SECURITIES AND EXCHANGE COMMISSION
                       Washington, D. C.  20549

                              FORM 10-K

           ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                 THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1998 Commission File Number 0-18540

                         UNITED INCOME, INC.
        (Exact name of registrant as specified in its charter)

                    2500 CORPORATE EXCHANGE DRIVE
                          COLUMBUS, OH 43231
     (Address of principal executive offices, including zip code)


      OHIO                                                  37-1224044
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                     Identification No.)


Registrant's telephone number, including area code:  (614) 899-6773

Securities registered pursuant to Section 12(b) of the Act:

                                                 Name of each exchange
Title of each class                                    on which registered
      None                                                   None

Securities registered pursuant to Section 12(g) of the Act:

                         Title of each class

                             Common Stock

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 shorter 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to  Item
405  of  Regulation S-K (229.405 of this chapter) is not contained  herein,
and  will  not  be  contained,  to the best of registrant's  knowledge,  in
definitive proxy or  information statements incorporated by reference in Part
III  of  this Form 10-K or any amendment to this Form 10-K. [X].

At  March  12,  1999,  the Registrant had outstanding 1,391,919  shares  of
Common Stock, stated value $.033 per share.

DOCUMENTS INCORPORATED BY REFERENCE:  None
                                   

                             Page 1 of 95

                                      1
<PAGE>

                            UNITED INCOME, INC.
                                 FORM 10-K
                       YEAR ENDED DECEMBER 31, 1998
                                     
                                     
                             TABLE OF CONTENTS


PART I                                                              3

ITEM 1.  BUSINESS                                                   3

ITEM 2.  PROPERTIES                                                11

ITEM 3.  LEGAL PROCEEDINGS                                         11

ITEM 4.  SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS       12

PART II                                                            12

ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK AND RELATED
         SECURITY HOLDERS MATTERS                                  12

ITEM 6.  SELECTED FINANCIAL DATA                                   13

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                       14

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA               28

ITEM 9.  DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE                                  44

PART III                                                           44

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF UII                  44

ITEM 11.  EXECUTIVE COMPENSATION UII                               46

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT OF UII                                        50

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS           52

PART IV                                                            55

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
          ON FORM 8-K                                              55

                                       2

<PAGE>
                                     PART I

ITEM 1.  BUSINESS

FORWARD-LOOKING INFORMATION

Any  forward-looking statement contained herein or in  any  other  oral  or
written  statement  by  the company or any of its  officers,  directors  or
employees  is qualified by the fact that actual results of the company  may
differ  materially  from  those  projected in  forward-looking  statements.
Additional  information concerning factors that could cause actual  results
to  differ  from  those in the forward-looking statements is  contained  in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."


OVERVIEW

United  Income, Inc. (the "Registrant") was incorporated in 1987 under  the
laws  of  the State of Ohio to serve as an insurance holding company.   The
Registrant  and  its affiliates (the "Company") have only  one  significant
industry   segment  -  insurance.   The  Company's  dominant  business   is
individual  life  insurance  which  includes  the  servicing  of   existing
insurance  business  in  force, the solicitation  of  new  individual  life
insurance,  and  the  acquisition  of  other  companies  in  the  insurance
business.


At  December 31, 1998, the affiliates of the Registrant were as depicted on
the following organizational chart:

                      ORGANIZATIONAL CHART
                    AS OF DECEMBER 31, 1998

United  Trust, Inc. ("UTI") is the ultimate controlling company.  UTI  owns
53%  of  United Trust Group ("UTG") and 41% of United Income, Inc. ("UII").
UII  owns  47%  of  UTG.   UTG  owns 79% of First Commonwealth  Corporation
("FCC") and 100% of Roosevelt Equity Corporation ("REC").  FCC owns 100% of
Universal  Guaranty Life Insurance Company ("UG").  UG owns 100% of  United
Security  Assurance  Company ("USA").  USA owns  84%  of  Appalachian  Life
Insurance  Company ("APPL") and APPL owns 100% of Abraham Lincoln Insurance
Company ("ABE").



                                     3
<PAGE>

The holding companies within the group, UTI, UII, UTG and FCC, are all life
insurance  holding companies.  These companies became members of  the  same
affiliated group through a history of acquisitions in which life  insurance
companies  were  involved.   The  focus of the  holding  companies  is  the
acquisition of other companies in the insurance business and management  of
the  insurance subsidiaries.  The companies have no activities outside  the
life insurance focus.

The insurance companies of the group, UG, USA, APPL and ABE, all operate in
the  individual  life  insurance business.   The  primary  focus  of  these
companies  has been the servicing of existing insurance business  in  force
and the solicitation of new insurance business.


HISTORY

United  Income, Inc. ("UII"), was incorporated on November 2, 1987,  as  an
Ohio  corporation.  Between March 1988 and August 1990, UII raised a  total
of  approximately  $15,000,000 in an intrastate public  offering  in  Ohio.
During 1990, UII formed a life insurance subsidiary and began selling  life
insurance products.

On  February 20, 1992, UII and its affiliate, UTI, formed a joint  venture,
United Trust Group, Inc., ("UTG").  On June 16, 1992, UII contributed  $7.6
million  in  cash  and 100% of the common stock of its  wholly  owned  life
insurance  subsidiary.  UTI contributed $2.7 million in cash,  an  $840,000
promissory  note  and  100% of the common stock of its  wholly  owned  life
insurance  subsidiary.  After the contributions of cash, subsidiaries,  and
the note, UII owns 47% and UTI owns 53% of UTG.

On  June 16, 1992, UTG acquired 67% of the outstanding common stock of  the
now  dissolved Commonwealth Industries Corporation, ("CIC") for a  purchase
price  of  $15,567,000.  Following the acquisition, UTG  controlled  eleven
life  insurance  subsidiaries.  The Company  has  taken  several  steps  to
streamline and simplify the corporate structure following the acquisitions.

On March 25, 1997, the Board of Directors of UTI and UII voted to recommend
to  the  shareholders a merger of the two companies.   Under  the  Plan  of
Merger, UTI would be the surviving entity with UTI issuing one share of its
stock  for each share held by UII shareholders.  Neither UTI nor  UII  have
any  other  significant  holdings  or  business  dealings.   The  Board  of
Directors  of  each  company thus concluded a merger of the  two  companies
would be in the best interests of the shareholders.  The merger will result
in  certain  cost  savings,  primarily related  to  costs  associated  with
maintaining  a  corporation in good standing in  the  states  in  which  it
transacts  business.   Additionally, the merger will further  simplify  the
group's  holding company system making it easier to understand for  outside
parties,  including current investors, potential investors and lenders.   A
vote  of  the shareholders of UTI and UII regarding the proposed merger  is
anticipated to occur sometime during the second quarter of 1999.

On November 20, 1998, First Southern Funding, LLC., a Kentucky corporation,
("FSF")  and affiliates acquired 929,904 shares of common stock  of  United
Trust,  Inc.,  an  Illinois corporation, ("UTI") from UTI and  certain  UTI
shareholders.   As consideration for the shares, FSF paid  UTI  $10,999,995
and certain shareholders of UTI $999,990 in cash.

UTI  has  granted,  for  nominal consideration, an  irrevocable,  exclusive
option to FSF to purchase up to 1,450,000 shares of UTI common stock for  a
purchase  price  in  cash equal to $15.00 per share, with  such  option  to
expire  on  July 1, 2001.  UTI has also caused three persons designated  by
FSF  to  be  appointed,  as part of the maximum of  11,  to  the  Board  of
Directors of UTI.

Following the above transactions, and together with shares of UTI  acquired
in  the market, FSF and affiliates own 1,073,577 shares of UTI common stock
(43.1%)  becoming  the  largest shareholder of  UTI.   Through  the  shares
acquired  and options owned, FSF can ultimately own over 51% of  UTI.   Mr.
Jesse  T. Correll is the majority shareholder of FSF, which is an affiliate
of  First Southern Bancorp, Inc., a bank holding company that owns  a  bank
that operates out of 14 locations in central Kentucky.
                                    4
<PAGE>

This  transaction  provides the Company with increased opportunities.   The
additional  capitalization  has enabled UTI  to  significantly  reduce  its
outside  debt  and  has  enhanced its ability to make  future  acquisitions
through  increased borrowing power and financial strength.  Many  synergies
exist  between  the Company and First Southern Funding and its  affiliates.
The  potential  for  cross selling of services to  each  customer  base  is
currently  being  explored.  Legislation is currently  pending  that  would
eliminate  many  of  the  barriers currently  existing  between  banks  and
insurance  companies.  Such alliances are already being formed  within  the
two industries.  Management believes this transaction positions the Company
for  continued growth and competitiveness into the future as the  financial
industry changes.


PRODUCTS

The  Company's portfolio consists of two universal life insurance products.
Universal  life  insurance is a form of permanent life  insurance  that  is
characterized  by  its  flexible  premiums,  flexible  face  amounts,   and
unbundled pricing factors.  The primary universal life insurance product is
referred  to  as  the "Century 2000".  This product was introduced  to  the
marketing  force  in  1993  and  has  become  the  cornerstone  of  current
marketing.  This product has a minimum face amount of $25,000 and currently
credits 5.5% interest with a guaranteed rate of 4.5% in the first 20  years
and  3% in years 21 and greater.  The policy values are subject to a  $4.50
monthly  policy fee, an administrative load and a premium load of  6.5%  in
all  years.   The  premium and administrative loads are a  general  expense
charge,  which  is added to a policy's net premium to cover  the  insurer's
cost  of doing business.  A premium load is assessed upon the receipt of  a
premium  payment.  An administrative load is a monthly maintenance  charge.
The  administrative load and surrender charge are based on the  issue  age,
sex  and  rating class of the policy.  A surrender charge is effective  for
the  first 14 policy years.  In general, the surrender charge is very  high
in  the  early  years and then declines to zero at the  end  of  14  years.
Policy  loans  are  available  at 7% interest  in  advance.   The  policy's
accumulated fund will be credited the guaranteed interest rate in  relation
to the amount of the policy loan.

The second universal life product referred to as the "UL90A", has a minimum
face amount of $25,000.  The administrative load is based on the issue age,
sex and rating class of the policy.  Policy fees vary from $1 per month  in
the  first  year to $4 per month in the second and third years and  $3  per
month each year thereafter.  The UL90A currently credits 5% interest with a
4.5% guaranteed interest rate.  Partial withdrawals, subject to a remaining
minimum  $500 cash surrender value and a $25 fee, are allowed once  a  year
after  the  first duration.  Policy loans are available at 7%  interest  in
advance.   The  policy's accumulated fund will be credited  the  guaranteed
interest  rate  in  relation to the amount of the policy  loan.   Surrender
charges  are based on a percentage of target premium starting at  120%  for
years 1-5 then grading downward to zero in year 15.  This policy contains a
guaranteed  interest  credit  bonus for the long-term  policyholder.   From
years 10 through 20, additional interest bonuses are earned with a total in
the  twentieth year of 1.375%.  The bonus is credited from the policy issue
date and is contractually guaranteed.

The  Company's  actual  experience  for earned  interest,  persistency  and
mortality  vary from the assumptions applied to pricing and for determining
premiums.  Accordingly, differences between the Company's actual experience
and  those assumptions applied may impact the profitability of the Company.
The  minimum interest spread between earned and credited rates is 1% on the
"Century  2000"  universal life insurance product.   The  Company  monitors
investment  yields, and when necessary adjusts credited interest  rates  on
its  insurance  products to preserve targeted interest  spreads.   Credited
rates  are  reviewed  and  established by the Board  of  Directors  of  the
respective life insurance subsidiaries.

The premium rates are competitive with other insurers doing business in the
states in which the Company is marketing its products.

The  Company  markets  other  products, none of  which  is  significant  to
operations.  The Company has a variety of policies in force different  from
those  which  are  currently being marketed.  Interest  sensitive  products
including  universal  life and excess interest whole life  ("fixed  premium
UL")  account for 50% of the insurance in force.  Approximately 34% of  the
insurance  in  force  is participating business, which represents  policies
under  which  the  policyowner shares in the insurance companies  statutory
divisible surplus.  The Company's average persistency rate for its policies
in  force  for  1998 and 1997 has been 89.9% and 89.4%, respectively.   The
Company does not anticipate any material fluctuations in these rates in the
future that may result from competition.
                                     5
<PAGE>

Interest-sensitive life insurance products have characteristics similar  to
annuities with respect to the crediting of a current rate of interest at or
above  a  guaranteed  minimum  rate and the use  of  surrender  charges  to
discourage  premature withdrawal of cash values. Universal  life  insurance
policies  also  involve variable premium charges against the policyholder's
account  balance  for  the  cost of insurance and administrative  expenses.
Interest-sensitive  whole  life  products generally  have  fixed  premiums.
Interest-sensitive life insurance products are designed with a  combination
of  front-end  loads,  periodic variable charges,  and  back-end  loads  or
surrender charges.

Traditional   life   insurance   products  have   premiums   and   benefits
predetermined at issue; the premiums are set at levels that are designed to
exceed  expected policyholder benefits and Company expenses.  Participating
business is traditional life insurance with the added feature of an  annual
return  of  a  portion  of the premium paid by the policyholder  through  a
policyholder  dividend.   This dividend is set annually  by  the  Board  of
Directors of each insurance company and is completely discretionary.


MARKETING

The  Company  markets  its products through separate  and  distinct  agency
forces.  The Company has approximately 45 captive agents who actively write
new  business,  and  15  independent agents  who  primarily  service  their
existing  customers.  No individual sales agent accounted for over  10%  of
the  Company's premium volume in 1998.  The Company's sales agents  do  not
have the power to bind the Company.

Marketing  is  based  on  a  referral  network  of  community  leaders  and
shareholders of UII and UTI.  Recruiting of sales agents is also  based  on
the  same  referral network.  New sales are marketed by UG and USA  through
their  agency  forces  using prepared presentation materials  and  personal
computer  illustrations when appropriate.  Current  marketing  efforts  are
primarily focused on the Midwest region.

USA is licensed in Illinois, Indiana and Ohio.  During 1998, Ohio accounted
for 96% of USA's direct premiums collected.

ABE  is  licensed  in  Alabama, Arizona, Illinois, Indiana,  Louisiana  and
Missouri.   During 1998, Illinois and Indiana accounted for  45%  and  33%,
respectively of ABE's direct premiums collected.

APPL   is  licensed  in  Alabama,  Arizona,  Arkansas,  Colorado,  Georgia,
Illinois,   Indiana,   Kansas,  Kentucky,  Louisiana,  Missouri,   Montana,
Nebraska,  Ohio,  Oklahoma, Pennsylvania, Tennessee, Utah,  Virginia,  West
Virginia  and  Wyoming.  During 1998, West Virginia accounted  for  96%  of
APPL's direct premiums collected.

UG  is licensed in Alabama, Arizona, Arkansas, Colorado, Delaware, Florida,
Georgia,  Idaho,  Illinois,  Indiana, Iowa,  Kansas,  Kentucky,  Louisiana,
Massachusetts,   Michigan,  Minnesota,  Mississippi,   Missouri,   Montana,
Nebraska, Nevada, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma,
Oregon,   Pennsylvania,  Rhode  Island,  South  Carolina,   South   Dakota,
Tennessee,  Texas, Utah, Virginia, Washington, West Virginia and Wisconsin.
During  1998,  Illinois accounted for 32%, and Ohio accounted  for  12%  of
direct  premiums collected.  No other state accounted for more than  7%  of
direct premiums collected in 1998.

In  1998,  $35,899,905 of total direct premium was collected by  USA,  ABE,
APPL  and UG.  Ohio accounted for 32%, Illinois accounted for 21%, and West
Virginia accounted for 10% of total direct premiums collected.

New  business production has decreased 43% from 1996 to 1997 and  39%  from
1997  to  1998.   Several  factors have had a  significant  impact  on  new
business  production.   Over  the  last  two  years  there  has  been   the
possibility  of  a  change in control of UTI.  In  September  of  1996,  an
agreement  was reached effecting a change in control of UTI to an unrelated
party.   The  transaction did not materialize.  On November 20,  1998,  UTI
closed  on  a  transaction with First Southern Funding, LLC in which  First
Southern  became  the largest shareholder of UTI.  These  events,  and  the
uncertainty  surrounding  each event, have hurt  the  insurance  companies'
ability  to  attract  and  maintain sales agents.  In  addition,  increased
competition for consumer dollars from other financial institutions, product
Illustration  guideline  changes  by State  Insurance  Departments,  and  a
decrease  in  the total number of insurance sales agents in  the  industry,
have all had an impact, given the relatively small size of the Company.
                                     6
<PAGE>

The  Company  is  currently in a position where it must  increase  its  new
business  writings or look at measures to reduce costs associated with  new
business  production  to a level more in line with  the  current  level  of
production.  In late 1998, A.M. Best Company, a leading insurance  industry
rating  agency,  increased  two  levels its  rating  assigned  to  UG,  the
Company's  largest insurance subsidiary, from a C++ to a  B.   This  rating
change should aid in the agents selling ability although to what extent  is
currently unknown.


UNDERWRITING

The  underwriting procedures of the insurance subsidiaries are  established
by  management.   Insurance policies are issued by the Company  based  upon
underwriting  practices established for each market in  which  the  Company
operates.   Most policies are individually underwritten.  Applications  for
insurance are reviewed to determine additional information required to make
an  underwriting decision, which depends on the amount of insurance applied
for  and  the  applicant's age and medical history.  Additional information
may  include inspection reports, medical examinations, and statements  from
doctors  who  have treated the applicant in the past and, where  indicated,
special  medical  tests.   After reviewing the information  collected,  the
Company  either issues the policy as applied for or with an  extra  premium
charge   because  of  unfavorable  factors  or  rejects  the   application.
Substandard  risks  may  be  referred to reinsurers  for  full  or  partial
reinsurance of the substandard risk.

The Company's insurance subsidiaries require blood samples to be drawn with
individual  insurance applications for coverage over $45,000  (age  46  and
above) or $95,000 (ages 16-45).  Blood samples are tested for a wide  range
of  chemical  values  and are screened for antibodies  to  the  HIV  virus.
Applications  also  contain questions permitted by law  regarding  the  HIV
virus which must be answered by the proposed insureds.


RESERVES

The  applicable  insurance  laws  under which  the  insurance  subsidiaries
operate  require  that  each insurance company report  policy  reserves  as
liabilities  to  meet future obligations on the policies in  force.   These
reserves are the amounts which, with the additional premiums to be received
and  interest  thereon compounded annually at certain  assumed  rates,  are
calculated in accordance with applicable law to be sufficient to  meet  the
various policy and contract obligations as they mature.  These laws specify
that  the reserves shall not be less than reserves calculated using certain
mortality tables and interest rates.

The  liabilities  for  traditional life insurance and accident  and  health
insurance  policy  benefits are computed using a net level  method.   These
liabilities  include  assumptions  as  to  investment  yields,   mortality,
withdrawals,   and   other  assumptions  based  on   the   life   insurance
subsidiaries'  experience  adjusted to reflect anticipated  trends  and  to
include provisions for possible unfavorable deviations.  The Company  makes
these  assumptions at the time the contract is issued or, in  the  case  of
contracts acquired by purchase, at the purchase date.  Benefit reserves for
traditional  life  insurance policies include certain deferred  profits  on
limited-payment  policies  that are being recognized  in  income  over  the
policy  term.   Policy benefit claims are charged to expense in the  period
that the claims are incurred.  Current mortality rate assumptions are based
on  1975-80  select and ultimate tables.  Withdrawal rate  assumptions  are
based  upon  Linton  B or Linton C, which are industry  standard  actuarial
tables for forecasting assumed policy lapse rates.

Benefit  reserves for universal life insurance and interest sensitive  life
insurance  products are computed under a retrospective deposit  method  and
represent  policy  account  balances before applicable  surrender  charges.
Policy  benefits  and  claims that are charged to expense  include  benefit
claims  in  excess of related policy account balances.  Interest  crediting
rates for universal life and interest sensitive products range from 4.5% to
5.5% in 1998 and 5.0% to 6.0% in 1997 and 1996.
                                     7
<PAGE>

REINSURANCE

As  is  customary in the insurance industry, the insurance affiliates  cede
insurance  to  other  insurance  companies  under  reinsurance  agreements.
Reinsurance agreements are intended to limit a life insurer's maximum  loss
on   a   large  or  unusually  hazardous  risk  or  to  obtain  a   greater
diversification  of risk.  The ceding insurance company  remains  primarily
liable  with respect to ceded insurance should any reinsurer be  unable  to
meet  the  obligations  assumed by it.  However,  it  is  the  practice  of
insurers to reduce their exposure to loss to the extent that they have been
reinsured with other insurance companies.  The Company sets a limit on  the
amount  of  insurance retained on the life of any one person.  The  Company
will not retain more than $125,000, including accidental death benefits, on
any one life.  At December 31, 1998, the Company had insurance in force  of
$3.536 billion of which approximately $924 million was ceded to reinsurers.

The  Company's  reinsured  business is ceded to numerous  reinsurers.   The
Company  believes the assuming companies are able to honor all  contractual
commitments,  based  on the Company's periodic reviews of  their  financial
statements,  insurance  industry  reports  and  reports  filed  with  state
insurance departments.

Currently,  the Company is utilizing reinsurance agreements  with  Business
Men's  Assurance Company, ("BMA") and Life Reassurance Corporation,  ("LIFE
RE") for new business.  BMA and LIFE RE each hold an "A+" (Superior) rating
from  A.M.  Best,  an industry rating company.  The reinsurance  agreements
were effective December 1, 1993, and cover all new business of the Company.
The agreements are a yearly renewable term ("YRT") treaty where the Company
cedes  amounts above its retention limit of $100,000 with a minimum cession
of $25,000.

One of the Company's insurance subsidiaries (UG) entered into a coinsurance
agreement with First International Life Insurance Company ("FILIC")  as  of
September  30, 1996.  Under the terms of the agreement, UG ceded  to  FILIC
substantially  all  of its paid-up life insurance policies.   Paid-up  life
insurance  generally refers to non-premium paying life insurance  policies.
A.M. Best assigned FILIC a Financial Performance Rating (FPR) of 7 (Strong)
on a scale of 1 to 9.  A.M. Best assigned a Best's Rating of A++ (Superior)
to  The Guardian Life Insurance Company of America ("Guardian"), parent  of
FILIC,   based  on  the  consolidated  financial  condition  and  operating
performance of the company and its life/health subsidiaries.  During  1997,
FILIC  changed  its  name to Park Avenue Life Insurance Company  ("PALIC").
The  agreement with PALIC accounts for approximately 65% of the reinsurance
receivables of UTG as of December 31, 1998.


