SECURITIES AND EXCHANGE COMMISSION
Washington, D. C.  20549

FORM 10-K


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



For the fiscal year ended December 31, 1996  Commission File Number 0-18540


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


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



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



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

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

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


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

 Title of each class 

                                Common Stock

Registrant  has filed  all reports required  to be  filed by  Section 13 or
15(d)  of the  Securities  Exchange Act  of  1934 during  the preceding  12
months, and  has been subject to  such filing requirements for  the past 90
days.

At  March  1, 1997,  the Registrant  had  outstanding 19,887,572  shares of
Common Stock, stated value $.033 per share. 

DOCUMENTS  INCORPORATED BY REFERENCE:   Portions of  the Registrant's proxy
statement  for the annual meeting of shareholders  to be held during 1997
are incorporated by reference into Part III of this Report.

                             Page 1 of 72
<PAGE>

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, 1996, the affiliates of the Registrant were as depicted on the
following organizational chart:

United Trust, Inc. ("UTI") is  the ultimate controlling company.  UTI  owns
53% of United Trust Group  ("UTG") and 30% of United Income,  Inc. ("UII").
UII owns  47% of  UTG.   UTG  owns 72%  of  First Commonwealth  Corporation
("FCC").   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").

<PAGE>                              2 
      
ITEM 1.  BUSINESS

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 March 30, 1994, Farmers and  Ranchers Life Insurance Company ("F&R") was
sold to an unrelated third party.   F&R was a small life insurance  company
which did not significantly contribute to the operations of the group.  F&R
primarily represented a  marketing opportunity.  The Company  determined it
would not be able to allocate the time and resources  necessary to properly
develop the opportunity,  due to  continued focus and  emphasis on  certain
other agency forces of the Company.

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

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.   Following the liquidations, UTG holds  72% of
the common stock of FCC.

<PAGE>                             3

PRODUCTS

The Company's portfolio consists of  two universal life insurance products.
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 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  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.    Approximately  30% of  the
insurance in  force  is  participating business.    The  Company's  average
persistency rate for its policies in force for 1996 and 1995 has been 87.9%
and  87.5%, respectively.   The  Company does  not anticipate  any material
fluctuations in these rates in the future that may result from competition.

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 affiliates.

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


MARKETING

The  Company  markets its  products  through separate  and  distinct agency
forces.  The Company has approximately 60 captive agents and 15 independent
agents  who actively  write  new  business.    No  individual  sales  agent
accounted for  over 10%  of  the Company's  premium volume  in  1996.   The
Company's sales agents do not have the power to bind the Company.

The change  in marketing strategy from traditional  life insurance products
to  universal life  insurance  products had  a  significant impact  on  new
business production.  As a  result of the change in marketing  strategy the
agency  force   went  through  a  restructuring   and  retraining  process.
Marketing  is  based  on  a  referral  network  of  community  leaders  and
shareholders  of UII and  UTI.  Recruiting  of agents is also  based on the
same referral network. 

<PAGE>                              4

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.

Recruiting  of agents  is  based on  obtaining  people  with little  or  no
experience in the life  insurance business.   These recruits go through  an
extensive internal training program.

USA is licensed in Illinois, Indiana and Ohio.  During 1996, Ohio accounted
for 99% of USA's direct premiums collected.

ALIC is  licensed in  Alabama, Arizona,  Illinois,  Indiana, Louisiana  and
Missouri.   During 1996,  Illinois and Indiana  accounted for 44%  and 36%,
respectively of ALIC'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 1996,  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 1996, Illinois and Ohio accounted for 33% and 15%, respectively,  of
UG's  direct premiums collected.  No other  states account for more than 7%
of UG's direct premiums collected.


UNDERWRITING

The  underwriting  procedures of  the  Company's  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 Company's 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  Company's  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 

<PAGE>                            5

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.

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 1996, 1995 and 1994.


REINSURANCE

As  is  customary  in  the  insurance  industry,  the  Company's  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 contingently
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  financial statement  liabilities 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, 1996, the Company had insurance
in force of $3.953 billion of which approximately  $1.109 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.

The Company's insurance affiliate (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, an  industry rating  company, 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.  The
agreement  with FILIC  accounts  for approximately  66% of  the reinsurance
receivables as of December 31, 1996.  

As a result  of the  FILIC coinsurance agreement,  effective September  30,
1996,  UG received a  reinsurance credit  in the  amount of  $28,318,000 in
exchange for an equal amount of  assets.  UG also received $6,375,000  as a
commission allowance.

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.

In  selecting  a reinsurance  company,  the Company  examines  many factors
including:  

1)   Whether the reinsurer is  licensed in the states in  which reinsurance
     coverage is being sought;

2)   the solvency and stability of the company.  One source utilized is the
     rating  given the  reinsurer by  the A.M.  Best Company,  an insurance
     industry  rating company.    Another source  is  the statutory  annual
     statement of the reinsurer;

<PAGE>                              6


3)   the history and reputation of the Company;

4)   competitive pricing  of reinsurance  coverage.  The  Company generally
     seeks quotes from several reinsurers when considering a new treaty. 


INVESTMENTS

At  December 31,  1996,  substantially all  of the  assets  of the  Company
represent investments or receivables  in affiliates.  The Company  does own
one  mortgage loan as  of December 31,  1996.  Interest  income was derived
from mortgage loans and cash and cash equivalents.


COMPETITION

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

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


GOVERNMENT REGULATION

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 ALIC are domiciled in the states of Ohio, Ohio, West Virginia
and Illinois, respectively. 

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 are registered as  controlled insurers in those jurisdictions  in which
such registration  is required.    Statutes vary  from state  to state  but
typically  require  periodic  disclosure  concerning  the  corporation that
controls the registered  insurers and all  affiliates of such  corporation.
In  addition,  prior  notice  to,  or  approval  by,  the  state  insurance
commission  of  material intercorporate  transfers  of  assets, reinsurance
agreements, management agreements,  and payment of  dividends in excess  of
specified  amounts by  the insurance  affiliate within the  holding company
system are required.

<PAGE>                            7


The  National   Association  of   Insurance  Commissioners  (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 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.

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 1996,  UG had two ratios outside  the normal range.   The first
ratio compared  commission allowances  with statutory capital  and surplus.
The ratio was outside the norm  due to the reinsurance agreement with First
International Life  Insurance Company  ("FILIC").   Additional  information
about  the reinsurance  agreement with  FILIC can  be found in  the section
titled Reinsurance.   Management does not  believe that this ratio  will be
outside the normal range in future periods.

The second ratio is related to the  decrease in premium income.  The  ratio
fell outside  the normal range the last two years.  The decrease in premium
income is directly attributable  to the change in distribution  systems and
marketing strategy.  The Company changed  its focus from primarily a broker
agency  distribution system  to  a captive  agent  system and  changed  its
marketing  strategy  from  traditional  whole life  insurance  products  to
universal  life  insurance  products.   Management  is  taking  a long-term
approach  to its recent changes  to the marketing  and distribution systems
and believes these changes will provide long-term benefits to the Company.
  
The NAIC  has adopted Risk  Based Capital  ("RBC") rules,  to evaluate  the
adequacy  of statutory  capital  and surplus  in  relation to  a  company's
investment and insurance risks.  The RBC formula reflects the level of risk
of  invested  assets and  the types  of  insurance products.    The formula
classifies company risks into four categories:

1)   Asset risk  - the risk  of loss  of principal due  to default  through
     creditor  bankruptcy or decline in market value for assets reported at
     market.

2)   Pricing inadequacy  - the  risk of  adverse mortality, morbidity,  and
     expense experience in relation to pricing assumptions.

3)   Asset and  liability mismatch - the  risk of having  to reinvest funds
     when market yields fall  below levels guaranteed to contract  holders,
     and the risk of having to sell assets when market yields are above the
     levels at which the assets were purchased.

4)   General  risk - the risk  of fraud, mismanagement,  and other business
     risks.

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.  

<PAGE>                              8

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                                2.0*
   Regulatory action level                             1.5
   Authorized control level                            1.0
   Mandatory control level                             0.7

   * Or, 2.5 with negative trend.

At December  31, 1996, each  of the  Company's insurance  affiliates has  a
Ratio  that  is  in  excess  of  300%  of  the  authorized  control  level;
accordingly the Company's affiliates meet the RBC requirements. 

The  NAIC has  recently released  the Life  Illustration Model  Regulation.
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 which does not
meet the  various tests.   The  only implication  is the way  in which  the
product is marketed  to the consumer.   A product which  does not pass  the
tests  uses  guaranteed  assumptions  rather than  current  assumptions  in
presenting future product performance to the consumer.

As states in which the Company does business adopt the  regulation or adopt
a modified  version  of the  regulation, the  Company will  be required  to
comply with this new regulation.   The Company may need to  modify existing
products or sales methods.

The  NAIC  has proposed  a new  Model Investment  Law  that may  affect the
statutory  carrying  values of  certain  investments;   however,  the final
outcome of that proposal is not certain, nor is it possible to predict what
impact the  proposal will have or  whether the proposal will  be adopted in
the foreseeable future.


EMPLOYEES

UII has no employees  of its own.  There are  approximately 100 persons who
are employed by the Company's affiliates.


ITEM 2.  PROPERTIES

The Company  leases approximately 1,951 square feet of office space at 2500
Corporate  Exchange  Drive, Suite  345, Columbus,  Ohio  43231.   The lease
expires June 30,  1999 with  annual lease  rent of  $23,000 unadjusted  for
additional  rent  for  the Company's  pro  rata  share  of building  taxes,
operating  expenses and  management  expenses.    Under the  current  lease
agreement, the  Company will pay a minimum of $59,000 through the remaining
term of  the lease.   The rent  expense will be  approximately $35,000  for
1997.  The lease contains no renewal or purchase option clause.  The leased
space  cannot be sublet  without written approval of  lessor.  Rent expense
for 1996, 1995  and 1994  was approximately $61,000,  $69,000 and  $68,000,
respectively.


<PAGE>                              9

ITEM 3.  LEGAL PROCEEDINGS

The Company and its affiliates are named as defendants in a number of legal
actions arising primarily from claims made under insurance policies.  Those
actions  have been  considered in  establishing the  Company's liabilities.
Management 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.



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

None
                                 PART II


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


As of March 1, 1997, there was no established public trading market for the
Company's common  stock.  The Company's  common stock is not  listed on any
exchange.   The Company  has entered into  a stock purchase  agreement with
LaSalle  Group, Inc.,  whereby LaSalle  will acquire  10,000,000 shares  of
authorized but unissued shares of UII for $0.70 per share.  Please refer to
Note 9 of the Notes to the Financial Statements, pending  change in control
of United Income, Inc.  and United Trust, Inc., for  additional information
regarding the price per share of stock of United Income, Inc. 

As  of December 31, 1996, no cash dividends had been declared on the common
stock of UII.

See  Note  7  in  the  accompanying  financial statements  for  information
regarding dividend restrictions.

Number of Common Shareholders as of March 3, 1997 is 6,543.

<PAGE>                              10

ITEM 6.   SELECTED FINANCIAL DATA

The  following table provides selected  financial data for  the Company for
five (5) years:


                                  FINANCIAL HIGHLIGHTS
                         (000's omitted, except per share data)
                          1996      1995      1994      1993      1992
Net Operating
 Revenues               $  1,791  $  2,234  $  1,667  $  1,459   $  4,255 
Operating Costs
 and Expenses           $  1,414  $  1,976  $  1,627  $  1,384   $  4,092 
Income taxes            $      0  $      0  $      0  $      0   $     40 
Equity in loss
 of investees           $   (696) $ (2,406) $   (384) $   (580)  $   (346)
Net Income (loss)       $   (319) $ (2,148) $   (344) $   (505)  $   (223)
Net Income (loss)
 per common share (1)   $  (0.02) $  (0.11) $  (0.02) $  (0.03)  $  (0.01)
Cash Dividend Declared
  per common share      $      0  $      0  $      0  $      0   $      0 
Total Assets            $ 12,881  $ 13,386  $ 15,414  $ 14,919   $ 15,038 
Long Term
  Obligations           $    902  $      0  $      0  $      0   $      0 

(1)  The comparability of the selected financial data for the year 1992 is
materially affected by  the formation of United Trust Group, Inc.  ("UTG") 
and the sale of UII's subsidiary, United Security Assurance Company ("USA").

