A.M. Best Comments on Penn Treaty's Under Review Status.

OLDWICK, N.J. -- A.M. Best Co. has commented that the financial strength rating (FSR) of B (Fair) and the issuer credit ratings (ICR) of "bb" on Penn Treaty American Corporation's (Penn Treaty) (NYSE:PTA) subsidiaries remain unchanged and under review with negative implications.

Penn Treaty anticipates it will release its 2005 year-end Generally Accepted Accounting Principles (GAAP) by March 15, 2007. Shortly thereafter, it should be able to begin filing its 2006 GAAP financials. Penn Treaty's insurance subsidiaries include Penn Treaty Network America Insurance Company, American Network Insurance Company and American Independent Network Insurance Company of New York (New York, NY). All companies are domiciled in Allentown, PA unless otherwise specified and have been under review since July 6, 2006.

In April 2006, Penn Treaty announced it would have to increase its 2005 year-end GAAP claim reserves by approximately $30 million as a result of an actuarial review conducted on its claim reserve assumptions on the company's "old" block of business (written prior to December 31, 2001, which is currently reinsured by Imagine International Reinsurance, Ltd.).

The current delay is related to the timing of prospective unlocking of factors used in the active life reserves when premium rate increases are needed. The Securities and Exchange Commission (SEC) is expected to rule on this issue shortly. However, A.M. Best believes the extended delay, which is well beyond A.M. Best's initial expectations, of the release of Penn Treaty's year-end 2005 and interim 2006 GAAP financial statements have been a hindrance to the company executing its business strategy and could have longer-term negative effects.

During the past year, A.M. Best reviewed the year-end 2005 and first three quarters 2006 statutory filings of the organization. The Penn Treaty insurance subsidiaries continue to maintain an adequate level of risk-based capitalization for the business they have written since the beginning of 2002. A.M. Best continues to have dialogue with Penn Treaty regarding a number of items, which could potentially improve its future financial flexibility and strengthen the organization.

Any delay in filing its 2005 statements beyond March 15, 2007 would trigger an immediate downgrading of Penn Treaty's FSR and ICRs by A.M. Best. If Penn Treaty does meet the March 15, 2007 deadline, A.M. Best will still need to review the results to ascertain that no additional negative, unexpected events have occurred prior to A.M. Best affirming Penn Treaty's current ratings.

For Best's Ratings, an overview of the rating process and rating methodologies, please visit www.ambest.com/ratings.

Founded in 1899, A.M. Best Company is a full-service credit rating organization dedicated to serving the financial services industries, including the banking and insurance sectors. For more information, visit www.ambest.com.