SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-Q

(Mark One)

(x)  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF  THE  SECURITIES
     EXCHANGE ACT OF 1934

For the quarterly period ended    March 31, 2003
                                  --------------

                                       OR

( )  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR 15 (d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                     to
                                -----------------       -------------------

Commission file number                   0-22316
                                   --------------------

                            Penn-America Group, Inc.
        -----------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


          Pennsylvania                                  23-2731409
---------------------------------          -------------------------------------
(State or other jurisdiction of            (I.R.S. Employer Identification No.)
 incorporation or organization)


                420 South York Road, Hatboro, Pennsylvania 19040
     -----------------------------------------------------------------------
          (Address of principal executive offices, including zip code)

                                 (215) 443-3600
     -----------------------------------------------------------------------
              (Registrant's telephone number, including area code)


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 other  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 X No __

At May 8, 2003,  14,617,265 shares of the registrant's  common stock,  $0.01 par
value, were outstanding.




                                     Page 1
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                                      Index

                                                                     Page Number

Part I - Financial Information

      Item 1. Financial Statements

         Consolidated Balance Sheets - March 31, 2003 (unaudited) and
                December 31, 2002                                             3

         Consolidated Unaudited Statements of Operations - For the three
                 months ended March 31, 2003 and 2002                         4

         Consolidated Unaudited Statement of Stockholders' Equity -
                For the three months ended March 31, 2003                     5

         Consolidated Unaudited Statements of Cash Flows -
                For the three months ended March 31, 2003 and 2002            6

         Notes to Unaudited Consolidated Financial Statements                 7

      Item 2. Management's Discussion and Analysis of Financial Condition
                   and Results of Operations                                 11

      Item 3. Quantitative and Qualitative Disclosure About Market Risk      19

      Item 4. Controls and Procedures                                        20

Part II - Other Information                                                  21


                                     Page 2
<PAGE>



<TABLE>
<CAPTION>
                                           PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                                                  Consolidated Balance Sheets
                                               (In thousands, except share data)
                                                                                           March 31,           December 31,
                                                                                              2003                 2002
                                                                                        ----------------     -----------------
                                                                                          (Unaudited)
<S>                                                                                           <C>                  <C>
ASSETS

Investments:
    Fixed maturities:
       Available for sale, at fair value (amortized cost, $253,886 and $237,450)           $  262,561            $ 246,583
       Held to maturity, at amortized cost (fair value, $1,317 and $2,017)                      1,277                1,963
    Equity securities, at fair value (cost, $10,966 and $17,859)                               11,933               18,625
                                                                                        ----------------     -----------------
       Total investments                                                                      275,771              267,171
Cash and cash equivalents                                                                       7,137                9,796
Accrued investment income                                                                       2,971                3,196
Premiums receivable                                                                            14,065               12,564
Reinsurance recoverable                                                                        27,612               27,843
Prepaid reinsurance premiums                                                                    9,196                8,965
Deferred policy acquisition costs                                                              12,866               13,159
Capital lease, affiliate                                                                        1,557                1,579
Deferred income taxes                                                                           2,217                2,105
Income tax recoverable                                                                             --                   60
Other assets                                                                                      724                  801
                                                                                        ----------------     -----------------
       Total assets                                                                         $ 354,116            $ 347,239
                                                                                        ================     =================

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
  Unpaid losses and loss adjustment expenses                                                $ 143,185            $ 137,747
  Unearned premiums                                                                            65,229               65,365
  Accounts payable and accrued expenses                                                         6,495                7,700
  Capitalized lease obligation, affiliate                                                       1,389                1,428
  Company obligated mandatorily redeemable preferred securities of
         subsidiary trust holding solely junior subordinated debentures                        15,000               15,000
  Income tax payable                                                                            1,502                   --
  Other liabilities                                                                             1,574                3,404
                                                                                        ----------------     -----------------
         Total liabilities                                                                    234,374              230,644
                                                                                        ----------------     -----------------
Stockholders' equity:
  Preferred stock, $.01 par value; authorized 2,000,000 shares;
    None issued                                                                                    --                   --
  Common stock, $.01 par value; authorized 20,000,000 shares;
    issued and outstanding, 14,610,577 and 14,572,098 shares                                      147                  146
  Additional paid-in capital                                                                   71,275               70,875
   Accumulated other comprehensive income                                                       6,199                6,401
  Retained earnings                                                                            42,930               39,995
   Officers' stock loans                                                                         (629)                (629)
  Unearned compensation from restricted stock awards                                             (180)                (193)
                                                                                        ----------------     -----------------
         Total stockholders' equity                                                           119,742              116,595
                                                                                        ----------------     -----------------
         Total liabilities and stockholders' equity                                         $ 354,116            $ 347,239
                                                                                        ================     =================

</TABLE>

                                                             Page 3
<PAGE>


<TABLE>
<CAPTION>

                               PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                                 Consolidated Statements of Operations
                                              (Unaudited)

                           For the three months ended March 31, 2003 and 2002
                                   (In thousands, except share data)


                                                                   Three months ended March 31,
                                                              ----------------------------------------
                                                                     2003                 2002
                                                              -------------------   ------------------
<S>                                                           <C>                   <C>
Revenues
Premiums earned                                               $         34,365      $        22,983
Net investment income                                                    3,213                2,833
Net realized investment gain (loss)                                        714                 (252)
                                                              -------------------   ------------------
    Total revenues                                                      38,292               25,564
                                                              -------------------   ------------------

Losses and expenses
Losses and loss adjustment expenses                                     22,012               15,286
Amortization of deferred policy acquisition costs                        8,617                6,011
Other underwriting expenses                                              2,046                1,657
Corporate expenses                                                         185                  111
Interest expense                                                           304                   35
                                                              -------------------   ------------------
    Total losses and expenses                                           33,164               23,100
                                                              -------------------   ------------------


Income before income tax                                                 5,128                2,464
Income tax expense                                                       1,554                  678
                                                              -------------------   ------------------

