SCHEDULE 14A INFORMATION

           Proxy Statement Pursuant to Section 14(a) of the Securities
                              Exchange Act of 1934
                                (Amendment No. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
    Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12

                        PENN TREATY AMERICAN CORPORATION
                        --------------------------------
                (Name of Registrant as Specified In Its Charter)


     ----------------------------------------------------------------------
    (Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

     1) Title of each class of securities to which transaction applies:

     2) Aggregate number of securities to which transaction applies:

     3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):

     4) Proposed maximum aggregate value of transaction:

     5) Total fee paid:

[ ] Fee paid previously with preliminary materials.



[ ]  Check box if any part of the fee is offset as provided by Exchange Act
     Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
     paid previously. Identify the previous filing by registration statement
     number, or the Form or Schedule and the date of its filing.

     1) Amount Previously Paid:

     2) Form, Schedule or Registration Statement No.:

     3) Filing Party:

     4) Date Filed:





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                    NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
                         TO BE HELD FRIDAY, MAY 25, 2001


             TO THE SHAREHOLDERS OF PENN TREATY AMERICAN CORPORATION

The Annual Meeting of Shareholders of PENN TREATY AMERICAN CORPORATION will be
held at Brookside Country Club, 901 Willow Lane, Macungie, Pennsylvania on
Friday, May 25, 2001, at 9:00 a.m. to consider and vote upon the following
proposals:

     1.   to consider and approve an amendment to the Company's Restated
          Articles of Incorporation (the "Articles") to increase the number of
          authorized shares of Common Stock, par value $.10 per share ("Common
          Stock"), from 25,000,000 to 40,000,000 shares; and

     2.   to elect three persons to Penn Treaty's Board of Directors as Class II
          Directors to serve until the 2004 Annual Meeting of Shareholders and
          until their successors are elected and have been qualified;

     3.   to ratify the selection of PricewaterhouseCoopers LLP as independent
          public accountants for Penn Treaty and its subsidiaries for the year
          ending December 31, 2001; and

     4.   to transact other business that properly comes before the Annual
          Meeting, or any adjournments or postponements.

Only those holders of our common stock of record at the close of business on
April 9, 2001 shall be entitled to notice of, and to vote at, the Annual
Meeting.

     EACH SHAREHOLDER, WHETHER OR NOT HE OR SHE PLANS TO ATTEND THE ANNUAL
MEETING, IS REQUESTED TO SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD WITHOUT
DELAY IN THE ENCLOSED SELF-ADDRESSED ENVELOPE. ANY PROXY GIVEN BY A SHAREHOLDER
MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED BY FILING WITH THE SECRETARY
OF PENN TREATY A WRITTEN REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER
DATE. ANY SHAREHOLDER PRESENT AT THE ANNUAL MEETING MAY REVOKE HIS OR HER PROXY
AND VOTE PERSONALLY ON EACH MATTER BROUGHT BEFORE THE ANNUAL MEETING.




                                            By Order of the Board of Directors,

                                            /s/ SANDRA A. KOTSCH
                                            -----------------------------------
                                            Sandra A. Kotsch, Secretary


Allentown, Pennsylvania
April 30, 2001






                                 PROXY STATEMENT
                         ANNUAL MEETING OF SHAREHOLDERS
                             TO BE HELD MAY 25, 2001

                             INTRODUCTORY STATEMENT

     Penn Treaty American Corporation is a Pennsylvania corporation with its
principal executive offices located at 3440 Lehigh Street, Allentown,
Pennsylvania 18103, telephone number (610) 965-2222. This Proxy Statement is
being furnished to our shareholders in connection with the solicitation by our
Board of Directors of proxies to be voted at the Annual Meeting of Shareholders
of Penn Treaty to be held on May 25, 2001, at Brookside Country Club, 901 Willow
Lane, Macungie, Pennsylvania at 9:00 a.m., or at any adjournment or
postponement.

     This Proxy Statement and the accompanying proxy card are first being mailed
to our shareholders on or about April 30, 2001. A copy of the Annual Report on
Form 10-K, which includes financial statements for the fiscal year ended
December 31, 2000, which are hereby incorporated by reference herein, is
enclosed with this Proxy Statement.

     For your information, our subsidiaries are Senior Financial Consultants
Company (the "Agency"), Penn Treaty Network America Insurance Company
("PTNA")(formerly Network America Life Insurance Company), American Network
Insurance Company ("ANIC"), American Independent Network Insurance Company of
New York ("AINIC"), United Insurance Group Agency, Inc. ("UIG") and Network
Insurance Senior Health Division ("NISHD").

                            ABOUT THE ANNUAL MEETING

WHAT IS THE PURPOSE OF THE ANNUAL MEETING?

     At the Annual Meeting, shareholders will act upon the following matters:
the adoption of an amendment to the Articles to increase the number of
authorized shares of Common Stock from 25,000,000 to 40,000,000 shares; the
election of three directors of Penn Treaty, each to serve for a three-year
term expiring at the annual meeting of shareholders in 2004; the ratification
of our selection of PricewaterhouseCoopers LLP as the independent public
accountants for Penn Treaty and its subsidiaries for the year ending December
31, 2001; and any other business that may properly be brought before the
Annual Meeting.



WHO IS ENTITLED TO VOTE?

     Only shareholders of record on the record date, which was the close of
business on Monday, April 9, 2001, will be entitled to receive notice of, and to
vote at, the Annual Meeting and any adjournments or postponements. Each share of
common stock is entitled to one vote.

HOW DO I VOTE?

     If you complete and properly sign the accompanying proxy card and return it
to us, it will be voted as you direct. If you are a registered shareholder and
attend the Annual Meeting, you may deliver your completed proxy card in person
or vote in person at the Annual Meeting.

WHAT CONSTITUTES A QUORUM?

     The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the shares of Common Stock outstanding on the record date will
constitute a quorum, permitting business to be conducted at the Annual Meeting.
As of the record date, 7,820,634 shares of Common Stock were outstanding, held
by 354 shareholders of record.

HOW DOES DISCRETIONARY VOTING AUTHORITY APPLY?

     If you sign and return your proxy card, but do not make any selections, you
give discretionary authority to the persons named as proxy holders on the proxy
card, Irving Levit, A. J. Carden and Michael F. Grill, to vote on the proposals
and any other matters that may arise at the Annual Meeting.

WHAT ARE THE BOARD'S RECOMMENDATIONS?

     Unless you give other instructions on your proxy card, the proxy holders
will vote in accordance with the recommendations of the Board of Directors. The
Board recommends a vote:

     o    FOR the adoption of an amendment to the Articles to increase the
          number of authorized shares of Common Stock from 25,000,000 to
          40,000,000 shares; and



                                       2


     o    FOR election of the three nominees for director of Penn Treaty, Jack
          D. Baum, Alexander M. Clark and Matthew W. Kaplan; and

     o    FOR the ratification of our selection of PricewaterhouseCoopers LLP as
          the independent public accountants for Penn Treaty and its
          subsidiaries for the year ending December 31, 2001.

     With respect to any other matter that properly comes before the meeting,
the proxy holders will vote as recommended by the Board or, if no recommendation
is given, in their own discretion.

WHAT VOTE IS REQUIRED TO AMEND THE ARTICLES?

     The approval of the amendment to the Articles will require the affirmative
vote, either in person or by proxy, of the holders of shares representing at
least sixty-seven percent (67%) of the outstanding shares of Common Stock.
Abstentions and broker non-votes will be included in the calculation of a quorum
and will have the effect of votes cast against the proposal.

WHAT VOTE IS REQUIRED TO ELECT THE DIRECTORS?

