10,144
Weighted average common shares outstanding             7,277         7,585         7,277         7,584
Basic earnings per share                             $  0.66       $  0.69       $  1.41       $  1.34
                                                     =======       =======       =======       =======

Net income                                           $ 4,788       $ 5,240       $ 10,279      $10,144
Adjustments net of tax:
     Interest expense on convertible debt                772           783          1,542        1,565
     Amortization of debt offering costs                  60            61            120          122
                                                     -------       -------       --------      -------
Diluted net income                                   $ 5,620       $ 6,084       $ 11,941      $11,831
                                                     =======       =======       ========      =======

Weighted average common shares outstanding             7,277         7,585          7,277         7,584
Common stock equivalents due to dilutive
     effect of stock options                              71           169             58           157
Shares converted from convertible debt                 2,628         2,628          2,628         2,628
                                                     -------       -------         ------      --------
Total outstanding shares for diluted earnings
     per share computation                             9,976        10,382          9,963       10,369
Diluted earnings per share                           $  0.56       $  0.59         $ 1.20      $  1.14
                                                     =======       =======        =======      =======
</TABLE>

                                       8
<PAGE>

Item 2. Management's Discussion and Analysis of Financial Condition and  Results
of Operaitons.

Overview

     Our principal products are individual,  defined benefit accident and health
insurance policies that consist of nursing home care, home health care, Medicare
supplement and long-term disability insurance.  Our underwriting  practices rely
upon the base of experience,  which we have developed over 28 years of providing
nursing home care  insurance,  as well as upon available  industry and actuarial
information.  As the home health care market has developed,  we have  encouraged
the purchase of both nursing home care and home health care  coverage,  and have
introduced new life  insurance  products as well,  thus providing  policyholders
with enhanced protection while broadening our policy base.

     Our  insurance   subsidiaries   are  subject  to  the  insurance  laws  and
regulations of each state in which they are licensed to write  insurance.  These
laws and regulations govern matters such as payment of dividends,  settlement of
claims and loss ratios.  State  regulatory  authorities  must  approve  premiums
charged for insurance  products.  In addition,  our insurance  subsidiaries  are
required to  establish  and  maintain  reserves  with  respect to  reported  and
incurred but not reported  losses,  as well as estimated future benefits payable
under our insurance  policies.  These reserves  must, at a minimum,  comply with
mandated standards.

     Our results of  operations  are  affected  significantly  by the  following
factors:

Level of  required  reserves  for  policies  in-force.  The  amount of  reserves
relating  to  reported  and   unreported   claims   incurred  is  determined  by
periodically evaluating historical claims experience and statistical information
with respect to the probable  number and nature of such claims.  Claim  reserves
reflect  actual  experience  through  the most  recent  time  period  and policy
reserves reflect  expectations of claims related to a block of business over its
entire life. We compare actual experience with estimates and adjust our reserves
on the basis of such  comparisons.  Revisions to reserves  are  reflected in our
current results of operations through benefits to policyholders' expense.

     We also  maintain  reserves  for policies  that are not  currently in claim
based upon actuarial  expectations  that a policy may go on claim in the future.
These  reserves  are  calculated  based on factors that  include  estimates  for
mortality,   morbidity,  interest  rates  and  persistency.   Factor  components
generally  include  assumptions that are consistent with both our experience and
industry practices.

Policy premium levels. We attempt to set premium levels to ensure profitability,
subject to the constraints of competitive market conditions and state regulatory
approvals.  Premium levels are reviewed on new product  filings,  as well as for
rate increases as claims experience warrants.

Deferred  acquisition  costs.  In  connection  with  the  sale of our  insurance
policies,  we defer and amortize a portion of the policy  acquisition costs over
the  related  premium  paying  periods of the life of the  policy.  These  costs
include all expenses that are directly  related to and vary with the acquisition
of the  policy,  including  commissions,  underwriting  and other  policy  issue
expenses. The amortization of deferred acquisition costs is determined using the
same projected actuarial assumptions used in computing policy reserves. Deferred
acquisition  costs can be  affected  by  unanticipated  termination  of policies
because, upon such unanticipated  termination,  we are required to expense fully
the deferred acquisition costs associated with the terminated policy.

                                       9
<PAGE>

The number of years a policy has been in effect.  Claims costs tend to be higher
on policies  that have been  in-force for a longer period of time. As the policy
ages,  it is more  likely  that the insured  will need  services  covered by the
policy.  However,  the longer the policy is in effect,  the more premium we will
receive.

