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                     September 30, 1996
                                            ----------------------------------

                                       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 __ .

At November 8, 1996 4,445,754 shares of the registrant's  common stock, $.01 par
value, were outstanding.

                                     Page 1

<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY
                                      Index

                                                                  Page Number

Part I - Financial Information

   Consolidated Unaudited Balance Sheets - September 30, 1996 and
      December 31, 1995                                                 3

   Consolidated Unaudited Statements of Earnings - For the three
      and nine month periods ended September 30, 1996 and 1995          4

   Consolidated Unaudited Statement of Stockholders' Equity -
      For the nine months ended September 30, 1996                      5

   Consolidated Unaudited Statements of Cash Flows -
      For the nine months ended September 30, 1996 and 1995             6

   Notes to Unaudited Consolidated Financial Statements                 7

   Management's Discussion and Analysis of Results
      of Operations and Financial Condition                             8

Part II - Other Information                                             10


                                     Page 2
<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY
                           Consolidated Balance Sheets
                                   (unaudited)
                        (in thousands, except share data)
<TABLE>
<CAPTION>

                                                                                          September 30,         December 31,
                                                                                              1996                   1995
<S>                                                                                             <C>                  <C>  
ASSETS
Investments:
    Fixed Maturities:
      Available for sale, at fair value (amortized cost 1996 $46,672; 1995 $42,948)         $ 45,349             $ 43,281
      Held to maturity, at amortized cost (fair value 1996 $42,771; 1995 $34,812)             43,226               34,276
    Equity securities, at fair value (cost 1996 $10,103; 1995 $8,726)                         12,078               10,667
    Short-term investments, at cost, which approximates fair value                             1,000                7,000
                                                                                           ---------            ---------
      Total Investments                                                                      101,653               95,224
Cash and cash equivalents                                                                      8,055                5,204
Receivables:
    Accrued investment income                                                                  1,602                1,385
    Premiums receivable                                                                        9,721                8,981
    Reinsurance recoverable                                                                   14,246               13,952
    Note receivable, affiliate                                                                   400                  400
                                                                                           ---------            ---------
      Total receivables                                                                       25,969               24,718
Prepaid reinsurance premiums                                                                   2,605                2,438
Deferred policy acquisition costs                                                              6,804                5,716
Capital leases                                                                                 1,733                1,786
Deferred income tax                                                                            2,665                1,947
Income tax recoverable                                                                           383                  529
Other assets                                                                                     569                  201
                                                                                           ---------            ---------
      Total assets                                                                         $ 150,436            $ 137,763
                                                                                           =========            =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Unpaid losses and loss adjustment expenses                                                  $ 66,451             $ 60,139
Unearned premiums                                                                             29,537               26,245
Accounts payable and accrued expenses                                                          1,375                1,842
Capitalized lease obligations                                                                  1,818                1,890
Notes payable:
  Affiliate                                                                                       --                  150
  Bank                                                                                        10,000               10,000
Other liabilities                                                                              1,523                1,247
                                                                                           ---------            ---------
      Total liabilities                                                                      110,704              101,513
                                                                                           ---------            ---------

Stockholders' equity:
Preferred stock, $.01 par value; authorized 2,000,000 shares;
  none issued                                                                                      --                  --
Common stock, $.01 par value, authorized 10,000,000 shares;
  issued and outstanding 1996; 4,445,754 and 1995; 4,430,000 shares                                44                  44
Additional paid-in capital                                                                     21,822              21,608
Unrealized investment gains, net of tax                                                           430               1,501
Retained earnings                                                                              17,550              13,251
                                                                                           ---------            ---------
                                                                                               39,846              36,404
Unearned compensation from restricted stock awards                                               (114)               (154)
                                                                                           ---------            ---------
      Total stockholders' equity                                                               39,732              36,250
                                                                                           ---------            ---------
      Total liabilities and stockholders' equity                                            $ 150,436           $ 137,763
                                                                                            =========           =========
</TABLE>
      See accompanying notes to unaudited consolidated financial statements

                                     Page 3

<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY
                       Consolidated Statements of Earnings
                                   (unaudited)