Net income                                                    $          3,574      $         1,786
                                                              ===================   ==================

Net income per share
   Basic                                                      $           0.24      $          0.15

   Diluted                                                    $           0.24      $          0.15


Weighted average shares outstanding
   Basic                                                            14,591,096           11,536,694
   Diluted                                                          14,798,913           11,710,482

Cash dividend per share                                       $        0.04375      $       0.03833


</TABLE>

                                                Page 4

<PAGE>


<TABLE>
<CAPTION>
                                              PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

                                           Consolidated Statement of Stockholders' Equity
                                                             (Unaudited)

                                              For the three months ended March 31, 2003
                                                  (In thousands, except share data)



                                                                                                        Unearned
                                                                Accumulated                           Compensation
                                                   Additional      Other                  Officers'       From             Total
                                         Common      Paid-In   Comprehensive   Retained     Stock      Restricted      Stockholders'
                                          Stock      Capital      Income       Earnings     Loans     Stock Awards         Equity
                                         -------- ------------ -------------- ----------- ----------  -------------  ---------------
<S>                                       <C>       <C>            <C>        <C>          <C>            <C>          <C>
Balance at December 31, 2002               $ 146     $ 70,875       $ 6,401    $ 39,995     $ (629)        $ (193)      $ 116,595

Net income                                    --           --            --       3,574         --             --           3,574
Other comprehensive loss:
 Unrealized loss on investments, net
  of tax and reclassification adjustment      --           --          (170)         --         --             --            (170)
 Unrealized loss on cash-flow hedging
  instrument, net of tax                      --           --           (32)         --         --             --             (32)
                                                                                                                     ---------------
Comprehensive income
                                                                                                                            3,372
                                                                                                                     ---------------
Issuance of common stock                       1          378            --          --         --             --             379
Compensation expense on stock
    options                                   --           22            --          --         --             --              22
Amortization of compensation expense
 from restricted stock awards issued          --           --            --          --         --             13              13
Cash dividends paid ($0.04375 per share)      --           --            --        (639)        --             --            (639)
                                         -------- ------------ -------------- ----------- ----------  -------------  ---------------
Balance at March 31, 2003                  $ 147     $ 71,275       $ 6,199    $ 42,930     $ (629)        $ (180)      $ 119,742
                                         ======== ============ ============== =========== ==========  =============  ===============

</TABLE>




                                                               Page 5
<PAGE>


<TABLE>
<CAPTION>
                                           PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                                             Consolidated Statements of Cash Flows
                                                          (Unaudited)

                                       For the three months ended March 31, 2003 and 2002
                                                         (In thousands)
                                                                                           Three months ended March 31,
                                                                                      ----------------------------------------
                                                                                            2003                   2002
                                                                                      ------------------     -----------------
<S>                                                                                         <C>                    <C>
Cash flows from operating activities:
    Net income                                                                              $ 3,574                $ 1,786
    Adjustments to reconcile net income to net cash provided by
      operating activities:
         Amortization (accretion) and depreciation expense                                      365                    (43)
         Net realized investment loss (gain)                                                   (714)                   252
         Deferred income tax benefit                                                             (8)                  (154)
         Net change in premiums receivable, prepaid reinsurance
           premiums and unearned premiums                                                    (1,868)                 5,327
         Net change in unpaid losses and loss adjustment expenses
           and reinsurance recoverable                                                        5,669                  4,544
         Decrease (increase) in:
             Accrued investment income                                                          225                     89
             Deferred policy acquisition costs                                                  293                   (702)
             Income tax recoverable/payable                                                   1,562                    831
             Other assets                                                                         4                    (36)
         Decrease in:
             Accounts payable and accrued expenses                                           (1,183)                  (266)
             Other liabilities                                                               (1,879)                    (3)
                                                                                      ------------------     -----------------
         Net cash provided by operating activities                                            6,040                 11,625
                                                                                      ------------------     -----------------

Cash flows from investing activities:
    Purchases of fixed maturities available for sale                                        (62,496)               (17,476)
    Proceeds from sales of equity securities                                                  6,447                  1,000
    Proceeds from sales and maturities of fixed maturities available for sale                46,963                  3,146
    Proceeds from maturities and calls of fixed maturities held to maturity                     686                  5,315
                                                                                      ------------------     -----------------
         Net cash used by investing activities                                               (8,400)                (8,015)
                                                                                      ------------------     -----------------

Cash flows from financing activities:
    Issuance of common stock                                                                    379                    100
    Principal payments on capital lease obligations, affiliate                                  (39)                   (36)
    Dividends paid                                                                             (639)                  (442)
                                                                                      ------------------     -----------------
         Net cash used by financing activities                                                 (299)                  (378)
                                                                                      ------------------     -----------------

Increase (decrease) in cash                                                                  (2,659)                 3,232
Cash, beginning of period                                                                     9,796                 13,129
                                                                                      ------------------     -----------------
Cash, end of period                                                                        $  7,137           $     16,361
                                                                                      ==================     =================
</TABLE>


                                                            Page 6
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements

Note 1 - Organization and Basis of Presentation

         Penn-America  Group,  Inc.  ("PAGI") is an insurance  holding  company.
Approximately  32% of the  outstanding  common  stock of PAGI was  owned by Penn
Independent Corporation ("Penn Independent") at March 31, 2003. The accompanying
financial   statements  include  the  accounts  of  PAGI  and  its  wholly-owned
subsidiaries,   Penn-America   Insurance   Company   ("Penn-America")   and  its
wholly-owned   subsidiary,   Penn-Star  Insurance  Company  ("Penn-Star");   and
Penn-America Statutory Trust I (the "Trust") (collectively the "Company").

