SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C.  20549

                             FORM 10-K/A

                           AMENDMENT NUMBER 3 to
            ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1997Commission 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

                              Amendment No. 3

The  undersigned  registrant hereby amends the following  items,  financial
statements, exhibits, or other portions of its December 31, 1997 filing  of
Form 10-K as set forth in the pages attached hereto:

          Each amendment as shown on the index page is amended to
          replace   the  existing  item,  statement  or   exhibit
          reflected  in  the December 31, 1997 Form 10-K  filing.
          Changes  to  the original filing have been  shaded  for
          easy identification.

Pursuant  to the requirements of the Securities Exchange Act of  1934,  the
registrant  duly caused this amendment to be signed on its  behalf  by  the
undersigned , thereunto duly authorized.

                                            UNITED INCOME, INC.

                                                (Registrant)



                                   By:  /s/ James E. Melville
                                        James E. Melville
                                        President and Chief
                                        Operating Officer
                                   
                                   
                                   
                                   By:  /s/ Theodore C. Miller
                                        Senior Vice President and
                                        Chief Financial Officer
                                   
Date:     January 15, 1999
                                   1
<PAGE>
      
                           UNITED INCOME, INC,
                                     
                                FORM 10-K/A
                                     
                                   INDEX
                                     
CERTIFIED PUBLIC ACCOUNTANT'S CONSENT

             KERBER, ECK, & BRAECKEL LLP                               3

PART I

ITEM 1.      BUSINESS                                                  4


ITEM 3.      LEGAL PROCEEDINGS                                        12



PART II

ITEM 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS             12


ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA               25



PART IV

ITEM 14.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES
            AND REPORTS ON FORM 8-K                                   40




                                    2
<PAGE>











            Consent of Independent Certified Public Accountant
                                     
                                     
      We consent to the amendments on pages 25-38 of this Form 10-K/A dated
January  15, 1999, and to the use of our opinion dated March 26,  1998,  as
originally filed with the United Income, Inc. Form 10-K for 1997 after such
amendment.  We also consent to the amendments in Exhibit 99(d) on pages 44-
70 of this Form 10-K/A and to the use of our opinion on United Trust Group,
Inc. dated March 26, 1998.



                              KERBER, ECK & BRAECKEL LLP





Springfield, Illinois
January 15, 1999

                                     3
<PAGE>

PART I, ITEM I, BUSINESS, SHOULD BE AMENDED AS FOLLOWS:


                                PART I

ITEM 1.  BUSINESS

United  Income, Inc. (the "Registrant") was incorporated in 1987 under  the
laws  of  the  State of Ohio to serve as an insurance holding company.   At
December 31, 1997, the affiliates of the Registrant were as depicted on the
following organizational chart:



                      ORGANIZATIONAL CHART
                    AS OF DECEMBER 31, 1997



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").

                                 4
<PAGE>

The Registrant and its affiliates (the "Company") operate principally
in  the  individual life insurance business.  The primary business  of  the
Company has been the servicing of existing insurance business in force, the
solicitation  of  new  insurance business, and  the  acquisition  of  other
companies in similar lines of business.

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  December 28, 1992, Universal Guaranty Life Insurance Company ("UG") was
the  surviving  company of a merger with Roosevelt National Life  Insurance
Company  ("RNLIC"), United Trust Assurance Company ("UTAC"), Cimarron  Life
Insurance  Company  ("CIM")  and  Home  Security  Life  Insurance   Company
("HSLIC").   On June 30, 1993, Alliance Life Insurance Company ("ALLI"),  a
subsidiary of UG, was merged into UG.

On  July  31, 1994, Investors Trust Assurance Company ("ITAC")  was  merged
into Abraham Lincoln Insurance Company ("ABE").

On  August  15,  1995,  the shareholders of CIC, ITI,  and  UGIC  voted  to
voluntarily  liquidate each of the companies and distribute the  assets  to
the  shareholders  (consisting solely of common stock of  their  respective
subsidiary).   As  a  result, the shareholders of the liquidated  companies
became shareholders of FCC.

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.  A vote of the shareholders of UTI and  UII  regarding
the  proposed  merger  is anticipated to occur sometime  during  the  third
quarter of 1998.

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 similar lines of 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.

On  February 19, 1998, UTI signed a letter of intent with Jesse T. Correll,
whereby   Mr.  Correll  will  personally  or  in  combination  with   other
individuals make an equity investment in UTI over a period of three  years.
Under  the  terms of the letter of intent, Mr. Correll will  buy  2,000,000
authorized but unissued shares of UTI common stock for $15.00 per share and
will also buy 389,715 shares of UTI common stock, representing stock of UTI
                                 5
<PAGE>

and  UII,  that  UTI  purchased during the last  eight  months  in  private
transactions  at the average price UTI paid for such stock, plus  interest,
or  approximately $10.00 per share.  Mr. Correll also will purchase  66,667
shares  of  UTI  common stock and $2,560,000 of face amount of  convertible
bonds  (which  are  due and payable on any change in  control  of  UTI)  in
private transactions, primarily from officers of UTI.

UTI  intends  to use the equity that is being contributed to  expand  their
operations through the acquisition of other life insurance companies.   The
transaction  is subject to negotiation of a definitive purchase  agreement;
completion  of due diligence by Mr. Correll; the receipt of regulatory  and
other   approvals;  and  the  satisfaction  of  certain  conditions.    The
transaction is not expected to be completed before June 30, 1998, and there
can be no assurance that the transaction will be completed.


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  6% 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 first couple of 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 5.5% 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 calculated  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.  The previously defined Universal
life  and  interest sensitive whole life, which is a type of  indeterminate
premium life insurance which provides that the policy's cash value  may  be
greater  than that guaranteed if changing assumptions warrant an  increase,
business  account  for  approximately  46%  of  the  insurance  in   force.

                                     6
<PAGE>

Approximately  29%  of  the insurance in force is  participating  business,
which  represents  policies  under  which the  policyowner  shares  in  the
insurance  companies divisible surplus.  The Company's average  persistency
rate  for its policies in force for 1997 and 1996 has been 89.4% and 87.9%,
respectively.  The Company does not anticipate any material fluctuations in
these rates in the future that may result from competition.

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 1997.  The Company's sales agents  do  not
have the power to bind the Company.

Marketing   is  based  on  referral  network  of  community   leaders   and
shareholders of UII and UTI.  Recruiting of sales agents is also  based  on
the  same referral network.  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.  As this trend  appears  to
continue,  the  recruiting focus of the Company  has  been  on  introducing
quality individuals to the insurance industry through an extensive internal
training  program.   The Company feels this approach is  conducive  to  the
mutual success of our new recruits and the Company as these recruits market
our products in a professional, company structured manner.

New  sales  are  marketed by UG and USA through their agency  forces  using
contemporary   sales  approaches  with  personal  computer   illustrations.
Current marketing efforts are primarily focused on the Midwest region.

USA is licensed in Illinois, Indiana and Ohio.  During 1997, Ohio accounted
for 99% of USA's direct premiums collected.

ABE  is  licensed  in  Alabama, Arizona, Illinois, Indiana,  Louisiana  and
Missouri.   During 1997, Illinois and Indiana accounted for  46%  and  32%,
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 1997, West Virginia accounted  for  95%  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  1997,  Illinois accounted for 33%, and Ohio accounted  for  14%  of
direct  premiums collected.  No other state accounted for more than  7%  of
direct premiums collected in 1997.

In  1997 $38,471,452 of total direct premium was written by USA, ABE,  APPL
and  UG.   Ohio  accounted for 35% , Illinois accounted for 21%,  and  West
Virginia accounted for 10% of total direct premiums collected.

New  business production has decreased 15% from 1995 to 1996 and  43%  from
1996  to  1997.   Several  factors have had a  significant  impact  on  new

                                 7
<PAGE>
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.  At this writing negotiations
are  progressing with a different unrelated party for change in control  of
UTI.   Please  refer to the Notes to the Consolidated Financial  Statements
for  additional  information.  The possible changes  in  control,  and  the
uncertainty  surrounding  each potential 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.

Management recognizes the aforementioned challenges and is responding.  The
potential  change  in control of the Company is progressing,  bringing  the
possibility  for  future  growth,  efforts  are  being  made  to  introduce
additional  products,  and  the  recruitment  of  quality  individuals  for
intensive  sales  training,  are directed at  reversing  current  marketing
trends.


Underwriting

The underwriting procedures of the insurance affiliates 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,  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  insurance affiliates require blood samples to be drawn with individual
insurance  applications for coverage over $45,000 (age  46  and  above)  or
$95,000 (age 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 affiliates 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  affiliates'
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.
                                8
<PAGE>
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 5.0% to
6.0% in each of the years 1997, 1996 and 1995.


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, 1997, the Company had insurance in force of $3.692 billion  of
which approximately $1.022 billion 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 affiliates.   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 as of December 31, 1997.


Investments

At  December  31,  1997, substantially all of the assets of  UII  represent
investments  in or receivables from affiliates.  UII does own one  mortgage
loan  as  of  December 31, 1997.  The mortgage loan is  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.

                                   9
<PAGE>
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.

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.  As this trend appears to continue, the recruiting  focus
of the Company has been on introducing quality individuals to the insurance
industry through an extensive internal training program.  The Company feels
this  approach is conducive to the mutual success of our new  recruits  and
the  Company  as  these  recruits market our products  in  a  professional,
company structured manner.

Government Regulation

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,  the  Company'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.  The Company cannot predict the  form  of
any  future  proposals or regulation.  The Company'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 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 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  9  of the Notes to the Financial  Statements),  and
payment  of dividends (see Note 2 of the Notes to the Financial Statements)
in  excess  of  specified amounts by the insurance  subsidiary  within  the
holding company system are required.

                                 10
<PAGE>
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 1997, 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.  The  cause  for  the
decrease in premium income is related to the possible change in control  of
UTI over the last two years to two different parties.  At year end 1996  it
was  announced that UTI was to be acquired by an unrelated party,  but  the
sale  did  not  materialize.  At this writing negotiations are  progressing
with  a different unrelated party for the change in control of UTI.  Please
refer  to the Notes to the Consolidated Financial Statements for additional
information.  The possible changes in control over the last two years  have
hurt  the  insurance companies' ability to recruit new agents.  The  active
agents were apprehensive due to uncertainties in relation to the change  in
control of UTI.  In recent years, the industry experienced a decline in the
total number of agents selling insurance products and therefore competition
has  increased  for  quality agents.  Accordingly, new business  production
decreased significantly over the last two years.

A life insurance company's statutory capital is computed according to rules
prescribed by the National Association of Insurance Commissioners ("NAIC"),
as  modified  by  the  insurance company's state  of  domicile.   Statutory
accounting   rules   are  different  from  generally  accepted   accounting
principles  and are intended to reflect a more conservative  view  by,  for
example,  requiring immediate expensing of policy acquisition  costs.   The
achievement  of  long-term  growth will require  growth  in  the  statutory
capital  of the Company's insurance affiliates.  The affiliates may  secure
additional  statutory capital through various sources, such  as  internally
generated  statutory earnings or equity contributions by the  Company  from
funds generated through debt or equity offerings.

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, 1997, each of the insurance subsidiaries has a Ratio  that
is  in  excess  of  3,  which  is  300% 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

                               11
<PAGE>

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  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.
This  project is not expected to be completed earlier than 1999.   Specific
recommendations  have  been set forth in papers  issued  by  the  NAIC  for
industry  review.  The Company is monitoring the process, but the potential
impact of any changes in insurance accounting standards is not yet known.


Employees

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


PART I, ITEM 3, LEGAL PROCEEDINGS, SHOULD BE AMENDED AS FOLLOWS:

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.


PART II, ITEM 7 SHOULD BE AMENDED AS FOLLOWS:

UII MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

At  December 31, 1997 and 1996, 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 1997, 1996  and  1995
include the operating results of UII.


Results of Operations

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 100% OWNED SUBSIDIARY OF UII.
CHANGES IN THE AFFILIATE STRUCTURE HAVE RESULTED IN USA NO LONGER BEING A DIRECT

                                 12
<PAGE>
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
    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
    
                                  13
<PAGE>

    control  did  not  materialize.   At  this  writing,  negotiations  are
    progressing with a different unrelated party for the change in  control
    of  UTI.   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 7.25%, 7.31%
    and  7.14%, 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.
    
    
    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

                                14
<PAGE>    
    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
    due  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 THE 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 ACTURIAL SERVICES, WERE 
    REDUCED APPROXIMATELY $400,000 AS THE COMPANY WAS ABLE TO HIRE AN ACTUARY, 
    ON A PART-TIME BASIS, AT A COST LESS THAN FEES PAID IN THE PREVIOS 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.
                                    15
<PAGE>
    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.


Results of Operations

1996 compared to 1995

(a)  Revenues

The  Company's source of revenues is derived from service fee income  which
is  provided  via  a  service agreement with USA.   The  service  agreement
between UII and USA is to provide USA with certain administrative services.
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.

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 a percentage of the fees  paid
to  UII  by  USA.   The  Company has incurred $1,241,000,  $1,809,000,  and
$1,210,000 in service fee expense in 1996, 1995, and 1994, respectively.

Interest expense of $84,000, $89,000 and $59,000 was incurred in 1996, 1995
and  1994, 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
    
   Premium  and policy fee revenues, net of reinsurance premium, decreased
   7%  when  comparing  1996 to 1995. The decrease in  premium  income  is
   primarily attributed to a 15% decrease in new business production. THE 
   DECREASE IS DUE TO TWO FACTORS. THE FIRST FACTOR IS THAT UTG AND ITS 
   SUBSIDIARIES' CHANGED ITS FOCUS FROM PRIMARILY A BROKER AGENCY DISTRIBUTION
   SYSTEM TO A CAPTIVE AGENT SYSTEM. THE SECOND FACTOR IS THAT UTG and its 
   subsidiaries' changed its PRODUCT PORTFOLIO FROM TRADITIONAL LIFE INSURANCE
   TO UNIVERSAL LIFE INSURANCE .
                                    16
<PAGE>
 
   Business  written by the broker agency force, in recent years,  did  not
   meet  UTG and its subsidiaries' expectations.  With the change in  focus
   of  distribution  systems, most of the broker  agents  were  terminated.
   (The  termination  of  the broker agency force  caused  a  non-recurring
   write  down  of the value of agency force asset in 1995, see  discussion
   of  amortization of agency force for further details.).  The  change  in
   distribution  systems  effectively reduced the total  number  of  agents
   representing  and  producing  business for  UTG  and  its  subsidiaries'
   Broker   agents  sell  insurance  and  related  products   for   several
   companies.  Captive agents sell for only one company. THE CHANGE FROM A
   BROKERAGE AGENCY SYSTEM TO A CAPTIVE AGENT SYSTEM CAUSED A DECLINE IN NEW
   PREMIUM WRITINGS AS THE CAPTIVE AGENTS REQUIRED TRAINING FROM THE HOME OFFICE
   AND OFTEN HAD LITTLE OR NO PREVIOUS INSURANCE SALES EXPERIENCE. ADDITIONALLY,
   THE PRODUCTS SOLD WERE CHANGED FROM TRADITIONAL WHOLE LIFE TO UNIVERSAL LIFE,
   RESULTING IN VETERAN CAPTIVE AGENTS HAVING TO LEARN THE FEATURES OF THE NEW
   PRODUCTS. BROKER AGENTS TYPICALLY SELL PRODUCTS FOR SEVERAL COMPANIES 
   AND TYPICALLY HAVE MORE EXPERIENCE IN THE INDUSTRY OR HAVE EXPERIENCED AGENTS
   WITHIN THE AGENCY TO ASSIST AND TRAIN THEM. THE CAPTIVE AGENT APPROACH, 
   THOUGH SLOWER AND REQUIRING MORE HOME OFFICE TRAINING, IS BELIEVED TO BE THE
   BEST LONG TERM APPROACH FOR UTG AND ITS SUBSIDIARIES' AS AGENTS WILL BE 
   TRAINED IN THE PROCEDURES AND PRACTICES OF THE INSURANCE SUBSIDIARIES AND 
   WILL BE MORE FAMILIAR THROUGH THE TRAINING PROCESS. THIS WILL HELP IN 
   RECRUITING QUALITY INDIVIDUALS WITH THE CHARACTER AND ATTITUDE CONDUCIVE WITH
   UTG AND ITS SUBSIDIARIES' DESIRES.
   
