<PAGE>


                                      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 September 30, 1996

                                          or

[  ]  Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period 
    ______________________________  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 November 8, 1996 was 7,505,373.

<PAGE>

PART I   FINANCIAL INFORMATION

ITEM 1.  Financial Statements

The registrant's Unaudited Consolidated Balance Sheets, Statements of Income and
Statements of Cash Flows and Notes thereto required under this item are
contained on pages 3 through 8 of this report, respectively.  These financial
statements represent the consolidation of the operations of the registrant, and
its subsidiaries, American Network Insurance Company (ANIC), Senior Financial
Consultants Company and Penn Treaty Life Insurance Company (PTLIC).  ANIC, PTLIC
and its subsidiary, Network America Life Insurance Company (the "Insurers"), are
underwriters of long-term care insurance products.  PTLIC and its subsidiary are
also underwriters of life insurance products.


                                          2

<PAGE>

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

                            CONSOLIDATED BALANCE SHEETS

                                                           SEPTEMBER 30,             DECEMBER 31,
                                                              1996                      1995
                                                              ----                      ----
                                                            (UNAUDITED)
                                ASSETS
<S>                                                        <C>                       <C>
  Investments:
    Bonds, available for sale at market,
      (amortized cost $167,552,583 and
       $136,600,775, respectively)                         $167,883,832              $142,243,341
    Equity securities at market value, (cost of
      $5,145,703 and $2,102,529, respectively)                6,401,816                 2,605,612
    Policy loans                                                 81,461                    79,404
                                                           ------------              -------------
      Total Investments                                     174,367,109               144,928,357
                                                           ------------              -------------
  Cash and cash equivalents                                   9,258,285                 8,881,061
  Property and equipment, at cost, less
    accumulated depreciation of $2,118,965
    and $1,854,065, respectively                              8,161,225                  5,740,353
  Unamortized policy acquisition costs                       76,742,702                 63,133,759
  Receivables from agents, less allowance for
    uncollectable amounts of $231,226                         1,613,175                  1,275,481
  Accrued investment income                                   2,689,463                  2,436,435
  Cost in excess of net assets acquired, less
    accumulated amortization of $258,637 and
    $231,826, respectively                                    5,341,622                  1,197,574
  Receivable from reinsurers                                  9,972,221                  7,730,828
  Present value of future profits acquired                    4,959,000                          -
  Other assets                                                4,167,740                  2,420,422
                                                           -------------             --------------
      Total Asset                                         $  297,272,542             $ 237,744,270

                     LIABILITIES
  Policy reserves:
    Accident and health                                   $   93,227,927             $  62,007,433
    Life                                                       7,855,817                 7,118,848
  Unearned premium reserve                                       511,610                    26,503
  Policy and contract claims                                  57,716,263                50,206,608
  Accounts payable and other liabilities                       4,589,672                 2,681,499
  Mortgages and other debts                                    2,082,926                 2,206,117
  Federal income taxes payable                                   243,586                   183,249
  Deferred income taxes                                       16,856,168                16,206,959
                                                           -------------             --------------
      Total Liabilities                                      183,083,969               140,637,216
                                                           -------------             --------------
  Commitments and contingencies
                SHAREHOLDERS' EQUITY
  Preferred stock, par value $1.00; 5,000,000                    ___                       ___
    shares authorized, none outstanding
  Common stock, par value $.10; 10,000,000
    shares authorized, 8,111,002 and
    7,576,913 shares issued                                     811,100                    757,691
  Additional paid-in capital                                 52,474,377                 41,146,594
  Net unrealized appreciation of securities                   1,047,659                  4,055,788
  Retained earnings                                          61,561,311                 52,852,855
                                                           -------------             --------------
                                                            115,894,447                 98,812,928
  Less 605,629 common shares held in treasury,
    at cost                                                  (1,705,874)                (1,705,874)
                                                              -----------                 ----------
      Total Shareholders' Equity                             14,188,573                 97,107,054
                                                           -------------             --------------
      Total Liabilities and Shareholders' Equity          $  297,272,542             $ 237,744,270
                                                           -------------             --------------
                                                           -------------             --------------
</TABLE>

   SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                       3

<PAGE>

<TABLE>
<CAPTION>


                     PENN TREATY AMERICAN CORPORATION
                                AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS
                                (UNAUDITED)