Investment  income.  Our investment  portfolio  consists primarily of high-grade
fixed  income  securities.  Income  generated  from this  portfolio  is  largely
dependent upon prevailing  levels of interest rates. Due to the longevity of our
investment  portfolio duration  (approximately 5.0 years),  investment  interest
income does not immediately  reflect changes in market interest rates.  However,
we are  susceptible  to  changes in market  rates when cash flows from  maturing
investments  are  reinvested  at prevailing  market rates.  As of June 30, 2000,
approximately  5.0% of our invested  assets were committed to high quality large
capitalization common stocks and preferred stocks of smaller corporations.

Lapsation and  persistency.  Factors that affect our results of  operations  are
lapsation  and  persistency,  both of which  relate to the renewal of  insurance
policies,  and  first  year  compared  to  renewal  premiums.  Lapsation  is the
termination of a policy by nonrenewal and,  pursuant to our policy, is automatic
if and when premiums become more than 31 days overdue;  however, policies may be
reinstated, if approved, within six months after the policy lapses.  Persistency
represents  the percentage of premiums  renewed,  which we calculate by dividing
the total annual  premiums at the end of each year (less first year business for
that  year) by the  total  annual  premiums  in-force  for the prior  year.  For
purposes of this  calculation,  a decrease in total annual premiums  in-force at
the end of any year  would be a result of  non-renewal  of  policies,  including
those policies that have terminated by reason of death,  lapse due to nonpayment
of  premiums,  and/or  conversion  to other  policies  offered by us. First year
premiums  are premiums  covering  the first twelve  months a policy is in-force.
Renewal premiums are premiums covering all subsequent periods.

     Policies renew or lapse for a variety of reasons,  due both to internal and
external  causes.  We  believe  that our  efforts to  address  any  policyholder
concerns or  questions in an expedient  fashion  help to ensure  ongoing  policy
renewal. We also believe that we enjoy a favorable  policyholder  reputation for
providing  desirable  policy  benefits,   minimal  premium  rate  increases  and
efficient claims processing.  We work closely with our licensed agents, who play
an integral role in policy conservation and policyholder communication.

     External  factors also contribute to policy renewal or lapsation.  Economic
cycles can  influence  a  policyholder's  ability  to  continue  the  payment of
insurance premiums when due. New government/ legislative initiatives have raised
public  awareness of the escalating  costs of long-term  care,  which we believe
boosts new sales and promotes renewal payments.  Recent initiatives also include
tax relief for certain long-term care insurance coverage, which promotes new and
renewal payments.

     Lapsation  and  persistency  can  positively  and  adversely  impact future
earnings.  Improved persistency  generally results in higher renewal premium and
reduced  amortization of deferred  acquisition costs than anticipated.  However,
higher persistency may lead to increased claims in future periods. Additionally,
increased  lapsation  can  result in  reduced  premium  collection,  accelerated
deferred  acquisition  cost  amortization  and  anti-selection  of  higher-risk,
remaining policyholders.

                                       10
<PAGE>

Three  Months  Ended June 30, 2000 and 1999
(amounts in  thousands, except per share data)

Premiums.  Total premium revenue earned in the three month period ended June 30,
2000  ("the 2000  quarter"),  including  long-term  care,  disability,  life and
Medicare supplement, increased 20.4% to $86,825, compared to $72,142 in the same
period in 1999 ("the 1999 quarter").

     First year  long-term  care premiums  earned in the 2000 quarter  increased
5.2% to  $24,824,  compared to $23,589 in the 1999  quarter.  We  attribute  our
growth to continued improvements in product offerings,  which competitively meet
the needs of the long-term care  marketplace,  and growth from recent  expansion
into new states, such as New Jersey, Connecticut and New York.

     Renewal  premiums  earned in the 2000 quarter  increased  28.5% to $61,757,
compared to $48,062 in the 1999 quarter.  Renewal long-term care premiums earned
in the 2000 quarter increased 29.7% to $58,494,  compared to $45,136 in the 1999
quarter.  This increase reflects renewals of a larger base of in-force policies,
as well as a continued increase in policyholder persistency.

Net  Investment  Income.  Net  investment  income  earned  for the 2000  quarter
increased  19.1%  to  $6,636,  from  $5,571  for the  1999  quarter.  Management
attributes this growth to more invested assets as a result of higher established
reserves, as well as higher interest rates achieved on newly invested funds.

Net Realized  Capital Gains  (Losses).  During the 2000  quarter,  we recognized
capital losses of $1,414,  compared to gains of $3,227 in the 1999 quarter.  The
2000  quarter  losses  resulted  primarily  from  the sale of a  portion  of our
convertible  bond portfolio,  which occurred as a result of increasing  interest
rates and  volatility in the underlying  common stock of these bonds.  The funds
from these sales were subsequently invested in similar investments.