         The  Company  markets and  underwrites  general  liability,  commercial
property,  and multi-peril  insurance for small businesses  located primarily in
small  towns and  suburban  and rural  areas.  The  Company is licensed to write
business in all 50 states and the  District  of  Columbia.  The  Company  writes
business on both an admitted  and  non-admitted  basis in 37 states,  on only an
admitted  basis in one state and on only a  non-admitted  basis in 12 states and
the District of Columbia.

         The accompanying  condensed unaudited consolidated financial statements
and notes have been prepared in accordance with accounting  principles generally
accepted in the United States  ("GAAP") for interim  financial  information  and
with  the   instructions  to  Form  10-Q  and  Article  10  of  Regulation  S-X.
Accordingly,  they do not include all of the  information  and notes required by
GAAP for  complete  financial  statements.  In the  opinion of  management,  all
adjustments   (consisting  of  normal  and  recurring  adjustments)   considered
necessary for a fair  presentation  of results for the interim periods have been
included.  All  significant  intercompany  accounts and  transactions  have been
eliminated in  consolidation.  It is suggested  that these  condensed  unaudited
consolidated  financial  statements  and notes be read in  conjunction  with the
financial  statements  and notes in the  Company's  2002 Annual Report which was
incorporated  by  reference  into the  Company's  Form  10-K for the year  ended
December 31, 2002. The Company's  results of operations for interim  periods are
not necessarily indicative of the results to be expected for the entire year.

Note 2 - Reinsurance

         Premiums  earned are  presented  net of amounts  ceded to reinsurers of
$6,200,000  and  $3,100,000  for the three months ended March 31, 2003 and 2002,
respectively.  Losses and loss adjustment  expenses are presented net of amounts
ceded to  reinsurers  of $3,869,000  and  $1,700,000  for the three months ended
March 31, 2003 and 2002, respectively.

Note 3 - Comprehensive Income

           For the three months ended March 31, 2003,  comprehensive  income was
$3,372,000,  which consisted of net income of $3,574,000 and other comprehensive
loss of $202,000 related to net unrealized losses on investments and a cash flow
hedging  instrument.  For the three months  ended March 31, 2002,  comprehensive
income was  $769,000,  which  consisted  of net income of  $1,786,000  and other
comprehensive   loss  of  $1,017,000   related  to  net  unrealized   losses  on
investments.


                                     Page 7
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)


Note 4 - Net Income Per Share

         Basic net income per share is computed by dividing net income available
to  common  stockholders  by  the  weighted  average  number  of  common  shares
outstanding for each period. Diluted net income per share includes the potential
dilution  that could occur if  outstanding  contracts to issue common stock were
exercised and converted to common stock.  The following is a  reconciliation  of
the basic and diluted net income per share computations:



<TABLE>
<CAPTION>
     (in thousands, except per share data)                                 Three months ended March 31,
     -------------------------------------------------------------------------------------------------------
                                                                            2003                 2002
                                                                       ----------------    -----------------
<S>                                                                    <C>                 <C>
     Basic per share computation:
          Net income                                                   $        3,574      $         1,786


          Weighted average common shares outstanding                       14,591,096           11,536,694
                                                                       ----------------    -----------------

     Basic net income per share                                        $         0.24      $          0.15
                                                                       ================    =================

     Diluted per share computation:
          Net income                                                   $        3,574      $         1,786

          Weighted average common shares outstanding                       14,591,096           11,536,694

          Additional shares outstanding after the assumed
             assumed exercise of stock options
             by applying  the treasury stock method                           207,817              173,788
                                                                       ----------------    -----------------

          Total shares                                                     14,798,913           11,710,482
                                                                       ================    =================

     Diluted net income per share                                      $         0.24      $          0.15
                                                                       ================    =================
</TABLE>

Note 5 - Segment Information

         The  Company  has only one  reportable  segment.  In 1999,  the Company
exited the non-standard  personal automobile line of business and announced that
it would run-off its remaining portfolio of such business.  For the three months
ended March 31, 2003 and 2002,  amounts relating to the non-personal  automobile
business were not material to the financial statements presented, and therefore,
are not presented separately.



                                     Page 8
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

Note 6 - Stock Options

         On January 1, 2003,  the  Company  adopted  the fair value  recognition
provisions of SFAS No. 148, Accounting for Stock-Based Compensation - Transition
and  Disclosure  ("SFAS  148"),  and SFAS No. 123,  Accounting  for  Stock-Based
Compensation  ("SFAS 123") by implementing the modified  prospective  transition
method  permitted  under SFAS 148.  This method  requires  the Company to record
compensation  expense in 2003,  and  annually  thereafter,  as if the fair value
recognition  method had been used since  January 1, 1995.  For the three  months
ended March 31, 2003, $22,000 of compensation expense was recorded.

         Prior  to  January  1,  2003,  the  Company   applied  the  recognition
principles  of APB No.  25,  Accounting  for  Stock  Issued to  Employees,  and,
accordingly,  no compensation expense was recognized. If the Company had applied
the fair value  recognition  provisions  of SFAS 123 for the three  months ended
March 31, 2002,  $62,000 of compensation  expense would have been recorded.  The
following  table  illustrates  the effect on net income and net income per share
for the three months ended March 31, 2002 as if the Company had applied the fair
value recognition provisions of SFAS 123.


<TABLE>
<CAPTION>
                                                                                                Three
                                                                                            Months Ended
                    (in thousands, except per share data)                                  March 31, 2002
                    ----------------------------------------------------------------------------------------
<S>                                                                                      <C>
                    Net income:
                        As reported                                                      $       1,786
                        Pro forma                                                                1,745

                    Basic and diluted income per share:
                        As reported                                                      $         0.15
                        Pro forma                                                                  0.15
</TABLE>


Note 7 - Company Obligated Mandatorily Redeemable Preferred Securities of
          Subsidiary Trust Holding Solely Junior Subordinated Debentures

         The  Company  has  executed a letter of intent to issue $15  million of
floating rate trust  preferred  securities by a business trust  subsidiary to be
established by the Company.  These securities will have a thirty-year  maturity,
with a provision  that allows the Company to call these  securities at par after
five years from the date of issuance.  Cash distributions will be paid quarterly
in arrears  at a rate of 410 basis  points  over  three-month  London  Interbank
Offered Rates.  Distributions on these securities can be deferred for up to five
years,  but the  Company  may not  declare or pay cash  dividends  on its common
stock.  The  Company  will  guarantee  all  obligations  of the  business  trust
subsidiary with respect to distributions and payments of these securities.