INVESTMENTS

At  December  31,  1998, substantially all of the assets of  UII  represent
investments  in or receivables from affiliates.  UII does own two  mortgage
loans  as  of December 31, 1998.  The mortgage loans are in good  standing.
Interest  income  was  derived  from  mortgage  loans  and  cash  and  cash
equivalents.


COMPETITION

The  insurance business is a highly competitive industry and  there  are  a
number  of other companies, both stock and mutual, doing business in  areas
where  the Company operates.  Many of these competing insurers are  larger,
have  more  diversified  lines  of insurance coverage,  have  substantially
greater  financial resources and have a greater number  of  agents.   Other
significant competitive factors include policyholder benefits,  service  to
policyholders, and premium rates.

The insurance industry is a mature industry.  In recent years, the industry
has  experienced  virtually no growth in life insurance sales,  though  the
aging  population has increased the demand for retirement savings products.
The  products offered (see Products) are similar to those offered by  other
major companies.  The product features are regulated by the states and  are
subject to extensive competition among major insurance organizations.   The
Company  believes a strong service commitment to policyholders,  efficiency
and  flexibility of operations, timely service to the agency force and  the
expertise of its key executives help minimize the competitive pressures  of
the insurance industry.
                                    8
<PAGE>

GOVERNMENT REGULATION

UII's  insurance affiliates are assessed contributions by life  and  health
guaranty  associations in almost all states to indemnify  policyholders  of
failed  companies.  In several states the company may reduce premium  taxes
paid  to recover a portion of assessments paid to the states' guaranty fund
association.  This right of "offset" may come under review by  the  various
states,  and  the  company  cannot  predict  whether  and  to  what  extent
legislative initiatives may affect this right to offset.  Also, some  state
guaranty associations have adjusted the basis by which they assess the cost
of  insolvencies  to individual companies.  The Company believes  that  its
reserve  for future guaranty fund assessments is sufficient to provide  for
assessments  related  to known insolvencies.  This reserve  is  based  upon
management's  current  expectation of the availability  of  this  right  of
offset,  known  insolvencies  and  state guaranty  fund  assessment  bases.
However, changes in the basis whereby assessments are charged to individual
companies  and  changes  in  the  availability  of  the  right  to   offset
assessments  against  premium  tax payments  could  materially  affect  the
company's results.

Currently,  the Company's insurance subsidiaries are subject to  government
regulation  in  each  of the states in which they conduct  business.   Such
regulation  is  vested in state agencies having broad administrative  power
dealing with all aspects of the insurance business, including the power to:
(i)  grant  and  revoke licenses to transact business;  (ii)  regulate  and
supervise  trade  practices and market conduct;  (iii)  establish  guaranty
associations;   (iv)  license  agents;  (v)  approve  policy  forms;   (vi)
approve  premium rates for some lines of business;  (vii) establish reserve
requirements;  (viii) prescribe the form and content of required  financial
statements and reports;  (ix) determine the reasonableness and adequacy  of
statutory  capital and surplus; and  (x) regulate the type  and  amount  of
permitted  investments.  Insurance regulation is concerned  primarily  with
the protection of policyholders.  The Company cannot predict the impact  of
any  future  proposals, regulations or market conduct investigations.   The
Company's  insurance subsidiaries, USA, UG, APPL and ABE are  domiciled  in
the states of Ohio, Ohio, West Virginia and Illinois, respectively.

The  insurance regulatory framework continues to be scrutinized by  various
states,  the  federal government and the National Association of  Insurance
Commissioners  ("NAIC").   The  NAIC is  an  association  whose  membership
consists  of the insurance commissioners or their designees of the  various
states.   The  NAIC  has  no  direct regulatory  authority  over  insurance
companies.   However, its primary purpose is to provide a  more  consistent
method  of  regulation  and  reporting  from  state  to  state.   This   is
accomplished  through  the  issuance of model  regulations,  which  can  be
adopted  by individual states unmodified, modified to meet the state's  own
needs or requirements, or dismissed entirely.

Most  states  also  have insurance holding company statutes  which  require
registration  and periodic reporting by insurance companies  controlled  by
other  corporations licensed to transact business within  their  respective
jurisdictions.  The insurance subsidiaries are subject to such  legislation
and  registered as controlled insurers in those jurisdictions in which such
registration is required.  Statutes vary from state to state but  typically
require periodic disclosure, concerning the corporation, that controls  the
registered insurers and all subsidiaries of such corporation.  In addition,
prior notice to, or approval by, the state insurance commission of material
intercorporate  transfers  of  assets, reinsurance  agreements,  management
agreements  (see  Note  6  in the Notes to the Financial  Statements),  and
payment  of dividends (see Note 2 in the Notes to the Financial Statements)
in  excess  of  specified amounts by the insurance subsidiary,  within  the
holding company system, are required.

Each year the NAIC calculates financial ratio results (commonly referred to
as  IRIS  ratios) for each company.  These ratios compare various financial
information pertaining to the statutory balance sheet and income statement.
The  results are then compared to pre-established normal ranges  determined
by  the  NAIC.  Results outside the range typically require explanation  to
the domiciliary insurance department.
                                       9
<PAGE>

At  year-end 1998, the insurance companies had one ratio outside the normal
range.  The ratio is related to the decrease in premium income.  The  ratio
fell  outside the normal range the last three years.  A primary  cause  for
the  decrease  in  premium revenues is related to the potential  change  in
control  of  UTI over the last two years to two different parties.   During
September  of 1996, it was announced that control of UTI would pass  to  an
unrelated  party,  but  the transaction did not materialize.   In  February
1998,  an  announcement was made regarding negotiations  with  a  different
unrelated  party, First Southern Funding LLC, for the change in control  of
UTI.   In  November 1998, the change in control with this second party  was
completed.   Please  refer  to the Notes to the  Financial  Statements  for
additional  information.  The possible changes and resulting  uncertainties
have  hurt  the insurance companies' ability to recruit and maintain  sales
agents.  The industry has experienced a downward trend in the total  number
of  agents  who sell insurance products, and competition for the top  sales
producers has intensified.

The  NAIC's risk-based capital requirements require insurance companies  to
calculate  and report information under a risk-based capital formula.   The
risk-based  capital formula measures the adequacy of statutory capital  and
surplus  in  relation  to  investment and insurance  risks  such  as  asset
quality,  mortality and morbidity, asset and liability matching  and  other
business factors.  The RBC formula is used by state insurance regulators as
an early warning tool to identify, for the purpose of initiating regulatory
action,  insurance companies that potentially are inadequately capitalized.
In  addition, the formula defines new minimum capital standards  that  will
supplement  the  current system of low fixed minimum  capital  and  surplus
requirements   on  a  state-by-state  basis.   Regulatory   compliance   is
determined by a ratio of the insurance company's regulatory total  adjusted
capital,  as defined by the NAIC, to its authorized control level  RBC,  as
defined by the NAIC.  Insurance companies below specific trigger points  or
ratios  are  classified  within  certain levels,  each  of  which  requires
specific corrective action.

The levels and ratios are as follows:

                                Ratio of Total Adjusted Capital to
                                 Authorized Control Level RBC
       Regulatory Event                     (Less Than or Equal to)

  Company action level                                2*
  Regulatory action level                             1.5
  Authorized control level                            1
  Mandatory control level                             0.7

  * Or, 2.5 with negative trend.

At  December 31, 1998, each of the insurance subsidiaries has a Ratio  that
is  in  excess  of  4,  which  is  400% of the  authorized  control  level;
accordingly, the insurance subsidiaries meet the RBC requirements.

The NAIC, in conjunction with state regulators, has been reviewing existing
insurance  laws and regulations.  A committee of the NAIC proposed  changes
in  the  regulations  governing insurance company investments  and  holding
company  investments in subsidiaries and affiliates which were  adopted  by
the  NAIC as model laws in 1996.  The Company does not presently anticipate
any material adverse change in its business as a result of these changes.

Legislative and regulatory initiatives regarding changes in the  regulation
of  banks and other financial services businesses and restructuring of  the
federal income tax system could, if adopted and depending on the form  they
take,  have  an  adverse impact on the Company by altering the  competitive
environment  for its products.  The outcome and timing of any such  changes
cannot  be  anticipated  at  this time, but the Company  will  continue  to
monitor  developments in order to respond to any opportunities or increased
competition that may occur.
                                     10
<PAGE>

The  Clinton  Administration has recently proposed tax changes  that  would
affect  the  insurance industry.  One proposal is to require  recapture  of
untaxed  profits on policyholder surplus accounts.  Between 1959 and  1983,
stock  life insurance companies deferred tax on a portion of their profits.
These  untaxed  profits  were  added to  a  policyholders  surplus  account
("PSA").   In  1984,  Congress  precluded  life  insurance  companies  from
continuing   to   defer   taxes  on  any  future  profits.    The   Clinton
Administration  argues  that  there  is  no  continuing  justification  for
permitting stock life insurance companies to defer tax on profits that were
earned between 1959 and 1983.  Accordingly, the stock life companies  would
be  required  to  include in their gross income over ten  years  their  PSA
balances.   The  second  proposal modifies rules  for  capitalizing  policy
acquisition  costs  on the grounds that life insurance companies  generally
only  capitalize a fraction of their actual policy acquisition costs.  This
modification would increase the current capitalization percentages.  Either
of  these  changes  would be onerous to the Company and  to  the  insurance
industry  as a whole.  The outcome and timing of these proposals cannot  be
anticipated at this time.

The  NAIC adopted the Life Illustration Model Regulation.  Many states have
adopted the regulation effective January 1, 1997.  This regulation requires
products which contain non-guaranteed elements, such as universal life  and
interest  sensitive  life, to comply with certain  actuarially  established
tests.   These  tests  are  intended  to  target  future  performance   and
profitability  of a product under various scenarios.  The  regulation  does
not prevent a company from selling a product that does not meet the various
tests.  The only implication is the way in which the product is marketed to
the  consumer.   A  product that does not pass the  tests  uses  guaranteed
assumptions  rather than current assumptions in presenting  future  product
performance  to  the  consumer.  The Company conducts an  ongoing  thorough
review  of  its sales and marketing process and continues to emphasize  its
compliance efforts.

A  task  force of the NAIC is currently undertaking a project to  codify  a
comprehensive set of statutory insurance accounting rules and  regulations.
Project  results were recently approved by the NAIC with an  implementation
date  of  January  1, 2001.  Individual states in which  the  Company  does
business  must  implement  these new rules for them  to  become  effective.
Specific recommendations have been set forth in papers issued by the  NAIC.
The  NAIC  continues  to  modify and amend these papers.   The  Company  is
monitoring the process, and is not aware of any new requirements that would
result  in a material financial impact on the Company's financial  position
or  results of operations.  The Company will continue to monitor this issue
as changes and new proposals are made.


EMPLOYEES

UII  has  no employees of its own.  There are approximately 90 persons  who
are employed by the Company's affiliates.


ITEM 2.  PROPERTIES

The  Company leases approximately 1,951 square feet of office space at 2500
Corporate  Exchange  Drive, Suite 345, Columbus,  Ohio  43231.   The  lease
expires  June  30,  1999 with annual lease rent of $23,000  unadjusted  for
additional  rent  for  the  Company's pro rata  share  of  building  taxes,
operating  expenses  and  management expenses.   Under  the  current  lease
agreement, the Company will pay a minimum of $18,000 through the  remaining
term  of  the  lease.   The lease contains no renewal  or  purchase  option
clause.   The  leased  space cannot be sublet without written  approval  of
lessor.   Rent  expense for 1998, 1997 and 1996 was approximately  $36,000,
$65,000 and $61,000, respectively.


ITEM 3.  LEGAL PROCEEDINGS

The Company and its affiliates are named as defendants in a number of legal
actions arising primarily from claims made under insurance policies.  Those
actions  have  been  considered in establishing the Company's  liabilities.
Management is of the opinion that the settlement of those actions will  not
have  a  material  adverse effect on the Company's  financial  position  or
results of operations.
                                      11
<PAGE>

ITEM 4.  SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS

None


                                  PART II


ITEM 5.  MARKET FOR COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDERS
         MATTERS


As  of  March 12, 1999, there was no established public trading market  for
the  Company's common stock.  The Company's common stock is not  listed  on
any exchange.

The  Company has no current plans to pay dividends on its common stock  and
intends  to  retain  all  earnings for investment  in  and  growth  of  the
Company's  business.   The payment of future dividends,  if  any,  will  be
determined  by  the  Board  of Directors in light of  existing  conditions,
including  the Company's earnings, financial condition, business conditions
and other factors deemed relevant by the Board of Directors.  See Note 2 in
the  accompanying  financial statements for information regarding  dividend
restrictions.

On  May  13,  1997,  UII  effected a 1 for  14.2857  reverse  stock  split.
Fractional shares received a cash payment on the basis of $.70 for each old
share.   Prior  period numbers have been restated to  give  effect  of  the
reverse stock split.

Number of Common Shareholders as of March 12, 1999 is 6,453.
                                      12
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

                                FINANCIAL HIGHLIGHTS
                      (000's omitted, except per share data)
                  1998           1997           1996         1995     1994
<TABLE>
<S>             <C>            <C>            <C>          <C>     <C>
Net operating                                                                
  revenues      $ 1,035        $ 1,186        $ 1,791      $ 2,234 $  1,667
Operating costs                                                                
  and expenses  $   667        $  909         $ 1,414      $ 1,976 $  1,627
Income taxes    $     0        $    0         $     0      $     0 $     0
Equity in loss                                                             
  of investees  $ (421)        $ (357)        $ (696)      $(2,406)$  (384)
Net loss        $  (53)        $  (79)        $ (319)      $(2,148)$  (344)
Net loss                                                                    
per common share$(0.04)        $(0.06)        $(0.23)      $ (1.54)$ (0.25)
Cash dividend                                                              
declared                 
per common
 share          $    0         $    0         $    0       $     0 $     0 
Total assets   $12,646        $12,840        $12,881       $13,386 $15,414
Long-term                                                          
  obligations  $   902        $   902         $  902       $   902 $   902
</TABLE>
                                        13

<PAGE>
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS


At  December 31, 1998 and 1997, the balance sheet reflects the  assets  and
liabilities  of UII and its 47% equity interest in UTG.  The statements  of
operations and statements of cash flows presented for 1998, 1997  and  1996
include the operating results of UII.


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Any  forward-looking statement contained herein or in  any  other  oral  or
written  statement  by  the company or any of its  officers,  directors  or
employees  is qualified by the fact that actual results of the company  may
differ  materially  from any such statement due to the following  important
factors,  among  other risks and uncertainties inherent  in  the  company's
business:

1.   Prevailing interest rate levels, which may affect the ability of the
     company to sell its products, the market value of the company's
     investments and the lapse ratio of the company's policies,
     notwithstanding product design features intended to enhance
     persistency of the company's products.

2.   Changes in the federal income tax laws and regulations which may
     affect the relative tax advantages of the company's products.

3.   Changes in the regulation of financial services, including bank sales
     and underwriting of insurance products, which may affect the
     competitive environment for the company's products.

4.   Other factors affecting the performance of the company, including, but
     not limited to, market conduct claims, insurance industry
     insolvencies, stock market performance, and investment performance.


RESULTS OF OPERATIONS

1998 COMPARED TO 1997

(A)  REVENUES

UII's  primary source of revenues is derived from service fee income, which
is provided via a service agreement with USA.  The agreement was originally
established upon the formation of USA, which was a 100% owned subsidiary of
UII.   Changes  in the affiliate structure have resulted in USA  no  longer
being  a  direct  subsidiary of UII, though still  a  member  of  the  same
affiliated  group.   The original service agreement has remained  in  place
without  modification.   The  fees are based on  a  percentage  of  premium
revenue of USA.  The percentages are applied to both first year and renewal
premiums  at  different rates.  Under the current structure, FCC  pays  all
general  operating  expenses of the affiliated group.   FCC  then  receives
management and service fees from the various affiliates, including UTI  and
UII.   Pursuant  to the terms of the agreement, USA pays UII  monthly  fees
equal to 22% of the amount of collected first year statutory premiums,  20%
in  second  year and 6% of the renewal premiums in years three  and  after.
The  Company recognized service agreement income of $835,345, $989,295  and
$1,567,891  in  1998,  1997  and  1996, respectively,  based  on  statutory
collected  premiums  in USA of $8,443,463, $10,300,332 and  $13,298,597  in
1998,  1997  and  1996, respectively.  First year premium revenues  of  USA
decreased 39% in 1998 from 1997.  This decline is primarily related to  the
potential change in control of UTI over the last two years to two different
parties.  The possible changes and resulting uncertainties have hurt  USA's
ability to recruit and maintain sales agents.  In November 1998, the change
in control transaction was completed with First Southern Funding LLC.

The  Company  holds  $1,364,100 of notes receivable from  affiliates.   The
notes  receivable  from affiliates consists of four  separate  notes.   The
$700,000 note bears interest at the rate of 1% above the variable per annum
rate of interest most recently published by the Wall Street Journal as  the
prime  rate.  Interest is payable quarterly with principal due at  maturity
on May 8, 2006.  In February 1996, FCC borrowed an additional $150,000 from
                                   14
<PAGE>

UII  to provide additional cash for liquidity.  The note bears interest  at
the  rate  of  1% over prime as published in the Wall Street Journal,  with
interest payments due quarterly and principal due upon maturity of the note
on  June  1,  1999.  The remaining $14,100 are 20 year notes  of  UTG  with
interest at 8.5% payable semi-annually.  In December 1998, FCC borrowed  an
additional  $500,000  from UII to further reduce outside  debt.   The  note
bears  interest at the rate of 7.5%, with interest payments  due  quarterly
and  principal due upon maturity of the note on March 31, 2004.  At current
interest levels, the notes will generate approximately $122,000 in interest
earnings annually.


(B)  EXPENSES

The  Company  has a sub-contract service agreement with United Trust,  Inc.
("UTI")  for  certain administrative services. Through its  facilities  and
personnel,  UTI  performs  such services as may  be  mutually  agreed  upon
between the parties.  The fees are based on 60% of the fees paid to UII  by
USA.   The  Company  has  incurred $501,207, $743,577  and  $1,240,735   in
service fee expense in 1998, 1997, and 1996, respectively.

Interest expense of $85,155, $85,155 and $84,027 was incurred in 1998, 1997
and  1996, respectively.  The interest expense is directly attributable  to
the  convertible debentures.  The Debentures bear interest  at  a  variable
rate  equal to one percentage point above the prime rate published  in  the
Wall Street Journal from time to time.


(C)  EQUITY IN LOSS OF INVESTEES

Equity in earnings of investees represents UII's 47% share of the net  loss
of  UTG.   Included with this filing as Exhibit 99(d) are audited financial
statements  of UTG.  Following is a discussion of the results of operations
of UTG:


    Revenues of UTG
    
    Premiums  and  policy  fee  revenues, net of reinsurance  premiums  and
    policy  fees,  decreased 8% when comparing 1998 to 1997.   The  Company
    currently   writes  little  new  traditional  business,   consequently,
    traditional  premiums  will  decrease  as  the  amount  of  traditional
    business in-force decreases.  Collected premiums on universal life  and
    interest  sensitive  products is not reflected in premiums  and  policy
    revenues  because  Generally  Accepted Accounting  Principles  ("GAAP")
    requires that premiums collected on these types of products be  treated
    as  deposit  liabilities  rather  than  revenue.   Unless  the  Company
    acquires a block of in-force business or marketing changes its focus to
    traditional  business, premium revenue will continue to  decline  at  a
    rate consistent with prior experience.

    Another  cause for the decrease in premium revenues is related  to  the
    uncertainties regarding the pending change in control of UTI  over  the
    last two years to two different parties.  During September of 1996,  it
    was announced that control of UTI would pass to an unrelated party, but
    the  change  in  control did not materialize.   In  February  1998,  an
    announcement was made regarding negotiations with a different unrelated
    party,  First Southern Funding LLC, for the change in control  of  UTI.
    In  November  1998, the change in control with this  second  party  was
    completed.   Please refer to the Notes to the Financial Statements  for
    additional   information.    The   possible   changes   and   resulting
    uncertainties have hurt the insurance companies' ability to recruit and
    maintain sales agents.  Although the transaction has resulted  in  some
    short  term  negative  impacts,  management  believes  the  long   term
    potential  to be gained from the increased capitalization and  alliance
    with  a  banking  group will result in a stronger and more  competitive
    position in the future.

    New  business  production decreased significantly  over  the  last  two
    years.    New   business  production  decreased  39%  or  approximately
    $2,063,000 when comparing 1998 to 1997.  In recent years, the insurance
    industry  as a whole has experienced a decline in the total  number  of
    agents   who   sell  insurance  products,  therefore  competition   has
    intensified for top producing sales agents.  The relatively small  size
    of   our  companies,  and  the  resulting  limitations,  have  made  it
    challenging  to  compete in this area.  The Company is currently  in  a
    position  where it must increase its new business writings or  look  at
    measures to reduce costs associated with new business production  to  a
    level more in line with the current level of production.  In late 1998,
                                      15
<PAGE>
    A.M.   Best  Company,  a  leading  insurance  industry  rating  agency,
    increased  two levels its rating assigned to UG, the Company's  largest
    insurance subsidiary, from a C++ to a B.  This rating change should aid
    in  the  agents  selling ability although to what extent  is  currently
    unknown.

    A  positive impact on premium income is the improvement of persistency.
    Persistency is a measure of insurance in force retained in relation  to
    the  previous  year.  The Companies' average persistency rate  for  all
    policies  in force for 1998 and 1997 has been approximately  89.9%  and
    89.4%, respectively.