Other Income.  We recorded  $2,222 in other income  during the 2000 quarter,  up
from $1,657 in the 1999 quarter.  The increase is primarily  attributable  to an
increase of commissions  earned by United  Insurance Group on sales of insurance
products  underwritten  by  unaffiliated  insurers and to income  generated from
corporate owned life insurance policies.

Benefits to  Policyholders.  Total benefits to policyholders in the 2000 quarter
increased  20.7% to $59,488,  compared to $49,305 in the 1999 quarter.  Our loss
ratio,  or  policyholder  benefits to premiums,  was 68.5% in the 2000  quarter,
compared  to 68.3% in the 1999  quarter.  This ratio is  expected to grow as the
percentage  of new business  premium to total  premium  decreases.  As discussed
under  "Premiums,"  new premium in the 2000 quarter grew less as a percentage of
the total portfolio than in prior periods, causing the loss ratio to increase.

     Claims experience can differ from our expectations due to numerous factors,
including mortality rates,  duration of care and type of care utilized.  When we
experience  deviation  from  our  estimates,  we  typically  seek  premium  rate
increases that are sufficient to offset future deviation. We have been generally
successful in the past in obtaining  state  insurance  department  approvals for
these increases when deemed to be actuarially sound.

Commissions.  Commissions  to  agents  increased  9.3% to  $26,086  in the  2000
quarter, compared to $23,872 in the 1999 quarter.

                                       11
<PAGE>

     First year  commissions on accident and health business in the 2000 quarter
decreased .2% to $16,312,  compared to $16,343 in the 1999 quarter. The ratio of
first year  accident and health  commissions  to first year  accident and health
premiums was 65.4% in the 2000 quarter and 69.0% in the 1999 quarter. The mix of
policyholder  issue ages for new business  affects the percentage of commissions
paid for new business due to our age-scaled commission rates. Generally, younger
policyholder sales receive a higher commission percentage.

     Renewal  commissions  on accident  and health  business in the 2000 quarter
increased  35.6% to $9,596,  compared to $7,077 in the 1999 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
16.1% in the 2000 quarter and 15.3% in the 1999 quarter.

     Commission  expense  during the 2000  quarter was reduced by the netting of
$1,227 from override  commissions  paid to the Agencies by affiliated  insurers.
During the 1999 quarter, commissions were reduced by $519.

Net Policy Acquisition Costs Deferred. The net deferred policy acquisition costs
in the 2000 quarter  decreased 2.4% to $12,090,  compared to $12,388 in the 1999
quarter.

     Deferred  costs are typically  all costs that are directly  related to, and
vary with, the acquisition of policies. These costs include the variable portion
of  commissions,  which are  defined  as the  first  year  commission  rate less
ultimate  renewal  commission  rates,  and variable  general and  administrative
expenses related to policy  underwriting.  Deferred costs are amortized over the
life of the policy based upon actuarial  assumptions,  including  persistency of
policies  in-force.  In the event a policy  lapses  prematurely  due to death or
termination  of  coverage,  the  remaining  unamortized  portion of the deferred
amount is immediately recognized as expense in the current period.

General and Administrative Expenses.  General and administrative expenses in the
2000 quarter increased 25.0% to $12,261, compared to $9,805 in the 1999 quarter.
The 2000 and 1999 quarters  include $2,102 and $1,955,  respectively  of general
and   administrative   expenses  related  to  United  Insurance  Group  expense.
Management  attributes  much of its expense growth to printing and  distribution
costs related to its new group product line and newer policy forms. In addition,
management believes that current cost savings initiatives, such as remote office
consolidation and outsourcing of certain administrative  functions,  has reduced
the level of overall  expenses  (excluding  United  Insurance Group and goodwill
amortization) as a percentage of premiums.

Loss Due to Impairment of Property and  Equipment.  During the 1999 quarter,  we
determined to discontinue  our planned  implementation  of our LifePro  computer
system. At June 30, 1999, we had capitalized  $2,799 of expenditures  related to
this project,  including  licensing  costs and fees paid to outside  parties for
system  development  and  implementation.  As the  system  was not yet placed in
service, none of these costs had previously been depreciated on our Consolidated
Statements of Operations  and  Comprehensive  Income.  Upon  determining  not to
utilize these fixed assets,  their value became fully impaired and we recognized
the entire amount as current period expense.

     In conjunction with our decision to discontinue our implementation project,
we filed  suit  against  the  software  manufacturer  and  several  consultants,
alleging  misrepresentations  by all  accused  parties  regarding  the  system's
capabilities and ability to meet our expectations. The suit is still is process.