                                     Page 9

<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

Note 7 - Company Obligated Mandatorily Redeemable Preferred Securities of
           Subsidiary Trust Holding SolelyJunior Subordinated Debentures
           (continued)

         Proceeds  from the  sale of  these  securities  by the  business  trust
subsidiary  will be  used  to  acquire  $15  million  of  Floating  Rate  Junior
Subordinated  Deferrable  Interest Rate Debentures issued by the Company.  These
debentures  will have the same terms with  respect to  maturity,  payments,  and
distributions  as the floating  rate trust  preferred  securities  issued by the
business  trust  subsidiary.  The  intended  use  of  the  proceeds  from  these
debentures is to support  growth in the Company's  insurance  operations and for
general  corporate  purposes.  The transactions are expected to close on May 15,
2003.













                                    Page 10
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

                Management's Discussion and Analysis of Financial
                      Condition and Results of Operations

Results of Operations

Three Months Ended March 31, 2003 and 2002

         Premiums  earned  increased 49.5% to $34.4 million for the three months
ended March 31, 2003,  compared  with $23.0 million for the same period in 2002,
due to the growth in net written premiums over the last 12 months.

         Gross written  premiums,  which  represent the amount received or to be
received for insurance policies written without reduction for acquisition costs,
reinsurance  costs or other  deductions,  increased  34.5% for the three  months
ended March 31, 2003 to $40.4 million, compared with $30.0 million for the three
months ended March 31, 2002. The increase was  attributable  to rate  increases,
growth in new business and higher average exposures per policy.

         Ceded written premiums, the portion of gross written premiums reinsured
by unaffiliated  insurers,  increased to $6.4 million for the three months ended
March 31, 2003,  compared with $3.6 million for the three months ended March 31,
2002.  The increase in ceded  written  premiums  was due  primarily to growth in
gross  written  premiums  and  an   approximately   32.0%  percent  increase  in
reinsurance rates on the Company's multiple-line excess of loss treaty.

         Net  written  premiums,  which are gross  written  premiums  less ceded
written  premiums,  increased 28.9% for the three months ended March 31, 2003 to
$34.0 million,  compared with $26.4 million for the three months ended March 31,
2002. The increase in net written  premiums was consistent  with the increase in
gross written premiums, but was offset partially by higher reinsurance costs.

         Net  investment  income  increased to $3.2 million for the three months
ended March 31,  2003,  compared  with $2.8  million for the three  months ended
March  31,  2002,  primarily  due to the  growth  in  average  invested  assets,
partially offset by a decrease in average yield on fixed-maturity investments.

         Net  realized  investment  gain was $714,000 for the three months ended
March 31, 2003,  compared to a net realized  investment loss of $252,000 for the
three months ended March 31, 2002. The net realized  investment gain for 2003 is
attributable to the sale of certain of the Company's  fixed-maturity  securities
and all of the Company's common stock investments.

           Losses and loss adjustment  expenses increased 44.0% to $22.0 million
for the three months ended March 31, 2003,  compared  with $15.3 million for the
three  months  ended March 31,  2002.  The loss ratio for the three months ended
March 31, 2003 was 64.1, compared with 66.5 for the three months ended March 31,
2002.  The loss ratio is  calculated  by  dividing  losses  and loss  adjustment
expenses by premiums  earned.  The  improvement  in the loss ratio is  primarily
attributable to rate increases implemented in 2002 and 2003.

         Amortization of deferred policy  acquisition  costs ("ADAC")  increased
43.4% to $8.6  million  for the three  months  ended  March  31,  2003 from $6.0
million for the three months ended March 31, 2002 primarily due to the growth in
premiums earned.

                                    Page 11

<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)

         Other  underwriting  expenses  increased  23.5% to $2.0 million for the
three  months  ended March 31, 2003 from $1.7 million for the three months ended
March 31,  2002  primarily  due to  increases  in salary  and  benefit  expenses
associated with the hiring of additional underwriting and marketing personnel.

         The  overall  GAAP  combined  ratio,  which  is the sum of the loss and
expense ratios,  improved to 95.1 for the three months ended March 31, 2003 from
99.9 for the three months ended March 31, 2002.  The loss ratio improved to 64.1
for the three  months  ended March 31, 2003 from 66.5 for the three months ended
March 31, 2002.  The expense  ratio,  which is calculated by dividing the sum of
ADAC and other  underwriting  expenses by premiums earned,  improved to 31.0 for
the three months ended March 31, 2003 from 33.4 for the three months ended March
31,  2002.  The  GAAP  combined  ratio is a  standard  measure  of  underwriting
profitability  used throughout the property and casualty insurance  industry.  A
ratio below 100.0 generally indicates underwriting profitability.

         Interest expense increased to $304,000 for the three months ended March
31, 2003 from $35,000 for the three months ended March 31, 2002 primarily due to
interest expense on $15.0 million of Company  Obligated  Mandatorily  Redeemable
Preferred  Securities of Subsidiary  Trust  Holding  Solely Junior  Subordinated
Debentures ("Trust Preferred Securities") issued in December 2002.

         The factors described above resulted in net income for the three months
ended March 31,  2003 of $3.6  million or $0.24 per share  (basic and  diluted),
compared  with $1.8 million or $0.15 per share (basic and diluted) for the three
months ended March 31, 2002.