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

   Net investment income                     2,601,980      2,177,418           7,493,143           5,666,792
   Net realized capital gains                     -218          2,996              92,665              16,254
   Other income                                 88,637        124,601             269,929             256,429
                                               -------        -------           ---------           ---------
                                            35,074,993     28,560,612         102,920,466          81,294,150
 Benefits and expenses:
   Benefits to policyholders                20,161,328     16,387,215          61,779,767          47,498,682
   Commissions                              10,658,991      9,261,009          31,529,578          26,032,354
   Net policy acquisition costs  deferred   -4,053,954     -3,508,846         -13,526,533         -10,134,069
   General and administrative                3,850,155      3,033,698          10,643,236           8,827,055
   Interest                                     36,696         40,702             106,651             286,893
                                                ------         ------             -------             -------
                                            30,653,216     25,213,778          90,532,699          72,510,915
                                            ----------     ----------          ----------          ----------

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


 Earnings per share                              $0.43          $0.35               $1.23               $1.15

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

</TABLE>

 SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                        4

<PAGE>
 
                       PENN TREATY AMERICAN CORPORATION
                                AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOW
                                   (UNAUDITED)

                                                       NINE MONTHS ENDED
                                                          SEPTEMBER 30,
                                                      --------------------
                                                      1996            1995
                                                      ----            -----
Net cash flow from operating activities:
  Net income                                        $8,673,491     $6,148,235
  Adjustments to reconcile net income to cash
    provided by operations:
    Amortization of intangible assets                   76,477         26,820
    Policy acquisition costs, net                  (13,526,533)    (10,134,069)
    Deferred income taxes                            1,801,308      1,233,194
    Depreciation expense                               271,939        198,390
    Net realized capital (gains)                       (92,665)      (16,254)
  Increase (decrease) due to change in:
    Receivables from agents                           (325,255)      (122,697)
    Receivable from reinsurers                        (791,562)      (950,540)
    Policy and contract claims                       7,062,544      7,357,312
    Policy and unearned premium reserves            20,926,785     13,864,199
    Accounts payable and other liabilities           1,426,719        751,560
    Federal income tax payable                          79,711      1,358,866
    Accrued investment income                          (71,863)      (572,558)
    Other, net                                      (1,061,739)      (593,263)
                                                    ----------    -----------
     Cash provided by operations                    24,449,359    18,549,215

Cash flow from (used in) investing activities:
  Acquisition of business, net of cash received     (1,518,102)             0
  Proceeds from sales of investments                 8,701,987      3,844,760
  Maturities of investments                          7,851,943      4,320,808
  Purchase of investments                          (37,432,259)   (43,445,886)
  Acquisition of property and equipment             (2,076,888)      (641,974)
                                                    ----------    -----------
      Cash used in investing...................    (24,473,319)   (35,922,292)

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

Increase in cash                                       377,224      4,578,825

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



SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                                          5

<PAGE>


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

The Consolidated Financial Statements should be read in conjunction with these
notes and with the Notes to Consolidated Financial Statements included in Penn
Treaty American Corporation's ("the Company's") Annual Report on Form 10-K for
the year ended December 31, 1995.

In the opinion of management, the summarized financial information reflects all
adjustments (consisting only of normal recurring adjustments) which are
necessary for a fair presentation of the financial position and results of
operations for the interim periods. Certain prior period amounts have been
reclassified to conform with current period presentation.

1.  INVESTMENTS

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


                                          6

<PAGE>

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

 
<TABLE>
<CAPTION>

                                               SEPTEMBER 30, 1996                     DECEMBER 31, 1995
                                        ---------------------------------        ------------------------------
                                           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 corporations
     And Agencies                       $ 138,155,892       $137,677,532        $ 103,119,270       $  107,160,841

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

   debt Securities issued by
     Foreign governments                      424,055            440,286              449,055              480,500

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

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

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

   Policy Loans                                81,461             81,632               79,404               79,404
                                        --------------      -------------        -------------        -------------

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

   Net Unrealized gain (loss)               1,587,362          6,145,649        $ 174,367,280        $ 144,928,357
                                        --------------      -------------        -------------        -------------

</TABLE>

                                      7
<PAGE>

2.  MERGER AGREEMENTS

    On August 30, 1996, the Company, consummated its acquisition of Health
    Insurance of Vermont ("HIVT") as a reverse triangular merger with its newly
    formed subsidiary, Mayfly, Inc. ("Mayfly").  The resultant wholly-owned
    subsidiary of the Company was incorporated under the state of Vermont as
    American Network Insurance Company ("ANIC").