                                       12
<PAGE>

Provision for Federal  Income Taxes.  Our provision for federal income taxes for
the 2000  quarter  decreased  4.9% to  $2,455,  compared  to $2,581 for the 1999
quarter.  The effective tax rates of 33.9% and 33.0% in the 2000 quarter and the
1999 quarter,  respectively,  are below the normal  federal  corporate rate as a
result of credits from the small life insurance  company  deduction,  as well as
our  investments in tax-exempt  bonds,  corporate  owned life insurance and from
dividends received that are partially exempt from taxation,  which are partially
offset by non-deductible goodwill amortization.

Comprehensive   Income.  During  the  2000  quarter,  our  investment  portfolio
generated  pre-tax,  unrealized  losses of $3,720,  compared to the 1999 quarter
period  unrealized  losses of $8,919.  After  accounting for deferred taxes from
these losses, shareholders' equity increased by $2,333 from comprehensive income
during the 2000 quarter,  compared to  comprehensive  losses of $646 in the 1999
quarter.


Six Months Ended June 30, 2000 and 1999
(amounts in thousands, except per share data)

Premiums.  Total premium  revenue  earned in the six month period ended June 30,
2000  ("the  2000  period"),  including  long-term  care,  disability,  life and
Medicare  supplement,  increased 24.2% to $172,863,  compared to $139,201 in the
same period in 1999 ("the 1999 period").

     First year  long-term  care  premiums  earned in the 2000 period  increased
10.6% to  $49,495,  compared to $44,739 in the 1999  period.  We  attribute  our
growth to continued improvements in product offerings,  which competitively meet
the needs of the long-term care  marketplace,  and growth from recent  expansion
into new states, such as New Jersey,  Connecticut and New York. In addition,  we
introduced  our group  plan in the 2000  period,  which  offers  long-term  care
insurance to group members on a guaranteed acceptance basis. This plan generated
approximately $1,650 of additional premium in the 2000 period.

     Renewal  premiums  earned in the 2000 period  increased  31.0% to $122,416,
compared to $93,419 in the 1999 period.  Renewal  long-term care premiums earned
in the 2000 period increased 33.4% to $116,099,  compared to $87,055 in the 1999
period.  This increase reflects renewals of a larger base of in-force  policies,
as well as a continued increase in policyholder persistency.

Net  Investment  Income.  Net  investment  income  earned  for the  2000  period
increased  19.0%  to  $12,797,  from  $10,754  for the 1999  period.  Management
attributes this growth to more invested assets as a result of higher established
reserves. Investment income is reduced, however, by our use of invested cash for
the acquisition of NISHD on January 1, 2000.

Net Realized Capital Gains.  During the 2000 period, we recognized capital gains
of $741,  compared  to gains of  $3,843  in the 1999  period.  The gains in both
periods  were  recorded  as  a  result  of  our  normal  investment   management
operations.

Other Income. We recorded $4,360 in other income during the 2000 period, up from
$3,097 in the 1999  period.  The  increase  is  attributable  to an  increase of
commissions  earned by United  Insurance  Group on sales of  insurance  products
underwritten  by  unaffiliated  insurers and to income  generated from corporate
owned life insurance policies.

                                       13
<PAGE>

Benefits to  Policyholders.  Total benefits to  policyholders in the 2000 period
increased  26.1% to $119,399,  compared to $94,709 in the 1999 period.  Our loss
ratio,  or  policyholder  benefits to  premiums,  was 69.1% in the 2000  period,
compared  to 68.0% in the 1999  period.  This ratio is  expected  to grow as the
percentage  of new business  premium to total  premium  decreases.  As discussed
under  "Premiums,"  new premium in the 2000 quarter grew less as a percentage of
the total portfolio than in prior periods, causing the loss ratio to increase.

     Claims experience can differ from our expectations due to numerous factors,
including mortality rates,  duration of care and type of care utilized.  When we
experience  deviation  from  our  estimates,  we  typically  seek  premium  rate
increases that are sufficient to offset future deviation. We have been generally
successful in the past in obtaining  state  insurance  department  approvals for
these increases when deemed to be actuarially sound.

Commissions.  Commissions  to  agents  increased  13.0% to  $51,372  in the 2000
period, compared to $45,480 in the 1999 period.

     First year  commissions on accident and health  business in the 2000 period
increased  5.1% to $32,373,  compared to $30,789 in the 1999 period,  due to the
increase in first year accident and health premiums.  Commission growth is lower
than premium  growth as no commission was paid for our new group  policies.  The
mix of  policyholder  issue ages for new  business  affects  the  percentage  of
commissions  paid  for new  business  due to our  age-scaled  commission  rates.
Generally,  younger  policyholder sales receive a higher commission  percentage.
The ratio of first year accident and health  commissions  to first year accident
and health premiums was 65.1% in the 2000 period and 68.4% in the 1999 period.

