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      June 30, 2000
                                  -----------------

                                       OR

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

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

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

                            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
  incorporation or organization)                       Identification No.)


                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       .
       -----      ----

At August 10, 2000,  7,557,417 shares of the registrant's common stock, $.01 par
value, were outstanding.



                                     Page 1
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                                      Index

                                                                          Page
                                                                         Number

Part I - Financial Information

         Consolidated Unaudited Balance Sheets - June 30, 2000 and
                December 31, 1999                                           3

         Consolidated Unaudited Statements of Earnings - For the three
                and six month periods ended June 30, 2000 and 1999          4

         Consolidated Unaudited Statement of Stockholders' Equity -
                For the six months ended June 30, 2000                      5

         Consolidated Unaudited Statements of Cash Flows -
                For the six months ended June 30, 2000 and 1999             6

         Notes to Unaudited Consolidated Financial Statements               7

         Management's Discussion and Analysis of Financial Condition
                and Results of Operations                                  14

Part II - Other Information                                                19
















                                     Page 2
<PAGE>
                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                   (Unaudited)
                 (In thousands, except share and per share data)
<TABLE>
<CAPTION>
                                                                                              June 30,         December 31,
                                                                                              2000                 1999
                                                                                        ----------------     -----------------
ASSETS
Investments:
<S>                                                                                           <C>                  <C>
    Fixed maturities:
       Available for sale, at fair value (amortized cost 2000, $115,675; 1999, $115,975)     $112,610            $ 111,419
       Held to maturity, at amortized cost (fair value 2000, $22,105; 1999, $16,103)           22,263               16,294
    Equity securities, at fair value (cost 2000, $27,788; 1999, $28,014)                       24,694               26,020
    Short-term investments, at cost, which approximates fair value                                 --                  449
                                                                                        ----------------     -----------------
       Total investments                                                                      159,567              154,182
Cash                                                                                            6,883               12,045
Receivables:
    Accrued investment income                                                                   2,050                1,965
    Premiums receivable, net                                                                   11,463                8,981
    Reinsurance recoverable                                                                    18,263               18,284
                                                                                        ----------------     -----------------
       Total receivables                                                                       31,776               29,230
Prepaid reinsurance premiums                                                                    4,227                3,529
Deferred policy acquisition costs                                                              10,514                9,306
Capital lease                                                                                   1,797                1,840
Deferred income taxes                                                                           5,340                5,487
Income tax recoverable                                                                            836                1,652
Other assets                                                                                      406                  511
                                                                                        ----------------     -----------------
       Total assets                                                                          $221,346            $ 217,782
                                                                                        ================     =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
  Unpaid losses and loss adjustment expenses                                                 $ 96,356             $ 93,719
  Unearned premiums                                                                            41,416               36,332
  Accounts payable and accrued expenses                                                         2,440                1,755
  Capitalized lease obligation                                                                  1,761                1,821
  Other liabilities                                                                             3,055                3,537
                                                                                        ----------------     -----------------
         Total liabilities                                                                    145,028              137,164
                                                                                        ----------------     -----------------

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 2000 and 1999, 10,057,417 and 9,990,436 shares;
    outstanding 2000 and 1999, 7,557,417 and 8,062,861 shares                                     100                  100
  Additional paid-in capital                                                                   70,047               69,591
  Accumulated other comprehensive loss                                                         (4,066)              (4,324)
  Retained earnings                                                                            35,154               35,050
  Treasury stock, 2000, 2,500,000 shares; 1999, 1,927,575 shares, at cost                     (24,161)             (19,474)
  Officers' stock loans                                                                          (491)                  --
  Unearned compensation from restricted stock awards                                             (265)                (325)
                                                                                        ----------------     -----------------
         Total stockholders' equity                                                            76,318               80,618
                                                                                        ----------------     -----------------

         Total liabilities and stockholders' equity                                         $ 221,346            $ 217,782
                                                                                        ================     =================


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

                                     Page 3

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

                            For the three and six month periods ended June 30, 2000 and 1999
                                          (In thousands, except per share data)

                                                   Three months ended June 30,               Six months ended June 30,
                                                 --------------------------------        ----------------------------------
                                                     2000              1999                  2000                1999
                                                 --------------    --------------        --------------     ---------------
<S>                                                  <C>               <C>                  <C>                <C>
Revenues:
    Premiums earned                                  $ 22,479          $ 21,359             $ 44,026           $ 42,820
    Net investment income                               2,460             2,349                4,860              4,760
    Net realized investment (losses) gains                (16)              682                  (29)             1,238
                                                 --------------    --------------        --------------     ---------------
       Total revenues                                  24,923            24,390               48,857             48,818
                                                 --------------    --------------        --------------     ---------------