    On June 25, 1996, the Company signed a letter of intent to purchase 100% of
    the outstanding common stock of Merrion Insurance Company, Inc.
    ("Merrion"), a licensed New York domiciled company.  On August 23, 1996,
    the Company rescinded its intention to purchase Merrion.

3.  SUBSEQUENT EVENTS

    On November 7, 1996, the Company announced that it plans to offer
    $60,000,000 aggregate principal amount of Convertible Subordinated Notes
    due 2003 (the "Notes").  The Company will grant to the initial purchasers
    the option to purchase up to an additional $9,000,000 principal amount of
    the notes solely to cover over-allotments.  The Notes will be convertible
    into shares of Common Stock of the Company at a fixed conversion price per
    share to be determined, subject to adjustment in certain circumstances.
    The notes will be redeemable by the Company at declining redemption prices
    commencing in November 1999.  The purpose of the proposed offering is to
    provide funds to support future growth.  The Company intends to register
    the notes and the underlying Common Stock within 90 days of the first
    issuance of the Notes.

    The Notes will be offered through initial purchasers in the United States
    only to qualified institutional buyers in reliance on Rule 144a under the
    Securities Act of 1933, as amended (the "Act") and to a limited number of
    institutional "Accredited Investors" as defined in the act.  The remainder
    of the Notes will be offered by the initial purchasers outside the United
    States in reliance on Regulation S under the Act.

    The notes issued and sold in reliance on Rule 144a are expected to be
    eligible for trading on the PORTAL market of the National Association of
    Securities Dealers, Inc.

    THE NOTES AND THE UNDERLYING COMMON STOCK OFFERED HAVE NOT BEEN REGISTERED
    UNDER THE ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
    REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS.



                                          8

<PAGE>


ITEM 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations.

THIRD QUARTER AND THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:

    ACCIDENT AND HEALTH PREMIUMS.  First year accident and health premiums
earned in the three month period ended September 30, 1996 (the 1996 quarter),
including long-term care and Medicare supplement, increased 11.1% to
$10,974,991, compared to $9,877,625 in the same period in 1995 (the 1995
quarter). First year long-term care premiums earned in the 1996 quarter
increased 10.7% to $10,864,391, compared to $9,815,629 in the 1995 quarter.
This increase was primarily attributable to increased sales of home health care
policies, which increased to $4,851,993 for the 1996 quarter from $3,968,734 for
the same period in 1995.  Premiums from sales of nursing home care policies
decreased from $5,846,895 in the 1995 quarter to $6,012,398 in the 1996 quarter.
These results reflect increased market demand for the Company's home health care
policies, particularly its Independent Living policy first introduced in the
fourth quarter of 1994, relative to its nursing home policies.  Management
believes this trend indicates more nursing home care insurance is being
purchased by policyholders as riders to home health care policies, rather than
as a stand-alone or lead policy.  First year Medicare supplement premiums earned
by the Company in the 1996 quarter increased to $110,600 from $61,996 in the
1995 quarter.  Total new business for this product remains low due to the
Company's continued reduced emphasis of its Medicare supplement products because
of lower profit margins associated with this line of business.

Renewal accident and health premiums earned by the Company in the 1996 quarter
including long-term care and Medicare supplement, increased 27.9% to
$19,988,957, compared to $15,631,808 in the same period of 1995.  Renewal long-
term care premiums earned in the 1996 quarter increased 29.3% to $19,386,718,
compared to $14,989,221 in the 1995 quarter.  This increase reflects renewals of
a larger base of in-force policies, as well as the effect of rate increases the
Company received in various states.  The Company believes that this increase
also reflects an increase in persistency, or renewals as a percentage of total
prior year business.  Renewal Medicare supplement premiums in the 1996 quarter
decreased 6.3% to $602,239, compared to $642,587 in the 1995 quarter.  This
trend is consistent with the Company's decision not to actively pursue Medicare
supplement business.

In addition, ANIC, which the Company acquired on August 30, 1996, generated
Accident and Health premiums, comprised primarily of long-term disability
coverage, of $547,012 during the 1996 quarter.