     The three nominees for Director receiving the highest number of votes cast
by shareholders entitled to vote for Directors (there being no cumulative
voting) will be elected to serve on the Board. Abstentions and broker non-votes
will be included in the calculation of a quorum but will have no effect on the
result of the vote.

CAN I CHANGE MY VOTE AFTER I RETURN MY PROXY CARD?

     Yes. Even after you have submitted your proxy, you may change your vote at
any time before the proxy is exercised by filing with the Secretary of Penn
Treaty either a notice of revocation or a duly executed proxy bearing a date
later than the date on the proxy you submitted. The powers of the proxy holders
to vote your proxy will be suspended if you attend the Annual Meeting in person
and request to change your vote or vote in person, although attendance at the
Annual Meeting will not by itself revoke a previously granted proxy.



                                       3


WHO BEARS THE COST OF SOLICITATION OF PROXIES?

     We bear the cost of preparing, printing, assembling and mailing this
proxy statement and other material furnished to shareholders in connection
with the solicitation of proxies for the Annual Meeting. We have retained the
services of Georgeson Shareholder at a cost of approximately $5,500 to
perform proxy solicitation activities on our behalf.

WHEN ARE SHAREHOLDER PROPOSALS DUE FOR THE YEAR 2002 ANNUAL MEETING?

     To be included in next year's proxy statement, shareholder proposals must
be submitted in writing by December 31, 2001 to: Secretary, Penn Treaty American
Corporation, 3440 Lehigh Street, Allentown, PA 18103. If any shareholder wishes
to present a proposal to the 2002 annual meeting that is not included in Penn
Treaty's proxy statement for that meeting and does not submit such proposal to
the Secretary of Penn Treaty until after March 16, 2002, then the persons named
in the proxy card for the 2002 annual meeting will be allowed to use their
discretionary voting authority when the proposal is raised at the 2002 annual
meeting, without any discussion of the matter in the proxy statement for that
meeting.

                       PROPOSAL I - AMENDMENT TO ARTICLES

     At the Meeting, the shareholders will be asked to vote on a resolution
approving an amendment (the "Proposed Amendment") to Article FIFTH of the
Articles to increase the number of authorized shares of Common Stock, par value
$.10 per share ("Common Stock"), from 25,000,000 to 40,000,000 shares.

     As of April 9, 2001, 7,820,634 shares of Common Stock were issued and
outstanding, 1,381,117 shares of Common Stock were reserved for issuance
under our stock option plans, 2,628,340 shares of Common Stock were reserved
for issuance upon conversion of our 6 1/4% Convertible Subordinated Notes due
2003 ("Convertible Subordinated Notes") and no shares of Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), were outstanding. On April 27,
2001, we issued rights to purchase up to 12,083,000 shares of Common Stock to
the holders of Common Stock and holders of our 6 1/4% Convertible
Subordinated Notes due 2003 ("Convertible Subordinated Notes"). If all of the
rights are exercised, we expect that we will be required to issue
substantially all of our currently authorized shares of Common Stock.

                                       4



     The increase in the authorized number of shares of Common Stock is being
proposed because the Board of Directors believes that it is advisable to have
authorized but unissued shares of Common Stock available for various
corporate purposes.

     Penn Treaty may from time to time consider acquisitions, stock dividends
or stock splits, and public or private financings to provide Penn Treaty with
capital, all of which may involve the issuance of additional shares of Common
Stock or securities convertible into Common Stock. In addition, the
authorized capital stock could be used for stock options, warrants, employee
benefit plans, shareholder rights plans (which could contain anti-takeover
measures) and other distributions. The Board of Directors believes that
having authority to issue additional shares of Common Stock, without, except
as required by law, obtaining specific shareholder approval will avoid the
possible delay of calling and holding a special meeting of shareholders to
increase Penn Treaty's authorized capital at the time a transaction may be
proposed, so as to enhance Penn Treaty's ability to take prompt advantage of
market conditions and to respond promptly to any future acquisition
opportunities.

     The Company has no present plan, understanding or arrangement to issue
any of the additional shares of Common Stock that will be authorized if the
proposed amendment is approved.

     The authorization of additional shares of Common Stock will not, by
itself, have any effect on the rights of holders of existing Common Stock.
Depending on the circumstances, any issuance of additional shares of Common
Stock may dilute the present equity ownership of current shareholders. If the
proposed amendment is approved, the Board of Directors will have the
authority to issue the additional authorized shares of Common Stock to such
persons and for such consideration as it may determine

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without further action by the shareholders except as required by law, the
Articles or the rules of any stock exchange or national interdealer quotation
system on which Penn Treaty's securities may then be listed.

     Although the proposed amendment is not intended to be an anti-takeover
measure, shareholders should note that, under certain circumstances, the
additional shares of Common Stock could be used to make any attempt to gain
control of Penn Treaty or the Board of Directors more difficult or
time-consuming. The proposed amendment might be considered to have the effect
of discouraging an attempt by another person or entity, through the
acquisition of a substantial number of shares of Penn Treaty's stock, to
acquire control of Penn Treaty, because the issuance of the additional shares
of Common Stock could be used to dilute the stock ownership of a person or
entity seeking to obtain control and to increase the cost to a person or
entity seeking to acquire a majority of the voting power of Penn Treaty. If
so used, the effect of the additional authorized shares of Common Stock might
be (i) to deprive shareholders of an opportunity to sell their stock at a
higher price as a result of a tender offer or other purchase of shares by a
person seeking to obtain control of Penn Treaty or (ii) to assist incumbent
management in retaining its present position.

     The Articles do contain certain provisions intended to be anti-takeover in
nature including provisions: (i) authorizing the Board of Directors, without
further action by the shareholders, to issue shares of preferred stock; (ii)
creating a staggered Board of Directors, divided into three classes, each of
which is comprised of three directors elected for a three-year term with one
class being elected each year; (iii) requiring the approval of 67% of the voting
power of the stock entitled to vote in the election of directors to remove
directors without cause; (iv) requiring the affirmative vote of shareholders
owning at least 67% of the outstanding shares of the Common Stock in order for
Penn Treaty to: (a) amend, repeal or add any provision to the Articles; (b)
merge or consolidate with another corporation, other than a wholly-owned
subsidiary; (c) exchange shares of the Common Stock in such a manner that a
corporation, person or entity acquires the issued or outstanding shares of
Common Stock pursuant to a vote of shareholders; (d) sell, lease, convey,
encumber or otherwise dispose of all or substantially all of the property or
business of Penn Treaty; or (e) liquidate or dissolve Penn Treaty; and (v)
permitting the Board of Directors to oppose a tender offer or other offer for



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Penn Treaty's securities, and allowing the Board of Directors to consider any
pertinent issue in determining whether to oppose any such offer. In addition,
Penn Treaty's By-laws require shareholders to give timely written notice to Penn
Treaty and to provide certain information with respect to any candidate
nominated by shareholders for election as a director of Penn Treaty.

