<PAGE>

                                                                       Page 1


                                   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 March 31, 1997

                                       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 May 8, 1997 was 7,518,080.

<PAGE>
                                                                       Page 2


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 ("Network
America") (collectively, "the Insurers"), are underwriters of long-term care
insurance products. PTLIC and its subsidiary are also underwriters of life
insurance products.
 
 
<PAGE>

                                                                       Page 3


    PENN TREATY AMERICAN CORPORATION AND SUBSIDIARIES
    Consolidated Balance Sheets
 
<TABLE>
<CAPTION>
                                                                     
                                                                        MARCH 31,         DECEMBER 31,
                                                                           1997              1996
                                                                      --------------      --------------
                                                                       (UNAUDITED)
<S>                                                                <C>                    <C>
ASSETS
Investments:
  Bonds, available for sale at market (cost of $244,735,470
    and $199,508,579, respectively)..........................        $  241,698,092        $  201,329,966
  Equity securities at market value, (cost of $13,640,295 and
    $9,642,912, respectively)................................            15,117,310            11,247,516
  Policy loans...............................................                80,644                84,232
                                                                      --------------        --------------
    Total investments........................................           256,896,046           212,661,714
Cash and cash equivalents....................................            14,512,008            51,612,067
Property and equipment, at cost, less accumulated
  depreciation of $2,316,362 and $2,205,407, respectively....             8,156,881             8,092,028
Unamortized deferred policy acquisition costs................            87,668,685            82,176,268
Receivables from agents, less allowance for uncollectable
  amounts of $231,226 and $231,226, respectively.............             1,621,316             1,543,382
Accrued investment income....................................             3,900,983             3,581,077
Federal income tax recoverable...............................               126,815               175,219
Cost in excess of fair value of net assets acquired, less
  accumulated amortization of $379,667 and $324,203,
  respectively...............................................             5,987,322             6,042,786
Present value of future profits acquired.....................             3,907,917             4,011,668
Receivable from reinsurers...................................            10,216,937            10,105,654
Other assets.................................................             6,663,446             6,766,129
                                                                     --------------        --------------
    Total assets.............................................        $  399,658,356        $  386,767,992
                                                                     --------------        --------------
                                                                     --------------        --------------
LIABILITIES
Policy reserves:
  Accident and health........................................        $  110,439,081        $  101,107,697
  Life.......................................................             8,678,602             8,523,267
Unearned premium reserve.....................................                12,215                12,215
Policy and contract claims...................................            58,406,726            57,539,380
Accounts payable and other liabilities.......................             7,647,333             4,768,441
Long-term debt...............................................            76,925,396            77,114,592
Deferred income taxes........................................            18,439,024            18,795,316
                                                                     --------------        --------------
    Total liabilities........................................           280,548,377           267,860,908
                                                                     --------------        --------------
Commitments and contingencies
SHAREHOLDERS' EQUITY
Preferred stock, par value $1.00; 5,000,000 shares
  authorized, none outstanding...............................              --                    --
Common stock, par value $.10; 25,000,000 and 10,000,000
  shares authorized, 8,123,709 and 8,116,464 shares issued...               812,370               811,646
Additional paid-in capital...................................            52,600,752            52,526,956
Net unrealized appreciation/(depreciation) of securities.....            (1,029,840)            2,261,154
Retained earnings............................................            68,432,571            65,013,202
                                                                     --------------        --------------
                                                                        120,815,853           120,612,958
Less 605,629 common shares held in treasury, at cost.........            (1,705,874)           (1,705,874)
                                                                     --------------         --------------
                                                                        119,109,979           118,907,084
                                                                     --------------        --------------
    Total liabilities and shareholders' equity...............        $  399,658,356        $  386,767,992
                                                                     --------------        --------------
                                                                     --------------        --------------
</TABLE>
                 See accompanying notes to consolidated financial statements.
 
