UNITED STATES 


SECURITIES AND EXCHANGE
COMMISSION 


WASHINGTON, DC 20549

# FORM 10-Q

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

| | For
the quarterly period ended March 31, 2005
| | ---------------------------------------------

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
001-14681

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# PENN TREATY AMERICAN
CORPORATION 

3440 Lehigh Street,
Allentown, PA 18103 


(610) 965-2222

``

|                             |  |                       
|---------------------------- |  | ----------------------
|Incorporated in Pennsylvania |  | I.R.S. Employer ID No.
|                             |  | 23-1664166            

---

| | 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 [ ]
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of
the Exchange Act).    Yes [ ]   No [X]
| | -----------------------------------------------------------------------------------------------------------------------------------------

| | The
number of shares outstanding of the Registrants common stock, par value $.10 per
share, as of June 13, 2005 was 49,634,555.
| | --------------------------------------------------------------------------------------------------------------------------------



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# PART I FINANCIAL
INFORMATION

Item 1. Financial
Statements

Penn Treaty American Corporation is
one of the leading providers of long-term nursing home and home health care insurance. Our
unaudited Consolidated Balance Sheets, Statements of Income and Comprehensive Income and
Statements of Cash Flows and Notes thereto required under this item are contained on pages
3 through 13 of this report. Our financial statements represent the consolidation
of our operations and those of our subsidiaries: Penn Treaty Network America Insurance
Company, American Network Insurance Company, American Independent Network Insurance
Company of New York, United Insurance Group Agency, Inc., Network Insurance Senior Health
Division and Senior Financial Consultants Company, which are underwriters and marketers of
long-term care insurance, Medicare supplement insurance and other senior-market products.



---

|PENN TREATY AMERICAN CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(amounts in thousands, except per share data)
|---------------------------------------------------------------------------------------------------------------------------
|
|ASSETS                                                                                                                     
|Investments:                                                                                                               
|Bonds, available for sale at market (cost of $59,443 and $58,945 respectively) (1)                                         
|Policy loans                                                                                                               
|                                                                                                                           
|Total investments                                                                                                          
|Cash and cash equivalents (1)                                                                                              
|Property and equipment, at cost, less accumulated depreciation of                                                          
|$11,139 and $10,727, respectively (see Note 8)                                                                             
|Unamortized deferred policy acquisition costs                                                                              
|Receivables from agents, less allowance for                                                                                
|uncollectible amounts of $444 and $474, respectively                                                                       
|Accrued investment income                                                                                                  
|Goodwill                                                                                                                   
|Receivable from reinsurers                                                                                                 
|Corporate owned life insurance                                                                                             
|Notional experience account due from reinsurer                                                                             
|Other assets                                                                                                               
|                                                                                                                           
|Total assets                                                                                                               
|                                                                                                                           
|LIABILITIES                                                                                                                
|Policy reserves:                                                                                                           
|Accident and health                                                                                                        
|Life                                                                                                                       
|Claim reserves                                                                                                             
|Federal income tax payable                                                                                                 
|Accounts payable and other liabilities                                                                                     
|Long-term debt, less discount of $1,256 and $1,426, respectively                                                           
|Preferred interest on early conversion                                                                                     
|Deferred income taxes                                                                                                      
|                                                                                                                           
|Total liabilities                                                                                                          
|                                                                                                                           
|Commitments and contingencies (see note 4)                                                                                 
|SHAREHOLDERS' EQUITY                                                                                                       
|                                                                                                                           
|Common stock, par value $.10; 150,000 shares authorized;                                                                   
|47,851 and 44,091 shares issued, respectively                                                                              
|Preferred stock, par value $1.00; 5,000 shares authorized, none outstanding                                                
|Additional paid-in capital                                                                                                 
|Accumulated other comprehensive (loss) income                                                                              
|Retained earnings                                                                                                          
|Less 915 common shares held in treasury, at cost                                                                           
|                                                                                                                           
|Total shareholders' equity                                                                                                 
|                                                                                                                           
|Total liabilities and shareholders' equity                                                                                 
|                                                                                                                           

(1) Cash and
investments of $32,971 and $31,497 respectively, are restricted as to use (see Note 6). 



See accompanying notes
to consolidated financial statements.



---

|PENN TREATY AMERICAN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Income and Comprehensive Income
(amounts in thousands, except per share data)
|----------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
|Revenues:                                                                                                                                                 
|Premium revenue                                                                                                                                           
|Net investment income                                                                                                                                     
|Net realized capital (loss) gain                                                                                                                          
|Market (loss) gain on notional experience account                                                                                                         
|Change in preferred interest on early conversion liability                                                                                                
|Other income                                                                                                                                              
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Benefits and expenses:                                                                                                                                    
|Benefits to policyholders                                                                                                                                 
|Commissions                                                                                                                                               
|Net policy acquisition costs amortized                                                                                                                    
|General and administrative expense                                                                                                                        
|Litigation accrual expense                                                                                                                                
|Expense and risk charges on reinsurance                                                                                                                   
|Excise tax expense                                                                                                                                        
|Interest expense                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|                                                                                                                                                          
|Income before federal income taxes                                                                                                                        
|Federal income tax provision                                                                                                                              
|                                                                                                                                                          
|Net income                                                                                                                                                
|                                                                                                                                                          
|Other comprehensive (loss) income:                                                                                                                        
|Unrealized holding (loss) gain arising during period                                                                                                      
|Income tax benefit (provision) from unrealized holdings                                                                                                   
|Reclassification of losses (gains) included in net income                                                                                                 
|Income tax (provision) benefit from reclassification adjustment                                                                                           
|                                                                                                                                                          
|Comprehensive income                                                                                                                                      
|                                                                                                                                                          
|                                                                                                                                                          
|Basic earnings per share from net income                                                                                                                  
|Diluted earnings per share from net income                                                                                                                
|                                                                                                                                                          
|Weighted average number of shares outstanding                                                                                                             
|Weighted average number of shares and share equivalents                                                                                                   

See accompanying notes
to consolidated financial statements.



---

|PENN TREATY AMERICAN CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited)
(amounts in thousands)
|--------------------------------------------------------------------------------------------------------------------------
|
|
|Cash flow from operating activities:                                                                                      
|Net income                                                                                                                
|Adjustments to reconcile net income to cash                                                                               
|provided by operations:                                                                                                   
|Depreciation and amortization                                                                                             
|Change in preferred interest on early conversion liability                                                                
|Net realized capital gains                                                                                                
|Notional experience account due from reinsurer                                                                            
|Investment credit on corporate owned life insurance                                                                       
|Equity issued for interest expense from long-term debt conversions                                                        
|Increase (decrease) due to change in:                                                                                     
|Receivables from agents                                                                                                   
|Receivable from reinsurers                                                                                                
|Policy acquisition costs, net                                                                                             
|Deferred income taxes                                                                                                     
|Claim reserves                                                                                                            
|Policy reserves                                                                                                           
|Accounts payable and other liabilities                                                                                    
|Accrued investment income                                                                                                 
|Other, net                                                                                                                
|                                                                                                                          
|Cash provided by operations                                                                                               
|                                                                                                                          
|Cash flow from investing activities:                                                                                      
|Proceeds from sales of bonds                                                                                              
|Proceeds from maturities of bonds                                                                                         
|Purchase of bonds                                                                                                         
|Change in policy loans                                                                                                    
|Death benefits received from corporate owned life insurance                                                               
|Deposits to notional experience account due from reinsurer                                                                
|Proceeds from sale of property and equipment                                                                              
|Acquisition of property and equipment                                                                                     
|                                                                                                                          
|Cash used in investing                                                                                                    
|                                                                                                                          
|Cash flow from financing activities:                                                                                      
|Issuance of long-term debt                                                                                                
|                                                                                                                          
|Cash provided by financing                                                                                                
|                                                                                                                          
|Decrease in cash and cash equivalents                                                                                     
|Cash balances:                                                                                                            
|Beginning of period                                                                                                       
|                                                                                                                          
|End of period                                                                                                             
|                                                                                                                          

See accompanying notes
to consolidated financial statements.



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PENN TREATY AMERICAN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2005(unaudited) (amounts in
thousands, except per share data)

The Consolidated Financial Statements
should be read in conjunction with these notes and with the Notes to Consolidated
Financial Statements included in the Annual Report on Form 10-K for the year ended
December 31, 2004 of Penn Treaty American Corporation (the Company).

The
summarized financial information reflects all adjustments (consisting only of normal
recurring adjustments) that are necessary for a fair presentation of the financial
position and results of operations, comprehensive income and cash flows for the interim
periods.