<PAGE>                                11

ITEM 7.

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


At December 31, 1996  and 1995, 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  1996, 1995 and  
1994 include  the operating results of UII.  


LIQUIDITY AND CAPITAL RESOURCES


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,  1996, 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.   UG's dividend limitations are described below.

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,  1996, UG  had a statutory gain from  operations of
$8,006,000.   At December  31, 1996, UG statutory capital and surplus 
amounted to  $10,227,000.  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 $440,000 in cash and  cash equivalents.  The
Company holds one mortgage  loan.   Operating  activities of  the Company  
produced  cash flows  of $256,000, $ 327,000  and $27,000 in 1996,  1995 and 
1994, respectively.  The Company had uses of cash from investing activities
of $180,000, $193,000  and $811,000  in 1996, 1995 and 1994,  respectively.
Cash flows from financing activities were $0, $0 and $905,000 in 1996, 1995 
and 1994, 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  nsecured obligations of UII, subordinate in right 
of payment  to any existing or future senior debt of UII.  The Debentures  
are exchangeable and transferrable, and are convertible at any time prior to
March 31, 1999 into UII's Common Stock at a conversion price  of $1.75 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 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.

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

<PAGE>                                 12

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 income, net of reinsurance premium, decreased 8% when
     comparing 1996  to 1995.   The decrease in premium income is primarily  
     attributed to the change in marketing strategy and to  a lesser extent 
     the  change in distribution  systems.  The Company  changed  its 
     marketing  strategy  from traditional  life insurance products  to 
     universal  life insurance  products.   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.  The Company changed its marketing strategy
     to remain competitive.  

<PAGE>                                 13

The Company changed its  focus from primarily a broker  agency distribution
system to  a captive agent system.   Business written by  the broker agency
force, in recent years, did not meet Company 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.)

One factor that has had 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 Company's average 
persistency rate  for all policies  in force  for 1996 and  1995 has  been 
approximately  87.9% and 87.5%, respectively.

Other considerations, net of reinsurance, increased 7% compared to one
year ago.  Other considerations consists of administrative charges on 
universal life and interest sensitive life insurance  products.  
The insurance in force relating to these types of products continues to 
increase as marketing  efforts are focused on universal life insurance 
products.

Net investment income  increased 3% when  comparing 1996 to  1995. 
The  overall investment  yields  for 1996,  1995  and  1994,  are  7.21%,  
7.04% and  7.13%, respectively.   The improvement in  investment yield is  
primarily attributed to the fixed maturity  portfolio.  The  Company has 
invested financing cash  flows generated by cash received through sales of 
universal life insurance products.
  
The Company's investments are  generally managed to match related insurance 
and policyholder liabilities.  The comparison of investment return with
insurance or investment  product crediting rates establishes an interest 
spread. The minimum interest spread  between earned and credited  rates is 
1% on  the "Century 2000" universal  life insurance product, the  Company's 
primary product.  The Company monitors investment yields, and when necessary
adjusts credited interest rates on its insurance products to preserve 
targeted spreads.  It is expected that the monitoring of the interest 
spreads by management  will provide  the necessary margin to adequately 
provide for associated costs on insurance policies the Company has in force 
and will write in the future. 

Realized investment losses were $466,000 and $114,000 in 1996 and 1995,
respectively.  The Company sold two foreclosed real estate properties that
resulted in approximately $357,000 in realized losses in 1996.  The Company 
had 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 Company standards.  These non-standard policies had a face 
amount of $22,700,000 and represented 1/2 of 1% of the insurance in-force  
in 1994.  Management's initial analysis indicated that expected death claims 
on the business in-force was adequate in relation to mortality assumptions 
inherent in the calculation of statutory  reserves.  Nevertheless, 
management  determined it  was in the best interest of  the Company to 
repurchase  as many of the  non-standard policies as possible.  Through 
December 31, 1996, the Company 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 the 
Company incurred life benefits of $3,307,000, $720,000 and  $1,250,000 in
1996, 1995 and 1994, respectively.  The Company incurred legal costs of  
$906,000, $687,000 and $229,000 in 1996, 1995 and 1994, respectively.  All 
the policies associated with this issue have been settled as of December 31,
1996.   The Company  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.

<PAGE>                           14

Commissions and amortization of deferred policy acquisition costs decreased 
14% in 1996 compared  to 1995.  The  decrease was due to  the decline in
first  year premium production.

Amortization of  cost of  insurance acquired increased  26% in  1996
compared  to 1995.   Cost of insurance acquired  is amortized in relation  to
expected future profits,  including direct charge-offs for  any excess of  the
unamortized asset over the projected  future profits.   The Company did  not 
have any  charge-offs during the periods covered by this  report.  The 
increase in amortization during the current period is a  normal 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 Company 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 Company's  change in distribution  systems.  
The Company  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 Company  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 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.  The Company  incurred legal costs 
of  $906,000, $687,000 and $229,000  in 1996, 1995 and 1994, 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  which  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 10  "Notes Payable"  of the  Consolidated  Notes  to  the  
Financial  Statements for  more information on this matter.


     NET LOSS OF UTG

     UTG 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.


RESULTS OF OPERATIONS

1995 compared to 1994


(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.  

<PAGE>                            15

The Company  holds $714,100 of notes  receivable from affiliates.  
$700,000 of these notes represent a participation interest in the senior 
debt of FCC.   The notes carry interest  at a  rate  of  1% above  prime,  
with interest  received quarterly.   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 $66,000 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 $1,809,000, $1,210,000, and $921,000 in 
service fee expense in 1995, 1994, and 1993 respectively.

Interest expense of $89,000 and $59,000  was incurred in 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

     Total revenue increased slightly when comparing 1995 to 1994. 

     Premium income, net of reinsurance premium,  decreased 7% when
     comparing 1995 to 1994.  The  decrease is primarily  attributed to the
     reduction in new business production  and the  change in  products  
     marketed.   In 1995, the Company has streamlined the product portfolio, 
     as well as restructured the marketing force.  The  decrease in  first  
     year  premium production  is  directly related  to  the Company's 
     change in  distribution systems.   The Company  has changed its  focus
     from primarily  a broker agency distribution  system to a captive 
     agent system.  Business written by the broker agency force in recent 
     years did not meet Company 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.   See discussion of 
     amortization of agency force for further details.)

     The change in  marketing strategy  from traditional life  insurance
     products  to universal  life  insurance products  had a  significant  
     impact on new business production.   As a result of the change in 
     marketing strategy  the agency force went through  a restructure  and 
     retraining  process.   Cash collected from  the universal life and 
     interest  sensitive products contribute only the risk charge to  
     premium income,  however  traditional insurance  products contribute  
     monies received to  premium  income.   One factor  that has  had 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.  Overall, persistency improved to 87.5% 
     in 1995 compared to 86.3% in 1994.  

     Other considerations, net  of reinsurance,  increased 13% compared  to
     one  year ago.   Other considerations consists of administrative charges 
     on universal life and interest sensitive life insurance products.  The 
     insurance in force relating to these  types of  products  continues to
     increase  as marketing efforts  are focused on universal life insurance 
     products.

<PAGE>                                 16

     Net investment income increased 8% when comparing 1995 to 1994. 
     The change reflected an increase in the amount of invested assets, 
     which was partially offset by a  lower effective yield  on investments 
     made  during 1995.   The overall investment  yields for  1995, 1994 and  
     1993, are 7.04%, 7.13% and 7.22%, respectively.  The Company has been 
     able to increase its investment portfolio through financing  cash flows,
     generated by cash received through sales  of universal life insurance 
     products.   Although the Company sold no fixed maturities during the 
     last few years, it did experience a significant turnover in the  
     portfolio.  Many companies with bond issues outstanding took advantage 
     of lower interest rates and retired older debt which carried higher  
     rates.  This was  accomplished through early  calls and accelerated
     pay-downs of fixed maturity investments.  

     The Company's investments are generally managed to match related 
     insurance and policyholder liabilities.   The Company,  in conjunction
     with the decrease in average  yield of  the  Company's fixed  maturity
     portfolio has decreased the average crediting rate for the insurance  
     and investment products.    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, the 
     Company's primary product.  The Company monitors investment yields,
     and  when necessary  takes  action  to adjust  credited  interest 
     rates on its insurance products to preserve targeted spreads.  Over 60%
     of the insurance and investment product reserves are crediting 5% or 
     less in interest and 39%  of the insurance and investment product 
     reserves are crediting 5.25% to 6% in interest. It is  expected that 
     the monitoring  of the interest spreads  by management will provide the
     necessary margin  to adequately  provide  for associated costs on
     insurance policies the Company has in force and will write in the
     future. 

     Realized  investment losses  were  $114,000 and  $1,224,000  in 1995 
     and  1994, respectively.  Fixed  maturities and equity  securities 
     realized net investment losses of $224,000 and real estate realized net
     investment gains of $100,000 in 1995.   The realized loss  in 1995  can 
     not  be attributed to  any one specific transaction.    In 1994,  the  
     Company  realized losses  of  $865,000 due to  a permanent impairment of 
     property located in Louisiana.  The permanent impairment was based on 
     recent appraisals and marketing analysis of surrounding properties.

     The  Company realized  a gain  of  $467,000 from  the sale  of an 
     insignificant subsidiary in 1994.  The  Company had other gains  and 
     losses during the  period that comprised the remaining amount  reported 
     but were routine or immaterial  in nature to disclose on an individual 
     basis.


     EXPENSES OF UTG

     Total expenses increased 16% when comparing 1995 to 1994. 

     Life benefits,  net of reinsurance benefits and claims, decreased 4%
     compared to 1994.  The decrease is related to the decrease in first 
     year premium production.  Another factor that has caused life benefits 
     to decrease is  that during 1994, the  Company lowered its crediting 
     rates  on  interest sensitive products  in response  to financial  
     market  conditions.   This  action will facilitate  the appropriate  
     spreads between investment returns and credited interest rates.  It
     takes approximately one year to fully realize a change in credited
     rates since a change becomes  effective on each  policy's next  
     anniversary.  Please refer to discussion of net investment income for 
     analysis of interest spreads. 

     The  Company experienced an increase of 6%  in mortality during 1995
     compared to 1994.   The  increase  in  mortality is  due  primarily to  
     settlement expenses discussed in the following paragraph:

     During the  third quarter of  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 Company 
     standards.  These policies had a face amount  of $22,700,000  and  
     represent 1/2 of 1% of the insurance in  force. Management's analysis 
     indicates that  the expected death claims on the business in force to 
     be adequately covered by  the mortality assumptions inherent in the
     calculation of statutory  reserves.  Nevertheless, management  has
     determined it is in the best  interest of the Company to repurchase as 
     many of the policies as possible.  As of December  31, 1995, there 
     remained approximately $5,738,000 of the original face amount which 
     have not been settled.  The Company will continue its efforts  to 
     repurchase as  many of  the policies as  possible and 


<PAGE>                              17

     regularly apprise the Ohio Department of Insurance regarding the status 
     of this situation.  Through  December 31,  1995, the  Company spent  a 
     total  of $2,886,000  for the repurchase of these policies and for the 
     legal  defense of related litigation. In relation to  the repurchase of
     insurance  policies the Company incurred life benefits of $720,000 and 
     $1,250,000 in 1995 and 1994, respectively. The Company incurred legal 
     costs of $687,000 and $229,000 in 1995 and 1994, respectively.

     Dividends to  policyholders increased approximately  16% when
     comparing 1995 to 1994.  USA continued to market participating policies 
     through most of 1994.  Management expects dividends to  policyholders
     will continue to increase  in the future.    A significant  portion  of 
     the  insurance in  force  is participating insurance.   A significant 
     portion  of the participating  business is relatively newer business, 
     and the  dividend scale for participating policies increases in the 
     early durations.   The dividend scale is subject to approval of
     the Board of Directors and  may be changed at their discretion.  The 
     Company has discontinued its marketing of participating policies.

     Commissions  and amortization of deferred policy acquisition costs
     increased 21% in  1995  compared  to  1994.    The  increase  is  
     directly attributed to the amortization of a larger asset.  The increase 
     is also caused by the reduction in first year  premium production.  To 
     a lesser extent the increase in amortization of  deferred  policy 
     acquisition  costs  is directly  related to  the change in
     products  that is  currently  marketed.   The Company  revised its 
     portfolio of products as  previously discussed  in premium income.   
     These  new products  pay lower first year commissions than the products 
     sold in prior periods. The asset increased due to first year premium 
     production by the agency force. The Company did benefit from improved 
     persistency.  