   Universal life and interest sensitive products contribute only the  risk
   charge  to  premium  income;  however,  traditional  insurance  products
   contribute  all  monies  received  to  premium  income.   UTG  and   its
   subsidiaries' changed their PRODUCT PORTFOLIO to remain competitive based on
   consumer demand.
   
    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.  Average persistency rate for all policies in force
    for 1996 and 1995 has been approximately 87.9% and 87.3%, respectively.
    
    Net  investment income increased 3% when comparing 1996 to  1995.   The
    overall  investment  yields  for 1996 and 1995  are  7.31%  and  7.14%,
    respectively.   The  improvement  in  investment  yield  is   primarily
    attributed  to  fixed maturity investments.  Cash  generated  from  the
    sales of universal life insurance products, has been invested primarily
    in our fixed investment 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'
    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 UTG and its  subsidiaries'
    currently has in force and will write in the future.
    
    Realized investment losses were $466,000 and $114,000 in 1996 and 1995,
    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.
    
    Expenses of UTG
    
    Life  benefits,  net of reinsurance benefits and claims,  increased  2%
    compared  to  1995.  The increase in life benefits is due primarily  to
    settlement expenses discussed in the following paragraph:
    
    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

                                17
<PAGE>   
    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, 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 benefits  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 the policies associated with this issue  have  been
    settled  as  of December 31, 1996.  UTG and its insurance subsidiaries'
    has  approximately $3,742,000 of insurance in-force and  $1,871,000  of
    reserves  from  the  issuance of paid-up life  insurance  policies  for
    settlement  of  matters related to the original non-standard  policies.
    Management  believes the reserves are adequate in relation to  expected
    mortality on this block of in-force.
    
    Commissions  and  amortization  of deferred  policy  acquisition  costs
    decreased  14%  in  1996 compared to 1995. The decrease  is  due  to  a
    decrease  in  commissions expense.  Commissions decreased 15%  in  1996
    compared  to 1995.  The decrease in commissions was due to the  decline
    in  new  business  production.  There is a direct relationship  between
    premium   revenues  and  commission  expenses.   First   year   premium
    production decreased 15% and first year commissions decreased 32%  when
    comparing  1996  to 1995.  Amortization of deferred policy  acquisition
    costs  decreased  12%  in  1996 compared to 1995.   Management  expects
    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  increased  26%  in  1996
    compared to 1995. 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  increase  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.
    
    UTG  and its subsidiaries' reported a non-recurring write down of value
    of  agency  force of $0 and $8,297,000 in 1996 and 1995,  respectively.
    The  write  down  was  directly related to the change  in  distribution
    systems.  UTG and its subsidiaries' changed its focus from primarily  a
    broker  agency distribution system to a captive agent system.  Business
    produced  by  the  broker agency force in recent  years  did  not  meet
    expectations.   With the change in focus of distribution systems,  most
    of  the broker agents were terminated.  The termination of most of  the
    agents  involved  in the broker agency force caused management  to  re-
    evaluate  and  write-off the value of the agency force carried  on  the
    balance sheet.
    
    Operating expenses increased 6% in 1996 compared to 1995.  The  primary
    factor  that  caused  the increase in operating  expenses  is  directly
    related   to  increased  legal  costs  and  reserves  established   for
    litigation.   The legal costs are due to the settlement of non-standard
    insurance  policies as was discussed in the review  of  life  benefits.
    UTG and its subsidiaries' incurred legal costs of $906,000 and $687,000
    in 1996 and 1995, respectively in relation to the settlement of the non-
    standard insurance policies.
    
    Interest  expense  decreased  12% in  1996  compared  to  1995.   Since
    December  31,  1995,  notes payable decreased approximately  $1,623,000
    that has directly attributed to the decrease in interest expense during
    1996.   Interest  expense  was  also  reduced,  as  a  result  of   the
    refinancing  of  the senior debt under which the new interest  rate  is
    more  favorable.   Please  refer to Note  12  "Notes  Payable"  of  the
    Consolidated  Notes  to  the  Financial  Statements  of  UTG  for  more
    information on this matter.
                                  18
<PAGE>
    Net loss of UTG
    
    UTG and its subsidiaries' had a net loss of $1,661,000 in 1996 compared
    to  a  net  loss  of  $5,321,000 in 1995.  The  net  loss  in  1996  is
    attributed  to  the  increase in life benefits net of  reinsurance  and
    operating  expenses  primarily associated  with  settlement  and  other
    related costs of the non-standard life insurance policies.
    
    
(d) Net loss

The Company recorded a net loss of $319,000 for 1996 compared to a net loss
of  $2,148,000 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  $348,000,000.   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, 1997,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  1  of  the  Notes to the
Financial  Statements.   UG's  dividend  limitations  are  described  below
without effect of the ownership structure.  Please refer to Note 1  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, 1997, UG had a statutory gain from operations of  $1,779,000.
At  December  31,  1997,  UG  statutory capital  and  surplus  amounted  to
$10,997,000.   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 $711,000 in cash and  cash  equivalents.   The
Company  holds  one  mortgage loan.  Operating activities  of  the  Company
produced  cash flows of $324,097, $255,675 and $326,905 in 1997,  1996  and
1995, respectively.  The Company had uses of cash from investing activities
of  $50,764,  $180,402 and $192,801 in 1997, 1996 and  1995,  respectively.
Cash  flows  from financing activities were ($2,112), $33 and $0  in  1997,
1996 and 1995, 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
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
                             19
<PAGE>

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 8.25% during first  quarter
1997, increasing to 8.5% April 1, 1997, and has remained unchanged.  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,  the  Company'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. The Company cannot predict THE IMPACT OF ANY
FUTURE PROPOSALS, REGULATIONS OR MARKET CONDUCT INVESTIGATIONS . The Company'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
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

                                20
<PAGE>
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  9  in  the  notes  to  the  consolidated  financial
statements),  and  payment of dividends (see note 2 in  the  notes  to  the
consolidated  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 1997, 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.  At this writing,
negotiations  are  progressing with a different  unrelated  party  for  the
change  in  control of UTI.  Please refer to the Notes to the  Consolidated
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.   As  this  trend
appears  to  continue,  the recruiting focus of the  Company  has  been  on
introducing  quality  individuals  to the  insurance  industry  through  an
extensive  internal training program.  The Company feels this  approach  is
conducive  to  the mutual success of our new recruits and  the  Company  as
these  recruits  market our products in a professional, company  structured
manner.

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  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.
This  project is not expected to be completed earlier than 1999.   Specific
recommendations  have  been set forth in papers  issued  by  the  NAIC  for
industry  review.  The Company is monitoring the process, but the potential
impact of any changes in insurance accounting standards is not yet known.

                                  21
<PAGE>
Accounting and Legal Developments

The  Financial  Accounting Standards Board (FASB) has issued  Statement  of
Financial Accounting Standards (SFAS) No. 128 entitled Earnings per  share,
which  is  effective  for financial statements for fiscal  years  beginning
after   December  15,  1997.   SFAS  No.  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.

Under  SFAS  No.  128,  primary EPS computed in  accordance  with  previous
opinions  is replaced with a simpler calculation called basic  EPS.   Basic
EPS  is  calculated  by  dividing income available to  common  stockholders
(i.e.,  net income or loss adjusted for preferred stock dividends)  by  the
weighted-average number of common shares outstanding.  Thus,  in  the  most
significant  change in current practice, options, warrants, and convertible
securities   are  excluded  from  the  basic  EPS  calculation.    Further,
contingently  issuable shares are included in basic EPS  only  if  all  the
necessary conditions for the issuance of such shares have been satisfied by
the end of the period.

Fully  diluted  EPS  has not changed significantly  but  has  been  renamed
diluted  EPS.   Income  available to common stockholders  continues  to  be
adjusted  for  assumed  conversion of all potentially  dilutive  securities
using the treasury stock method to calculate the dilutive effect of options
and  warrants.  However, unlike the calculation of fully diluted EPS  under
previous opinions, a new treasury stock method is applied using the average
market   price  or  the  ending  market  price.   Further,  prior   opinion
requirement  to use the modified treasury stock method when the  number  of
options  or  warrants outstanding is greater than 20%  of  the  outstanding
shares  also  has been eliminated.  SFAS 128 also includes  certain  shares
that  are contingently issuable; however, the test for inclusion under  the
new rules is much more restrictive.

SFAS   No.   128  requires  companies  reporting  discontinued  operations,
extraordinary items, or the cumulative effect of accounting changes are  to
use  income from operations as the control number or benchmark to determine
whether  potential  common  shares  are  dilutive  or  antidilutive.   Only
dilutive securities are to be included in the calculation of diluted EPS.

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 No. 128 did not have an impact
on the Company's financial statement.

The  FASB  has issued SFAS No. 130 entitled Reporting Comprehensive  Income
and   SFAS  No.  132  Employers'  Disclosures  about  Pensions  and   Other
Postretirement  Benefits.  Both of the above statements are  effective  for
financial statements with fiscal years beginning after December 15, 1997.

SFAS No. 130 defines how to report and display comprehensive income and its
components in a full set of financial statements.  The purpose of reporting
comprehensive income is to report a measure of all changes in equity of  an
enterprise  that  result from recognized transactions  and  other  economic
events  of the period other than transactions with owners in their capacity
as owners.

SFAS   No.   132  addresses  disclosure  requirements  for  post-retirement
benefits.   The  statement does not change post-retirement  measurement  or
recognition issues.

The  Company  will adopt both SFAS No. 130 and SFAS No. 132  for  the  1998
financial statements.  Management does not expect either adoption to have a
material impact on the Company's financial statements.

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

                                22
<PAGE>
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.

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 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 the Company operationally or financially.


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.  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 third quarter of 1998.


Subsequent Event

On  February 19, 1998, UTI signed a letter of intent with Jesse T. Correll,
whereby   Mr.  Correll  will  personally  or  in  combination  with   other
individuals make an equity investment in UTI over a period of three  years.
UPON COMPLETION OF THE TRANSACTION MR. CORRELL WILL OWN 51% OF UTI. Under the  
terms  of the letter of intent Mr. Correll will  buy  2,000,000
authorized but unissued shares of UTI common stock for $15.00 per share and
will also buy 389,715 shares of UTI common stock, representing stock of UTI
and  UII,  that  UTI  purchased during the last  eight  months  in  private
transactions  at the average price UTI paid for such stock, plus  interest,
or  approximately $10.00 per share.  Mr. Correll also will purchase  66,667
shares  of  UTI  common stock and $2,560,000 of face amount of  convertible
bonds  (which  are  due and payable on any change in  control  of  UTI)  in
private  transactions, primarily from officers of UTI.  Upon completion  of
the transaction, Mr. Correll would be the largest shareholder of UTI.
UTI  intends  to use the equity that is being contributed to  expand  their
operations through the acquisition of other life insurance companies.   The
transaction  is subject to negotiation of a definitive purchase  agreement;
completion  of due diligence by Mr. Correll; the receipt of regulatory  and
other   approvals;  and  the  satisfaction  of  certain  conditions.    The
transaction is not expected to be completed before June 30, 1998, and there
can be no assurance that the transaction will be completed.
   
                             23
<PAGE>
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.

                                    24
<PAGE>
PART  II, ITEM 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA  SHOULD
BE AMENDED AS FOLLOWS:

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, 1997, 1996, 1995            26



  Balance Sheets                                         27



  Statements of Operations                               28



  Statements of Shareholders' Equity                     29



  Statements of Cash Flows                               30



  Notes to Financial Statements                       30-39

                                    25
<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, 1997 and 1996, and the related
statements of operations, shareholders' equity, and cash flows for each of
the three years in the period ended December 31, 1997.  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, 1997 and 1996, and the results of its operations
and its cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles.