1.   Stock Based Employee
Compensation:

The
following table reflects net income and basic and diluted earnings per share as reported
and pro-forma as if the Company had adopted the fair value based method of accounting for
its stock-based employee compensation awards:

|                                            | Three Months Ended March 31,
|------------------------------------------- | ----------------------------
|
|Net income as reported                      |                             
|Total stock-based employee                  |                             
|compensation expense determined under       |                             
|fair value based method for all awards, net |                             
|of related tax effects                      |                             
|                                            |                             
|Pro forma net income                        |                             
|                                            |                             
|                                            |                             
|Earnings per share:                         |                             
|Basic - as reported                         |                             
|Basic - pro forma                           |                             
|Diluted - as reported                       |                             
|Diluted - pro forma                         |                             

2.   Regulatory
Developments:

Pennsylvania
Corrective Action Plan

The
Companys primary insurance subsidiary, Penn Treaty Network America Insurance Company
(PTNA), which represented approximately 90% of the Companys direct
premium revenue during the three months ended March 31, 2005, is subject to a Corrective
Action Plan dated February 12, 2002 (the Plan), as approved by the Pennsylvania Insurance Department
(the Department). American Network Insurance Company (ANIC), which
is wholly owned by PTNA, is also subject to the provisions of the Plan.

The
Plan principally:

| | a) | required
the Company to enter into a reinsurance agreement with Centre Solutions
               (Bermuda) Limited (the 2001 Centre Agreement) for
substantially all                of its existing long-term care business at December 31,
2001;
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| | b) | limits
new investments to those rated by the National Association of Insurance
               Commissioners (NAIC) as 1 or 2;
| | -- | -------------------------------------------------------------------------------------------------------------------------------

| | c) | limits
and requires Department approval for affiliated transactions; and
| | -- | ------------------------------------------------------------------------

| | d) | required
a $125,000 increase in statutory reserves over a three-year period,                which
was completed as of December 31, 2004.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------

The
2001 Centre Agreement is accounted for as reinsurance for statutory accounting purposes,
but does not qualify as reinsurance under generally accepted accounting principles
(GAAP). As the agreement is treated as reinsurance for statutory accounting
purposes, it results in the ceding (or removal) of substantially all of PTNAs and
ANICs policy reserve and claim reserve liabilities for statutory accounting
purposes.

The
2001 Centre Agreement is subject to certain coverage limitations, including an aggregate
limit of liability that is a function of certain factors and that may be reduced in the
event that the premium rate increases that the reinsurance agreement may require are not
obtained. The Company is required to perform annual comparisons of its actual to expected
claims experience. If the Company has reason to believe, whether from this analysis or
other available information, that at least a 5% premium rate increase is necessary, the
Company is obligated to file and obtain such premium rate increases in order to comply
with the requirements of the agreement. If the Company does not file and obtain such
premium rate increases, the aggregate limit of liability would be reduced by 50% of the
premium amount that would have otherwise been received. The Company is currently in
compliance with the agreement.

In
the event the statutory policy and claim reserves for the reinsured policies ultimately
exceed the limit of liability established in the reinsurance agreement, either as a result
of additions to reserves or reductions in the amount of the reinsurers limit of
liability, PTNA or ANIC would have to retain any reserve liabilities in excess of the
limit of liability, which could have a materially adverse impact upon their statutory
surplus.

New
Policy Sales

The
Company is licensed and receives renewal premiums from policyholders in all states, but is
currently restricted from issuing new policies in 8 states. The Company is approved for
sales in Florida, California and Pennsylvania (subject to corrective orders in all three
states) which accounted for approximately 17%, 14% and 11%, respectively, of the
Companys direct premium revenue for the three months ended March 31, 2005. No other
states sales accounted for more than 10% of the Companys direct premium
revenue for the three months ended March 31, 2005.

3.  2001 Centre Agreement:

Effective
December 31, 2001, the Company entered into the 2001 Centre Agreement to reinsure, on a
quota share basis, substantially all of its long-term care insurance policies then
in-force. This agreement does not qualify for reinsurance treatment in accordance with
GAAP because it does not result in the reasonable possibility that the reinsurer may
realize a significant loss. This is due to a number of factors related to the agreement,
including experience refund provisions, expense and risk charges due to the reinsurer and
the aggregate limit of liability. Accordingly, the contract is being accounted for in
accordance with deposit accounting for reinsurance contracts.

The
initial premium and future cash flows from the reinsured policies, less claims payments,
ceding commissions and risk charges, are credited to a notional experience account, which
is held for the Companys benefit in the event of commutation and recapture on or
after December 31, 2007. The notional experience account balance receives an investment
credit based upon the total return from a series of benchmark indices and derivative
hedges that are intended to match the duration of the Companys reserve liability.



---

The
notional experience account represents a hybrid instrument, containing both a fixed debt
host contract and an embedded derivative. The economic characteristics and risks of the
embedded derivative instrument are not clearly and closely related to the economic
characteristics and risks of the fixed debt host contract. The Company is accounting for
the investment credit received on the notional experience account as follows:

| | a) | The
fixed debt host yields a fixed return based on the yield to maturity of the
                    underlying benchmark indices. The return on the fixed debt host is
reported as                     investment income in the Statements of Income and
Comprehensive Income.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | b) | The
change in fair value of the embedded derivative represents the percentage
                    change in the underlying indices applied to the notional experience
account,                     similar to that of an unrealized gain/loss on a bond. The
change in the fair                     value of the embedded derivative is reported as
market gain (loss) on notional                     experience account in the Statements
of Income and Comprehensive Income.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The
benchmark indices are comprised of US treasury strips, agencies and investment grade
corporate bonds, with weightings of approximately 25%, 15% and 60%, respectively, and have
a duration of approximately 14 years. The hybrid instrument subjects the Companys
financial results to significant volatility as the estimated value of the embedded
derivative is highly sensitive to changes in prevailing market interest rates.

The
notional experience account activity for the three months ended March 31, 2005 and 2004
was as follows:

|                              | Three Months Ended March 31,
|----------------------------- | ----------------------------
|
|Beginning balance             |                             
|Premiums, net of claims and   |                             
|ceding allowance              |                             
|Investment credit:            |                             
|Investment income             |                             
|Market (loss) gain            |                             
|Expense and risk charges      |                             
|Broker/custodian/trustee fees |                             
|                              |                             
|Ending balance                |                             
|                              |                             

The reinsurance agreement contains commutation provisions and allows the Company to
recapture the reserve liabilities and the current notional experience account balance as
of December 31, 2007, or on December 31 of any year thereafter. The Company intends, but
is not required, to commute the agreement on December 31, 2007. In the event the Company
does not commute the agreement on December 31, 2007, the expense and risk charges applied
to the notional experience account will increase significantly. Additionally, the
agreement contains certain covenants and conditions that, if breached, may result in the
immediate commutation of the agreement and the payment of $2,500 per quarter from the
period of the breach through December 31, 2007.



---

The
Companys current modeling and actuarial projections suggest that it is probable that
it will be able to commute the agreement, as planned, on December 31, 2007. In order to
commute the agreement, PTNAs and ANICs statutory surplus following commutation
must be sufficient to support the reacquired business in compliance with all statutory
requirements. Upon commutation, the Company will receive cash or other liquid assets
equaling the value of the notional experience account from the reinsurer. The Company
would also record the necessary reserves for the business in PTNAs and ANICs
statutory financial statements. Accordingly, the Companys ability to commute the
agreement is highly dependent upon the value of the notional experience account exceeding
the level of required statutory reserves to be established. As of March 31, 2005, the
statutory basis reserve liabilities of $1,037,124 exceeded the combination of the notional
experience account value and funds held due to the reinsurer of $952,529. Based upon the
Companys current modeling and actuarial projections, management expects the value of
the notional experience account to exceed the reserve liabilities at December 31, 2007. In
addition to the performance of the reinsured policies from now through 2007, the notional
experience account value is susceptible to market interest rate changes. A market interest
rate increase of 100 basis points could reduce the value of the current notional
experience account by approximately $112,000 and jeopardize the Companys ability to
commute as planned.

In
the event the Company determines that commutation of the reinsurance agreement is unlikely
on December 31, 2007, but likely at some future date, it will include additional annual
reinsurer expense and risk charges in its unamortized deferred acquisition cost
(DAC) recoverability analysis. As a result, it could impair the value of its
DAC asset and record the impairment in its financial statements at that time. However, the
Company currently believes that PTNA and ANIC will have sufficient statutory capital and
surplus to commute the agreement on December 31, 2007 or that other alternatives, such as
new reinsurance opportunities or additional capital issuance will be available to enable
it to commute the agreement on December 31, 2007.

The
Company has entered into a letter of intent with its reinsurer to commute its reinsurance
agreement and recapture policies ceded under the existing reinsurance agreement, subject to, among
other things, the execution of an agreement with a new reinsurer on or before July 28,
2005.  In the event that definitive agreements to recapture and reinsure these policies with another
reinsurer are entered into, the
commutation of the existing agreement will be effective as of May 24, 2005 and the value
of the notional experience account will be fixed as of May 23, 2005.  In addition, the
reinsurer would forfeit all warrants granted to it as part of the existing agreement.  If
definitive agreements to recapture and reinsure these policies with a new reinsurer are
not entered into, the existing agreement will remain
in effect.  There can be no assurance that definitive agreements to recapture and
reinsure these policies with another reinsurer will be entered into.