     Amortization of cost  of insurance acquired  decreased 40% in  1995
     compared  to 1994.   Cost of insurance acquired  is amortized in 
     relation  to expected future profits,  including direct charge-offs for
     any excess of  the unamortized asset over the  projected future profits.
     The Company did not have any charge-offs during the periods covered by 
     this report.  The decrease in amortization during the  current period 
     is a normal 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 
     Company's average persistency  rate  for  all  policies  in  force  for 
     1995  and  1994 has  been approximately 87.5% and 86.3%, respectively.

     During 1995, the Company reported a non-recurring write down of  value
     of agency force of $8,297,000.  The write down is directly related to 
     the Company's change in distribution systems.   The Company has 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 Company 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 the  value of the 
     agency force carried on the balance sheet.   As of December 31, 1995, 
     the  remaining value of the agency force on the balance sheet 
     represents the active agency forces that continue to originate premium 
     production.   

     Operating expenses increased  20% in 1995  compared to 1994.   The
     increase was caused by several factors.   The primary factor for the 
     increase  in operating expenses is due to  the decrease in production.  
     The decrease  in production was discussed in the analysis of premium  
     income.   As  such, the Company was positioned to handle significantly 
     more first year production than was produced.  First year operating  
     expenses that were deferred and  capitalized as a deferred policy 
     acquisition  costs asset was $532,000 in 1995 compared to $1,757,000 in
     1994.   The difference  between the  policy acquisition  costs deferred
     in  1995 compared to  1994, effected the increase in operating expenses.  
     The increase in operating expenses was offset, to a lesser extent, from 
     a 12% reduction in staff in 1995 compared to 1994.  The reduction in 
     staff was achieved by attrition.

     Another  factor that  caused  the increase  in  operating expenses  is 
     directly related  to increased legal costs.  During  the third quarter 
     of 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 Company standards. These policies had a face amount  of 
     $22,700,000 and represent 1/2 of 1%  of the insurance in force of the 
     Company.   As  of December 31,  1995, there remained approximately  
     $5,738,000  of  the original  face  amount  which  have not  been
     settled.   The Company will  continue its efforts to  repurchase as
     many  of the policies  as possible  and 

<PAGE>                                18

     regularly  apprise the  Ohio Department  of Insurance regarding the 
     status  of this situation.   The Company  incurred legal costs  of 
     $687,000 and $229,000  in 1995 and 1994, respectively, for  the legal 
     defense of related litigation. 

     Interest expense increased slightly in 1995  compared to 1994.  The
     increase was due to the increase in  the interest rate on the Company's 
     senior debt, which is tied to the base  rate of the First Bank of 
     Missouri.   The interest rate on the senior debt increased  to 10% on 
     March 1, 1995 compared  to 7% on March 1, 1994.  The Company was  able 
     to minimize the effect of the higher interest rate in 1995 by early 
     payments of principal.  The Company paid $600,000 in principal payments
     in early 1995.   The interest rate on the senior  debt has decreased
     to 9.25% as of March 1, 1996.


     NET LOSS OF UTG

     UTG had a net loss of $5,321,000 in 1995 compared to a net loss of
     $1,116,000 in 1994.  The decline in 1995 is attributed to the 
     non-recurring  write down of the value of agency force and the increase
     in operating expenses. 


(d)  NET LOSS

The  Company recorded a  net loss of  $2,148,000 for 1995  compared to a 
net loss of $344,000 for the same  period one year  ago.  The  increase in 
net  loss is from  the equity share of UTG's operating results for the year.


FINANCIAL CONDITION

The  Company  owns  47%  equity  interest  in  UTG  which  controls  total
assets  of approximately $355,000,000.   Audited financial  statements of UTG  
are presented  as Exhibit 99(d) of this filing.


REGULATORY ENVIRONMENT

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 ALIC are domiciled in the states of Ohio, Ohio, West Virginia 
and Illinois, respectively. 

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 are registered as controlled insurers in those jurisdictions 
in which such  registration is required.   Statutes vary from state to state
but  typically require periodic disclosure concerning  the corporation that 
controls  the registered insurers  and all affiliates  of such corporation.
In addition, prior notice to, or approval by, the state insurance commission
of material intercorporate transfers  of assets,  reinsurance agreements,  
management agreements, and payment  of dividends in excess of specified 
amounts by the insurance affiliate within the holding company system are 
required.

<PAGE>                                19

The  National Association of Insurance  Commissioners (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 it's 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 the  individual state unmodified, modified to
meet the state's own needs or requirements, or dismissed entirely.

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  1996, UG  had two  ratios outside  the normal  range.   The
first  ratio compared commission  allowances with statutory  capital and 
surplus.  The ratio was outside the normal range due to the reinsurance 
agreement  with First International Life Insurance Company ("FILIC").   
Management does  not believe that  this ratio will  be outside the normal 
range in future periods.

The  second ratio  is related  to the  decrease in  premium income.   The 
ratio fell outside the normal  range the  last two  years.  The  decrease in  
premium income  is directly attributable to the  change in distribution 
systems and  marketing strategy. The Company changed its focus from primarily 
a broker agency distribution system to a captive agent system and changed 
its  marketing strategy from traditional whole life insurance products to 
universal life  insurance products.  Management is taking  a long-term 
approach to its recent  changes to the marketing and distribution systems
and believes these changes will  provide long-term benefits to the Company.

The Company  receives funds from its  insurance affiliates in the  form of
managementand cost sharing arrangements and  through dividends.  Annual 
dividends in excess of maximum amounts prescribed by  state statutes 
("extraordinary dividends") may  not be paid without the  prior approval of 
the insurance commissioner  in which an insurance affiliate is domiciled.  

The  NAIC  has  adopted  Risk-Based  Capital  ("RBC")  requirements  for 
life/health insurance companies  to evaluate  the adequacy  of statutory  
capital and  urplus 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 will be 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.

<PAGE>                               20

At December 31, 1996, each of the Company's insurance  affiliates has a
Ratio that is in  excess  of  300%  of  the authorized  control  level; 
accordingly  the Company's affiliates meet the RBC requirements. 

The NAIC  has  recently  released  the Life  Illustration  Model Regulation.
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 which does 
not meet the various tests.  The only implication is the way in which the 
product is marketed to the consumer.  A product which does not  pass the 
tests uses guaranteed  assumptions rather than current assumptions  in
presenting future product performance to the consumer.

As states in which the Company does business adopt the regulation or adopt
a modified version of  the regulation,  the Company  will be  required to  
comply with this  new regulation.  The Company may need to modify existing 
products or sales methods.

The  NAIC has  proposed a  new Model  Investment Law  that may  affect the 
statutory carrying values of certain investments;   however, the final 
outcome of that proposal is not certain, nor is it possible to  predict what 
impact the proposal will have  on the Company or whether the proposal will be 
adopted in the foreseeable future.


FUTURE OUTLOOK

The  Company  operates in  a highly  competitive industry.    In connection 
with the development  and sale of its products, the Company encounters 
significant competition from  other insurance  companies, many of  which have 
financial  resources or ratings greater than those of the Company. 

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.   Management believes that the Company's ability  to compete is 
dependent upon, among  other things, its ability to  attract and retain 
agents to  market its insurance  products and  its ability to develop 
competitive and profitable products.

<PAGE>                               21

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

During 1996, the Company adopted Statement of Financial Accounting
Standards No. 123, accounting for stock-based compensation.  The adoption of 
this standard did not have a material impact on the Company's financial 
statements.

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, 1996, 1995, 1994  . . . . . . . .  23



     Balance Sheets . . . . . . . . . . . . . . . . . . . . . .  24



     Statements of Operations . . . . . . . . . . . . . . . . .  25



     Statements of Shareholders' Equity . . . . . . . . . . . .  26



     Statements of Cash Flows . . . . . . . . . . . . . . . . .  27



     Notes to Financial Statements  . . . . . . . . . . . .   28-34



ITEM 9.   DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
          DISCLOSURE

None


<PAGE>                               22

                     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, 1996 and 1995, and the related
statements of operations, shareholders' equity, and cash flows for each 
of the three years in the period ended December 31, 1996.  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, 1996 and 1995, and the results of its operations and its 
cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.

 

                                   KERBER, ECK & BRAECKEL  LLP



Springfield, Illinois
March 26, 1997



<PAGE>                               23
<TABLE>

UNITED INCOME, INC.
BALANCE SHEET
As of December 31, 1996 and 1995

                                   ASSETS
                                                    1996          1995
<S>                                              <C>            <C>

Cash and cash equivalents                         $  439,676     $  364,370 
Mortgage loans                                       122,853        182,206 
Notes receivable from affiliate                      864,100        714,100
Accrued interest income                               11,784          7,040
Property and equipment (net of accumulated
    depreciation $92,140 and $102,208)                 2,578         12,058
Investment in affiliates                          11,324,947     11,985,958
Receivable from (Indebtedness to) affiliate           31,837        (87,869)
Other assets (net of accumulated            
  amortization $146,011 and $108,995)                 83,274        120,290
          TOTAL ASSETS                          $ 12,881,049  $  13,298,153 

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities and accruals: 
   Convertible debentures                       $    902,300  $    902,300 
   Other liabilities                                   1,273        40,722   
          TOTAL LIABILITIES                          903,573       943,022    


Shareholders' equity:
Common stock - no par value, stated value 
   $0.033 per share. 33,000,000 shares 
   authorized, 22,424,572 issued in 1996,
   and 22,423,572 issued in 1995                     740,010       739,977 
Additional paid-in capital                        14,634,122    14,633,455
Unrealized depreciation of investments held 
   for sale of affiliate                             (59,508)         (236)
Accumulated deficit                               (3,253,427)   (2,934,344)
                                                  12,061,197    12,438,852 
Common stock in treasury, at cost
    (2,537,000 shares)                               (83,721)      (83,721)
          TOTAL SHAREHOLDERS' EQUITY              11,977,476    12,355,131
          TOTAL LIABILITIES AND SHAREHOLDERS'
           EQUITY                             $   12,881,049  $ 13,298,153
      


                          See accompanying notes 
</TABLE>
<PAGE>                             24

<TABLE>
UNITED INCOME, INC.
STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1996
                                               1996      1995       1994
<S>                                      <C>         <C>         <C>
Revenues: 

   Interest income                        $   13,099  $   16,516  $   26,520
   Interest income from affiliates            79,433      71,646      71,811 
   Service agreement income from 
    affiliates                             1,567,891   2,015,325   1,392,141
   Other income from affiliates              127,922     129,627     171,682
   Realized investment gains                   2,599         905           0 
   Other income                                    3         130       5,192
                                           1,790,947   2,234,149   1,667,346
Expenses:    

   Management fee to affiliate             1,240,735   1,809,195   1,210,284
   Operating expenses                         89,529      78,505     358,074
   Interest expense                           84,027      88,538      58,630 
                                           1,414,291   1,976,238   1,626,988


Income before provision for income taxes 
and equity in loss of investees              376,656     257,911      40,358

Provision for income taxes                         0           0           0 
Equity in loss of investees                 (695,739) (2,405,813)   (384,395)
Net loss                                 $  (319,083)$(2,147,902) $ (344,037)

Net loss per common share                $     (0.02)$     (0.11) $    (0.02)

Weighted average common 
   shares outstanding                     19,886,920  19,886,572  19,838,931 


                               See accompanying notes.
</TABLE>
<PAGE>                                   25

<TABLE>
UNITED INCOME, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY 
Three Years Ended December 31, 1996

                                             1996        1995       1994
<S>                                  <C>          <C>           <C>
Common stock 
     Balance, beginning of year       $  739,977   $  739,977    $  738,047 
     Exercise of stock options                33            0         1,930 
     Balance, end of year             $  740,010   $  739,977    $  739,977 


Additional paid-in capital 
     Balance beginning of year        $14,633,455  $14,633,455   $14,541,786 
     Exercise of stock options                667            0        91,669 
     Balance, end of year             $14,634,122  $14,633,455   $14,633,455 