     Renewal  commissions  on  accident  and health  business in the 2000 period
increased 36.8% to $18,817,  compared to $13,756 in the 1999 period,  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 2000 period and 15.4% in the 1999 period.

     Commission  expense  during the 2000  period was  reduced by the netting of
$2,064 from override  commissions  paid to the Agencies by affiliated  insurers.
During the 1999 period, commissions were reduced by $1,070.

Net Policy Acquisition Costs Deferred. The net deferred policy acquisition costs
in the 2000 period  decreased  2.0% to $22,980,  compared to $23,458 in the 1999
period.

     Deferred  costs are typically  all costs that are directly  related to, and
vary with, the acquisition of policies. These costs include the variable portion
of  commissions,  which are  defined  as the  first  year  commission  rate less
ultimate  renewal  commission  rates,  and variable  general and  administrative
expenses related to policy  underwriting.  Deferred costs are amortized over the
life of the policy based upon actuarial  assumptions,  including  persistency of
policies  in-force.  In the event a policy  lapses  prematurely  due to death or
termination  of  coverage,  the  remaining  unamortized  portion of the deferred
amount is immediately recognized as expense in the current period.

General and Administrative Expenses.  General and administrative expenses in the
2000 period increased 18.8% to $23,334,  compared to $19,647 in the 1999 period.
The 2000 and 1999 periods include $4,256 and $3,865, respectively of general and
administrative  expenses related to United  Insurance Group expense.  Management
believes  that  current  cost  savings   initiatives,   such  as  remote  office
consolidation and outsourcing of certain administrative  functions,  has reduced

                                       14
<PAGE>

the  level  of  expenses   (excluding   United   Insurance  Group  and  goodwill
amortization)  as a percentage of premiums,  which declined to 10.7% in the 2000
period, compared to 11.0% in the 1999 period.

Reserve for Claim  Litigation.  During the 2000 period,  we were notified that a
jury awarded a  compensatory  judgement of $24 and a punitive award of $2,000 in
favor of the plaintiff against one of our subsidiaries in a disputed claim case.
We are  vigorously  pursuing  all of our legal rights and remedies to reverse or
substantially  reduce this award,  including  motion for remittiter,  post trial
motions and appeal. In the event that our efforts are unsuccessful in full or in
part to reduce the award,  we  established a $1,500  litigation  reserve for the
potential future payment of this judgement.

Loss Due to Impairment  of Property and  Equipment.  During the 1999 period,  we
determined to discontinue  our planned  implementation  of our LifePro  computer
system. At June 30, 1999, we had capitalized  $2,799 of expenditures  related to
this project,  including  licensing  costs and fees paid to outside  parties for
system  development  and  implementation.  As the  system  was not yet placed in
service, none of these costs had previously been depreciated on our Consolidated
Statements of Operations  and  Comprehensive  Income.  Upon  determining  not to
utilize these fixed assets,  their value became fully impaired and we recognized
the entire amount as current period expense.

     In conjunction with our decision to discontinue our implementation project,
we filed  suit  against  the  software  manufacturer  and  several  consultants,
alleging  misrepresentations  by all  accused  parties  regarding  the  system's
capabilities and ability to meet our expectations. The suit is still is process.

Provision for Federal  Income Taxes.  Our provision for federal income taxes for
the 2000  period  increased  6.0% to  $5,295,  compared  to $4,996  for the 1999
period.  The  effective  tax rates of 34.0% and 33.0% in the 2000 period and the
1999 period,  respectively,  are below the normal  federal  corporate  rate as a
result of credits from the small life insurance  company  deduction,  as well as
our  investments in tax-exempt  bonds,  corporate  owned life insurance and from
dividends received that are partially exempt from taxation,  which are partially
offset by non-deductible goodwill amortization.

Comprehensive Income. During the 2000 period, our investment portfolio generated
pre-tax,  unrealized  losses of $3,916,  compared to the 1999 period  unrealized
losses of  $16,888.  After  accounting  for  deferred  taxes from  these  gains,
shareholders'  equity increased by $7,695 from  comprehensive  income during the
2000 period, compared to comprehensive losses of $1,002 in the 1999 period.