4.  Contingencies:

The
Company and its subsidiaries are parties to various lawsuits generally arising in the
normal course of their business. While the outcome of any single lawsuit could have a
material impact upon the Company's financial results for the period in which it occurs,
the Company does not believe that the eventual outcome of the majority of these lawsuits
is likely to have a material adverse effect on its overall financial condition or results
of operations. However, the matters specifically described below are currently viewed by
management as potentially material and, in the event of an unfavorable outcome, any one
of these matters could have a material adverse effect on the Company's financial
condition and results of operations.

The
Company and its subsidiary, PTNA, are defendants in an action in the Fifth Judicial
Circuit of the State of Florida in and for Marion County, Civil Division. Plaintiffs filed
this matter on January 10, 2003 in Florida State Court, on behalf of themselves and a
class of similarly situated Florida long-term care policyholders. The Company removed this
case to United States District Court, Middle District of Florida, Ocala Division for a
second time in November 2003. Plaintiffs motion to remand the case to Florida State
Court was granted in April 2004. Plaintiffs claim wrongdoing in connection with the sale
of long-term care insurance policies to the plaintiffs and the class. Plaintiffs allege
claims for reformation, breach of fiduciary duty, breach of the implied duty of good faith
and fair dealing, negligent misrepresentation, fraudulent misrepresentation, and
restitution and pray for relief in the form of compensatory damages and restitution, an
order of reformation of the policies, and attorney fees and court costs. No amounts were
specified for compensatory damages and restitution. The Company has filed motions to
dismiss for failure to state a claim and lack of personal jurisdiction, and to strike
certain allegations of the complaint as irrelevant and improper. While the Company denies
liability to plaintiffs, the Company is continuing
its negotiations towards settlement in this matter.



---

The
Company and PTNA are defendants in an action in the Orange County Superior Court in the
state of California. Plaintiffs filed this matter in November 2003 on behalf of
themselves, all other persons similarly situated and the general public. Plaintiffs claim
wrongdoing in violation of the California Business & Professions Code in connection
with the sale of long term care insurance policies. Plaintiffs allege unlawful business
acts, claims for reformation, breach of fiduciary duty, breach of the implied duty of good
faith and fair dealing, and negligent misrepresentation and pray for relief in the form of
compensatory damages and restitution, punitive damages, an order of reformation of the
policies, and attorney fees and court costs. No amounts were specified for compensatory
damages and restitution. After review of the Companys motions related to the
plaintiffs complaint, the court dismissed plaintiffs claim for breach of
fiduciary duty, and the Company filed an answer to the other claims in the complaint.
While the Company denies liability to plaintiffs,
the Company is continuing its negotiations toward settlement in this matter.

PTNA
is a defendant in an action in the Los Angeles County Superior Court in the state of
California. Plaintiffs filed this matter on May 28, 2004 on behalf of themselves and all
other persons similarly situated and the general public. Plaintiffs allege wrongdoing in
connection with the payment of long-term care insurance claims. Plaintiffs allege
violations of the California Consumer Legal Remedies Act, the California Business and
Professions Code, breach of the implied duty of good faith and fair dealing, financial
elder abuse and pray for relief in the form of compensatory damages and restitution,
punitive damages, any accounting, attorney fees and court costs. No amounts were specified
for compensatory damages and restitution or punitive damages. PTNA removed this case to
United States District Court for the Central District of California in March 2005. PTNA
has filed a motion to dismiss all counts of the plaintiffs complaint, and a motion
to strike allegations of the complaint, including plaintiffs class allegations.
However, the Company believes that the complaint is without merit and
intends to continue to defend the matter vigorously.

PTNA
is a party to a reinsurance agreement to cede the risk of certain home health care claims
that extend beyond 36 months. The reinsurance recoverable related to this treaty was
$11,631 and $11,236 at March 31, 2005 and December 31, 2004, respectively. The reinsurer
has notified PTNA that it believes that PTNA is in breach of its current agreement as a
result of entering into the 2001 Centre Agreement without the prior written approval of
the reinsurer. PTNA has contested this assertion of breach based upon its verbal and
written notification to the reinsurer prior to entering into the 2001 Centre
Agreement.   In addition, PTNA believes that the 2001 Centre Agreement substantially
improved PTNAs financial strength and actually benefited the reinsurer. On May 9,
2005, PTNA notified the reinsurer that PTNA was initiating arbitration proceedings. The
ultimate resolution of this dispute cannot be determined at this time.

5.  Investments:

Management
has categorized all of its investment securities as available for sale because they may be
sold in response to changes in interest rates, prepayments and similar factors.
Investments in this category are reported at their current market value, with net
unrealized gains and losses, net of the applicable deferred income tax effect, added to or
deducted from the Companys total shareholders equity on the balance sheet. As
of March 31, 2005, shareholders equity was decreased by $444 due to unrealized
losses of $685 in the investment portfolio. As of December 31, 2004, shareholders
equity was increased by $147 due to unrealized gains of $226 in the investment portfolio.
The amortized cost and estimated market value of the Companys available for sale
investment portfolio as of March 31, 2005 and December 31, 2004 were as follows:



---

|                           | March 31, 2005 | December 31, 2004
|-------------------------- | -------------- | -----------------
|
|U.S. Treasury securities   |                |                  
|and obligations of U.S.    |                |                  
|Government authorities     |                |                  
|and agencies               |                |                  
|Mortgage backed securities |                |                  
|Debt securities issued by  |                |                  
|foreign governments        |                |                  
|Corporate securities       |                |                  
|Policy loans               |                |                  
|                           |                |                  
|Total investments          |                |                  
|                           |                |                  
|Net unrealized (loss) gain |                |                  
|                           |                |                  

Pursuant
to certain statutory licensing requirements, as of March 31, 2005 and December 31, 2004
the Company had on deposit bonds with an estimated market value aggregating $12,172 and
$12,264 in insurance department special deposit accounts. The Company is not permitted to
remove the bonds from these accounts without approval of the regulatory authority.

The
Company maintains assets in a trust account under a reinsurance agreement with an
unaffiliated insurer. The Company is required to hold assets equal to 102% of the reserves
for the policies assumed under this agreement. At March 31, 2005 and December 31, 2004,
the Company was required to hold $20,799 and $18,869, respectively, in the trust account.

6.  Reconciliation of
Earnings Per Share:

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
follows. Basic earnings per share excludes dilution and is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential dilution
that could occur if options, warrants and convertible debt were exercised or converted.
Anti-dilutive effects are not included.



---

|                                                           | Three Months Ended March 31,
|---------------------------------------------------------- | ----------------------------
|
|Net income                                                 |                             
|Weighted average common shares outstanding                 |                             
|                                                           |                             
|Basic earnings per share from net income                   |                             
|                                                           |                             
|                                                           |                             
|Adjustments net of tax:                                    |                             
|Change in preferred interest on early conversion liability |                             
|Interest expense on convertible debt                       |                             
|Amortization of debt offering costs                        |                             
|                                                           |                             
|Diluted net income                                         |                             
|                                                           |                             
|                                                           |                             
|Weighted average common shares outstanding                 |                             
|Common stock issuable upon exercise of                     |                             
|options/warrants                                           |                             
|Shares issuable upon conversion of convertible debt        |                             
|                                                           |                             
|Total outstanding shares for diluted earnings per share    |                             
|computation                                                |                             
|                                                           |                             
|                                                           |                             
|Diluted earnings per share from net income                 |                             
|                                                           |                             

Shares of common stock that could
potentially dilute basic earnings per share in the future that were not included in the
computation of diluted earnings per share, because to do so would have been anti-dilutive,
were 17,006 and 15,877 at March 31, 2005 and March 31, 2004, respectively. These shares
include shares issuable upon exercise of options and warrants.

7.  Long-Term Debt:

Principal
repayment of the Companys long-term debt outstanding at March 31, 2005 is as
follows:

|      | Debt
|----- | ----
|2005  |     
|2006  |     
|2007  |     
|2008  |     
|2009  |     
|      |     
|Total |     
|      |     

During
the three months ended March 31, 2005, $6,349 of the Companys 6 1/4% Convertible
Subordinated Notes due 2008 (the 2008 Notes)were converted into
3,628 shares of the Companys common stock and 126 shares were issued as payment for
preferred interest on early conversion. In connection with these conversions, the Company
recognized additional interest expense of $254 for the three months ended March 31, 2005.

During
the three months ended March 31, 2004, $17,180 of the Companys 2008 Notes were
converted into 9,817 shares of the Companys common stock and 992 shares were issued
as payment for preferred interest on early conversion. In connection with these
conversions, the Company recognized additional interest expense of $1,805 for the three
months ended March 31, 2004.



---

Holders
of the 2008 Notes are entitled to convert their notes into shares of common stock before
October 15, 2005 and receive a discounted amount of interest that they would have
otherwise received until that date. This feature is an embedded derivative as defined in
Statement of Financial Accounting Standards No. 133 Accounting for Derivative
Instruments and Hedging Activities. This embedded derivative is not clearly and
closely related to the host contract, the 2008 Notes, because it could at least double the
investors initial rate of return on the host contract and could also result in a
rate of return that is at least twice what otherwise would be the market return for a
contract that has the same terms as the host contract and that involves a debtor with a
similar credit quality.