     For the three and nine month periods ended September 30, 1996 and 1995
                 (in thousands, except share and per share data)
<TABLE>
                                                           Three months ended         Nine months ended
                                                              September 30,             September 30,
                                                            1996         1995         1996         1995
<S>                                                     <C>          <C>          <C>          <C>       
Revenues:
    Premiums earned                                     $   17,836   $   14,710   $   49,944   $   42,197
    Net investment income                                    1,694        1,277        4,942        3,659
    Net realized investment gains                              227          724          330          857
                                                        ----------   ----------   ----------   ----------
      Total revenues                                        19,757       16,711       55,216       46,713
                                                        ----------   ----------   ----------   ----------

Losses and expenses:
    Losses and loss adjustment expenses                     11,222        9,130       31,326       26,179
    Amortization of deferred policy acquisition costs        4,574        3,524       12,785       10,502
    Other underwriting expenses                              1,017        1,306        3,267        3,542
    Interest expense                                           227           37          665          109
                                                        ----------   ----------   ----------   ----------
      Total losses and expenses                             17,040       13,997       48,043       40,332
                                                        ----------   ----------   ----------   ----------
Earnings before income tax                                   2,717        2,714        7,173        6,381

Income tax                                                     887          846        2,341        2,050
                                                        ----------   ----------   ----------   ----------
Net earnings                                            $    1,830   $    1,868   $    4,832   $    4,331
                                                        ==========   ==========   ==========   ==========
Weighted average number of shares outstanding            4,445,754    4,430,000    4,440,359    4,430,000
                                                        ==========   ==========   ==========   ==========
Net earnings per share                                  $     0.41   $      .42   $     1.09   $      .98
                                                        ==========   ==========   ==========   ==========
Cash dividend per share                                 $     0.04   $      .03   $     0.12   $      .06
                                                        ==========   ==========   ==========   ==========
</TABLE>
      See accompanying notes to unaudited consolidated financial statements

                                     Page 4

<PAGE>
                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY
                 Consolidated Statement of Stockholders' Equity
                                   (unaudited)

                  For the nine months ended September 30, 1996
                             (dollars in thousands)
<TABLE>
                                                                                Unrealized
                                                                  Additional    Investment                 Restricted   
                                               Common Stock         Paid-In       Gains       Retained       Stock
                                           Shares       Amount      Capital     (Losses)      Earnings       Awards        Total
<S>                                       <C>              <C>       <C>           <C>         <C>            <C>         <C>    
Balance at December 31, 1995              4,430,000        $44       $21,608       $1,501      $13,251        $(154)      $36,250
Net earnings                                                                                     4,832                      4,832
Issuance of common stock                     15,754                      214                                                  214
Amortization of unearned compensation
  from restricted stock awards                                                                                   40            40
Unrealized investment gains from fixed
  maturities available for sale and
  equities, net of tax                                                             (1,071)                                 (1,071)
Cash dividends paid                                                                               (533)                      (533)
                                          ---------        ---       -------       ------      -------        -----       -------
Balance at September 30, 1996             4,445,754        $44       $21,822         $430      $17,550        $(114)      $39,732
                                          =========        ===       =======       ======      =======        =====       =======




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

                                     Page 5
<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY
                      Consolidated Statements of Cash Flows
                                   (unaudited)

              For the nine months ended September 30, 1996 and 1995
                                 (in thousands)
<TABLE>

                                                                                            Nine months ended September 30,
                                                                                              1996                  1995
<S>                                                                                         <C>                   <C>    
Cash flows from operating activities
    Net earnings                                                                            $ 4,832               $ 4,331
    Adjustments to reconcile net earnings to net cash provided by
      operating activities
        Amortization of net premium on fixed maturities                                          88                   186
        Amortization of capital leases and leasehold improvements                               109                    26
        Amortization of restricted stock awards                                                  40                    40
        Net realized investment gains                                                          (330)                 (857)
        Deferred income tax benefit                                                            (166)                 (474)
        Net increase in premiums and notes receivable,
           prepaid reinsurance premiums and unearned premiums                                 2,384                   178
        Net increase in unpaid loss and loss adjustment expenses
           and reinsurance recoverable                                                        6,018                 7,094
        (Increase) decrease in:
           Accrued investment income                                                           (217)                 (102)
           Deferred policy acquisition costs                                                 (1,088)                 (562)
           Income tax recoverable                                                               147                  (210)
           Other assets                                                                        (410)                    2
        Increase (decrease) in:
           Accounts payable and accrued expenses                                               (468)                 (381)
           Other liabilities                                                                    276                   207
                                                                                            -------               -------
        Net cash provided by operating activities                                            11,215                 9,478
                                                                                            -------               -------