Unrealized appreciation (depreciation) 
  of investments held for sale 
  of affiliate
     Balance, beginning of year       $      (236) $   (99,907)  $   (16,435)
     Change during year                   (59,272)      99,671       (83,472)
     Balance, end of year             $   (59,508) $      (236)  $   (99,907)


Accumulated deficit
     Balance, beginning of year       $(2,934,344) $  (786,442)  $  (442,405)
     Net loss                            (319,083)  (2,147,902)     (344,037)
     Balance, end of year             $(3,253,427) $(2,934,344)  $  (786,442)

Treasury stock                        $   (83,721) $   (83,721)  $   (83,721)

Total shareholders' equity, 
  end of year                         $11,977,476  $12,355,131   $14,403,362 


                          See accompanying notes
</TABLE>
<PAGE>                              26               

<TABLE>
UNITED INCOME, INC.
STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1996
                                           1996        1995          1994
<S>                                  <C>           <C>          <C> 
Increase (decrease) in cash and 
 cash equivalents 
Cash flows from operating activities:
   Net loss                           $   (319,083) $(2,147,902) $  (344,037)
   Adjustments to reconcile net 
    loss to net cash provided by 
    operating activities:
     Depreciation and amortization          45,331       52,169       53,642
     Gain on payoff of mortgage loan        (2,599)           0            0 
     Accretion of discount on mortgage 
      loans                                   (481)      (1,591)           0 

     Compensation expense through stock 
      option plan                              667            0       91,227 
     Equity in loss of investees           695,739    2,405,813      384,395    
 Changes in assets and liabilities:
     Change in accrued interest income      (4,744)      (1,713)       1,181
     Change in indebtedness of affiliates (119,706)      25,598     (105,249)
     Change in deposits and other assets         0            0      (85,471)
     Change in other liabilities           (39,449)      (5,469)      31,559
Net cash provided by operating activities  255,675      326,905       27,247

Cash flows from investing activities: 
     Change in notes receivable from 
      affiliate                           (150,000)           0      300,000
     Purchase of investments in 
      affiliates                                 0      (26,091)  (1,050,651)
     Capital contribution to investee      (94,000)     (47,000)           0
     Sale of investments in affiliates           0        1,810            0 
     Payments of principal on mortgage 
      loans                                 62,434        4,480            0 
     Purchase of mortgage loan                   0     (126,000)     (60,000)
     Proceeds from sale of property 
      and equipment                          1,164            0            0 
Net cash used in investing activities     (180,402)    (192,801)    (810,651)

Cash flows from financing activities: 
     Proceeds from sale of debentures            0            0      902,300
     Proceeds from sale of common stock         33            0        2,371 
Net cash provided by financing activities       33            0      904,671

Net increase in cash and cash 
 equivalents                                75,306      134,104      121,267
Cash and cash equivalents at 
 beginning of year                         364,370      230,266      108,999
Cash and cash equivalents at 
end of year                              $ 439,676    $ 364,370  $   230,266 

</TABLE>
                            See accompanying notes
<PAGE>                                27

UNITED INCOME, INC.
NOTES TO FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A.   ORGANIZATION  - At December 31, 1996, the affiliates of United Income,
     Inc. were as depicted on the following organizational chart.

United Trust, Inc.  ("UTI") is the ultimate controlling  company.  UTI owns
53% of United Trust Group  ("UTG") and 30% of United Income,  Inc. ("UII").
UII owns  47% of  UTG.   UTG  owns 72%  of  First Commonwealth  Corporation
("FCC").   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").

<PAGE>                                28

A   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 29.7% of UII. 

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 both  straight-line  and  accelerated
     methods.  Accumulated depreciation was $92,140 in 1996 and $102,208 in
     1995.  Depreciation expense  for the years ended December  1996, 1995,
     and 1994 was $8,315, $11,265, and $17,080 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 upon  the weighted
     average  number of  common  shares outstanding  during the  respective
     period.

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, 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

Mortgage  loans are  carried  at  the  unpaid  principal  balances  net  of
unamortized  purchase discounts.    Yields on  these  loans exceed  current
mortgage  loan rates  in the  market.   Therefore, management  believes the
market value of these loans is at least equal to carrying value.

<PAGE>                              29

(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 into  a service  agreement with  its then  direct parent,  UII, for
certain administrative services.   The Company recognized service agreement
income of $1,568,000,  $2,015,000 and  $1,392,000 in 1996,  1995 and  1994,
respectively.
  
Effective September 1, 1990,  the Company entered into 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, the Company  pays
UTI  a contractually  established fee.   The  Company incurred  expenses of
approximately $941,000, $1,209,000 and $835,000 during 1996, 1995 and 1994,
respectively, pursuant to the terms of  the service agreement with UTI.  In
addition, the Company incurred $300,000, $600,000 and $375,000 during 1996,
1995 and 1994, respectively, as reimbursement for services performed on its
behalf by FCC.  

At December  31, 1996,  the Company  owns a  $864,000 note  receivable from
affiliate.  In  December 1993, the Company  acquired $1,000,000 of FCC,  an
affiliate,  senior  debt  from outside  third  parties.    The notes  carry
interest  at a  rate of 1%  above prime.   Interest  is received quarterly.
During 1994, the Company sold $300,000 of the debt to UTI for cash.


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 450,000  shares of
common  stock at  $.915  per  share.   Options  become  exercisable at  25%
annually beginning one  year after date  of grant  and expire generally  in
five years.   In  November 1992,  149,100 option shares  were granted.   At
December  31, 1996, options for 155,550 shares were exercisable and options
for  293,950 shares  were available for  grant.  No  options were exercised
during 1996.

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 600,000
options at an  exercise price of  $.033 per share.   The options  generally
expire five years from  the date of grant.   Options for 146,000 shares  of
common stock were granted  in 1991, options for 19,000 shares  were granted
in 1993 and  options for  4,300 shares were  granted in 1995.   A total  of
166,000 option  shares have  been exercised  as of December  31, 1996.   At
December 31, 1996,  3,300 options  have been granted  and are  exercisable.
Options  for 1,000  and  0  shares were  exercised  during  1996 and  1995,
respectively.

During  1996,  the  Company   adopted  Statement  of  Financial  Accounting
Standards No. 123, accounting  for stock-based compensation.  The  adoption
of this  standard did not have a material impact on the Company's financial
statements.

<PAGE>                                  30

5.   FEDERAL INCOME TAXES

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

                                                 UII
                                  2006     $    319,000
                                  2007          532,000
                                    TOTAL  $    851,000



The  Company has  established a  deferred  tax asset  of  $298,000 for  its
operating loss carryforwards and  has established an allowance of  $298,000
against this asset.  The Company has no other deferred tax components which
would be reflected in the consolidated balance sheets.

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


                                          1996        1995         1994
Income tax at statutory rate of
  35% of income before income taxes   $ 132,000     $  90,000    $  14,000
Dividends received deduction                  0             0       (3,000)
Amortization of start up costs                0             0      (11,000)
Utilization of net operating loss
  carryforward                         (134,000)      (92,000)           0
Depreciation                              2,000         2,000            0
Provision for income taxes           $        0    $        0    $       0


<PAGE>                                31

<TABLE>
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,
                      ASSETS                  1996                 1995
<S>                                  <C>                 <C>
   Total investments                  $   223,964,687     $    244,815,985 
   Cash and cash equivalents               16,903,789           12,024,668 
   Cost of insurance acquired              41,362,973           59,601,720 
   Other assets                            72,768,173           38,831,261

     Total assets                     $   354,999,622     $    355,273,634 

       LIABILITIES AND SHAREHOLDERS' EQUITY 

   Policy liabilities                 $   268,771,766     $    261,796,945 
   Notes payable                           19,839,853           21,463,328
   Deferred taxes                          11,591,086           16,100,283
   Other liabilities                        6,335,866            5,315,613 
     Total liabilities                    306,538,571          304,676,169 
   Minority interests in 
    consolidated subsidiaries              13,332,034           13,881,640 

   Shareholders' equity
   Common stock no par value               45,926,705           45,726,705
   Authorized 10,000 shares - 100 issued 
   Unrealized depreciation of investment 
    in stocks                                (126,612)                (501)
   Accumulated deficit                    (10,671,076)          (9,010,379)
     Total shareholders' equity            35,129,017           36,715,825 
     Total liabilities and 
      shareholders' equity            $   354,999,622     $    355,273,634 


                                     1996           1995            1994
Premiums, net of reinsurance   $   27,618,892 $    29,998,125 $   32,404,489 
Net investment income              15,902,107      15,497,547     14,325,243 
Other                               2,955,112       3,101,648      1,678,268 
                                   46,476,111      48,597,320     48,408,000 
Benefits, claims and 
 settlement expenses               30,326,032      29,855,764     29,661,234 
Other expenses                     22,953,093      30,725,908     22,379,433 
                                   53,279,125      60,581,672     52,040,667 
Loss before income tax and
  minority interest                (6,803,014)    (11,984,352)    (3,632,667)
Income tax credit (provision)       4,643,961       4,724,792      2,005,207 
Minority interest in loss of
  consolidated subsidiaries           498,356       1,938,684        511,178 
Net loss                      $    (1,660,697) $   (5,320,876) $  (1,116,282)
</TABLE>
<PAGE>                                   32

7.   SHAREHOLDER DIVIDEND RESTRICTION

At  December  31, 1996,  substantially  all  of consolidated  shareholders'
equity  represents investment in affiliates.  The payment of cash dividends
to shareholders  by UII and UTG  is not legally restricted.   UG's dividend
limitations are described below.

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, 1996,  UG had a statutory gain  from operations of $8,006,000.
At  December 31,  1996,  UG  statutory  capital  and  surplus  amounted  to
$10,227,000.    Extraordinary  dividends  (amounts in  excess  of  ordinary
dividend limitations) require prior  approval of the insurance commissioner
and are not restricted to a specific calculation.


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 transferrable,  and are convertible at any  time prior
to March 31,  1999 into UII's Common  Stock at a conversion  price of $1.75
per share, subject  to adjustment in  certain events.  The  Debentures bear
interest from March 31,  1994, payable quarterly, at a  variable rate equal
to one percentage  point above the prime rate published  in the Wall Street
Journal from time to time.  On or after March 31, 1999, the Debentures will
be redeemable  at UII's option, in  whole or in part,  at redemption prices
declining from  103% of their  principal amount.   No sinking fund  will be
established to redeem Debentures.  The Debentures will mature on March  31,
2004.  The Debentures are not listed on any national securities exchange or
the NASDAQ National Market System.


9.   PENDING CHANGE IN CONTROL OF UNITED INCOME, INC.

On September 23, 1996, UII and UTI entered into a  stock purchase agreement
with  LaSalle  Group, Inc.,  a  Delaware  corporation ("LaSalle"),  whereby
LaSalle will acquire 12,000,000 shares of authorized but unissued shares of
UTI for  $1.00 per share  and 10,000,000 shares of  authorized but unissued
shares  of UII  for  $0.70  per  share.    Additionally,  LaSalle  intends,
contemporaneously with the closing of the above transaction, to purchase in
privately  negotiated transactions additional shares of UTI and UII so that
LaSalle will own not  less than 51% of the outstanding  common stock of UTI
and indirectly control 51% of UII.

The  agreement  requires and  is pending  approval  of the  Commissioner of
Insurance of  the State of Ohio, Illinois and West Virginia, (the states of
domicile of the insurance  affiliates).  It is anticipated  the transaction
will be completed during the second quarter of 1997.

<PAGE>                              33
<TABLE>
10.   SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<S>                       <C>         <C>        <C>         <C>
                                               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 
Interest 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              65,494      56,698     52,469      83,250 
Net income (loss)            137,752    (530,781)   132,804  (1,887,677)
Net income (loss) 
 per share                      0.01       (0.03)      0.01       (0.11)

                                                1994
                                1st         2nd        3rd        4th
Net investment income      $   3,567   $  16,569  $   4,901    $  1,483 
Investment income/affil.      17,994      19,890     17,574      16,353 
Service agreement income     313,531     369,475    330,001     379,134 
Total revenues               371,022     463,826    415,056     417,442 
Management fee               288,119     321,685    295,999     304,481 
Operating expenses            75,334      65,305    108,768     108,667 
Interest expense               1,281      35,282      2,314      19,753 
Operating income (loss)        6,288      41,554      7,975     (15,459)
Net income (loss)            280,796     (73,133)  (393,095)   (158,605)
Net income (loss) 
 per share                      0.01       (0.00)     (0.02)      (0.01)

</TABLE>

<PAGE>                                     34

                                        PART III




With  respect  to Items  10  through 13,  the  Company will  file  with the
Securities  and Exchange Commission,  within 120 days  of the close  of the
fiscal year, a definitive proxy statement pursuant to Regulation 14-A.



ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information regarding  directors of  the Company will  be set forth  in the
Company's proxy statement relating to the annual meeting of shareholders to
be  held  during 1997  and  is  incorporated  herein   by  reference.
Information  regarding executive officers of the Company is set forth under
the caption "Executive Officers".



ITEM 11.   EXECUTIVE COMPENSATION

Information  regarding  executive compensation  will  be set  forth  in the
Company's proxy statement relating to the annual meeting of shareholders to
be held during 1997 and is incorporated herein by reference.



ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information regarding  security ownership of certain  beneficial owners and
management will be set forth  in the Company's proxy statement relating  to
the  annual meeting  of  shareholders to  be  held during 1997 and  is
incorporated herein by reference.



ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding  certain relationships and related  transactions will
be  set forth  in  the Company's  proxy statement  relating  to the  annual
meeting  of  shareholders to  be held  during 1997 and  is incorporated
herein by reference.

<PAGE>                              35

                                  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 for the
         reasons 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 Page 37).

<PAGE>                              36

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

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

10(g)         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.

99(a)    (1)  Order of  Ohio Division  of  Securities registering  United'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.


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.



<PAGE>                               37

                                 SIGNATURES

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

                            UNITED INCOME, INC.
                                 Registrant


/s/  Vincent T. Aveni                   Date:      March 25, 1997
Vincent T. Aveni, Director


/s/  Marvin W. Berschet                 Date:      March 25, 1997
Marvin W. Berschet, Director


/s/  John K. Cantrell                   Date:      March 25, 1997
John K. Cantrell, Director


/s/  Gertrude W. Donahey                Date:      March 25, 1997
Gertrude W. Donahey, Director


/s/  Thomas F. Morrow                   Date:      March 25, 1997
Thomas F. Morrow, Chief Operating
  Officer, Vice Chairman, and Director


/s/  Charlie E. Nash                    Date:      March 25, 1997
Charlie E. Nash, Director


/s/  Larry E. Ryherd                    Date:      March 25, 1997
Larry E. Ryherd, Chairman of the Board,
  Chief Executive Officer, President, 
  and Director


/s/  Robert W. Teater                   Date:      March 25, 1997
Robert W. Teater, Director


/s/  James E. Melville                  Date:      March 25, 1997
James E. Melville, Chief Financial Officer
  and Senior Executive Vice President

<PAGE>                               38


                               EXHIBIT 99(d)

                      AUDITED FINANCIAL STATEMENTS OF

                          UNITED TRUST GROUP, INC.




















<PAGE>                              39

                       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, 1996 and 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the three years in the
period ended December 31, 1996. 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, 1996 and 1995, and
the consolidated results of their operations and their consolidated cash
flows for each of the three years in the period ended December 31, 1996, 
in conformity with generally accepted accounting principles.

  We have also audited Schedule I as of December 31, 1996, and Schedules
II, IV and V as of December 31, 1996 and 1995, 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, 1997



<PAGE>                              40


UNITED TRUST GROUP, INC.
CONSOLIDATED BALANCE SHEETS
As of December 31, 1996 and 1995
<TABLE>
<S>                                            <C>             <C>
ASSETS                                 
                                                      1996         1995
Investments:
   Fixed maturities at amortized cost (market
      $181,815,225 and $197,006,257)           $  179,926,785  $  191,074,220 
   Investments held for sale:
      Fixed maturities, at market
       (cost $1,984,661 and $3,224,039)             1,961,166       3,226,175
      Equity securities, at market 
       (cost  $2,086,159  and  $2,086,159)          1,794,405       1,946,481 
   Mortgage loans on real estate at 
       amortized cost                              11,022,792      13,891,762
   Investment real estate, at cost, net
       of accumulated depreciation                 10,543,490      11,978,575 
   Real estate acquired in satisfaction 
       of debt, at cost, net of accumulated 
       depreciation                                 3,846,946       5,332,413 
   Policy loans                                    14,438,120      16,941,359 
   Short term investments                             430,983         425,000 
                                                  223,964,687     244,815,985 

Cash and cash equivalents                          16,903,789      12,024,668
Investment in affiliates                              350,000         350,000 
Accrued investment income                           3,459,748       3,655,569 
Reinsurance receivables:
   Future policy benefits                          38,745,013      13,540,413
   Policy claims and other benefits                 3,856,124         861,488 
Other accounts and notes receivable                 1,734,321       1,803,468 
Cost of insurance acquired                         47,536,812      59,601,720
Deferred policy acquisition costs                  11,325,356      11,436,728
Cost in excess of net assets purchased,
   net of accumulated amortization                  5,496,808       5,661,462 
Other assets                                        1,626,964       1,522,133 
            Total assets                        $ 354,999,622   $ 355,273,634 

LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
   Future policy benefits                       $ 248,879,317   $ 243,044,963 
   Policy claims and benefits payable               3,193,806       3,110,378 
   Other policyholder funds                         2,784,967       3,004,655 
   Dividend and endowment accumulations            13,913,676      12,636,949
Income taxes payable:
   Current                                             70,663         215,200 
   Deferred                                        11,591,086      16,100,283 
Notes payable                                      19,839,853      21,463,328 
Indebtedness to (from) affiliates, net                 62,084        (162,388)
Other liabilities                                   6,203,119       5,262,801 
            Total liabilities                     306,538,571     304,676,169 
Minority interests in consolidated 
   subsidiaries                                    13,332,034      13,881,640

Shareholders' equity:                               
Common stock no par value.
    Authorized 10,000 shares - 100  
      shares issued                                45,926,705      45,726,705
Unrealized depreciation of investments 
    held for sale                                    (126,612)           (501)
Accumulated deficit                               (10,671,076)     (9,010,379)
            Total shareholders' equity             35,129,017      36,715,825
            Total liabilities and 
               shareholders' equity             $ 354,999,622   $ 355,273,634 

</TABLE>

                           See accompanying notes.
                                     41

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1996

<TABLE>


                                        1996           1995          1994

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

   Premium income                $ 32,386,635     $ 35,200,815  $ 38,063,186 
   Reinsurance premium             (4,767,743)      (5,202,690)   (5,658,697)
   Other considerations             3,504,974        3,280,823     2,969,131 
   Other considerations paid 
     to reinsurers                   (179,408)        (180,412)     (229,093)
   Net investment income           15,902,107       15,497,547    14,325,243
   Realized investment gains 
     and (losses), net               (465,879)        (114,235)   (1,224,274)
   Other income                        95,425          115,472       162,504 
                                   46,476,111       48,597,320    48,408,000 


Benefits and expenses:

   Benefits, claims and settlement expenses:
       Life                        26,568,062       26,680,217    27,479,315 
       Reinsurance benefits 
         and claims                (2,283,827)      (2,850,228)   (2,766,776)
       Annuity                      1,892,489        1,797,475     1,314,384 
       Dividends to policyholders   4,149,308        4,228,300     3,634,311 
   Commissions and amortization of 
       deferred policy acquisition 
       costs                        4,224,885        4,907,653     4,060,425 
   Amortization of cost of 
       insurance acquired           5,690,069        4,509,755     7,128,247 
   Amortization of agency force             0          396,852       382,006 
   Non-recurring write down of 
       value of agency force                0        8,296,974             0 
   Operating expenses              11,285,566       10,634,314     8,859,740 
   Interest expense                 1,752,573        1,980,360     1,949,015 
                                   53,279,125       60,581,672    52,040,667 


Loss before income taxes
   and minority interest           (6,803,014)     (11,984,352)   (3,632,667)

Credit for income taxes             4,643,961        4,724,792     2,005,207 
Minority interest in loss
   of consolidated subsidiaries       498,356        1,938,684       511,178 
Net loss                         $ (1,660,697)    $ (5,320,876) $ (1,116,282)



Net loss per 
   common share                  $    (16,607)    $    (53,209) $    (11,163)

Weighted average common
   shares outstanding                     100              100           100 

</TABLE>
                              See accompanying notes
                                        42

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 1996



<TABLE>

                                      1996            1995          1994
<S>                              <C>            <C>            <C>
Common stock
     Balance, beginning of year  $ 45,726,705   $ 45,626,705   $ 43,078,761 
     Capital contribution             200,000        100,000      2,547,944 
     Balance, end of year        $ 45,926,705   $ 45,726,705   $ 45,626,705 





Unrealized appreciation  
  (depreciation) of 
  investments held for sale
     Balance, beginning of year  $       (501)  $   (212,567)  $    (34,968)
     Change during year              (126,111)       212,066       (177,599)
     Balance, end of year        $   (126,612)  $       (501)  $   (212,567)





Accumulated deficit
     Balance, beginning of year  $ (9,010,379)  $ (3,689,503)  $ (2,573,221)
     Net loss                      (1,660,697)    (5,320,876)    (1,116,282)
     Balance, end of year        $(10,671,076)  $ (9,010,379)  $ (3,689,503)



Total shareholders' equity, 
  end of year                    $ 35,129,017    $ 36,715,825  $ 41,724,635 


</TABLE>






                              See accompanying notes.                           
                                        43

UNITED TRUST GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1996                              
<TABLE>
                                                                 
                                      1996          1995          1994
<S>                               <C>           <C>           <C> 
Increase (decrease) in cash 
  and cash equivalents
Cash flows from operating 
  activities:
   Net loss                       $ (1,660,697) $ (5,320,876) $ (1,116,282)
   Adjustments to reconcile 
    net loss to net cash provided  
    by operating activities net of 
    changes in assets and 
    liabilities resulting from the 
    sales and purchases of 
    subsidiaries:
      Amortization/accretion of 
       fixed maturities                899,445       803,696     1,173,981 
      Realized investment (gains) 
       losses, net                     465,879       114,235     1,224,274 
      Policy acquisition costs 
       deferred                     (1,276,000)   (2,370,000)   (4,939,000)
      Amortization of deferred 
       policy acquisition costs      1,387,372     1,567,748     1,137,923 
      Amortization of cost of 
       insurance acquired            5,690,069     4,509,755     7,128,247 
      Amortization of value of  
       agency force                          0       396,852       382,006 
      Non-recurring write down 
       of value of agency force              0     8,296,974             0 
      Amortization of costs in 
       excess of net assets 
       purchased                       185,279       423,192       297,676 
      Depreciation                     371,991       694,194       466,213 
      Minority interest                498,356    (1,938,684)     (511,178)
      Change in accrued investment 
       income                          195,821      (173,517)     (572,900)
      Change in reinsurance 
       receivables                      83,871      (482,275)   (1,009,745)
      Change in policy liabilities 
       and accruals                  3,326,651     3,581,928     4,487,982 
      Charges for mortality and 
       administration of universal 
       life and annuity products   (10,239,476)   (9,757,354)   (9,178,363)
      Interest credited to account 
       balances                      7,075,921     6,644,282     5,931,019 
      Change in income taxes 
       payable                      (4,653,734)   (4,749,335)   (2,160,132)
      Change in indebtedness (to)  
       from affiliates, net            224,472        (3,023)      158,606 
      Change in other assets and 
       liabilities, net                 41,277    (1,562,548)     (342,382)
Net cash provided by operating 
  activities                         2,616,497       675,244     2,557,945 




Cash flows from investing 
  activities:
   Proceeds from investments 
    sold and matured:
      Fixed maturities held 
       for sale                      1,152,736       619,612       250,000 
      Fixed maturities sold         18,736,612             0             0 
      Fixed maturities matured      20,787,782    16,265,140    23,894,954
      Equity securities                  8,990       104,260        49,557 
      Mortgage loans                 3,364,427     2,252,423     4,029,630 
      Real estate                    3,219,851     1,768,254     2,640,025 
      Policy loans                   3,937,471     4,110,744     4,064,602 
      Short term                       825,000        25,000     1,103,856 
Total proceeds from investments 
  sold and matured                  52,032,869    25,145,433    36,032,624