Losses and expenses:
    Losses and loss adjustment expenses                17,994            13,822               31,899             27,546
    Amortization of deferred policy
      acquisition costs                                 6,473             6,087               12,712             12,240
    Other underwriting expenses                         1,722             1,431                3,372              2,884
    Interest expense                                       36                36                   73                 73
                                                 --------------    --------------        --------------     ---------------
       Total losses and expenses                       26,225            21,376               48,056             42,743
                                                 --------------    --------------        --------------     ---------------

Earnings (loss) before income tax                      (1,302)            3,014                  801              6,075

Income tax (benefit) expense                             (640)              817                 (120)             1,670

                                                 --------------    --------------        --------------     ---------------
Net earnings (loss)                                    $ (662)          $ 2,197              $   921            $ 4,405
                                                 ==============    ==============        ==============     ===============

Net earnings (loss) per share
         Basic                                      $(0.09)            $0.25                 $0.12              $0.50
         Diluted                                    $(0.09)            $0.25                 $0.12              $0.49

Weighted average number of shares outstanding
         Basic                                       7,616             8,647                 7,794              8,887
         Diluted                                     7,663             8,724                 7,840              8,965

Cash dividends per share                            $0.0525           $0.0525               $0.105              $0.1025


                         See accompanying notes to unaudited consolidated financial statements.

</TABLE>


                                                         Page 4

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

                                           Consolidated Statement of Stockholders' Equity
                                                             (Unaudited)

                                               For the six months ended June 30, 2000
                                                  (In thousands, except share data)


                                                                                                              Unearned
                                                                                                            Compensation
                                                                Accumulated                                     From
                                  Common Stock      Additional     Other                            Officers'  Restricted
                              --------------------   Paid-In   Comprehensive   Retained Treasury     Stock      Stock
                                Shares      Amount   Capital   Income (Loss)   Earnings   Stock      Loans      Awards     Total
                              ----------------------------------------------------------------------------------------------------
<S>                            <C>          <C>     <C>         <C>          <C>        <C>                  <C>         <C>
Balance at December 31, 1999    9,990,436    $100    $69,591     $(4,324)     $35,050    $(19,474)       -    $(325)      $80,618
Net earnings                                                                      921                                         921
Other comprehensive income,
 net of tax: unrealized gains
 on investments, net of
 reclassification adjustment                                         258                                                     258
                                                                                                                             ---
Comprehensive income                                                                                                        1,179
                                                                                                                            -----
Issuance of common stock           66,981                456                                                                  456
Officers' stock loans                                                                                 (491)                  (491)
Amortization of compensation
 expense from restricted
 stock awards issued                                                                                             60            60
Cash dividends paid
 ($0.105 per share)                                                              (817)                                       (817)
Purchase of treasury
 stock, 572,425 shares                                                                     (4,687)                         (4,687)
                              ----------------------------------------------------------------------------------------------------
Balance at June 30, 2000       10,057,417    $100    $70,047     $(4,066)     $35,154    $(24,161)  $ (491)   $(265)      $76,318
                              ====================================================================================================




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


                                                               Page 5

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

                                     For the six months ended June 30, 2000 and 1999
                                                     (In thousands)

                                                                                            Six months ended June 30,
                                                                                            2000               1999
                                                                                          --------           --------
Cash flows from operating activities:
<S>                                                                                       <C>                <C>
    Net earnings                                                                          $    921           $  4,405
    Adjustments to reconcile net earnings to net cash provided by operating
    activities:
         Amortization and depreciation expense                                                 324                311
         Net realized investment losses (gains)                                                 29             (1,238)
         Deferred income tax                                                                    14                 85
         Net increase in premiums receivable, prepaid reinsurance premiums
           and unearned premiums                                                             1,904              1,350
         Net increase (decrease) in unpaid losses and loss adjustment expenses
           and reinsurance recoverable                                                       2,659             (1,079)
         Decrease (increase) in:
           Accrued investment income                                                           (85)               131
           Deferred policy acquisition costs                                                (1,208)              (356)
           Income tax recoverable                                                              816                710
           Other assets                                                                         38                 64
         Increase (decrease) in:
           Accounts payable and accrued expenses                                               684               (298)
           Other liabilities                                                                  (482)              (745)
                                                                                          --------           --------
               Net cash provided by operating activities                                     5,614              3,340
                                                                                          --------           --------