    At  the  March 1998 Board of Directors meeting, the UG and  USA  Boards
    approved  a permanent premium reduction on certain of its participating
    products in force commonly referred to as the initial contract and  the
    presidents plan.  The premium reduction was generally 20% with 35% used
    on  initial contract plans of UG with original issue ages less than  56
    years  old.   The dividends were also reduced, the net  effect  to  the
    policyholder  was  a slightly lower net premium.  This  change  becomes
    effective with the 1999 policy anniversary and is expected to result in
    a  $2,000,000  decline  in  premiums  and  a  comparable  reduction  in
    dividends  to policyholders in 1999 as compared to 1998.   This  action
    was taken by the Boards to ensure these policyholders will be protected
    in  future periods from potential dividend reductions at least  to  the
    extent  of  the  permanent premium reduction amount.  By  reducing  the
    required  premium  payment,  it  makes replacement  activity  by  other
    insurance  companies  more difficult as ongoing  premium  payments  are
    compared from the current policy to a potential replacement policy.

    Net  investment income increased 1% when comparing 1998 to  1997.   The
    increase  in  investment  income is the  result  of  a  combination  of
    factors.   The  Company changed banks during 1997,  which  provided  an
    improvement in yield on cash balances.  In late 1998, the Company again
    transferred  most of its cash balances to another bank, First  Southern
    National  Bank,  an  affiliate of First Southern  Funding,  LLC.   This
    transfer  resulted in an increase in earning rates on cash balances  of
    approximately  one quarter of one percent (.25%) over those  previously
    received.   During 1998, the Company directed a greater  percentage  of
    its  investing activity to mortgage loans.  These new loans provide  an
    investment yield approximately 3% higher or $110,000 more than  can  be
    obtained  from  quality fixed maturities currently  available.   During
    September  and October of 1998, the national prime rate declined  three
    quarters  of  one  percent  (.75%).  This  decline  reduced  yields  on
    investments available in the marketplace in which the Company  invests,
    primarily fixed maturities.  The decline had a more immediate impact on
    the earnings rates of the Company's cash and cash equivalents balances.

    The overall investment yields for 1998, 1997 and 1996, are 6.69%, 6.71%
    and  6.87%,  respectively.  Cash generated from the sales of  universal
    life  insurance  products, has been invested  primarily  in  our  fixed
    maturity portfolio.

    The  Company's  investments  are generally  managed  to  match  related
    insurance  and policyholder liabilities.  The comparison of  investment
    return with insurance or investment product crediting rates establishes
    an  interest  spread.  The minimum interest spread between  earned  and
    credited  rates  is 1% on the "Century 2000" universal  life  insurance
    product,  which currently is the Company's primary sales product.   The
    Company monitors investment yields, and when necessary adjusts credited
    interest  rates on its insurance products to preserve targeted interest
    spreads.   It  is expected that monitoring of the interest  spreads  by
    management will provide the necessary margin to adequately provide  for
    associated costs on the insurance policies the Company currently has in
    force  and  will write in the future.  At the September 1998  Board  of
    Directors  meeting, the Board lowered crediting rates one half  percent
    on  all  products  crediting  5.5% or more.   This  adjustment  was  in
    response  to continued declines in interest rates in the market  place.
    The  change  affected approximately $60,000,000 of policy reserves  and
    will  result  in  interest crediting reductions of $300,000  per  year.
    Policy  interest  crediting  rate  changes  become  effective   on   an
    individual policy basis on the next policy anniversary.  Therefore,  it
    will  take a full year from the time the change is determined  for  the
    full impact of such change to be realized.

    Realized  investment losses were $1,119,000 and $279,000  in  1998  and
    1997, respectively.  Approximately $440,000 of realized losses in  1998
    is  due  to  the  sale  of real estate.  During 1998  the  Company  re-
    evaluated   its  real  estate  holdings,  especially  those  properties
    acquired  through  acquisitions of other companies  and  mortgage  loan
    foreclosures, and determined it would be in the long term  interest  of
                                      16
<PAGE>
    the  Company to dispose of certain of these parcels.  Parcels  targeted
    for  sale were generally non-income or low income producing and located
    in  parts  of the country where management has little other  reason  to
    travel  to.   The disposal of these properties will free up  management
    time  to  focus  on  the properties that have a more  viable  long-term
    benefit  to the Company.  The Company reduced its non-income  producing
    investments $1,610,000 during 1998, as a result of these actions.   The
    Company  incurred  losses  of  $339,000 on  the  foreclosure  of  three
    mortgage  loans  during  the second quarter of  1998.   The  foreclosed
    properties  were  sold before the end of 1998. As  a  result  of  these
    foreclosures,   management  reassessed  its  remaining  mortgage   loan
    portfolio  and  determined an allowance of $70,000 was  appropriate  to
    cover potential future losses in the portfolio.  The Company realized a
    loss  of  $88,000 on the investment in John Alden Financial Corporation
    common  stock.   Under  the  terms of an acquisition  agreement  beween
    Fortis, Inc. and John Alden all outstanding common shares of John Alden
    were  acquired.   The  Company had other gains and  losses  during  the
    period that comprised the remaining amount reported but were immaterial
    on an individual basis.

    
    Expenses of UTG
    
    Life benefits, net of reinsurance benefits and claims, decreased 5%  in
    1998  as  compared  to  1997.  The most significant  influence  on  the
    decrease  in  life benefits was from a decline of $1,036,000  in  death
    benefit  claims.  There was no specific incident or event  in  1998  or
    1997  that  caused  this  to occur.  At the  September  1998  Board  of
    Directors  meeting, the Board lowered crediting rates one half  percent
    on  all  products  crediting  5.5% or more.   This  adjustment  was  in
    response  to continued declines in interest rates in the market  place.
    The  change  affected approximately $60,000,000 of policy reserves  and
    will  result  in  interest crediting reductions of $300,000  per  year.
    This  change had little effect on the 1998 results, but will  influence
    future   periods.   Policy  interest  crediting  rate  changes   become
    effective on an individual policy basis on the next policy anniversary.
    Therefore,  it  will  take a full year from  the  time  the  change  is
    determined for the full impact of such change to be realized.

    Commissions  and  amortization  of deferred  policy  acquisition  costs
    increased 78% in 1998 compared to 1997.  At year-end 1998, the  Company
    recorded  an impairment write off of deferred policy acquisition  costs
    of $2,983,000.  The impairment was the result of the actuarial analysis
    of  the  recoverability of the asset based on current trends and  known
    events  compared  to  assumptions used  in  the  establishment  of  the
    original  asset.   The  recent  decline  in  interest  rates   in   the
    marketplace  combined  with  lower than expected  new  policy  writings
    leaving the Company with greater per policy costs as a result of  fixed
    costs   being   spread  over  fewer  policies  caused  the  impairment.
    Exclusive of the impairment write down, commissions and amortization of
    deferred policy acquisition costs were comparable to 1997 results.  The
    write  down  will result in lower amortizations in future  periods,  as
    there is now a smaller asset to amortize.

    Amortization  of  cost  of  insurance acquired  decreased  8%  in  1998
    compared  to 1997.  Cost of insurance acquired is established  when  an
    insurance  company is acquired.  The Company assigns a portion  of  its
    cost to the right to receive future cash flows from insurance contracts
    existing  at  the  date  of  the acquisition.   The  cost  of  policies
    purchased  represents the actuarially determined present value  of  the
    projected  future  cash  flows from the  acquired  policies.   Cost  of
    insurance  acquired is comprised of individual life insurance  products
    including whole life, interest sensitive whole life and universal  life
    insurance  products.   Cost  of insurance acquired  is  amortized  with
    interest  in  relation  to  expected future profits,  including  direct
    charge-offs for any excess of the unamortized asset over the  projected
    future  profits.   The  interest  rates utilized  in  the  amortization
    calculation are 9% on approximately 25% of the balance and 15%  on  the
    remaining  balance.   The  interest rates vary  due  to  risk  analysis
    performed  at  the time of acquisition on the business  acquired.   The
    amortization is adjusted retrospectively when estimates of  current  or
    future  gross  profits  to be realized from a  group  of  products  are
    revised.   The Company did not have any charge-offs during the  periods
    covered by this report.  Amortization of cost of insurance acquired  is
    particularly sensitive to changes in persistency of certain  blocks  of
    insurance in-force.  The improvement of persistency during the year had
    a  positive  impact  on  amortization of cost  of  insurance  acquired.
    Persistency is a measure of insurance in force retained in relation  to
    the  previous  year.  The Company's average persistency  rate  for  all
    policies  in force for 1998 and 1997 has been approximately  89.9%  and
    89.4%,  respectively.  Persistency has shown a steady improvement  over
    the past several years.
                                       17
<PAGE>
    Operating expenses increased 17% in 1998 compared to 1997.  Included in
    operating  expenses in 1998 is $2,367,474 from the release of discounts
    associated   with   the   Company's  notes  payable.    The   Company's
    subordinated  debt  was  issued at rates considered  favorable  to  the
    Company  at  time  of  issue, therefore the notes  were  discounted  to
    reflect an effective interest rate of 15%.  With the payment of part of
    this  debt in November 1998, the unamortized discount was written  off.
    Management's plan to repay the remaining debt in a much shorter  period
    of  time from required repayment resulted in the determination to write
    off  the  entire  remaining note discount.  See  information  contained
    below  in interest expense analysis for further details regarding  debt
    retirement.  Excluding the note discount write off, operating  expenses
    decreased  9%  attributable primarily to reduced  salary  and  employee
    benefit costs in 1998, as a result of natural attrition.

    Interest  expense  decreased 2% in 1998 compared to 1997.  In  November
    1998,  the  Company's  ultimate  parent,  UTI,  received  approximately
    $11,000,000 from the issuance of common stock to First Southern Funding
    and its affiliates.  These funds were used to retire outside debt.   On
    November  23, 1998, the Company paid a $6,300,000 principle payment  on
    its senior debt, and paid a $2,608,099 principal payment on its 10 year
    subordinated  debt  through  intercompany  borrowings  from  UTI.    On
    December  16,  1998  the Company paid an additional $500,000  principal
    payment  on  its  10  year  subordinated debt through  an  intercompany
    borrowing from UII.  In total these transactions retired $9,408,099  of
    outside debt and replaced it with intercompany debt, which provides the
    Company  with increased flexibility when it comes to repayment options.
    With the new capital and expectations of future growth, management  has
    formulated a plan to repay the remaining outside debt within  the  next
    two years.  At December 31, 1998, FCC had $17,369,993 in notes payable,
    of  which  $5,561,894  is debt owed to outside  parties.   The  Company
    believes  this  can  be  accomplished in the  next  two  years  through
    dividends  from the subsidiaries, namely dividends to FCC from  UG  and
    from expected operating cashflows.
    
    The  provision for income taxes reflected a significant change from the
    same  period  one  year  ago.  This is the result  of  changes  in  the
    deferred  tax  liability.  Deferred taxes are established to  recognize
    future  tax  effects attributable to temporary differences between  the
    financial  statements  and the tax return.  As  these  differences  are
    realized in the financial statement or tax return, the deferred  income
    tax  established  on  the  difference is recognized  in  the  financial
    statements  as  an  income  tax expense or credit.   During  1997,  the
    insurance  subsidiaries  incurred a loss on their  federal  income  tax
    return  that was carried forward to future periods.  A tax benefit  was
    not  incurred in the financial statements as a corresponding  allowance
    was  established against the deferred tax asset attributable to the tax
    loss   carryforward.   In  1998,  the  insurance  company  subsidiaries
    incurred  taxable  income for federal income  tax  purposes  which  was
    offset  through  utilization of federal tax loss carryforwards.   Since
    these  carryforwards  had  an allowance established  against  them  for
    deferred  tax  purposes, no corresponding expense was incurred  in  the
    financial statements.  Additionally, the Company incurred deferred  tax
    credits  of  $1,872,666  from  the deferred  policy  acquisition  costs
    impairment and the notes payable discounts write offs.

    
    Net loss of UTG
    
    UTG  had  a  net loss of $1,273,000 in 1998 compared to a net  loss  of
    $923,000  in 1997.  During 1998, the deferred policy acquisition  costs
    impairment resulted in a net loss of $1,551,000 and the notes  discount
    write  offs resulted in a net loss of $1,231,000.  Exclusive  of  these
    two  events,  the Company would have reported net income of $1,509,000.
    Lower  death  benefit claims and reduced operating expenses  from  1997
    results provided improvements to the 1998 results.

(D)  NET LOSS

The Company recorded a net loss of $53,000 for 1998 compared to $79,000 for
the  same  period one year ago.  The net loss is from the equity  share  of
UTG's operating results.
                                    18
<PAGE>
1997 COMPARED TO 1996

(A)  REVENUES

UII's  primary source of revenues is derived from service fee income, which
is provided via a service agreement with USA.  The agreement was originally
established upon the formation of USA, which was a 100% owned subsidiary of
UII.   Changes  in the affiliate structure have resulted in USA  no  longer
being  a  direct  subsidiary of UII, though still  a  member  of  the  same
affiliated  group.   The original service agreement has remained  in  place
without  modification.   The  fees are based on  a  percentage  of  premium
revenue of USA.  The percentages are applied to both first year and renewal
premiums  at  different rates.  Under the current structure, FCC  pays  all
general  operating  expenses of the affiliated group.   FCC  then  receives
management and service fees from the various affiliates, including UTI  and
UII.  Pursuant  to  the terms of the agreement, USA pays UII  monthly  fees
equal to 22% of the amount of collected first year statutory premiums,  20%
in  second  year and 6% of the renewal premiums in years three  and  after.
The Company recognized service agreement income of $989,295, $1,567,891 and
$2,015,325  in  1997,  1996  and  1995, respectively,  based  on  statutory
collected  premiums in USA of $10,300,332, $13,298,597, and $14,128,199  in
1997,1996  and  1995,  respectively.  First year premium  revenues  of  USA
decreased 54% in 1997 from 1996.  This decline is primarily related to  the
potential change in control of UTI over the last two years to two different
parties.  The possible changes and resulting uncertainties have hurt  USA's
ability  to  recruit and maintain sales agents.  Management  expects  first
year production to decline slightly in 1998, and then growth is anticipated
in  subsequent periods following the resolution of the change in control of
UTI.

The  Company holds $864,100 of notes receivable from affiliates.  The notes
receivable from affiliates consists of three separate notes.  The  $700,000
note bears interest at the rate of 1% above the variable per annum rate  of
interest  most recently published by the Wall Street Journal as  the  prime
rate.  Interest is payable quarterly with principal due at maturity on  May
8, 2006.  In February 1996, FCC borrowed an additional $150,000 from UII to
provide additional cash for liquidity.  The note bears interest at the rate
of  1%  over  prime as published in the Wall Street Journal, with  interest
payments due quarterly and principal due upon maturity of the note on  June
1,  1999.  The remaining $14,100 are 20 year notes of UTG with interest  at
8.5%  payable  semi-annually.  At current interest levels, the  notes  will
generate approximately $80,000 annually.


(B)  EXPENSES

The  Company  has a sub-contract service agreement with United Trust,  Inc.
("UTI")  for  certain administrative services. Through its  facilities  and
personnel,  UTI  performs  such services as may  be  mutually  agreed  upon
between the parties.  The fees are based on 60% of the fees paid to UII  by
USA.   The  Company  has incurred $744,000, $1,241,000  and  $1,809,000  in
service fee expense in 1997, 1996, and 1995, respectively.

Interest expense of $85,000, $84,000 and $89,000 was incurred in 1997, 1996
and  1995, respectively.  The interest expense is directly attributable  to
the  convertible debentures.  The Debentures bear interest  at  a  variable
rate  equal to one percentage point above the prime rate published  in  the
Wall Street Journal from time to time.


(C)  EQUITY IN LOSS OF INVESTEES

Equity in earnings of investees represents UII's 47% share of the net  loss
of  UTG.   Included with this filing as Exhibit 99(d) are audited financial
statements  of UTG.  Following is a discussion of the results of operations
of UTG:


    Revenues of UTG
    
    Premiums  and  policy  fee  revenues, net of reinsurance  premiums  and
    policy  fees, decreased 7% when comparing 1997 to 1996.   UTG  and  its
    subsidiaries   currently  writes  little  new   traditional   business;
    consequently,  traditional  premiums will decrease  as  the  amount  of
    traditional   business  in-force  decreases.   Collected  premiums   on
    universal  life  and interest sensitive products is  not  reflected  in
    premiums  and  policy  revenues because Generally  Accepted  Accounting
    Principles ("GAAP") requires that premiums collected on these types  of
                                       19
<PAGE>
    products be treated as deposit liabilities rather than revenue.  Unless
    UTG  and  its  subsidiaries' acquires a block of in-force  business  or
    marketing  changes its focus to traditional business,  premium  revenue
    will continue to decline.
    
    Another  cause for the decrease in premium revenues is related  to  the
    potential  change  in control of UTI over the last  two  years  to  two
    different  parties.   During September of 1996, it was  announced  that
    control  of  UTI would pass to an unrelated party, but  the  change  in
    control  did  not  materialize.  In February 1998, an announcement  was
    made  regarding  negotiations with a different unrelated  party,  First
    Southern  Funding LLC, for the change in control of UTI.   In  November
    1998,  the  change  in  control  of UTI  with  this  second  party  was
    completed.   Please  refer to the Notes to the  Consolidated  Financial
    Statements of UTG for additional information.  The possible changes and
    resulting  uncertainties have hurt the insurance companies' ability  to
    recruit and maintain sales agents.
    
    New  business  production decreased significantly  over  the  last  two
    years.   New  business  production decreased  43%  or  $3,935,000  when
    comparing 1997 to 1996.  In recent years, the insurance industry  as  a
    whole has experienced a decline in the total number of agents who  sell
    insurance  products,  therefore competition  has  intensified  for  top
    producing  sales agents.  The relatively small size of  our  companies,
    and  the resulting limitations, have made it challenging to compete  in
    this area.
    
    A  positive impact on premium income is the improvement of persistency.
    Persistency is a measure of insurance in force retained in relation  to
    the  previous year.  The average persistency rate for all  policies  in
    force  for  1997  and  1996  has been approximately  89.4%  and  87.9%,
    respectively.
    
    Net  investment income decreased 6% when comparing 1997 to  1996.   The
    decrease  relates to the decrease in invested assets from a coinsurance
    agreement.   UTG's insurance subsidiary UG entered into  a  coinsurance
    agreement with First International Life Insurance Company ("FILIC"), an
    unrelated party, as of September 30, 1996.  During 1997, FILIC  changed
    its  name  to Park Avenue Life Insurance Company ("PALIC").  Under  the
    terms of the agreement, UG ceded to FILIC substantially all of its paid-
    up life insurance policies.  Paid-up life insurance generally refers to
    non-premium  paying  life  insurance  policies.   At  closing  of   the
    transaction, UG received a coinsurance credit of $28,318,000 for policy
    liabilities  covered under the agreement.  UG transferred assets  equal
    to  the  credit  received.  This  transfer  included  policy  loans  of
    $2,855,000 associated with policies under the agreement and a net  cash
    transfer of $19,088,000, after deducting the ceding commission  due  UG
    of  $6,375,000.   To provide the cash required to be transferred  under
    the agreement, UG sold $18,737,000 of fixed maturity investments.
    
    The overall investment yields for 1997, 1996 and 1995, are 6.71%, 6.87%
    and  6.07%, respectively.  Since 1995 investment yield improved due  to
    the  fixed  maturity investments.  Cash generated  from  the  sales  of
    universal life insurance products, has been invested primarily  in  our
    fixed maturity portfolio.
    
    The  investments are generally managed to match related  insurance  and
    policyholder  liabilities.  The comparison of  investment  return  with
    insurance or investment product crediting rates establishes an interest
    spread.  The minimum interest spread between earned and credited  rates
    is  1%  on  the "Century 2000" universal life insurance product,  which
    currently  is  the  primary sales product.  UTG and  its  subsidiaries'
    monitor investment yields, and when necessary adjusts credited interest
    rates  on its insurance products to preserve targeted interest spreads.
    It  is  expected that monitoring of the interest spreads by  management
    will  provide the necessary margin to adequately provide for associated
    costs on the insurance policies the Company currently has in force  and
    will write in the future.
    
    Realized investment losses were $279,000 and $466,000 in 1997 and 1996,
    respectively.  UTG and its subsidiaries sold two foreclosed real estate
    properties  that resulted in approximately $357,000 in realized  losses
    in  1996.   There  were other gains and losses during the  period  that
    comprised  the remaining amount reported but were immaterial in  nature
    on an individual basis.
                                       20
    <PAGE>
    Expenses of UTG
    
    Life benefits, net of reinsurance benefits and claims, decreased 11% in
    1997 as compared to 1996.  The decrease in premium revenues resulted in
    lower  benefit  reserve  increases in 1997.  In addition,  policyholder
    benefits  decreased  due  to  a decrease in  death  benefit  claims  of
    $162,000.
    
    In  1994, UG became aware that certain new insurance business was being
    solicited by certain agents and issued to individuals considered to  be
    not  insurable  by  UTG  and its subsidiaries' standards.   These  non-
    standard policies had a face amount of $22,700,000 and represented  1/2
    of 1% of the insurance in-force in 1994.  Management's initial analysis
    indicated  that  expected  death claims on the  business  in-force  was
    adequate  in  relation  to  mortality  assumptions  inherent   in   the
    calculation of statutory reserves.  Nevertheless, management determined
    it  was in the best interest of UTG and its subsidiaries' to repurchase
    as many of the non-standard policies as possible.  Through December 31,
    1996, the UTG and its subsidiaries' spent approximately $7,099,000  for
    the  settlement of non-standard policies and for the legal  defense  of
    related litigation.  In relation to settlement of non-standard policies
    UTG  and  its  subsidiaries' incurred life benefit costs of $3,307,000,
    and $720,000 in 1996 and 1995, respectively.  UTG and its subsidiaries'
    incurred  legal  costs  of  $906,000 and $687,000  in  1996  and  1995,
    respectively.   All  policies associated  with  this  issue  have  been
    settled  as  of  December 31, 1996.  Therefore, expense reductions  for
    1997 would follow.
    