     The Pennsylvania Business Corporation Law of 1988, as amended (the "BCL")
also contains certain shareholder protection provisions applicable to Penn
Treaty that may have an anti-takeover effect including (i) a "control
transaction" provision that allows holders of voting shares of a corporation to
"put" their stock to an acquiror for fair value in the event of a control
transaction (the acquisition of 20% of the voting stock of the corporation);
(ii) an "interested shareholder" provision that precludes the beneficial owner
of 20% of the voting stock of a corporation or certain affiliates of the
corporation from engaging in a business combination with the corporation for a
period of five years unless: (a) the board approves the business combination or
the acquisition of shares in advance, or (b) if the interested shareholder owns
80% of such stock, the business combination is approved by a majority of the
disinterested shareholders and the transaction satisfies certain "fair price"
provisions; (iii) a provision authorizing corporations to adopt shareholders'
rights plans with discriminatory provisions (sometimes referred to as poison
pills) which take effect only in the event of a control transaction; (iv) a
provision allowing directors taking action with respect to a tender offer or
takeover proposal to consider the effects of any action upon employees,
suppliers, customers, communities where the corporation is located and all other
pertinent factors when determining whether the action is in the best interests
of the corporation; and (v) a provision removing the statutory right of
shareholders to call special meetings of shareholders or to propose amendments
to the articles of incorporation.

     The foregoing provisions may discourage certain types of transactions that
involve a change of control of Penn Treaty and ensure a measure of continuity in
the management of the business and affairs of Penn Treaty. While Penn Treaty
does not currently have a shareholders' rights plan or poison pill, the effect
of the above-described provisions may be to deter hostile takeovers at a price
higher than the prevailing market price for the Common Stock and to permit
current management to remain in control of Penn Treaty.



                                       7


     In addition to the provisions of the BCL, the insurance laws and
regulations of Pennsylvania, which are applicable to Penn Treaty, provide, among
other things, that without the consent of the insurance commissioner of such
state, no person may acquire control of Penn Treaty and that any person or
holder of shares of Common Stock or securities convertible into such Common
Stock possessing 10% or more of the aggregate voting power of the Common Stock
(inclusive of shares issuable upon conversion of all convertible securities)
will be presumed to have acquired such control unless each such insurance
commissioner, upon application, has determined otherwise.

     The holders of Common Stock have no preemptive rights to purchase
additional shares of Common Stock.

     The Articles also authorize the issuance of 5,000,000 shares of
Preferred Stock, which the Board of Directors has the power to issue in one
or more series and with respect to which the Board of Directors has the power
to fix the number of shares of each series and all designations, preferences,
qualifications, limitations, restrictions and special or relative rights, if
any, of the shares in each series. The proposed amendment does not increase
or otherwise affect our authorized preferred stock.

     If the proposed amendment is approved by the shareholders at the Meeting,
the first paragraph of Article FIFTH of the Articles will be amended and
restated so that such first paragraph of such Article FIFTH shall be and read in
its entirety as follows:

     "FIFTH: The aggregate number of shares which the Corporation shall have
authority to issue is 40,000,000 shares of common stock, par value $.10 per
share ("Common Stock"); and 5,000,000 shares of preferred stock, par value $1.00
per share ("Preferred Stock")."

     No other changes will be required to the current Article FIFTH of the
Articles.

       THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ADOPTION OF THE
                       PROPOSED AMENDMENT TO THE ARTICLES.

                       PROPOSAL II - ELECTION OF DIRECTORS

     Our Board of Directors currently has nine members and is divided into three
classes, each comprised of three Directors who serve for terms of three years
and until their successors have been elected and qualified. At the Annual
Meeting, the Board will nominate Jack D. Baum, Alexander M. Clark and Matthew W.
Kaplan to be elected as Class II Directors of Penn Treaty, to hold office until
the 2004 annual meeting and until their successors have been elected and
qualified. The nominees have each consented to serve if elected to the Board. If
for any reason any of the nominees becomes unable or is unwilling to serve at
the time of the Annual Meeting, the proxy holders, unless you instruct them
otherwise, will vote for a substitute nominee or nominees in their


                                       8


discretion. We do not anticipate that any nominee will be unavailable for
election.

       THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE
                 ABOVE NOMINEES FOR A FIXED TERM OF THREE YEARS.

     The following table and paragraphs set forth information about the current
nominees and the other persons who will continue to serve as Directors of Penn
Treaty. The information has been furnished to Penn Treaty by each person
nominated as a Director and each person whose term of office as a Director will
continue after the Annual Meeting.



                                                                                 DIRECTOR
NAME                                AGE     POSITION(S) WITH PENN TREATY           SINCE
----                                ---     ----------------------------           -----
                                                                        
CLASS II: NOMINEES TO BE ELECTED FOR TERMS EXPIRING IN 2004:

Jack D. Baum                        67      Vice President of Agency Management    1987
                                            and Director

Alexander M. Clark                  67      Director                               1999

Matthew W. Kaplan                   43      Director Nominee                       Current Nominee

CLASS I: DIRECTORS CONTINUING FOR TERMS EXPIRING IN 2003:

A.J. Carden                         68      Executive Vice President and Director  1983

Irving Levit                        71      Founder, Chairman of the Board of      1971
                                            Directors, President and Chief
                                            Executive Officer

Domenic P. Stangherlin              74      Director                               1971

CLASS III: DIRECTORS CONTINUING FOR TERMS EXPIRING IN 2002:

Francis R. Grebe                    69      Director                               1999

Michael F. Grill                    51      Treasurer, Comptroller and             1986
                                            Director

David B. Trindle                    51      Director                               1997


---------------
     JACK D. BAUM has served as a Vice President of Penn Treaty since 1985, of
the Agency since 1988, of PTNA since 1989, of ANIC since 1996 and of AINIC since
its inception in 1997. His duties include supervising and motivating Penn
Treaty's sales force. Prior to joining Penn Treaty, Mr. Baum served as Vice
President of Marketing for National Security General Insurance Company in
Lancaster, Pennsylvania from 1983 to 1985 and as a Director of Group Sales and
Marketing for Educators Mutual Life


                                       9


Insurance in Lancaster, Pennsylvania from 1976 to 1983. Mr. Baum has over
20 years experience in the insurance business.

     ALEXANDER M. CLARK has also served as a Director of AINIC since its
inception in 1997. Mr. Clark is a Managing Director of Advest, Inc., a position
he has held since 1993. He was formerly a Senior Vice President at Gramercy
Partners and previously with McKinley Allsopp, both of New York. Mr. Clark is a
graduate of Dartmouth College and pursued graduate studies at Harvard where he
earned an M.B.A. and further studies at Brown University in savings banking. He
is a member of the Association of Insurance and Financial Analysts(CFA-1968).

     MATTHEW W. KAPLAN has served as President and Chief Executive Officer of
U.S. Care, Inc. ("U.S. Care") since 1996. U.S. Care is an integrated chronic
care management company, whose services include the design and management of
long-term care insurance programs. From 1995 to 1996, Mr. Kaplan served as Chief
Marketing Officer for U.S. Care. Prior to joining U.S. Care, Mr. Kaplan served
as General Manager and Vice Chairman of the North Melbourne Giants Basketball
Pty. Ltd.; Consultant for the World Health Organization, Regional Office for
Europe and the Commission for the European Communities; Managing Partner for B&K
Development LLP; and held several positions with U.S. Administrators, Inc., the
last position being that of Executive Vice President. Mr. Kaplan is a member of
the Board of Trustees for the UCLA Center on Aging, serves on the Board of
Directors of Healant, Inc. and is a Founding Director of Cancervive. He also
serves as Director for Crown Reinsurance Company (Cayman) Limited, a wholly
owned subsidiary of U.S. Care, and as Chairman for Northstar Telefilm, Inc.

     A. J. CARDEN has served as Executive Vice President of Penn Treaty since
1983. Mr. Carden has also served as Executive Vice President and Director of the
Agency since 1988, of PTNA since 1989, of ANIC since 1996 and of AINIC since its
inception in 1997. Mr. Carden also serves as Vice President, Secretary and
Director of NISHD. From 1970 to 1983, Mr. Carden served as Assistant to the
President and Vice President of Claims for Columbia Life Insurance Company and
Columbia Accident and Health Insurance Company located in Bloomsburg,
Pennsylvania. Mr. Carden has over 42 years experience in the insurance business.