<PAGE>


                                                                       Page 4

                              PENN TREATY AMERICAN CORPORATION
                                      AND SUBSIDIARIES
                            Consolidated Statements of Operations
                             for the three months ended March 31,
                                         (unaudited)
 
<TABLE>
<CAPTION>
                                                                           1997                 1996
                                                                       -------------        -------------
<S>                                                                   <C>                  <C>
Revenue:
  Accident and health premiums.................................        $  38,816,211        $  29,523,797
  Life premiums................................................              893,677              946,097
                                                                       -------------        -------------
                                                                          39,709,888           30,469,894
  Net investment income........................................            3,893,298            2,386,069
  Net realized capital gains...................................               49,762               51,221
  Other income.................................................               78,966               85,750
                                                                       -------------        -------------
                                                                          43,731,914           32,992,934
Benefits and expenses:
  Benefits to policyholders....................................           25,330,614           19,786,654
  Commissions..................................................           12,906,707           10,186,871
  Net policy acquisition costs deferred........................           (5,492,417)          (4,169,856)
  General and administrative expense...........................            4,967,307            3,305,716
  Interest expense.............................................            1,203,334               36,215
                                                                       -------------        -------------
                                                                          38,915,545           29,145,600
                                                                       -------------        -------------
Income before federal income taxes.............................            4,816,369            3,847,334
Provision for federal income taxes.............................            1,397,000            1,154,000
                                                                       -------------        -------------
    Net Income.................................................        $   3,419,369        $   2,693,334
                                                                       -------------        -------------
                                                                       -------------        -------------
Primary earnings per share.....................................        $        0.45        $        0.39
Fully diluted earnings per share...............................        $        0.42                --
Weighted average number of shares outstanding..................            7,515,608            6,985,988
Weighted average number of shares outstanding (fully
  diluted).....................................................           10,370,416                --
                                                                       -------------        -------------
                                                                       -------------        -------------
</TABLE>
 
    See accompanying notes to consolidated financial statements.
 
<PAGE>

                                                                       Page 5

                        PENN TREATY AMERICAN CORPORATION
                                 AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       for the three months ended March 31,
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                                           1997                 1996
                                                                        -------------        -------------
<S>                                                                     <C>                  <C>
Net cash flow from operating activities:
 Net income......................................................        $   3,419,369        $    2,693,334 
 Adjustments to reconcile net income to cash provided by
    operations:
   Amortization of intangible assets.............................              265,464                 8,940
   Policy acquisition costs, net.................................           (5,492,417)           (4,169,856)
   Deferred income taxes.........................................            1,339,067               612,248
   Depreciation expense..........................................              101,405                70,665
   Net realized capital gains....................................              (49,762)              (51,221)
 Increase (decrease) due to change in:
   Receivables from agents.......................................              (77,934)              (78,896)
   Receivable from reinsurers....................................             (111,283)             (311,257)
   Policy and contract claims....................................              867,346             2,868,746    
   Policy and unearned premium reserves..........................            9,486,719             7,013,305
   Accounts payable and other liabilities........................            2,878,892             1,008,682
   Federal income taxes recoverable..............................               48,404                 --
   Federal income tax payable....................................                 --                  (8,249)    
   Accrued investment income.....................................             (319,906)              103,029
   Other, net....................................................               (3,249)             (642,134)
                                                                           ------------          -------------
   Cash provided by operations...................................           12,352,115             9,117,336
 Cash flow from (used in) investing activities:
  Proceeds from sales of investments.............................              529,897             2,549,725
  Maturities of investments......................................            8,021,760             2,140,771
  Purchase of investments........................................          (57,722,898)          (14,117,271)
  Acquisition of property and equipment..........................             (166,257)             (338,025)
                                                                           ------------          -------------
   Cash used in investing........................................          (49,337,498)           (9,764,800)
 Cash flow from (used in) financing activities:
  Proceeds from exercise of stock options........................               74,520               156,520                   
  Repayments of mortgages and other debts........................             (189,196)              (40,445)
                                                                           ------------          -------------
   Cash provided/(used) by financing.............................             (114,676)              116,075
                                                                           ------------          -------------
Decrease in cash and cash equivalents............................           (37,100,059)             (531,389)
Cash balances:
 Beginning of period.............................................            51,612,067             8,881,061
                                                                          -------------          -------------
 End of period...................................................         $  14,512,008         $   8,349,672
                                                                          -------------          -------------
                                                                          -------------          -------------
</TABLE>
 
                  See accompanying notes to consolidated financial statements
 
                                       


<PAGE>
                                                                       Page 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(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, 1996 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 March 31, 1997, shareholders' equity
       was decreased by $1,029,840 due to unrealized losses of $1,560,363 in the
       investment portfolio. As of  December 31, 1996, shareholders' equity was 
       increased by $2,261,154 due to unrealized gains of $3,425,991 in the
       investment portfolio.