Cash flows from investing activities:
    Purchases of equity securities                                                          (2,945)            (5,634)
    Purchases of fixed maturities available for sale                                       (11,268)           (24,270)
    Purchases of fixed maturities held to maturity                                          (9,899)            (2,100)
    Proceeds from sales of equity securities                                                 3,674              3,520
    Proceeds from sales and maturities of fixed maturities available for sale               10,812             16,921
    Proceeds from maturities and calls of fixed maturities held to maturity                  4,000              7,258
    Change in short-term investments                                                           449                997
                                                                                          --------           --------
         Net cash used by investing activities                                              (5,177)            (3,308)
                                                                                          --------           --------

Cash flows from financing activities:
    Issuance of common stock                                                                   456                465
    Purchase of treasury stock                                                              (4,687)           (10,418)
    Principal payments on capital lease obligations                                            (60)               (70)
    Officers' stock loans                                                                     (491)                --
    Dividends paid                                                                            (817)              (900)
                                                                                          --------           --------
         Net cash used by financing activities                                              (5,599)           (10,923)
                                                                                          --------           --------

Decrease in cash                                                                            (5,162)           (10,891)
Cash, beginning of period                                                                   12,045             24,077
                                                                                          --------           --------
Cash, end of period                                                                       $  6,883           $ 13,186
                                                                                          ========           ========

Supplemental  disclosure of cash flow information:  Cash paid (recovered) during
    the period for:
      Interest paid                                                                       $     73           $     73
      Income taxes (recovered) paid                                                           (950)               875


                         See accompanying notes to unaudited consolidated financial statements.
</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. ("PNG") is an insurance holding company whose
principal  asset  is  the  common  stock  of  Penn-America   Insurance   Company
("Penn-America").  The "Company" refers to PNG and  Penn-America,  as well as to
Penn-America's  wholly-owned  subsidiary,   Penn-Star  Insurance  Company.  Penn
Independent  Corporation ("Penn Independent") currently owns approximately 40.9%
of the outstanding common stock of PNG as of June 30, 2000.

         The accompanying  unaudited consolidated financial statements should be
read in conjunction with the audited financial statements and notes for the year
ended December 31, 1999. In the opinion of management, the financial information
reflects all  adjustments  which are  necessary for a fair  presentation  of the
Company's  financial  position,  results of  operations,  and cash flows for the
interim periods. 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 net of amounts ceded to reinsurers of $2.9 million
and  $1.8   million  for  the  three  months  ended  June  30,  2000  and  1999,
respectively.  Losses and loss  adjustment  expenses are net of amounts ceded to
reinsurers of $637,000 and $3.5 million for the three months ended June 30, 2000
and 1999, respectively.

         Premiums  earned are net of amounts ceded to reinsurers of $5.5 million
and $3.5 million for the six months ended June 30, 2000 and 1999,  respectively.
Losses and loss  adjustment  expenses are net of amounts  ceded to reinsurers of
$2.5  million and $4.1  million for the six months ended June 30, 2000 and 1999,
respectively.


                                     Page 7
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

Note 3 - Comprehensive (Loss) Income

           Accumulated other comprehensive (loss) income of the Company consists
solely of net unrealized (losses) gains on investment securities.

The  following  are  components  of  other  comprehensive   (losses)/income  (in
thousands):
<TABLE>
<CAPTION>
<S>                                                           <C>                   <C>                    <C>
                                                                      Six Months ended June 30, 2000
                                                        ------------------------------------------------------------
                                                           Before Tax                Tax               Net of Tax
                                                             Amount                Expense               Amount
                                                        -----------------     ------------------     ---------------
Unrealized gains on investments:
    Unrealized holding gains arising
       during period                                          $420                  $(143)                 $277
    Add: reclassification adjustment for
      losses realized in net earnings                          (29)                    10                   (19)
                                                        -----------------     ------------------     ---------------
Other comprehensive income                                    $391                  $(133)                 $258
                                                        =================     ==================     ===============



                                                                      Six Months ended June 30, 1999
                                                        ------------------------------------------------------------
                                                           Before Tax                Tax               Net of Tax
                                                             Amount                Expense               Amount
                                                        -----------------     ------------------     ----------------
Unrealized losses on investments:
    Unrealized holding losses arising
      during period                                        $(4,392)               $ 1,493              $ (2,899)
    Less: reclassification adjustment for
       gains realized in net earnings                       (1,238)                   421                  (817)
                                                        -----------------     ------------------     ---------------
Other comprehensive loss                                   $(5,630)               $ 1,914               $(3,716)
                                                        =================     ==================     ===============
</TABLE>

For the three  months  ended June 30,  2000,  comprehensive  loss of  $1,090,000
consisted of net losses of $662,000 and other comprehensive loss of $428,000.