     IRVING LEVIT has served as Chairman of the Board of Directors, President
and Chief Executive Officer of Penn Treaty since 1972. Mr. Levit has also
served as President of PTNA, ANIC and AINIC since December 2000, as the
Chairman of the Board of Directors and Chief Executive Officer of PTNA since

                                       10


1989, ANIC since 1996 and of AINIC since its inception in 1997 and as the
Chairman of the Board of Directors, President and Chief Executive Officer of the
Agency since 1988. Mr. Levit also serves as Chairman of the Board, President and
Chief Executive Officer of NISHD, and Chairman of the Board of UIG. In addition,
Mr. Levit has been the sole owner of the Irv Levit Insurance Management
Corporation ("IMC"), an insurance agency, since 1961. Mr. Levit has over 42
years experience in the insurance business.

     DOMENIC P. STANGHERLIN served as Secretary of Penn Treaty from 1971 to
2000. Mr. Stangherlin also served as Secretary and Director of the Agency from
1988 to 2000, of PTNA from 1989 to 2000, of ANIC from 1996 to 2000 and of AINIC
from 1997 to 2000. Mr. Stangherlin is the owner and manager of the Line Tool
Company, a manufacturer of micropositioners, located in Allentown, Pennsylvania.

     FRANCIS R. GREBE is a partner at the investment counseling firm of James M.
Davidson and Company. He has held this position since 1988. Mr. Grebe also
serves as a Director and Executive President of The Main Line Trust Company, a
private fiduciary. Mr. Grebe has over 40 years experience with leading financial
institutions in the trust and investment area, including Girard Trust Bank,
Philadelphia National Bank and U.S. Trust Company of Florida. Mr. Grebe
currently serves as a Director of the Athenaeum of Philadelphia and as a Trustee
of The Guthrie Healthcare System. He is also a Director and former President of
Family Services of Montgomery County, Pennsylvania and currently serves as
Trustee of the Meshewa Farm Foundation and The Sylvan Foundation. Mr. Grebe is a
Phi Beta Kappa graduate of the University of Rochester and the University of
Michigan and is admitted to practice law in Michigan, Illinois and New York.

     MICHAEL F. GRILL has served as Treasurer and Comptroller of Penn Treaty
since 1981, of the Agency since 1988, of PTNA since 1989, of ANIC since 1996 and
of AINIC since its inception in 1997. Mr. Grill became a Director of the Agency
in 1988, of PTNA in 1989, of ANIC in 1996, of AINIC in 1997 and of NISHD in
2000. Prior to joining Penn Treaty, Mr. Grill served as Chief Accountant for
World Life and Health Insurance Company located in King of Prussia, Pennsylvania
from 1973 to 1981. Mr. Grill has 27 years experience in the insurance business.

     DAVID B. TRINDLE, FSA, MAAA is a family therapist at Catholic Charities in
the state of New Jersey. He has held this position since 1999. As an actuary
with 27 years experience in


                                       11


the areas of health insurance and managed care, Mr. Trindle served as an
independent consulting actuary from 1996 until 1999. From 1993 until 1996, Mr.
Trindle served as Partner and National Director of the Health Actuarial practice
of KPMG Peat Marwick. Prior to 1993, Mr. Trindle served as President of QED
Consulting Group, an actuarial firm specializing in health insurance and
long-term care which was co-founded by Mr. Trindle in 1988. From 1973 to 1988,
Mr. Trindle served in various senior management and executive roles at UNUM
Corporation, Transport Life Insurance Company and Union Fidelity Life Insurance
Company where he also served on the Board of Directors. Mr. Trindle is a Member
of the American Academy of Actuaries and a Fellow of the Society of Actuaries,
for whom he served as Chairman of the Health Section. Mr. Trindle holds a
Masters Degree in Mathematics from Pennsylvania State University.

         GENERAL INFORMATION REGARDING DIRECTORS AND EXECUTIVE OFFICERS

HOW OFTEN DID THE BOARD MEET DURING 2000?

     During 2000, the Board of Directors held four meetings. Each Director
attended at least 75% of the meetings of the Board and the Committees of the
Board on which he served. The average attendance of directors at Board and
Committee meetings held during 2000 was 97%.

WHAT COMMITTEES HAS THE BOARD ESTABLISHED?

     To assist in the discharge of its responsibilities, the Board of Directors
has three committees - the Audit Committee, the Compensation Committee and the
Executive Committee. The Board of Directors does not have a nominating
committee. The total combined attendance for all Committee meetings was 100%.

     AUDIT COMMITTEE. The principal functions of the Audit Committee are to
assist the Board of Directors in the oversight of executive management's
responsibilities related to Penn Treaty's internal control process. In
connection with this function, the Audit Committee reviews various policies and
practices of management related to Penn Treaty's responsibilities to its
investors, customers, employees and the general public.

     The Audit Committee is comprised of three outside directors, Mr. Clark, Mr.
Grebe, and Mr. Stangherlin. Mr. Stangherlin previously served as the Secretary
to Penn Treaty and its subsidiaries from 1988 to 2000. The Board of Directors
has


                                       12


determined in its business judgment that Mr. Stangherlin's membership on
the Audit Committee is in the best interests of Penn Treaty and its shareholders
based upon his substantial experience as a member of Penn Treaty's Board of
Directors and private industry management tenure. Penn Treaty believes that each
member of the Audit Committee is now independent as independence is defined in
the New York Stock Exchange listing standards. The Audit Committee has a written
charter, adopted in September 1999. The Audit Committee held three meetings
during 2000.

     COMPENSATION COMMITTEE. The principal functions of the Compensation
Committee are to review and evaluate, at least annually, the performance of the
chief executive officer and other senior officers of Penn Treaty and its
subsidiaries, and to set their remuneration, including incentive rewards. The
members of the Compensation Committee during 2000 were Mr. Clark, Mr. Grebe and
Mr. Stangherlin. The Compensation Committee met once in 2000.

     EXECUTIVE COMMITTEE. During the periods between Board meetings, the
Executive Committee exercises all of the powers of the Board of Directors,
except that the Executive Committee may not elect directors, change the
membership of or fill vacancies in the Executive Committee, fix the compensation
of the Directors, change the Bylaws, or take any action restricted by the
Pennsylvania Business Corporation Law or the Bylaws (including actions delegated
to another Board Committee). The members of the Executive Committee during 2000
were Mr. Levit, Mr. Carden and Mr. Stangherlin. The Executive Committee met once
in 2000.

HOW ARE DIRECTORS COMPENSATED?

     Each Director receives a fee of $400 for each regular Board meeting
attended. In addition, Mr. Clark, Mr. Grebe and Mr. Stangherlin receive a
monthly fee of $200 for their service as members of Penn Treaty's Audit
Committee.

     Information with respect to the share ownership of the Directors and the
nominees is set forth below. See "Principal Shareholders."

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     IMC, an insurance agency which is owned by Irving Levit, produced
approximately $41,000, $34,000 and $43,000 of new and renewal premiums for PTNA
for the years ended December 31, 1998, 1999 and 2000, respectively, for which it
received commissions of approximately $10,000, $8,000 and $10,000 respectively.
While IMC




                                       13




has only been minimally involved in the sale of insurance products since 1979
and IMC'S operations since that time have not been significant, IMC continues to
receive overriding commissions from Penn Treaty of 5% on business written for
PTNA by any IMC general agents who were appointed prior to 1979 and any of their
sub-agents hired prior and subsequent to January 1979 and one agent appointed in
1981. For the years ended December 31, 1998, 1999 and 2000 these overriding
commissions totaled approximately $559,000, $543,000 and $551,000, respectively.
The premium revenues on which such overrides are paid are based on commissions
which are higher than those currently paid to independent agents.