    LIFE PREMIUMS.  First year life premiums earned by the Company in the 1996
quarter decreased 9.5% to $345,040, compared to $381,391 in the 1995 quarter.
The Company's life business has remained stable as the Company is focusing its
marketing efforts on its Independent Living policy and its other long-term care
products.  Renewal life premiums earned by the Company in the 1996 quarter
increased to $528,594,


                                          9

<PAGE>

compared to $364,773 in the 1995 quarter.  This increase was primarily the
result of renewals of first-year policies written in 1995.

    NET INVESTMENT INCOME.  Net investment income earned by the Company,
excluding ANIC, for the 1996 quarter increased 16.1% to $2,527,870, from
$2,177,418 for the 1995 quarter.  This increase was primarily the result of
growth in the Company's investment assets due to continued premium growth, which
was partially offset by a decrease in the average yield on the Company's
investments, at cost, to 6.43% for the 1996 quarter from 6.91% for the same
period in 1995.  ANIC's average investments of $13,152,621, from an average
yield of 6.87%, produced an additional $74,110 for the 1996 quarter.

    BENEFITS TO POLICYHOLDERS. Total benefits to policyholders in the 1996
quarter increased 23.0% to $20,161,328 compared to $16,387,215 in the 1995
quarter.

Excluding ANIC, accident and health benefits to policyholders in the 1996
quarter increased 21.2% to $19,416,579 compared to $16,021,632 in the 1995
quarter.  The Company's accident and health loss ratio (the ratio of benefits to
policyholders to total accident and health premiums) was 62.7% in the 1996
quarter, compared to 62.8% in the 1995 quarter.  As management expected, the
accelerated claims reported throughout 1996, due to the Company's offer to waive
a policy elimination period if the insured agrees to utilize case management,
remained higher at the start of the quarter, but showed a declining trend by the
end of the 1996 quarter.  Management expects that this acceleration of reported
claims has all been recognized by the end of the 1996 quarter.  Benefits for
long-term disability from ANIC totaled $260,320 for the 1996 quarter.

Life benefits to policyholders in the 1996 quarter increased to $484,429,
compared to $365,583 for the 1995 quarter.  The life loss ratio (the ratio of
claims experience and increases in policy reserves to total life premium) was
55.4% in the 1996 quarter, compared to 49.0% in the 1995 quarter, and reflects
the actual claims incurred and actuarial reserves necessary to support the
portfolio mix of business.

    COMMISSIONS.  Commissions to agents increased 14.4% to $10,591,302 in the
1996 quarter compared to $9,261,009 in the 1995 quarter. In addition, ANIC
commissions on long-term disability policies generated $67,689 in the 
1995 quarter.

For the Company, excluding ANIC, first year commissions on accident and health
business in the 1996 quarter increased 9.2% to $7,116,404, compared to
$6,517,477 in the 1995 quarter, corresponding to the increase in first year
accident and health premiums.  The ratio of first year accident and health
commissions to first year accident and health premiums was 64.8% in the 1996
quarter and 66.0% in the 1995 quarter.  First year commissions on life business
in the 1996 quarter decreased 26.3% to $227,598, compared to $308,743 in the
1995 quarter, directly reflecting the Company's reduction in first year life
premiums.  The ratio of first year life commissions to first year life premiums
was 66.0% in the 1996 quarter compared to 81.0% in the 1995 quarter.


                                          10

<PAGE>


Renewal commissions on accident and health business in the 1996 quarter
increased 33.2% to $3,182,832, compared to $2,389,987 in the 1995 quarter,
consistent with the increase in renewal premiums discussed above.  The ratio of
renewal accident and health commissions to renewal accident and health premiums
was 15.9% in the 1996 quarter and 15.3% in the 1995 quarter.  This ratio
fluctuates in relation to the age of the policies in force and the rates of
commissions paid to the agents.

    NET POLICY ACQUISITION COSTS DEFERRED.  The net deferred policy acquisition
costs in the 1996 quarter increased 15.5% to $4,053,954 compared to $3,508,846
in the 1995 quarter, consistent with the growth of the Company's business.  This
deferral is net of amortization, which decreases or increases as the Company's
actual persistency is higher or lower than the persistency assumed for reserving
purposes.  The deferral of policy acquisition costs has remained consistent with
the growth of premiums, and the growth in amortization of policy acquisition
costs has been modified by improved persistency.

    GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses
in the 1996 quarter increased 26.9% to $3,850,155, compared to $3,033,698 in the
1995 quarter.  This increase was due to $167,414 related to the operating
expense and amortization of goodwill of ANIC and to the increase in the growth
of the Company's business.  The ratio of general and administrative expenses to
total premiums, excluding ANIC, remained at 11.6% in the 1996 quarter.  As the
Company utilizes, and expenses, case management for claims, expenses increase
while claims costs are expected to decrease by a greater amount.

    NET INCOME.  Net income of $3,097,501, including an ANIC contribution of
$84,996,  for the 1996 quarter was $727,667 or 30.7% above the same period for
1995 of $2,342,834.  Net income includes income tax provisions of $1,324,276 and
$1,004,000, for the 1996 and 1995 quarters, respectively.  Income before federal
income taxes increased in the 1996 quarter by $1,047,943 or 31.1% to $4,421,777.
This increase was primarily attributable to the continuing growth of premiums
earned.


NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995:

ACCIDENT AND HEALTH PREMIUMS.  First year accident and health premiums earned by
the Company in the nine month period ended September 30, 1996 (the "1996
period"), increased 21.0% to $32,195,941, compared to $26,603,300 in the same
period in 1995 (the "1995 period"). First year long-term care premiums in the
1996 period increased 20.2% to $31,750,676, compared to $26,410,217 in the 1995
period. This increase was primarily attributable to increased sales of home
health care policies, which increased to $15,160,511 for the 1996 period from
$9,217,563 for the 1995 period. Premiums from sales of nursing home care
policies decreased from $17,192,654 in the 1995 period to $16,590,165 in the
1996 period. Management believes that the increase in the sale of home health
care policies reflects the continued growth in the home health care market.
Management further believes that the decrease in the sale of nursing home
policies primarily resulted from nursing home



                                          11

<PAGE>

policies increasingly being sold as riders to home care policies as opposed to
separate stand-alone policies. First year Medicare supplement premiums earned by
the Company in the 1996 period increased to $445,265 from $193,083 in the 1995
period. The Company places reduced emphasis upon this product due to reduced
profitability caused by regulation.

    Renewal accident and health premiums earned by the Company in the 1996
period increased 28.6% to $59,635,823, compared to $46,363,391 in the 1995
period. Renewal long-term care premiums in the 1996 period increased 30.4% to
$57,677,311, compared to $44,241,488 in the 1995 period. This increase reflects
higher persistency and growth of in-force premiums. Renewal Medicare supplement
premiums earned by the Company in the 1996 period decreased 7.7% to $1,958,512,
compared to $2,121,903 in the 1995 period. This trend is consistent with the
Company's decision not to actively pursue Medicare supplement business.

    In addition, ANIC, which the Company acquired on August 30, 1996, generated
accident and health premiums, comprised primarily of long-term disability
coverage, of $547,012 during the 1996 period.

 LIFE PREMIUMS.  First year life premiums earned by the Company decreased 13.5%
to $1,093,827, in the 1996 period, compared to $1,264,120 in the 1995 period.
The Company's life business has remained stable as the Company is focusing its
marketing efforts on its Independent Living policy and its other long-term care
products. Renewal life premiums in the 1996 period increased to $1,592,126,
compared to $1,123,864 in the 1995 period. This increase was primarily the
result of renewals of first-year policies written in 1995.

    In order to enhance the marketability of certain products, the Company has
recently emphasized offering new policy holders a monthly premium payment plan.
The Company believes that the lower monthly payment is more attractive than the
historical larger annual premium payment and that offering the monthly payment
option enables it to sell more policies. However, because the Company records
premiums when due, and a higher percentage of new policy holders opted for the
monthly payment option in the 1996 period compared with the 1995 period,
management believes that it has experienced a delay in premium recognition of
approximately $3,750,000 throughout the 1996 period.

 NET INVESTMENT INCOME.  Net investment income earned by the Company for the
1996 period increased 32.2% to $7,493,143 from $5,666,792 for the 1995 period.
This increase was primarily the result of growth in the Company's investment
assets due to continued premium growth and additional funds of approximately
$26,000,000 from the Company's public offering in July 1995, which were
partially offset by a decrease in the average yield at cost on the Company's
investments to 6.67% for the 1996 period from 6.69% for the 1995 period.