       The amortized cost and estimated market value of investments available
       for sale as of March 31, 1997 and December 31, 1996 are as follows:
 
<TABLE>
<CAPTION>
                                                               MARCH 31, 1997                DECEMBER 31, 1996
                                                       ------------------------------  ------------------------------
<S>                                                    <C>             <C>             <C>             <C>
                                                         AMORTIZED       ESTIMATED       AMORTIZED       ESTIMATED
                                                            COST        MARKET VALUE        COST        MARKET VALUE
                                                       --------------  --------------  --------------  --------------
U.S. Treasury securities and obligations of U.S
  Government authorities and agencies..........        $  179,120,140  $  176,335,721  $  149,354,655  $  150,196,015
Obligations of states and political sub-
  divisions....................................            34,410,032      34,945,642      30,460,952      31,537,001
Debt securities issued by foreign
  governments..................................               399,275         414,496         424,275         445,250
Corporate securities...........................            30,605,481      29,808,233      19,068,114      18,959,700
Other debt securities..........................               200,542         194,000         200,583         192,000
Equities.......................................            13,640,295      15,117,310       9,642,912      11,247,516
Policy Loans...................................                80,644          80,644          84,232          84,232
                                                       --------------  --------------  --------------  --------------
Total Investments..............................        $  258,456,409  $  256,896,046  $  209,235,723  $  212,661,714
                                                       --------------  --------------  --------------  --------------
Net unrealized gain (loss).....................            (1,560,363)                      3,425,991
                                                       --------------                  --------------                
                                                       $  256,896,046                  $  212,661,714
                                                       --------------                  --------------                
</TABLE>
 
<PAGE>

                                                                       Page 7
2.      NEW ACCOUNTING PRINCIPLE:
        -------------------------

        In February 1997, the Financial Accounting Standards Board issued 
        Statement of Financial Accounting Standard No. 128, "Earnings per 
        Share" ("SFAS 128"). SFAS 128 establishes standards for computing and 
        presenting earnings per share, and simplifies the standards for 
        computing earnings per share previously found in Accounting 
        Principles Board Opinion No. 15, "Earnings per Share." Primary and 
        fully diluted earnings per share will be replaced with basic and 
        diluted earnings per share, and these amounts are required to be shown
        on the face of the income statement. In addition, a 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 is required.
 
        Basic earnings per share excludes dilution and is computed by 
        dividing income available to common stockholders by the 
        weighted-average number of common shares outstanding for the period. 
        Diluted earnings per share reflects the potential dilution that could 
        occur if securities or other contracts to issue common stock were 
        exercised or converted into common stock. This Statement is effective 
        for financial statements issued for periods ending after December 15, 
        1997, and requires restatement of all prior-period earnings per share 
        data presented. Management has determined the impact that SFAS 128 
        may have on the financial statements for the current quarter and 
        prior year quarter is as follows:
 
<TABLE>
<CAPTION>
                                                                               1997             1996
                                                                           ------------  ------------
      <S>                                                                 <C>           <C>
      Net income...................................................         $  3,419,369  $  2,693,334
      Weighted average common shares outstanding...................            7,515,608     6,985,988
      Basic earnings per share.....................................         $       0.45  $       0.39
                                                                            ------------  ------------
                                                                            ------------  ------------
      Net income...................................................         $  3,419,369  $  2,693,334
      Adjustments net of tax:
        Interest expense on convertible debt.......................              829,196       --
        Amortization of debt offering costs........................               64,466       --
                                                                            ------------  ------------
      Diluted net income...........................................         $  4,313,031  $  2,693,334
                                                                            ------------  ------------
                                                                            ------------  ------------
      Weighted average common shares outstanding...................            7,515,608     6,985,988
      Common stock equivalents due to dilutive effect of stock
        options....................................................              226,468       108,860
      Shares converted from convertible debt.......................            2,628,340       --
                                                                            ------------  ------------
      Total outstanding shares for diluted earnings per share
        computation................................................           10,370,416     7,094,848
      Diluted earnings per share...................................         $       0.42  $       0.38
                                                                            ------------  ------------
                                                                            ------------  ------------
</TABLE>
 
 

<PAGE>

                                                                       Page 8  


ITEM 2. Management's Discussion and Analysis Of Financial   Condition And
Results Of Operations.
 
