RIGHTS TO PURCHASE
                           SHARES OF COMMON STOCK OF
                        PENN TREATY AMERICAN CORPORATION
              INITIALLY DISTRIBUTED TO HOLDERS OF COMMON STOCK AND
                 6 1/4% CONVERTIBLE SUBORDINATED NOTES DUE 2003

To Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees:

    Enclosed is a Prospectus Supplement, dated April 25, 2001, to a Prospectus
dated November 15, 2000 (the "Prospectus Supplement"), and Instructions as to
Use of Rights Certificates relating to the offering of shares of common stock,
$.10 par value per share (the "Common Stock"), of Penn Treaty American
Corporation (the "Company") at a subscription price of $2.40 per share, in cash,
pursuant to transferable subscription rights ("Rights") initially distributed to
holders of record of shares of Common Stock and holders of record of 6 1/4%
convertible subordinated notes due 2003 (the "Notes") as of the close of
business on April 20, 2001 (the "Record Date"). The Rights are described in the
Prospectus Supplement and evidenced by a Rights Certificate (a "Rights
Certificate") registered in your name or the name of your nominee.

    Each beneficial owner of Common Stock registered in your name or the name of
your nominee is entitled to 1.1 Rights for each share of Common Stock so owned
by such beneficial owner on the Record Date. Additionally, each beneficial owner
of Notes registered in your name or the name of your nominee is entitled to 1.1
Rights for each share of Common Stock such beneficial owner would own had the
Notes been converted into Common Stock on the Record Date. In lieu of fractional
Rights, the aggregate number of Rights issued in respect of each beneficial
owner will be rounded up to the next whole number.

    We are asking you to contact clients for whom you hold shares of Common
Stock and/or Notes, as the case may be, registered in your name or in the name
of your nominee to obtain instructions with respect to the Rights. You will be
reimbursed for customary mailing and handling expenses incurred by you in
forwarding any of the enclosed materials to your clients.

    Enclosed are copies of the following documents:

        1. The Prospectus Supplement;

        2. The Chairman's Letter to Shareholders and Noteholders;

        3. The Instructions as to Use of Rights Certificates;

        4. A form of letter which may be sent to clients for whose accounts you
    hold shares of Common Stock and/or Notes registered in your name or the name
    of your nominee, with space provided for obtaining such clients'
    instructions with regard to the Rights;

        5. A Notice of Guaranteed Delivery; and

        6. A return envelope addressed to First Union National Bank, the
    Subscription Agent.

    Your prompt action is requested. The Rights will expire at 5:00 p.m.,
Eastern Time, on May 25, 2001, unless extended by the Company (as it may be
extended, the "Expiration Date").

    TO EXERCISE RIGHTS, PROPERLY COMPLETED AND EXECUTED RIGHTS CERTIFICATE(S)
(UNLESS THE GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH) AND PAYMENT IN
FULL FOR ALL RIGHTS EXERCISED MUST BE DELIVERED TO THE SUBSCRIPTION AGENT AS
INDICATED IN THE PROSPECTUS SUPPLEMENT PRIOR TO THE EXPIRATION DATE.

    Additional copies of the enclosed materials may be obtained from Georgeson
Shareholder, the Information Agent, by calling (201) 896-1900.

                                                      
                                                       Very truly yours,

                                                       PENN TREATY AMERICAN CORPORATION

                                                       [LOGO]
                                                       Irving Levit
                                                       CHAIRMAN OF THE BOARD,
                                                       CHIEF EXECUTIVE OFFICER AND
                                                       PRESIDENT



    NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY, THE SUBSCRIPTION AGENT OR ANY OTHER PERSON
MAKING OR DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO
THE OFFERING, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS SUPPLEMENT
OR THE SUBSCRIPTION DOCUMENTS.