Liquidity and Capital Resources

     Our consolidated  liquidity requirements have historically been created and
met from the operations of our insurance  subsidiaries.  Our primary  sources of
cash are premiums,  investment  income and  maturities of  investments.  We have
provided,  and may  continue to provide,  cash through  public  offerings of our
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  commissioners.  Statutory  earnings
                                       15
<PAGE>

are generally lower than earnings reported in accordance with generally accepted
accounting  principles  due to the immediate or  accelerated  recognition of all
costs  associated with premium growth and benefit  reserves.  We have not and do
not  intend  to pay  shareholder  dividends  in the  near  future  due to  these
requirements,  choosing to retain statutory surplus to support continued premium
growth

     In the 2000 period,  our cash flows were  attributable  to cash provided by
operations,  cash  used in  investing  and  cash  used in  financing.  Our  cash
decreased $4,284 in the 2000 period primarily due to the purchase of $122,234 in
bonds and equity securities and $6,000 cash used for the purchase of NISHD. Cash
was provided primarily from the maturity and sale of $81,174 in bonds and equity
securities.   These  sources  of  funds  were  supplemented  with  $45,352  from
operations.  The major provider of cash from operations was premium revenue used
to fund reserve additions of $57,072.

     Our cash flows in the 1999 period  were  attributable  to cash  provided by
operations,  cash  used in  investing  and  cash  used in  financing.  Our  cash
increased by $6,980 in the 1999 period  primarily  due to the sale of $16,412 of
our equity securities  portfolio and cash from operations of $39,739.  The major
provider of cash from operations was premiums used to fund additions to reserves
of  $48,799  in the 1999  period.  The  primary  uses of cash  were  commissions
deferred as additions to policy  acquisition  costs of $23,458,  the purchase of
bonds of  $61,226  and net cash of  $9,194  paid for the  acquisition  of United
Insurance Group.

     We invest in  securities  and other  investments  authorized  by applicable
state laws and regulations and follow an investment  policy designed to maximize
yield to the extent  consistent with liquidity  requirements and preservation of
assets.  At June 30, 2000,  the market value of our bond  portfolio  represented
95.9% of our  cost,  with a  current  unrealized  loss of  $14,619.  Our  equity
portfolio  exceeded  cost by  $1,986  at June 30,  2000.  Our  equity  portfolio
exceeded  cost by $1,310 at December  31, 1999 and the market  value of our bond
portfolio was below our cost by $12,013.

     As of June 30, 2000,  shareholders'  equity was  decreased by $9,648 due to
unrealized  losses of $14,619 in the  investment  portfolio.  As of December 31,
1999,  shareholders'  equity was decreased by $7,064 due to unrealized losses of
$10,703 in the investment portfolio.

     Our debt currently consists primarily of a mortgage note in the approximate
amount of $1,700 and $74,750 in convertible  subordinated  debt. The convertible
debt,  issued in November 1996, is  convertible  into common stock at $28.44 per
share until November  2003.  The debt carries a fixed interest  coupon of 6.25%,
payable  semi-annually.  The mortgage note is currently amortized over 15 years,
and has a balloon payment due on the remaining  outstanding  balance in December
2003.  Although the note carries a variable  interest rate, we have entered into
an amortizing swap agreement with the same bank, with a notional amount equal to
the  outstanding  debt,  which has the effect of converting  the note to a fixed
rate of interest of 6.85%.

     On  January  1,  1999,  we  purchased  all of the  common  stock of  United
Insurance  Group,  a Michigan  based  consortium  of  long-term  care  insurance
agencies,  for the amount of $18,192. As part of the purchase,  we issued a note
payable  for  $8,078,  which  was  in  the  form  of  a  three-year  zero-coupon
installment  note. The installment note, after discounting for imputed interest,
was recorded as a note payable of $7,167,  with a current outstanding balance of
$5,554 at June 30, 2000. The remainder of the purchase was for cash.

     Our company consists of the Insurers, the Agencies and a non-insurer parent
company,  Penn Treaty American  Corporation (the "Parent").  The Parent directly
controls  100% of the voting stock of the  Insurers.  In the event the Parent is

                                       16
<PAGE>

unable to meet its financial  obligations,  becomes  insolvent,  or discontinues
operations, the Insurers' financial condition and results of operations could be
materially affected.

     In addition to the United Insurance Group installment note obligation,  the
Parent  currently has the  obligation of making  semi-annual  interest  payments
attributable  to its  convertible  debt.  In that the  dividend  ability  of the
subsidiaries  is restricted,  the Parent must rely on its own liquidity and cash
flows to make all required interest  installments.  Management believes that the
Parent  holds  sufficient  liquid funds from its current  investments,  dividend
capabilities  of United  Insurance Group and from its line of credit to meet its
obligations for the foreseeable future.