    Director Nominee Matthew W. Kaplan is President and Chief Executive
Officer of U.S. Care, Inc. During the year ended December 31, 2000, U.S. Care
engaged in certain consulting and marketing capacities for PTNA for which it
received customary overriding commission fees.

     The terms on which commissions have been paid to IMC and U.S. Care are
consistent with (i) the terms on which commissions have been paid by Penn
Treaty to comparable unaffiliated agencies in the past and currently to one
unaffiliated agency performing similar services and (ii) the terms on which
commissions are paid in the industry in general, and were no less favorable
than would have been obtained from unrelated third parties. To the extent
that Penn Treaty engages in future transactions with any of its affiliates,
all such transactions will likewise be on terms no less favorable than could
be obtained from unaffiliated parties and will be approved by a majority of
Penn Treaty's disinterested directors.

     Director Francis R. Grebe is a partner at the investment counseling firm of
James M. Davidson and Company, an affiliate of Davidson Capital Management.
Davidson Capital Management manages a portion of our investment portfolio for
which it received fees of $242,000 and $300,000 for the years ended December 31,
1999 and 2000, respectively. Mr. Grebe is not directly involved with any of Penn
Treaty's investment matters. Mr. Grebe serves as a financial advisor to Irving
Levit on some of Mr. Levit's personal matters.

     Director Alexander M. Clark is a Managing Director with Advest, Inc.
Advest, Inc. has engaged in, and may in the future engage in, investment
banking and other commercial dealings in the ordinary course of business with
Penn Treaty. Advest, Inc. has received and will receive customary fees for
these transactions.

                                       14


OTHER EXECUTIVE OFFICERS OF PENN TREATY

     CAMERON B. WAITE has served as Chief Financial Officer of Penn Treaty since
May 1996. Mr. Waite also serves as Director, Treasurer and Chief Financial
Officer of NISHD. From 1994 to 1996, Mr. Waite was Chief Financial Officer and
Treasurer of Blue Fish Clothing, Inc., a manufacturer, wholesaler and retailer
of women's clothing. From 1983 to 1994, Mr. Waite held various positions with
Independence Bancorp. Inc., which merged with CoreStates Financial Corporation,
his last position being Vice President of Asset Liability Management. Mr. Waite
holds a B.A. in Economics from Dickinson College and an M.B.A. from Lehigh
University. Mr. Waite is 40.

     JIM HEYER was appointed the Chief Operating Officer of PTNA in January
1999. Prior to that time, Mr. Heyer served as the Vice President of
Administration of PTNA from 1993 to 1998. Mr. Heyer has also served as Vice
President of Administration of Penn Treaty since 1997 and as a Vice President
and Director of ANIC and AINIC since 1996 and 1997, respectively. Mr. Heyer
oversees our claims, underwriting, compliance and product development areas.
Prior to joining Penn Treaty in 1988, Mr. Heyer was employed by The Guardian
Life Insurance Company of North America. Mr. Heyer received his B.S. in Business
Administration and Marketing from Penn State University. Mr. Heyer is 37 and has
15 years experience in the insurance business.

COMPLIANCE WITH SECTION 16(a) REPORTING

     The rules of the Securities and Exchange Commission require that Penn
Treaty disclose delinquent filings for reports of stock ownership (and changes
in stock ownership) by its directors and executive officers. To the best of Penn
Treaty's knowledge, all Form 3, Form 4 and Form 5 reports were timely filed,
except for the Form 3 report for Mr. Grebe.

          PROPOSAL III - RATIFICATION OF INDEPENDENT PUBLIC ACCOUNTANTS

     The Board of Directors, upon recommendation of the Audit Committee, has
selected the firm of PricewaterhouseCoopers LLP as the independent public
accountants of Penn Treaty and its subsidiaries for the year ending December 31,
2001. In taking this action, the members of the Board and the Audit Committee
considered carefully PricewaterhouseCoopers' performance for the Company in that
capacity since 1986, its independence with respect to the services to be
performed and its general reputation for

                                       15


adherence to professional auditing standards. A representative of
PricewaterhouseCoopers LLP is expected to be present at the Meeting for the
purpose of making a statement if he so desires and to respond to appropriate
questions. If the stockholders do not approve this proposal, the Audit Committee
and the Board of Directors will consider the matter of the appointment of
independent public accountants.

AUDIT FEES

     The aggregate fees billed by PricewaterhouseCoopers for professional
services required for the audit of the Company's annual financial statements for
the year ended December 31, 2000 and the reviews of the interim financial
statements included in the Company's Forms 10-Q for the year ended December 31,
2000 were approximately $470,000.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

     No fees were billed by PricewaterhouseCoopers for financial information
systems design and implementation services for the year ended December 31, 2000.

ALL OTHER FEES

     The aggregate fees billed by PricewaterhouseCoopers for additional
professional services rendered by PricewaterhouseCoopers for the year ended
December 31, 2000, other than for the services described above, were
approximately $320,000. Prior to engaging PricewaterhouseCoopers for these
additional services, the Audit Committee considered whether the provision of
these services was compatible with maintaining PricewaterhouseCoopers'
independence.

 THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" RATIFICATION OF THE APPOINTMENT
  OF PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT PUBLIC ACCOUNTANTS FOR PENN
       TREATY AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 2001.

                    EXECUTIVE COMPENSATION AND OTHER MATTERS

SUMMARY COMPENSATION TABLE

     The following table sets forth information concerning the annual and
long-term compensation for services in all capacities to Penn Treaty for the
fiscal years ended December 31, 1998, 1999 and 2000 of those persons who, during
2000, (i) served as Penn Treaty's Chief Executive Officer or (ii) were Executive
Officers (other than the Chief Executive Officer) whose total annual salary and
bonus exceeded $100,000:

                                       16





                                                                                      LONG-TERM
                                                   ANNUAL COMPENSATION               COMPENSATION
                                            ---------------------------------       ----------------       ALL OTHER
NAME AND                                    SALARY       BONUS        OTHER             OPTIONS           COMPENSATION
PRINCIPAL POSITION                  YEAR      ($)         ($)         ($)(1)              (#)                ($) (2)
------------------                  ----      ---         ---         ------              ---                -------
                                                                                          
IRVING LEVIT                        2000     500,000     80,000        1,600             40,000             7,875(3)
Chairman, President and             1999     475,000     80,000        1,600                  0             7,500(3)
Chief Executive Officer             1998     277,875     50,000          800                  0             7,627(3)

GLEN A. LEVIT(4)                    2000     184,615          0        1,200             27,000             4,615
Senior Vice President               1999     125,224     12,000        1,600                  0             4,117
and President of                    1998      75,962      7,500          800                  0             2,504
Insurance Company Subsidiaries

CAMERON B. WAITE                    2000     129,000     11,000        1,600              6,000             4,200
Chief Financial Officer             1999     111,199      8,000        1,600                  0             3,576
                                    1998      67,385      4,000            0                  0             2,142

JIM HEYER                           2000     114,000     11,000        1,600             12,000             3,750
Chief Operating Officer             1999      96,783      8,000        1,600                  0             3,143
                                    1998      54,846      5,000            0                  0             1,795

MICHAEL F. GRILL                    2000      87,500     20,000        1,600              5,000             3,225
Treasurer                           1999      84,550     18,000        1,600                  0             3,077
                                    1998      73,117     15,000          800                  0             2,644

A. J. CARDEN                        2000      85,173     14,000        1,600              4,000             2,975
Executive Vice President            1999     100,297     14,000        1,600                  0             3,429
                                    1998     135,935     14,000          800                  0             4,498


-----------------------
(1)  Represents Directors' fees of $400 for each regular board meeting and board
     meeting of the insurance company subsidiaries attended.
(2)  Represents company contributions to Penn Treaty's 401(k) Plan on behalf of
     each of the named individuals.
(3)  Excludes cash overriding commissions and direct commissions totaling
     approximately $559,000, $543,000 and $551,000 paid to IMC by Penn Treaty in
     1998, 1999 and 2000, respectively, in connection with policies written for
     Penn Treaty. See "Certain Relationships and Related Transactions."
(4)  Mr. Levit died on October 3, 2000.