The
Company has bifurcated the embedded derivative from the host contract. At each balance
sheet date, the embedded derivative is recorded at fair value, with any change in fair
value recognized in current operations.

As
of March 31, 2005 and December 31, 2004, the fair value of the embedded derivative was
$762 and $1,403, respectively. In determining the fair value of the embedded derivative,
the Company makes certain assumptions, including with respect to the future volatility and
liquidity of the Companys common stock, as well as recent trends in the number of
holders converting. The decrease in fair value during 2005 is due to the conversions that
occurred during 2005 and the decrease in the time period until October 15, 2005, the date
that interest is paid through.

8.  Sale Leaseback:

During
the first quarter of 2005, the Company entered into a sale leaseback agreement under which
it sold property and equipment, consisting entirely of software, with a value of $3,000 to a third party and agreed to lease
back the same equipment.  The term of the lease is two years and the lease will be
accounted for as a capital lease. The Company recorded $8 in rent expense related to
the lease in the first quarter.

Minimum
annual rentals for the term of the lease are as follows:

|Year                                                                | Capital Lease
|------------------------------------------------------------------- | -------------
|2005                                                                |              
|2006                                                                |              
|2007                                                                |              
|                                                                    |              
|                                                                    |              
|Less executory costs                                                |              
|                                                                    |              
|Net minimum lease payments under capital lease                      |              
|Less amount representing interest                                   |              
|                                                                    |              
|Present value of the net minimum lease payments under capital lease |              
|                                                                    |              

In
the second quarter of 2005, the Company received an additional $1,000 under the sale leaseback agreement.



---

Item
2.Managements Discussion and Analysis of Financial Condition and Results of
Operations. (amounts in thousands,
except per share data)

Overview

Our
principal products are individual, defined benefit accident and health insurance policies
that consist of nursing home care, home health care and Medicare supplement.

Our
insurance subsidiaries are subject to the insurance laws and regulations of the states in
which they are licensed to write insurance. These laws and regulations govern matters such
as payment of dividends, settlement of claims and loss ratios. State regulatory
authorities must approve premiums charged for insurance products. In addition, our
insurance subsidiaries are required to establish and maintain reserves with respect to
reported and incurred but not reported claims, as well as estimated future benefits
payable under our insurance policies. These reserves must, at a minimum, comply with
mandated standards. Our reserves are certified annually by our consulting actuary as to
standards required by the insurance departments for our domiciliary states and for the
other states in which we conduct business. We believe we maintained adequate reserves as
mandated by each state in which we are currently writing business at March 31, 2005
and the date of this filing.

Our
insurance subsidiaries are regulated by various state insurance departments. The National
Association of Insurance Commissioners (NAIC) has Risk-Based Capital
(RBC) requirements for insurance companies to evaluate the adequacy of
statutory capital and surplus in relation to investment and insurance risks, such as asset
quality, mortality and morbidity, asset and liability matching, benefit and loss reserve
adequacy, and other business factors. The RBC formula is used by state insurance
regulators as an early warning tool to identify, for the purpose of initiating regulatory
action, insurance companies that potentially are inadequately capitalized. In addition,
the formula defines minimum capital standards that an insurer must maintain. Regulatory
compliance is determined by a ratio of the enterprises regulatory Total Adjusted
Capital to its Authorized Control Level RBC, as defined by the NAIC. Companies below
specific trigger points or ratios are classified within certain levels, each of which may
require specific corrective action depending upon the insurers state of domicile.

At
December 31, 2000, Penn Treaty Network America Insurance Company (PTNA) had
Total Adjusted Capital at the Regulatory Action level, which required it to file a
Corrective Action Plan (the Plan) with the Pennsylvania Insurance Department
(the Department). In addition, American Network Insurance Company
(ANIC), which is wholly owned by PTNA, is also subject to the provisions of
the Plan. On February 12, 2002, the Department approved the Plan. As a primary component
of the Plan, effective December 31, 2001, PTNA and ANIC entered a reinsurance transaction
to reinsure, on a quota share basis, substantially all of their long-term care insurance
policies then in-force (the 2001 Centre Agreement). The agreement is subject
to certain coverage limitations, including an aggregate limit of liability that is a
function of certain factors and that may be reduced in the event that the premium rate
increases that the reinsurance agreement may require are not obtained. We are required to
perform annual comparisons of our actual to expected claims experience. If we have reason
to believe, whether from this analysis or other available information, that at least a 5%
premium rate increase is necessary, we are obligated to file and obtain such premium rate
increases in order to comply with the requirements of the agreement. If we do not file and
obtain such premium rate increases, our aggregate limit of liability would be reduced by
50% of the premium amount that would have otherwise been received. We were in compliance
with the agreement as of March 31, 2005.



---

As
part of this agreement, annual risk charges of approximately $11,000 are credited against
our notional experience account by the reinsurer. The annual amount increases if we do not
commute on December 31, 2007. This agreement does not qualify for reinsurance treatment in
accordance with generally accepted accounting principles (GAAP) because it
does not result in the reasonable possibility that the reinsurer may realize a significant
loss. This is due to a number of factors related to the agreement, including experience
refund provisions, the expense and risk charges credited to the notional experience
account by the reinsurer and the aggregate limit of liability. However, this agreement
meets the requirements to qualify for reinsurance treatment under statutory accounting
rules.

The
initial premium and future cash flows from the reinsured policies, less claims payments,
ceding commissions and risk charges, are credited to a notional experience account, which
is held for our benefit in the event of commutation and recapture on or after December 31,
2007. The notional experience account balance receives an investment credit based upon the
total return from a series of benchmark indices and derivative hedges that are intended to
closely match the duration of our reserve liability.

Our
current modeling and actuarial projections suggest that it is probable we will be able to
commute the agreement, as planned, on December 31, 2007. In order to commute the
agreement, our statutory capital following commutation must be sufficient to support the
reacquired business in compliance with all statutory requirements. Upon commutation, we
would receive cash or other liquid assets equaling the market value of our notional
experience account from the reinsurer. We would also record the necessary reserves for the
business in our statutory financial statements. Our ability to commute the agreement is
highly dependent upon the market value of the notional experience account exceeding the
level of required reserves to be established. As of March 31, 2005, the statutory basis
reserve liabilities of $1,037,124 exceed the combination of the notional experience
account value and funds held due to the reinsurer of $952,529. Based upon our current
modeling and actuarial projections, management believes it is probable that the value of
the notional experience account will exceed the reserve liabilities at December 31, 2007.
In addition to the performance of the reinsured policies from now until 2007, the notional
experience account value is susceptible to market interest rate changes. A market interest
rate increase of 100 basis points could reduce the market value of the current notional
experience account by approximately $112,000 and jeopardize our ability to commute as
planned. As we approach the intended commutation date, the sensitivity of our notional
experience account to market interest rate movement will decline as the duration of the
benchmark indices becomes shorter; however, the amount of assets susceptible to such
interest sensitivity will continue to grow as additional net cash flows are added to the
experience account balance prior to commutation. The reinsurer has agreed to fix the
market value of the experience account and to invest the assets in a manner that we
request in order to minimize short term volatility when we inform the reinsurer of our
intention to commute the agreement.

As
a result of our intention to commute, we considered only the expense and risk charges
anticipated prior to the commutation date in our unamortized DAC recoverability analyses
and have not recorded the potential of future escalating charges. In the event we
determine that commutation of the reinsurance agreement is unlikely on December 31, 2007,
but likely at some future date, we will include additional annual expense and risk charge
credits against our notional experience account in our DAC recoverability analysis. As a
result, we could impair the value of our DAC asset and record the impairment in our
financial statements. However, we currently believe that it is probable we will have
sufficient statutory capital and surplus to commute the reinsurance agreement on December
31, 2007 or that other alternatives, such as new reinsurance opportunities or, additional
capital issuances will be available to enable us to commute the agreement as planned.

We
have entered into a letter of intent with our reinsurer to commute our reinsurance
agreement and recapture policies ceded under the existing reinsurance agreement, subject to, among
other things, the execution of an  agreement with a new reinsurer on or before July 28,
2005.  In the event definitive agreements to recapture and reinsure these policies with another
reinsurer are entered into, the
commutation of the existing agreement will be effective as of May 24, 2005 and the value
of the notional experience account will be fixed as of May 23, 2005.  In addition, the
reinsurer would forfeit all warrants granted to it as part of the existing agreement.  If
definitive agreements to recapture and reinsure these policies with a new reinsurer are
 not entered into, the existing agreement will remain
in effect.  There can be no assurance that definitive agreements to recapture and
reinsure these policies with another reinsurer will be entered into.



---

In
addition to the requirement to enter into the 2001 Centre Agreement, the Plan principally:

| | a) | limits
new investments to those rated by the NAIC as 1 or 2;
| | -- | ------------------------------------------------------------

| | b) | limits
and requires Department approval for affiliated transactions; and
| | -- | ------------------------------------------------------------------------

| | c) | requires
a $125,000 increase in statutory reserves over a three-year period,                which
was completed as of December 31, 2004.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------

Upon
the Departments approval of the Plan in February 2002, we recommenced new policy
sales in 23 states, including Pennsylvania. We have now recommenced new policy sales in 19
additional states. These 42 states represented approximately 94% of our direct premium
revenue in the three months ended March 31, 2005. We are working with the remaining states
to recommence new policy sales in all jurisdictions.