Catastrophe Losses

         The  Company  received  several  claims  related  to a series of severe
storms in the Midwestern  states  occurring  between May 2 and May 11, 2003. The
Company is  investigating  these  claims and is currently  unable to  reasonably
estimate  the amount of its  liabilities  related to these  storms.  The Company
limits its exposure to  catastrophic  events by maintaining a catastrophic  loss
reinsurance  program which  provides  coverage of $29 million per  occurrence in
excess of $1 million per occurrence. The Company's catastrophic loss reinsurance
program  limits an occurence to all  individual  losses  during any period of 72
consectutive hours arising from the same event. Since these storms occurred over
a period of 10 days,  the Company has not yet  determined  if this event will be
deemed to be one or more  occurrences  under  the  Company's  catastrophic  loss
reinsurance program.


Critical Accounting Estimates and Policies

         The  preparation of financial  statements in conformity with accounting
principles  generally accepted in the United States requires the Company to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting periods.  Actual results could differ
from those estimates.

         The Company  has  identified  that the  establishment  of reserves  for
unpaid losses and loss adjustment  expenses and the valuation of investments are
critical  accounting  estimates  because they involve a high degree of judgment.
Although  variability is inherent in these  estimates,  the Company believes the
amounts  provided are  appropriate  based upon facts available at this time. See
the Investment Portfolio section beginning on page 16 for information related to
the valuation of investments.


                                    Page 12
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)

         The Company is directly liable for losses and loss adjustment  expenses
under the terms of the  insurance  policies it writes.  In many  cases,  several
years may lapse between the  occurrence of an insured loss, the reporting of the
loss and the payment of that loss.  The Company  reflects its  liability for the
ultimate  payment  of all  incurred  losses  and  loss  adjustment  expenses  by
establishing  its best estimate of loss and loss adjustment  expense reserves as
balance sheet liabilities for both reported and unreported claims.

         When a claim  involving  a  probable  loss  is  reported,  the  Company
establishes a case reserve for the estimated  amount of its ultimate  loss.  The
estimate of the amount of the ultimate loss is based upon factors such as:

|X|      the type of loss,
|X|      the jurisdiction of the occurrence,
|X|      the Company's knowledge of the circumstances surrounding the claim,
|X|      the severity of injury or damage,
|X|      the potential for ultimate exposure, and
|X|      policy provisions relating to the claim.

         The Company  determines  loss  adjustment  expenses as a percentage  of
expected  indemnity  losses  based on  historical  patterns  adjusted to current
experience.

         In addition to case reserves,  the Company  establishes  reserves on an
aggregate  basis to  provide  for  incurred  but not  reported  losses  and loss
adjustment  expenses,  commonly referred to as "IBNR". To establish reserves for
IBNR, the Company must estimate the ultimate  liability  based primarily on past
experience. The Company applies a variety of traditional actuarial techniques to
estimate its ultimate liability. The techniques recognize, among other factors:

|X|      the Company's and the industry's experience,
|X|      historical trends in reserving patterns and loss payments,
|X|      the impact of claim inflation,
|X|      the pending level of unpaid claims,
|X|      the cost of claim settlements,
|X|      the line of business mix, and
|X|      the economic environment in which property and casualty insurance
          companies operate.

         The Company  continually  reviews  these  estimates  and,  based on new
developments and information,  the Company includes  adjustments of the probable
ultimate  liability  in the  operating  results  for the  periods  in which  the
adjustments are made. In general,  initial reserves are based upon the actuarial
and  underwriting  data  utilized  to set  pricing  levels and are  reviewed  as
additional information, including claims experience, becomes available.

         The establishment of loss and loss adjustment expense reserves makes no
provision  for the  broadening  of  coverage by  legislative  action or judicial
interpretation; or the extraordinary future emergence of new types of losses not
sufficiently represented in the Company's historical experience,  or that cannot
yet be  quantified.  The Company  regularly  analyzes  its  reserves and reviews
pricing and reserving  methodologies  so that future



                                    Page 13
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)


adjustments  to  prior  year  reserves  can be  minimized.  However,  given  the
complexity of this  process,  reserves  will require  continual  updates and the
ultimate liability may be higher or lower than previously indicated. The Company
does not discount its loss reserves.

         The Company received an unexpected increase in the number of new claims
reported relating to four policies issued to a single insured between January 1,
1980 and April 1,  1983.  The  insured  is a  manufacturer  of safety  equipment
including  industrial  masks and the new claims  reported  allege  existing  and
potential bodily injury due to medical condition called  silicosis.  This is the
only  insured  with which the Company  has open claims  relating to this type of
injury. The original policies covered products and completed operations only and
were issued with a $500,000  indemnity policy aggregate limit of liability and a
$5,000  insured  deductible  per claim.  At this  time,  it is not  possible  to
evaluate the probability of a favorable or unfavorable  outcome on these claims.
The Company believes that the amount of losses or loss adjustment  expenses will
not have a material  effect on the  Company's  financial  position or results of
operations.

         During the first three months of 2003, the Company  increased  incurred
losses and loss  adjustment  expenses  attributable  to insured  events of prior
years by $320,000,  primarily  due to an increase in estimates for loss and loss
adjustment  expense  reserves  for the  exited  commercial  automobile  lines of
business.  The  increase in these  estimates  is  primarily  attributable  to an
increase in the expected  loss  adjustment  expenses  relating to open claims at
March 31, 2003.

         In  addition,  the  Company  reduced  its  estimates  for loss and loss
adjustment  expense  reserves for the commercial  property lines of business for
the 2002  accident  year by  $900,000.  This  reduction  was fully  offset by an
increase  in the  Company's  estimate  for the  commercial  liability  lines  of
business  due to  the  development  of  outstanding  claim  reserves  on  claims
occurring in various accident years.

Liquidity and Capital Resources

         PAGI is a holding  company,  the principal asset of which is the common
stock of  Penn-America  Insurance  Company.  At March 31, 2003,  PAGI's  capital
structure consisted of common stockholders' equity of $119.7 million and Company
Obligated  Mandatorily  Redeemable  Preferred  Securities  of  Subsidiary  Trust
Holding Solely Junior Subordinated Debentures of $15.0 million.