OPTION GRANTS IN LAST FISCAL YEAR

     The following table sets forth information concerning grants of stock
options during the fiscal year ended December 31, 2000 to each of the
Company's executive officers named in the Summary Compensation Table.



                                                                                    Potential Realizable
                                                                                     Values at Assumed
                                                                                    Annual Rates of Stock
                                                                                     Price Appreciation
                                   Individual Grants                                  for Option Term(1)
                     ------------------------------------------------               --------------------
                                      % of Total
                                    Options Granted
                       Options       to Employee        Exercise or     Expiration      5%       10%
Name                 Granted (#)    in Fiscal Year     Base Price ($)      Date         ($)      ($)
----                 -----------    ---------------    --------------   ----------      ---      ---
                                                                             

Irving Levit           40,000           25.6%              $19.25        2/26/10      424,523  1,045,620

Glen A. Levit (2)      27,000           17.3%              $19.25        2/26/10            0          0

Cameron B. Waite        6,000            3.8%              $19.25        2/26/10       63,678    156,843

Jim Heyer              12,000            7.7%              $19.25        2/26/10      127,357    313,686

Michael F. Grill        5,000            3.2%              $19.25        2/26/10       53,065    130,702

A. J. Carden            4,000            2.6%              $19.25        2/26/10       42,452    104,562


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

(1)  The dollar amounts set forth under these columns are the result of
     calculations made at assumed 5% and 10% appreciation rates as required
     by the Securities and Exchange Commission regulations and are not intended
     to indicate future price appreciation, if any, of the Company's common
     stock.

(2)  Mr. Levit died on October 3, 2000 before the options granted during the
     fiscal year ended December 31, 2000 became exercisable.


AGGREGATED OPTION EXERCISES AND YEAR-END OPTION VALUES

     The following table sets forth the number of shares acquired on exercise of
stock options and the aggregate gains realized on

                                       17


exercise in 2000 by Penn Treaty's executive officers named in the Summary
Compensation Table. The table also sets forth the number of shares covered by
exercisable and unexercisable options held by such executives on December 31,
2000 and the aggregate gains that would have been realized had these options
been exercised on December 31, 2000, even though these options were not
exercised, and the unexercisable options could not have been exercised, on
December 31, 2000.



                                                           NUMBER OF SECURITIES                  VALUE OF UNEXERCISED
                        SHARES               VALUE         UNDERLYING UNEXERCISED                IN-THE-MONEY OPTIONS
                        ACQUIRED ON        REALIZED     OPTIONS AT FISCAL YEAR-END(#)            AT FISCAL YEAR-END ($)(2)
NAME                    EXERCISE(#)         ($)(1)      EXERCISABLE       UNEXERCISABLE       EXERCISABLE      UNEXERCISABLE
----                    -----------         ------      -----------       -------------       -----------      -------------
                                                                                             
Irving Levit               0                   0         208,456             32,999              662,096          53,347

Glen A. Levit(3)           0                   0          25,500                  0               46,125               0

Cameron B. Waite           0                   0           7,500              6,500                    0               0

Jim Heyer                  0                   0          36,000             13,500               38,438               0

Michael F. Grill           0                   0          48,044              6,875              123,860               0

A.J. Carden                0                   0          47,500              6,500               92,259               0


-----------------
(1)  The value realized represents the difference between the fair market value
     per share of our common stock on the date of exercise and the per share
     exercise price, multiplied by the applicable number of options.
(2)  These values represent the difference between the closing price per share
     on The New York Stock Exchange on December 31, 2000 ($17.50) and the per
     share exercise price of the option.
(3)  Mr. Levit died on October 3, 2000.

PENSION PLAN AND 401(k) PLAN

     On August 1, 1996, Penn Treaty adopted a 401(k)retirement plan, covering
substantially all employees with one year of service. Under the plan,
participating employees may contribute up to 15% of their annual salary on a
pre-tax basis, and Penn Treaty equally matches employee contributions up to the
first 3% of the employee's salary. The Penn Treaty and employee portions of the
plan vest immediately. Penn Treaty's expense in 2000 under the plan was
$147,000. Penn Treaty may elect to make a discretionary contribution to the
plan, which will be contributed proportionately to each eligible employee. Penn
Treaty did not make a discretionary contribution in 2000.

                                       18


INCENTIVE STOCK OPTION PLANS

     The shareholders of Penn Treaty adopted an Incentive Stock Option Plan (the
"Plan") in March 1987. No options have been granted under the Plan since October
1997. The Plan, as amended by shareholder action on May 25, 1990, May 28, 1993,
and May 23, 1997, provided for the granting of options to purchase up to
1,200,000 shares of our common stock. Stock options have been granted and are
outstanding to date with respect to 685,000 shares of our common stock. The
exercise prices of such options range from $8.71 to $35.475 per share. In
October 1997, options to purchase 72,250 shares of common stock were granted
under the Plan at an exercise price of $32.25 per share and options to purchase
29,000 shares of common stock were granted under the Plan at $35.475 per share.
No stock options were granted under the Plan during 1999 or 2000.

     As of April 9, 2001, stock options with respect to 44,008 shares have been
canceled and stock options with respect to 198,402 shares have been exercised.
Options granted under the Plan are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended. A committee of the Board of Directors had the authority to
administer the Plan and to grant options to key employees (including officers,
whether or not they were Directors) of Penn Treaty and its subsidiaries. The
exercise price of all options granted under the Plan could not be less than the
fair market value of the shares on the date of grant (110% of fair market value
in the case of a grant to any person who holds more than 10% of the combined
voting power of all classes of outstanding stock.) The maximum allowable term of
each option was ten years (five years in the case of holders of more than 10% of
the combined voting power of all classes of outstanding stock), and the options
become exercisable in four equal, annual installments commencing one year from
the option grant date.

     The shareholders of Penn Treaty adopted a new Employee Non-Qualified
Incentive Stock Option Plan in May 1998 (the "1998 Plan"). The 1998 Plan
authorizes Penn Treaty to grant "incentive stock options" under Section 422 of
the Internal Revenue Code, and non-qualified stock options, covering up to an
aggregate of 600,000 shares of our common stock. The purpose of the 1998 Plan is
to enable Penn Treaty to offer officers, directors and employees of Penn Treaty
and its subsidiaries options to acquire equity interests in Penn Treaty, thereby
attracting, retaining and rewarding such persons, and strengthening the
mutuality

                                       19


of interests between such persons and our shareholders. The maximum allowable
term of each option granted under the 1998 Plan is ten years (five years in the
case of holders of more than 10% of the combined voting power of all classes of
outstanding stock), and the options become exercisable in four equal, annual
installments commencing one year from the option grant date. In February
2000, 156,000 stock options were granted under the 1998 Plan at an exercise
price of $19.25 per share.