For the three and six months ended June 30, 1999, comprehensive income (loss) of
($184,000) and $689,000 consisted of net income of $2,197,000 and $4,405,000 and
other comprehensive losses of $2,381,000 and $3,716,000.


                                     Page 8
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)


Note 4 - Basic and Diluted Earnings Per Share

         The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations (in thousands,  except per
share data):
<TABLE>
<CAPTION>

                                                   Three months ended                       Six months ended
                                                        June 30,                                June 30,
                                           -----------------------------------     -----------------------------------
                                                2000                1999                2000               1999
                                           ----------------    ---------------     ---------------    ----------------
Basic EPS:
<S>                                                 <C>                <C>                   <C>               <C>
Net Earnings (Loss)                                 $(662)             $2,197                $921              $4,405
                                           ----------------    ---------------     ---------------    ----------------

Weighted average common
      shares outstanding                             7,616              8,647               7,794               8,887
                                           ----------------    ---------------     ---------------    ----------------

Basic EPS                                         $ (0.09)             $ 0.25              $ 0.12              $ 0.50
                                           ================    ===============     ===============    ================

Diluted EPS:

Net Earnings (Loss)                                 $(662)            $ 2,197                $921              $4,405
                                           ----------------    ---------------     ---------------    ----------------

Weighted average common
      shares outstanding                             7,616              8,647               7,794               8,887

Additional shares outstanding
      after the assumed exercise
      of options by applying the
      treasury stock method                             47                 77                  46                  78
                                           ----------------    ---------------     ---------------    ----------------

Total weighted average common
     shares outstanding                              7,663              8,724               7,840               8,965
                                           ================    ===============     ===============    ================

Diluted EPS                                       $ (0.09)             $ 0.25              $ 0.12              $ 0.49
                                           ================    ===============     ===============    ================
</TABLE>




                                     Page 9
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

Note 5- Segment Information

         The Company has two reportable segments:  personal lines and commercial
lines.  These  segments  are  managed  separately  because  they have  different
customers,  pricing and expense structures. The Company does not allocate assets
between  segments  because  assets  are  reviewed  in  total by  management  for
decision-making purposes.

         The  accounting  policies  of the  segments  are the same as those more
fully  described  in the  summary  of  significant  accounting  policies  in the
Company's annual report. The Company evaluates segment profit based on profit or
loss from operating  activities.  Segment  profits or losses from  operations is
pre-tax and does not include  unallocated  expenses but does include  investment
income attributable to insurance transactions.  Segment profit or loss therefore
excludes  federal  income  taxes,  unallocated  expenses and  investment  income
attributable to equity as opposed to investment income attributable to insurance
transactions.

         The Company had one major customer  accounting for more than 10% of the
Company's  revenue at June 30, 1999.  This customer no longer  accounts for more
than 10% of revenue at June 30, 2000. The Company  derived  approximately  10.7%
and 11.8% of its  revenues  from this agent for the three  months and six months
ended June 30, 1999,  respectively.  This major customer was the agent who wrote
personal  non-standard  automobile  coverage  in the  states of  California  and
Nevada. The Company announced on April 28, 1999 that it would be running off the
California  automobile  book with this  customer.  The  Company  had  previously
announced  the runoff of the Nevada  automobile  book with this agent in January
1999.