                                   KERBER, ECK & BRAECKEL LLP




Springfield, Illinois
March 26, 1998


                                    26
<PAGE>

UNITED INCOME, INC.
BALANCE SHEETS
As of December 31, 1997 and 1996




     ASSETS
                                                         1997        1996
<TABLE>
<S>                                                  <C>          <C>
Cash and cash equivalents                            $   710,897  $   439,676
Mortgage loans                                           121,520      122,853
Notes receivable from affiliate                          864,100      864,100
Accrued interest income                                   12,068       11,784
Property and equipment (net of accumulated
   depreciation of $93,648 and $92,140)                    1,070        2,578
Investment in affiliates                              11,060,682   11,324,947
Receivable from affiliate                                 23,192       31,837
Other assets (net of accumulated amortization
   of $138,810 and $101,794)                              46,258       83,274
     Total assets                                   $ 12,839,787 $ 12,881,049



LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities and accruals:
  Convertible debentures                            $   902,300 $   902,300
  Other liabilities                                       1,534       1,273
     Total liabilities                                  903,834     903,573


Shareholders' equity:
Common stock - no par value, stated value $.033 per
  Authorized 2,310,001 shares - 1,391,919 and 1,392,130 
  shares issued after deducting treasury shares of 
  177,590 and 177,590                                    45,934      45,940
Additional paid-in capital                           15,242,365  15,244,471
Unrealized depreciation of investments held for 
  sale of affiliate                                     (19,603)    (59,508)
Accumulated deficit                                  (3,332,743) (3,253,427)
     Total shareholders' equity                      11,935,953  11,977,476
     Total liabilities and shareholders' equity    $ 12,839,787 $12,881,049
</TABLE>
                               See accompanying notes.
                                       27
<PAGE>
UNITED INCOME, INC.
STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1997


                                         1997        1996        1995
<TABLE>
<S>                                 <C>         <C>         <C>
Revenues:

 Interest income                    $    27,127 $    13,099 $    16,516
 Interest income from affiliates         82,579      79,433      71,646
 Service agreement income
   from affiliates                      989,295   1,567,891   2,015,325
 Other income from affiliates            87,073     127,922     129,627
 Realized investment gains                    0       2,599         905
 Other income                                48           3         130
                                      1,186,122   1,790,947   2,234,149


Expenses:

 Management fee to affiliate            743,577   1,240,735   1,809,195
 Operating expenses                      80,173      89,529      78,505
 Interest expense                        85,155      84,027      88,538
                                        908,905   1,414,291   1,976,238

Gain before income taxes and equity
  in loss of investees                  277,217     376,656     257,911
Provision for income taxes                    0           0           0
Equity in loss of investees            (356,533)   (695,739)  (2,405,813
Net loss                            $   (79,316)$  (319,083)$ (2,147,902


Net loss per
  common share                      $     (0.06)$     (0.23)$     (1.54)

Average common
  shares outstanding                  1,391,996   1,392,084   1,392,060
</TABLE>
                                See accompanying notes.
                                        28


<PAGE>
UNITED INCOME, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 1997



                                         1997         1996         1995
<TABLE>
<S>                                 <C>          <C>          <C>
Common stock
  Balance, beginning of year        $     45,940 $     45,938 $     45,938
  Exercise of stock options                    0            2            0
  Stock retired from purchase of fractional
   shares of reverse stock split              (6)           0            0
Balance, end of year                $     45,934 $     45,940 $     45,938



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



Unrealized appreciation (depreciation) of
   investments held for sale
  Balance, beginning of year        $    (59,508)$       (236)$    (99,907)
  Change during year                      39,905      (59,272)      99,671
  Balance, end of year              $    (19,603)$    (59,508)$       (236)



Accumulated deficit
  Balance, beginning of year        $ (3,253,427)$ (2,934,344)$   (786,442)
  Net loss                               (79,316)    (319,083)  (2,147,902)
  Balance, end of year              $ (3,332,743)$ (3,253,427)$ (2,934,344)


Total shareholders' equity, 
  end of year                       $ 11,935,953 $ 11,977,476 $ 12,355,131
</TABLE>
                         See accompanying notes.
                                 29

<PAGE>

UNITED INCOME, INC.
STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1997


                                                 
                                                 1997      1996      1995
<TABLE>
<S>                                         <C>        <C>       <C>    
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net loss                                 $  (79,316)$(319,083)$(2,147,902)
   Adjustments to reconcile net loss to 
    net cash provided by (used in) 
    operating activities
   Depreciation and amortization                38,524    45,331      52,169
  Gain on payoff of mortgage loan                    0    (2,599)          0
  Accretion of discount on mortgage loans         (266)     (481)     (1,591)
  Compensation expense through stock 
   option plan                                       0       667           0
  Equity in loss of investees                  356,533   695,739   2,405,813
  Changes in assets and liabilities:
  Change in accrued interest income               (284)   (4,744)     (1,713)
  Change in receivable from affiliates           8,645  (119,706)     25,598
  Change in other liabilities                      261   (39,449)     (5,469)
Net cash provided by operating activities       24,097   255,675     326,905

Cash flows from investing activities:
  Change in notes receivable from affiliate          0  (150,000)          0
  Purchase of investments in affiliates        (52,363)        0     (26,091)
  Capital contribution to investee                   0   (94,000)    (47,000)
  Sale of investments in affiliates                  0         0       1,810
  Payments of principal on mortgage loans        1,599    62,434       4,480
  Purchase of mortgage loan                          0         0    (126,000)
  Proceeds from sale of property and equipment       0     1,164           0
Net cash used in investing activities          (50,764) (180,402)   (192,801)

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

Net increase in cash and cash equivalents      271,221    75,306     134,104
Cash and cash equivalents at beginning of year 439,676   364,370     230,266
Cash and cash equivalents at end of year    $  710,897$  439,676    $364,370
</TABLE>
                            See accompanying notes.
                                    30

<PAGE>
1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.ORGANIZATION  -  At December 31, 1997, the affiliates of  United  Income,
  Inc. were as depicted on the following organizational chart.


                      ORGANIZATIONAL CHART
                    AS OF DECEMBER 31, 1997



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").

                                      31
<PAGE>

The  summary  of the Company's significant accounting policies consistently
applied  in  the  preparation  of the accompanying  consolidated  financial
statements 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  - 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.PROPERTY  AND  EQUIPMENT - Property and equipment is  recorded  at  cost.
  Depreciation  is  provided  using  a straight-line  method.   Accumulated
  depreciation  was  $93,648  in 1997 and $92,140  in  1996.   Depreciation
  expense  for  the years ended December 1997, 1996, and 1995  was  $1,508,
  $8,315, and $11,265 respectively.

E.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.

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 1997, 1996, AND 1995, 
  RESPECTIVELY, AND STOCK OPTIONS EXERCISABLE OF 231, 231, AND 301 SHARES IN
  1997, 1996, AND 1995 RESPECTIVELY, UII HAD STOCK OPTIONS OUTSTANDING FOR
  SHARES OF COMMON STOCK IN 1997, 1996, AND 1995 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.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.

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


2.   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, 1997 THE ESTIMATED FAIR VALUE AND
CARRYING AMOUNT WERE $138,519 AND $121,520, RESPECTIVELY. AS OF DECEMBER 31, 
1996 THE ESTIMATED FAIR VALUE AND CARRYING AMOUNT WERE EACH $122,853.

                               32
<PAGE>
(b) Notes receivable from affiliate

For notes receivable from affiliate, 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.


3.   RELATED PARTY TRANSACTIONS

Effective  November  8,  1989, United Security  Assurance  Company  ("USA")
entered  a service agreement with its then direct parent, UII, for  certain
administrative services.  Pursuant to the terms of the agreement, USA  pays
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.   The Company recognized service agreement income of  $989,295,
$1,567,891 and $2,015,325 in 1997, 1996 and 1995, respectively.

Effective  September 1, 1990, UII entered a service agreement  with  United
Trust,  Inc.  (UTI)  for  certain  administrative  services.   Through  its
personnel,  UTI  performs  such services as may  be  mutually  agreed  upon
between  the  parties.  In compensation for its services, UII  pays  UTI  a
contractually established fee.  The Company incurred expenses of  $593,577,
$940,735  and $1,209,195 during 1997, 1996 and 1995, respectively, pursuant
to  the  terms of the service agreement with UTI.  In addition, the Company
incurred  $150,000,  $300,000  and $600,000 during  1997,  1996  and  1995,
respectively, as reimbursement for services performed on its behalf by FCC.

At  December  31, 1997, the Company owns $864,100 in notes receivable  from
affiliates.   The  notes  carry interest at  a  rate  of  1%  above  prime.
Interest  is  received  quarterly.  Principal is due  upon  maturity,  with
$150,000  maturing in 1999, $700,000 maturing in 2006 and $14,100  maturing
in 2012.


4.   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, 1997, 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 1997.

A  summary  of the status of the Company's stock option plan for the  three
years ended December 31, 1997, and changes during the years ending on those
dates is presented below.
   
                                        1997              1996            1995
                                    Exercise          Exercise          Exercise
                          Shares     Price     Shares    Price  Shares     Price
<TABLE>
<S>                       <C>        <C>       <C>    <C>       <C>       <C>
   Outstanding at 
    beginning of year     10,888     $ 13.07   10,888 $  13.07  10,437    $13.07
   Granted                     0        0.00        0     0.00     451     13.07
   Exercised                   0        0.00        0     0.00       0      0.00
   Forfeited              10,437       13.07        0     0.00       0      0.00
   Outstanding at 
    end of year              451     $ 13.07   10,888  $ 13.07  10,888    $13.07

   Options exercisable
    at year end              451     $ 13.07   10,888  $ 13.07  10,888    $13.07
</TABLE>

                                       33
<PAGE>
   The following information applies to options outstanding at December 31,
1997:

  Number outstanding                             451
  Exercise price                             $ 13.07
  Remaining contractual life                 3 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, 1997.  At December 31,
1997, 231 options have been granted and are exercisable.  Options for 0 and
70 shares were exercised during 1997 and 1996, respectively.

  A  summary of the status of the Company's stock option plan for the three
  years  ended  December 31, 1997, and changes during the years  ending  on
  those dates is presented below.
 
                                          1997            1996             1995
                                      Exercise        Exercise         Exercise
                              Shares     Price Shares    Price Shares     Price
   Outstanding at beginning 
    of year                      231    $ 0.47    301  $  0.47      0    $ 0.47
   Granted                         0      0.00      0     0.00    301      0.47
   Exercised                       0      0.00    (70)    0.47      0      0.00
   Forfeited                       0      0.00      0     0.00      0      0.00
   Outstanding at end of year    231    $ 0.47    231  $  0.47    301    $ 0.47

   Options exercisable at 
    year end                     231    $ 0.47    231  $  0.47    301    $ 0.47
   Fair value of options 
    granted during the year             $ 0.00         $  0.00           $ 8.40

   The following information applies to options outstanding at December 31,
1997:

  Number outstanding                             231
  Exercise price                              $ 0.47
  Remaining contractual life                 3 years


5.   INCOME TAXES

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

                    UII
2006          $  41,314
2007            531,747
   TOTAL      $ 573,061

The  Company  has  established a deferred tax asset  of  $200,571  for  its
operating  loss carryforwards and has established an allowance of  $200,571
against this asset.  The Company has no other deferred tax components which
would be reflected in the balance sheets.

                           34
<PAGE>
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:

                                  1997            1996            1995
Income tax at statutory                                                   
 rate of                      $ 97,026       $ 131,830        $ 90,269
  35% of income before income taxes
Utilization of net                                                        
 operating loss                (97,026)       (133,866)        (92,049)
  carryforward
Depreciation                         0           2,036           1,780
Provision for income taxes   $       0       $       0        $      0


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

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

                                 December 31       December 31
<TABLE>
<S>                             <C>              <C>
       ASSETS                        1997              1996
Total investments               $ 222,601,494    $ 221,078,779
Cash and cash equivalents          15,763,639       16,903,789
Cost of insurance acquired         45,009,452       47,536,812
Other assets                       64,576,450       69,480,242
     Total assets               $ 347,951,035    $ 354,999,622
                                                               
LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities              $ 268,237,887    $ 268,771,766
Notes payable                      19,081,602       19,839,853
Deferred taxes                     12,157,685       11,591,086
Other liabilities                   4,053,293        6,335,866
     Total liabilities            303,530,467      306,538,571
Minority interests in     
 consolidated subsidiaries         10,130,024       13,332,034
                                                               
Shareholders' equity                                           
Common stock no par value          45,926,705       45,926,705
Authorized 10,000 shares - 100 issued
Unrealized depreciation of     
 investment in stocks                 (41,708)        (126,612)
Accumulated deficit               (11,594,453)     (10,671,076)
     Total shareholders'equity     34,290,544       35,129,017
     Total liabilities and
      shareholders' equity      $ 347,951,035    $ 354,999,622
</TABLE>

                                      35
<PAGE>

<TABLE>
<S>                            <C>             <C>            <C>
                                     1997           1996           1995
Premiums and policy fees, net   
 of reinsurance                 $ 28,639,245   $ 30,944,458   $ 33,098,536
Net investment income             14,882,677     15,902,107     15,497,547
Other                               (171,304)      (370,454)         1,237
                                  43,350,618     46,476,111     48,597,320
Benefits, claims and  
 settlement expenses              27,055,171     30,326,032     29,855,764
Other expenses                    16,776,537     22,953,093     30,725,908
                                  43,831,708     53,279,125     60,581,672
Loss before income tax and                                                 
  minority interest                 (481,090)    (6,803,014)   (11,984,352)
Income tax credit (provision)       (571,999)     4,643,961      4,724,792
Minority interest in loss of                                               
  consolidated subsidiaries          129,712        498,356      1,938,684
Net loss                        $   (923,377)  $ (1,660,697)  $ (5,320,876)
</TABLE>

7.   SHAREHOLDER DIVIDEND RESTRICTION

At  December  31,  1997,  substantially all of  consolidated  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, 1997, UG had a statutory gain from operations of  $1,779,246.
At  December  31,  1997,  UG's statutory capital and  surplus  amounted  to
$10,997,365.   Extraordinary  dividends  (amounts  in  excess  of  ordinary
dividend  limitations) require prior approval of the insurance commissioner
and are not restricted to a specific calculation.


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
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.

                                   36
<PAGE>
9.   NEW ACCOUNTING STANDARDS

The  Financial  Accounting Standards Board (FASB) has issued  Statement  of
Financial Accounting Standards (SFAS) No. 128 entitled Earnings per  share,
which  is  effective  for financial statements for fiscal  years  beginning
after   December  15,  1997.   SFAS  No.  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.

Under  SFAS  No.  128,  primary EPS computed in  accordance  with  previous
opinions  is replaced with a simpler calculation called basic  EPS.   Basic
EPS  is  calculated  by  dividing income available to  common  stockholders
(i.e.,  net income or loss adjusted for preferred stock dividends)  by  the
weighted-average number of common shares outstanding.  Thus,  in  the  most
significant  change in current practice, options, warrants, and convertible
securities   are  excluded  from  the  basic  EPS  calculation.    Further,
contingently  issuable shares are included in basic EPS  only  if  all  the
necessary conditions for the issuance of such shares have been satisfied by
the end of the period.

Fully  diluted  EPS  has not changed significantly  but  has  been  renamed
diluted  EPS.   Income  available to common stockholders  continues  to  be
adjusted  for  assumed  conversion of all potentially  dilutive  securities
using the treasury stock method to calculate the dilutive effect of options
and  warrants.  However, unlike the calculation of fully diluted EPS  under
previous opinions, a new treasury stock method is applied using the average
market   price  or  the  ending  market  price.   Further,  prior   opinion
requirement  to use the modified treasury stock method when the  number  of
options  or  warrants outstanding is greater than 20%  of  the  outstanding
shares  also  has been eliminated.  SFAS 128 also includes  certain  shares
that  are contingently issuable; however, the test for inclusion under  the
new rules is much more restrictive.

SFAS   No.   128  requires  companies  reporting  discontinued  operations,
extraordinary items, or the cumulative effect of accounting changes are  to
use  income from operations as the control number or benchmark to determine
whether  potential  common  shares  are  dilutive  or  antidilutive.   Only
dilutive securities are to be included in the calculation of diluted EPS.

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 No. 128 did not have an impact
on the Company's financial statement.

The  FASB  has issued SFAS No. 130 entitled Reporting Comprehensive  Income
and   SFAS  No.  132  Employers'  Disclosures  about  Pensions  and   Other
Postretirement  Benefits.  Both of the above statements are  effective  for
financial statements with fiscal years beginning after December 15, 1997.

SFAS No. 130 defines how to report and display comprehensive income and its
components in a full set of financial statements.  The purpose of reporting
comprehensive income is to report a measure of all changes in equity of  an
enterprise  that  result from recognized transactions  and  other  economic
events  of the period other than transactions with owners in their capacity
as owners.

SFAS   No.   132  addresses  disclosure  requirements  for  post-retirement
benefits.   The  statement does not change post-retirement  measurement  or
recognition issues.