AGENT STOCK OPTION PLAN

     In October 1994, the Board of Directors of Penn Treaty authorized a stock
option plan for its agents (the "Agent Plan"). The Agent Plan, adopted by the
Board of Directors in May 1995, provides for the grant of options to purchase up
to 300,000 shares of common stock and is designed to reward Penn Treaty's agents
by providing for the grant of options to purchase common stock to agents who
attain certain sales objectives determined by the Board of Directors. The
exercise price of all options granted under the Agent Plan may not be less than
the fair market value of the shares on the date of grant. The maximum allowable
term of each option is ten years, and the options become exercisable in four
equal annual installments commencing one year from the option grant date. Under
the Agent Plan, stock options have been granted and are outstanding to date with
respect to 58,450 shares. Prices of these options range from $12.63 to $32.25
per share. In October 1997, 23,600 stock options were granted under the Agent
Plan at an exercise price of $32.25 per share. No options were granted under the
Agent Plan during 1999 and 2000.

CHANGE IN CONTROL AGREEMENTS

     Penn Treaty has entered into Change in Control Agreements with each of the
executive officers named in the Summary Compensation Table. Under these
agreements, if Penn Treaty merges into another entity or ownership of the voting
control of Penn Treaty otherwise changes and, as a result of such change in
control, any of the named executive officers are terminated or their positions
or work locations are materially changed at any time during the three year
period (five years in the case of the Company's President and Chief Executive
Officer) after the change in control, they will be entitled to receive a lump
sum payment of their base salary through the end of the three-year period (or
five-year period in the case of the Company's President and Chief Executive
Officer) and they shall be entitled to continue to receive certain other
insurance and retirement benefits for the remainder of the three-year period

                                       20


(or five-year period in the case of the Company's President and Chief Executive
Officer).

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee of the Board of Directors during
2000 were Mr. Clark, Mr. Grebe and Mr. Stangherlin, who are non-employee
directors. Mr. Stangherlin also served as the Secretary of Penn Treaty, the
Agency, PTNA, ANIC and AINIC until May 2000.

     Director Francis R. Grebe is a partner at the investment counseling firm of
James M. Davidson and Company, an affiliate of Davidson Capital Management.
Davidson Capital Management manages a portion of our investment portfolio for
which it received fees of $242,000 and $300,000 for the years ended December 31,
1999 and 2000, respectively. Mr. Grebe is not directly involved with any of Penn
Treaty's investment matters. Mr. Grebe serves as a financial advisor to Irving
Levit on some of Mr. Levit's personal matters.

     Director Alexander M. Clark is a Managing Director with Advest, Inc.
Advest, Inc. has engaged in, and may in the future engage in, investment
banking and other commercial dealings in the ordinary course of business with
Penn Treaty. Advest, Inc. has received and will receive customary fees for
these transactions.

                             AUDIT COMMITTEE REPORT

With respect to the audited financial statements of Penn Treaty and its
subsidiaries for the year ended December 31, 2000, the Audit Committee:

     o    has reviewed and discussed the audited financial statements with
          management of Penn Treaty;

     o    has discussed with Penn Treaty's independent accountants matters
          such as the quality (in addition to acceptability), clarity,
          consistency and completeness of Penn Treaty's financial reporting,
          as required by Statement on Auditing Standards No. 61, Communication
          with Audit Committee; and

     o    has received the written disclosures and the letter from the
          independent accountants concerning the independent accountants'
          independence from Penn Treaty, as required by Independence Standards
          Board Standard No. 1, Independence Discussions with Audit Committees,
          and has discussed with Penn Treaty's independent accountants the
          independent accountants' independence.

Based on the review and discussions described above, the Audit Committee has
ratified the inclusion by the Board of Directors of the audited financial
statements in Penn Treaty's Annual Report on Form 10-K for the year ended
December 31, 2000 for filing with the SEC.
                                                   Alexander M. Clark
                                                   Francis R. Grebe
                                                   Domenic P. Stangherlin

                                       21


             COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

     Penn Treaty's Executive Compensation Program is administered by the
Compensation Committee (the "Committee"), a committee of the Board of Directors
consisting of independent non-employee directors. The primary functions of the
Committee are to review and evaluate the performance and leadership of the Chief
Executive Officer and all other executive officers and to recommend compensation
amounts to the Board of Directors. In 2000, the Committee compared all executive
compensation with industry and regional executive compensation levels and
believes that Penn Treaty's compensation levels compare conservatively to other
comparable executive positions. The Board of Directors accepted and adopted all
of the Committee's recommendations concerning executive compensation amounts
during 2000.

The Committee seeks to:

     o    provide compensation that is closely linked to Company and individual
          performance;

     o    align the interests of Penn Treaty's executives with those of its
          shareholders through award opportunities that can result in ownership
          of common stock;

     o    ensure that compensation is sufficiently competitive to attract and
          retain high quality executive talent.

     Consistent with these objectives, the Committee employs a system of
quantitative measures and qualitative assessments in evaluating and measuring
executive officer performance. Quantitative measures include earnings
performance, return on assets and growth of revenues. Qualitative assessments
include the quality and measured progress of the operations of Penn Treaty and
the success of strategic actions taken.

     In addition to company-wide measures of performance, the Committee
considers performance factors particular to each executive officer, such as the
performance of the departments for which such officer had management
responsibility, individual managerial accomplishments and contribution to the
achievement of corporate goals.

CEO COMPENSATION

     In accordance with the Committee's general practice and Penn Treaty's
compensation policies, Mr. Levit's compensation for the 2000 fiscal year was
based principally upon Penn Treaty's performance and Mr. Levit's ongoing
contribution to that

                                       22


performance. The increases in Mr. Levit's salary and the amount of his bonus
were determined in the Committee's sole discretion after its consideration of
competitive data, the Board's assessment of Mr. Levit's performance and
recognition of Penn Treaty's performance during 2000.

                                                        Alexander M. Clark
                                                        Francis R. Grebe
                                                        Domenic P. Stangherlin

                             PRINCIPAL SHAREHOLDERS

     The following table sets forth, as of March 31, 2001, information with
respect to the beneficial ownership of our common stock by (i) each person known
to Penn Treaty to own 5% or more of the outstanding shares of common stock, (ii)
each of Penn Treaty's Directors, (iii) Penn Treaty's Chief Executive Officer and
other most highly compensated Executive Officers, and (iv) all Directors and
Executive Officers as a group:



                                                                 Percent of
Name and Address(1)                         Shares Owned        Ownership(2)
-------------------                         ------------        ------------
                                                          
Irving Levit(3)                               2,028,772            25.27%
Goldman Sachs Asset Management(4)               727,650             9.31%
Dimensional Fund Advisors, Inc.(5)              616,305             7.88%
Bear Stearns Asset Management(6)                596,600             7.63%
Bank Of America Corporation(7)                  433,779             5.44%
Wellington Management Co., LLP(8)               424,145             5.42%
Jack D. Baum(9)                                  45,202              *
A. J. Carden(10)                                 47,500              *
Alexander M. Clark                                2,000              *
Francis R. Grebe                                   --                *
Michael F. Grill(11)                             48,044              *
Jim Heyer(12)                                    36,100              *
Glen A. Levit(13)                                  --                --
Domenic P. Stangherlin                           27,925              *
David B. Trindle                                  3,000              *
Cameron B. Waite(14)                              8,500              *

All Directors and Executive
  Officers as a group
  (10 persons) (15)                           2,247,043            27.36%


* Less than 1%
---------------------

(1)  Unless otherwise noted, the address of each person named above is in care
     of us.