Cost of investments acquired:
      Fixed maturities             (29,365,111)  (25,112,358)  (52,768,480)
      Equity securities                      0    (1,000,000)     (249,925)
      Mortgage loans                  (503,113)     (322,129)   (5,611,967)
      Real estate                     (841,793)   (1,927,413)   (3,321,599)
      Policy loans                  (4,329,124)   (4,713,471)   (3,886,821)
      Short term                      (830,983)     (100,000)     (650,000)
Total cost of investments acquired (35,870,124)  (33,175,371)  (66,488,792)
Cash of subsidiary at date of sale           0             0    (3,134,343)
Cash received in sale of subsidiary          0             0     4,995,804 
Net cash provided by (used in) 
  investing activities              16,162,745    (8,029,938)  (28,594,707)

Cash flows from financing 
  activities:
   Policyholder contract deposits   22,245,369    25,021,983    23,110,031
   Policyholder contract 
     withdrawals                   (15,433,644)  (16,008,462)  (14,893,221)
   Net cash transferred from 
     coinsurance ceded             (19,088,371)            0             0 
   Proceeds from notes payable       9,300,000       300,000             0 
   Payments of principal on 
     notes payable                 (10,923,475)   (1,205,861)   (2,005,687)
Net cash provided by (used in) 
   financing activities            (13,900,121)    8,107,660     6,211,123 

Net increase (decrease) in cash 
   and cash equivalents              4,879,121       752,966   (19,825,639)
Cash and cash equivalents at 
   beginning of year                12,024,668    11,271,702    31,097,341
Cash and cash equivalents at 
   end of year                    $ 16,903,789  $ 12,024,668  $ 11,271,702 

</TABLE>

                            See accompanying notes.
                                       44
<PAGE>

UNITED TRUST GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




1.       ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         A. ORGANIZATION -  At December 31,  1996, the parent,  significant
            majority-owned subsidiaries  and  affiliates  of  United  Trust
            Group, Inc.  were as depicted  on the following  organizational
            chart.

United Trust, Inc. ("UTI") is  the ultimate controlling company.  UTI  owns
53% of United Trust Group  ("UTG") and 30% of United Income,  Inc. ("UII").
UII owns  47% of  UTG.   UTG  owns 72%  of  First Commonwealth  Corporation
("FCC").   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").
<PAGE>                                45
             A  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  Trust  Group,  Inc.  is  an
             insurance   holding   company   that  through   its  insurance
             subsidiaries  sells individual  life insurance  products.  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 -- at cost, less  allowances for depreciation  and
             any impairment  which would result in  a carrying value  below
             net realizable value.  Foreclosed real estate is  adjusted for
             any   impairment  at   the  foreclosure   date.    Accumulated
             depreciation on real  estate was $1,340,746 and $1,049,652  as
             of December 31, 1996 and 1995, 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.  
<PAGE>                                   46
         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,
             limited-payment   life   insurance   policies,   and   certain
             annuities with life  contingencies are recognized  as revenues
             when  due.    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,  policy  administration,  and  surrenders
             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 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.


                                          1996          1995          1994
Deferred, beginning of year         $ 11,437,000  $ 10,634,000  $  7,160,000 

Acquisition costs deferred:
  Commissions, net of 
    reinsurance of $0 $0 
    and $1,837,000                       845,000     1,838,000     3,182,000 
  Marketing, salaries and 
    other expenses                       431,000       532,000     1,757,000 
  Total                                1,276,000     2,370,000     4,939,000 

  Interest accretion                     408,000       338,000       181,000 
  Amortization charged to income      (1,796,000)   (1,905,000)   (1,319,000)
  Net amortization                    (1,388,000)   (1,567,000)   (1,138,000)

  Deferred acquisition costs
    disposed of at sale
    of subsidiary                              0             0      (327,000)
  Change for the year                   (112,000)      803,000     3,474,000 

Deferred, end of year               $ 11,325,000  $ 11,437,000  $ 10,634,000 


<PAGE>                                  47

             The  following table  reflects the  components  of the  income
             statement for  the line item  Commissions and amortization  of
             deferred policy acquisition costs:

                                              1996         1995        1994   

             Net amortization of deferred 
               policy acquisition costs   $ 1,388,000 $ 1,567,000 $ 1,138,000
             Commissions                    2,837,000   3,341,000   2,922,000
               Total                      $ 4,225,000 $ 4,908,000 $ 4,060,000


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

                                         Interest                    Net      
                                         Accretion Amortization Amortization

             1997                      $  400,000   $ 1,600,000  $ 1,200,000
             1998                         400,000     1,500,000    1,100,000
             1999                         300,000     1,300,000    1,000,000
             2000                         300,000     1,200,000      900,000
             2001                         300,000     1,000,000      700,000


         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  30%  of  the  balance  and  15%  on the
             remaining  balance.     The   interest  rates   vary  due   to
             differences in the blocks of business.

                                            1996         1995         1994    


             Cost of insurance acquired,
               beginning of year      $ 59,602,000  $ 64,111,000 $ 73,237,000
               Additions from
                 acquisitions                    0             0            0 
               Interest accretion        6,649,000     7,044,000    7,593,000 
               Amortization            (12,339,000)  (11,553,000) (14,722,000)
                 Net amortization       (5,690,000)   (4,509,000)  (7,129,000)
               Balance attributable to
                 coinsurance agreement  (6,375,000)            0            0 
               Balance attributable to
                 subsidiary at date 
                 of sale                         0             0   (1,379,000)
               Balance attributable to 
                 down-stream merger of 
                 subsidiary                      0             0     (618,000)
               Write-offs due to impairment      0             0            0 
             Cost of insurance acquired,
               end of year            $ 47,537,000  $ 59,602,000 $ 64,111,000

<PAGE>                                      48
             Estimated  net  amortization  expense  of  cost  of  insurance
             acquired for the next five years is as follows:

                                        Interest                     Net     
                                        Accretion  Amortization  Amortization

             1997                    $  5,800,000  $  9,700,000  $  3,900,000
             1998                       5,500,000     8,700,000     3,200,000
             1999                       5,100,000     7,600,000     2,500,000
             2000                       4,900,000     7,200,000     2,300,000
             2001                       4,700,000     7,100,000     2,400,000


         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.
             Cost  in excess  of net  assets  purchased are  amortized over
             periods  not  exceeding  forty years  using  the straight-line
             method.  Management reviews the valuation  and amortization of
             goodwill on  an annual  basis.   As part of  this review,  the
             Company estimates the value of and  the estimated undiscounted
             future cash  flows expected  to be  generated  by the  related
             subsidiaries  to  determine that  no impairment  has occurred.
             Accumulated  amortization of  cost  in  excess of  net  assets
             purchased was  $1,265,146 and  $1,079,867 as  of December  31,
             1996 and 1995, respectively.

         K.  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.

             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 1996,  1995 and
             1994.

         L.  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.

         M.  PARTICIPATING  INSURANCE  - Participating  business represents
             30%  and  34% of  the  ordinary  life  insurance  in force  at
             December  31, 1996  and 1995,  respectively.   Premium  income
             from participating  business represents 52%,  55%, and 53%  of
             total premiums  for the  years ended December  31, 1996,  1995
             and 1994,  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
             which vary by state.
<PAGE>                                   49
         N.  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.

         O.  BUSINESS SEGMENTS  - The Company  operates principally in  the
             individual life insurance business.

         P.  EARNINGS  PER SHARE  - Earnings per  share are  based upon the
             weighted average  number of  common shares outstanding  during
             the year.

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

         R.  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, total assets, or shareholders' equity.

         S.  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  co-insurance 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  premiums,  commissions,  expense  reimbursements,
             and reserves  on reinsured  business  are accounted  for on  a
             basis  consistent  with  those  used  in  accounting  for  the
             original  policies issued  and the  terms  of the  reinsurance
             contracts.   Expense  reimbursements  received  in  connection
             with  reinsurance ceded have been accounted for as a reduction
             of  the related  policy acquisition  costs  or, to  the extent
             such reimbursements exceed  the related acquisition costs,  as
             revenue.

             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;
             consequently, allowances  are established  for amounts  deemed
             uncollectible.  The Company evaluates the  financial condition
             of its reinsurers  and monitors concentrations of credit  risk
             arising  from  similar   geographic  regions,  activities,  or
             economic characteristics  of the  reinsurers  to minimize  its
             exposure to significant losses from reinsurer insolvencies.


2.  SHAREHOLDER DIVIDEND RESTRICTION




At  December  31, 1996,  substantially  all  of consolidated  shareholders'
equity represents net  assets of UTG's subsidiaries.   The payment of  cash
dividends to shareholders by UTG is not legally restricted.   UG's dividend
limitations are described below.

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, 1996, UG  had a statutory gain from  operations of $8,006,000.
At  December 31,  1996,  UG's statutory  capital  and surplus  amounted  to
$10,227,000.    Extraordinary  dividends  (amounts in  excess  of  ordinary
dividend limitations) require prior  approval of the insurance commissioner
and are not restricted to a specific calculation.

<PAGE>
3.  FEDERAL 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.  If  certain of the  life companies pay
shareholder dividends in  excess of  "shareholders' surplus"  they will  be
required to pay taxes on income not taxed under the pre-1984 acts.

The  following table summarizes the  companies with this  situation and the
maximum amount of income which has not been taxed in each.



                                   Shareholders'          Untaxed
                      Company        Surplus              Balance
                        ABE       $   5,242,000        $ 1,150,000
                        APPL          4,943,000          1,525,000
                        UG           24,038,000          4,364,000
                        USA             981,000                  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:

                                         1996         1995         1994
Current tax expense (credit)       $  (148,000)  $     2,000    $   51,000 
Deferred tax expense (credit)       (4,496,000)   (4,727,000)   (2,056,000)
                                   $(4,644,000)  $(4,725,000)  $(2,005,000)


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





                                      UG                 FCC
                       2002     $         0        $    527,000
                       2003               0             285,000
                       2004               0             283,000
                       2005               0             139,000
                       2006       2,109,000              33,000
                       2007         783,000             676,000
                       2008         940,000               4,000
                       2009               0             169,000
                       2010               0              19,000
                      TOTAL     $ 3,832,000         $ 2,135,000

<PAGE>                               51

The Company  has established  a deferred tax  asset of  $2,088,000 for  its
operating  loss   carryforwards  and   has  established  an   allowance  of
$2,088,000.

The provision  or  (credit) 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:


                                            1996          1995         1994
Tax computed at standard corporate rate $(2,381,000) $(4,195,000) $(1,271,000)
Changes in taxes due to:                                    
  Cost in excess of net assets purchased     65,000       61,000      104,000 
  Special insurance deductions                    0            0      (24,000)
  Benefit of prior losses                (2,393,000)    (599,000)    (649,000)
  Other                                      65,000        8,000     (165,000)
Income tax expense (credit)             $(4,644,000 )$(4,725,000) $(2,005,000)

The  following  table summarizes  the major  components which  comprise the
deferred tax liability as reflected in the balance sheets:

                                                  1996           1995
Investments                                 $   (122,251)  $    (48,918)
Cost of insurance acquired                    16,637,883     20,860,602 
Deferred policy acquisition
   costs                                       3,963,875      4,002,855 
Agent balances                                   (65,609)       (71,625)
Furniture and equipment                          (37,683)       (82,257)
Discount of notes                                922,766      1,003,038 
Management/consulting fees                      (733,867)      (841,991)
Future policy benefits                        (5,906,087)    (5,039,938)
Other liabilities                             (1,151,405)      (818,484)
Federal tax DAC                               (1,916,536)    (2,862,999)
Deferred tax liability                      $ 11,591,086   $ 16,100,283
               
<PAGE>                                 52

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,
                                           1996          1995         1994

        Fixed maturities and fixed 
         maturities held for sale    $ 13,326,312  $ 13,253,122  $ 12,185,941
        Equity securites                   88,661        52,445         3,999
        Mortgage loans                  1,047,461     1,257,189     1,423,474
        Real estate                       794,844       975,080       990,857
        Policy loans                    1,121,538     1,041,900     1,014,723
        Short-term investments            512,322       498,496       419,416
        Other                             233,872       143,753       202,641
        Total consolidated investment 
         income                        17,125,010    17,221,985    16,241,051
        Investment expenses            (1,222,903)   (1,724,438)   (1,915,808)
        Consolidated net investment 
          income                     $ 15,902,107  $ 15,497,547  $ 14,325,243

    At December 31, 1996, the Company had a total of $6,025,000 of 
    investments, comprised of $5,325,000 in real estate including its home 
    office property and $700,000 in equity securities, which did not produce 
    income during 1996.