                                    Page 10
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

         The following is a summary of the Company's segment revenues,  expenses
and profit for the three months ended June 30, 2000 and 1999:
<TABLE>
<CAPTION>

(in thousands)                                  Three Months Ended June 30, 2000
                                                --------------------------------
                                           Commercial       Personal        Total
                                         --------------------------------------------
<S>                                           <C>              <C>           <C>
Premiums earned                               $21,090          $1,389        $22,479
Net investment income from
  insurance operations                          1,304             146          1,450
                                         --------------------------------------------
Total segment revenues                         22,394           1,535         23,929
                                         --------------------------------------------

Segment losses and LAE                         16,935           1,059         17,994
Segment expenses                                6,481             497          6,977
                                         --------------------------------------------
Total segment expenses                         23,416           1,556         24,971
                                         --------------------------------------------



Segment losses                               $(1,022)           $(20)        $(1,042)
                                         ===============================

Plus unallocated items:
Net investment income from equity                                                994
Unallocated expenses                                                          (1,254)
Income tax benefit                                                               640
                                                                          -----------
Net losses                                                                     $(662)
                                                                          ===========


(in thousands)                                Three Months Ended June 30, 1999
                                              --------------------------------
                                           Commercial       Personal        Total
                                         --------------------------------------------
Premiums earned                               $17,422          $3,937        $21,359
Net investment income from
  insurance operations                          1,326             233          1,589
                                         --------------------------------------------
Total segment revenues                         18,748           4,170         22,918
                                         --------------------------------------------

Segment losses and LAE                         10,575           3,247         13,822
Segment expenses                                5,225           1,273          6,498
                                         --------------------------------------------
Total segment expenses                         15,800           4,520         20,320
                                         --------------------------------------------

Segment profit (loss)                          $2,948          $(350)         $2,598
                                         ===============================

Plus unallocated items:
Net investment income from equity                                              1,472
Unallocated expenses                                                          (1,056)
Income tax expense                                                              (817)
                                                                          -----------
Net earnings                                                                  $2,197
                                                                          ===========


                                    Page 11
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)

         The following is a summary of the Company's segment revenues,  expenses
and profit for the six months ended June 30, 2000 and 1999:

(in thousands)                                  Six Months Ended June 30, 2000
                                                ------------------------------
                                           Commercial       Personal         Total
                                         ----------------------------------------------
Premiums earned                               $40,867          $3,159          $44,026
Net investment income from
  insurance operations                          2,501             302            2,803
                                         ----------------------------------------------
Total segment revenues                         43,368           3,461           46,829
                                         ----------------------------------------------

Segment losses and LAE                         29,688           2,211           31,899
Segment expenses                               12,535           1,142           13,677
                                         ----------------------------------------------
Total segment expenses                         42,223           3,353           45,576
                                         ----------------------------------------------



Segment profit                                 $1,145            $108           $1,253
                                         ============================

Plus unallocated items:


Net investment income from equity                                                2,028
Unallocated expenses                                                            (2,480)
Income tax benefit                                                                 120
                                                                           -----------
Net earnings                                                                      $921
                                                                           ===========


(in thousands)                                  Six Months Ended June 30, 1999
                                                ------------------------------
                                           Commercial       Personal         Total
                                         ----------------------------------------------
Premiums earned                              $ 34,035          $8,785          $42,820
Net investment income from
  Insurance operations                          2,623             460            3,083
                                         ----------------------------------------------
Total segment revenues                         36,658           4,170            45,903
                                         ----------------------------------------------

Segment losses and LAE                         20,692           6,854            27,546
Segment expenses                               10,226           2,849            13,075
                                         ----------------------------------------------
Total segment expenses                         30,918           9,703            40,621
                                         ----------------------------------------------

Segment profit (loss)                          $5,740          $ (458)           $5,282
                                         ============================

Plus unallocated items:


Net investment income from equity                                                2,915
Unallocated expenses                                                            (2,122)
Income tax expense                                                              (1,670)
                                                                           -----------
Net earnings                                                                    $4,405
                                                                           ===========
</TABLE>


                                    Page 12
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements
                                   (continued)


         Total  segment  revenue  of  $23.9  million  and  $46.9  million,  plus
unallocated net investment income of $1.0 million and $2.0 million, equals total
Company  segment revenue of $24.9 and $48.9 million for the three and six months
ended June 30, 2000, respectively.




















                                     Page 13
<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 June 30, 2000 and 1999

         Gross written  premiums  increased 15.9% to $28.3 million for the three
months ended June 30, 2000, compared to $24.4 million for the three months ended
June 30, 1999. The increase  resulted from a 27.0% increase in commercial  lines
premium to $27.3  million,  partially  offset by a 66.0%  decrease  in  personal
automobile  lines premium to $1.0 million from $2.9  million.  This decrease was
due to the  run-off  by the  company  of the  non-standard  personal  automobile
segment, which began in early 1999.