Our
financial condition and results of operations are affected significantly by the following
other factors:

Level
of required reserves for policies in-force. Our insurance policies are accounted for
as long duration contracts. As a result, there are two components of policyholder
liabilities. The first is a policy reserve liability for future policyholder benefits,
represented by the present value of future benefits less a portion of future premium
collection. These reserves are calculated based on assumptions that include estimates for
mortality, morbidity, interest rates, premium rate increases and policy persistency. The
assumptions are based on our past experience, industry experience and current trends.

The
second is a reserve for incurred, either reported or not yet reported, policy claims. The
amount of reserves relating to reported and unreported claims incurred is determined by
periodically evaluating statistical information with respect to the number and nature of
historical claims. We compare actual experience with estimates and adjust our reserves in
the current period on the basis of such comparisons to the extent that our analysis
suggests that the estimates utilized differ from actual experience.

Additions
to, or reductions in, reserves are recognized in our current Consolidated Statements of
Income and Comprehensive Income as expense or income, respectively, through benefits to
policyholders and are a material component of our net income or loss. A portion of premium
collected in each period is set aside to establish reserves for future policy benefits.
Establishing reserves is based upon current assumptions and we can provide no assurance
that actual experience will not differ materially from the assumptions used in the
establishment of our reserves. Any variance from these assumptions could affect our
profitability in future periods.

Deferred
policy acquisition costs. In connection with the sale of our insurance policies, we
defer and amortize a portion of the policy acquisition costs over the related premium
paying periods of the life of the policy. These costs include all expenses that are
directly related to, and vary with, the acquisition of the policy, including commissions,
underwriting and other policy issue expenses. The amortization of deferred policy
acquisition costs (DAC) is determined using the same projected actuarial
assumptions used in computing policy reserves. DAC can be affected by unanticipated
terminations of policies because, upon such terminations, we are required to expense fully
the DAC associated with the terminated policies. In addition, the assumptions underlying
DAC and our policy benefit reserves are periodically reviewed and updated to reflect
current assumptions, including planned premium rate increases. In the event planned
premium rate increases are not achieved, we could recognize an impairment of our DAC in
the future. Whenever we determine that our DAC is not fully recoverable, we impair the
carrying value of our DAC through an expense to our Consolidated Statements of Income and
Comprehensive Income. DAC is fully recoverable at March 31, 2005.



---

Policy
premium levels. We attempt to set premium levels to maintain planned profit margins.
Premium levels on new products, as well as rate increases on existing products, are
subject to government review and regulation.

Investment
income and notional experience account. Our investment portfolio, excluding our
notional experience account, consists primarily of investment grade fixed income
securities. Income generated from this portfolio is largely dependent upon prevailing
levels of interest rates. Due to the duration of our investments (approximately 3.3
years), investment income does not immediately reflect changes in market interest rates.

Our
2001 Centre reinsurance agreement includes a provision for the maintenance of a notional
experience account for our benefit in the event we elect to, and are able to, commute the
reinsurance agreement in the future. We receive a return on the experience account that is
based on a series of benchmark indices and derivative hedges. The benchmark indices are
comprised of US Treasury strips, agencies, and investment grade corporate bonds with
weightings of approximately 25%, 15% and 60%, respectively, and a duration of
approximately 14 years.

We
believe the return on the notional experience account represents a hybrid instrument,
containing both a fixed debt host and an embedded derivative, as defined in Statement of
Financial Accounting Standards No. 133, Accounting for Derivative Instruments and
Hedging Activities (SFAS 133). In accordance with SFAS 133, we are accounting for
the investment return on the experience account as follows:

|a). | The
fixed debt host yields a fixed return based upon the yield to maturity of           the
underlying benchmark indices. The return on the fixed debt host is reported           as
investment income in the Statements of Income and Comprehensive Income.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|b). | The
change in fair value of the embedded derivative represents the percentage
          change in the underlying indices applied to the notional experience account,
          similar to that of an unrealized gain/loss on a bond. The change in the fair
          value of the embedded derivative is reported as market gain or loss on notional
          experience account in the Statements of Income and Comprehensive Income.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our
conclusion that the return on the notional experience account represents a hybrid
instrument with an embedded derivative is based on our belief that the economic
characteristics and risk of the fixed debt host contract are not clearly and closely
related to those of the embedded derivative. When we determine the yield on the fixed debt
host and the value of the embedded derivate, we reconcile these amounts to the amount
credited to the experience account by the reinsurer, as we believe the actual return
credited by the reinsurer should equal the sum of the amounts recognized in our Statements
of Income and Comprehensive Income.

Lapsation
and persistency. Both lapsation and persistency relate to the renewal of insurance
policies. Lapsation is the termination of a policy by non-renewal. Lapsation is automatic
if and when premiums become more than 31 days overdue, although, in some cases, a lapsed
policy may be reinstated within six months. Persistency represents the percentage of
premiums renewed.

Policies
renew or lapse for a variety of reasons, both internal and external. We believe that our
efforts to address policyholder concerns or questions help to ensure policy renewals. We
work closely with our licensed agents, who play an integral role in policy persistency and
policyholder communication.



---

Economic
cycles can influence a policyholders ability to continue the payment of insurance
premiums when due. We believe that publicity regarding Federal and state tax legislation
allowing medical deductions for certain long-term care insurance premiums has raised
public awareness of the escalating costs of long-term care and the value provided to the
consumer of long-term care insurance. The ratings assigned to our insurance subsidiaries
by independent rating agencies also influence consumer decisions.

Lapsation
and persistency can both positively and adversely affect future earnings. Reduced
lapsation and higher persistency generally result in higher renewal premiums and lower
amortization of DAC, but may lead to increased claims in future periods. Higher lapsation
can result in reduced premium collection, a greater percentage of higher-risk
policyholders, and accelerated expensing of DAC. However, higher lapsation may also lead
to decreased claims in future periods.

Results of Operations

# Three Months Ended March
31, 2005 and 2004

On
June 2,  2005, we announced our resutls of operations for the three month period ended
March 31, 2005, in a press release and on our investors conference call.
 Subsequent to that announcement and prior to the filing of this Form 10-Q, we have
reevaluated our most likely outcome for the settlement of a pending legal action against
us (see Litigation Accrual Expense and Part II, Item 1. Legal Proceedings).  As a
result, net income reported in this Form 10-Q of $1,449 is $767 lower than the net income
previously reported in our press release and on our investors conference call.

Premiums.  
          Total
premium revenue earned in the three month period ended March 31, 2005,
          including long-term care, disability, life and Medicare supplement, decreased
          3.0% to $79,812, compared to $82,288 in the same period in 2004.

Total
first year premium revenue in the 2005 quarter increased 7.1% to $2,893, compared to
$2,702 in the 2004 quarter. First year long-term care premium revenue in the 2005 quarter
increased 10.7% to $2,718, compared to $2,455 in the 2004 quarter. We believe that the
increase in first year premiums is due to (1) the recommencement of sales in additional
states during 2004, (2) the engagement of additional independent agents that had not
previously sold our policies, and (3) the introduction of our new products, which have
higher annual premiums than our previously sold products. We anticipate that first year
premium revenue will continue to increase as independent agents that sold our policies
prior to the cessation of sales are reengaged and independent agents that had not
previously sold our policies are recruited. We also anticipate that we will recommence
sales in additional states in which we are currently not writing new business.

Total
renewal premium revenue in the 2005 quarter decreased 3.4% to $76,919 compared to $79,587
in the 2004 quarter. Renewal long-term care premium revenue in the 2005 quarter decreased
4.0% to $73,395, compared to $76,441 in the 2004 quarter. The decrease in renewal premium
revenue is due to the lapsation of existing policies and a reduced level of new premium
revenue compared to periods prior to the cessation of sales in 200l. We anticipate that we
will continue to experience reduced levels of renewal premium revenue until the level of
new premium revenue is sufficient to offset the lapsation of existing policies. Our
persistency was 89.5% and 88.0% in the 2005 and 2004 quarters, respectively.

Net
investment income. Net investment income earned in the 2005 quarter increased 12.3% to
$12,335 compared to $10,987 in the 2004 quarter.

Our
average yield on invested assets at cost, including the notional experience account and
cash equivalents, was 5.02% in both the 2005 and 2004 quarters. The investment income
component of our notional experience account investment credit generated $11,778 and
$10,911 in the 2005 and 2004 quarters, respectively. The average yield on our notional
experience account was 5.22% and 5.13% in the 2005 and 2004 quarters, respectively.
Although the average yield on the notional experience account increased, our average yield
on invested assets remained the same due to a higher concentration of short-term
investments that were held in cash and cash equivalents.



---

Market
gain (loss) on notional experience account. We recorded a market loss on our notional
experience account balance of $588 in the 2005 quarter compared to a market gain of
$35,648 in the 2004 quarter.