The  Company  will adopt both SFAS No. 130 and SFAS No. 132  for  the  1998
financial statements.  Management does not expect either adoption to have a
material impact on the Company's financial statements.

                           37
<PAGE>
10.  PENDING CHANGE IN CONTROL OF UNITED TRUST, INC.

On  February 19, 1998, UTI signed a letter of intent with Jesse T. Correll,
whereby   Mr.  Correll  will  personally  or  in  combination  with   other
individuals  make an equity investment in UTI over a three year  period  of
time. UPON COMPLETION OF THE TRANSACTION MR. CORRELL WILL OWN 51% OF UTI. 
Under  the  terms  of the letter of intent,  Mr.  Correll  will  buy
2,000,000 authorized but unissued shares of UTI common stock for $15.00 per
share  and  will also buy 389,715 shares of UTI common stock,  representing
stock  of  UTI and UII, that UTI purchased during the last eight months  in
private  transactions at the average price UTI paid for  such  stock,  plus
interest,  or  approximately  $10.00 per  share.   Mr.  Correll  also  will
purchase 66,667 shares of UTI common stock and $2,560,000 of face amount of
convertible  bonds (which are due and payable on any change in  control  of
UTI) in private transactions, primarily from officers of UTI.

UTI  intends  to use the equity that is being contributed to  expand  their
operations through the acquisition of other life insurance companies.   The
transaction  is subject to negotiation of a definitive purchase  agreement;
completion  of due diligence by Mr. Correll; the receipt of regulatory  and
other   approvals;  and  the  satisfaction  of  certain  conditions.    The
transaction is not expected to be completed before June 30, 1998, and there
can be no assurance that the transaction will be completed.


11.   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.


12.   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.  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 third quarter of 1998.

                               38
<PAGE>
13.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
                                       1997

<TABLE>
<S>                      <C>           <C>             <C>           <C>
                                 1st          2nd            3rd            4th
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               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)
Net income (loss) per share     0.04         0.06          (0.10)         (0.06)

                                      1996                 
                                 1st          2nd            3rd            4th
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               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)
Net income (loss)per share      0.01         0.00          (0.03)          0.00
    
                                        1995
                                 1st          2nd            3rd            4th
Net investment income    $     1,431   $    7,283      $   4,064      $   3,738
Investment income/affil.      22,111       13,830         17,778         17,927
Service agreement income     505,118      529,411        494,867        485,929
Total revenues               570,284      587,002        540,031        536,832
Management fee               437,041      483,677        452,935        435,542
Operating expenses            46,264       23,951         12,243         (3,953)
Interest expense              21,485       22,676         22,384         21,993
Operating income (loss)       65,494       56,698         52,469         83,250
Net income (loss)            137,752     (530,781)       132,804        (1,887,
Net income (loss)per share      0.01        (0.03)          0.01          (0.11)
</TABLE>
                                            39
<PAGE>
ITEM  14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM  8-K,
SHOULD BE AMENDED AS FOLLOWS:


                               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.

 None


(c) Exhibits:

  Index to Exhibits (See Pages 41-42).

                                   40

<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)    Employment  Agreement dated as of July  31,  1997  between
         Larry E. Ryherd and First Commonwealth Corporation

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

10(j)    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.

                                 41
<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.


                                         42
<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


                                                       Date:    March 24, 1998
Vincent T. Aveni, Director


/s/   Marvin  W. Berschet                              Date:    March 24, 1998
Marvin W. Berschet, Director


/s/   Charlie E. Nash                                  Date:    March 24, 1998
Charlie E. Nash, Director


/s/   Larry E. Ryherd                                  Date:    March 24, 1998
Larry E. Ryherd, Chairman of the
 Board, Chief Executive Officer,
 and Director


/s/   Robert W. Teater                                 Date:    March 24, 1998
Robert W. Teater, Director


/s/   James E. Melville                                Date:    March 24, 1998
James E. Melville, Chief Operating
 Officer; President and Director


/s/   Theodore C. Miller                               Date:    March 24, 1998
Theodore C. Miller, Chief Financial
 Officer

                                      43
<PAGE>






                               EXHIBIT 99(d)
                                     
                      AUDITED FINANCIAL STATEMENTS OF
                                     
                         UNITED TRUST GROUP, INC.

                                    44
<PAGE>







                       Independent Auditors' Report



Board of Directors and Shareholders
United Trust Group, Inc.


     We have audited the accompanying consolidated balance sheets of United
Trust Group, Inc. (an Illinois corporation) and subsidiaries as of December
31, 1997 and 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1997.  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 consolidated financial position  of
United Trust Group, Inc. and subsidiaries as of December 31, 1997 and 1996,
and  the  consolidated results of their operations and  their  consolidated
cash  flows  for each of the three years in the period ended  December  31,
1997, in conformity with generally accepted accounting principles.

     We have also audited Schedule I as of December 31, 1997, and Schedules
II,  IV and V as of December 31, 1997 and 1996, of United Trust Group, Inc.
and subsidiaries and Schedules II, IV and V for each of the three years  in
the period then ended.  In our opinion, these schedules present fairly,  in
all material respects, the information required to be set forth therein.




                                   KERBER, ECK & BRAECKEL LLP




Springfield, Illinois
March 26, 1998


                                    45

<PAGE>

UNITED TRUST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 and 1996

ASSETS
<TABLE>
<S>                                                  <C>          <C> 
                                                          1997         1996
Investments:
  Fixed maturities at amortized cost                 $180,970,333 $ 179,926,785
  (market $184,782,568 and $181,815,225)
  Investments held for sale:
  Fixed maturities, at market (cost $1,672,298 
   and $1,984,661)                                      1,668,630     1,961,166
  Equity securities, at market (cost $3,184,357 
   and $2,086,159)                                      3,001,744     1,794,405
  Mortgage loans on real estate at amortized cost       9,469,444    11,022,792
  Investment real estate, at cost, net of accumulated
   depreciation                                         9,760,732     9,779,984
  Real estate acquired in satisfaction of debt          1,724,544     1,724,544
  Policy loans                                         14,207,189    14,438,120
  Short-term investments                                1,798,878       430,983
                                                      222,601,494   221,078,779

Cash and cash equivalents                              15,763,639    16,903,789
Investment in affiliates                                  350,000       350,000
Accrued investment income                               3,665,228     3,459,748
Reinsurance receivables:
  Future policy benefits                               37,814,106    38,745,013
  Policy claims and other benefits                      3,529,078     3,856,124
Other accounts and notes receivable                     1,680,066     1,734,321
Cost of insurance acquired                             45,009,452    47,536,812
Deferred policy acquisition costs                      10,600,720    11,325,356
Cost in excess of net assets purchased,
  net of accumulated amortization                       2,777,089     5,496,808
Property and equipment, net of accumulated 
 depreciation                                           3,392,905     3,255,171
Other assets                                              767,258     1,257,701
     Total assets                                    $347,951,035  $354,999,622

LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
  Future policy benefits                             $248,805,695  $248,879,317
  Policy claims and benefits payable                    2,080,907     3,193,806
  Other policyholder funds                              2,445,469     2,784,967
  Dividend and endowment accumulations                 14,905,816    13,913,676
Income taxes payable:
  Current                                                  15,730        70,663
  Deferred                                             12,157,685    11,591,086
Notes payable                                          19,081,602    19,839,853
Indebtedness to affiliates, net                            49,977        62,084
Other liabilities                                       3,987,586     6,203,119
     Total liabilities                                303,530,467   306,538,571
Minority interests in consolidated subsidiaries        10,130,024    13,332,034


Shareholders' equity:
Common stock - no par value
  Authorized 10,000 shares  -  100 shares issued       45,926,705    45,926,705
Unrealized depreciation of investments held for sale      (41,708)     -126,612
Accumulated deficit                                   (11,594,453)  -10,671,076
     Total shareholders' equity                        34,290,544    35,129,017
     Total liabilities and shareholders' equity      $347,951,035  $354,999,622
</TABLE>

                                   See accompanying notes.
                                         46
<PAGE>
UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1997



                                           1997        1996        1995
<TABLE>
<S>                                    <C>         <C>         <C>
Revenues:

 Premiums and policy fees              $ 33,373,950$ 35,891,609$ 38,481,638
 Reinsurance premiums and policy fees    -4,734,705  -4,947,151  -5,383,102
 Net investment income                   14,882,677  15,902,107  15,497,547
 Realized investment gains and (losses),   -279,096    -465,879    -114,235
 Other income                               107,792      95,425     115,472
                                         43,350,618  46,476,111  48,597,320


Benefits and other expenses:

Benefits, claims and settlement expenses:
  Life                                   23,644,252  26,568,062  26,680,217
  Reinsurance benefits and claims        -2,078,982  -2,283,827  -2,850,228
  Annuity                                 1,560,828   1,892,489   1,797,475
  Dividends to policyholders              3,929,073   4,149,308   4,228,300
Commissions and amortization of deferred
  policy acquisition costs                3,616,365   4,224,885   4,907,653
Amortization of cost of insurance 
  acquired                                2,527,360   5,690,069   4,509,755
Amortization of agency force                      0           0     396,852
Non-recurring write down of value of age          0           0   8,296,974
Operating expenses                        8,957,372  11,285,566  10,634,314
Interest expense                          1,675,440   1,752,573   1,980,360
                                         43,831,708  53,279,125  60,581,672

Loss before income taxes, minority interest
  and equity in loss of investees          -481,090  -6,803,014 -11,984,352
Credit (provision) for income taxes        -571,999   4,643,961   4,724,792
Minority interest in loss of
 consolidated subsidiaries                  129,712     498,356   1,938,684
Net loss                               $   -923,377$ -1,660,697$ -5,320,876


Net loss per common share              $  -9,233.77$ -16,606.97$ -53,208.76

Average common shares outstanding               100         100         100
</TABLE>
                                 See accompanying notes.
                                          47
<PAGE>
UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 1997

                                             1997          1996         1995
<TABLE>
<S>                                       <C>          <C>         <C>
Common stock
  Balance, beginning of year              $45,926,705  $45,726,705 $45,626,705
  Capital contribution                              0      200,000     100,000
  Balance, end of year                    $45,926,705  $45,926,705 $45,726,705

Unrealized appreciation (depreciation) of
   investments held for sale
 Balance, beginning of year               $  (126,612) $      (501) $ (212,567)
 Change during year                            84,904     (126,111)    212,066
 Balance, end of year                     $   (41,708) $  (126,612) $     (501)

Accumulated deficit
 Balance, beginning of year               $(10,671,076 $(9,010,379) $(3,689,503)
 Net loss                                     (923,377) (1,660,697)  (5,320,876)
 Balance, end of year                     $(11,594,453 $(10,671,076)$(9,010,379)



Total shareholders' equity, end of year   $ 34,290,544 $ 35,129,017 $ 36,715,825
</TABLE>
                                      
                                        See accompanying notes.
                                                   48
<PAGE>
UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1997

                                              1997        1996        1995
<TABLE>
<S>                                   <C>           <C>          <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
  Net loss                            $   (923,377) $ (1,660,697)$ (5,320,876)
  Adjustments to reconcile net loss 
   to net cash provided by (used in) 
   operating activities net of changes 
   in assets and  liabilities resulting 
   from the sales and purchases of 
   subsidiaries:
 Amortization/accretion of fixed 
  maturities                               670,185       899,445      803,696
 Realized investment(gains)losses,net      279,096       465,879      114,235
 Policy acquisition costs deferred        (586,000)   (1,276,000)  (2,370,000)
 Amortization of deferred policy 
  acquisition                            1,310,636     1,387,372    1,567,748
 Amortization of cost of insurance 
  acquired                               2,527,360     5,690,069    4,509,755
 Amortization of value of agency force           0             0      396,852
 Non-recurring write down of value 
  of agency                                      0             0    8,296,974
 Amortization of costs in excess of net 
  assets purchased                         155,000       185,279      423,192
 Depreciation                              457,415       371,991      694,194
 Minority interest                         129,712       498,356   (1,938,684)
 Change in accrued investment income      (205,480)      195,821     (173,517)
 Change in reinsurance receivables       1,257,953        83,871     (482,275)
 Change in policy liabilities and 
  accruals                                (547,081)    3,326,651    3,581,928
 Charges for mortality and administration of
  universal life and annuity products  (10,588,874)  (10,239,476)  (9,757,354)
 Interest credited to account balances   7,212,406     7,075,921    6,644,282
 Change in income taxes payable            511,666    (4,653,734)  (4,749,335)
 Change in indebtedness (to) from 
  affiliates                               (12,107)      224,472       (3,023)
 Change in other assets and liabilities,
  net                                   (1,893,811)      396,226   (1,529,727)
 Net cash provided by (used in) 
  operating activities                    (245,301)    2,971,446      708,065

Cash flows from investing activities:
  Proceeds from investments sold and matured:
 Fixed maturities held for sale            290,660     1,219,036      619,612
 Fixed maturities sold                           0    18,736,612            0
 Fixed maturities matured               21,488,265    20,721,482   16,265,140
 Equity securities                          76,302         8,990      104,260
 Mortgage loans                          1,794,518     3,364,427    2,252,423
 Real estate                             1,136,995     3,219,851    1,768,254
 Policy loans                            4,785,222     3,937,471    4,110,744
 Short term                                410,000       825,000       25,000
 Total proceeds from investments sold 
  and matured                           29,981,962    52,032,869   25,145,433
 Cost of investments acquired:
 Fixed maturities                      (23,220,172)  (29,365,111) (25,112,358)
 Equity securities                      (1,248,738)            0   (1,000,000)
 Mortgage loans                           (245,234)     (503,113)    (322,129)
 Real estate                            (1,444,980)     (813,331)  (1,902,609)
 Policy loans                           (4,554,291)   (4,329,124)  (4,713,471)
 Short term                             (1,726,035)     (830,983)    (100,000)
 Total cost of investments acquired    (32,439,450)  (35,841,662) (33,150,567)
 Purchase of property and equipment       (531,528)     (383,411)     (57,625)
Net cash provided by (used in) 
 investing activities                   (2,989,016)   15,807,796   (8,062,759)

Cash flows from financing activities:
 Policyholder contract deposits         17,902,246    22,245,369   25,021,983
 Policyholder contract withdrawals     (14,515,576)  (15,433,644) (16,008,462)
 Net cash transferred from coinsurance 
  ceded                                          0   (19,088,371)           0
 Proceeds from notes payable             1,000,000     9,300,000      300,000
 Payments on principal of notes payable (1,758,252)  (10,923,475)  (1,205,861)
 Payment for fractional shares from reverse stock
  split of subsidiary                     (534,251)            0            0
Net cash provided by financing 
 activities                              2,094,167   (13,900,121)   8,107,660

Net increase (decrease) in cash 
 and cash equivalents                   (1,140,150)    4,879,121      752,966
Cash and cash equivalents at beginning 
 of year                                16,903,789    12,024,668   11,271,702
Cash and cash equivalents at end 
 of year                               $15,763,639   $16,903,789  $12,024,668
</TABLE>
                       See accompanying notes.
                             49
<PAGE>
UNITED TRUST, GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  A. ORGANIZATION - At December 31, 1997,  the parent,  significant  majority-
     owned subsidiaries  and  affiliates  of United Trust Group,Inc., were as  
     depicted  on  the   following organizational chart.

