ENDORSEMENT

     Attached  to and  forming  part of  PROPERTY  AND  CASUALTY  EXCESS OF LOSS
     REINSURANCE AGREEMENT NO. 3154-0026 between PENN-AMERICA INSURANCE COMPANY,
     PENN-STAR INSURANCE COMPANY, both of Hatboro, Pennsylvania and PENN-PATRIOT
     INSURANCE  COMPANY of Richmond,  Virginia  (hereinafter  referred to as the
     `Company'),  and AMERICAN RE-INSURANCE COMPANY, a Delaware Corporation with
     administrative offices in Princeton, New Jersey (hereinafter referred to as
     the "Reinsurer").

     It is understood and agreed by the parties  hereto,  that  effective  12:01
     a.m.,  Eastern Standard Time, January 1, 2004, this Agreement is amended to
     read as follows:

     I.   The "Slender  Lady Program" is added as an exception to Exclusion C. 1
          of the EXCLUSIONS Article and the exclusion reads as follows:

          1.   Professional  Liability or Errors and  Omissions  Coverage  other
               than for the following:

                           a.   "Beau-T-Pak";
                           b.   Barbers;
                           c.   Opticians;
                           d.   Veterinarians that treat household pets;
                           e.   Morticians;
                           f.   Clergy;
                           g.   Employee Benefits Liability (E&O Coverage);
                           h.   Druggists;
                           i.   "Day Care Pak";
                           j.   "Adult Day Care";
                           k.   "Health Club Pak";
                           l.   "Instructor Pak";
                           m.   In-Home Day Care;
                           n.   "Pet Pak";
                           o.   "Wellness Pak";
                           p.   "Massage Program"; or
                           q.   "Slender Lady Program".

     II.  Professional  Liability  maximum policy limits are added to Section 6,
          WARRANTY of EXHIBIT B, CASUALTY EXCESS OE LOSS, and Section 6 reads as
          follows:

                                    Section 6
                                    ---------

     WARRANTY
     --------

     The maximum  limits of liability for any one policy of the Company shall be
     deemed not to exceed the following:


<PAGE>



                                                              No. 3154-026-E001



     1.   General Liability - $1,000,000 each occurrence and $2,000,000  general
          aggregate.

          a)   As respects Products and Completed Operations - $1,000,000 in the
               aggregate.

     2.   Massage Program - - $2,000,000 each occurrence and $3,000,000  general
          aggregate.

     3.   Professional  Liability -- $1,000,000  each  occurrence and $2,000,000
          general aggregate.

     4.   Professional  Liability  "Slender  Lady  Program"  -  $1,000,000  each
          occurrence and $3,000,000 general aggregate.

     IN WITNESS  WHEREOF the parties  hereto have caused this  Endorsement to be
     executed in duplicate in Hatboro, Pennsylvania, this 10th day of September,
     2004;


        ACCEPTED:
        PENN-AMERICA INSURANCE COMPANY
        PENN-STAR INSURANCE COMPANY
        PENN-PATRIOT INSURANCE COMPANY





        -----------------------------------

        and in Princeton, New Jersey, this       9th Day of September 2004.

                                                AMERICAN RE-INSURANCE COMPANY



                                                -------------------------------
                                                Vice President


        DATED: August 9, 2004
        RG/rg