 BENEFITS TO POLICYHOLDERS.  Benefits to policyholders in the 1996 period
increased 30.1% to $61,779,767, including ANIC expenses of $260,320, compared to
$47,498,682 in the 1995 period. Accident and health benefits to policyholders in
the 1996 period increased 30.1% to



                                          12

<PAGE>

$60,274,779 compared to $46,314,600 in the 1995 period. The Company's accident
and health loss ratio was 65.2% in the 1996 period, compared to 63.5% in the
1995 period. This increase in loss ratio was due, in part, to the increase in
premium and policies of the Company's Independent Living policy which is
reserved for at a higher rate, and also to improved persistency. In addition,
management believes that claims were reported more quickly throughout the 1996
period due to the Company's offer to waive a policy elimination period if the
insured agreed to utilize a Case Manager. Management expects that this
acceleration of reported claims will all be recognized by the end of the 1996
period.

    Life benefits to policyholders in the 1996 period increased to $1,504,988,
compared to $1,184,082 for the 1995 period. The life loss ratio was 56.0% in the
1996 period, compared to 49.6% in the 1995 period. This increase relates to the
maturing of the life products that the Company first introduced in 1993.

 COMMISSIONS.  Commissions to agents increased 20.9% to $31,461,889 in the 1996
period compared to $26,032,354 in the 1995 period. In addition, ANIC commissions
on long-term disability policies generated $67,689 of expenses in the 1996
period.

    For the Company, excluding ANIC, first year commissions on accident and
health business in the 1996 period increased 19.7% to $21,027,007, compared to
$17,562,104 in the 1995 period, corresponding to the increase in first year
accident and health premiums. The ratio of first year accident and health
commissions to first year accident and health premiums was 65.3% in the 1996
period and 66.0% in the 1995 period. First year commissions on life business in
the 1996 period decreased 17.3% to $806,627, compared to $975,343 in the 1995
period, directly reflecting the Company's reduction in first year life premiums.
The ratio of first year life commissions to first year life premiums was 73.7%
in the 1996 period compared to 77.2% in the 1995 period.

    Renewal commissions on accident and health business in the 1996 period
increased 27.9% to $9,440,753, compared to $7,381,518 in the 1995 period,
remaining consistent with the increase in renewal premiums discussed above. The
ratio of renewal accident and health commissions to renewal accident and health
premiums was 15.8% in the 1996 period and 15.9% in the 1995 period. This ratio
fluctuates in relation to the age of the policies in force and the rates of
commissions paid to the producing agents.

 NET POLICY ACQUISITION COSTS DEFERRED.  The net deferred policy acquisition
costs in the 1996 period increased 33.5% to $13,526,533 compared to $10,134,069
in the 1995 period, consistent with the growth of the Company's business. This
deferral is net of amortization, which decreases or increases as the Company's
actual persistency is higher or lower than the persistency assumed for reserving
purposes. The deferral of policy acquisition costs has remained consistent with
the growth of premiums, and the growth in amortization of policy acquisition
costs has been modified by improved persistency.

 GENERAL AND ADMINISTRATIVE EXPENSES.  General and administrative expenses in
the 1996 period increased 18.7% to $10,475,822, compared to $8,827,055 in the
1995 period. ANIC


                                          13

<PAGE>

expenses accounted for an additional $167,414 in the 1996 period. The ratio of
general and administrative expenses to total revenues decreased to 10.3% in the
1996 period, compared to 10.9% in the 1995 period due to increases in investment
income and operating efficiencies realized with premium growth throughout the
1996 period.

 NET INCOME.  Net income of $8,673,491 (including a contribution of $84,996 from
ANIC) for the 1996 period was $2,525,256 or 41.1% above the 1995 period of
$6,148,235. Net income includes income tax provisions of $3,714,276 and
$2,635,000, for the 1996 period and 1995 period, respectively. Income before
federal income taxes increased in the 1996 period by $3,604,533 or 41.0% to
$12,387,767. This increase was primarily attributable to the continuing growth
of premiums earned.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's consolidated liquidity requirements have historically been
created and met from the operations of its insurance subsidiaries. The Company's
primary sources of cash are premiums and investment income. The Company has
provided, and may continue to provide, cash through public offerings of its
common stock, capital markets activities or debt instruments. The primary uses
of cash are policy acquisition costs (principally commissions), payments to
policyholders, investment purchases and general and administrative expenses.