During
the 2005 quarter the interest rates on the notional experience account had a small
increase leading to a market loss. The yield on the notional experience account was 5.30%
at December 31, 2004 compared to 5.37% at March 31, 2005. During the 2004 quarter, the
interest rates on the notional experience account decreased, leading to a market gain. The
yield on the notional experience account was 5.60% at December 31, 2003 compared to 5.26%
at March 31, 2004.

Change
in preferred interest on early conversion. The fair value of the embedded derivative
was $762 and $4,324 as of March 31, 2005 and 2004, respectively. We recorded $640 and
$(818) in the 2005 and 2004 quarters, respectively, to reflect the change in value of the
preferred interest on early conversion. We believe that the value of the embedded
derivative is significantly affected by the ability of the investor to liquidate their
shares in the market. We further believe that the number of shares of our common stock
outstanding and the average daily trading volume of our common stock provide an indication
of the ability for the market to bear additional sales of stock without a material
reduction of the current market value of those shares. The value decreased in the 2005
quarter as a result of $6,349 of conversions and the decrease in the value of the interest
we would pay upon the conversion due to the shortening of the time period between the date
of conversion and October 15, 2005. The value increased during the 2004 quarter due to the
issuance of additional convertible debt in February 2004 and an increase in the liquidity
and average daily trading volume of our common stock. These increases were partially
offset by conversions of $17,180. Assuming that all holders converted on March 31,
2005, without giving any consideration to the relationship of the current share price to
the conversion price or to the impact of this level of conversions on the stock price, the
value of the embedded derivative would be $2,901. If actual experience deviates from
current assumptions, our financial results may be significantly impacted in future
periods.

Other
income. We recorded $1,396 in other income in the 2005 quarter compared to $1,621 in
the 2004 quarter. The decrease is primarily attributable to a decrease of approximately
$133 in the income generated from our ownership of corporate owned life insurance policies,
which was caused by a decrease in our crediting rate.

Benefits
to policyholders. Total benefits to policyholders in the 2005 quarter increased 1.2%
to $60,103, compared to $59,386 in the 2004 quarter. Our loss ratio, or policyholder
benefits to premium revenue, was 75.3% in the 2005 quarter, compared to 72.2% in the 2004
quarter.

Historically,
more new claims are reported during the first quarter than in later quarters. This
seasonality generates higher incurred claim ratios in the first quarter than in subsequent
quarters. Management employs these seasonal assumptions throughout the year in the
establishment of its claim reserves so that it can more consistently monitor loss ratio
variances from its expectations based upon other significant factors such as claims
duration and incidence. Management estimates that seasonality would have otherwise
resulted in approximately $2,546 and $3,800 in higher incurred claims in the 2005 and 2004
quarters, respectively, and as a result established lower claim reserves during both
quarters to reflect this seasonal variation.

Commissions.            Commissions
to agents decreased 6.3% to $9,760 in the 2005 quarter, compared to           $10,421 in
the 2004 quarter.



---

First
year commissions on accident and health business in the 2005 quarter increased 11.0% to
$1,704, compared to $1,535 in the 2004 quarter, due to the increase in first year accident
and health premium revenue. The ratio of first year accident and health commissions to
first year accident and health premium revenue was 58.9% in the 2005 quarter and 56.8% in
the 2004 quarter. The first year commission ratio for both 2005 and 2004 quarters is lower
than the first year commission ratio prior to the cessation of sales in 2001, due to the
increased sale of our Secured Risk, Medicare Supplement and franchise group policies as a
percentage of total new sales. All of these policies pay a lower commission as a
percentage of premium revenue to agents than our individual long-term care policies. This
ratio has been increasing as sales of our traditional long-term care policies continue to
increase as a percentage of total sales.

Renewal
commissions on accident and health business in the 2005 quarter decreased 9.1% to $8,585,
compared to $9,443 in the 2004 quarter. The ratio of renewal accident and health
commissions to renewal accident and health premiums was 11.2% in the 2005 quarter and
12.0% in the 2004 quarter. We have implemented premium rate increases on a majority of
policies written prior to December 31, 2001. We do not pay commissions on the additional
premium collected as a result of rate increases, which reduces the ratio of renewal
commissions to renewal premium revenue. We anticipate that this ratio will continue to
decline until these premium rate increases are fully implemented, which we anticipate will
occur prior to the end of 2005.

Net
policy acquisition costs amortized. The net policy acquisition costs amortized in the
2005 quarter decreased to $1,922, compared to $3,955 in the 2004 quarter.

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

The
net amortization of deferred policy acquisition costs is affected by new business
generation, imputed interest on prior reserves and policy persistency. The amortization of
deferred costs historically had been offset by the deferral of costs associated with new
premium generation. However, lower new premium revenue throughout the 2005 and 2004
quarters, as compared to premium revenue prior to the cessation of sales in 2001, produced
significantly less expense deferral to offset amortized costs.

General
and administrative expenses. General and administrative expenses in the 2005 quarter
decreased 2.7% to $13,115, compared to $13,477 in the 2004 quarter. The ratio of total
general and administrative expenses to premium revenues was 16.4% in the 2005 and 2004 quarters.

The
decrease in general and administrative expenses is primarily due to a decrease in salaries
and benefits of approximately $400 in the 2005 quarter compared to the 2004 quarter, as a result of
 reductions in staffing levels over the past two years. In addition, the
amortization of debt offering costs decreased from $468 in the 2004 quarter to $238 in the
2005 quarters.

Litigation
accrual expense. While there can be no assurance, we believe that we will reach a settlement with plaintiffs in a class
action lawsuit that has been filed against us, for which we accrue an expense amount that
we believe represents our most probable outcome.  During the 2005 quarter, we increased
this accrued amount by $900 based upon our most recent best estimate.

Expense
and risk charges on reinsurance and excise tax expense. Our 2001 Centre Agreement
provides the reinsurer with annual expense and risk charges, which are credited against
our notional experience account in the event of future commutation of the agreement. The
annual charge consists of a fixed cost and a variable component based upon reserve and
capital levels needed to support the reinsured business. In the 2005 and 2004 quarters, we
incurred charges of $2,834 and $2,807, respectively, for this item. In addition, we are
subject to an excise tax for premium payments made to a foreign reinsurer equal to one
percent of the net premium revenue ceded to the foreign reinsurer. We recorded $729 and
$783 for excise tax expenses in the 2005 and 2004 quarters, respectively.



---

Interest
expense. Interest expense in the 2005 quarter decreased 48.5% to $1,965, compared to
$3,817 in the 2004 quarter. The interest expense in both the 2005 and 2004 quarters is
primarily related to our convertible subordinated notes, which pay interest at an annual
percentage rate of 6.25%. We incur additional interest expense related to the conversion
of our convertible subordinated notes.  Holders of our convertible subordinated
notes are entitled to convert their notes into shares of our common stock before October
15, 2005 and receive a discounted amount of interest that they would have otherwise
received through October 15, 2005 had they not converted the notes. We incurred $254 of
additional interest expense from the conversion of $6,349 in convertible subordinated
notes during the 2005 quarter, compared to $1,805 of additional interest expense from the
conversion of $17,180 in convertible subordinated notes during the 2004 quarter.

Federal
income tax provision. Our provision for Federal income taxes was $817 and $12,001,
for the 2005 and 2004 quarters, respectively. The effective tax rate was 36.1% in the 2005
quarter and 34.0% in the 2004 quarter. The increase in the 2005 quarter is primarily
attributable to non-deductible interest expense related to certain of our convertible debt
that was issued when the conversion price was below the market price of our common stock.



---

Liquidity and Capital
Resources

Our
consolidated liquidity requirements have historically been met from the operations of our
insurance subsidiaries, from our agency subsidiaries and from funds raised in the capital
markets. Our primary sources of cash from normal operations are premiums, investment
income and sales and maturities of investments. We have obtained, and may in the future
obtain, cash through public and private offerings of our debt instruments, common stock,
the exercise of stock options and warrants and other capital markets activities. Our
primary uses of cash are policy acquisition costs (principally commissions), claim
payments to policyholders, investment purchases, deposits to our notional experience
account, debt service and general and administrative expenses.

In
the 2005 quarter, our cash flows were attributable to cash provided by operations, cash
used in investing and cash provided by financing. Our cash increased $559 in the 2005
quarter primarily due to the funds received on a sale/leaseback agreement of $3,000. This
was supplemented by $2,553 from operations. The major source of cash from operations was
premium revenue and investment income received. Our major uses of cash during the 2005
quarter were payments made to our reinsurer of $3,152 and the purchase of $6,544 in bonds.

In
the 2004 quarter, our cash flows were attributable to cash provided by operations, cash
used in investing and cash provided by financing. Our cash increased $8,971 in the 2004
quarter primarily due to $16,000 in additional funds generated from the issuance of
convertible subordinated debt. This was supplemented by $11,159 from operations. The major
source of cash from operations was premium revenue and investment income received. Our
major uses of cash during the 2004 quarter were payments made to our primary reinsurer of $21,277
and the purchase of $17,976 in bonds.