Cash flows from investing activities
    Purchases of equity securities                                                           (5,732)               (1,392)
    Purchases of fixed maturities available for sale                                        (15,050)              (10,134)
    Purchases of fixed maturities held to maturity                                          (17,070)              (15,092)
    Proceeds from sales of equity securities                                                  4,840                 3,739
    Proceeds from sales and maturities of fixed maturities available for sale                11,181                11,290
    Proceeds from maturities and calls of fixed maturities held to maturity                   8,008                 1,200
    Decrease in short-term investments                                                        6,000                 3,000
                                                                                              -----                 -----
        Net cash used by investing activities                                                (7,823)               (7,389)
                                                                                            -------               -------

Cash flows from financing activities
    Issuance of common stock                                                                    214                    --
    Principal payments on capital lease obligations                                             (72)                  (23)
    Dividends paid                                                                             (533)                 (266)
    Note payable affiliate                                                                     (150)                 (150)
                                                                                            -------               -------
        Net cash used by financing activities                                                  (541)                 (439)
                                                                                            -------               -------

Increase in cash and cash equivalents                                                         2,851                 1,650
Cash and cash equivalents, beginning of period                                                5,204                 1,813
                                                                                            -------               -------
Cash and cash equivalents, end of period                                                    $ 8,055               $ 3,463
                                                                                            =======               =======

Supplemental disclosure of cash flow information
    Cash paid during the period for:
      Income tax                                                                            $ 2,360               $ 2,734
      Interest                                                                                  640                    70

</TABLE>
            See accompanying notes to unaudited financial statements.
                                     Page 6

<PAGE>
                                     
                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY

              Notes to Unaudited Consolidated Financial Statements

Note 1 - Organization and Basis of Presentation

Penn-America  Group, Inc. (the "Company") is an insurance holding company.  Penn
Independent  Corporation  currently owns approximately  61.4% of the outstanding
common stock of the Company.

The accompanying  unaudited  consolidated financial statements should be read in
conjunction with the financial  statements and notes for the year ended December
31, 1995. In the opinion of management,  the financial  information reflects all
adjustments   (consisting  only  of  normal  recurring  adjustments)  which  are
necessary for a fair presentation of financial position,  results of operations,
and cash flows for the interim  periods.  The 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 insurers of $5.0 and $4.1  million
for the nine month periods ended  September 30, 1996 and 1995, and $1.7 and $1.5
million for the three months ended September 30, 1996 and 1995.  Losses and loss
adjustment  expenses  are net of  amounts  ceded  to  insurers  of $5.6 and $6.1
million for the nine months ended September 30, 1996 and 1995, and $930 thousand
and 2.2 million for the three months ended September 30, 1996 and 1995.

                                     Page 7

<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY

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

Results of Operations

Gross written premiums  increased 18.7% and 19.1% to $21.0 and $58.2 million for
the three and nine month periods ended  September 30, 1996, as compared to $17.7
and $48.9  million for the same periods in 1995.  The increase in gross  written
premiums was primarily attributable to increased volume in addition to some rate
increases which occur  automatically  because some risks are exposure rated. The
increase in volume came  primarily from a 15.0% and 17.9% increase in commercial
multi-peril  gross written  premiums to $8.3 and $23.0 million for the three and
nine month  periods  ended  September  30,  1996,  as compared to gross  written
premiums of $7.2 and $19.5  million for the same  periods in 1995.  In addition,
personal  automobile  written premium volume  increased 104.4% and 62.7% to $5.7
and $15.6 million for the three and nine month periods ended September 30, 1996,
as compared  to gross  written  premiums  of $2.8 and $9.6  million for the same
periods  in  1995.  As of  September  30,  1996,  the  Company  writes  personal
automobile  coverage in the following states;  California,  Washington,  Nevada,
Kentucky and South Dakota.

Net written  premiums  increased  20.5% and 17.8% to $19.2 and $53.1 million for
the three and nine month  periods  ended  September  30, 1996  respectively,  as
compared  to $15.9 and $45.1  million for the same  periods in 1995.  Net earned
premiums  increased 21.3% and 18.4% to $17.8 and $49.9 million for the three and
nine month  periods  ended  September  30, 1996,  as compared to $14.7 and $42.2
million for the same  periods in 1995,  which  growth can be  attributed  to the
overall growth in net written premium.