     We believe that our insurance  subsidiaries'  capital and surplus presently
meet or exceed the requirements in all jurisdictions in which they are licensed.
Our  continued  growth is dependent  upon our ability to (1) continue  marketing
efforts to expand our historical markets,  (2) continue to expand our network of
agents and  effectively  market our  products  and (3) 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 our insurance  subsidiaries,  can be met
through 2000 by funds generated from non-insurance subsidiary dividends, current
and future financial  reinsurance  transactions,  off-shore  reinsurance through
Penn Treaty (Bermuda) and the  availability of our line of credit  facility.  We
expect future capital market activities will be necessary to support our ongoing
growth, but continue to seek alternative  measures.  If alternative  measures to
support our growth are unsuccessful, we believe that additional capital would be
required as early as 2001.

     In the event (1) we fail to  maintain  minimum  loss ratios  calculated  in
accordance  with statutory  guidelines,  (2) we fail to meet other  requirements
mandated  and enforced by  regulatory  authorities,  (3) we have adverse  claims
experience in the future,  (4) we are unable to obtain  additional  financing to
support  future growth or (5) the economy  continues to affect the buying powers
of senior citizens,  our results of operations,  liquidity and capital resources
could be adversely affected.

     Certain  statements  that we have  made in this  report  may be  considered
forward-looking  within the meaning of the Private Securities  Litigation Reform
Act of 1995.  We  believe  that  our  expectations  are  based  upon  reasonable
assumptions  within the bounds of our knowledge of our business and  operations,
there can be no assurance that actual results of our operations  will not differ
materially  from our  expectations.  Factors which could cause actual results to
differ  from  expectations  include,  among  others,  the  adequacy  of our loss
reserves and our ability to meet statutory surplus  requirements,  especially in
light of our recent  growth,  our ability to qualify new insurance  products for
sale in certain states, our ability to comply with government  regulations,  the
impact of securities  transactions,  the ability of senior  citizens to purchase
our products in light of the  increasing  costs of health care,  the modality of
premium revenue, our ability to defend ourself from adverse litigation,  and our
ability to expand our network of productive  independent  agents. For additional
information,  please  refer to  "Overview"  within  our  reports  filed with the
Securities and Exchange Commission.

                                       17
<PAGE>

New Accounting Principle

     In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting   for  Derivative   Instruments  and  Hedging   Activities,"   which
establishes  accounting  and  reporting  standards for  derivative  instruments,
including   certain   derivative   instruments   embedded  in  other   contracts
(collectively referred to as "derivatives") and for hedging activities. SFAS No.
133, as amended by SFAS No. 137  "Deferral  of the  Effective  Date of FAS 133",
which is effective for all fiscal  quarters of all fiscal years  beginning after
June 15, 2000,  requires an entity to recognize all derivatives as either assets
or  liabilities  in the  statement  of  financial  position  and  measure  those
instruments  at fair value.  We are currently  evaluating the impact of SFAS No.
133 as relates to the embedded option values in our investment porfolio.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

     We invest in  securities  and other  investments  authorized  by applicable
state laws and regulations and follow an investment  policy designed to maximize
yield to the extent  consistent with liquidity  requirements and preservation of
assets.

     A significant portion of assets and liabilities are financial  instruments,
which are subject to the market risk of potential losses from adverse changes in
market rates and prices.  Our primary market risk  exposures  relate to interest
rate  risk on fixed  rate  domestic  medium-term  instruments  and,  to a lesser
extent,  domestic  short-term  and long-term  instruments.  We have  established
strategies,  asset  quality  standards,  asset  allocations  and other  relevant
criteria for our portfolio to manage our exposure to market risk.

     We  currently  have an interest  rate swap on our  mortgage,  with the same
bank, which is used as a hedge to convert the mortgage to a fixed interest rate.
We believe that since the  notional  amount of the swap is amortized at the same
rate as the underlying  mortgage,  and that both financial  instruments are with
the same bank, no credit or financial risk is carried with the swap.

     Our financial  instruments  are held for purposes  other than trading.  Our
portfolio  does not contain any  significant  concentrations  in single  issuers
(other  than  U.S.  treasury  and  agency  obligations),  industry  segments  or
geographic regions.

     We urge  caution in  evaluating  overall  market risk from the  information
below.  Actual  results  could differ  materially  because the  information  was
developed  using  estimates  and  assumptions  as described  below,  and because
insurance   liabilities  and   reinsurance   receivables  are  excluded  in  the
hypothetical effects (insurance liabilities represent 78.7% of total liabilities
and  reinsurance  receivables on unpaid losses  represent 2.0% of total assets).
Long-term  debt,  although  not  carried  at  fair  value,  is  included  in the
hypothetical effect calculation.