                      ORGANIZATIONAL CHART
                    AS OF DECEMBER 31, 1997



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").



                               50
<PAGE>

 The  Company's significant accounting policies consistently applied in the
 preparation  of  the  accompanying consolidated financial  statements  are
 summarized as follows.

B.   NATURE  OF  OPERATIONS  -  United  Trust
     Group,  Inc.  is an insurance holding company, which sells  individual
     life  insurance  products  through its  subsidiaries.   The  Company's
     principal  market is the Midwestern United States.  The primary  focus
     of  the  Company has been the servicing of existing insurance business
     in  force,  the  solicitation of new life insurance products  and  the
     acquisition of other companies in similar lines of business.

C.   PRINCIPLES   OF  CONSOLIDATION   -   The
     consolidated financial statements include the accounts of the  Company
     and  its  majority-owned  subsidiaries.  All significant  intercompany
     accounts and transactions have been eliminated.

D.   BASIS  OF  PRESENTATION -  The  financial
     statements  of United Trust Group, Inc.'s life insurance  subsidiaries
     have  been  prepared in accordance with generally accepted  accounting
     principles which differ from statutory accounting practices  permitted
     by insurance regulatory authorities.

E.   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.

F.   INVESTMENTS - Investments  are  shown  on the following bases:

     Fixed maturities -- at cost, adjusted for
     amortization  of  premium or discount and other-than-temporary  market
     value  declines.  The amortized cost of such investments differs  from
     their  market values; however, the Company has the ability and  intent
     to  hold  these investments to maturity, at which time the  full  face
     value is expected to be realized.

     Investments held for sale --  at  current
     market  value,  unrealized  appreciation or  depreciation  is  charged
     directly to shareholders' equity.

     Mortgage  loans  on  real  estate  --  at
     unpaid  balances,  adjusted for amortization of premium  or  discount,
     less allowance for possible losses.

     Real estate - Investment real estate at cost, less allowances for
     depreciation and, as appropriate, provisions for possible losses.
     Foreclosed real estate is adjusted for any impairment at the
     foreclosure date.  Accumulated depreciation on investment real estate
     was $539,366 and $442,373 as of December 31, 1997 and 1996,
     respectively.

     Policy   loans  --  at  unpaid  balances
     including  accumulated  interest  but  not  in  excess  of  the   cash
     surrender value.

     Short-term investments -- at cost, which approximates current market value.

     Realized  gains and losses  on  sales  of
     investments   are   recognized  in  net   income   on   the   specific
     identification basis.

G.   RECOGNITION OF REVENUES AND RELATED EXPENSES - Premiums for traditional 
     life insurance  products,  which include those products with fixed and 
     guaranteed  premiums and benefits, consist principally of whole life 
     insurance  policies,  and certain  annuities with life contingencies are 
     recognized as revenue when due. LIMITED PAYMENT LIFE INSURANCE POLICIES
     DEFER GROSS PREMIUMS RECEIVED IN EXCESS OF NET PREMIUMS WHICH IS THEN
     RECOGNIZED IN INCOME IN A CONSTANT RELATIONSHIP WITH INSURANCE IN FORCE. 
      
                               51
<PAGE>
 
     Accident and health insurance premiums are recognized as revenue pro rata  
     over the terms of the policies. Benefits and related expenses associated 
     with the premiums earned are  charged  to expense  proportionately  over
     the lives of  the  policies  through  a
     provision  for future policy benefit liabilities and through  deferral
     and  amortization of deferred policy acquisition costs.  For universal
     life  and  investment products, generally there is no requirement  for
     payment  of premium other than to maintain account values at  a  level
     sufficient   to  pay  mortality  and  expense  charges.  Consequently,
     premiums for universal life policies and investment products  are  not
     reported  as  revenue,  but  as  deposits.   Policy  fee  revenue  for
     universal  life policies and investment products consists  of  charges
     for  the  cost  of insurance and policy administration  fees  assessed
     during  the  period.   Expenses include interest  credited  to  policy
     account  balances  and benefit claims incurred  in  excess  of  policy
     account balances.
 
H.   DEFERRED POLICY ACQUISITION COSTS - Commissions and other costs (SALARIES
     OF CERTAIN EMPLOYEES INVOLVED IN THE UNDERWRITING AND POLICY ISSUE 
     FUNCTIONS, AND MEDICAL AND INSPECTION FEES) of acquiring life  insurance  
     products that  vary  with  and are primarily related to the production of 
     new business  have been deferred.  Traditional life insurance  acquisition
     costs  are  being  amortized  over the premium-paying  period  of  the
     related  policies  using assumptions consistent  with  those  used  in
     computing policy benefit reserves.

     For universal life insurance and interest
     sensitive  life  insurance  products,  acquisition  costs  are   being
     amortized  generally in proportion to the present  value  of  expected
     gross  profits  from surrender charges and investment, mortality,  and
     expense  margins.   Under SFAS No. 97, "Accounting  and  Reporting  by
     Insurance  Enterprises  for Certain Long-Duration  Contracts  and  for
     Realized  Gains and Losses from the Sale of Investments," the  Company
     makes   certain  assumptions  regarding  the  mortality,  persistency,
     expenses,  and  interest  rates it expects  to  experience  in  future
     periods.   These assumptions are to be best estimates and  are  to  be
     periodically  updated whenever actual experience  and/or  expectations
     for  the future change from initial assumptions.  The amortization  is
     adjusted  retrospectively when estimates of current  or  future  gross
     profits to be realized from a group of products are revised.

     The  following table summarizes  deferred
     policy acquisition costs and related data for the years shown.

<TABLE>
<S>                       <C>            <C>            <C>
                                 1997           1996           1995
    Deferred, beginning 
     of year              $ 11,325,356   $ 11,436,728   $ 10,634,476
                                                                       
    Acquisition costs deferred:
      Commissions              312,000        845,000      1,838,000
      Other expenses           274,000        431,000        532,000
      Total                    586,000      1,276,000      2,370,000
                                                                       
      Interest accretion       425,000        408,000        338,000
      Amortization   
       charged to income    (1,735,636)    (1,795,372)    (1,905,748)
      Net amortization      (1,310,636)    (1,387,372)    (1,567,748)
                                                                       
      Change for the year     (724,636)      (111,372)       802,252
                                                                       
    Deferred, end of year $ 10,600,720   $ 11,325,356   $ 11,436,728
</TABLE>
    The  following  table reflects the components of the income  statement
    for  the  line  item Commissions and amortization of  deferred  policy
    acquisition costs:

<TABLE>
<S>                        <C>            <C>            <C>
                                 1997           1996           1995
    Net amortization of                                 
     deferred policy 
     acquisition costs     $  1,310,636   $  1,387,372   $  1,567,748
    Commissions               2,305,729      2,837,513      3,339,905
                                                                       
    Total                  $  3,616,365    $ 4,224,885   $  4,907,653
</TABLE>

                                    52
<PAGE>
    Estimated  net  amortization  expense of deferred  policy  acquisition
    costs for the next five years is as follows:

                                    Interest                     Net
                                   Accretion  Amortization  Amortization

     1998                        $   403,000$   1,530,000    $ 1,127,000
     1999                            365,000    1,359,000        994,000
     2000                            330,000    1,211,000        881,000
     2001                            299,000    1,082,000        783,000
     2002                            270,000      969,000        699,000


I.   COST  OF  INSURANCE ACQUIRED - 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
     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  differences in the blocks of business.  The  amortization  is
     adjusted  retrospectively when estimates of current  or  future  gross
     profits to be realized from a group of products are revised.

<TABLE>
<S>                            <C>            <C>            <C>
                                    1997           1996           1995
    Cost of insurance acquired,                                      
     beginning of year         $ 47,536,812   $ 59,601,720   $ 64,111,475
     Interest accretion           6,288,402      6,649,203      7,044,239
     Amortization                (8,815,762)   (12,339,272)   (11,553,994)
     Net amortization            (2,527,360)    (5,690,069)    (4,509,755)
     Balance attributable                                   
      to coinsurance 
      agreement                           0     (6,374,839)             0
    Cost of insurance                                      
     acquired, end of year     $ 45,009,452   $ 47,536,812   $ 59,601,720
</TABLE>

     Estimated  net amortization expense of cost of insurance acquired  for
     the next five years is as follows:

                                    Interest                            Net
                                   Accretion     Amortization  Amortization

     1998                       $  6,427,000     $  8,696,000  $  2,269,000
     1999                          6,090,000        7,688,000     1,598,000
     2000                          5,851,000        7,229,000     1,378,000
     2001                          5,649,000        7,229,000     1,580,000
     2002                          5,008,000        6,569,000     1,561,000
      
                                        53                                      
<PAGE>
J.   COST IN EXCESS OF NET ASSETS PURCHASED - Cost in excess of
     net  assets  purchased is the excess of the amount paid to  acquire  a
     company  over  the fair value of its net assets.  Costs in  excess  of
     net  assets purchased are amortized on the straight-line basis over  a
     40-year  period.  Management continually reviews the value of goodwill
     based  on  estimates  of future earnings.  As  part  of  this  review,
     management  determines  whether goodwill  is  fully  recoverable  from
     projected   undiscounted  net  cash  flows  from   earnings   of   the
     subsidiaries  over the remaining amortization period.   If  management
     were  to determine that changes in such projected cash flows no longer
     supported   the   recoverability  of  goodwill  over   the   remaining
     amortization period, the carrying value of goodwill would  be  reduced
     with  a  corresponding charge to expense       (no such  changes  have
     occurred).   Accumulated amortization of cost in excess of net  assets
     purchased  was $1,420,146 and $1,265,146 as of December 31,  1997  and
     1996,  respectively.  A reverse stock split of  FCC  in  May  of  1997
     created  negative  goodwill of $2,564,719.   The  credit  to  goodwill
     resulted  from the retirement of fractional shares.  Please  refer  to
     Note  11  to  the  Consolidated Financial  Statements  for  additional
     information concerning the reverse stock split.

K.   PROPERTY AND EQUIPMENT - Company-
     occupied property, data processing equipment and furniture and  office
     equipment  are  stated  at  cost  less  accumulated  depreciation   of
     $1,375,105   and   $1,014,683  at  December   31,   1997   and   1996,
     respectively.  Depreciation is computed on a straight-line  basis  for
     financial reporting purposes using estimated useful lives of three  to
     thirty years.  Depreciation expense was $360,422 and $277,567 for  the
     years ended December 31, 1997 and 1996, respectively.

L.   FUTURE   POLICY   BENEFITS  AND  EXPENSES  -  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 5.0% to 6.0% in 1997, 1996 and 1995.

M.   POLICY  AND  CONTRACT  CLAIMS - Policy and contract  claims  include
     provisions  for  reported claims in process of settlement,  valued  in
     accordance  with the terms of the policies and contracts, as  well  as
     provisions  for  claims  incurred  and  unreported  based   on   prior
     experience of the Company.

N.   PARTICIPATING INSURANCE - Participating business represents 29%  and
     30%  of the ordinary life insurance in force at December 31, 1997  and
     1996,   respectively.   Premium  income  from  participating  business
     represents  50%,  52%, and 55% of total premiums for the  years  ended
     December  31,  1997,  1996  and  1995, respectively.   The  amount  of
     dividends  to  be  paid  is  determined  annually  by  the  respective
     insurance  subsidiary's  Board of Directors.   Earnings  allocable  to
     participating policyholders are based on legal requirements that  vary
     by state.

O.   INCOME  TAXES  -  Income  taxes  are  reported  under  Statement  of
     Financial Accounting Standards Number 109.  Deferred income taxes  are
     recorded  to  reflect  the  tax  consequences  on  future  periods  of
     differences between the tax bases of assets and liabilities and  their
     financial reporting amounts at the end of each such period.

                                     54
<PAGE>                                 
P.   BUSINESS SEGMENTS - The  Company
     operates principally in the individual life insurance business.
 
Q.   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. DURING 1997, 1996, AND 1995 RESPECTIVELY, THE 
     COMPANY HAD NO DILUTIVE IINSTRUMENTS.
 
R.   CASH  EQUIVALENTS  - The Company considers certificates  of  deposit
     and  other short-term instruments with an original purchased  maturity
     of three months or less cash equivalents.

S.   RECLASSIFICATIONS   -   Certain  prior  year   amounts   have   been
     reclassified   to   conform   with  the   1997   presentation.    Such
     reclassifications  had  no  effect on previously  reported  net  loss,
     total assets, or shareholders' equity.

T.   REINSURANCE  - In the normal course of business, the  Company  seeks
     to  limit its exposure to loss on any single insured and to recover  a
     portion  of  benefits paid by ceding reinsurance  to  other  insurance
     enterprises  or  reinsurers  under  excess  coverage  and  coinsurance
     contracts.  The Company retains a maximum of $125,000 of coverage  per
     individual life.

     Amounts  paid  or  deemed to have been paid for reinsurance  contracts
     are  recorded as reinsurance receivables.  Reinsurance receivables  is
     recognized  in  a manner consistent with the liabilities  relating  to
     the  underlying reinsured contracts.  The cost of reinsurance  related
     to  long-duration  contracts is accounted for over  the  life  of  the
     underlying reinsured policies using assumptions consistent with  those
     used to account for the underlying policies.

2.  SHAREHOLDER DIVIDEND RESTRICTION

At  December  31,  1997,  substantially all of  consolidated  shareholders'
equity  represents net assets of UTG's subsidiaries.  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, 1997, UG had a statutory gain from operations of  $1,779,246.
At  December  31,  1997,  UG's statutory capital and  surplus  amounted  to
$10,997,365.   Extraordinary  dividends  (amounts  in  excess  of  ordinary
dividend  limitations) require prior approval of the insurance commissioner
and are not restricted to a specific calculation.


3.  INCOME TAXES

Until 1984, the insurance companies were taxed under the provisions of  the
Life  Insurance Company Income Tax Act of 1959 as amended by the Tax Equity
and  Fiscal Responsibility Act of 1982.  These laws were superseded by  the
Deficit Reduction Act of 1984.  All of these laws are based primarily  upon
statutory results with certain special deductions and other items available
only to life insurance companies.  Under the provision of the pre-1984 life
insurance  company  income  tax  regulations,  a  portion  of   "gain  from
operations" of a life insurance company was not subject to current taxation
but  was accumulated, for tax purposes, in a special tax memorandum account
designated as "policyholders' surplus account".  Federal income taxes  will
become  payable on this account at the then current tax rate  when  and  if
distributions to shareholders, other than stock dividends and other limited
exceptions,  are made in excess of the accumulated previously taxed  income
maintained in the "shareholders surplus account".

                               55
<PAGE>
The  following table summarizes the companies with this situation  and  the
maximum amount of income that has not been taxed in each.

                  Shareholders'     Untaxed
    Company          Surplus        Balance
 
     ABE        $    5,237,958  $    1,149,693
     APPL            5,417,825       1,525,367
     UG             27,760,313       4,363,821
     USA                     0               0

The  payment  of taxes on this income is not anticipated; and, accordingly,
no deferred taxes have been established.