Net investment income increased 32.6% and 35.1% to $1.7 and $4.9 million for the
three and nine month  periods  ended  September  30,  1996,  as compared to $1.3
million and $3.7 million for the same periods in 1995. The investment  portfolio
increased  24.4% to $101.7  million at September  30, 1996, as compared to $81.8
million at September  30, 1995.  The increase in the  investment  portfolio  was
funded principally from increased premium volume, cash flow from operations, and
net funds of $9 million from a loan entered into in December of 1995.

The Company  realized net investment gains after taxes of $150 and $218 thousand
for the three and nine month periods ended September 30, 1996, as compared to an
after-tax gain of $478 thousand and $566 thousand on security  transactions  for
the same periods in 1995.

Losses and loss adjustment expenses increased 22.9% and 19.7% to $11.2 and $31.3
million  for the three and nine month  periods  ended  September  30,  1996,  as
compared to $9.1 and $26.2  million for the same periods in 1995.  The Company's
statutory  combined  ratio was 94.5 % for the third quarter ended  September 30,
1996,  compared  to a 91.6%  combined  ratio for the same  quarter of 1995.  The
statutory combined ratio for the first nine months of 1996 was 94.3% compared to
92.6% for 1995. The increase in the statutory  combined ratio for the first nine
months of 1996 was principally  due to an increase in the commission  component.
Commission expense ratio for the first nine months of 1996 was 22.7% as compared
to 21.1% for the same period of 1995. The increase in commission  expense is due
to the higher  commission  rate on the auto line which as of September  30, 1996
accounts for 28% of gross  written  premiums as compared to 16% of gross written
premiums in 1995.

                                     Page 8

<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY

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


Amortization of deferred policy  acquisition  costs increased 29.8% and 21.7% to
$4.6 and $12.8 million for the three and nine month periods ended  September 30,
1996,  as compared to $3.5 and $10.5  million for the same period in 1995.  This
increase was  attributable to the increased growth in earned premiums as well as
the increase  personal auto  commission rate which is a component of acquisition
costs.

Other underwriting expense decreased 22.1% and 7.8% to $1.0 and $3.3 million for
the three and nine month periods  ended  September 30, 1996, as compared to $1.3
and $3.5 million for the same periods in 1995 principally due to a $150 thousand
reinsurance recovery previously written off and an increase in the allowance for
doubtful accounts in 1995 that was not necessary in the same period of 1996.

Interest expense was $227 and $665 thousand for the three and nine month periods
ended  September  30,  1996,  as compared to $37 and $109  thousand for the same
periods in 1995.  The increases were  primarily  attributable  to the additional
interest  on the  loan  and the  recapitalization  of the  lease  on the  office
building.

For the three month period,  net earnings  decreased 2.0% to $1.83  million,  as
compared to $1.87  million for 1995.  For the nine month  period,  net  earnings
increased 11.6% to $4.8 million, as compared to $4.3 million for the same period
in 1995. The decrease in net earnings for the three month period ended September
30, 1996 was  attributable to a decrease in realized  investment gains from $724
thousand in 1995 to $227 thousand in 1996.  Overall,  net operating earnings for
the three month  period  increased  20.9% to $1.7  million,  as compared to $1.4
million for the same period in 1995.

Liquidity and Capital Resources

Net cash provided by operating  activities was $11.2 million for the nine months
ended  September  30,  1996,  as compared to $9.5 million for the same period in
1995.  This  increase in cash  provided by  operations  primarily  reflects  the
increase in net premiums written and investment income during the period.

Net cash used by investing activities was $7.8 million for the nine months ended
September  30,  1996,  as  compared to $7.4  million  for the nine months  ended
September 30, 1995.  This  increase was primarily due to the  investment of cash
provided by operating  activities for the nine month period ended  September 30,
1996.

Net cash used by  financing  activities  was $541  thousand  for the nine months
ended  September  30, 1996,  as compared to $439 thousand for the same period in
1995.

During the first nine months of 1996, the Company's  fixed income  portfolio was
affected by a rise in interest  rates  resulting  in a $1.1  million  unrealized
after tax investment loss on this portfolio.

                                     Page 9

<PAGE>

                     PENN-AMERICA GROUP, INC. AND SUBSIDIARY

                           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 - None

Item 5.       Other Information - None

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


                                    Page 10

<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:   November 8, 1996                     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 11