    Statutory requirements allow insurers to pay dividends only from statutory
earnings as approved by the state insurance commissioner. Statutory earnings are
generally lower than publicly-reported earnings due to the immediate or
accelerated recognition of all costs associated with premium growth and benefit
reserves. The Company has not and does not intend to pay shareholder dividends
in the near future due to these requirements, choosing to retain statutory
surplus to support continued premium growth.

    The Company invests in securities and other investments authorized by
applicable state laws and regulations and follows an investment policy designed
to maximize yield to the extent consistent with liquidity requirements and
preservation of assets. On December 31, 1995, the average maturity of the
Company's bond portfolio was 6.4 years, and its market value exceeded cost by
4.1% or approximately $5,643,000. On December 31, 1994, the average maturity of
the Company's portfolio was 6.9 years and its market value was below cost by
4.4% or approximately $4,165,000. The Company's equity portfolio exceeded cost
by $503,083 or 23.9% in 1995 and $52,780 or 6.0% in 1994. At September 30, 1996,
the average maturity of the Company's bond portfolio was 6.3 years, and its
market value represented approximately 100.2% of its cost, with a current gain
of $413,907.

    In December 1994, a loan was extended to the Company by a bank in the
amount of $4,000,000. The proceeds of the loan were contributed to the surplus
of PTLIC in the form of cash to strengthen its overall capital position. The
Company repaid this loan as required by the loan agreement, with a portion of
the proceeds of the Company's public offering of



                                          14

<PAGE>

2,300,000 shares of Common Stock. The public offering was consummated on July 6,
1995, and the Company realized net proceeds of approximately $26,000,000,
including the proceeds from the exercise of the underwriters' over-allotment
option.

    On January 1, 1994, the Company adopted SFAS 115. The cumulative effect of
adoption of SFAS 115 was an increase in shareholders' equity of $3,528,512, net
of taxes, for unrealized gains of $5,040,731 in the investment securities
available for sale portfolio. During the year ended December 31, 1994, the
Company experienced a decrease in unrealized gains of $9,205,393. As of
December 31, 1994, shareholders' equity was decreased by $2,713,842 due to
unrealized losses of $4,111,882 in the investment portfolio. As of December 31,
1995, shareholders' equity was increased by $4,055,788 due to unrealized gains
of $6,145,649 in the investment portfolio. As of September 30, 1996,
shareholders' equity was increased by $1,047,659 due to unrealized gains of
$1,587,362 in the investment portfolio.

    During 1993, the Company contributed $2,000,000 in bonds to PTLIC and
Network America. During 1994, the Company contributed $4,000,000 in cash to
PTLIC. The capital position of PTLIC and Network America was further improved by
the contribution of $14,000,000 of the net proceeds of the public offering in
1995 to the capital and surplus of PTLIC and Network America during the third
quarter of 1995. In November 1996, the Company contributed an additional
$5,000,000 of the net proceeds of the public offering in July 1995 to Network
America. The Company believes that its insurance subsidiaries' capital and
surplus presently meet or exceed the requirements in all jurisdictions in which
they are licensed.

    The Company's debt currently consists primarily of a mortgage note in the
approximate amount of $2,000,000. This note is currently amortized over 12
years, and has a balloon payment due on the remaining outstanding balance in
September 1998. Although the note carries a variable interest rate, the Company
has entered into an amortizing swap agreement, with a notional amount equal to
the outstanding debt, which has the effect of converting the note to a fixed
rate of interest.

    On November 7, 1996, the Company announced that it plans to offer
$60,000,000 aggregate principal amount of Convertible Subordinated Notes due
2003 (the "Notes").  The Company will grant to the initial purchasers the option
to purchase up to an additional $9,000,000 principal amount of the Notes solely
to cover over-allotments.  The Notes will be convertible into shares of Common
Stock of the Company at a fixed conversion price per share to be determined,
subject to adjustment in certain circumstances.  The Notes will be redeemable by
the Company at declining redemption prices commencing in November 1999.  The
purpose of the proposed offering is to provide funds to support future growth.
The Company intends to register the Notes and the underlying Common Stock within
90 days of the first issuance of the Notes.