The  life insurance company subsidiaries file a consolidated federal income
tax return. The holding companies of the group file separate returns.

Life  insurance company taxation is based primarily upon statutory  results
with  certain  special deductions and other items available  only  to  life
insurance   companies.   Income  tax  expense  consists  of  the  following
components:

                              1997              1996        1995
    Current tax expense      $      5,400  $  (148,148)   $     1,897
    Deferred tax expense(credit)  566,599   (4,495,813)    (4,726,689)
                             $    571,999  $(4,643,961)   $(4,724,792)

The  Companies have net operating loss carryforwards for federal income tax
purposes expiring as follows:

<TABLE>
<S>        <C>            <C> 
                   UG             FCC
     2004  $            0 $      163,334
     2005               0        138,765
     2006       2,400,574         33,345
     2007         782,452        676,067
     2008         939,977          4,595
     2009               0        168,800
     2010               0         19,112
     2012       2,970,692              0
    TOTAL  $    7,093,695 $    1,204,018
</TABLE>
The  Company  has  established a deferred tax asset of $2,904,200  for  its
operating   loss  carryforwards  and  has  established  an   allowance   of
$2,904,200.
                                  56
<PAGE>
The expense or (credit) for income taxes differed from the amounts computed
by  applying the applicable United States statutory rate of 35% to the loss
before taxes as a result of the following differences:

<TABLE>
<S>                             <C>          <C>            <C> 
                                    1997           1996           1995
Tax computed at statutory rate  $ (168,382)  $ (2,381,055)  $ (4,194,523)
Changes in taxes due to:                                                           
 Cost in excess of net
  assets purchased                  54,250         64,848         60,594
 Current year loss for 
  which no benefit realized      1,039,742              0              0
 Benefit of prior losses          (324,705)     (2,393,395)      (598,563)
 Other                             (28,906)         65,641          7,700
Income tax expense (credit)     $  571,999   $  (4,643,961) $  (4,724,792)
</TABLE>
The  following  table  summarizes the major components  that  comprise  the
deferred tax liability as reflected in the balance sheets:
<TABLE>
<S>                                    <C>             <C>
                                            1997            1996
    Investments                        $  (228,027)    $  (122,251)
    Cost of insurance acquired          15,753,308      16,637,883
    Deferred policy acquisition costs    3,710,252       3,963,875
    Agent balances                         (23,954)        (65,609)
    Property and equipment                 (19,818)        (37,683)
    Discount of notes                      896,113         922,766
    Management/consulting fees            (573,182)       (733,867)
    Future policy benefits              (4,421,038)     (5,906,087)
    Other liabilities                     (756,482)     (1,151,405)
    Federal tax DAC                     (2,179,487)     (1,916,536)
    Deferred tax liability           $  12,157,685   $  11,591,086
</TABLE>
                                    57
<PAGE>
4.  ANALYSIS OF INVESTMENTS, INVESTMENT INCOME AND INVESTMENT GAIN

A.  NET  INVESTMENT  INCOME  -  The following table reflects  net  investment
    income by type of investment:
                                             December 31,
                                   1997           1996          1995
<TABLE>
<S>                          <C>           <C>           <C>
Fixed maturities and fixed                                              
 maturities held for sale    $ 12,677,348  $ 13,326,312   $ 13,253,122
Equity securities                  87,211        88,661         52,445
Mortgage loans                    802,123     1,047,461      1,257,189
Real estate                       745,502       794,844        975,080
Policy loans                      976,064     1,121,538      1,041,900
Short-term investments             70,624        21,423         21,295
Other                             721,866       724,771        620,954
Total consolidated investment
 income                        16,080,738    17,125,010     17,221,985
Consolidated net investment 
 income                      $ 14,882,677  $ 15,902,107   $ 15,497,547
</TABLE>
At December 31, 1997, the Company had a total of $5,797,000 of investments,
comprised of $3,848,000 in real estate and $1,949,000 in equity securities,
which did not produce income during 1997.

The  following table summarizes the Company's fixed maturity  holdings  and
investments held for sale by major classifications:
        

                                                 Carrying Value
                                              1997            1996
<TABLE>
<S>                                     <C>             <C>
Investments held for sale:
  Fixed maturities                      $   1,668,630   $   1,961,166
  Equity securities                         3,001,744       1,794,405
Fixed maturities:
  U.S. Government, government agencies
   and authorities                         28,259,322      28,554,631
  State, municipalities and political  
   subdivisions                            22,778,816      14,421,735
  Collateralized mortgage obligations      11,093,926      13,246,781
  Public utilities                         47,984,322      51,821,989
  All other corporate bonds                70,853,947      71,891,649
                                        $ 185,640,707   $ 183,692,356
</TABLE>

By insurance statute, the majority of the Company's investment portfolio is
required  to  be invested in investment grade securities to  provide  ample
protection  for  policyholders.  The Company does not invest  in  so-called
"junk bonds" or derivative investments.

                             58
<PAGE>
Below  investment  grade  debt securities  generally  provide  higher
yields  and  involve  greater risks than investment grade  debt  securities
because  their  issuers  typically  are  more  highly  leveraged  and  more
vulnerable  to  adverse economic conditions than investment grade  issuers.
In  addition,  the  trading  market for these securities  is  usually  more
limited  than  for  investment  grade  debt  securities.   Debt  securities
classified  as below-investment grade are those that receive a  Standard  &
Poor's rating of BB or below.

  The  following  table  summarizes by category securities  held  that  are
  below investment grade at amortized cost:
<TABLE>
<S>                     <C>            <C>            <C>
Below Investment                                       
Grade Investments                 1997           1996            1995
 State,Municipalities
  and political
  subdivisions          $            0  $      10,042  $            0
Public Utilities                80,497        117,609         116,879
Corporate                      656,784        813,717         819,010
Total                   $      737,281  $     941,368  $      935,889
</TABLE>

B.     INVESTMENT SECURITIES

  The  amortized  cost  and  estimated  market  values  of  investments  in
  securities including investments held for sale are as follows:
          
                            Cost or      Gross        Gross      Estimated
                            Amortized   Unrealized   Unrealized    Market
1997                          Cost        Gains        Losses       Value
<TABLE>
<S>                    <C>             <C>           <C>         <C> 
Investments Held for Sale:
  U.S. Government and
  govt. agencies and
  authorities          $    1,448,202  $         0   $   (5,645) $  1,442,557
States, municipalities
  and political subdivisions   35,000          485            0        35,485
Collateralized mortgage
  obligations                       0            0            0             0
Public utilties                80,169          328            0        80,497
All other corporate bonds     108,927        1,164            0       110,091
                            1,672,298        1,977       (5,645)    1,668,630
Equity securities           3,184,357      176,508     (359,121)    3,001,744
Total                  $    4,856,655  $   178,485   $ (364,766) $  4,670,374
                                                                             
Held to Maturity Securities:
 U.S. Government                                                            
  and govt. agencies
  and authorities      $   28,259,322  $   415,419   $  (51,771) $ 28,622,970
 States, municipalities   
  and political
  subdivisions             22,778,816      672,676       (1,891)   23,449,601
 Collateralized mortgage
  obligations              11,093,926      210,435      (96,714)   11,207,647
Public utilities           47,984,322    1,241,969      (84,754)   49,141,537
All other 
 corporate bonds           70,853,947    1,599,983      (93,117)   72,360,813
Total                  $  180,970,333 $  4,140,482  $  (328,247) $184,782,568
</TABLE>

                                       59
<PAGE> 

                               Cost or     Gross         Gross       Estimated
                              Amortized   Unrealized    Unrealized     Market
1996                            Cost        Gains         Losses        Value
<TABLE>
<S>                         <C>           <C>            <C>        <C>                             
Investments Held for Sale:
 U.S. Government and govt. 
  agencies & authorities    $  1,461,068  $         0    $ (17,458) $ 1,443,609
 States, municipalities
  and political subdivisions     145,199          665       (6,397)     139,467
 Collateralized mortgage
  obligations                          0            0            0            0
 Public utilities                119,970          363         (675)     119,658
All other corporate bonds        258,424        4,222       (4,215)     258,432
                               1,984,661        5,250      (28,745)   1,961,166
Equity securities              2,086,159       37,000     (328,754)   1,794,405
Total                     $    4,070,820 $     42,250   $ (357,499) $ 3,755,571
                                                                             
Held to Maturity Securities:
 U.S. Government and govt.
  agencies & authorities  $   28,554,631 $    421,523   $ (136,410) $28,839,744
 States, municipalities
  and political subdivisions  14,421,735      318,682      (28,084)  14,712,333
 Collateralized mortgage      13,246,780      175,163     (157,799)  13,264,145
 Public utilities             51,821,990      884,858     (381,286)  52,325,561
 All other corporate bonds    71,881,649    1,240,230     (448,437)  72,673,442
 Total                    $  179,926,785 $  3,040,456  $(1,152,016)$181,815,225
</TABLE>

  The  amortized  cost  of  debt  securities  at  December  31,  1997,   by
  contractual  maturity, are shown below.  Expected maturities will  differ
  from  contractual maturities because borrowers may have the right to call
  or prepay obligations with or without call or prepayment penalties.

 Fixed Maturities Held for Sale                                  Estimated
   December 31, 1997                            Amortized          Market
                                                  Cost             Value
<TABLE>
<S>                                        <C>               <C> 
Due in one year or less                    $       83,927    $      84,952
Due after one year through five years           1,533,202        1,528,211
Due after five years through ten years             55,169           55,467
Due after ten years                                     0                0
Collateralized mortgage obligation                      0                0
Total                                      $    1,672,298    $   1,668,630
</TABLE>
                                                   
                               60
<PAGE>               
                                                                Estimated
Fixed Maturities Held to Maturity               Amortized         Market
   December 31, 1997                               Cost           Value

<TABLE>
<S>                                        <C>               <C> 
Due in one year or less                    $   15,023,173    $  15,003,728
Due after one year through five years         118,849,668      120,857,201
Due after five years through ten years         30,266,228       31,726,265
Due after ten years                             5,737,338        5,987,726
Collateralized mortgage obligations            11,093,926       11,207,648
Total                                      $  180,970,333    $ 184,782,568
</TABLE>

  An  analysis  of  sales,  maturities  and  principal  repayments  of  the
  Company's  fixed  maturities portfolio for the years ended  December  31,
  1997, 1996 and 1995 is as follows:

                                   Cost or      Gross        Gross    Proceeds
                                  Amortized    Realized    Realized     from
Year ended December 31, 1997          Cost      Gains       Losses      Sale
<TABLE>
<S>                           <C>           <C>            <C>      <C>
Scheduled principal repayments,
   calls and tenders:
     Held for sale            $     299,390  $       931   $  (9,661)$   290,660
     Held to maturity            21,467,552       21,435        (722) 21,488,265
Sales:                                                                         
      Held for sale                       0            0           0           0
      Held to maturity                    0            0           0           0
Total                         $  21,766,942  $    22,366   $ (10,383) 21,778,925
</TABLE>

                                 Cost or        Gross         Gross    Proceeds
                                Amortized      Realized     Realized     from
Year ended December 31, 1996        Cost         Gains       Losses      Sale
<TABLE>
<S>                         <C>            <C>           <C>         <C>
Scheduled principal repayments,
   calls and tenders:
     Held for sale          $     699,361   $     6,035  $     (813) $   704,583
     Held to maturity          20,900,159        13,469    (192,146)  20,721,482
Sales:                                                                         
      Held for sale               517,111             0      (2,658)             514,453
      Held to maturity         18,735,848        81,283     (80,519)  18,736,612
Total                       $  40,852,479   $   100,787  $ (276,136) $40,677,130
</TABLE>
                                   61
<PAGE>

                                   Cost or     Gross      Gross     Proceeds
                                 Amortized    Realized   Realized     from
Year ended December 31, 1995       Cost        Gains      Losses      Sale
<TABLE>
<S>                           <C>           <C>         <C>         <C>
Scheduled principal repayments,
   calls and tenders:
     Held for sale            $     621,461  $        0  $  (1,849) $    619,612
     Held to maturity            16,383,921     125,740   (244,521)   16,265,140
Sales:                                                                         
      Held for sale                       0           0          0             0
      Held to maturity                    0           0          0             0
Total                         $  17,005,382  $  125,740 $ (246,370) $ 16,884,752
</TABLE>
C.INVESTMENTS  ON  DEPOSIT - At December 31, 1997, investments  carried  at
  approximately  $17,801,000 were on deposit with various  state  insurance
  departments.


5.  DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The  financial statements include various estimated fair value  information
at  December  31,  1997  and 1996, as required by  Statement  of  Financial
Accounting  Standards  107,  Disclosure  about  Fair  Value  of   Financial
Instruments  ("SFAS  107").   Such  information,  which  pertains  to   the
Company's financial instruments, is based on the requirements set forth  in
that  Statement  and does not purport to represent the aggregate  net  fair
value of the Company.

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)  Cash and Cash equivalents

The  carrying  amount in the financial statements approximates  fair  value
because  of the relatively short period of time between the origination  of
the instruments and their expected realization.

(b)  Fixed maturities and investments held for sale

Quoted  market prices, if available, are used to determine the fair  value.
If  quoted market prices are not available, management estimates  the  fair
value  based  on  the  quoted market price of a financial  instrument  with
similar characteristics.

(c)  Mortgage loans on real estate

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.

(d) Investment real estate and real estate acquired in satisfaction of debt

An estimate of fair value is based on management's review of the individual
real estate holdings.  Management utilizes sales of surrounding properties,
current   market  conditions  and  geographic  considerations.   Management
conservatively estimates the fair value of the portfolio is  equal  to  the
carrying value.

                                 62
<PAGE>
(e)  Policy loans

It  is  not practicable to estimate the fair value of policy loans as  they
have  no  stated  maturity and their rates are set at  a  fixed  spread  to
related  policy liability rates.  Policy loans are carried at the aggregate
unpaid  principal  balances in the consolidated balance  sheets,  and  earn
interest at rates ranging from 4% to 8%.  Individual policy liabilities  in
all cases equal or exceed outstanding policy loan balances.

(f)  Short-term investments

For short-term instruments, the carrying amount is a reasonable estimate of
fair  value.   Short-term  instruments represent United  States  Government
Treasury  Bills  and certificates of deposit with various  banks  that  are
protected under FDIC.

(g)  Notes and accounts receivable and uncollected premiums

The Company holds a $840,066 note receivable for which the determination of
fair  value  is  estimated by discounting the future cash flows  using  the
current  rates  at  which  similar loans would be made  to  borrowers  with
similar  credit  ratings and for the same remaining  maturities.   Accounts
receivable  and  uncollected  premiums  are  primarily  insurance  contract
related   receivables  which  are  determined  based  upon  the  underlying
insurance liabilities and added reinsurance amounts, and thus are  excluded
for the purpose of fair value disclosure by paragraph 8(c) of SFAS 107.