    Commissions  and  amortization  of deferred  policy  acquisition  costs
    decreased  14% in 1997 compared to 1996. The decrease is due  primarily
    to  a reduction in commissions paid.  Commissions decreased 19% in 1997
    compared  to 1996.  The decrease in commissions was due to the  decline
    in  new  business  production.  There is a direct relationship  premium
    revenues   and  commission  expense.   First  year  premium  production
    decreased  43% and first year commissions decreased 33% when  comparing
    1997  to  1996.   Amortization  of deferred  policy  acquisition  costs
    decreased  6%  in  1997  compared  to 1996.   Management  would  expect
    commissions  and amortization of deferred policy acquisition  costs  to
    decrease in the future if premium revenues continue to decline.
    
    Amortization  of  cost  of insurance acquired  decreased  56%  in  1997
    compared  to  1996. Cost of insurance acquired is established  when  an
    insurance  company is acquired.  The Company assigns a portion  of  its
    cost to the right to receive future cash flows from insurance contracts
    existing  at  the  date  of  the acquisition.   The  cost  of  policies
    purchased  represents the actuarially determined present value  of  the
    projected  future  cash  flows from the  acquired  policies.   Cost  of
    insurance  acquired is comprised of individual life insurance  products
    including whole life, interest sensitive whole life and universal  life
    insurance  products.   Cost  of insurance acquired  is  amortized  with
    interest  in  relation  to  expected future profits,  including  direct
    charge-offs for any excess of the unamortized asset over the  projected
    future  profits.   The  interest  rates utilized  in  the  amortization
    calculation are 9% on approximately 24% of the balance and 15%  on  the
    remaining  balance.   The  interest rates vary  due  to  risk  analysis
    performed  at  the time of acquisition on the business  acquired.   The
    amortization is adjusted retrospectively when estimates of  current  or
    future  gross  profits  to be realized from a  group  of  products  are
    revised.  UTG and its subsidiaries' did not have any charge-offs during
    the  periods  covered  by  this report.  The decrease  in  amortization
    during  the current period is a fluctuation due to the expected  future
    profits.   Amortization of cost of insurance acquired  is  particularly
    sensitive to changes in persistency of certain blocks of insurance  in-
    force.   The improvement of persistency during the year had a  positive
    impact on amortization of cost of insurance acquired.  Persistency is a
    measure  of  insurance in force retained in relation  to  the  previous
    year.  The average persistency rate for all policies in force for  1997
    and 1996 has been approximately 89.4% and 87.9%, respectively.
    
    Operating expenses decreased 21% in 1997 compared to 1996.Approximately
    one-half  of  the  decrease  in  operating   expenses  is   related  to 
    the  settlement  of  certain litigation in December  of  1996 regarding
    non-standard policies.  Included in this decrease were  legal fees  and
    payments  to  the litigants to settle the issue.  In 1992,  as part  of
    the  acquisition of Commonwealth Industries  Corporation,  an agreement
    was  entered  into  between John Cantrell and FCC  for  future payments
    to  be  made by FCC.  A liability was established at  the  date of  the
    agreement.    Upon   the   death   of   Mr.   Cantrell  in  late  1997,
    obligations under this agreement transferred to Mr. Cantrell's wife  at
    a  reduced  amount.   This  resulted in a  reduction  of  approximately
    $600,000   of  the  liability  held  for  future  payments  under   the
    agreement.   In addition, 1997 Consulting fees, primarily in  the  area
    of  actuarial  services,  were reduced approximately  $400,000  as  the
                                       21
<PAGE>
    Company  was able to hire an actuary, on a part-time basis, at  a  cost
    less than fees paid in the previous year to consulting actuaries.   The
    remaining  reduction in operating expenses is attributable  to  reduced
    salary  and  employee  benefit costs in 1997, as a  result  of  natural
    attrition.
    
    Interest expense decreased 4% in 1997 compared to 1996.  Since December
    31,  1996,  notes  payable decreased approximately  $758,000.   Average
    outstanding indebtedness was $19,461,000 with an average cost  of  8.6%
    in  1997  compared to average outstanding indebtedness  of  $20,652,000
    with an average cost of 8.5% in 1996.  In March 1997, the base interest
    rate for most of the notes payable increased a quarter of a point.  The
    base  rate is defined as the floating daily, variable rate of  interest
    determined  and  announced by First of America Bank.  Please  refer  to
    Note  12  "Notes  Payable" in the Notes to the  Consolidated  Financial
    Statements of UTG for more information.
    
    Net loss of UTG
    
    UTG  had  a  net  loss of $923,000 in 1997 compared to a  net  loss  of
    $1,661,000  in  1996.   The  improvement is  directly  related  to  the
    decrease  in life benefits and operating expenses primarily  associated
    with  the  1996 settlement and other related costs of the  non-standard
    life insurance policies.

(D)  NET LOSS

The  Company  recorded a net loss of $79,000 for 1997 compared to  $319,000
for the same period one year ago.  The net loss is from the equity share of
UTG's operating results.


FINANCIAL CONDITION

The Company owns 47% equity interest in UTG which controls total assets  of
approximately  $342,000,000.   Audited  financial  statements  of  UTG  are
presented as Exhibit 99(d) of this filing.


LIQUIDITY AND CAPITAL RESOURCES

Since  UII  is  a holding company, funds required to meet its debt  service
requirements  and other expenses are primarily provided by its  affiliates.
UII's  cash flow is dependent on revenues from a management agreement  with
USA  and  its  earnings received on invested assets and cash balances.   At
December  31, 1998,substantially all of the shareholders equity  represents
investment  in  affiliates.   UII does not  have  significant  day  to  day
operations  of its own.  Cash requirements of UII primarily relate  to  the
payment  of interest on its convertible debentures and expenses related  to
maintaining the Company as a corporation in good standing with the  various
regulatory bodies which govern corporations in the jurisdictions where  the
Company  does  business.  The payment of cash dividends to shareholders  is
not  legally restricted.  However, insurance company dividend payments  are
regulated by the state insurance department where the company is domiciled.
UTI  is the ultimate parent of UG through ownership of several intermediary
holding  companies.  UG can not pay a dividend directly to UII due  to  the
ownership  structure.  However, if UG paid a dividend to its direct  parent
and  each  subsequent  intermediate  company  within  the  holding  company
structure  paid  a  dividend equal to the amount  it  received,  UII  would
receive 37% of the original dividend paid by UG.  Please refer to Note 2 of
the  Notes  to  the  Financial Statements.  UG's dividend  limitations  are
described below without effect of the ownership structure.

Ohio domiciled insurance companies require five days prior notification  to
the  insurance  commissioner  for  the payment  of  an  ordinary  dividend.
Ordinary  dividends are defined as the greater of: a) prior year  statutory
earnings  or b) 10% of statutory capital and surplus.  For the  year  ended
December  31, 1998, UG had a statutory gain from operations of  $3,226,364.
At  December  31,  1998,  UG  statutory capital  and  surplus  amounted  to
$15,280,577.   Extraordinary  dividends  (amounts  in  excess  of  ordinary
dividend  limitations) require prior approval of the insurance commissioner
and are not restricted to a specific calculation.

The  Company  currently  has $368,692 in cash and  cash  equivalents.   The
Company  holds  two mortgage loans.  Operating activities  of  the  Company
produced  cash flows of $425,607, $324,097 and $255,675 in 1998,  1997  and
                                      22
<PAGE>
1996, respectively.  The Company had uses of cash from investing activities
of  $767,812,  $50,764 and $180,402 in 1998, 1997 and  1996,  respectively.
Cash  flows  from financing activities were $0, $(2,112) and $33  in  1998,
1997 and 1996, respectively.

In  early  1994,  UII received $902,300 from the sale of  Debentures.   The
Debentures  were  issued pursuant to an indenture between the  Company  and
National  City  Bank (formerly First of America Bank - Southeast  Michigan,
N.A.),  as  trustee.  The Debentures are general unsecured  obligations  of
UII,  subordinate in right of payment to any existing or future senior debt
of  UII.   The  Debentures  are  exchangeable  and  transferable,  and  are
convertible at any time prior to March 31, 1999 into UII's Common Stock  at
a  conversion  price  of  $25 per share, subject to adjustment  in  certain
events.   The  Debentures  bear  interest  from  March  31,  1994,  payable
quarterly, at a variable rate equal to one percentage point above the prime
rate  published  in the Wall Street Journal from time to time.   The  prime
rate  was 8.5% during the first three quarters of 1998, decreasing to 8.25%
October  1,  1998, and decreasing to 7.75% January 1, 1999.   On  or  after
March 31, 1999, the Debentures will be redeemable at UII's option, in whole
or  in  part,  at redemption prices declining from 103% of their  principal
amount.  No sinking fund will be established to redeem the Debentures.  The
Debentures will mature on March 31, 2004.  The Debentures are not listed on
any national securities exchange or the NASDAQ National Market System.

The  Company  is  not  aware of any litigation that will  have  a  material
adverse effect on the financial position of the Company.  In addition,  the
Company  does  not believe that the regulatory initiatives currently  under
consideration  by various regulatory agencies will have a material  adverse
impact on the Company.  The Company is not aware of any material pending or
threatened  regulatory action with respect to the Company  or  any  of  its
affiliates.  The Company does not believe that any insurance guaranty  fund
assessments will be materially different from amounts already provided  for
in the financial statements.

Management believes that the overall sources of liquidity available to  the
Company will be more than sufficient to satisfy its financial obligations.


REGULATORY ENVIRONMENT

The  Company's insurance affiliates are assessed contributions by life  and
health   guaranty   associations  in  almost  all   states   to   indemnify
policyholders  of  failed companies.  In several  states  the  company  may
reduce  premium taxes paid to recover a portion of assessments paid to  the
states'  guaranty fund association.  This right of "offset" may come  under
review by the various states, and the company cannot predict whether and to
what extent legislative initiatives may affect this right to offset.  Also,
some  state  guaranty associations have adjusted the basis  by  which  they
assess  the  cost  of  insolvencies to individual companies.   The  Company
believes  that  its  reserve  for  future  guaranty  fund  assessments   is
sufficient to provide for assessments related to known insolvencies.   This
reserve  is based upon management's current expectation of the availability
of  this  right  of  offset, known insolvencies  and  state  guaranty  fund
assessment  bases.  However, changes in the basis whereby  assessments  are
charged  to  individual companies and changes in the  availability  of  the
right  to  offset assessments against premium tax payments could materially
affect the company's results.

Currently,  UII's insurance affiliates are subject to government regulation
in  each of the states in which they conduct business.  Such regulation  is
vested in state agencies having broad administrative power dealing with all
aspects  of the insurance business, including the power to:  (i) grant  and
revoke  licenses  to transact business;  (ii) regulate and supervise  trade
practices and market conduct;  (iii) establish guaranty associations;  (iv)
license agents;  (v) approve policy forms;  (vi) approve premium rates  for
some  lines  of  business;  (vii) establish reserve  requirements;   (viii)
prescribe  the  form  and  content  of required  financial  statements  and
reports;   (ix)  determine  the reasonableness and  adequacy  of  statutory
capital  and  surplus; and  (x) regulate the type and amount  of  permitted
investments.   Insurance  regulation  is  concerned  primarily   with   the
protection  of policyholders. UII cannot predict the impact of  any  future
proposals,  regulations or market conduct investigations.  UII's  insurance
affiliates,  USA,  UG, APPL and ABE are domiciled in the  states  of  Ohio,
Ohio, West Virginia and Illinois, respectively.

The  insurance regulatory framework continues to be scrutinized by  various
states,  the  federal government and the National Association of  Insurance
Commissioners  ("NAIC").   The  NAIC is  an  association  whose  membership
consists  of the insurance commissioners or their designees of the  various
states.   The  NAIC  has  no  direct regulatory  authority  over  insurance
                                    23
<PAGE>
companies,  however  its primary purpose is to provide  a  more  consistent
method  of  regulation  and  reporting  from  state  to  state.   This   is
accomplished  through  the  issuance of model  regulations,  which  can  be
adopted  by individual states unmodified, modified to meet the state's  own
needs or requirements, or dismissed entirely.

Most  states  also  have insurance holding company statutes  which  require
registration  and periodic reporting by insurance companies  controlled  by
other  corporations licensed to transact business within  their  respective
jurisdictions.   The insurance affiliates are subject to  such  legislation
and  registered as controlled insurers in those jurisdictions in which such
registration is required.  Statutes vary from state to state but  typically
require periodic disclosure, concerning the corporation, that controls  the
registered  insurers and all affiliates of such corporation.  In  addition,
prior notice to, or approval by, the state insurance commission of material
intercorporate  transfers  of  assets, reinsurance  agreements,  management
agreements  (see  Note  6  in the Notes to the Financial  Statements),  and
payment  of dividends (see note 2 in the Notes to the Financial Statements)
in  excess  of  specified amounts by the insurance subsidiary,  within  the
holding company system, are required.

Each year the NAIC calculates financial ratio results (commonly referred to
as  IRIS  ratios) for each company.  These ratios compare various financial
information pertaining to the statutory balance sheet and income statement.
The  results are then compared to pre-established normal ranges  determined
by  the  NAIC.  Results outside the range typically require explanation  to
the domiciliary insurance department.

At  year-end 1998, the insurance companies had one ratio outside the normal
range.  The ratio is related to the decrease in premium income.  The  ratio
fell  outside the normal range the last three years.  A primary  cause  for
the  decrease  in  premium revenues is related to the potential  change  in
control  of  UTI over the last two years to two different parties.   During
September  of 1996, it was announced that control of UTI would pass  to  an
unrelated  party,  but  the transaction did not materialize.   In  February
1998,  an  announcement was made regarding negotiations  with  a  different
unrelated  party, First Southern Funding LLC, for the change in control  of
UTI.   In  November 1998, the change in control with this second party  was
completed.   Please  refer  to the Notes to the  Financial  Statements  for
additional  information.  The possible changes and resulting  uncertainties
have  hurt  the insurance companies' ability to recruit and maintain  sales
agents.

The NAIC, in conjunction with state regulators, has been reviewing existing
insurance  laws and regulations.  A committee of the NAIC proposed  changes
in  the  regulations  governing insurance company investments  and  holding
company  investments in subsidiaries and affiliates which were  adopted  by
the  NAIC as model laws in 1996.  The Company does not presently anticipate
any material adverse change in its business as a result of these changes.

Legislative and regulatory initiatives regarding changes in the  regulation
of  banks and other financial services businesses and restructuring of  the
federal income tax system could, if adopted and depending on the form  they
take,  have  an  adverse impact on the Company by altering the  competitive
environment  for its products.  The outcome and timing of any such  changes
cannot  be  anticipated  at  this time, but the Company  will  continue  to
monitor  developments in order to respond to any opportunities or increased
competition that may occur.

The  Clinton  Administration has recently proposed tax changes  that  would
affect  the  insurance industry.  One proposal is to require  recapture  of
untaxed  profits on policyholder surplus accounts.  Between 1959 and  1983,
stock  life insurance companies deferred tax on a portion of their profits.
These  untaxed  profits  were  added to  a  policyholders  surplus  account
("PSA").   In  1984,  Congress  precluded  life  insurance  companies  from
continuing   to   defer   taxes  on  any  future  profits.    The   Clinton
Administration  argues  that  there  is  no  continuing  justification  for
permitting stock life insurance companies to defer tax on profits that were
earned between 1959 and 1983.  Accordingly, the stock life companies  would
be  required  to  include in their gross income over ten  years  their  PSA
balances.   The  second  proposal modifies rules  for  capitalizing  policy
acquisition  costs  on the grounds that life insurance companies  generally
only  capitalize a fraction of their actual policy acquisition costs.  This
modification would increase the current capitalization percentages.  Either
of  these  changes  would be onerous to the Company and  to  the  insurance
industry  as a whole.  The outcome and timing of these proposals cannot  be
anticipated at this time.
                                   24
<PAGE>
The NAIC adopted the Life Illustration Model Regulation.  Many states
have  adopted  the regulation effective January 1, 1997.   This  regulation
requires  products which contain non-guaranteed elements, such as universal
life  and  interest  sensitive  life, to comply  with  certain  actuarially
established  tests.  These tests are intended to target future  performance
and  profitability  of a product under various scenarios.   The  regulation
does  not  prevent a company from selling a product that does not meet  the
various  tests.   The only implication is the way in which the  product  is
marketed  to  the consumer.  A product that does not pass  the  tests  uses
guaranteed assumptions rather than current assumptions in presenting future
product  performance  to  the consumer.  The Company  conducts  an  ongoing
thorough  review  of  its  sales and marketing  process  and  continues  to
emphasize its compliance efforts.

A  task  force of the NAIC is currently undertaking a project to  codify  a
comprehensive set of statutory insurance accounting rules and  regulations.
Project  results were recently approved by the NAIC with an  implementation
date  of  January  1, 2001.  Individual states in which  the  Company  does
business  must  implement  these new rules for them  to  become  effective.
Specific recommendations have been set forth in papers issued by the  NAIC.
The  NAIC  continues  to  modify and amend these papers.   The  Company  is
monitoring the process, and is not aware of any new requirements that would
result  in a material financial impact on the Company's financial  position
or  results of operations.  The Company will continue to monitor this issue
as changes and new proposals are made.

ACCOUNTING AND LEGAL DEVELOPMENTS

The  Financial  Accounting Standards Board (FASB) has issued  Statement  of
Financial  Accounting  Standards (SFAS) 128 entitled  Earnings  per  share,
which  is  effective  for financial statements for fiscal  years  beginning
after December 15, 1997.  SFAS 128 specifies the computation, presentation,
and  disclosure requirements for earnings per share (EPS) for entities with
publicly  held  common  stock or potential common stock.   The  Statement's
objective is to simplify the computation of earnings per share, and to make
the  U.S. standard for computing EPS more compatible with the EPS standards
of other countries.

This  statement  was  adopted for the 1997 Financial Statements.   For  all
periods presented the Company reported a loss from continuing operations so
any  potential issuance of common shares would have an antidilutive  effect
on  EPS.  Consequently, the adoption of SFAS 128 did not have an impact  on
the Company's financial statement.

The FASB has issued SFAS 130 entitled Reporting Comprehensive Income, which
is  effective  for  financial statements for fiscal years  beginning  after
December  15,  1997.   SFAS  130 establishes standards  for  reporting  and
presentation of comprehensive income and its components in a  full  set  of
financial  statements.   Comprehensive  income  includes  all  changes   in
shareholders'   equity,  except  those  arising  from   transactions   with
shareholders, and includes net income and net unrealized gains (losses)  on
securities.  SFAS 130 was adopted as of January 1, 1998.  Adopting the  new
standard  required  the  Company  to make  additional  disclosures  in  the
financial  statements, but did not affect the Company's financial  position
or results of operations.

All  items  of  other comprehensive income reflect no related  tax  effect,
since the Company has an allowance against the collection of any future tax
benefits.   In  addition, there was no sale or liquidation  of  investments
requiring a reclassification adjustment for the period presented.

The  FASB  has issued SFAS 131 entitled, Disclosures about Segments  of  an
Enterprise  and  Related  Information, which  is  effective  for  financial
statements  for fiscal years beginning after December 15, 1997.   SFAS  131
requires that a public business enterprise report financial and descriptive
information  about  its reportable operating segments.  Operating  segments
are  components of an enterprise about which separate financial information
is  available  that  is  evaluated regularly in deciding  how  to  allocate
resources and in assessing performance. SFAS 131 was adopted as of  January
1,  1998.   Adopting  the  new  standard had no  affect  on  the  Company's
financial  position  or results of operations, since  the  Company  has  no
reportable operating segments.

The  FASB  has  issued  SFAS  132  entitled, Employers'  Disclosures  about
Pensions  and  Other  Postretirement  Benefits,  which  is  effective   for
financial  statements for fiscal years beginning after December  15,  1997.
SFAS 132 revises current disclosure requirements for employer provided post-
retirement  benefits.  The statement does not change retirement measurement
or  recognition  issues.   SFAS 132 was adopted  as  of  January  1,  1998.
Adopting the new standard had no affect on the Company's financial position
or  results of operations, since the Company has no pension plan  or  other
obligation for post-retirement benefits.
                                 25
<PAGE>
The   FASB   has  issued  SFAS  133  entitled,  Accounting  for  Derivative
Instruments  and  Hedging  Activities, which is effective  for  all  fiscal
quarters  of fiscal years beginning after June 15, 1999.  SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilities in
the  statement of financial position and measure those instruments at  fair
value.   If  certain conditions are met, a derivative may  be  specifically
designated  as  a  specific  type of exposure hedge.   The  accounting  for
changes  in the fair value of a derivative depends on the intended  use  of
the derivative and the resulting designation.  The adoption of SFAS 133  is
not  expected to have a material effect on the Company's financial position
or  results  of operations, since the Company has no derivative or  hedging
type investments.

The  Company  is  not  aware of any litigation that will  have  a  material
adverse effect on the financial position of the Company.  In addition,  the
Company  does  not believe that the regulatory initiatives currently  under
consideration  by various regulatory agencies will have a material  adverse
impact on the Company.  The Company is not aware of any material pending or
threatened  regulatory action with respect to the Company  or  any  of  its
subsidiaries.   The  Company does not believe that any  insurance  guaranty
fund assessments will be materially different from amounts already provided
for in the financial statements.


YEAR 2000 ISSUE

The  "Year  2000  Issue"  is  the  inability  of  computers  and  computing
technology  to recognize correctly the Year 2000 date change.  The  problem
results  from a long-standing practice by programmers to save memory  space
by  denoting  years  using just two digits instead of four  digits.   Thus,
systems  that  are  not  Year 2000 compliant may be unable  to  read  dates
correctly  after  the Year 1999 and can return incorrect  or  unpredictable
results.    This   could  have  a  significant  effect  on  the   Company's
business/financial  systems  as  well as  products  and  services,  if  not
corrected.

The  Company established a project to address year 2000 processing concerns
in  September  of 1996.  In 1997 the Company completed the  review  of  the
Company's   internally  and  externally  developed   software,   and   made
corrections  to all year 2000 non-compliant processing.  The  Company  also
secured  verification of current and future year 2000 compliance  from  all
major  external software vendors.  In December of 1997, a separate computer
operating  environment was established with the system  dates  advanced  to
December  of 1999.  A parallel model office was established with all  dates
in the data advanced to December of 1999.  Parallel model office processing
is being performed using dates from December of 1999 to January of 2001, to
insure  all  year 2000 processing errors have been corrected.  Testing  was
completed  by  the  end of the first quarter of 1998.  Periodic  regression
testing is being performed to monitor continuing compliance.  By addressing
year 2000 compliance in a timely manner, compliance has been achieved using
existing  staff and without significant impact on the Company operationally
or financially.