         Net written  premiums  increased  11.7% to $25.0  million for the three
months ended June 30, 2000, compared to $22.4 million for the three months ended
June 30, 1999. This increase  resulted from a 23.1% increase in commercial lines
net premium to $24.0 million,  partially  offset by a 66.0% decrease in personal
automobile lines net premium to $1.0 million.

         Premiums  earned  increased  5.2% to $22.5 million for the three months
ended June 30, 2000,  compared to $21.4  million for the three months ended June
30, 1999. This increase  resulted from a 21.1% increase in commercial  lines net
earned  premium  to $21.1  million,  partially  offset  by a 64.7%  decrease  in
personal automobile lines net earned premium to $1.4 million.

         Net investment income increased 4.7% to $2.5 million from $2.3 million,
respectively  for the three  months  ended June 30,  2000  compared  to the same
period in 1999,  primarily  due to an  increase in the tax  equivalent  yield to
6.50% at June 30, 2000 from 6.20% at June 30, 1999.

         Net  realized  investment  (losses)  gains  before taxes were losses of
$16,000 for the three months ended June 30, 2000  compared to a realized gain of
$682,000 for the three months ended June 30, 1999. The realized  losses were due
from sales from the Company's equity portfolio.

         Losses and loss  adjustment  expenses  increased 30.2% to $18.0 million
for the three  months  ended June 30,  2000,  from $13.8  million  for the three
months ended June 30, 1999, primarily due to an increase in the commercial lines
loss ratio to 80.3% for the three months  ended June 30, 2000  compared to 60.7%
for the three months ended June 30, 1999. The increase in the  commercial  lines
loss  ratio is mostly  due to  current  year  property  losses  and  unfavorable
development in casualty lines.  This increase was partially offset by a decrease
in the  personal  lines loss ratio to 76.2% for the three  months ended June 30,
2000,  compared  to 82.5% for the three  months  ended June 30,  1999.  Personal
lines,  which is entirely  non-standard  personal  automobile  is  currently  in
run-off by the Company.



                                    Page 14
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

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

         Amortization  of deferred  policy  acquisition  costs increased 6.3% to
$6.5 million from $6.1 million for the three months ended June 30, 2000 and June
30, 1999, respectively due to the increase in net earned premiums.

         Other  underwriting  expenses  increased  20.4% to $1.7 million for the
three  months  ended June 30, 2000 from $1.4  million for the three months ended
June 30, 1999. This increase is primarily  attributable to the 15.9% increase in
gross written  premiums  experienced in the second quarter of 2000,  compared to
the same quarter of 1999.

         Net losses from operations  before net realized  investment  losses for
the  second  quarter  of 2000 were  $651,000  or  $(0.09)  per share  (basic and
diluted)  compared with net operating gains from operations  before net realized
investment  gains of $1.7 million or $0.20 per share (basic and diluted) for the
second quarter of 1999.

         As a result of the factors  described above, the Company had a net loss
for the three months ended June 30, 2000 of $662,000 or $(0.09) per share (basic
and  diluted),  compared  with $2.2 million net income or $0.25 per share (basic
and diluted) for the three months ended June 30, 1999.


Six Months Ended June 30, 2000 and 1999

         Gross  written  premiums  increased  17.3% to $54.6 million for the six
months ended June 30, 2000,  compared to $46.5  million for the six months ended
June 30, 1999. The increase  resulted from a 33.1% increase in commercial  lines
premium to $52.1  million,  partially  offset by a 66.7%  decrease  in  personal
automobile  lines premium to $2.4 million.  This decrease was due to the run-off
by the company of the non-standard personal automobile segment.

         Net  written  premiums  increased  12.2% to $48.4  million  for the six
months ended June 30, 2000,  compared to $43.1  million for the six months ended
June 30, 1999. This increase  resulted from a 28.3% increase in commercial lines
net premium to $46.0 million,  partially  offset by a 66.7% decrease in personal
automobile lines net premium to $2.4 million.

         Premiums  earned  increased  2.8% to $44.0  million  for the six months
ended June 30, 2000, compared to $42.8 million for the six months ended June 30,
1999.  This  increase  resulted from a 20.7%  increase in  commercial  lines net
earned  premium  to $40.9  million,  partially  offset  by a 64.0%  decrease  in
personal automobile lines net earned premium to $3.2 million.

         Net investment income increased 2.1% to $4.9 million for the six months
ended June 30, 2000 compared to $4.8 million for six months ended June 30, 1999.


                                    Page 15
<PAGE>

                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

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


         Net  realized  investment  (losses)  gains before taxes were a realized
loss of $29,000 for the six months  ended June 30,  2000  compared to a realized
gain of $1.2 million for the six months ended June 30, 1999.