     The  hypothetical  effects of changes in market rates or prices on the fair
values  of  financial  instruments  as of June  30,  2000,  excluding  insurance
liabilities and reinsurance  receivables on unpaid losses because such insurance
related assets and liabilities are not carried at fair value, would have been as
follows:

     If interest rates had increased by 100 basis points,  there would have been
an  approximate  $14,000,000  decrease  in the net fair value of our  investment
portfolio less our long-term debt and the related swap agreement.  The change in
fair values was  determined by estimating the present value of future cash flows
using models that measure the change in net present values arising from selected

                                       18
<PAGE>

hypothetical  changes in market  interest  rate.  A 200 basis point  increase in
market rates at June 30, 2000 would have resulted in an approximate  $26,000,000
decrease in the net fair value.  If interest  rates had decreased by 100 and 200
basis points,  there would have been an approximate  $15,000,000 and $32,000,000
net increase,  respectively,  in the net fair value of our total investments and
debt.

     We  hold  certain  mortgage  and  asset  backed  securities  as part of our
investment portfolio.  The fair value of these instruments may react in a convex
or non-linear  fashion when  subjected to interest rate  increases or decreases.
The anticipated cash flows of these  instruments may differ from expectations in
changing  interest rate  environments,  resulting in duration drift or a varying
nature of predicted  time-weighted  present values of cash flows.  The result of
unpredicted cash flows from these investments could cause the above hypothetical
estimates to change.  However,  we believe that our minimal  invested  amount in
these  instruments  and their broadly defined  payment  parameters  sufficiently
outweigh the cost of computer  models  necessary  to  accurately  predict  their
possible  impact to our  investment  income  from the  hypothetical  effects  of
changes in market rates or prices on the fair values of financial instruments as
of June 30, 2000.


                            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.

     During the second  quarter 1999, we filed a lawsuit in state court,  naming
IBM and others, for breach of contract and other claims. The lawsuit, filed June
28, 1999,  in the Court of Common Pleas in Lehigh  County,  Pennsylvania,  names
IBM,  Tangent  International  Computer  Consultants,  Inc.  of New  York and The
Outsourcing  Partnership  LLC of  Pennsylvania,  and seeks  damages  for alleged
misrepresentations concerning its LifePro computer software.

     During the second  quarter  2000,  we were  notified  that a jury awarded a
compensatory judgement of $24,000 and a punitive award of $2,000,000 in favor of
the plaintiff  against one of our  subsidiaries in a disputed claim case. We are
vigorously  pursuing  all of  our  legal  rights  and  remedies  to  reverse  or
substantially  reduce this award,  including  motion for remittiter,  post trial
motions and appeal.

     We do not believe that the eventual outcome of any of the suits to which we
are  currently  a party will have a  material  adverse  effect on our  financial
condition  or results of  operations.  However,  the outcome of any single event
could have a material impact upon the quarterly or annual  financial  results of
the period in which it occurs.

Item 2. Changes in Securities

Not Applicable

Item 3. Defaults Upon Senior Securities

Not Applicable

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<PAGE>

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

The Company's  Annual Meeting of Shareholders  was held on May 26, 2000. At such
meeting,  the following matters were voted upon by the  shareholders,  receiving
the number of  affirmative,  negative and withheld votes, as well as abstentions
and broker non-votes, set forth below each matter.

     (1) Election of three persons to the Company's  Board of Directors as Class
I Directors  to serve until the 2003 Annual  Meeting of  Shareholders  and until
their successors are elected and have been qualified.

                                   A.J. Carden
     6,558,839  Affirmative                            0  Negative
     ---------                                     -----
       605,121  Withheld                               0  Abstentions and broker
     ---------                                     -----  non-votes

                                  Irving Levit
     6,558,939  Affirmative                            0  Negative
     ---------                                     -----
       605,021  Withheld                               0  Abstentions and broker
     ---------                                     -----  non-votes

                             Domenic P. Stangherlin
     6,254,352  Affirmative                            0  Negative
     ---------                                     -----
       909,608  Withheld                               0  Abstentions and broker
     ---------                                     -----  non-votes

     (2)  Ratification  of  the  selection  of  PricewaterhouseCoopers   LLP  as
independent public accountants for the Company and its subsidiaries for the year
ending December 31, 2000.

     7,128,413  Affirmative                        4,362  Negative
     ---------                                    ------
             0  Withheld                          31,185  Abstentions and broker
     ---------                                    ------  non-votes

Item 5. Other Information

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits:

     Exhibit 27 - Financial Data Schedule

(b)  Reports on Form 8-K:

     The Company filed no reports on Form 8-K during the quarter ending June 30,
2000.





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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


Dat:  August 11, 2000                   /s/  Irving Levit
      ---------------                   -------------------------------------
                                              Irving Levit
                                              Chairman of the Board, President
                                              and Chief Executive Officer

Date:  August 11, 2000                  /s/  Cameron B. Waite
       ---------------                  -------------------------------------
                                             Cameron B. Waite
                                             Chief Financial Officer








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