CHANGE IN CONTROL OF UNITED TRUST, INC.

On November 20, 1998, First Southern Funding, LLC., a Kentucky corporation,
("FSF")  and affiliates acquired 929,904 shares of common stock  of  United
Trust,  Inc.,  an  Illinois corporation, ("UTI") from UTI and  certain  UTI
shareholders.   As consideration for the shares, FSF paid  UTI  $10,999,995
and  certain  shareholders  of UTI $999,990 in cash.   FSF  and  affiliates
employed working capital to make these purchases of common stock, including
funds  on  hand and amounts drawn under existing lines of credit with  Star
Bank,  NA.   FSF borrowed $7,082,878 and First Southern Bancorp,  Inc.,  an
affiliate  of  FSF,  borrowed $495,775 in making the  purchases.   FSF  and
affiliates  expect to repay the borrowings through the sale of assets  they
currently own.

Details of the transaction can be outlined as follows: FSF acquired 389,715
shares  of  UTI common stock at $10.00 per share.  These shares represented
stock  acquired during 1997 by UTI in private transactions.   Additionally,
FSF  acquired  473,523 shares of authorized but unissued  common  stock  at
$15.00 per share.  FSF acquired 66,666 shares of common stock from UTI  CEO
Larry  Ryherd, and his family, at $15.00 per share.  FSF has  committed  to
purchase  $2,560,000 of face amount of UTI convertible notes  from  certain
officers  and directors of UTI for a cash price of $3,072,000 by  March  1,
1999.  FSF is required to convert the notes to UTI common stock by July 31,
2000.    UTI  has  granted,  for  nominal  consideration,  an  irrevocable,
exclusive  option to FSF to purchase up to 1,450,000 shares of  UTI  common
                                   26
<PAGE>
stock  for  a purchase price in cash equal to $15.00 per share,  with  such
option  to  expire  on  July 1, 2001.  UTI has also  caused  three  persons
designated  by FSF to be appointed, as part of the maximum of  11,  to  the
Board of Directors of UTI.

Following the transactions described above, and together with shares of UTI
acquired  on the market, FSF and affiliates currently own 1,073,577  shares
of  UTI  common  stock  (43.1%) becoming the largest  shareholder  of  UTI.
Through the shares acquired and options owned, FSF can ultimately own  over
51% of UTI.  Mr. Jesse T. Correll is the majority shareholder of FSF, which
is  an  affiliate  of First Southern Bancorp, Inc., a bank holding  company
that owns a bank that operates out of 14 locations in central Kentucky.

This   transaction   provides  UTI  and  its  affiliates   with   increased
opportunities.    The  additional  capitalization  has   enabled   UTI   to
significantly reduce its outside debt and has enhanced its ability to  make
future   acquisitions  through  increased  borrowing  power  and  financial
strength.   Many synergies exist between UTI and its affiliates  and  First
Southern  Funding and its affiliates.  The potential for cross  selling  of
services to each customer base is currently being explored.  Legislation is
currently  pending  that  would eliminate many of  the  barriers  currently
existing between banks and insurance companies.  Such alliances are already
being   formed  within  the  two  industries.   Management  believes   this
transaction  positions the Company for continued growth and competitiveness
into the future as the financial industry changes.


PROPOSED MERGER

On March 25, 1997, the Board of Directors of UTI and UII voted to recommend
to  the  shareholders a merger of the two companies.   Under  the  Plan  of
Merger, UTI would be the surviving entity with UTI issuing one share of its
stock for each share held by UII shareholders.

UII owns 47% of United Trust Group, Inc., an insurance holding company, and
UTI owns 53% of United Trust Group, Inc.  Neither UTI nor UII had any other
significant  holdings  or  business dealings at the  time  the  merger  was
recommended by the respective Boards of Directors.  The Board of  Directors
of  each company thus concluded a merger of the two companies would  be  in
the  best interests of the shareholders.  The merger will result in certain
cost  savings,  primarily related to costs associated  with  maintaining  a
corporation in good standing in the states in which it transacts  business.
Additionally, the merger will further simplify the group's holding  company
system making it easier to understand for outside parties including current
investors, potential investors and lenders.

A  vote of the shareholders of UTI and UII regarding the proposed merger is
anticipated to occur sometime during the second quarter of 1999.
                                  27
<PAGE>
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Listed  below  are the financial statements included in this  Part  of  the
Annual Report on SEC Form 10-K:

                                                     Page No.
UNITED INCOME, INC.


  Independent Auditor's Report for the
    Years ended December 31, 1998, 1997, 1996            29



  Balance Sheets                                         30



  Statements of Operations                               31



  Statements of Shareholders' Equity                     32



  Statements of Cash Flows                               33



  Notes to Financial Statements                       34-43
                                    28

<PAGE>
                       INDEPENDENT AUDITORS' REPORT



Board of Directors and Shareholders
United Income, Inc.


     We have audited the accompanying balance sheets of United Income, Inc.
(an Ohio corporation) as of December 31, 1998 and 1997, and the related
statements of operations, shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1998.  These financial
statements are the responsibility of the Company's management.  Our
responsibility is to express an opinion on these financial statements based
on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the  audit  to
obtain reasonable assurance about whether the financial statements are free
of  material  misstatement.  An audit includes examining, on a test  basis,
evidence   supporting  the  amounts  and  disclosures  in   the   financial
statements.   An  audit  also includes assessing the accounting  principles
used  and  significant estimates made by management, as well as  evaluating
the  overall financial statement presentation.  We believe that our  audits
provide a reasonable basis for our opinion.

      In  our  opinion, the financial statements referred to above  present
fairly,  in all material respects, the financial position of United Income,
Inc.  as  of  December 31, 1998 and 1997, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1998, in conformity with generally accepted accounting principles.




                                   KERBER, ECK & BRAECKEL LLP




Springfield, Illinois
March 26, 1999








                                    29

<PAGE>
                           UNITED INCOME, INC.
                             BALANCE SHEETS
                   As of December 31, 1998 and 1997




             ASSETS
                            1998        1997
<TABLE>
<S>                     <C>         <C>
Cash and
 cash equivalents       $   368,692 $   710,897
Mortgage loans              170,052     121,520
Notes receivable
 from affiliate           1,364,100     864,100
Accrued
 interest income             13,629      12,068
Property and equipment
 (net of accumulated
   depreciation of
    $50,038 and $93,648)        444       1,070
Investment in affiliates 10,697,626  11,060,682
Receivable from affiliate    22,244      23,192
Other assets
 (net of accumulated
  amortization
   of $175,826
    and $138,810)             9,242      46,258
   Total assets        $ 12,646,029$ 12,839,787



LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities and accruals:
 Convertible
 debentures             $   902,300 $   902,300
Other
 liabilities                 22,209       1,534
Total liabilities           924,509     903,834


Shareholders' equity:
Common stock -
 no par value, stated value
  $.033 per share.
        Authorized 2,310,001 shares -
         1,391,919 and 1,391,919 shares
        issued after deducting treasury
         shares of 177,590 and
         177,590            45,934      45,934
Additional paid-in
 capital                15,242,365  15,242,365
Accumulated
 deficit                (3,385,700) (3,332,743)
Accumulated other comprehensive
 income                   (181,079)    (19,603)
Total shareholders'
 equity                 11,721,520  11,935,953
Total liabilities and
 shareholders' equity  $12,646,029$ 12,839,787
</TABLE>
                      See accompanying notes
                                30


<PAGE>

                        UNITED INCOME, INC.
                     STATEMENTS OF OPERATIONS
                Three Years Ended December 31, 1998


                            1998       1997       1996
<TABLE>
<S>                     <C>        <C>        <C>
Revenues:

        Interest income $   49,708 $   27,127 $   13,099
        Interest income
         from affiliates    83,317     82,579     79,433
        Service agreement
         income from
          affiliates       835,345    989,295  1,567,891
        Other income
         from affiliates    66,553     87,073    127,922
        Realized investment
         gains                   0          0      2,599
        Other income             0         48          3
                         1,034,923  1,186,122  1,790,947


Expenses:

        Management fee
         to affiliate      501,207    743,577  1,240,735
        Operating
         expenses           80,396     80,173     89,529
        Interest
         expense            85,155     85,155     84,027
                           666,758    908,905  1,414,291

Gain before income
 taxes and equity
        in loss
         of investees      368,165    277,217    376,656
Provision for
 income taxes                    0          0          0
Equity in loss
 of investees             (421,122)  (356,533)  (695,739)
Net loss                $  (52,957)$  (79,316)$ (319,083)

Basic loss per share
 from continuing
   operations and
    net loss            $    (0.04)$    (0.06)$    (0.23)

Diluted loss per share
  from continuing
   operations and
    net loss            $    (0.04)$    (0.06)$    (0.23)

Basic weighted average
 shares outstanding       1,391,919 1,391,996  1,392,084

Diluted weighted average
 shares outstanding       1,391,919 1,391,996  1,392,084
</TABLE>
                          See accompanying notes
                                     31
<PAGE>

                            UNITED INCOME, INC.
                    STATEMENTS OF SHAREHOLDERS' EQUITY
                    Three Years Ended December 31, 1998

                            1998                  1997             1996
<TABLE>
<S>                  <C>       <C>      <C>        <C>    <C>         <C>
Common stock
 Balance, beginning
  of year            $   45,934         $    45,940       $     45,938
 Exercise of stock
  options                     0                   0                  2
 Stock retired from purchase
  of fractional
   shares of reverse
    stock split               0                  (6)                 0
 Balance, end
  of year            $   45,934        $     45,934      $      45,940


Additional paid-in capital
 Balance, beginning
  of year          $ 15,242,365        $ 15,244,471      $ 15,243,773
 Exercise of stock
  options                     0                   0               698
 Stock retired from purchase
  of fractional
   shares of reverse
    stock split               0              (2,106)                0
 Balance, end
  of year          $ 15,242,365        $ 15,242,365        15,244,471


 Accumulated deficit
  Balance, beginning
   of year         $ (3,332,743)       $ (3,253,427)       (2,934,344)
  Net loss              (52,957)$(52,957)   (79,316)(79,316) (319,083)$(319,083)
  Balance, end
   of year         $ (3,385,700)       $ (3,332,743)      $(3,253,427)


Accumulated other
 comprehensive income
Balance, beginning
 of year                (19,603)            (59,508)            (236)
Other comprehensive
 income      
Unrealized holding gain (loss)
 on securities         (161,476)(161,476)    39,905  39,905  (59,272)   (59,272)
Comprehensive
 income                       $ (214,433)         $ (39,411)         $ (378,355)
Balance, end
 of year               (181,079)            (19,603)         (59,508)

Total shareholders' equity,
 end
  of year          $ 11,721,520        $ 11,935,953      $11,977,476
</TABLE>
                                 See accompanying notes
                                        32
<PAGE>
                          UNITED INCOME, INC.
                      STATEMENTS OF CASH FLOWS
                Three Years Ended December 31, 1998



                            1998      1997      1996
<TABLE>
<S>                     <C>       <C>       <C>
Increase (decrease) in cash and
 cash equivalents
Cash flows from
 operating activities:
   Net loss             $ (52,957)$ (79,316)$(319,083)
   Adjustments to reconcile
    net loss to net cash
     provided by operating
      activities
        Depreciation and
         amortization      37,643    38,524    45,331
        Gain on payoff of
          mortgage loan         0         0    (2,599)
        Accretion of discount
         on mortgage loans   (262)     (266)     (481)
        Compensation expense through
         stock option plan      0         0       667
        Equity in loss
         of investees     421,122   356,533   695,739
   Changes in assets
     and liabilities:
        Change in accrued
         interest income   (1,561)     (284)   (4,744)
        Change in receivable
          from affiliates     948     8,645  (119,706)
        Change in other
         liabilities       20,674       261   (39,449)
Net cash provided by
 operating activities     425,607   324,097   255,675

Cash flows from
  investing activities:
        Change in notes receivable
          from affiliate (688,633)        0  (150,000)
        Purchase of investments
         in affiliates    (30,909)  (52,363)        0
        Capital contribution
         to investee            0         0   (94,000)
        Payments of principal on
          mortgage loans    1,730     1,599    62,434
        Issuance of
         mortgage loan    (50,000)        0         0
        Proceeds from sale of
        property and equipment  0         0     1,164
Net cash used in
  investing activities   (767,812)  (50,764) (180,402)

Cash flows from
  financing activities:
        Proceeds from sale of
         common stock           0         0        33
        Payment for fractional
         shares from
         reverse stock split    0    (2,112)        0
Net cash provided by (used in)
  financing activities          0    (2,112)       33

Net increase (decrease) in cash and
 cash equivalents        (342,205)  271,221    75,306
Cash and cash equivalents at
 beginning of year        710,897   439,676   364,370
Cash and cash equivalents
 at end of year         $ 368,692 $ 710,897 $ 439,676
</TABLE>
                          See accompanying notes
                                  33
<PAGE>
1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.ORGANIZATION  -  At December 31, 1998, the affiliates of  United  Income,
  Inc. were as depicted on the following organizational chart.


                      ORGANIZATIONAL CHART
                    AS OF DECEMBER 31, 1998


United Trust, Inc. ("UTI") is the ultimate controlling company.  UTI owns
53% of United Trust Group ("UTG") and 41% of United Income, Inc. ("UII").
UII owns 47% of UTG.  UTG owns 79% of First Commonwealth Corporation
("FCC") and 100% of Roosevelt Equity Corporation ("REC").  FCC owns 100% of
Universal Guaranty Life Insurance Company ("UG").  UG owns 100% of United
Security Assurance Company ("USA").  USA owns 84% of Appalachian Life
Insurance Company ("APPL") and APPL owns 100% of Abraham Lincoln Insurance
Company ("ABE").
                                 34
<PAGE>
The  summary of the Company's significant accounting policies, consistently
applied  in  the preparation of the accompanying financial statements,  are
summarized as follows.

B.NATURE  OF OPERATIONS - United Income, Inc. ("UII"), referred to  as  the
  ("Company"),  was  incorporated  November  2,  1987,  and  commenced  its
  activities  January 20, 1988.  UII is an insurance holding  company  that
  through   its  insurance  affiliates  sells  individual  life   insurance
  products.   UII  is  an affiliate of UTI, an Illinois  insurance  holding
  company.   UTI owns 40.6% of UII.  The officers of UII are  the  same  as
  those of its parent UTI.

C.MORTGAGE  LOANS - Mortgage loans are shown on the following  basis  -  at
  unpaid  balances,  adjusted for amortization premium  or  discount,  less
  allowance  for possible losses.  Realized gains and losses  on  sales  of
  mortgage  loans are recognized in net income on a specific identification
  basis.

D.CASH  AND  CASH  EQUIVALENTS  -  The Company  considers  certificates  of
  deposit  and  other short-term investment instruments  with  an  original
  purchased maturity of three months or less as cash equivalents.

E.PROPERTY  AND  EQUIPMENT - Property and equipment is  recorded  at  cost.
  Depreciation  is  provided  using  a straight-line  method.   Accumulated
  depreciation  was  $50,038  in 1998 and $93,648  in  1997.   Depreciation
  expense  for  the  years ended December 1998, 1997, and  1996  was  $627,
  $1,508 and $8,315 respectively.

F.EARNINGS  PER  SHARE  -  Earnings per share are  based  on  the  weighted
  average   number   of  common  shares  outstanding  during   each   year,
  retroactively  adjusted  to  give  effect  to  all  stock   splits.    In
  accordance with Statement of Financial Accounting Standards No. 128,  the
  computation of diluted earnings per share is not shown since the  Company
  has  a loss from continuing operations in each period presented, and  any
  assumed conversion, exercise, or contingent issuance of securities  would
  have  an antidilutive effect on earnings per share.  Had UII not been  in
  a  loss  position, the outstanding dilutive instruments would  have  been
  convertible notes of 36,092, 36,092 and 36,092 shares in 1998,  1997  and
  1996,  respectively, and stock options exercisable of 231, 231,  and  231
  shares  in  1998,  1997, and 1996, respectively. UII  had  stock  options
  outstanding  for  shares  of  common  stock  in  1998,  1997,  and   1996
  respectively,  at  a  per share price in excess  of  the  average  market
  price,  and would therefore not have been included in the computation  of
  diluted  earnings  per  share.  For purposes of  this  calculation,  book
  value per share was utilized to represent market value.

G.RECLASSIFICATIONS - Certain  prior  year  amounts  have been reclassified
  to conform with the current year presentation.  Such reclassifications had
  no effect on previously reported net loss, total assets, or shareholders'
  equity.

H.USE  OF ESTIMATES - In preparing financial statements in conformity  with
  generally accepted accounting principles, management is required to  make
  estimates and assumptions that affect the reported amounts of assets  and
  liabilities, the disclosure of contingent assets and liabilities  at  the
  date  of  the financial statements, and the reported amounts of  revenues
  and  expenses  during the reporting period.  Actual results could  differ
  from those estimates.

2.   SHAREHOLDER DIVIDEND RESTRICTION

At  December 31, 1998, substantially all of shareholders' equity represents
investment in affiliates.  The payment of cash dividends to shareholders is
not  legally restricted.  However, insurance company dividend payments  are
regulated by the state insurance department where the company is domiciled.
UTI  is the ultimate parent of UG through ownership of several intermediary
holding  companies.  UG can not pay a dividend directly to UII due  to  the
ownership structure.  UG's dividend limitations are described below without
effect of the ownership structure.

Ohio domiciled insurance companies require five days prior notification  to
the  insurance  commissioner  for  the payment  of  an  ordinary  dividend.
Ordinary  dividends are defined as the greater of: a) prior year  statutory
earnings  or b) 10% of statutory capital and surplus.  For the  year  ended
December  31, 1998, UG had a statutory gain from operations of  $3,226,364.
At  December  31,  1998,  UG's statutory capital and  surplus  amounted  to
$15,280,577.   Extraordinary  dividends  (amounts  in  excess  of  ordinary
dividend  limitations) require prior approval of the insurance commissioner
and are not restricted to a specific calculation.
                                 35
<PAGE>
3.   INCOME TAXES

The  Company  has net operating loss carryforwards for federal  income  tax
purposes expiring as follows:

               UII
           
2007     $ 206,309
TOTAL    $ 206,309

The  Company  has  established a deferred tax  asset  of  $72,208  for  its
operating  loss carryforwards and has established an allowance  of  $72,208
against this asset.  The Company has no other deferred tax components which
would be reflected in the balance sheets.

The  provision for income taxes shown in the statements of operations  does
not  bear the normal relationship to pre-tax income as a result of  certain
permanent  differences.  The sources and effects of  such  differences  are
summarized in the following table:

                                  1998            1997            1996
<TABLE>
<S>                           <C>             <C>            <C>
Income tax at statutory                                                   
rate of
  35% of income before        $ 128,858       $ 97,026       $ 131,830

income taxes
Utilization of net                                                        
operating loss
  carryforward                 (128,858)       (97,026)       (133,866)

Depreciation                          0              0           2,036
Provision for income taxes    $       0       $      0       $       0
</TABLE>

4.   DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The  following methods and assumptions were used to estimate the fair value
of each class of financial instrument required to be valued by SFAS 107 for
which it is practicable to estimate that value:

(a) Mortgage loans

The  fair values of mortgage loans are estimated using discounted cash flow
analyses  and  interest rates being offered for similar loans to  borrowers
with  similar credit ratings.  As of December 31, 1998, the estimated  fair
value and carrying amounts were $248,216 and $170,052, respectively.  As of
December  31,  1997,  the  estimated fair value and  carrying  amount  were
$138,519 and $121,520, respectively.

(b) Notes receivable from affiliate

For  notes receivable from affiliates, which is subject to a floating  rate
of interest, carrying value is a reasonable estimate of fair value.

(c) Convertible debentures

For  the  convertible debentures, which are subject to a floating  rate  of
interest, carrying value is a reasonable estimate of fair value.
                                  36
<PAGE>
6.  RELATED PARTY TRANSACTIONS

Under  the  current structure, FCC pays a majority of the general operating
expenses  of  the affiliated group.  FCC then receives management,  service
fees and reimbursements from the various affiliates.

UII  has  a  service  agreement  with USA.  The  agreement  was  originally
established upon the formation of USA which was a 100% owned subsidiary  of
UII.   Changes  in the affiliate structure have resulted in USA  no  longer
being  a  direct  subsidiary of UII, though still  a  member  of  the  same
affiliated  group.   The original service agreement has remained  in  place
without modification.  USA is to pay UII monthly fees equal to 22%  of  the
amount  of collected first year premiums, 20% in second year and 6% of  the
renewal premiums in years three and after.  UII has a subcontract agreement
with  UTI  to  perform services and provide personnel and facilities.   The
services  included  in  the  agreement are claim processing,  underwriting,
processing and servicing of policies, accounting services, agency services,
data  processing and all other expenses necessary to carry on the  business
of  a  life insurance company.  UII's subcontract agreement with UTI states
that  UII is to pay UTI monthly fees equal to 60% of collected service fees
from  USA as stated above.  The service fees received from UII are recorded
in UTI's financial statements as other income.

On January 1, 1993, FCC entered into an agreement with UG pursuant to which
FCC provides management services necessary for UG to carry on its business.
In  addition  to  the  UG  agreement, FCC and its  affiliates  have  either
directly   or   indirectly  entered  into  management  and/or  cost-sharing
arrangements  for FCC's management services.  FCC received  net  management
fees  of $8,793,905, $9,893,321 and $9,927,000 under these arrangements  in
1998,  1997  and  1996, respectively.  UG paid $8,018,141,  $8,660,481  and
$9,626,559 to FCC in 1998, 1997 and 1996, respectively.