         The  Company  has  executed a letter of intent to issue $15  million of
floating rate trust  preferred  securities by a business trust  subsidiary to be
established by the Company.  These securities will have a thirty-year  maturity,
with a provision  that allows the Company to call these  securities at par after
five years from the date of issuance.  Cash distributions will be paid quarterly
in arrears  at a rate of 410 basis  points  over  three-month  London  Interbank
Offered Rates.  Distributions on these securities can be deferred for up to five
years,  but the  Company  may not  declare or pay cash  dividends  on its common
stock.  The  Company  will  guarantee  all  obligations  of the  business  trust
subsidiary with respect to distributions and payments of these securities.




                                    Page 14
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)

         Proceeds  from the  sale of  these  securities  by the  business  trust
subsidiary  will be  used  to  acquire  $15  million  of  Floating  Rate  Junior
Subordinated  Deferrable  Interest Rate Debentures issued by the Company.  These
debentures  will have the same terms with  respect to  maturity,  payments,  and
distributions  as the floating  rate trust  preferred  securities  issued by the
business  trust  subsidiary.  The  intended  use  of  the  proceeds  from  these
debentures is to support  growth in the Company's  insurance  operations and for
general  corporate  purposes.  The transactions are expected to close on May 15,
2003.

         PAGI's  principal  source  of  cash to meet  short-term  and  long-term
liquidity needs,  including the payment of dividends to stockholders,  corporate
expenses  and  interest  on  its  debentures,  is  dividends  from  Penn-America
Insurance Company.  PAGI has no planned capital  expenditures that could have an
impact on its long-term liquidity needs.

         Penn-America's  principal sources of funds are underwriting operations,
investment income and proceeds from sales and redemptions of investments.  Funds
are used by  Penn-America  Insurance  Company and  Penn-Star  Insurance  Company
principally to pay claims and operating expenses, to purchase investments and to
make  dividend  payments to PAGI.  PAGI's  future  liquidity is dependent on the
ability of Penn-America Insurance Company to pay dividends to PAGI.

         The Company's  insurance  subsidiaries  are restricted by statute as to
the  amount  of  dividends  that they may pay  without  the  prior  approval  of
regulatory authorities. Penn-America Insurance Company may pay dividends to PAGI
without advance regulatory approval only from unassigned surplus and only to the
extent that all dividends in the past twelve months do not exceed the greater of
10% of total statutory  policyholders'  surplus, or statutory net income for the
prior year.  Using these criteria,  the available  ordinary  dividend payable by
Penn-America  Insurance  Company to PAGI for 2003 is $11,026,200.  For the three
months ended March 31, 2003,  ordinary dividends paid by Penn-America  Insurance
Company to PAGI were $500,000.  Penn-America  Insurance Company's ability to pay
future dividends to PAGI without advance  regulatory  approval is dependent upon
maintaining a positive level of unassigned and policyholders' surplus, which, in
turn, is dependent upon Penn-America  Insurance Company and Penn-Star  Insurance
Company  generating  net income in excess of dividends paid to PAGI. As of March
31, 2003,  Penn-America  Insurance Company's  policyholders'  surplus was $114.4
million, and included unassigned surplus of $28.9 million.

         Penn-America  and  Penn-Star  are required by law to maintain a certain
minimum level of  policyholders'  surplus on a statutory  basis.  Policyholders'
surplus is calculated by subtracting  total  liabilities from total assets.  The
National  Association  of Insurance  Commissioners  adopted  risk-based  capital
standards  designed to  identify  property  and  casualty  insurers  that may be
inadequately  capitalized  based on inherent risks of each insurer's  assets and
liabilities  and its  mix of net  written  premiums.  Insurers  falling  below a
calculated  threshold may be subject to varying degrees of regulatory action. As
of December 31,  2002,  the  policyholders'  surplus of  Penn-America  Insurance
Company  and  Penn-Star  Insurance  Company  was in  excess  of  the  prescribed
risk-based capital requirements. Penn-America Insurance Company's policyholders'
surplus at December 31, 2002 was  $110,262,000  and its regulatory  action level
was  $22,532,000.   Penn-Star  Insurance  Company's  policyholders'  surplus  at
December  31,  2002  was  $37,356,000  and  its  regulatory   action  level  was
$8,276,000.



                                    Page 15
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)

         The Company has generated  positive cash flows from  operations to meet
its short-term liquidity requirements. Net cash provided by operating activities
was $6.0 million for the three months ended March 31, 2003 and $11.6 million for
the three months ended March 31, 2002.

         Net cash used by  investing  activities  was $8.4 million for the three
months  ended March 31, 2003 and $8.0  million for the three  months ended March
31, 2002.

         Net cash used by financing activities was $299,000 for the three months
ended March 31, 2003 and $378,000 for the three months ended March 31, 2002.

Investment Portfolio

         The Company's  investment strategy emphasizes quality,  liquidity,  and
diversification, as well as total return. With respect to liquidity, the Company
considers  liability  durations,  specifically  related to loss  reserves,  when
determining  desired investment  maturities.  In addition,  maturities have been
staggered   to  produce   cash  flows  for  loss   payments   and   reinvestment
opportunities. The Company outsources the management of its investment portfolio
to Gen Re New England Asset Management,  Inc. ("NEAMS").  In accordance with the
asset  management  agreement  between  the  Company  and NEAMS,  all  investment
transactions  are approved by the Investment  Committee of the Company within 60
days of their  initiation by NEAMS.  At March 31, 2003, the Company held a total
of  $282.9  million  in cash  and  investments.  Of this  amount,  cash and cash
equivalents  represented $7.1 million,  equity securities,  consisting solely of
preferred  stock,  represented  $11.9  million,  and  fixed-maturity  securities
represented $263.9 million.