Parent company operations

We
have engaged in financing activities, including issuance of both debt and equity
securities, over the past two years to fund our liquidity and subsidiary capital needs.
These activities have included:

| | 1) | In
the first quarter of 2004, we issued an additional $16,000 in 2008 Notes. We
               used the proceeds to supplement parent liquidity, for general working
capital                purposes and to further supplement our subsidiaries statutory
surplus.
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 2) | In
the fourth quarter of 2004, we issued an additional $10,000 in 2008 Notes. We
               used the proceeds to supplement parent liquidity, for general working
capital                purposes and to further supplement our subsidiaries statutory
surplus.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In addition,
during the first quarter of 2005, holders of $6,349 of our 2008 Notes elected to convert
their 2008 Notes into 3,628 shares of our common stock, which includes 126 shares issued
for interest paid for conversion prior to October 15, 2005 and during the first quarter
of 2004, holders of $17,180 of our 2008 Notes elected to convert their 2008 Notes into
10,809 shares of our common stock, which includes 992 shares issued for interest paid for
conversion prior to October 15, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



---

At
March 31, 2005, our total principal repayment and lease obligations through 2009 were as
follows:

|      | Debt | Lease
Obligations | Total
|----- | ---- | ----------------- | -----
|2005  |      |                   | $    
|2006  |      |                   |      
|2007  |      |                   |      
|2008  |      |                   |      
|2009  |      |                   |      
|      |      |                   |      
|Total |      |                   | $    
|      |      |                   |      

The
cash flow needs of the parent company primarily include interest payments on outstanding
debt and operating expenses. Historically, the funding had been primarily derived from the
issuance of debt securities, the operating cash flow of our agency subsidiary operations
and dividends from the insurance subsidiaries. However, the dividend capabilities of the
insurance subsidiaries are limited and we may need to rely upon our ability to raise
additional capital and the operating cash flow of our agency subsidiaries to meet current
liquidity needs. We believe that our current cash on hand and the operating cash flow of
our agency subsidiaries will be sufficient to service our debt obligations through at
least April 15, 2006 and potentially through October 15, 2006, depending on our parent
company expenses and our insurance subsidiaries surplus needs. If we are unable to
generate sufficient funds through operations or raise additional capital to meet our debt
service obligations on or after October 15, 2006, or if our assumptions about our ability
to service our debt prior to 2006 are not correct, we may default on our debt obligations.
We believe we will need to raise additional capital to satisfy any parent company
liquidity needs, including debt service payments, beyond October 2006, particularly if the
price of our common stock on or after October 15, 2005 is insufficient to cause mandatory
conversion of our 2008 Notes.

Our
anticipated cash needs for 2005 are as follows:

|                       | 
|---------------------- | 
|Debt interest payments | 
|Litigation settlements | 
|Parent expenses        | 
|                       | 
|Cash requirements      | 
|                       | 

Our anticipated
sources to meet our 2005 obligations are:

|                             | 
|---------------------------- | 
|Cash and investments on hand | 
|Subsidiary sources           | 
|                             | 
|Cash sources                 | 
|                             | 

Subsidiary
operations

The
majority of our insurance subsidiaries cash flow results from our existing long-term
care policies, which have been ceded to the reinsurer under the 2001 Centre Agreement. Our
subsidiaries ability to meet additional liquidity needs and cover fixed expenses in
the future is highly dependent upon our ability to issue new policies and to control
expense growth. Our future growth and new policy issuance is dependent upon our ability to
continue to expand our historical markets, retain and expand our network of agents and
effectively market our products and fund our marketing and expansion while maintaining
minimum statutory levels of capital and surplus required to support such growth.



---

Under
the insurance laws of Pennsylvania and New York, where our insurance subsidiaries are
domiciled, insurance companies can pay ordinary dividends only out of earned surplus. In
addition, under Pennsylvania and New York law, insurance subsidiaries must give the
Department and the New York Insurance Department at least 30 days advance notice of
any proposed extraordinary dividend and cannot pay such a dividend if the
Department or the New York Insurance Department disapproves the payment during that 30-day
period. For purposes of Pennsylvania law, an extraordinary dividend is a dividend that,
together with all other dividends paid during the preceding twelve months, exceeds the
greater of 10% of the insurance companys surplus as shown on the companys last
annual statement filed with Department or its statutory net income as shown on that annual
statement. Statutory earnings are generally lower than earnings reported in accordance
with GAAP due to the immediate or accelerated recognition of all costs associated with
premium growth and benefit reserves. For purposes of New York law, approval must be
obtained for any dividend that, together with all other dividends paid during the
preceding twelve months, exceeds the lesser of 10% of the insurance companys surplus
as of the preceding December 31 or its adjusted net investment income for the year ended
the preceding December 31. Additionally, the Plan requires the Department to approve all
dividends made by PTNA, regardless of normal statutory requirements for allowable
dividends. We believe that the Department is unlikely to approve any dividend in the
foreseeable future as a result of PTNAs current statutory surplus position. Although
not stipulated in the Plan, this requirement is likely to continue until such time as PTNA
meets normal statutory allowances, including reported net income and positive cumulative
earned surplus. We do not expect that this will occur in the foreseeable future.

PTNA
and ANIC have not paid any dividends to the parent company for the past three years and
are unlikely in the foreseeable future to be able to make dividend payments due to
insufficient statutory surplus and anticipated earnings. We do not anticipate that
American Independent Network Insurance Company of New York will make a dividend payment to
the parent company in 2005.

Forward Looking Statements

Certain
statements made by us in this report may be considered forward looking within the meaning
of the Private Securities Litigation Reform Act of 1995. Although we believe that our
expectations are based upon reasonable assumptions within the bounds of our knowledge of
our business and operations, there can be no assurance that actual results of our
operations will not differ materially from our expectations. An investment in our
securities includes certain risks, which may be specific to us or to the long-term care
insurance industry. Factors which could cause actual results to differ from expectations
include, among others, our ability to comply with the Corrective Action Plan, the Florida
Consent Order, the orders or directives of other states in which we do business or any
special provisions imposed by states in connection with the resumption of writing new
business, whether our Corrective
Action Plan will be accepted and approved by all states, our ability to meet our future
risk-based capital goals, the adverse financial impact of suspending new business sales,
our ability to raise adequate capital to meet regulatory requirements and to support
anticipated growth, our ability to service and refinance, convert or repay our convertible
subordinated notes, the cost associated with recommencing new business sales, liquidity
needs and debt obligations, the adequacy of our loss reserves and the recoverability of
our DAC asset, our ability to sell insurance products in certain states, our ability to
enter into a reinsurance agreement for policies sold after July 31, 2004, our ability to
resume generating new business in all states, our ability to commute our reinsurance agreement
and to recapture our reinsured policies and accumulated notional
experience account balance or to enter into definitive agreements to commute our reinsurance
agreement and recapture existing policies early and enter into a new reinsurance agreement on
or before July 28, 2005, our
ability to commute any new reinsurance agreement on or after December 31, 2007,our ability
to comply with government
regulations and the requirements which may be imposed by state regulators as a result of
our capital and surplus levels, the ability of senior citizens to purchase our products in
light of the increasing costs of health care, our ability to defend ourselves against
adverse litigation, or to settle such matters, implementation of approved and pending premium rate increases,
policyholder persistency and our ability to recapture, expand and retain our network of
productive independent agents, especially in light of the suspension of new business.



---

Item 3.Quantitative and
Qualitative Disclosures about Market Risk(amounts in thousands)

We
invest in securities and other investments authorized by applicable state laws and
regulations and follow an investment policy designed to maximize yield to the extent
consistent with liquidity requirements and preservation of assets. A significant portion
of assets and liabilities are financial instruments, which are subject to the market risk
of potential losses from adverse changes in market rates and prices. Our primary market
risk exposures relate to interest rate risk on fixed rate domestic medium-term instruments
and, to a lesser extent, domestic short-term and long-term instruments. We have
established strategies, asset quality standards, asset allocations and other relevant
criteria for our portfolio to manage our exposure to market risk.

Our
financial instruments are held for purposes other than trading. Our portfolio does not
contain any significant concentrations in single issuers (other than U.S. treasury and
agency obligations), industry segments or geographic regions. However, our notional
experience account balance, which represents approximately 92% of our investable assets at
March 31, 2005, is with one reinsurer. Although sufficient assets to support our statutory
reserve liabilities and our notional experience account are secured by trust accounts and
irrevocable letters of credit with major United States financial institutions, the
accumulated profits of our reinsured business are susceptible to significant credit risk
of the reinsurer.

We
urge caution in evaluating overall market risk from the information below. Actual results
could differ materially because the information was developed using estimates and
assumptions as described below, and because insurance liabilities and reinsurance
receivables are excluded in the hypothetical effects (insurance liabilities represent 87%
of total liabilities). Long-term debt, although not carried at fair value, is included in
the hypothetical effect calculation.