THREE MONTHS ENDED MARCH 31, 1997 AND 1996:
 
    ACCIDENT AND HEALTH PREMIUMS.  First year accident and health premiums
earned in the three month period ended March 31, 1997 (the "1997 quarter"),
including long-term care and Medicare supplement, increased 20.5% to
$12,071,192, compared to $10,013,934 in the same period in 1996 (the "1996
quarter"). First year long-term care premiums earned in the 1997 quarter
increased 21.0% to $11,847,425, compared to $9,792,244 in the 1996 quarter. This
increase was primarily attributable to increased sales of nursing home policies,
which increased to $8,334,360 for the 1997 quarter from $5,144,205 for the 1996
quarter. Premiums from sales of home health care policies decreased from
$4,648,039 in the 1996 quarter to $3,513,065 in the 1997 quarter. These results
reflect increased market demand for the Company's newest products, which include
nursing home coverage with attached home health care riders and its Personal
Freedom policy, which combines the benefit coverage of nursing home and home
health care protection in one plan. Management believes this increase is
indicative of the growing need for both types of coverage following its late
1996 introduction of the plans. The Personal Freedom policies are classified as
nursing home products for reporting purposes. Management believes that as market
awareness of the need for combined coverage increases, less emphasis will be
placed on the growth of individual products, but rather upon total long-term
care coverage. First year Medicare supplement premiums earned by the Company in
the 1997 quarter increased to $223,767 from $221,690 in the 1996 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 1997
quarter increased 28.5% to $25,076,535, compared to $19,509,862 in the 1996
quarter. Renewal long-term care premiums earned in the 1997 quarter increased
29.3% to $24,288,508, compared to $18,788,224 in the 1996 quarter. This increase
reflects renewals of a larger base of in-force policies. 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 1997 quarter increased 9.2% to $788,027, compared to $721,638 in the 1996
quarter.
 
    DISABILITY PREMIUMS.  The Company, following its August, 1996, 
acquisition of ANIC, posted $1,668,484 in disability income in the 1997 
quarter. Due to the accounting of the acquisition as a purchase, no 
disability income is recorded for the 1996 quarter. During the 1997 quarter, 
first year disability premiums were $327,513 and renewal premiums were 
$1,340,971.
 
    LIFE PREMIUMS.  First year life premiums earned by the Company in the 1997
quarter decreased 32.4% to $261,699, compared to $387,036 in the 1996 quarter.
Renewal life premiums earned by the Company in the 1997 quarter increased to
$631,978, compared to $559,061 in the 1996 quarter. The Company's life business
has remained stable as the Company is focusing its marketing efforts on its
Independent Living, Personal Freedom and other long-term care plans.
 
    NET INVESTMENT INCOME.  Net investment income earned by the Company for 
the 1997 quarter increased 63.2% to $3,893,298, from $2,386,069 for the 1996 
quarter. This increase was primarily the result of growth in the Company's 
investment assets from the proceeds of the Company's November, 1996, 
$74,750,000 convertible debt issuance and continued premium growth. Interest 
expense includes a charge of $1,167,969, which is due to the interest cost of 
the convertible debt issuance. This cost is excluded from fully-diluted 
earnings per share calculations, as though all of the debt had been 
converted. The additional shares, if converted, are included in the 
fully-diluted earnings per share calculation.
 
<PAGE>

                                                                       Page  9

    BENEFITS TO POLICYHOLDERS.  Total benefits to policyholders in the 1997
quarter increased 28.0% to $25,330,614 compared to $19,786,654 in the 1996
quarter.