         Losses and loss  adjustment  expenses  increased 15.8% to $31.9 million
for the six months  ended June 30, 2000,  from $27.5  million for the six months
ended June 30, 1999,  due to an increase in the  commercial  lines loss ratio to
72.6% for the six  months  ended  June 30,  2000  compared  to 60.8% for the six
months ended June 30, 1999. The increase in the  commercial  lines loss ratio is
mostly due to  current  year  property  losses and  unfavorable  development  in
casualty lines. This increase was partially offset by a decrease in the personal
lines loss ratio to 69.7% for the six months  ended June 30,  2000,  compared to
78.0% for the six months ended June 30, 1999.  Personal lines, which is entirely
non-standard personal automobile is currently in run-off by the Company.

         Amortization  of deferred  policy  acquisition  costs increased 3.9% to
$12.7 million from $12.2 million for the six months ended June 30, 2000 and June
30, 1999, respectively due to the increase in net earned premiums.

         Other underwriting expenses increased 16.9% to $3.4 million for the six
months ended June 30, 2000 from $2.9 million for the three months ended June 30,
1999.  This increase is primarily  attributable  to the 17.3%  increase in gross
written premiums  experienced in the six months ended June 30, 2000, compared to
the same period in 1999.

         Net earnings from operations  before net realized  investment losses or
gains for the six months  ended June 30,  2000 were  $940,000 or $0.12 per share
(basic and  diluted)  compared  with $3.6  million or $0.40 per share (basic and
diluted) for the six months ended June 30, 1999.

         The  Company  had net income for the six months  ended June 30, 2000 of
$921,000 or $0.12 per share (basic and diluted),  compared with $4.4 million net
income or $0.50  per share  (basic)  and $0.49 per share  (diluted)  for the six
months  ended June 30,  1999.  The June 30,  1999  earnings  per share  (basic &
diluted)  includes  $0.09 (basic & diluted) of realized  investment  gains after
tax,  compared to no earnings per share impact from realized  investment  losses
for the six months ended June 30, 2000.





                                    Page 16
<PAGE>



                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

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

         As  part of the  Company's  corporate  stock  repurchase  program,  the
Company has continued to repurchase  its common stock.  The Company  repurchased
approximately  1.0  million  shares  between  June 30,  1999 and June 30,  2000,
resulting in a reduction  of weighted  average  diluted  shares  outstanding  to
approximately 7.7 million shares  outstanding during the second quarter of 2000,
compared to  approximately  8.7  million  shares  outstanding  during the second
quarter of 1999.  Between  June 30,  2000 and June 30,  1999,  weighted  average
shares outstanding decreased by approximately 12.5%.

Liquidity and Capital Resources

         PNG is a holding  company,  the principal  asset of which is the common
stock of Penn-America.  PNG's cash flows depend primarily on dividends and other
payments from Penn-America.  PNG uses these funds to pay (i) operating expenses,
(ii) taxes and other  payments,  (iii)  dividends to PNG  stockholders  and (iv)
purchases of treasury shares.  Penn-America's source of funds consists primarily
of  premiums,  investment  income and  proceeds  from sales and  redemptions  of
investments.  Funds  are used by  Penn-America  principally  to pay  claims  and
operating  expenses,  to purchase  investments  and to make  dividend  and other
payments to PNG.

         Net cash  provided  by  operating  activities  increased  68.1% to $5.6
million for the six months  ended June 30,  2000,  from $3.3 million for the six
months ended June 30, 1999,  due  primarily to the  Company's  growth in written
premiums.

         Net cash used by  investing  activities  was $5.2  million  for the six
months  ended June 30,  2000,  compared to $3.3 million for the six months ended
June  30,  1999.  The  increase  in  cash  used  by  investing   activities  was
attributable to the increase in cash flow from the growth in written premiums.

         Net cash used by  financing  activities  was $5.6  million  for the six
months  ended June 30,  2000,  compared to $10.9  million for the same period in
1999.  The  principal  use of cash by financing  activities  was the purchase of
572,425 shares of treasury  stock at an approximate  cost of $4.7 million during
the first two quarters of 2000,  compared to the  purchase of 958,700  shares of
treasury  stock at an  approximate  cost totaling  $10.4 million during the same
period ending June 30, 1999.  As of June 30, 2000,  the Company has acquired the
2.5  million  shares at an average  cost of $9.66 per  share.  The  Company  has
500,000  shares  remaining  which could be  purchased  under the  current  Board
authorized  stock buy-back  program.  The funding for the treasury stock program
has  been  primarily   provided  by  dividends  from  the  Company's   insurance
subsidiary, Penn-America.