The
hypothetical effects of changes in market rates or prices on the fair values of our
financial instruments as of March 31, 2005, excluding insurance liabilities and
reinsurance receivables on unpaid losses because such insurance related assets and
liabilities are not carried at fair value, would have been as follows:

If
interest rates had increased by 100 basis points at March 31, 2005, there would have been
a decrease of approximately $117,000 in the net fair value of our investment portfolio
less our long-term debt. A 200 basis point increase in market rates at March 31, 2005
would have resulted in a decrease of approximately $219,000 in the net fair value. If
interest rates had decreased by 100 and 200 basis points, there would have been a net
increase of approximately $134,000 and $288,000, respectively, in the net fair value of
our total investments and debt.

We
hold certain mortgage and asset backed securities as part of our investment portfolio. The
fair value of these instruments may react in a convex or non-linear fashion when subjected
to interest rate increases or decreases. The anticipated cash flows of these instruments
may differ from expectations in changing interest rate environments, resulting in duration
drift or a varying nature of predicted time-weighted present values of cash flows. The
result of unpredicted cash flows from these investments could cause the above hypothetical
estimates to change. However, we believe that the minimal amount we have invested in these
instruments and their broadly defined payment parameters sufficiently outweigh the cost of
computer models necessary to accurately predict the possible impact on our investment
income of hypothetical effects of changes in market rates or prices on the fair values of
financial instruments as of March 31, 2005.



---

Item 4.Controls and
Procedures

Our
management, under the supervision and with the participation of the principal executive
officer and principal financial officer, has evaluated the effectiveness of our controls
and procedures related to our reporting and disclosure obligations as of March 31, 2005,
which is the end of the period covered by this Quarterly Report on Form 10-Q. Based on
that evaluation, the principal executive officer and principal financial officer have
concluded that these disclosure controls and procedures are effective to provide that (a)
material information relating to us, including our consolidated subsidiaries, is made
known to these officers by other employees of us and our consolidated subsidiaries,
particularly material information related to the period for which this periodic report is
being prepared; and (b) this information is recorded, processed, summarized, evaluated and
reported, as applicable, within the time periods specified in the rules and forms of the
Securities and Exchange Commission.

As
further described in the Companys Annual Report on Form 10-K for the year ended
December 31, 2004, in March 2005, in conjunction with the preparation of the financial
statements for the year ended December 31, 2004, the Company discovered that certain
policy riders were not properly identified in data utilized to calculate policy reserves
and determined that, as a result, it did not properly account for benefits expense and
policy reserves. During the first fiscal quarter of 2005, the Company implemented a
control related to this control deficiency. A system report is run that identifies all
policies issued with an inflation rider. This report is cross-referenced to the data
utilized to calculate policy reserves to ensure that the policy rider is properly
identified.

This
Quarterly Report on Form 10-Q was not filed within the prescribed time period due to (i)
the delay in the filing of the Companys Annual Report on Form 10-K for the year ended
December 31, 2004 after discovery of the control deficiency described above, (ii) the
resources required to prepare the Companys Quarterly Report on Form 10-Q/A for the
quarter ended March 31, 2004, which amended the Companys Quarterly Report on Form 10-Q
for the same period,  filed on May 17, 2004, to restate its previously issued financial
statements to reflect the inclusion of the policy riders, and (iii) the resources required
to prepare an Amendment to the Companys Registration Statement
 for the resale of 6 1⁄4% Convertible Subordinated Notes due 2008 that the Company
issued in private placements in 2004.



---

# PART II OTHER
INFORMATION

Item 1.  Legal Proceedings

The
Company and its subsidiaries are parties to various lawsuits generally arising in the
normal course of their business. While the outcome of any single lawsuit could have a
material impact upon the Company's financial results for the period in which it occurs,
the Company does not believe that the eventual outcome of the majority of these lawsuits
is likely to have a material adverse effect on its overall financial condition or results
of operations. However, the matters specifically described below are currently viewed by
management as potentially material and, in the event of an unfavorable outcome, any one
of these matters could have a material adverse effect on the Company's financial
condition and results of operations.

The
Company and its subsidiary, Penn Treaty Network America Insurance Company
(PTNA), are defendants in an action in the Fifth Judicial Circuit of the State
of Florida in and for Marion County, Civil Division (Forest, et al. v. Penn Treaty Network
America Insurance Company). Plaintiffs filed this matter on January 10, 2003 in
Florida State Court, on behalf of themselves and a class of similarly situated Florida
long-term care policyholders. We removed this case to United States District Court, Middle
District of Florida, Ocala Division for a second time in November 2003. Plaintiffs
motion to remand the case to Florida State Court was granted in April 2004. Plaintiffs
claim wrongdoing in connection with the sale of long-term care insurance policies to the
plaintiffs and the class. Plaintiffs allege claims for reformation, breach of fiduciary
duty, breach of the implied duty of good faith and fair dealing, negligent
misrepresentation, fraudulent misrepresentation, and restitution and pray for relief in
the form of compensatory damages and restitution, an order of reformation of the policies,
and attorney fees and court costs. No amounts were specified for compensatory damages and
restitution. We have filed motions to dismiss for failure to state a claim and lack of
personal jurisdiction and to strike certain allegations of the complaint as irrelevant and
improper. While we deny liability to plaintiffs, we
are continuing our negotiations toward settlement in this matter.

The
Company and PTNA are defendants in an action in the Orange County Superior Court in the
state of California (Bartolini, et al. v. Penn Treaty Network America Insurance Company).
Plaintiffs filed this matter in November 2003 on behalf of themselves, all other persons
similarly situated and the general public. Plaintiffs claim wrongdoing in violation of the
California Business & Professions Code in connection with the sale of long term care
insurance policies. Plaintiffs allege unlawful business acts, claims for reformation,
breach of fiduciary duty, breach of the implied duty of good faith and fair dealing, and
negligent misrepresentation and pray for relief in the form of compensatory damages and
restitution, punitive damages, an order of reformation of the policies, and attorney fees
and court costs. No amounts were specified for compensatory damages and restitution. After
review of our motions related to the complaint, the court dismissed plaintiffs claim
for breach of fiduciary duty, and we filed an answer to the plaintiffs other claims
in the complaint. While we deny liability to plaintiffs, we are continuing our negotiations
toward settlement in this matter.

PTNA
is a defendant in an action in the Los Angeles County Superior Court in the state of
California (Westfall, et al. v. Penn Treaty Network America Insurance Company, et al.).
Plaintiffs filed this matter on May 28, 2004 on behalf of themselves and all other persons
similarly situated and the general public. Plaintiffs allege wrongdoing in connection with
the payment of long-term care insurance claims. Plaintiffs allege violations of the
California Consumer Legal Remedies Act, the California Business and Professions Code,
breach of the implied duty of good faith and fair dealing, financial elder abuse and pray
for relief in the form of compensatory damages and restitution, punitive damages, an
accounting, attorney fees and court costs. No amounts were specified for compensatory
damages and restitution or punitive damages. PTNA removed this case to United States
District Court for the Central District of California in March 2005. PTNA has filed a
motion to dismiss all counts of the plaintiffs complaint, and a motion to strike
allegations of the complaint, including plaintiffs class allegations.
However, we believe that the complaint is without merit and intend to continue to defend
the matter vigorously.

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

| | Not
Applicable
| | --------------

Item 5. Other Information

| | Not
Applicable
| | --------------



---

Item
6.    Exhibits

Exhibit Number    Description

|31.1 |  | Rule
13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
|---- |  | --------------------------------------------------------------------------------

|31.2 |  | Rule
13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer.
|---- |  | -----------------------------------------------------------------------------------------------

|32.1 |  | Section
1350 Certification of President and Chief Executive Officer.
|---- |  | --------------------------------------------------------------------

|32.2 |  | Section
1350 Certification of Executive Vice President and Chief Financial Officer.
|---- |  | -----------------------------------------------------------------------------------



---

SIGNATURES

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

| |  |                                 
| |  | --------------------------------
| |  | PENN TREATY AMERICAN CORPORATION
| |  | Registrant                      

|                     |  |                                                        
|-------------------- |  | -------------------------------------------------------
|Date:  June 27, 2005 |  | /s/ William W. Hunt                                    
|                     |  | William W. Hunt
 President and
 Chief Executive Officer

|                     |  |                                                                   
|-------------------- |  | ------------------------------------------------------------------
|Date:  June 27, 2005 |  | /s/Mark D. Cloutier                                               
|                     |  | Mark D. Cloutier
Senior Vice President and
Chief Financial Officer



---

# Exhibit Index

Exhibit Number    Description

|31.1 |  | Rule
13a-14(a)/15d-14(a) Certification of President and Chief Executive Officer.
|---- |  | --------------------------------------------------------------------------------

|31.2 |  | Rule
13a-14(a)/15d-14(a) Certification of Executive Vice President and Chief Financial Officer.
|---- |  | -----------------------------------------------------------------------------------------------

|32.1 |  | Section
1350 Certification of President and Chief Executive Officer.
|---- |  | --------------------------------------------------------------------

|32.2 |  | Section
1350 Certification of Executive Vice President and Chief Financial Officer.
|---- |  | -----------------------------------------------------------------------------------



---