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

                                                    Carrying Value
                                                   1996         1995
      Investments held for sale:
        Fixed maturities                      $  1,961,166  $  3,226,175
        Equity securities                        1,794,405     1,946,481
      Fixed maturities:
       U.S. Government, government 
         agencies and authorities               28,554,631    27,488,188
        State, municipalities and 
         political subdivisions                 14,421,735     6,785,476
        Collateralized mortgage obligations     13,246,781    15,395,913
        Public utilities                        51,821,989    59,136,696
        All other corporate bonds               71,881,649    82,267,947
                                              $183,682,356  $196,246,876


    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.
<PAGE>                                   53

    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:


             Below Investment
             Grade Investments              1996       1995        1994
             State, Municipalities and
              Political Subdivisions     $ 10,042   $       0  $   32,370
             Public Utilities             117,609     116,879     168,869
             Corporate                    813,717     819,010     848,033
             Total                       $941,368   $935,889   $1,049,272

<PAGE>                                   54
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
  1996                           Cost       Gains      Losses       Value
  Investments Held for Sale:
    U.S. Government and govt.
     agencies and 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 and 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
     obligations               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


<PAGE>                                   55


                                 Cost or       Gross       Gross    Estimated
                                Amortized    Unrealized  Unrealized   Market
  1995                             Cost        Gains       Losses      Value
  Investments Held for Sale:                                  
    U.S. Government and govt.
     agencies and authorities $  2,001,860 $    2,579 $      621 $  2,003,818
    States, municipalities and
     political subdivisions        812,454     14,313      3,749      823,018
    Collateralized mortgage 
     obligations                    32,177        506          0       32,683
    Public utilities               119,379        572      2,123      117,828
    All other corporate bonds      258,169        337      9,678      248,828
                                 3,224,039     18,307     16,171    3,226,175
    Equity securities            2,086,159     80,721    220,399    1,946,481
    Total                     $  5,310,198 $   99,028 $  236,570 $  5,172,656
                                                  
  Held to Maturity Securities:                                
    U.S. Government and govt.
     agencies and authorities $ 27,488,188 $  841,786 $  76,417 $  28,253,557
    States, municipalities and
     political subdivisions      6,785,476    305,053    10,895     7,079,634
    Collateralized mortgage 
     obligations                15,395,913    295,344    67,472    15,623,785
    Public utilities            59,136,696  2,279,509   134,091    61,282,114
    All other corporate bonds   82,267,947  2,974,553   475,333    84,767,167
    Total                     $191,074,220 $6,696,245 $ 764,208 $ 197,006,257

 The  amortized cost of debt  securities at December  31, 1996, 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           Amortized
                      December 31, 1996                     Cost
               Due in one year or less                $    139,724
               Due after one year through five years     1,569,804
               Due after five years through ten years      115,183
               Due after ten years                         159,950
                                                      $  1,984,661

                 Fixed Maturities Held to Maturity        Amortized
                      December 31, 1996                     Cost
               Due in one year or less                $ 13,222,084
               Due after one year through five years    74,120,886
               Due after five years through ten years   77,222,430
               Due after ten years                      15,361,385
                                                      $179,926,785
<PAGE>                                   56

Proceeds from sales, calls and maturities of investments in debt securities
during 1996  were $40,677,000.  Gross gains of $101,000 and gross losses of
$276,000 were realized on those sales, calls and maturities.

Proceeds from sales, calls and maturities of investments in debt securities
during 1995 were $16,885,000.  Gross gains of $126,000 and  gross losses of
$246,000 were realized on those sales, calls and maturities.

Proceeds from sales, calls and maturities of investments in debt securities
during 1994 were  $24,145,000.  Gross gains of $84,000  and gross losses of
$554,000 were realized on those sales, calls and maturities.

C. INVESTMENTS  ON  DEPOSIT  -  At December  31,  1996,  investments carried
   at approximately $18,016,000 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, 1996  and  1995, 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

An estimate of fair value is  based on management's review of the portfolio
in relation to market prices of similar loans with similar credit  ratings,
interest rates,  and maturity  dates.  Management  conservatively estimates
fair value of the portfolio is equal to the carrying value.

(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.
<PAGE>                                   57

(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.  All short  term instruments represent certificates of  deposit 
with various banks and all are protected under FDIC.

(g)  Notes and accounts receivable and uncollected premiums

The  Company   holds  notes   receivable  of  $1,680,066   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:

                                  1996                       1995
                                       Estimated                 Estimate
                         Carrying         Fair      Carrying       Fair
      Assets              Amount         Value       Amount        Value
      Fixed maturities $179,926,785 $181,815,225  $191,074,220 $197,006,257
      Fixed maturities
       held for sale      1,961,166    1,961,166     3,226,175    3,226,175
      Equity securities   1,794,405    1,794,405     1,946,481    1,946,481
      Mortgage loans on
       real estate       11,022,792   11,022,792    13,891,762   13,891,762
      Policy loans       14,438,120   14,438,120    16,941,359   16,941,359
      Short-term
       investments          430,983      430,983       425,000      425,000
      Investment in real
       estate            10,543,490   10,543,490    11,978,575   11,978,575
      Real estate
       acquired in
       satisfaction of 
       debt               3,846,946    3,846,946     5,332,413    5,332,413
      Notes receivable    1,680,066    1,566,562     1,680,066    1,550,742

      Liabilities                                       
      Notes payable      19,839,853   18,671,155    21,463,328   20,763,009
<PAGE>                                   58




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  is
expected to be completed  in 1997, 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 $10,227,000 and
$7,274,000  at  December 31,  1996 and  1995,  respectively.   The combined
statutory gain  from operations  (exclusive of intercompany  dividends) was
$10,692,000,   $4,076,000  and   $3,071,000  for   1996,  1995   and  1994,
respectively.


7.  REINSURANCE

The Company  assumes risks from, and  reinsures certain parts of  its risks
with other insurers under yearly renewable term  and coinsurance agreements
which 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  $1.109 billion, $1.088 billion and
$1.217  billion in face amount of life  insurance risks with other insurers
for  1996, 1995 and 1994, respectively.  Reinsurance receivables for future
policy benefits were $38,745,000  and $13,540,000 at December 31,  1996 and
1995,  respectively, for  estimated recoveries under  reinsurance treaties.
Should  any of the reinsurers be unable  to meet its obligation at the time
of the claim, obligation to pay such claim would remain with the Company.

The  Company's  insurance  subsidiary  ("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,  an industry  rating company,  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.  The
agreement  with FILIC  accounts for  approximately 66%  of  the reinsurance
receivables as of December 31, 1996.  

As a result  of the  FILIC coinsurance agreement,  effective September  30,
1996, UG  received a  reinsurance credit in  the amount  of $28,318,000  in
exchange  for an equal amount of assets.   UG also received $6,375,000 as a
commission allowance.

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.
<PAGE>                                  59
The  Company does not have  any short-duration reinsurance  contracts.  The
effect  of the  Company's long-duration  reinsurance contracts  on premiums
earned in 1996, 1995 and 1994 was as follows:


                                        Shown in thousands
                                   1996         1995        1994
                                 Premiums     Premiums    Premiums
                                  Earned       Earned      Earned
                   Direct       $  32,387    $  35,201   $  38,063 
                   Assumed              0            0           0 
                   Ceded           (4,768)      (5,203)     (5,659)
                   Net premiums $  27,619    $  29,998   $  32,404 



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  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.  Those mandatory assessments may be partially recovered
through a  reduction in future premium  taxes 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

United Income, Inc.  ("UII") has  a service agreement  with its  affiliate,
USA,  to  perform  services and  provide  personnel  and  facilities.   The
services  included in  the  agreement are  claim processing,  underwriting,
processing and servicing of policies, accounting services, agency services,
data processing and  all other expenses necessary to carry  on the business
of a life insurance company.

UII's service agreement 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 $1,568,000, $2,015,000  and $1,357,000 under their  agreement with
UII  for 1996, 1995 and 1994, respectively.   UII paid $941,000, $1,209,000
and  $814,000 under  their  agreement with  UTI for  1996,  1995 and  1994,
respectively.
  
<PAGE>                                   60

The  agreements  of the  insurance companies  have  been approved  by their
respective domiciliary insurance departments and it is Management's opinion
that  where  applicable,   costs  have  been  allocated   fairly  and  such
allocations are based upon  generally accepted accounting principles.   The
costs  paid by UTI  and its subsidiaries  for these 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  which are
charged as current period costs and included in "general expenses".


10.  NOTES PAYABLE

At  December 31,  1996,  the Company  has  $19,840,000  in long  term  debt
outstanding.  The debt is comprised of the following components:


                                                1996           1995
                Senior debt                $ 8,400,000    $ 10,400,000
                Subordinated 10 yr. notes    6,209,000       6,209,000
                Subordinated 20 yr. notes    3,831,000       3,831,000
                Other notes payable          1,400,000       1,000,000
                Encumbrance on real estate           0          23,000
                                           $19,840,000    $ 21,463,000


On  May  8, 1996,  FCC  refinanced  its senior  debt  of  $8,900,000.   The
refinancing was completed through First of America Bank - NA and is subject
to a credit agreement.   The refinanced debt bears interest to 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
announced by First of  America Bank from time to time  as its "base lending
rate".  The base  rate at issuance of the loan was  8.25%, and has remained
unchanged through  March 1, 1997.   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, 1996, the Company prepaid
$500,000 of the May 8, 1997 principal payment.

The credit agreement contains certain covenants with which the Company must
comply.  The 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 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
current and in compliance with  all of the terms on all  of its outstanding
debt  and does  not foresee  any problem  in maintaining compliance  in the
future.

United  Income, Inc. (UII) and  First Fidelity Mortgage  Company through an
assignment  from  United Trust,  Inc.  owned  a participating  interest  of
$700,000 and $300,000 respectively of the senior debt.  At the date  of the
refinance, these  obligations were converted from  participations of senior
debt  to promissory notes.   These  notes bear 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 and $250,000 from UTI 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  subordinated  debt was  incurred  June  16,  1992  as  a  part  of  an
acquisition.  The  10 year notes  bear interest at the  rate of 7  1/2% per
annum,  payable semi-annually  beginning December  16, 1992.   These  notes
provide for principal payments equal to 1/20th of the principal balance due
with  each interest  installment  beginning June  16,
<PAGE>                                   61

1997, with  a  final payment due June 16, 2002.  During 1995, the Company 
refinanced $300,695 of 10 year notes to  20 year notes bearing interest at
the rate of 8.75%.  The repayment  terms of these notes are similar  to the 
original 20 year notes.  The 20  year notes bear interest at  the rate of 
8 1/2% per annum, payable semi-annually  beginning  December 16,  1992,  
with  a  lump sum  principal payment  due June 16,  2012.  The  Company's 
subordinated debt  consists of $4,495,000  and $3,532,000 of ten year and 
twenty year notes, respectively, owed to current officers and directors of 
the Company or its affiliates.

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


            Year                                  Amount  
 
            1997                              $ 1,037,000
            1998                                1,537,000
            1999                                1,937,000
            2000                                1,537,000
            2001                                1,537,000


11.  OTHER CASH FLOW DISCLOSURE

On a cash basis, the Company  paid $1,700,973, $1,934,326 and $1,937,123 in
interest expense for  the years  1996, 1995  and 1994,  respectively.   The
Company paid $17,634, $25,821 and $190 in federal income tax for 1996, 1995
and 1994, respectively.

The  Company's  insurance  subsidiary  ("UG") entered  into  a  coinsurance
agreement with First  International Life Insurance Company  ("FILIC") as of
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.


12.  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.    An  officer  or agent  received  an  immediately
exercisable option  to purchase 23,000 shares of  UTI common stock at $1.75
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 1,050,000 options were granted in 1993 under  this plan.  As of December
31, 1996  no options were  exercised.  At  December 31, 1996  and 1995, the
Company  held  a  liability  of $1,268,000  and  $1,167,000,  respectively,
relating to this plan.  