(h)  Notes payable

For  borrowings  under  the  senior loan agreement,  which  is  subject  to
floating rates of interest, carrying value is a reasonable estimate of fair
value.  For subordinated borrowings fair value was determined based on  the
borrowing  rates currently available to the Company for loans with  similar
terms and average maturities.

The  estimated fair values of the Company's financial instruments  required
to be valued by SFAS 107 are as follows as of December 31:
  
                               1997                         1996
                                    Estimated                    Estimated
                      Carrying         Fair          Carrying        Fair
Assets                  Amount         Value           Amount        Value

<TABLE>
<S>               <C>            <C>            <C>            <C>
Fixed maturities  $ 180,970,333  $ 184,782,568  $ 179,926,785  $ 181,815,225
Fixed maturities 
 held for sale        1,668,630      1,668,630      1,961,166      1,961,166
Equity securities     3,001,744      3,001,744      1,794,405      1,794,405
Mortgage loans on
 real estate          9,469,444      9,837,530     11,022,792     11,022,792
Policy loans         14,207,189     14,207,189     14,438,120     14,438,120
Short-term 
 investments          1,798,878      1,798,878        430,983        430,983
Investment in 
 real estate          9,760,732      9,760,732      9,779,984      9,779,984
Real estate acquired                                                           
 in satisfaction of
 debt                 1,724,544      1,724,544      1,724,544      1,724,544
Notes receivable      1,680,066      1,569,603      1,680,066      1,566,562
                                                                      
Liabilities
Notes payable        19,081,602     18,539,301     19,839,853     18,671,155
</TABLE>
                                      63
<PAGE>
6.  STATUTORY EQUITY AND GAIN FROM OPERATIONS

The  Company's insurance subsidiaries are domiciled in Ohio,  Illinois  and
West  Virginia  and prepare their statutory-based financial  statements  in
accordance  with  accounting  practices  prescribed  or  permitted  by  the
respective  insurance  department.  These principles  differ  significantly
from  generally  accepted  accounting principles.   "Prescribed"  statutory
accounting   practices  include  state  laws,  regulations,   and   general
administrative rules, as well as a variety of publications of the  National
Association  of  Insurance Commissioners ("NAIC").   "Permitted"  statutory
accounting  practices  encompass  all accounting  practices  that  are  not
prescribed; such practices may differ from state to state, from company  to
company  within a state, and may change in the future.  The NAIC  currently
is  in  the process of codifying statutory accounting practices, the result
of  which  is  expected  to  constitute the  only  source  of  "prescribed"
statutory accounting practices.  Accordingly, that project, which  has  not
yet  been  completed,  will likely change prescribed  statutory  accounting
practices  and  may  result  in changes to the  accounting  practices  that
insurance  enterprises use to prepare their statutory financial statements.
UG's  total  statutory shareholders' equity was $10,997,365 and $10,226,566
at  December  31,  1997  and 1996, respectively.  The  Company's  insurance
subsidiaries reported combined statutory gain from operations (exclusive of
intercompany  dividends) was $3,978,000,  $10,692,000  and  $4,076,000  for
1997, 1996 and 1995, respectively.


7.  REINSURANCE

Reinsurance  contracts do not relieve the Company from its  obligations  to
policyholders.   Failure  of reinsurers to honor  their  obligations  could
result  in  losses  to  the Company.  The Company evaluates  the  financial
condition of its reinsurers to minimize its exposure to significant  losses
from reinsurer insolvencies.

The  Company assumes risks from, and reinsures certain parts of  its  risks
with  other insurers under yearly renewable term and coinsurance agreements
that  are  accounted for by passing a portion of the risk to the reinsurer.
Generally, the reinsurer receives a proportionate part of the premiums less
commissions and is liable for a corresponding part of all benefit payments.
While  the amount retained on an individual life will vary based  upon  age
and  mortality prospects of the risk, the Company generally will not  carry
more than $125,000 individual life insurance on a single risk.

The  Company has reinsured approximately $1.022 billion, $1.109 billion and
$1.088  billion in face amount of life insurance risks with other  insurers
for  1997, 1996 and 1995, respectively.  Reinsurance receivables for future
policy  benefits were $37,814,106 and $38,745,093 at December 31, 1997  and
1996,  respectively,  for estimated recoveries under reinsurance  treaties.
Should  any  reinsurer be unable to meet its obligation at the  time  of  a
claim, obligation to pay such claim would remain with the Company.

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 as of December 31, 1997.

                                 64
<PAGE>
The  Company  does not have any short-duration reinsurance contracts.   The
effect  of  the Company's long-duration reinsurance contracts  on  premiums
earned in 1997, 1996 and 1995 was as follows:

                                Shown in Thousands
                         1997           1996          1995
                       Premiums       Premiums      Premiums
                         Earned         Earned         Earned
Direct              $    33,374     $   35,891      $  38,482
Assumed                       0              0              0
Ceded                    (4,735)        (4,947)        (5,383)
Net premiums        $    28,639     $   30,944      $  33,099


8.  COMMITMENTS AND CONTINGENCIES

The  insurance  industry has experienced a number of  civil  jury  verdicts
which  have  been  returned  against  life  and  health  insurers  in   the
jurisdictions  in which the Company does business involving  the  insurers'
sales  practices,  alleged agent misconduct, failure to properly  supervise
agents, and other matters.  Some of the lawsuits have resulted in the award
of substantial judgments against the insurer, including material amounts of
punitive  damages.  In some states, juries have substantial  discretion  in
awarding punitive damages in these circumstances.

Under  the insurance guaranty fund laws in most states, insurance companies
doing  business in a participating state can be assessed up  to  prescribed
limits  for  policyholder losses incurred by insolvent or failed  insurance
companies.   Although the Company cannot predict the amount of  any  future
assessments,  most insurance guaranty fund laws currently provide  that  an
assessment  may  be excused or deferred if it would threaten  an  insurer's
financial  strength.   Mandatory assessments  may  be  partially  recovered
through a reduction in future premium tax in some states. The Company  does
not  believe  such  assessments will be materially different  from  amounts
already provided for in the financial statements.

The  Company  and its subsidiaries 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 and its legal counsel are 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.


9.  RELATED PARTY TRANSACTIONS

UII  has  a service agreement with USA which states that 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'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.

USA paid $989,295, $1,567,891 and $2,015,325 under their agreement with UII
for  1997,  1996 and 1995, respectively.  UII paid $593,577,  $940,734  and
$1,209,195  under  their  agreement with  UTI  for  1997,  1996  and  1995,
respectively.

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 UTG  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".
Also  included  are  costs  associated with  the  maintenance  of  existing
policies  that are charged as current period costs and included in "general
expenses".

                                     65
<PAGE>
On  July 31,1997, the Company entered into employment agreements with eight
individuals, all officers or employees of the Company.  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 the  Company  a  stable  management
environment and positioning for future growth.


10.   DEFERRED COMPENSATION PLAN
   
UTI and FCC established a deferred compensation plan during 1993 pursuant
to which an officer or agent of FCC, UTI or affiliates of UTI, could defer
a portion of their income over the next two and one-half years in return
for a deferred compensation payment payable at the end of seven years in
the amount equal to the total income deferred plus interest at a rate of
approximately 8.5% per annum and a stock option to purchase shares of
common stock of UTI.  At the beginning of the deferral period an officer or
agent received an immediately exercisable option to purchase 2,300 shares
of UTI common stock at $17.50 per share for each $25,000 ($10,000 per year
for two and one-half years) of total income deferred.  The option expires
on December 31, 2000.  A total of 105,000 options were granted in 1993
under this plan.  As of December 31, 1997 no options were exercised.  At
December 31, 1997 and 1996, the Company held a liability of $1,376,384 and
$1,267,598, respectively, relating to this plan. At December 31, 1997, UTI
common stock had a bid price of $8.00 and an ask price of $9.00 per share.
   
The following information applies to deferred compensation plan stock
options outstanding at December 31, 1997:
  
  Number outstanding                       105,000
  Exercise price                            $17.50
  Remaining contractual life               3 years
  


11.  REVERSE STOCK SPLIT OF FCC

On May 13, 1997, FCC effected a 1 for 400 reverse stock split.  Fractional
shares received a cash payment on the basis of $.25 for each old share.
FCC maintained a significant number of shareholder accounts with less than
$100 of market value of stock.  The reverse stock split enabled these
smaller shareholders to receive cash for their shares without incurring
broker costs and will save the Company administrative costs associated with
maintaining these small accounts.


12.  NOTES PAYABLE

At  December 31, 1997 and 1996, the Company has $19,081,602 and $19,839,853
in  long-term debt outstanding, respectively.  The debt is comprised of the
following components:

                                    1997            1996
Senior debt                   $   6,900,000    $  8,400,000
Subordinated 10 yr. notes         5,746,774       6,209,293
Subordinated 20 yr. notes         4,034,828       3,830,560
Other notes payable               2,400,000       1,400,000
                              $  19,081,602    $ 19,839,853

A.  Senior debt

The  senior  debt  is through First of America Bank - Illinois  NA  and  is
subject to a credit agreement.  The debt bears interest at a rate equal  to
the  "base  rate" plus nine-sixteenths of one percent.  The  Base  rate  is
defined  as  the  floating daily, variable rate of interest determined  and

                                  66
<PAGE>
announced  by First of America Bank from time to time as its "base  lending
rate."   The  base  rate at December 31, 1997 was 8.5%.  Interest  is  paid
quarterly.   Principal payments of $1,000,000 are due in May of  each  year
beginning  in 1997, with a final payment due May 8, 2005.  On  November  8,
1997, the Company prepaid the May 1998 principal payment.

The credit agreement contains certain covenants with which the Company must
comply.   These covenants contain provisions common to a loan of this  type
and include such items as; a minimum consolidated net worth of FCC to be no
less  than  400% of the outstanding balance of the debt; Statutory  capital
and  surplus of Universal Guaranty Life Insurance Company be maintained  at
no less than $6,500,000; an earnings covenant requiring the sum of the pre-
tax   earnings  of  Universal  Guaranty  Life  Insurance  Company  and  its
subsidiaries  (based on Statutory Accounting Practices) and  the  after-tax
earnings plus non-cash charges of FCC (based on parent only GAAP practices)
shall not be less than two hundred percent (200%) of the Company's interest
expense on all of its debt service.  The Company is in compliance with  all
of the covenants of the agreement.

B.  Subordinated debt

The  subordinated  debt  was  incurred June 16,  1992  as  a  part  of  the
acquisition  of  the  now  dissolved Commonwealth  Industries  Corporation,
(CIC).   The  10-year notes bear interest at the rate of 7 1/2% per  annum,
payable semi-annually beginning December 16, 1992.  These notes, except for
one  $840,000 note, provide for principal payments equal to 1/20th  of  the
principal balance due with each interest installment beginning December 16,
1997,  with a final payment due June 16, 2002.  The aforementioned $840,000
note  provides for a lump sum principal payment due June 16, 2002.  In June
1997,  the  Company refinanced a $204,267 subordinated 10-year  note  as  a
subordinated 20-year note bearing interest at the rate of 8.75% per  annum.
The  repayment  terms of the refinanced note are the same as  the  original
subordinated  20 year notes.  The original 20-year notes bear  interest  at
the  rate of 8 1/2% per annum on $3,397,620 and 8.75% per annum on $504,962
(of  which  the $204,267 note refinanced in the current year is  included),
payable semi-annually with a lump sum principal payment due June 16, 2012.

C.  Other notes payable

United Income, Inc. holds two promissory notes receivable totaling $850,000
due  from  FCC.  Each note bears interest at the rate of 1% over  prime  as
published in the Wall Street Journal, with interest payments due quarterly.
Principal  of $150,000 is due upon the maturity date of June 1, 1999,  with
the  remaining principal payment of $700,000 becoming due upon the maturity
date of May 8, 2006.

United  Trust,  Inc.  holds  three  promissory  notes  receivable  totaling
$1,550,000 due from FCC.  Each note bears interest at the rate of  1%  over
prime  as published in the Wall Street Journal, with interest payments  due
quarterly. Principal of $250,000 is due upon the maturity date of  June  1,
1999, with the remaining principal payment of $1,300,000 becoming due  upon
maturity in 2006.

Scheduled  principal reductions on the Company's debt  for  the  next  five
years is as follows:

              Year      Amount

              1998   $   516,504
              1999     1,916,504
              2000     1,516,504
              2001     1,516,504
              2002     2,356,504


13.  OTHER CASH FLOW DISCLOSURES

On  a cash basis, the Company paid $1,658,703, $1,700,973 and $1,934,326 in
interest  expense  for  the years 1997, 1996 and 1995,  respectively.   The
Company  paid $57,277, $17,634 and $25,821 in federal income tax for  1997,
1996 and 1995, respectively.

                              67
<PAGE>
One  of  the Company's insurance subsidiaries ("UG") entered  into  a
coinsurance agreement with Park Avenue Life Insurance Company ("PALIC")  at
September  30,  1996.   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, the Company sold  $18,737,000  of  fixed
maturity investments.


14.  NON-RECURRING WRITE DOWN OF VALUE OF AGENCY FORCE ACQUIRED

During  the  year-ended December 31, 1995, the Company  recognized  a  non-
recurring  write down of $8,297,000 on its value of agency  force  acquired
The  write  down  released  $2,904,000 of the deferred  tax  liability  and
$3,327,000  was  attributed to minority interest in  loss  of  consolidated
subsidiaries.   In  addition,  equity  loss  of  investees  was  negatively
impacted  by  $542,000.   The  effect of this write  down  resulted  in  an
increase  in  the  net  loss of $2,608,000.  This write  down  is  directly
related to the Company's change in distribution systems.  Due to the broker
agency  force not meeting management's expectations and lack of production,
the   Company  has  changed  its  focus  from  a  primarily  broker  agency
distribution system to a captive agent system.  With the change  in  focus,
most  of  the  broker agents were terminated and therefore, management  re-
evaluated the value of the agency force carried on the balance sheet.   For
purposes  of the write-down, the broker agency force has no future expected
cash  flows  and therefore warranted a write-off of the value.   The  write
down is reported as a separate line item "non-recurring write down of value
of  agency force acquired" and the release of the deferred tax liability is
reported  in  the  credit  for income taxes payable  in  the  Statement  of
Operations.   In  addition,  the impact to minority  interest  in  loss  of
consolidated subsidiaries and equity loss of investees is in the  Statement
of Operations.


15.  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.


16.  NEW ACCOUNTING STANDARDS

The  Financial  Accounting Standards Board (FASB) has issued  Statement  of
Financial Accounting Standards (SFAS) No. 128 entitled Earnings per  share,
which  is  effective  for financial statements for fiscal  years  beginning
after   December  15,  1997.   SFAS  No.  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.

Under  SFAS  No.  128,  primary EPS computed in  accordance  with  previous
opinions  is replaced with a simpler calculation called basic  EPS.   Basic
EPS  is  calculated  by  dividing income available to  common  stockholders
(i.e.,  net income or loss adjusted for preferred stock dividends)  by  the
weighted-average number of common shares outstanding.  Thus,  in  the  most
significant  change in current practice, options, warrants, and convertible
securities   are  excluded  from  the  basic  EPS  calculation.    Further,
contingently  issuable shares are included in basic EPS  only  if  all  the
necessary conditions for the issuance of such shares have been satisfied by
the end of the period.