USA  paid $835,345, $989,295 and $1,567,891 under their agreement with  UII
for  1998,  1997 and 1996, respectively.  UII paid $501,207,  $593,577  and
$940,734  under  their  agreement  with  UTI  for  1998,  1997  and   1996,
respectively.   Additionally, UII paid FCC $0,  $150,000  and  $300,000  in
1998, 1997 and 1996, respectively for reimbursement of costs attributed  to
UII.  These reimbursements are reflected as a credit to general expenses.

Respective  domiciliary insurance departments have approved the  agreements
of  the  insurance  companies  and it is Management's  opinion  that  where
applicable, costs have been allocated fairly and such allocations are based
upon  generally accepted accounting principles.  The costs paid by UTI  for
services include costs related to the production of new business, which are
deferred  as  policy  acquisition costs  and  charged  off  to  the  income
statement  through  "Amortization of deferred  policy  acquisition  costs".
Amounts  recorded by USA as deferred acquisition costs are no greater  than
what  would have been recorded had all such expenses been directly incurred
by  USA.   Also  included  are costs associated  with  the  maintenance  of
existing policies that are charged as current period costs and included  in
"general expenses".

On  July  31,  1997, United Trust Inc. issued convertible  notes  for  cash
received  totaling  $2,560,000  to  seven  individuals,  all  officers   or
employees  of United Trust Inc.  The notes bear interest at a  rate  of  1%
over  prime,  with interest payments due quarterly and principal  due  upon
maturity  of July 31, 2004.  The conversion price of the notes  are  graded
from  $12.50 per share for the first three years, increasing to $15.00  per
share  for  the next two years and increasing to $20.00 per share  for  the
last  two years.  Conditional upon the seven individuals placing the  funds
with  UTI were the acquisition by UTI of a portion of the holdings  of  UTI
owned by Larry E. Ryherd and his family and the acquisition of common stock
of UTI and UII held by Thomas F. Morrow and his family and the simultaneous
retirement of Mr. Morrow.  Neither Mr. Morrow nor Mr. Ryherd was a party to
the  convertible  notes.   On March 1, 1999, the  individuals  holding  the
convertible  notes  sold their interests in said notes  to  First  Southern
Bancorp, Inc. in private transactions.

Approximately  $1,048,000 of the cash received from  the  issuance  of  the
convertible notes was used to acquire stock holdings of United  Trust  Inc.
and  United  Income, Inc. of Mr. Morrow and to acquire  a  portion  of  the
United  Trust  Inc.  holdings  of Larry E.  Ryherd  and  his  family.   The
remaining cash received will be used by UTI to provide additional operating
liquidity and for future acquisitions of life insurance companies.  On July
31,  1997,  UTI  acquired a total of 126,921 shares of  United  Trust  Inc.
common  stock  and 47,250 shares of United Income, Inc. common  stock  from
Thomas F. Morrow and his family.  Mr. Morrow simultaneously retired  as  an
executive officer of UTI and its affiliates.  Mr. Morrow will remain  as  a
member  of  the Board of Directors of UTI.  In exchange for his stock,  Mr.
                                     37
<PAGE>
Morrow  and  his family received approximately $348,000 in cash, promissory
notes  valued  at  $140,000 due in eighteen months,  and  promissory  notes
valued at $1,030,000 due January 31, 2005.  These notes bear interest at  a
rate  of 1% over prime, with interest due quarterly and principal due  upon
maturity.    The   notes   do   not  contain  any  conversion   privileges.
Additionally,  on July 31, 1997, UTI acquired a total of 97,499  shares  of
United  Trust Inc. common stock from Larry E. Ryherd and his  family.   Mr.
Ryherd  and  his  family  received approximately $700,000  in  cash  and  a
promissory  note valued at $251,000 due January 31, 2005.  The  acquisition
of  approximately 16% of Mr. Ryherd's stock holdings in United  Trust  Inc.
was  completed as a prerequisite to the convertible notes placed  by  other
management  personnel to reduce the total holdings of Mr.  Ryherd  and  his
family  in  UTI  to  make  the  stock more  attractive  to  the  investment
community.   Following  the transaction, Mr. Ryherd and  his  family  owned
approximately 31% of the outstanding common stock of United Trust Inc.  The
market price of UTI common stock on July 31, 1997 was $6.00 per share.  The
stock  acquired  in  the  above  transaction  was  from  the  largest   two
shareholders  of  UTI stock.  There were no additional stated  or  unstated
items or agreements relating to the stock purchase.

On  July  31,1997,  UTI  entered  into  employment  agreements  with  eight
individuals, all officers or employees of UTI.  The agreements have a  term
of  three years, excepting the agreements with Mr. Ryherd and Mr. Melville,
which  have five-year terms.  The agreements secure the services  of  these
key   individuals,  providing  UTI  a  stable  management  environment  and
positioning for future growth.


7.   STOCK OPTION PLANS

The Company has a stock option plan under which certain directors, officers
and  employees  may be issued options to purchase up to  31,500  shares  of
common  stock  at  $13.07  per share.  Options become  exercisable  at  25%
annually  beginning  one year after date of grant and expire  generally  in
five  years.   In  November 1992, 10,437 option shares  were  granted.   At
December 31, 1998, options for 451 shares were exercisable and options  for
20,576  shares were available for grant.  Options for 10,437 shares expired
during 1997.  No options were exercised during 1998.

A  summary  of the status of the Company's stock option plan for the  three
years ended December 31, 1998, and changes during the years ending on those
dates is presented below.

                           1998            1997            1996
                            Exercise         Exercise          Exercise
                  Shares       Price Shares     Price Shares      Price
Outstanding  at
 beginning of year   451     $ 13.07 10,888   $ 13.07 10,888     $13.07
  Granted              0        0.00      0      0.00      0       0.00
  Exercised            0        0.00      0      0.00      0       0.00
  Forfeited            0        0.00 10,437     13.07      0       0.00
Outstanding at
 end of year         451     $ 13.07    451   $ 13.07 10,888     $13.07

Options exercisable
 at year end         451     $ 13.07    451   $ 13.07 10,888     $13.07

The following information applies to options outstanding at December 31, 1998:

  Number outstanding                             451
  Exercise price                             $ 13.07
  Remaining contractual life                 2 years

On  January 15, 1991, the Company adopted an additional Non-Qualified Stock
Option  Plan  under  which certain employees and  sales  personnel  may  be
granted  options.   The  plan provides for the granting  of  up  to  42,000
options  at  an  exercise price of $.47 per share.  The  options  generally
expire  five  years from the date of grant.  Options for 10,220  shares  of
common stock were granted in 1991, options for 1,330 shares were granted in
1993  and  options for 301 shares were granted in 1995.  A total of  11,620
option shares have been exercised as of December 31, 1998.  At December 31,
1998,  231 options have been granted and are exercisable.  No options  were
exercised during 1998.
                                     38
<PAGE>
  A  summary of the status of the Company's stock option plan for the three
  years  ended  December 31, 1998, and changes during the years  ending  on
  those dates is presented below.

                           1998            1997            1996
                            Exercise        Exercise           Exercise
                  Shares       Price  Shares   Price  Shares      Price
Outstanding at
 beginning of year   231      $ 0.47     231 $  0.47     301      $0.47
  Granted              0        0.00       0    0.00       0       0.00
  Exercised            0        0.00       0    0.00     (70)      0.47
  Forfeited            0        0.00       0    0.00       0       0.00
Outstanding at
 end of year         231      $ 0.47     231 $  0.47     231     $ 0.47

Options exercisable
 at year end         231      $ 0.47     231 $  0.47     231     $ 0.47
Fair value of
 options granted
  during the year             $ 0.00         $  0.00             $ 0.00

The following information applies to options outstanding at December 31, 1998:

  Number outstanding                             231
  Exercise price                              $ 0.47
  Remaining contractual life                 2 years


8.   CONVERTIBLE DEBENTURES

In  early  1994,  UII received $902,300 from the sale of  Debentures.   The
Debentures  were  issued pursuant to an indenture between the  Company  and
National  City  Bank (formerly First of America Bank - Southeast  Michigan,
N.A.),  as  trustee.  The Debentures are general unsecured  obligations  of
UII,  subordinate in right of payment to any existing or future senior debt
of  UII.   The  Debentures  are  exchangeable  and  transferable,  and  are
convertible at any time prior to March 31, 1999 into UII's Common Stock  at
a  conversion price of $25.00 per share, subject to adjustment  in  certain
events.   The  Debentures  bear  interest  from  March  31,  1994,  payable
quarterly, at a variable rate equal to one percentage point above the prime
rate  published in the Wall Street Journal from time to time.  On or  after
March 31, 1999, the Debentures will be redeemable at UII's option, in whole
or  in  part,  at redemption prices declining from 103% of their  principal
amount.   No  sinking fund will be established to redeem  Debentures.   The
Debentures will mature on March 31, 2004.  The Debentures are not listed on
any national securities exchange or the NASDAQ National Market System.


9.   REVERSE STOCK SPLIT

On  May  13,  1997,  UII  effected a 1 for  14.2857  reverse  stock  split.
Fractional  shares received a cash payment on the basis of $0.70  for  each
old  share.  Prior period numbers have been restated to give effect of  the
reverse split.
                                    39
<PAGE>

10.  SUMMARIZED FINANCIAL INFORMATION OF UNITED TRUST GROUP, INC.

The  following provides summarized financial information for the  Company's
50% or less owned affiliate:

                                  
            ASSETS                         
                              December 31, 1998   December 31, 1997
<TABLE>
<S>                             <C>              <C>
Total investments               $ 216,247,582    $ 224,281,560
Cash and cash equivalents          25,867,577       15,763,639
Cost of insurance acquired         42,673,693       45,009,452
Other assets                       57,499,087       62,896,384
     TOTAL ASSETS               $ 342,287,939    $ 347,951,035
                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities              $ 268,054,867    $ 268,237,887
Notes payable                      17,559,482       19,081,602
Deferred taxes                      7,543,678       12,157,685
Other liabilities                   6,055,611        4,053,293
     TOTAL LIABILITIES            299,213,638      303,530,467
Minority interests in       
 consolidated subsidiaries          9,749,693       10,130,024

                                                               
Shareholders' equity                                           
Common stock no par value          46,577,216       45,926,705
Authorized 10,000 shares - 100
issued
Accumulated other
comprehensive income                 (385,275)         (41,708)

Accumulated deficit               (12,867,333)     (11,594,453)

TOTAL SHAREHOLDERS' EQUITY         33,324,608       34,290,544
TOTAL LIABILITIES AND
 SHAREHOLDERS' EQUITY           $ 342,287,939    $ 347,951,035
</TABLE>

                                     1998           1997           1996
<TABLE>
<S>                             <C>            <C>            <C>
Premiums and policy fees,
 net of reinsurance             $ 26,396,077   $ 28,639,245   $ 30,944,458
Net investment income             15,080,005     14,882,677     15,902,107
Other                             (1,101,219)      (171,304)      (370,454)
                                  40,374,863     43,350,618     46,476,111
Benefits, claims and
 settlement expenses              25,472,374     27,055,171     30,326,032
Other expenses                    20,914,833     16,776,537     22,953,093
                                  46,387,207     43,831,708     53,279,125
Loss before income tax and                                                 
 minority interest                (6,012,344)      (481,090)    (6,803,014)
Income tax credit (provision)      4,502,537       (571,999)     4,643,961
Minority interest in loss of                                               
  consolidated subsidiaries          236,927        129,712        498,356
Net loss                        $ (1,272,880)  $   (923,377)  $ (1,660,697)
</TABLE>
                                       40
11.  OTHER CASH FLOW DISCLOSURES

On  a cash basis, UII paid $64,289, $85,155 and $84,027 in interest expense
for the years 1998, 1997 and 1996, respectively.  UII paid $0, $0 and $0 in
federal income tax for 1998, 1997 and 1996, respectively.


12.  CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in financial institutions that at times
may  exceed federally insured limits.  The Company has not experienced  any
losses  in  such accounts and believes it is not exposed to any significant
credit risk on cash and cash equivalents.


13.  NEW ACCOUNTING STANDARDS

The  Financial  Accounting Standards Board (FASB) has issued  Statement  of
Financial  Accounting  Standards (SFAS) 128 entitled  Earnings  per  share,
which  is  effective  for financial statements for fiscal  years  beginning
after December 15, 1997.  SFAS 128 specifies the computation, presentation,
and  disclosure requirements for earnings per share (EPS) for entities with
publicly  held  common  stock or potential common stock.   The  Statement's
objective is to simplify the computation of earnings per share, and to make
the  U.S. standard for computing EPS more compatible with the EPS standards
of other countries.

This  statement  was  adopted for the 1997 Financial Statements.   For  all
periods presented the Company reported a loss from continuing operations so
any  potential issuance of common shares would have an antidilutive  effect
on  EPS.  Consequently, the adoption of SFAS 128 did not have an impact  on
the Company's financial statement.

The FASB has issued SFAS 130 entitled Reporting Comprehensive Income, which
is  effective  for  financial statements for fiscal years  beginning  after
December  15,  1997.   SFAS  130 establishes standards  for  reporting  and
presentation of comprehensive income and its components in a  full  set  of
financial  statements.   Comprehensive  income  includes  all  changes   in
shareholders'   equity,  except  those  arising  from   transactions   with
shareholders, and includes net income and net unrealized gains (losses)  on
securities.  SFAS 130 was adopted as of January 1, 1998.  Adopting the  new
standard  required  the  Company  to make  additional  disclosures  in  the
financial  statements, but did not affect the Company's financial  position
or results of operations.

All  items  of  other comprehensive income reflect no related  tax  effect,
since the Company has an allowance against the collection of any future tax
benefits.   In  addition, there was no sale or liquidation  of  investments
requiring a reclassification adjustment for the period presented.

The  FASB  has issued SFAS 131 entitled, Disclosures about Segments  of  an
Enterprise  and  Related  Information, which  is  effective  for  financial
statements  for fiscal years beginning after December 15, 1997.   SFAS  131
requires that a public business enterprise report financial and descriptive
information  about  its reportable operating segments.  Operating  segments
are  components of an enterprise about which separate financial information
is  available  that  is  evaluated regularly in deciding  how  to  allocate
resources and in assessing performance. SFAS 131 was adopted as of  January
1,  1998.   Adopting  the  new  standard had no  affect  on  the  Company's
financial  position  or results of operations, since  the  Company  has  no
reportable operating segments.

The  FASB  has  issued  SFAS  132  entitled, Employers'  Disclosures  about
Pensions  and  Other  Postretirement  Benefits,  which  is  effective   for
financial  statements for fiscal years beginning after December  15,  1997.
SFAS 132 revises current disclosure requirements for employer provided post-
retirement  benefits.  The statement does not change retirement measurement
or  recognition  issues.   SFAS 132 was adopted  as  of  January  1,  1998.
Adopting the new standard had no affect on the Company's financial position
or  results of operations, since the Company has no pension plan  or  other
obligation for post-retirement benefits.
                                  41
<PAGE>
The  FASB  has  issued SFAS 133 entitled, Accounting  for  Derivative
Instruments  and  Hedging  Activities, which is effective  for  all  fiscal
quarters  of fiscal years beginning after June 15, 1999.  SFAS 133 requires
that an entity recognize all derivatives as either assets or liabilities in
the  statement of financial position and measure those instruments at  fair
value.   If  certain conditions are met, a derivative may  be  specifically
designated  as  a  specific  type of exposure hedge.   The  accounting  for
changes  in the fair value of a derivative depends on the intended  use  of
the derivative and the resulting designation.  The adoption of SFAS 133  is
not  expected to have a material effect on the Company's financial position
or  results  of operations, since the Company has no derivative or  hedging
type investments.


14.  CHANGE IN CONTROL OF UNITED TRUST, INC.

On November 20, 1998, First Southern Funding, Inc., a Kentucky corporation,
("FSF")  and affiliates acquired 929,904 shares of common stock  of  United
Trust,  Inc.,  an  Illinois corporation, ("UTI") from UTI and  certain  UTI
shareholders.   As consideration for the shares, FSF paid  UTI  $10,999,995
and  certain  shareholders  of UTI $999,990 in cash.   FSF  and  affiliates
employed working capital to make these purchases of common stock, including
funds  on  hand and amounts drawn under existing lines of credit with  Star
Bank,  NA.   FSF borrowed $7,082,878 and First Southern Bancorp,  Inc.,  an
affiliate  of  FSF,  borrowed $495,775 in making the  purchases.   FSF  and
affiliates  expect to repay the borrowings through the sale of assets  they
currently own.

Details of the transaction can be outlined as follows: FSF acquired 389,715
shares  of  UTI common stock at $10.00 per share.  These shares represented
stock  acquired during 1997 by UTI in private transactions.   Additionally,
FSF  acquired  473,523 shares of authorized but unissued  common  stock  at
$15.00 per share.  FSF acquired 66,666 shares of common stock from UTI  CEO
Larry  Ryherd, and his family, at $15.00 per share.  FSF has  committed  to
purchase  $2,560,000 of face amount of UTI convertible notes  from  certain
officers  and directors of UTI for a cash price of $3,072,000 by  March  1,
1999.  FSF is required to convert the notes to UTI common stock by July 31,
2000.    UTI  has  granted,  for  nominal  consideration,  an  irrevocable,
exclusive  option to FSF to purchase up to 1,450,000 shares of  UTI  common
stock  for  a purchase price in cash equal to $15.00 per share,  with  such
option  to  expire  on  July 1, 2001.  UTI has also  caused  three  persons
designated  by FSF to be appointed, as part of the maximum of  11,  to  the
Board of Directors of UTI.

Following the transactions described above, and together with shares of UTI
acquired  on the market, FSF and affiliates currently own 1,073,577  shares
of  UTI  common  stock  (43.1%) becoming the largest  shareholder  of  UTI.
Through the shares acquired and options owned, FSF can ultimately own  over
51% of UTI.  Mr. Jesse T. Correll is the majority shareholder of FSF, which
is  an  affiliate  of First Southern Bancorp, Inc., a bank holding  company
that owns a bank that operates out of 14 locations in central Kentucky.


15.  PROPOSED MERGER

On March 25, 1997, the Board of Directors of UTI and UII voted to recommend
to  the  shareholders a merger of the two companies.   Under  the  Plan  of
Merger, UTI would be the surviving entity with UTI issuing one share of its
stock for each share held by UII shareholders.

UTI owns 53% of United Trust Group, Inc., an insurance holding company, and
UII owns 47% of United Trust Group, Inc.  At the time the decision to merge
was  made,  neither  UTI  nor UII have any other  significant  holdings  or
business dealings.  The Board of Directors of each company thus concluded a
merger  of  the  two  companies  would be in  the  best  interests  of  the
shareholders.   The  merger will result in certain cost savings,  primarily
related to costs associated with maintaining a corporation in good standing
in the states in which it transacts business.

A  vote of the shareholders of UTI and UII regarding the proposed merger is
anticipated to occur sometime during the second quarter of 1999.
                                  42

<PAGE>
16.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

   
                                                 1998
                          1st             2nd             3rd         4th
<TABLE>
<S>                   <C>            <C>             <C>          <C>
Interest income       $  11,551      $   12,220      $   12,285   $  13,652
Interest income/affil.   20,488          20,708          20,972      21,149
Service agreement
 income                 237,358         197,581         227,868     172,538
Total revenues          287,351         250,471         276,404     220,697
Management fee/affil    142,415         116,226         139,022     103,544
Operating expenses       50,140          10,203          10,444       9,609
Interest expense         21,430          21,429          21,430      20,866
Operating income (loss)  73,366         102,613         105,508      86,678
Net income (loss)       105,177         225,221         328,299    (711,654)
Basic earnings (loss)
 per share                 0.08            0.16            0.24       (0.52)
Diluted earnings (loss)
 per share                 0.09            0.17            0.24       (0.52)
</TABLE>
                                                1997
                          1st              2nd            3rd         4th
<TABLE>
<S>                   <C>            <C>             <C>          <C>
Interest income       $   2,659      $    2,680      $   10,806   $  10,982
Interest income/affil.   19,956          20,171          21,521      20,931
Service agreement
 income                 294,095         287,596         213,518     194,086
Total revenues          342,657         333,661         266,816     242,988
Management fee/affil    226,457         247,558         153,111     116,451
Operating expenses       50,318           9,682           9,912      10,261
Interest expense         20,866          21,430          21,429      21,430
Operating income         45,016          54,991          82,364      94,846
Net income (loss)        55,572          84,941        (136,852)    (82,977)
Basic earnings (loss)
 per share                 0.04            0.06           (0.10)      (0.06)
Diluted earnings (loss)
 per share                 0.05            0.07           (0.10)      (0.06)
</TABLE>
                                          1996
                           1st            2nd             3rd         4th
<TABLE>
<S>                   <C>            <C>             <C>          <C>
Net investment income $   3,673      $    3,793      $    2,893   $   2,740
Interest income/affil.   18,078          20,717          20,249      20,389
Service agreement
 income                 536,604         459,454         406,952     164,881
Total revenues          583,627         535,094         456,715     215,511
Management fee/affil    421,963         425,672         294,170      98,930
Operating expenses       51,804          14,514          12,045      11,166
Interest expense         21,430          20,865          20,866      20,866
Operating income         88,430          74,043         129,634      84,549
Net income (loss)       235,469          50,795        (583,728)    (21,619)
Basic earnings (loss)
 per share                 0.01            0.00           (0.03)       0.00
Diluted earnings (loss)
 per share                 0.01            0.00           (0.03)       0.00
</TABLE>
                                       43
<PAGE>
ITEM  9.   DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND  FINANCIAL
           DISCLOSURE

           None

                                 PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF UII

                          THE BOARD OF DIRECTORS

In  accordance  with the laws of Ohio and the Certificate of  Incorporation
and  Bylaws  of  UII as amended, the Company is managed  by  its  executive
officers  under the direction of the Board of Directors.  The Board  elects
executive  officers, evaluates their performance, works with management  in
establishing business objectives and considers other fundamental  corporate
matters, such as the issuance of stock or other securities, the purchase or
sale  of  a business and other significant corporate business transactions.
In  the fiscal year ended December 31, 1998, the Board met five times.  All
directors attended at least 75% of all meetings of the board except for Mr.
Aveni.