(2)  Based on 7,819,384 shares outstanding, except that shares underlying
     options exercisable within 60 days are deemed to be

                                       23


     outstanding for purposes of calculating the percentage owned by the holder
     of such options.

(3)  Includes 46,350 shares held by a private foundation of which Mr. Levit is
     an officer and director, 45,007 shares held by Mr. Levit as trustee of a
     retirement account, 147,167 shares held by Mr. Levit as co-trustee of an
     irrevocable trust for Mr. Levit's five children and exercisable options to
     purchase 208,456 shares of Common Stock. Excludes 46,000 shares held by
     Mr. Levit's wife as to which he disclaims beneficial ownership and 56,153
     shares held by other family members as to which he also disclaims
     beneficial ownership.

(4)  According to the Schedule 13G filed with the SEC by Goldman Sachs Asset
     Management for the year ended December 31, 2000, the address for Goldman
     Sachs Asset Management is 32 Old Slip, New York, NY, 10005. Goldman Sachs
     Asset Management reported sole voting power with respect to 551,700 shares
     and sole dispositive power with respect to all shares.

(5)  According to the Schedule 13G filed with the SEC by Dimensional Fund
     Advisors, Inc. for the year ended December 31, 2000, the address for
     Dimensional Fund Advisors, Inc. is 1299 Ocean Avenue, 11th Floor, Santa
     Monica, CA 90401. Dimensional Fund Advisors, Inc. reported sole voting
     power and sole dispositive power with respect to all shares.

(6)  According to the Schedule 13G filed with the SEC by Bear Stearns Asset
     Management for the year ended December 31, 2000, the address for Bear
     Stearns Asset Management is 575 Lexington Avenue, New York, NY 10022. Bear
     Stearns Asset Management reported sole voting power and sole dispositive
     power with respect to all shares.

(7)  According to the Schedule 13G filed with the SEC by Bank of America
     Corporation for the year ended December 31, 2000, the address for Bank of
     America Corporation is 100 North Tryon Street, Charlotte, NC 28255. Bank of
     America reported shared voting power and shared dispositive power with
     respect to all shares. Includes 158,579 shares issuable upon conversion of
     6.25% Convertible Subordinated Notes due 2003.

(8)  According to the Schedule 13G filed with the SEC by Wellington Management
     Company, LLP for the year ended December 31, 2000, their principal business
     address is 75 State Street, Boston, MA 02109. Wellington Management
     Company, LLP reported shared voting power with respect to 269,098 shares
     and shared dispositive power with respect to all shares.

(9)  Includes exercisable options to purchase 45,202 shares of common stock.

                                       24


(10) Consists of exercisable options to purchase shares of common stock.

(11) Consists of exercisable options to purchase shares of common stock.

(12) Includes exercisable options to purchase 36,000 shares of common stock.

(13) Mr. Levit died on October 3, 2000.

(14) Includes exercisable options to purchase 7,500 shares of common stock.

(15) Includes exercisable options held by members of the group to purchase
     392,702 shares of common stock.

PERFORMANCE GRAPH

     The following graph compares the five-year cumulative total return for Penn
Treaty's common stock with the comparable cumulative return of two indices. The
NYSE Composite provides some indication of the performance of the overall stock
market, and the S & P Insurance Composite reflects the performance of insurance
company stock generally.

                                       25


                        PENN TREATY AMERICAN CORPORATION
                              Performance Graph(1)


     [In the printed document there appears a graph with the following plot
     points depicted:]



                            1995           1996          1997           1998           1999           2000
                            ----           ----          ----           ----           ----           ----
                                                                                   
PTA STOCK                 $100.00        $157.58        $192.42        $163.27        $ 95.45        $106.06
NYSE COMPOSITE            $100.00        $121.39        $161.21        $191.45        $212.83        $246.67
S&P INSURANCE INDEX       $100.00        $123.51        $180.13        $186.12        $192.84        $273.27


(1)  Assumes a $100.00 investment on December 31, 1995 in the Company's common
     stock, and in each of the indices shown. The total return assumes
     reinvestment of all dividends.


                                       26


                                  OTHER MATTERS

     At the date of this Proxy Statement, the only business that the Board of
Directors intends to present or knows that others will present at the Annual
Meeting is that which is presented above. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournment or postponement,
it is the intention of the persons named in the accompanying proxy card to vote
proxies on such matters in accordance with their judgment.

                                      By Order of the Board of Directors,

                                      /s/ Sandra A. Kotsch
                                      ----------------------------
                                      Sandra A. Kotsch, Secretary


Allentown, Pennsylvania
April 30, 2001

                                       27



                                 REVOCABLE PROXY
         PENN TREATY AMERICAN CORPORATION ANNUAL MEETING OF SHAREHOLDERS
                                  MAY 25, 2001

           THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

Irving Levit, A. J. Carden and Michael F. Grill, each with the power of
substitution and with all the powers and discretion the undersigned would have
if personally present, are hereby appointed the Proxy Agents to represent the
undersigned at the Annual Meeting of Shareholders of Penn Treaty American
Corporation (the "Company") to be held at 9:00 A. M., prevailing local time, on
May 25, 2001 (the "Meeting"), including any adjournments thereof, and to vote
all shares of stock of the Company which the undersigned is entitled to vote on
all matters that properly come before the Meeting, subject to any directions
indicated in the boxes below. Indicate your vote by placing an (X) in the
appropriate box.

1. PROPOSAL TO AMEND ARTICLE FIFTH OF THE RESTATED ARTICLES OF INCORPORATION OF
PENN TREATY TO INCREASE THE AUTHORIZED SHARES OF PENN TREATY COMMON STOCK FROM
25,000,000 SHARES TO 40,000,000 SHARES.

          For               Against           Abstain
         [   ]               [   ]             [   ]

2. PROPOSAL TO ELECT DIRECTORS

        For All           For All Except*   Withhold For All
         [   ]                [   ]             [   ]

Name of Nominee:
         Jack D. Baum
         Alexander M. Clark
         Matthew W. Kaplan

(*) To withhold authority to vote for any individual nominee, strike a line
through the nominee's name in the list above and mark an (X) in the "For All
Except" box.

3. PROPOSAL TO APPROVE THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT PUBLIC ACCOUNTANTS



FOR THE COMPANY AND ITS SUBSIDIARIES FOR THE YEAR ENDING DECEMBER 31, 2001.

          For               Against           Abstain
         [   ]               [   ]             [   ]

4. In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournment(s) or
postponement(s) thereof.

          For               Against           Abstain
         [   ]               [   ]             [   ]

                                     (over)

SHARES REPRESENTED BY ALL PROPERLY EXECUTED PROXIES WILL BE VOTED AT THE ANNUAL
MEETING IN THE MANNER SPECIFIED. IF PROPERLY EXECUTED AND RETURNED, AND NO
SPECIFICATION IS MADE, VOTES WILL BE CAST "FOR" ALL ITEMS ON THE PROXY. Receipt
of the Notice of the Annual Meeting of Shareholders and the Proxy Statement
dated April 30, 2001 are hereby acknowledged.

                              IMPORTANT: When signing as attorney, executor,
                              administrator, trustee or guardian, please give
                              your full title as such. In the case of JOINT
                              HOLDERS, all should sign.

                              Dated: ____________________, 2001


                              ---------------------------------
                                      (Signature)

                              ---------------------------------
                                      (Signature)


PLEASE ACT PROMPTLY. SIGN, DATE & MAIL YOUR PROXY CARD TODAY.