Fully  diluted  EPS  has not changed significantly  but  has  been  renamed
diluted  EPS.   Income  available to common stockholders  continues  to  be
adjusted  for  assumed  conversion of all potentially  dilutive  securities
using the treasury stock method to calculate the dilutive effect of options
and  warrants.  However, unlike the calculation of fully diluted EPS  under
previous opinions, a new treasury stock method is applied using the average

                                68
<PAGE>
market   price  or  the  ending  market  price.   Further,  prior   opinion
requirement  to use the modified treasury stock method when the  number  of
options  or  warrants outstanding is greater than 20%  of  the  outstanding
shares  also  has been eliminated.  SFAS 128 also includes  certain  shares
that  are contingently issuable; however, the test for inclusion under  the
new rules is much more restrictive.

SFAS   No.   128  requires  companies  reporting  discontinued  operations,
extraordinary items, or the cumulative effect of accounting changes are  to
use  income from operations as the control number or benchmark to determine
whether  potential  common  shares  are  dilutive  or  antidilutive.   Only
dilutive securities are to be included in the calculation of diluted EPS.

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 No. 128 did not have an impact
on the Company's financial statement.

The  FASB  has issued SFAS No. 130 entitled Reporting Comprehensive  Income
and   SFAS  No.  132  Employers'  Disclosures  about  Pensions  and   Other
Postretirement  Benefits.  Both of the above statements are  effective  for
financial statements with fiscal years beginning after December 15, 1997.

SFAS No. 130 defines how to report and display comprehensive income and its
components in a full set of financial statements.  The purpose of reporting
comprehensive income is to report a measure of all changes in equity of  an
enterprise  that  result from recognized transactions  and  other  economic
events  of the period other than transactions with owners in their capacity
as owners.

SFAS   No.   132  addresses  disclosure  requirements  for  post-retirement
benefits.   The  statement does not change post-retirement  measurement  or
recognition issues.

The  Company  will adopt both SFAS No. 130 and SFAS No. 132  for  the  1998
financial statements.  Management does not expect either adoption to have a
material impact on the Company's financial statements.

17.  PENDING CHANGE IN CONTROL OF UNITED TRUST, INC.

On  February 19, 1998, UTI signed a letter of intent with Jesse T. Correll,
whereby   Mr.  Correll  will  personally  or  in  combination  with   other
individuals make an equity investment in UTI over a period of three  years.
UPON COMPLETION OF THE TRANSACTION MR. CORRELL WILL OWN 51% OF UTI. Under the
terms  of the letter of intent Mr. Correll will  buy  2,000,000
authorized but unissued shares of UTI common stock for $15.00 per share and
will also buy 389,715 shares of UTI common stock, representing stock of UTI
and  UII,  that  UTI  purchased during the last  eight  months  in  private
transactions  at the average price UTI paid for such stock, plus  interest,
or  approximately $10.00 per share.  Mr. Correll also will purchase  66,667
shares  of  UTI  common stock and $2,560,000 of face amount of  convertible
bonds  (which  are  due and payable on any change in  control  of  UTI)  in
private  transactions, primarily from officers of UTI.  Upon completion  of
the transaction, Mr. Correll would be the largest shareholder of UTI.
UTI  intends  to use the equity that is being contributed to  expand  their
operations through the acquisition of other life insurance companies.   The
transaction  is subject to negotiation of a definitive purchase  agreement;
completion  of due diligence by Mr. Correll; the receipt of regulatory  and
other   approvals;  and  the  satisfaction  of  certain  conditions.    The
transaction is not expected to be completed before June 30, 1998, and there
can be no assurance that the transaction will be completed.

                           69
<PAGE>
18.   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.  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 third quarter of 1998.

                                  70
<PAGE>
19.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
                   
                                                   1997
                            1st             2nd            3rd             4th
Premiums and policy
 fees, net             $  7,926,386  $   7,808,782  $  6,639,394   $  6,264,683
Net investment income     3,859,875      3,839,519     3,691,584      3,491,699
Total revenues           11,781,878     11,687,887    10,216,109      9,664,744
Policy benefits                                                                 
 including dividends      7,718,015      6,861,699     6,467,739      6,007,718
Commissions and                                                                 
 amortization of
 DAC and COI              1,670,854      1,174,116     1,727,317      1,571,438
Operating and
 interest expense         2,884,663      3,084,239     2,778,435      1,885,475
Operating income(loss)     (491,654)       567,833      (757,382)       200,113
Net income (loss)           (23,565)        27,351      (512,444)      (414,719)
Net income (loss) per
 share                      (235.65)        273.51     (5,124.44)     (4,147.19)
  
                                                   1996
                                1st            2nd           3rd            4th

Premiums and policy
 fees, net             $  7,637,503  $   8,514,175  $  7,348,199   $  7,444,581
Net investment income     3,974,407      3,930,487     4,002,258      3,994,955
Total revenues           12,513,692     12,187,077    11,331,283     10,444,059
Policy benefits                                                                 
 including dividends      6,528,760      7,083,803     8,378,710      8,334,759
Commissions and                                                                 
 amortization 
 of DAC and COI           2,567,921      2,298,549     1,734,048      3,314,436
Operating and
 interest expense         3,616,660      3,072,535     3,685,600        910,771
Operating income(loss)     (198,649)      (267,810)   (2,467,075)    (3,869,480)
Net income (loss)           268,675        (93,640)   (1,563,817)      (271,915)
Net income (loss)
 per share                 2,686.75        (936.40)   (15,638.17)     (2,719.15)
                  
                                                     1995
                                1st            2nd           3rd             4th

Premiums and policy
 fees, net             $  8,703,332  $   9,507,694  $  7,868,803   $  7,018,707
Net investment income     3,857,562      3,849,212     3,757,605      3,918,933
Total revenues           13,385,477     12,566,391    11,514,869     11,130,583
Policy benefits                                                                 
 including dividends      8,097,830      9,113,933     5,978,795      6,665,206
Commissions and                                                                 
 amortization of 
 DAC and COI             2,451,030       2,860,032     3,044,057      1,459,141
Operating and 
 interest expenses       3,449,062       2,742,174     2,498,472      3,924,966
Operating income (loss)   (612,445)     (2,149,748)       (6,455)    (9,215,704)
Net income (loss)           95,608      (1,305,599)      126,751     (4,237,636)
Net income (loss) per
 share                      956.08      (13,055.99)     1,267.51     (42,376.60)

                                 71
<PAGE>

UNITED TRUST GROUP, INC.
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
As of December 31, 1997                                          Schedule I


  Column A                               Column B    Column C     Column D

                                                                 Amount at
                                                                Which Shown
                                                                 in Balance
                                           Cost        Value       Sheet
<TABLE>
<S>                                    <C>         <C>          <C>
Fixed maturities:
Bonds:
 United States Goverment and
   government agencies and authorities $28,259,322 $ 28,622,970 $ 28,259,322
 State, municipalities, and political
   subdivisions                         22,778,816   23,449,601   22,778,816
 Collateralized mortgage obligations    11,093,926   11,207,647   11,093,926
 Public utilities                       47,984,322   49,141,537   47,984,322
 All other corporate bonds              70,853,947   72,360,813   70,853,947
Total fixed maturities                 180,970,333 $184,782,568  180,970,333

Investments held for sale:
 Fixed maturities:
  United States Goverment and
   government agencies and authorities   1,448,202 $ 1 ,442,557    1,442,557
  State, municipalities, and political
   subdivisions                             35,000       35,485       35,485
Public utilities                            80,169       80,496       80,496
All other corporate bonds                  108,927      110,092      110,092
                                         1,672,298  $ 1,668,630    1,668,630

Equity securities:
 Banks, trusts and insurance companies   2,473,969  $ 2,167,368    2,167,368
 All other corporate securities            710,388      834,376      834,376
                                         3,184,357  $ 3,001,744    3,001,744


Mortgage loans on real estate            9,469,444                 9,469,444
Investment real estate                   9,760,732                 9,760,732
Real estate acquired in satisfaction of  1,724,544                 1,724,544
Policy loans                            14,207,189                14,207,189
Short-term investments                   1,798,878                 1,798,878
  Total investments                   $222,787,775              $222,601,494
</TABLE>

                                    72
<PAGE>

UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT PARENT ONLY BALANCE SHEETS
As of December 31, 1997 and 1996                                 Schedule II


                                                        1997         1996

ASSETS
<TABLE>
<S>                                                <C>           <C>
Investment in affiliates                           $ 34,683,168  $ 35,548,414
Cash and cash equivalents                                25,980        39,529
Notes receivable from affiliate                       9,781,602    10,039,853
Accrued interest income                                  34,455        35,202
   Total Assets                                    $ 44,525,205  $ 45,662,998



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
  Notes payable                                    $  9,635,257  $ 10,009,853
  Notes payable to affiliate                            146,345        30,000
  Income taxes payable                                    5,175         6,663
  Accrued interest payable                               34,455        35,202
  Other liabilities                                     413,429       452,263
      Total liabilities                              10,234,661    10,533,981



Shareholders' equity:
  Common stock                                       45,926,705    45,926,705
  Unrealized depreciation of investments held for sale  (41,708)     (126,612)
  Accumulated deficit                               (11,594,453)  (10,671,076)
     Total shareholders' equity                      34,290,544    35,129,017
     Total liabilities and shareholders' equity    $ 44,525,205  $ 45,662,998
</TABLE>

                                 73
<PAGE>

UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION OF
REGISTRANT PARENT ONLY STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1997                       Schedule II



                                     1997        1996        1995

<TABLE>
<S>                             <C>        <C>         <C> 
Revenues:

  Interest income from affiliates $ 782,892 $   792,046 $   790,334
  Other income                       37,641      34,600      31,774
                                    820,533     826,646     822,108


Expenses:

  Interest expense                  776,230     789,496     787,784
  Interest expense to affiliates      6,662       2,550       2,550
  Operating expenses                  5,585       4,624       3,341
                                    788,477     796,670     793,675

  Operating income                   32,056      29,976      28,433

  Provision for income taxes         (5,362)     (4,664)     (3,221)
  Equity in loss of subsidiaries   (950,071)  (1,686,009) (5,346,088)
     Net loss                   $  (923,377)$ (1,660,697$ (5,320,876)
</TABLE>

                                 74
<PAGE>


UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
PARENT ONLY STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1997                           Schedule II


                                                    1997       1996       1995
<TABLE>
<S>                                       <C>         <C>          <C>
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net loss                               $ (923,377) $(1,660,697) $ (5,320,876)
   Adjustments to reconcile net loss to 
    net cash provided by operating 
    activities:
  Equity in loss of subsidiaries              950,071   1,686,009     5,346,088
  Change in accrued interest income               747           0          (167)
  Change in accrued interest payable             (747)          0           167
  Change in income taxes payable               (1,488)      3,442         3,221
  Change in other liabilities                 (38,834)   (139,256)      (96,843)
Net cash used in operating activities         (13,628)   (110,502)      (68,410)

Cash flows from investing activities:
  Proceeds for fractional shares from reverse
   stock split of subsidiary                       79           0             0
  Purchase of stock of affiliates                   0     (95,000)         (200)
Net cash provided by (used in) investing           79     (95,000)         (200)

Cash flows from financing activities:
  Receipt of principal on notes receivable
   from affiliate                             258,252           0             0
  Payments of principal on notes payable     (258,252)          0             0
  Capital contribution from affiliates              0     200,000       100,000
Net cash provided by financing activities           0     200,000       100,000

Net increase (decrease) in cash and cash      (13,549)     (5,502)       31,390
Cash and cash equivalents at beginning of year 39,529      45,031        13,641
Cash and cash equivalents at end of year   $   25,980  $   39,529  $     45,031
</TABLE>

                               75
<PAGE>


UNITED TRUST GROUP, INC.
REINSURANCE
As of December 31, 1997 and the year ended December 31, 1997    Schedule IV







   Column A  Column B      Column C      Column D      Column E     Column F
  
                                                                    Percentage
                            Ceded to      Assumed                    of amount
                             other       from other                 assumed to
             Gross amount   companies    companies*    Net amount      net




Life insurance in force
           $3,691,867,000 $1,022,458,000 $1,079,885,000 $3,749,294,000  28.8%



Premiums and policy fees:

Life insurance
           $  33,133,414 $     4,681,928 $            0 $   28,451,486   0.0%

Accident and health insurance
                 240,536          52,777              0        187,759   0.0%

           $  33,373,950 $     4,734,705 $            0  $  28,639,245   0.0%



* All assumed business represents the Company's participation in the
  Servicemen's Group Life Insurance Program (SGLI).


                               76
<PAGE>
UNITED TRUST GROUP, INC.
REINSURANCE
As of December 31, 1996 and the year ended December 31, 1996       Schedule IV







   Column A    Column B      Column C      Column D      Column E     Column F


                                                                      Percentage
                             Ceded to      Assumed                    of amount
                               other      from other                  assumed to
             Gross amount   companies     companies*    Net amount      net



Life insurance in force
          $ 3,952,958,00 $ 1,108,534,00 $ 1,271,766,00 $ 4,116,190,00   30.9%

Premiums and policy fees:

 Life insurance
          $  35,633,232  $    4,896,896 $            0 $   30,736,336    0.0%

 Accident and health insurance
                258,377          50,255              0        208,122    0.0%
  
          $  35,891,609  $    4,947,151 $            0 $   30,944,458    0.0%


* All assumed business represents the Company's participation in the
  Servicemen's Group Life Insurance Program (SGLI).

                             77
<PAGE>


UNITED TRUST GROUP, INC.
REINSURANCE
As of December 31, 1995 and the year ended December 31, 1995        Schedule IV


   Column A   Column B      Column C      Column D      Column E     Column F

                                                                     Percentage
                            Ceded to      Assumed                     of amount
                             other      from other                   assumed to
           Gross amount    companies    companies*     Net amount        net

Life insurance in force
         $ 4,207,695,000 $ 1,087,774,000 $ 1,039,517,000 $ 4,159,438,000   25.0%

Premiums and policy fees:

 Life insurance
         $    38,233,190 $     5,330,351 $             0 $    32,902,839    0.0%

 Accident and Health Insurance
                 248,448          52,751               0         195,697    0.0%

           $  38,481,638 $     5,383,102 $             0 $    33,098,536    0.0%


* All assumed business represents the Company's participation in the
  Servicemen's Group Life Insurance Program (SGLI).


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UNITED TRUST GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1997, 1996 and 1995             Schedule V

                           Balance at    Additions
                           Beginning     Charges                  Balances at
  Description              Of Period     and Expenses Deductions  End of Period


December 31, 1997

Allowance for doubtful accounts -
    mortgage loans        $   10,000   $         0    $        0   $    10,000


December 31, 1996

Allowance for doubtful accounts -
    mortgage loans        $   10,000   $         0    $        0   $    10,000


December 31, 1995

Allowance for doubtful accounts -
    mortgage loans        $   26,000   $         0    $   16,000   $    10,000


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