Accident and health benefits to policyholders, excluding disability benefits, 
in the 1997 quarter increased 24.7% to $24,057,609 compared to $19,287,695 in 
the 1996 quarter. The Company's accident and health loss ratio (the ratio of 
benefits to policyholders to total accident and health premiums) was 64.8% in 
the 1997 quarter, compared to 65.3% in the 1996 quarter. The Company uses 
independent case managers to control claims in its home health care coverage. 
Prior to 1997, the cost associated with case management was reported as 
general and administrative expense. Management believes that these costs 
impact total benefits expense, and has chosen to report them as benefits to 
policyholders to objectively compare benefits costs in different periods. The 
amounts reported in the 1997 quarter due to case management were approximately 
$200,000 or .5% of premiums. Expenses related to case management in the 1996 
quarter were immaterial and have not been reclassified to benefits. 
Disability benefits were $819,682 in the 1997 quarter, or 49.1% of premiums.
 
Life benefits to policyholders in the 1997 quarter decreased to $453,323, 
compared to $498,959 for the 1996 quarter. The life loss ratio (the ratio of 
claims experience and increases in policy reserves to total life premium) was 
50.7% in the 1997 quarter, compared to 52.7% in the 1996 quarter, and 
reflects the actual claims incurred and actuarial reserves necessary to 
support the portfolio mix of business.
 
    COMMISSIONS.  Commissions to agents increased 26.7% to $12,906,707 in the
1997 quarter compared to $10,186,871 in the 1996 quarter..
 
First year commissions on accident and health business in the 1997 quarter 
increased 22.4% to $8,269,142, compared to $6,756,482 in the 1996 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 68.5% in the 1997 quarter and 67.5% in the 1996 
quarter. First year commissions on life business in the 1997 quarter 
decreased 31.3% to $213,309, compared to $310,272 in the 1996 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 81.5% in 
the 1997 quarter compared to 80.2% in the 1996 quarter.
 
Renewal commissions on accident and health business in the 1997 quarter 
increased 31.5% to $4,025,570, compared to $3,060,449 in the 1996 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 1997 quarter and 15.6% in the 1996 quarter. This 
ratio fluctuates in relation to the age of the policies in force and the 
rates of commissions paid to the agents. The ratio of disability commissions 
to disability premiums was 19.1% in the 1997 quarter, including 59.3% on 
first year premiums and 9.3% on renewal premiums, accounting for $319,384 in 
1997 commissions.
 
    NET POLICY ACQUISITION COSTS DEFERRED.  The net deferred policy acquisition
costs in the 1997 quarter increased 31.7% to $5,492,417 compared to
$4,169,856 in the 1996 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 1997 quarter 

<PAGE>

                                                                       Page 10

increased 50.3% to $4,967,307, compared to $3,305,716 in the 1996 quarter. 
This increase was due to variable expense growth related to the 30% rise in 
premiums, approximately $628,000 related to the operating expense and 
amortization of goodwill of ANIC, and to the amortization of approximately 
$90,000 related to the Company's convertible debt issuance. In addition, the 
Company has incurred additional actuarial and legal fees related to the 
filings of new products in its newly licensed states and has increased its 
management infrastructure to accommodate future growth. The ratio of general 
and administrative expenses to total premiums, excluding the ANIC goodwill 
and debt cost amortization, was 11.9% in the 1997 quarter, compared to 10.8% 
in the 1996 quarter, reflecting the additional costs. Management estimates 
that this ratio will decline as premium growth continues.
 
    PROVISION FOR FEDERAL INCOME TAXES.  The provision for federal income taxes
recorded by the Company for the 1997 quarter increased 21.1% to $1,397,000,
compared to $1,154,000 for the 1996 quarter. The effective tax rates of
approximately 29% and 30% in the 1997 and 1996 quarters, respectively, are 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, 1996, the market value of the Company's
investment portfolio exceeded cost by 1.6% or approximately $3,426,000. At March
31, 1997, the market value of the Company's portfolio represented approximately
99.4% of its cost, with a current unrealized loss of approximately $1,560,000.
The reduction of the portfolio's market value is attributable to first quarter,
1997, increases in interest rates.
 
    As of December 31, 1996, shareholders' equity was increased by 
approximately $2,261,000 due to unrealized gains in the investment portfolio. 
As of March 31, 1997, shareholders' equity was decreased by approximately 
$1,030,000 due to unrealized losses in the investment portfolio.
 