The  Board  of  Directors  has  an Audit Committee  consisting  of  Messrs.
Berschet,  Melville and Teater.  The Audit Committee reviews  and  acts  or
reports  to  the  Board  with respect to various  auditing  and  accounting
matters,  the  scope of the audit procedures and the results  thereof,  the
internal  accounting  and control systems of UII, the  nature  of  services
performed for UII and the fees to be paid to the independent auditors,  the
performance  of  the  UII's  independent  and  internal  auditors  and  the
accounting  practices of UII.  The Audit Committee also recommends  to  the
full  Board  of Directors the auditors to be appointed by the  Board.   The
Audit  Committee  met  once in 1998.  All members  were  present  with  the
exception of Mr. Teater.

The  compensation of the UII's executive officers is determined by the full
Board of Directors (see report on Executive Compensation).

Under the UII's Certificate of Incorporation, the Board of Directors may be
comprised of between five and twenty-one directors.  The Board currently
has a fixed number of directors at nine.  Shareholders elect Directors to
serve for a period of one year at the UII's Annual Shareholders' meeting.

The  following information with respect to business experience of the Board
of  Directors  has been furnished by the respective directors  or  obtained
from the records of UII.

DIRECTORS

NAME, AGE      POSITION WITH UII, BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS

Randall L. Attkisson  53
               Director  of  UII since  1998,  Chief  Financial
               Officer, Treasurer, Director of First Southern Bancorp, Inc.
               since 1986; Director of The Galilean Home, Liberty, KY since
               1996;  Treasurer, Director of First Southern  Funding,  Inc.
               since  1992;  Director of The River Foundation,  Inc.  since
               1990;  Treasurer, Director of Somerset Holdings, Inc.  since
               1987;  President  of Randall L. Attkisson & Associates  from
               1982 to 1986; Commissioner of Kentucky Department of Banking
               &  Securities  from  1980  to  1982;  Self-employed  Banking
               Consultant in Miami, FL from 1978 to 1980.

Vincent T. Aveni 72
               Director of UII since 1987; Chairman Emeritus  of
               Realty  One,  Inc.  and co-developer of  the  Three  Village
               Condominium;  currently  serving  the  Ohio  Association  of
               Realtors as a trustee; past President of Ohio Association of
               Realtors;  past  Regional Vice President  of  the  Ohio  and
               Michigan National Association Marketing Institute, and  Farm
               and Land Institute.

Marvin W. Berschet 69
               Director of UII since 1987; self-employed  since
               1956;  charter  member of National Cattlemen's  Association;
               Board  member of Meat Export Federation for seven years  and
               Chairman  of  Beef Council for three years;  served  on  the
               National  Livestock  and  Meat  Board  for  16  years;  past
               President of Ohio Cattlemen's Association.
                                      44
<PAGE>
Jesse T. Correll 42
               Director of UII since 1998, Chairman, President,
               Director  of  First  Southern  Bancorp,  Inc.  since   1983;
               President,  Director of First Southern Funding,  Inc.  since
               1992;   President, Director of Somerset Holdings,  Inc.  and
               Lancaster  Life  Reinsurance  Company  and  First   Southern
               Insurance  Agency  since 1987; President,  Director  of  The
               River  Foundation since 1990; President, Director of  Dyscim
               Holdings  Company,  Inc.  since  1990;  Director  or  Adamas
               Diamond Corporation since 1980; Secretary, Director Lovemore
               Holding  Company  since 1987; President, Director  of  North
               Plaza  of  Somerset  since  1990;  Director  of  St.  Joseph
               Hospital,  Lexington,  KY since 1997;  Managing  Partner  of
               World Wide Minerals from 1978 to 1983.

James E. Melville 53
               Director, President and Chief Operating  Officer
               since  July 1997; Chief Financial Officer of UII since 1993,
               Senior Executive Vice President of UII since September 1992;
               President of certain Affiliate Companies from May 1989 until
               September 1991; Chief Operating Officer of FCC from 1989  to
               September 1991; Chief Operating Officer of certain Affiliate
               Companies  from 1984 until September 1991; Senior  Executive
               Vice  President  of  certain Affiliate Companies  from  1984
               until  September 1989; Consultant to UTI and UTG from  March
               to September, 1992; President and Chief Operating Officer of
               certain  affiliate  life  insurance  companies  and   Senior
               Executive   Vice   President  of   non-insurance   affiliate
               companies since 1992.

Charlie E. Nash 70
               Director  of UII since 1987; Executive  Director  and
               State  President of the Ohio Farmers Union;  serves  on  the
               Board  of  Directors  for  National  Farmers  Union  Uniform
               Pension  Committee and a member of its Investment  Committee
               for  pension funds; Chairman of the Putnam County  Board  of
               Elections; serves on the Board of Directors of Farmers Union
               Ventures,  Inc.,  Green  Thumb, Inc. and  Farmers  Education
               Foundation; he is a farm owner.

Millard V. Oakley 68
               Director of UII since 1998, Presently serves on
               Board of Directors and Executive Committee of Thomas Nelson,
               a  publicly held publishing company based in Nashville,  TN;
               Director   of   First  National  Bank  of  the  Cumberlands,
               Livingston-Cooksville, TN; Lawyer with limited law  practice
               since  1980;  State  Insurance  Commissioner  for  State  of
               Tennessee  from  1975  to 1979; Served as  General  Counsel,
               United  States  House of Representatives, Washington,  D.C.,
               Congressional  Committee on Small Business  from  1971-1973;
               Served  four  elective terms as County Attorney for  Overton
               County,  Tennessee; Elected delegate to National  Democratic
               Convention  in  1964;   Served four elective  terms  in  the
               Tennessee  General  Assembly from 1956 to  1964;  Lawyer  in
               Livingston,  TN from 1953 to 1971; Elected to the  Tennessee
               Constitutional Convention in 1952.

Larry E. Ryherd 58
               Chairman  of the Board of Directors since  1987,  CEO
               since  1992;  UTI Chairman of the Board of Directors  and  a
               Director  since  1984,  CEO since 1991;  Chairman,  CEO  and
               Director  of UTG since 1992; President, CEO and Director  of
               certain  affiliate  companies since 1992.   Mr.  Ryherd  has
               served has Chairman of the Board, CEO, President and COO  of
               certain affiliate life insurance companies since 1992.

Robert W. Teater 71
               Director of UII since 1987; Director of UTG and certain
               affiliate  companies since 1992; member of  Columbus  School
               Board  since 1991, President of Columbus School Board  since
               1992;  President  of  Robert W.  Teater  and  Associates,  a
               comprehensive   consulting   firm   in   natural   resources
               development and organization management since 1983.
                                    45
<PAGE>

EXECUTIVE OFFICERS OF UII

More  detailed  information on the following officers of UII appears under
"The Board of Directors":

     Larry E. Ryherd    Chairman of the Board and Chief Executive Officer
     James E. Melville  President and Chief Operating Officer

Other officers of UII are set forth below:

NAME, AGE      POSITION WITH UII, BUSINESS EXPERIENCE AND OTHER DIRECTORSHIPS

George E. Francis  55
               Executive Vice President and Chief Administrative
               Officer  since  July 1997; Secretary of UII  since  February
               1993;  Director of certain Affiliate Companies since October
               1992; Senior Vice President and Chief Administrative Officer
               of  certain  Affiliate Companies since  1989;  Secretary  of
               certain Affiliate Companies since March 1993; Treasurer  and
               Chief Financial Officer of certain Affiliate Companies  from
               1984 until September 1992.

Theodore C. Miller 36
               Senior Vice President and Chief Financial Officer
               since  July 1997; Vice President and Treasurer since October
               1992;  Vice  President and Controller of  certain  Affiliate
               Companies from 1984 to 1992.

ITEM 11.  EXECUTIVE COMPENSATION UII

EXECUTIVE COMPENSATION TABLE

The  following table sets forth certain information regarding  compensation
paid  to  or  earned  by  UII's Chief Executive Officer  and  each  of  the
Executive Officers of UII whose salary plus bonus exceeded $100,000  during
each  of UII's last three fiscal years.  Compensation for services provided
by the named executive officers to UII and its affiliates is paid by FCC as
set forth in their employment agreements.  (See Employment Contracts).

                        SUMMARY COMPENSATION TABLE

                              Annual Compensation (1)

                                                 Other Annual
Name and                                        Compensation (2)
Principal Position                 Salary($)           $

Larry E. Ryherd          1998         400,000         20,373
Chairman of the Board    1997         400,000         18,863
Chief Executive Officer  1996         400,000         17,681

James E. Melville        1998         238,200         31,956
President, Chief         1997         238,200         29,538
Operating Officer        1996         238,200         27,537

George E. Francis        1998         126,200          8,791
Executive Vice           1997         122,000          8,187
President, Secretary     1996         119,000          7,348


(1)  Compensation deferred at the election of named officers is included in
     this section.
                                    46
<PAGE>

(2)   Other  annual  compensation consists of interest earned  on  deferred
compensation  amounts  pursuant  to their  employment  agreements  and  the
Company's  matching  contribution  to the  First  Commonwealth  Corporation
Employee Savings Trust 401(k) Plan.

AGGREGATED  OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END  OPTION/SAR
VALUES

The  following table summarizes for fiscal year ending, December 31,  1998,
the  number  of  shares subject to unexercised options  and  the  value  of
unexercised options of the Common Stock of UTI held by the named  executive
officers.   The values shown were determined by multiplying the  applicable
number of unexercised share options by the difference between the per share
market  price  on December 31, 1998 and the applicable per  share  exercise
price.   There were no options granted to the named executive officers  for
the past three fiscal years.
                                Number of Securities    Value of Unexercised
             Number of          Underlying Unexercised  in the Money Options/
               Shares             Options/SARs            SARs at FY-End ($)
             Acquired on   Value     at FY-End (#)
             Exercise     Realized      
                 (#)         ($)
Name                                Exerc-      Unexer-   Exerc-    Unexer-
                                     isable      cisable   isable    cisable

Larry E. Ryherd         -      -    13,800        -           -         -
James E. Melville       -      -    30,000        -           -         -
George E. Francis       -      -     4,600        -           -         -


COMPENSATION OF DIRECTORS

UII's  standard arrangement for the compensation of directors provide  that
each  director  shall receive an annual retainer of $2,400, plus  $300  for
each  meeting  attended and reimbursement for reasonable  travel  expenses.
UII's  director  compensation policy also provides that directors  who  are
either employees of UII or directors or officers of First Southern Funding,
LLC  and  affiliates do not receive any compensation for their services  as
directors  except  for  reimbursement for reasonable  travel  expenses  for
attending each meeting; namely, Messrs Ryherd, Melville, Attkisson, Correll
and Oakley.

EMPLOYMENT CONTRACTS

On July 31, 1997, Larry E. Ryherd entered into an employment agreement with
FCC.   Formerly, Mr. Ryherd had served as Chairman of the Board  and  Chief
Executive  Officer of UII and its affiliates.  Pursuant to  the  agreement,
Mr.  Ryherd  agreed to serve as Chairman of the Board and  Chief  Executive
Officer  of  UII  and  in  addition, to serve in  other  positions  of  the
affiliated  companies if appointed or elected.  The agreement provides  for
an  annual salary of $400,000 as determined by the Board of Directors.  The
term  of  the  agreement  is for a period of five years.   Mr.  Ryherd  has
deferred  portions of his income under a plan entitling him to  a  deferred
compensation  payment on January 2, 2000 in the amount  of  $240,000  which
includes   interest   at  the  rate  of  approximately   8.5%   per   year.
Additionally, Mr. Ryherd was granted an option to purchase up to 13,800  of
the  Common  Stock of UTI at $17.50 per share.  The option  is  immediately
exercisable and transferable.  The option will expire December 31, 2000.

FCC entered into an employment agreement dated July 31, 1997 with James  E.
Melville pursuant to which Mr. Melville is employed as President and  Chief
Operating  Officer  and  in addition, to serve in other  positions  of  the
affiliated  companies  if  appointed or elected  at  an  annual  salary  of
$238,200.   The term of the agreement expires July 31, 2002.  Mr.  Melville
has  deferred  portions  of his income under a  plan  entitling  him  to  a
deferred compensation payment on January 2, 2000 of $400,000 which includes
interest  at  the  rate of approximately 8.5% annually.  Additionally,  Mr.
Melville  was  granted  an option to purchase up to 30,000  shares  of  the
Common  Stock  of  UTI  at  $17.50 per share.  The  option  is  immediately
exercisable and transferable.  The option will expire December 31, 2000.

FCC entered into an employment agreement with George E. Francis on July 31,
1997.   Under  the  terms  of the agreement, Mr.  Francis  is  employed  as
Executive  Vice President of the Company at an annual salary  of  $126,200.
                                     47
<PAGE>
Mr. Francis also agreed to serve in other positions if appointed or elected
to  such  positions  without  additional compensation.   The  term  of  the
agreement expires July 31, 2000.  Mr. Francis has deferred portions of  his
income  under  a plan entitling him to a deferred compensation  payment  on
January  2,  2000  of  $80,000  which includes  interest  at  the  rate  of
approximately  8.5%  per year.  Additionally, Mr. Francis  was  granted  an
option  to purchase up to 4,600 shares of the Common Stock of UTI at $17.50
per  share.  The option is immediately exercisable and transferable.   This
option will expire on December 31, 2000.

REPORT ON EXECUTIVE COMPENSATION

INTRODUCTION

The  compensation  of UII's executive officers is determined  by  the  full
Board  of  Directors.  The Board of Directors strongly believes that  UII's
executive officers directly impact the short-term and long-term performance
of  UII.   With  this  belief  and the corresponding  objective  of  making
decisions that are in the best interest of UII's shareholders, the Board of
Directors  places significant emphasis on the design and administration  of
UII's executive compensation plans.

EXECUTIVE COMPENSATION PLAN ELEMENTS

BASE SALARY.  The Board of Directors establishes base salaries each year at
a  level  intended to be within the competitive market range of  comparable
companies.   In addition to the competitive market range, many factors  are
considered  in  determining base salaries, including  the  responsibilities
assumed   by  the  executive,  the  scope  of  the  executive's   position,
experience,  length of service, individual performance and internal  equity
considerations.  During the last three fiscal years, there were no material
changes in the base salaries of the named executive officers.

STOCK OPTIONS.  One of UII's priorities is for the executive officers to be
significant shareholders so that the interest of the executives are closely
aligned  with  the  interests of UII's other shareholders.   The  Board  of
Directors  believes  that  this  strategy motivates  executives  to  remain
focused  on  the overall long-term performance of UII.  Stock  options  are
granted at the discretion of the Board of Directors and are intended to  be
granted  at  levels  within  the competitive  market  range  of  comparable
companies.  During 1993, each of the named executive officers were  granted
options  under  their  employment agreements  for  UTI's  Common  Stock  as
described  in  the  Employment Contracts section.  There  were  no  options
granted to the named executive officers during the last three fiscal years.

DEFERRED  COMPENSATION.  A very significant component of overall  Executive
Compensation  Plans is found in the flexibility afforded  to  participating
officers  in  the  receipt of their compensation.  The availability,  on  a
voluntary basis, of the deferred compensation arrangements as described  in
the  Employment  Contracts  section may prove to  be  critical  to  certain
officers, depending upon their particular financial circumstance.


CHIEF EXECUTIVE OFFICER

Larry  E. Ryherd has been Chairman of the Board and Chief Executive Officer
since  1987  and Chairman of the Board of the Company's parent, UTI,  since
1984.   The  Board  of Directors used the same compensation  plan  elements
described  above for all executive officers to determine Mr. Ryherd's  1998
compensation.

In  setting  both the cash-based and equity-based elements of Mr.  Ryherd's
compensation,  the  Board of Directors made an overall  assessment  of  Mr.
Ryherd's  leadership  in achieving UII's long-term strategic  and  business
goals.

Mr.  Ryherd's  base  salary reflects a consideration  of  both  competitive
forces  and  UII's  performance.  The Board of Directors  does  not  assign
specific weights to these categories.

UII  surveys  total cash compensation for chief executive officers  of  the
same  group  of companies described under "Base Salary" above.  Based  upon
its  survey,  UII  then  determines  a median  around  which  it  builds  a
competitive range of compensation for the CEO.  As a result of this review,
the  Board of Directors concluded that Mr. Ryherd's base salary was in  the
low  end  of  the  competitive market, and his  total  direct  compensation
(including  stock  incentives) was competitive for CEOs  running  companies
comparable in size and complexity to UII.
                                  48
<PAGE>
The  Board  of Directors considered UII's financial results as compared  to
other companies within the industry, financial performance for fiscal  1998
as  compared  to fiscal 1997, UII's progress as it relates to UII's  growth
through acquisitions and simplification of the organization, the fact  that
since  UII  does  not  have a Chief Marketing Officer, Mr.  Ryherd  assumes
additional  responsibilities  of  the  Chief  Marketing  Officer,  and  Mr.
Ryherd's   salary  history,  performance  ranking  and  total  compensation
history.

Through  fiscal 1998, Mr. Ryherd's annual salary was $400,000,  the  amount
the  Board  of  Directors set in January 1997.  Following a review  of  the
above  factors,  the Board of Directors decided to recognize  Mr.  Ryherd's
performance  by  placing a greater emphasis on long-term incentive  awards,
and therefore retained Mr. Ryherd's base salary at $400,000.

CONCLUSION.

The Board of Directors believes the mix of structured employment agreements
with   certain   key  executives,  conservative  market   based   salaries,
competitive  cash incentives for short-term performance and  the  potential
for   equity-based  rewards  for  long  term  performance   represents   an
appropriate balance.  This balanced Executive Compensation Plan provides  a
competitive and motivational compensation package to the executive  officer
team  necessary to continue to produce the results UII strives to  achieve.
The  Board  of  Directors  also  believes the Executive  Compensation  Plan
addresses both the interests of the shareholders and the executive team.

                            BOARD OF DIRECTORS
               
               Randall L. Attkisson     Charlie E. Nash
               Vincent T. Aveni         Millard V. Oakley
               Marvin W. Berschet       Larry E. Ryherd
               Jesse T. Correll         Robert W. Teater
               James E. Melville

PERFORMANCE GRAPH

The  following  graph compares the cumulative total shareholder  return  on
UII's  Common Stock during the five fiscal years ended December  31,  1998,
with  the cumulative total return on the NASDAQ Composite Index Performance
and the NASDAQ Insurance Stock Index (1):

            1993    1994    1995    1996    1997    1998
UII          100      92      92      40      32      34
NASDAQ       100      98     138     170     209     293
NASDAQ
 Insurance   100      94     134     153     223     199
                                 49
<PAGE>

(1)UII  selected  the NASDAQ Composite Index Performance as an  appropriate
   comparison because UII's Common Stock is not listed on any exchange  but
   UII's   Common   Stock   is  traded  in  the  over-the-counter   market.
   Furthermore,  UII  selected  the NASDAQ Insurance  Stock  Index  as  the
   second  comparison because there is no similar single "peer company"  in
   the  NASDAQ  system  with  which to compare stock  performance  and  the
   closest  additional line-of-business index which could be found was  the
   NASDAQ  Insurance Stock Index.  Trading activity in UII's  Common  Stock
   is  limited, which may be in part a result of UII's low profile from not
   being  listed on any exchange, and its reported operating  losses.   UII
   has  experienced a tremendous growth rate over the period shown  in  the
   Return  Chart with assets growing from approximately $9 million in  1991
   to  approximately  $13 million in 1998.  The growth rate  has  been  the
   result  of  acquisitions of other companies and new insurance  writings.
   UII  has incurred costs of conversions and administrative consolidations
   associated with the acquisitions which has contributed to the  operating
   losses.   The Return Chart is not intended to forecast or be  indicative
   of possible future performance of UII's stock.

The  foregoing  graph shall not be deemed to be incorporated  by  reference
into  any  filing of UII under the Securities Act of 1933 or the Securities
Exchange   Act  of  1934,  except  to  the  extent  that  UII  specifically
incorporates such information by reference.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The  following  persons served as directors of UII  during  1998  and  were
officers  or  employees  of UII or its affiliates during  1998:   James  E.
Melville  and  Larry  E.  Ryherd.   Accordingly,  these  individuals   have
participated in decisions related to compensation of executive officers  of
UII and its affiliates.

During  1998,  Larry  E. Ryherd, James E. Melville and George  E.  Francis,
executive  officers of UII, were also members of the Board of Directors  of
FCC,  two  of whose executive officers served on the Board of Directors  of
UII:  Messrs. Melville and Ryherd.

During  1998, Larry E. Ryherd and James E. Melville, executive officers  of
UII,  were  also  members of the Board of Directors of UTI,  two  of  whose
executive  officers  served  on the Board of  Directors  of  UII:   Messrs.
Melville, and Ryherd.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF
          UII

                      PRINCIPLE HOLDERS OF SECURITIES

The  following  tabulation sets forth the name and address  of  the  entity
known to be the beneficial owners of more than 5% of UII's Common Stock and
shows:   (i) the total number of shares of Common Stock beneficially  owned
by  such  person as of December 31, 1998 and the nature of such  ownership;
and  (ii) the percent of the issued and outstanding shares of Common  Stock
so owned as of the same date.


Title                             Number of Shares        Percent
Of        Name and Address         and Nature of             of
Class     of Beneficial Owner   Beneficial Ownership       Class

Common     United Trust, Inc. (1)(2)      565,766            40.6%.
Stock no   5250 South Sixth Street
par value  Springfield, IL 62703

(1) Because Larry  E.  Ryherd owns 501,701 shares  of  UTI's  Common  Stock
  (19.6%),  and UTI  owns  565,766 shares of UII Common Stock  (40.6%)  Mr.
  Ryherd  may  be considered  a beneficial owner of UII; however, Mr. Ryherd
  disclaims  any beneficial  interest  in  the shares of UII owned by UTI as
  UTI's  board  of directors   controls  the voting and investment decisions 
  regarding  such
  shares.
                                     50
<PAGE>
(2) First  Southern  Funding,  LLC  &  Affiliates   owns  1,054,440  shares
  of  UTI's  Common  Stock  (42.3%) and  UTI  owns  565,776 shares  of  UII
  Common Stock (40.6%), and because Jesse T.  Correll   owns 83%  of  First
  Southern Funding, LLC, Mr. Correll may  be  considered a beneficial owner
  of UII.