         The Company's cash and  investments  portfolio mix as of March 31, 2003
was as follows:

<TABLE>
<CAPTION>
<S>                                                                                                   <C>
  Fixed-income:
         U.S. Treasury securities and obligations of U.S. government agencies                         6%
         Corporate securities                                                                        35%
         Mortgage-backed securities                                                                   6%
         Other structured securities                                                                 26%
         Municipal securities                                                                        20%
                                                                                                  --------
  Total fixed income                                                                                 93%
  Cash                                                                                                3%
  Preferred stock                                                                                     4%
                                                                                                  --------
                                                                                                    100%
                                                                                                  ========

</TABLE>




                                    Page 16
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)

         The Company's fixed-maturity portfolio of $263.9 million was 93% of the
total cash and  investments  as of March 31,  2003.  Approximately  93% of these
securities  were  rated "A" or better by  Standard  & Poor's.  Standard & Poor's
rates  publicly  traded  securities  in 20  categories  ranging  from AAA to CC.
Securities  with ratings from AAA to BBB- (the top ten  categories) are commonly
referred to as having an  investment  grade  rating.  Equity  securities,  which
consist solely of preferred  stocks,  were $11.9 million or 4% of total cash and
investments as of March 31, 2003.

         The quality of the fixed maturity portfolio as of March 31, 2003 was as
follows:

      "AAA"                                                52%
      "AA"                                                 15%
      "A"                                                  26%
      "BBB"                                                 6%
      Below "BBB"                                           1%
                                                      ---------
                                                          100%
                                                      =========


         As of March 31, 2003,  our  investment  portfolio  contained  corporate
fixed-maturity  and  preferred  stock  securities  with a market value of $111.0
million. A summary of these securities by industry segment is as follows:

      Financial institutions                               36%
      Consumer, non-cyclical                               21%
      Utilities                                            19%
      Communications                                       10%
      Industrial                                            4%
      Energy                                                3%
      Basic materials                                       3%
      Consumer, cyclical                                    2%
      Technology                                            2%
                                                      ---------
                                                          100%
                                                      =========


         As of March 31, 2003, the investment  portfolio contained $90.5 million
of mortgage-backed, asset-backed and collateralized mortgage obligations. All of
these securities were rated "A" or better and 85% were rated "AAA" by Standard &
Poor's.  These securities are publicly  traded,  and have market values obtained
from an  independent  pricing  service.  Changes in estimated  cash flows due to
changes in prepayment  assumptions  from the original  purchase  assumptions are
revised  based on  current  interest  rates and the  economic  environment.  The
Company had no real estate or mortgages in the investment  portfolio as of March
31, 2003.



                                    Page 17
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

               Management's Discussion and Analysis of Financial
                Condition and Results of Operations (continued)


         The Company  regularly  evaluates its investment  portfolio to identify
other-than-temporary impairments of individual securities. The Company considers
many  factors  in  determining  if an  other-than-temporary  impairment  exists,
including  the  length  of time and  extent  to which  the  market  value of the
security  has been  less  than  cost,  the  financial  condition  and  near-term
prospects  of  the  issuer  of  the  security  and  the  Company's  ability  and
willingness  to hold the security until the market value is expected to recover.
The following table contains an analysis of the Company's  securities with gross
unrealized  losses,  categorized  by the period  that the  securities  were in a
continuous unrealized loss position as of March 31, 2003:


<TABLE>
<CAPTION>
                                 Number                                          Gross               Six                More
                                   of            Fair           Book          Unrealized            Months              Than
(in thousands)                 Securities       Value          Value            Losses             or Less           Six Months
--------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>         <C>           <C>                 <C>             <C>
Fixed maturity securities            21          $26,208       $26,378             $170            $  170                 --
</TABLE>


         As of March 31, 2003, the Company's fixed-maturity investment portfolio
had 21 securities with 170,000 of gross unrealized  losses. No single issuer had
an  unrealized  loss  position  of greater  than  $30,000.  There were no equity
securities,  which consist  solely of preferred  stocks,  in an unrealized  loss
position as of March 31, 2003.


Forward-Looking Statements

         Certain information included in management's discussion and analysis of
financial  condition and results of operations  and elsewhere in this report are
not  historical  facts but are  forward-looking  statements  including,  but not
limited  to,  such  matters  as  anticipated  financial  performance,   business
prospects,  technological developments, new and existing products,  expectations
for market segment and growth and similar matters.  In connection with the "safe
harbor" provisions of the Private Securities  Litigation Reform Act of 1995, the
company provides the following  cautionary  remarks regarding  important factors
which, among others,  could cause the company's actual results and experience to
differ materially from the anticipated  results or other expectations  expressed
in the company's  forward-looking  statements.  The risks and uncertainties that
may affect the operations,  performance,  results of the company's business, and
the other matters  referred to above include,  but are not limited to: (1) risks
inherent  in  establishing  loss  and  loss  adjustment  expense  reserves;  (2)
uncertainties  relating  to the  financial  ratings of the  company's  insurance
subsidiaries;  (3) uncertainties relating to government and regulatory policies;
(4)  uncertainties  arising from the cyclical nature of the company's  business;
(5)  changes in the  company's  relationships  with,  and the  capacity  of, its
general agents;  and (6) the risk that the company's  reinsurers may not be able
to fulfill their obligations to the company. For additional disclosure regarding
potential  risk  factors,  refer  to  documents  filed by the  company  with the
Securities and Exchange Commission, including the company's 2002 10-K.
















                                    Page 18


<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

           Quantitative and Qualitative Disclosures About Market Risk

         The  Company's  primary  market  risk is the  potential  economic  loss
principally  arising from adverse  changes in the market value of its investment
portfolio. The major component of market risk affecting the Company's investment
portfolio is interest rate risk. The Company eliminated its underlying  exposure
to equity price risk,  as all of its common stock was sold in the first  quarter
of 2003.