                                    Page 17
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES
                Management's Discussion and Analysis of Financial
                       Condition and Results of Operations
                                   (continued)



         The  Company  believes  that it has  sufficient  liquidity  to meet its
anticipated  insurance  obligations and operating and capital expenditure needs.
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 average duration of the fixed maturity  portfolio as of June
30, 2000 was approximately 3.3 years.

         The Company's  fixed maturity  portfolio was $134.9 million or 84.5% of
the total investment portfolio as of June 30, 2000. Approximately 98.0% of these
securities were rated "A-" or better by Standard & Poor's or Moody's.  Equities,
the majority of which consist of preferred  stocks,  were $24.7 million or 15.5%
of total investments as of June 30, 2000.

         The  investment   portfolio   contained   $15.3  million  of  mortgage/
asset-backed obligations,  which represents 11.5% of the total investments as of
June 30, 2000. 92.3% of these securities are "AAA" rated and 7.7% are "AA" rated
securities  issued by government,  government-related  agencies or publicly held
corporations,  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 other
derivative  financial  instruments,  real estate or mortgages in the  investment
portfolio as of June 30, 2000.

         The  principal  source of cash for the  payment of  dividends  to PNG's
stockholders is dividends from Penn-America.  Penn-America is required by law to
maintain  a certain  minimum  surplus  on a  statutory  basis and is  subject to
risk-based capital requirements and regulations under which payment of dividends
from  statutory  surplus  may  require  prior  approval  from  the  Pennsylvania
regulatory  authorities.  The maximum  dividend  that may be paid as of June 30,
2000 by Penn-America to PNG without prior approval of regulatory  authorities is
approximately $678,000.


                                    Page 18
<PAGE>


                    PENN-AMERICA GROUP, INC. AND SUBSIDIARIES

                           PART II. OTHER INFORMATION



Item 1.   Legal Proceedings - None

Item 2.   Changes in Securities - None

Item 3.   Default Upon Senior Securities - None

Item 4.   Submission of Matters to a Vote by Security Holders - (See Attached)

Item 5.   Other Information - None

Item 6.   Exhibits and Reports on Form 8-K - None


















                                    Page 19
<PAGE>



PART II, ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS

         The annual meeting of the Shareholders of Penn-America  Group, Inc. was
held on May 17, 2000 (the "Annual  Meeting" or  "Meeting"),  with the  following
results:

         The total number of shares  represented at the Annual Meeting in person
or by proxy was 7,148,588 of the 7,719,161 share of common stock outstanding and
entitled to vote at the meeting.

         On the proposal to elect Irvin  Saltzman,  Jon S.  Saltzman,  Robert A.
Lear,  Jami  Saltzman-Levy,  M. Moshe  Porat,  Charles  Ellman and Paul Simon as
Directors to serve until the 2001 Annual Meeting and until their  successors are
duly elected and  qualified,  the  nominees for Director  received the number of
votes set forth opposite their respective names.

                                 Number of Votes

                                  For                   Withheld

Irvin Saltzman                  6,801,132               347,456
Jon S. Saltzman                 6,802,632               345,956
Robert A. Lear                  6,802,632               345,956
Jami Saltzman-Levy              6,802,632               345,956
M. Moshe Porat                  6,802,632               345,956
Charles Ellman                  6,802,632               345,956
Paul Simon                      6,703,832               444,756

         There  were no  broker  non-votes  recorded.  On the basis of the above
vote, Irvin Saltzman,  Jon S. Saltzman,  Robert A. Lear, Jami Saltzman-Levy,  M.
Moshe  Porat,  Charles  Ellman and Paul Simon were elected as Directors to serve
until the 2001 Annual  Meeting and until their  respective  successors  are duly
elected and qualified.













                                    Page 20
<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:      August 10, 2000               By:     /s/ Jon S. Saltzman
         ----------------------                  -------------------
                                                 Jon S. Saltzman
                                                 President and
                                                 Chief Executive Officer



                                         By:     /s/ Rosemary R. Ferrero
                                                 -----------------------
                                                 Rosemary R. Ferrero
                                                 Principal Finance and
                                                 Accounting Officer







                                    Page 21