SECURITY OWNERSHIP OF MANAGEMENT OF UII

The  following  tabulation shows with respect to each of the directors  and
nominees of UII, with respect to UII's chief executive officer and each  of
UII's  executive  officers whose salary plus bonus  exceeded  $100,000  for
fiscal  1998,  and with respect to all executive officers and directors  of
UII as a group:  (i) the total number of shares of all classes of stock  of
UII  or any of its parents or affiliates, beneficially owned as of December
31,  1998  and  the nature of such ownership; and (ii) the percent  of  the
issued and outstanding shares of stock so owned as of the same date.

Title  Directors, Named ExecutiveNumber of Shares    Percent
 of   Officers, & All Directors &and Nature of          of
ClassExecutive Officers as a Group Ownership          Class

UTI's       Randall L. Attkisson         0              *
Common      Vincent T. Aveni             0              *
Stock, no   Jesse T. Correll             0 (1)          *
Par value   Marvin W. Berschet           0              *
            George E. Francis        4,600 (2)          *
            James E. Melville       52,500 (3)         2.0%
            Charlie E. Nash              0              *
            Millard V. Oakley        9,000              *
            Larry E. Ryherd        501,701 (4)        19.6%
            Robert W. Teater             0              *
            All directors and
            executive officers as
            a group (ten in number)567,801            21.8%

FCC's       Randall L. Attkisson         0              *
Common      Vincent T. Aveni             0              *
Stock,$1.00 Marvin W. Berschet           0              *
Par value   Jesse T. Correll             0              *
            George E. Francis            0              *
            James E. Melville          544 (5)          *
            Charlie E. Nash              0              *
            Millard V. Oakley            0              *
            Larry E. Ryherd              0              *
            Robert W. Teater             0              *
            All directors and
            executive officers as a
            group (ten in number)      544              *

UII's       Randall L. Attkisson         0              *
Common      Vincent T. Aveni         7,716 (6)          *
Stock, no   Marvin W. Berschet       7,161 (7)          *
Par value   Jesse T. Correll             0              *
            George E. Francis            0              *
            James E. Melville            0              *
            Charlie E. Nash          7,052              *
            Millard V. Oakley            0              *
            Larry E. Ryherd         47,250 (8) (9)      *
            Robert W. Teater         7,380 (10)         *
            All directors and executive
            officers as a group 
            (ten in number)         76,559            5.5%
                                     51
<PAGE>
(1)In  addition,  Mr. Correll is a director and officer of  First  Southern
   Funding,  LLC & Affiliates which own 1,054,440 shares (42.34%)  of  UTI.
   (See Principle Holders of Securities)

(2)Includes  4,600  shares  which  may be acquired  upon  the  exercise  of
   outstanding stock options.

(3)James  E.  Melville  owns 2,500 shares individually  and  14,000  shares
   jointly  with  his spouse.  Includes: (i)  3,000 shares of UTI's  Common
   Stock  which  are  held beneficially in trust for his  daughter,  namely
   Bonnie  J. Melville; (ii) 3,000 shares of UTI's Common Stock, 750 shares
   of  which are in the name of Matthew C. Hartman, his nephew; 750  shares
   of  which are in the name of Zachary T. Hartman, his nephew; 750  shares
   of  which  are in the name of Elizabeth A. Hartman, his niece;  and  750
   shares  of which are in the name of Margaret M. Hartman, his niece;  and
   (iii)  30,000  shares which may be acquired by James  E.  Melville  upon
   exercise of outstanding stock options.

(4)Larry E.  Ryherd  owns  181,091 shares of UTI's Common Stock in his  own
   name.  Includes:  (i) 150,050 shares of UTI's Common Stock in the name of
   Dorothy LouVae Ryherd, his wife; ii) 150,000 shares of UTI's Common Stock
   which are held beneficially in  trust for the three children of Larry  E.
   Ryherd and Dorothy LouVae Ryherd, namely  Shari Lynette Serr, Derek Scott
   Ryherd  and Jarad John Ryherd; (iii) 4,600  shares of UTI's Common Stock,
   2,700 shares of which are in the name of Shari Lynette Serr, 1,900 shares
   of which are in the name of Jarad John Ryherd; (iv)  2,000 shares held by
   Dorothy LouVae Ryherd, his wife as custodian for  granddaughter, (v)  160
   shares held by Larry E. Ryherd as custodian  for  granddaughter; and  (vi)
   13,800  shares which may be acquired by Larry E. Ryherd upon exercise  of
   outstanding stock options.

(5)James E. Melville owns 168 shares individually and 376 shares jointly with
   his spouse.

(6)Includes 272 shares owned directly by Mr. Aveni's brother  and  210 shares
   owned directly by Mr. Aveni's son.

(7)Includes  42  shares  owned  directly  by each of Mr. Berschet's two  sons
   and  77 shares owned  directly  by Mr. Berschet's daughter, a total of 161
   shares.

(8)Includes 47,250 shares beneficially in trust for  the  three  children  of
   Larry  E. Ryherd  and  Dorothy  LouVae  Ryherd, namely Shari Lynette Serr,
   Derek Scott Ryherd and Jarad John Ryherd.

(9)In  addition, Mr. Ryherd is a  director  and  officer  of  UTI,  who  owns
   565,766 shares (29.9%) of the Company.  Mr. Ryherd disclaims any beneficial
   interest  in  the  shares  of the Company owned by UTI as the UTI board  of
   directors  controls the voting and investment decisions  regarding  such
   shares.

(10)Includes  210  shares  owned directly  by  Mr.  Teater's spouse.

   * Less than 1%.

Except  as  indicated  above, the foregoing persons hold  sole  voting  and
investment power.

Directors and officers of UII file periodic reports regarding ownership  of
UII  securities  with  the Securities and Exchange Commission  pursuant  to
Section  16(a) of the Securities Exchange Act of 1934 as amended,  and  the
rules promulgated thereunder.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Under  the  current structure, FCC pays a majority of the general operating
expenses  of  the affiliated group.  FCC then receives management,  service
fees and reimbursements from the various affiliates.

UII  has  a  service  agreement  with USA.  The  agreement  was  originally
established upon the formation of USA which was a 100% owned subsidiary  of
UII.   Changes  in the affiliate structure have resulted in USA  no  longer
being  a  direct  subsidiary of UII, though still  a  member  of  the  same
affiliated  group.   The original service agreement has remained  in  place
without modification.  USA is to pay UII monthly fees equal to 22%  of  the
                                    52
<PAGE>
amount  of collected first year premiums, 20% in second year and 6% of  the
renewal premiums in years three and after.  UII has a subcontract agreement
with  UTI  to  perform services and provide personnel and facilities.   The
services  included  in  the  agreement are claim processing,  underwriting,
processing and servicing of policies, accounting services, agency services,
data  processing and all other expenses necessary to carry on the  business
of  a  life insurance company.  UII's subcontract agreement with UTI states
that  UII is to pay UTI monthly fees equal to 60% of collected service fees
from  USA as stated above.  The service fees received from UII are recorded
in UTI's financial statements as other income.

On January 1, 1993, FCC entered into an agreement with UG pursuant to which
FCC provides management services necessary for UG to carry on its business.
In  addition  to  the  UG  agreement, FCC and its  affiliates  have  either
directly   or   indirectly  entered  into  management  and/or  cost-sharing
arrangements  for FCC's management services.  FCC received  net  management
fees  of $8,793,905, $9,893,321 and $9,927,000 under these arrangements  in
1998,  1997  and  1996, respectively.  UG paid $8,018,141,  $8,660,481  and
$9,626,559 to FCC in 1998, 1997 and 1996, respectively.

USA  paid $835,345, $989,295 and $1,567,891 under their agreement with  UII
for  1998,  1997 and 1996, respectively.  UII paid $501,207,  $593,577  and
$940,734  under  their  agreement  with  UTI  for  1998,  1997  and   1996,
respectively.   Additionally, UII paid FCC $0,  $150,000  and  $300,000  in
1998, 1997 and 1996, respectively for reimbursement of costs attributed  to
UII.  These reimbursements are reflected as a credit to general expenses.

Respective  domiciliary insurance departments have approved the  agreements
of  the  insurance  companies  and it is Management's  opinion  that  where
applicable, costs have been allocated fairly and such allocations are based
upon  generally accepted accounting principles.  The costs paid by UTI  for
services include costs related to the production of new business, which are
deferred  as  policy  acquisition costs  and  charged  off  to  the  income
statement  through  "Amortization of deferred  policy  acquisition  costs".
Amounts  recorded by USA as deferred acquisition costs are no greater  than
what  would have been recorded had all such expenses been directly incurred
by  USA.   Also  included  are costs associated  with  the  maintenance  of
existing policies that are charged as current period costs and included  in
"general expenses".

On  July  31,  1997, United Trust Inc. issued convertible  notes  for  cash
received  totaling  $2,560,000  to  seven  individuals,  all  officers   or
employees  of United Trust Inc.  The notes bear interest at a  rate  of  1%
over  prime,  with interest payments due quarterly and principal  due  upon
maturity  of July 31, 2004.  The conversion price of the notes  are  graded
from  $12.50 per share for the first three years, increasing to $15.00  per
share  for  the next two years and increasing to $20.00 per share  for  the
last  two years.  Conditional upon the seven individuals placing the  funds
with  UTI were the acquisition by UTI of a portion of the holdings  of  UTI
owned by Larry E. Ryherd and his family and the acquisition of common stock
of UTI and UII held by Thomas F. Morrow and his family and the simultaneous
retirement of Mr. Morrow.  Neither Mr. Morrow nor Mr. Ryherd was a party to
the  convertible  notes.   On March 1, 1999, the  individuals  holding  the
convertible  notes  sold their interests in said notes  to  First  Southern
Bancorp, Inc. in private transactions.

Approximately  $1,048,000 of the cash received from  the  issuance  of  the
convertible notes was used to acquire stock holdings of United  Trust  Inc.
and  United  Income, Inc. of Mr. Morrow and to acquire  a  portion  of  the
United  Trust  Inc.  holdings  of Larry E.  Ryherd  and  his  family.   The
remaining cash received will be used by UTI to provide additional operating
liquidity and for future acquisitions of life insurance companies.  On July
31,  1997,  UTI  acquired a total of 126,921 shares of  United  Trust  Inc.
common  stock  and 47,250 shares of United Income, Inc. common  stock  from
Thomas F. Morrow and his family.  Mr. Morrow simultaneously retired  as  an
executive officer of UTI and its affiliates.  Mr. Morrow will remain  as  a
member  of  the Board of Directors of UTI.  In exchange for his stock,  Mr.
Morrow  and  his family received approximately $348,000 in cash, promissory
notes  valued  at  $140,000 due in eighteen months,  and  promissory  notes
valued at $1,030,000 due January 31, 2005.  These notes bear interest at  a
rate  of 1% over prime, with interest due quarterly and principal due  upon
maturity.    The   notes   do   not  contain  any  conversion   privileges.
Additionally,  on July 31, 1997, UTI acquired a total of 97,499  shares  of
United  Trust Inc. common stock from Larry E. Ryherd and his  family.   Mr.
Ryherd  and  his  family  received approximately $700,000  in  cash  and  a
promissory  note valued at $251,000 due January 31, 2005.  The  acquisition
of  approximately 16% of Mr. Ryherd's stock holdings in United  Trust  Inc.
was  completed as a prerequisite to the convertible notes placed  by  other
management  personnel to reduce the total holdings of Mr.  Ryherd  and  his
family  in  UTI  to  make  the  stock more  attractive  to  the  investment
community.   Following  the transaction, Mr. Ryherd and  his  family  owned
                                    53
<PAGE>
approximately 31% of the outstanding common stock of United Trust Inc.  The
market price of UTI common stock on July 31, 1997 was $6.00 per share.  The
stock  acquired  in  the  above  transaction  was  from  the  largest   two
shareholders  of  UTI stock.  There were no additional stated  or  unstated
items or agreements relating to the stock purchase.

On  July  31,1997,  UTI  entered  into  employment  agreements  with  eight
individuals, all officers or employees of UTI.  The agreements have a  term
of  three years, excepting the agreements with Mr. Ryherd and Mr. Melville,
which  have five-year terms.  The agreements secure the services  of  these
key   individuals,  providing  UTI  a  stable  management  environment  and
positioning for future growth.

YEAR 2000 ISSUE

The  "Year  2000  Issue"  is  the  inability  of  computers  and  computing
technology  to recognize correctly the Year 2000 date change.  The  problem
results  from a long-standing practice by programmers to save memory  space
by  denoting  Years  using just two digits instead of four  digits.   Thus,
systems  that  are  not  Year 2000 compliant may be unable  to  read  dates
correctly  after  the Year 1999 and can return incorrect  or  unpredictable
results.    This  could  have  a  significant  effect  on  UTI  and   UII's
business/financial  systems  as  well as  products  and  services,  if  not
corrected.

UTI  and UII established a project to address year 2000 processing concerns
in  September of 1996.  In 1997 UTI and UII completed the review of UTI and
UII's internally and externally developed software, and made corrections to
all   year  2000  non-compliant  processing.   UTI  and  UII  also  secured
verification  of  current and future year 2000 compliance  from  all  major
external  software  vendors.   In December of  1997,  a  separate  computer
operating  environment was established with the system  dates  advanced  to
December  of 1999.  A parallel model office was established with all  dates
in the data advanced to December of 1999.  Parallel model office processing
is being performed using dates from December of 1999 to January of 2001, to
insure all year 2000 processing errors have been corrected.  Testing should
be  completed  by the end of the first quarter of 1998.  After  testing  is
completed,  periodic  regression  testing  will  be  performed  to  monitor
continuing  compliance.   By addressing year 2000 compliance  in  a  timely
manner,  compliance  will  be  achieved using existing  staff  and  without
significant impact on UTI and UII operationally or financially.


CHANGE IN CONTROL OF UNITED TRUST, INC.

On November 20, 1998, First Southern Funding, LLC., a Kentucky corporation,
("FSF")  and affiliates acquired 929,904 shares of common stock  of  United
Trust,  Inc.,  an  Illinois corporation, ("UTI") from UTI and  certain  UTI
shareholders.   As consideration for the shares, FSF paid  UTI  $10,999,995
and  certain  shareholders  of UTI $999,990 in cash.   FSF  and  affiliates
employed working capital to make these purchases of common stock, including
funds  on  hand and amounts drawn under existing lines of credit with  Star
Bank,  NA.   FSF borrowed $7,082,878 and First Southern Bancorp,  Inc.,  an
affiliate  of  FSF,  borrowed $495,775 in making the  purchases.   FSF  and
affiliates  expect to repay the borrowings through the sale of assets  they
currently own.

Details of the transaction can be outlined as follows: FSF acquired 389,715
shares  of  UTI common stock at $10.00 per share.  These shares represented
stock  acquired during 1997 by UTI in private transactions.   Additionally,
FSF  acquired  473,523 shares of authorized but unissued  common  stock  at
$15.00 per share.  FSF acquired 66,666 shares of common stock from UTI  CEO
Larry  Ryherd, and his family, at $15.00 per share.  FSF has  committed  to
purchase  $2,560,000 of face amount of UTI convertible notes  from  certain
officers  and directors of UTI for a cash price of $3,072,000 by  March  1,
1999.  FSF is required to convert the notes to UTI common stock by July 31,
2000.    UTI  has  granted,  for  nominal  consideration,  an  irrevocable,
exclusive  option to FSF to purchase up to 1,450,000 shares of  UTI  common
stock  for  a purchase price in cash equal to $15.00 per share,  with  such
option  to  expire  on  July 1, 2001.  UTI has also  caused  three  persons
designated  by FSF to be appointed, as part of the maximum of  11,  to  the
Board of Directors of UTI.

Following the transactions described above, and together with shares of UTI
previously owned, FSF and affiliates currently own 1,035,165 shares of  UTI
common stock (41.6%) becoming the largest shareholder of UTI.  Through  the
shares acquired and options owned, FSF can ultimately own over 51% of  UTI.
Mr.  Jesse  T.  Correll is the majority shareholder of  FSF,  which  is  an
affiliate of First Southern Bancorp, Inc., a bank holding company that owns
a bank that operates out of 14 locations in central Kentucky.
                                  54

PROPOSED MERGER

On March 25, 1997, the Board of Directors of UTI and UII voted to recommend
to  the  shareholders a merger of the two companies.   Under  the  Plan  of
Merger,  UTI would be the surviving entity issuing one share of  its  stock
for each share held by UII shareholders.

UTI owns 53% of United Trust Group, Inc., an insurance holding company, and
UII  owns  47%  of United Trust Group, Inc.  Neither UTI nor UII  have  any
other significant holdings or business dealings.  The Board of Directors of
each  company thus concluded a merger of the two companies would be in  the
best interests of the shareholders.  The merger will result in certain cost
savings,   primarily  related  to  costs  associated  with  maintaining   a
corporation in good standing in the states in which it transacts business.

A  vote of the shareholders of UTI and UII regarding the proposed merger is
anticipated to occur sometime during the second quarter of 1999.


RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Kerber,  Eck and Braeckel LLP served as the Company's independent certified
public accounting firm for the fiscal year ended December 31, 1998 and  for
fiscal  year  ended December 31, 1997.  In serving its primary function  as
outside auditor for the Company, Kerber, Eck and Braeckel LLP performed the
following  audit  services:   examination of annual  financial  statements;
assistance  and  consultation  on reports filed  with  the  Securities  and
Exchange  Commission and; assistance and consultation on separate financial
reports  filed with the State insurance regulatory authorities pursuant  to
certain statutory requirements.



                                    PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a) The following documents are filed as a part of the report:

 (1)  Financial Statements:
      See Item 8, Index to Financial Statements


 NOTE:   Schedules other than those listed above are omitted  because  they
 are  not  required  or  the  information is  disclosed  in  the  financial
 statements or footnotes.


(b) Reports on Form 8-K filed during fourth quarter.

  On  December  2, 1998, the Company filed a form 8-K regarding  change  in
  control.


(c) Exhibits:

 Index to Exhibits (See Page 56-57).
                                     55
<PAGE>
                            INDEX TO EXHIBITS

 Exhibit
 Number


 3(i)    (1)    Articles of Incorporation for the Company dated
                November 2, 1987.

 3(i)    (1)    Amended Articles of Incorporation for the Company dated
                January 27, 1988.

 3(ii)   (1)    Code of Regulations for the Company.

10(a)    (1)     Service Agreement between United Income, Inc.  and  United
                 Security Assurance Company dated November 8, 1989.

10(b)    (2)     Subcontract Service Agreement between United Income,  Inc.
                 and United Trust, Inc. dated September 1, 1990.

10(c)    (2)     Non-Qualified Stock Option Plan

10(d)    (2)     Stock Option Plan

10(e)    (3)     Credit  Agreement  dated May  8,  1996  between  First  of
                 America  Bank  - Illinois, N.A., as lender and First
                 Commonwealth Corporation, as borrower.

10(f)    (3)     $8,900,000 Term Note of First Commonwealth Corporation  to
                 First of America Bank - Illinois, N.A. dated May 8, 1996.

10(g)    (3)     Coinsurance  Agreement dated September  30,  1996  between
                 Universal  Guaranty Life Insurance Company and First
                 International Life Insurance Company, including assumption
                 reinsurance agreement exhibit and amendments.

10(h)    (4)     Employment  Agreement dated as of July  31,  1997  between
                 Larry E. Ryherd and First Commonwealth Corporation

10(i)    (4)     Employment  Agreement dated as of July  31,  1997  between
                 James E. Melville and First Commonwealth Corporation

10(j)    (4)     Employment  Agreement dated as of July  31,  1997  between
                 George  E. Francis and First Commonwealth Corporation. 
                 Agreements containing  the  same  terms and conditions
                 excepting  title  and current  salary were also entered into
                 by Joseph H. Metzger,  Brad M. Wilson, Theodore C. Miller,
                 Michael K. Borden and Patricia  G. Fowler.

99(a)    (1)     Order  of  Ohio Division of Securities registering  United
                 Income, Inc.'s securities dated March 9, 1988.

99(b)    (1)     Order  of  Ohio Division of Securities registering  United
                 Income, Inc.'s Securities dated April 5, 1989.

99(c)    (1)     Order  of  Ohio Division of Securities registering  United
                 Income, Inc.'s Securities dated April 23, 1990.

99(d)           Audited financial statements of United Trust Group, Inc.
                                   56
<PAGE>

FOOTNOTE

         (1) Incorporated by reference from the Company's Registration
         Statement on Form 10, File  No.  0-18540,  filed  on April 30, 1990.

         (2) Incorporated by reference from the Company's Annual  Report on
         Form 10-K, File No. 0-18540, as of December  31, 1991.

         (3) Incorporated by reference from the Company's Annual  Report on
         Form 10-K, File No. 0-18540, as of December  31, 1996.

         (4) Incorporated by reference  from the Company's Annual Report on
         Form 10-K, File No. 0-18540, as  of December 31, 1997.
                                     57
<PAGE>
                                 SIGNATURES

Pursuant  to the requirements of the Securities Exchange Act of 1934,  this
report  has  been signed below by the following persons on  behalf  of  the
registrant and in the capacities and on the dates indicated.

                         UNITED INCOME, INC.
                              Registrant


/s/   Randall L. Attkisson                               Date: March 23, 1999
Randall L. Attkisson, Director


                                                         Date: March 23, 1999
Vincent T. Aveni, Director


/s/   Marvin  W. Berschet                                Date: March 23, 1999
Marvin W. Berschet, Director


/s/   Jesse T. Correll                                   Date: March 23, 1999
Jesse T. Correll, Director


                                                         Date: March 23, 1999
Charlie E. Nash, Director


/s/   Millard V. Oakley                                  Date: March 23, 1999
Millard V. Oakley, Director


/s/   Larry E. Ryherd                                    Date: March 23, 1999
Larry E. Ryherd, Chairman of the
 Board, Chief Executive Officer,
 and Director


/s/   Robert W. Teater                                   Date: March 23, 1999
Robert W. Teater, Director


/s/   James E. Melville                                  Date: March 23, 1999
James E. Melville, Chief Operating
 Officer; President and Director


/s/   Theodore C. Miller                                 Date: March 23, 1999
Theodore C. Miller, Chief Financial
 Officer
                                    58
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