    In November, 1996, the Company contributed $5,000,000 of the net proceeds of
the public offering in July 1995 to Network America. In December, 1996, the
Company contributed an additional $20,000,000 to the surplus of Network America,
$20,000,000 to PTLIC, and $5,000,000 to the surplus of ANIC. These 

<PAGE>

                                                                       Page 11

funds were made available through the November, 1996 issuance of $74,750,000 
convertible, subordinated debt by the Company. The debt issuance was intended 
to provide additional surplus for future subsidiary growth and for 
acquisitions of blocks of business. The Company believes that it has retained 
sufficient proceeds from the debt issuance to meet its interest payment 
obligations, and has not relied upon the dividend paying ability of its 
subsidiaries to meet these obligations. 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 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. In 1996, the Company 
acquired a block of renewal commissions from an agency. In addition to cash, 
the Company entered a two-year agreement to pay an additional $325,000 to the 
seller.
 
    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 the Company's debt
issuance, its 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.

<PAGE>
 
                                                                       Page 12

NEW ACCOUNTING PRINCIPLE
 
    In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share" ("SFAS 128").
SFAS 128 establishes standards for computing and presenting earnings per share,
and simplifies the standards for computing earnings per share previously found
in Accounting Principles Board Opinion No. 15, "Earnings per Share." Primary and
fully diluted earnings per share will be replaced with basic and diluted
earnings per share, and these amounts are required to be shown on the face of
the income statement. In addition, a 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 will be required.
 
    Basic earnings per share excludes dilution and is computed by dividing
income available to common stockholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings per share reflects the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock. This Statement is
effective for financial statements issued for periods ending after December 15,
1997, and requires restatement of all prior-period earnings per share data
presented. Management has determined the impact that SFAS 128 may have on the
financial statements will result in similar statements of earnings per share as
are currently reported.
 
<PAGE>

                                                                       Page 13

                           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
 
(a) A Special Meeting of Shareholders was held on January 28, 1997.
 
(b) The meeting did not involve election of directors.
 
(c) At such meeting, the shareholders voted upon a proposal to amend the
Company's Restated Articles of Incorporation to increase the number of
authorized shares of Common Stock of the Company from 10,000,000 shares to
25,000,000 shares. The results of the voting were as follows:

        5,468,741 Affirmative          1,436,414 Negative
        ---------                      --------- 

        441,427 Withheld               4,477 Abstentions and broker non-votes
        -------                        -----

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:
 
        None.
 
<PAGE>

                                                                       Page 14
                                   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: MAY 8, 1997                  /S/ IRVING LEVIT 
      -----------               ---------------------------------
                                         IRVING LEVIT
                                         PRESIDENT


DATE: MAY 8, 1997                  /S/ MICHAEL F. GRILL 
      -----------               ---------------------------------
                                       MICHAEL F. GRILL
                                       TREASURER
 
<PAGE>


                                                                       Page 15





                                   EXHIBIT 11
                STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
                      for the three months ended March 31, 
                                  (unaudited)

<TABLE>
<CAPTION>
                                                                            1997              1996
                                                                            ----              ----
<S>                                                                    <C>                <C>
Net income........................................................      $  3,419,369       $  2,693,334
Weighted average common shares outstanding........................         7,515,608          6,985,988
Primary earnings per share........................................      $       0.45       $       0.39
                                                                        ------------       ------------
                                                                        ------------       ------------
Net income........................................................      $  3,419,369
Adjustments net of tax:
  Interest expense on convertible debt............................           829,196
  Amortization of debt offering costs.............................            64,466
                                                                         ------------
Fully diluted net income..........................................      $  4,313,031
                                                                         ------------
                                                                         ------------
Weighted average common shares outstanding........................         7,515,608
Common stock equivalents due to dilutive effect of stock
  options.........................................................           226,468
Shares converted from convertible debt............................         2,628,340
                                                                        ------------
Total outstanding shares for fully diluted earnings per share
  computation.....................................................        10,370,416
Fully diluted earnings per share..................................      $       0.42
                                                                        ------------
                                                                        ------------
</TABLE>