    The Notes will be offered through initial purchasers in the United States
only to qualified institutional buyers in reliance on Rule 144A under the
Securities Act of 1933,


                                          15

<PAGE>

as amended (the "Act") and to a limited number of institutional "accredited
investors" as defined in the Act.  The remainder of the Notes will be offered by
the initial purchasers outside the United States in reliance on Regulation S
under the Act.

    The Notes issued and sold in reliance on Rule 144A are expected to be
eligible for trading on the PORTAL Market of the National Association of
Securities Dealers, Inc.

    THE NOTES AND THE UNDERLYING COMMON STOCK OFFERED HAVE NOT BEEN REGISTERED
UNDER THE ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT
REGISTRATION OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS.

    The Company's continued growth is dependent upon its ability to
(i) continue marketing efforts to expand its historical markets, (ii) continue
to expand its network of agents and effectively market its products in states
where its insurance subsidiaries are currently licensed and (iii) fund such
marketing and expansion while at the same time maintaining minimum statutory
levels of capital and surplus required to support such growth. Management
believes that the funds necessary to accomplish the foregoing, including funds
required to maintain adequate levels of statutory surplus in the Company's
insurance subsidiaries can be met for the foreseeable future by funds generated
from this offering, the Company's public offering in 1995 and from operations.

    In the event (i) the Company fails to maintain minimum loss ratios
calculated in accordance with statutory guidelines, (ii) the Company fails to
meet other requirements mandated and enforced by regulatory authorities,
(iii) the Company has adverse claims experience in the future, (iv) the Company
is unable to obtain additional financing to support future growth, or (v) the
economy continues to effect the buying powers of senior citizens, the Company's
results of operations, liquidity and capital resources could be adversely
affected.


                                          16

<PAGE>


                             PART II   OTHER INFORMATION

ITEM 1.  Legal Proceedings

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

ITEM 2.  Changes in Securities

Not Applicable

ITEM 3.  Defaults Upon Senior Securities

Not Applicable

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

None

ITEM 5.  Other Information

    On November 7, 1996, the Company announced that it plans to offer
$60,000,000 aggregate principal amount of Convertible Subordinated Notes due
2003 (the "Notes").  The Company will grant to the initial purchasers the option
to purchase up to an additional $9,000,000 principal amount of the Notes solely
to cover over-allotments.  The Notes will be convertible into shares of Common
Stock of the Company at a fixed conversion price per share to be determined,
subject to adjustment in certain circumstances.  The Notes will be redeemable by
the Company at declining redemption prices commencing in November 1999.  The
purpose of the proposed offering is to provide funds to support future growth.
The Company intends to register the Notes and the underlying Common Stock within
90 days of the first issuance of the Notes.

    The Notes will be offered through initial purchasers in the United States
only to qualified institutional buyers in reliance on Rule 144A under the
Securities Act of 1933, as amended (the "Act") and to a limited number of
institutional "accredited investors" as defined in the Act.  The remainder of
the Notes will be offered by the initial purchasers outside the United States in
reliance on Regulation S under the Act.

    The Notes issued and sold in reliance on Rule 144A are expected to be
eligible for trading on the PORTAL Market of the National Association of
Securities Dealers, Inc.


                                          17


<PAGE>


THE NOTES AND THE UNDERLYING COMMON STOCK OFFERED HAVE NOT BEEN REGISTERED UNDER
THE ACT AND MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION
OR AN APPLICABLE EXEMPTION FROM REGISTRATION REQUIREMENTS.

ITEM 6.  Exhibits and Reports on Form 8-K

(a) Exhibits:

    Exhibit 11 -    Earnings Per Share Calculation
    Exhibit 27 -    Financial Data Schedule

(b) Reports on Form 8-K:
    The Company filed one report on Form 8-K during the quarter ending
September 30, 1996, pursuant to Items 2 and 7 of that form.  No financial
statements were filed as part of that report.



                                          18

<PAGE>

                                      SIGNATURES

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

                        PENN TREATY AMERICAN CORPORATION
                                        Registrant


Date November 8, 1996             /s/ Irving Levit
    -------------------      ----------------------------------------
                                       Irving Levit
                                       President

Date November 8, 1996           /s/ Michael F. Grill
     -------------------      -----------------------------------------
                                       Michael F. Grill
                                       Treasurer


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