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

The  Company recognized  a non-recurring  write down  of $8,297,000  on its
value of agency force  acquired for the year ended December 31,  1995.  The
write down released $2,904,000 of the deferred tax liability and $1,495,000
was attributed to minority  interest in loss of  consolidated subsidiaries.
The effect  of this write down resulted  in an increase in  the net loss of
$3,898,000.  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  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 
<PAGE>                                   62

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.


14.  CONCENTRATION OF CREDIT RISK

The  Company  maintains cash  balances in  financial institutions  which 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.


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

On September  23, 1996, UTI and UII entered into a stock purchase agreement
with  LaSalle  Group, Inc.,  a  Delaware  corporation ("LaSalle"),  whereby
LaSalle will acquire 12,000,000 shares of authorized but unissued shares of
UTI for  $1.00 per share  and 10,000,000 shares of  authorized but unissued
shares  of UII  for  $0.70  per  share.    Additionally,  LaSalle  intends,
contemporaneously with the closing of the above transaction, to purchase in
privately  negotiated transactions additional shares of UTI and UII so that
LaSalle will own not  less than 51% of the outstanding  common stock of UTI
and indirectly control 51% of UII.

The  agreement  requires and  is pending  approval  of the  Commissioner of
Insurance of the State of Ohio,  Illinois and West Virginia, (the states of
domicile of the insurance subsidiaries).  It is anticipated the transaction
will be completed during the second quarter of 1997.

<PAGE>                                   63

16.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
                                                   1996
                                 1st         2nd         3rd          4th
<S>                        <C>          <C>          <C>          <C>
Premium income and
other considerations, 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         2,567,921    2,298,549    1,734,048    3,314,436
Operating expenses           3,616,660    3,072,535    3,685,600      910,771
Operating 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
Premium income and
 other considerations, 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         2,451,030    2,860,032    3,044,057    1,459,141 
Operating expenses           3,449,062    2,742,174    2,498,472    3,924,966 
Operating 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)

                                                   1994
                                  1st        2nd          3rd         4th
Premium income and
other considerations, net  $ 8,370,746  $ 9,270,226  $ 9,326,855  $ 8,176,700 
Net investment income        3,358,729    3,515,440    3,632,044    3,819,030 
Total revenues              12,001,846   13,765,861   10,671,956   11,968,337 
Policy benefits including
 dividends                   6,927,743    7,496,765    7,483,568    7,753,158 
Commissions and
 amortization of DAC         1,756,091    4,169,240    3,141,884    2,503,463 
Operating expenses           2,598,764    2,138,533    2,574,920    1,547,523 
Operating income (loss)        719,248       38,677   (2,528,416)  (1,784,822)
Net income (loss)              506,003     (165,957)  (1,083,563)    (372,765)
Net income (loss) per
 share                         5060.03    (1,659.57)  (10,835.63)   (3,727.65)
</TABLE>
<PAGE>                                    64

UNITED TRUST GROUP, INC.                                          Schedule I
SUMMARY OF INVESTMENTS - OTHER THAN
INVESTMENTS IN RELATED PARTIES
As of December 31, 1996

<TABLE>

               Column A                  Column B     Column C     Column D
      
                                                                   Amount at
                                                                  Which Shown
                                                                   in Balance
                                            Cost        Value        Sheet
<S>                                    <C>           <C>          <C>
Fixed maturities:
  United States Goverment and                                         
   government agencies and authorities $ 28,554,631  $ 28,839,743 $ 28,554,631 
  State, municipalities, and political
   subdivisions                          14,421,735    14,712,334   14,421,735 
  Collateralized mortgage obligations    13,246,780    13,264,145   13,246,780 
  Public utilities                       51,821,990    52,325,561   51,821,990 
  All other corporate bonds              71,881,649    72,673,442   71,881,649

       Total fixed maturities           179,926,785  $181,815,225  179,926,785 



Investments held for sale:
  Fixed maturities:
   United States Goverment and                                      
    government agencies and authorities   1,461,068  $  1,443,609    1,443,609 
   State, municipalities, and political
    subdivisions                            145,199       139,467      139,467 
   Public utilities                         119,970       119,658      119,658 
   All other corporate bonds                258,424       258,432      258,432 
                                          1,984,661  $  1,961,166    1,961,166 

Equity securities:
  Public utilities                           82,073  $     56,053       56,053 
  All other corporate securities          2,004,086     1,738,352    1,738,352 
                                          2,086,159  $  1,794,405    1,794,405 



Mortgage loans on real estate            11,022,792                 11,022,792 
Investment real estate                   10,543,490                 10,543,490 
Real estate acquired in 
 satisfaction of debt                     3,846,946                  3,846,946 
Policy loans                             14,438,120                 14,438,120 
Short term investments                      430,983                    430,983 
       Total investments               $224,279,936               $223,964,687 


</TABLE>



<PAGE>                                   65

UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION
PARENT ONLY BALANCE SHEETS
As of December 31, 1996 and 1995                                 Schedule II


<TABLE>

                                                         1996        1995
<S>                                              <C>            <C>
ASSETS

  Investment in affiliates                       $   35,548,414 $  37,265,534 
  Notes receivable from affiliates                   10,039,853    10,039,853
  Accrued interest income                                35,202        35,202 
  Cash and cash equivalents                              39,529        45,031 
        Total assets                             $   45,662,998 $  47,385,620 


LIABILITIES AND SHAREHOLDERS' EQUITY

  Liabilities:
    Notes payable                                $   10,009,853 $  10,009,853 
    Notes payable to affiliate                           30,000        30,000 
    Income taxes payable                                  6,663         3,221 
    Accrued interest payable                             35,202        35,202 
    Other liabilities                                   452,263       591,519 
         Total liabilities                           10,533,981    10,669,795 



Shareholders' equity:
  Common stock                                       45,926,705    45,726,705 
  Unrealized depreciation of 
    investments held for sale of affiliates            (126,612)         (501)
  Accumulated deficit                               (10,671,076)   (9,010,379)
         Total shareholders' equity                  35,129,017    36,715,825 
    
         Total liabilities and shareholders' 
            equity                               $   45,662,998 $  47,385,620 

</TABLE>
<PAGE>                                   66

UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION
PARENT ONLY STATEMENTS OF OPERATIONS
Three Years Ended December 31, 1996                             Schedule II
<TABLE>
                                          1996        1995         1994

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

  Interest income from affiliates    $   792,046  $   790,334  $   790,477 
  Other income                            34,600       31,774        4,481 
                                         826,646      822,108      794,958 


Expenses:

  Interest expense                       789,496      787,784      787,920 
  Interest expense to affiliates           2,550        2,550        2,557 
  Operating expenses                       4,624        3,341           13 
                                         796,670      793,675      790,490 

  Operating income                        29,976       28,433        4,468 

  Provision for income taxes              (4,664)      (3,221)           0 
  Equity in loss of subsidiaries      (1,686,009)  (5,346,088)  (1,120,750)
         Net loss                    $(1,660,697) $(5,320,876) $(1,116,282)
</TABLE>

<PAGE>                                   67

UNITED TRUST GROUP, INC.
CONDENSED FINANCIAL INFORMATION
PARENT ONLY STATEMENTS OF CASH FLOWS
Three Years Ended December 31, 1996                            Schedule II

<TABLE>
                                           1996        1995        1994
<S>                                  <C>          <C>          <C>
Increase (decrease) in cash and 
  cash equivalents
Cash flows from operating activities:
  Net loss                           $(1,660,697) $(5,320,876) $(1,116,282)
  Adjustments to reconcile  
   net loss to net cash provided 
   by operating activities:
     Equity in loss of subsidiaries    1,686,009    5,346,088    1,120,750 
     Change in accrued interest 
      income                                   0         (167)      (2,189)
     Change in accrued interest 
      payable                                  0          167        2,189 
     Change in income taxes payable        3,442        3,221            0 
     Change in other liabilities        (139,256)     (96,843)     (21,599)
Net cash used in operating activities   (110,502)     (68,410)     (17,131)

Cash flows from investing activities:
  Cost of investments acquired:
     Purchase of stock of affiliates     (95,000)        (200)           0 
Net cash used in investing activities    (95,000)        (200)           0 

Cash flows from financing activities:
  Capital contribution from affiliates   200,000       100,000           0 
Net cash provided by financing 
  activities                             200,000       100,000           0 

Net increase (decrease) in cash 
 and cash equivalents                     (5,502)       31,390     (17,131)
Cash and cash equivalents at
 beginning of year                        45,031        13,641      30,772 
Cash and cash equivalents at
 end of year                         $    39,529  $     45,031  $   13,641 
</TABLE>
<PAGE>                                   68

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

    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
<S>          <C>            <C>            <C>            <C>            <C>
Life insurance 
 in force    $3,952,958,000 $1,108,534,000 $1,271,766,000 $4,116,190,000 30.9%

Premiums:

Life 
 insurance   $   32,128,258 $    4,717,488 $            0 $   27,410,770  0.0%

Accident and 
health
insurance           258,377         50,255              0        208,122  0.0%

             $   32,386,635 $    4,767,743 $            0 $   27,618,892  0.0%

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

</TABLE>
<PAGE>                                   69

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

<TABLE>
    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
<S>          <C>            <C>            <C>            <C>            <C>
Life insurance 
 in force    $4,207,695,000 $1,087,774,000 $1,039,517,000 $4,159,438,000 25.0%


Premiums:

Life 
 insurance   $   34,952,367 $    5,149,939 $            0 $   29,802,428  0.0%

Accident 
 and health
 insurance          248,448         52,751               0       195,697  0.0%

             $   35,200,815 $    5,202,690 $             0 $  29,998,125  0.0%


*All  assumed business  represents the  Company's participation  in the
 Servicemen's Group Life Insurance Program (SGLI).
</TABLE>
<PAGE>                                    70

UNITED TRUST GROUP, INC.
REINSURANCE
As of December 31, 1994 and the year ended December 31, 1994       Schedule IV
<TABLE>

    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
<S>          <C>            <C>            <C>            <C>            <C> 
Life insurance
 in force    $4,543,746,000 $1,217,119,000 $1,077,413,000 $4,404,040,000 24.5%
       
Premiums:

Life 
 insurance   $   37,800,871 $    5,597,512 $            0 $   32,203,359  0.0%

Accident
 and health
 insurance          262,315         61,185              0        201,130  0.0%

             $   38,063,186 $    5,658,697 $            0 $   32,404,489  0.0%

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

</TABLE>
<PAGE>                                   71


UNITED TRUST GROUP, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the years ended December 31, 1996, 1995, & 1994                Schedule V
<TABLE>
                          Balance at    Additions                  Balances
                           Beginning      Charges                   at End
    Description            Of Period   and Expenses  Deductions    of Period

<S>                        <C>         <C>           <C>         <C>
December 31, 1996

Allowance for doubtful 
 accounts - mortgage loans $   10,000   $        0   $         0  $    10,000
Accumulated depreciation on 
  property and equipment and
  EDP conversion costs         35,413       80,897             0      116,310 
Accumulated amortization of
   costs in excess of net 
   assets purchased         1,079,867      185,279             0    1,265,146 
Accumulated depreciation on
  real estate               1,049,652      291,094             0    1,340,746 
       Total               $2,174,932   $  557,270   $         0  $ 2,732,202


December 31, 1995

Allowance for doubtful
 accounts - mortgage loans $   26,000   $        0   $    16,000  $    10,000
Accumulated depreciation
 on property and equipment
 and EDP conversion costs     391,615      393,798       750,000       35,413 
Accumulated amortization
 of costs in excess of net 
 assets purchased             656,675      423,192             0    1,079,867 
Accumulated depreciation
 on real estate               802,476      300,396        53,220    1,049,652  
       Total               $1,876,766   $1,117,386  $    819,220  $ 2,174,932 


December 31, 1994

Allowance for doubtful
 accounts - mortgage loans $  300,000   $        0  $    274,000  $    26,000
Accumulated depreciation
 on property and equipment
 and EDP conversion costs     226,545      165,070             0      391,615 
Accumulated amortization
 of costs in excess of net
 assets purchased             426,999      297,676        68,000      656,675 
Accumulated depreciation
 on real estate               501,333      301,143             0      802,476 
       Total               $1,454,877   $  763,889  $    342,000   $1,876,766 

</TABLE>
<PAGE>                                   72