         The Company had  fixed-maturity  and preferred stock investments with a
market value of $275.8  million at March 31, 2003 subject to interest rate risk.
The Company  manages its exposure to interest  rate risk  through a  disciplined
asset/liability  matching and capital management  process.  In the management of
this risk, the characteristics of duration, credit and variability of cash flows
are critical  elements.  These risks constantly are assessed and balanced within
the context of the liability and capital position of the Company.

         The  Company's  market risk  associated  with exposure to interest rate
risk at March  31,  2003 has not  materially  changed  from that  identified  at
December 31, 2002.























                                    Page 19


<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

                             Controls and Procedures


         As of March 31, 2003, an evaluation was performed under the supervision
and with the participation of the Company's management,  including the President
and CEO and Senior Vice President,  CFO and Treasurer,  of the  effectiveness of
the design and operation of the Company's  disclosure  controls and  procedures.
Based on that evaluation, the Company's management,  including the President and
CEO and Senior Vice President,  CFO and Treasurer,  concluded that the Company's
disclosure  controls and procedures  were effective as of March 31, 2003.  There
have been no significant  changes in the Company's internal controls or in other
factors that could  significantly  affect internal controls  subsequent to March
31, 2003.






























                                    Page 20

<PAGE>






                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES


                           PART II. OTHER INFORMATION


Item 1.       Legal Proceedings - None

Item 2.       Changes in Securities and Use of Proceeds - None

Item 3.       Defaults Upon Senior Securities - None

Item 4.       Submission of Matters to a Vote by Security Holders - None

Item 5.       Other Information - None

Item 6.       Exhibits and Reports on Form 8-K

               (a)  Exhibits

                    An Exhibit  Index has been  filed as part of this  report on
                    page E-1

               (b)  Reports on Form 8-K

                    On January 17, 2003,  the Company filed a current  report on
                    Form 8-K announcing  that Martin  Sheffield had tendered his
                    resignation  as a  Director  of  the  Company  for  business
                    reasons  and that  Richard  L.  Duszak,  CPA shall  take his
                    place.

                    On January 22, 2003,  the Company filed a current  report on
                    Form 8-K announcing  that the Company  released its earnings
                    for the fourth quarter and year end of 2002.

                    On February 6, 2003,  the Company filed a current  report on
                    Form 8-K announcing the availability of materials  presented
                    by Jon Saltzman,  President and CEO, and Joseph Morris,  Sr.
                    Vice  President,  CFO  and  Treasurer  at the  Tenth  Annual
                    Emerald Groundhog Day Investment Forum.

                    On March 3, 2003, the Company filed a current report on Form
                    8-K announcing the availability of its Annual Statements for
                    its insurance  subsidiaries,  Penn-America Insurance Company
                    and Penn-Star  Insurance Company, on the Company's web-site,
                    in hard  copy  from the  Company,  or from the  Pennsylvania
                    Department of Insurance.




                                    Page 21

<PAGE>

                                    SIGNATURE



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-America Group, Inc.


Date:      May 14, 2003                    By:     /s/ Jon S. Saltzman
       ----------------------                      -------------------
                                                   Jon S. Saltzman
                                                   President and
                                                   Chief Executive Officer


                                           By:     /s/ Joseph F. Morris
                                                   --------------------
                                                   Joseph F. Morris
                                                   Senior Vice President,
                                                   Chief Financial Officer
                                                   and Treasurer














                                    Page 22
<PAGE>





         CERTIFICATION OF CHIEF EXECUTIVE OFFICER AS ADOPTED PURSUANT TO
                SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002


I, Jon S. Saltzman, certify that:

1.        I have reviewed  this  quarterly  report on Form 10-Q of  Penn-America
          Group, Inc.

2.        Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

3.        Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

4.        The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

a)        designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

b)        evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

c)        presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.        The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

a)        all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

b)        any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


6.        The registrant's other certifying officer and I have indicated in this
          quarterly  report whether there were  significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.


Date: May 14, 2003                       /s/ Jon S. Saltzman
                                         -------------------
                                         Jon S. Saltzman
                                         President and Chief Executive Officer





                                    Page 23
<PAGE>

         CERTIFICATION OF CHIEF FINANCIAL OFFICER AS ADOPTED PURSUANT TO
                SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph F. Morris, certify that:

1.        I have reviewed  this  quarterly  report on Form 10-Q of  Penn-America
          Group, Inc.

2.        Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

3.        Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

4.        The registrant's  other  certifying  officer and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

a)        designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

b)        evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

c)        presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

5.        The registrant's other certifying officer and I have disclosed,  based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee  of  registrant's  board  of  directors  (or  persons
          performing the equivalent functions):

d)        all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,   summarize  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

e)        any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


6.        The registrant's other certifying officer and I have indicated in this
          quarterly  report whether there were  significant  changes in internal
          controls or in other factors that could significantly  affect internal
          controls  subsequent  to the  date  of  our  most  recent  evaluation,
          including   any   corrective   actions  with  regard  to   significant
          deficiencies and material weaknesses.


Date: May 14, 2003            /s/ Joseph F. Morris
                              --------------------
                              Joseph F. Morris
                              Senior Vice President, Chief Financial Officer
                              and Treasurer



                                    Page 24


<PAGE>



Exhibit No.                        Description

10.1           Property  and   Casualty   Excess  of  Loss   Agreement   between
               Penn-America  Insurance Company,  Penn-Star Insurance Company and
               American Reinsurance Company, effective January 1, 2003.

99.1           Certification of Chief Executive  Officer of Penn-America  Group,
               Inc.,  dated May 14, 2003 in  accordance  with 18 U.S.C.  Section
               1350 as adopted pursuant to Section 906 of Sarbanes-Oxley  Act of
               2002.

99.2           Certification of Chief Executive  Officer of Penn-America  Group,
               Inc.,  dated May 14, 2003 in  accordance  with 18 U.S.C.  Section
               1350 as adopted pursuant to Section 906 of Sarbanes-Oxley  Act of
               2002.
















                                       E-1