SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                  FORM 10-Q


[*]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                OF THE SECURITIES EXCHANGE ACT OF 1934

         FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998 or

[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                  THE SECURITIES EXCHANGE ACT OF 1934


Commission file number: 0-20882

     STANDARD MANAGEMENT CORPORATION
            (Exact name of registrant as specified in its charter)


           Indiana                                 No. 35-1773567
(State or other jurisdiction            (I.R.S. Employer Identification No.)
of incorporation or organization)

9100 Keystone Crossing, Indianapolis, Indiana           46240
(Address of principal executive offices)             (Zip Code)

                            (317) 574-6200
         (Registrant's telephone number, including area code)

Indicate  by  check  mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of
1934  during  the  preceding  12 months (or for such shorter period  that  the
registrant was required to file  such  reports),  and  (2) has been subject to
such filing requirements for the past 90 days:  Yes [*]  No [  ]

As of November 2, 1998, the Registrant had 7,909,309 shares  of  Common  Stock
outstanding.

<PAGE>
                        STANDARD MANAGEMENT CORPORATION

                                     INDEX

                                                                        PAGE
NUMBER

Part I. FINANCIAL INFORMATION:

Item 1. Financial Statements

  Consolidated Balance Sheets --
  September 30,1998(Unaudited) and December 31,1997(Audited) 3

  Consolidated Statements of Income --
  For the Three and Nine Months Ended September 30,1998 and 1997(Unaudited) 4

  Consolidated Statements of Shareholders' Equity --
  For the Nine Months Ended September 30,1998 and 1997(Unaudited) 5

  Consolidated Statements of Cash Flows --
  For the Nine Months Ended September 30,1998 and 1997(Unaudited) 6

  Notes to Consolidated Financial Statements(Unaudited) 7 - 11

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operation 12 - 21

Part II.  OTHER INFORMATION:

Item 6. Exhibits and Reports on Form 8-K  22

        SIGNATURES 23
<PAGE>
                        PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                            (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,                 DECEMBER 31,
<S>                                                                                    <C>                           <C>
                                                                                            1998                          1997
                                                                                        (UNAUDITED)                    (AUDITED)
                                   ASSETS
Investments:
    Securities available for sale:
          Fixed maturity securities, at fair value (amortized cost: $423,356 in 
          1998 and $367,372 in 1997)                                                         $431,147                     $372,576
          Equity securities, at fair value(cost: $1,547 in 1998 and $55 in 1997)               1,338                           52
   Mortgage loans on real estate                                                                8,528                          375
   Policy loans                                                                                 8,875                        9,495
   Real estate                                                                                  3,815                        2,163
   Other invested assets                                                                          895                          779
   Short-term investments                                                                      19,569                       13,342
            Total investments                                                                 474,167                      398,782
Cash                                                                                           13,058                        4,165
Accrued investment income                                                                       6,832                        6,512
Amounts due and recoverable from reinsurers                                                    64,377                       61,596
Deferred policy acquisition costs                                                              27,298                       21,435
Present value of future profits                                                                23,117                       20,537
Excess of acquisition cost over net assets acquired                                             4,614                        2,445
Federal income tax recoverable                                                                    166                        1,854
Other assets                                                                                    3,635                        3,602
Assets held in separate accounts                                                              182,308                      148,064
            Total assets                                                                     $799,572                     $668,992
                LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Insurance policy liabilities                                                              $511,140                     $439,390
   Accounts payable and accrued expenses                                                        5,929                        6,208
   Obligations under capital lease                                                                 --                          141
   Notes payable                                                                               27,000                       26,000
   Deferred federal income taxes                                                                6,848                        4,488
   Excess of net assets acquired over acquisition cost                                            347                        1,388
   Liabilities related to separate accounts                                                   182,308                      148,064
            Total liabilities                                                                 733,572                      625,679
Series  A  Convertible Redeemable Preferred Stock, par value $100 per share;
      Authorized 130,000; 37,300 issued and outstanding in 1998. . . . . . . . . . .            3,730                           --
 . . . . .  . . . . . . . . . . . . .
Shareholders' Equity:
   Preferred Stock, no par value:
          Authorized 870,000 shares; none issued and outstanding                                   --                           --
   Common Stock, no par value:
          Authorized 20,000,000 shares; issued 8,105,860 in 1998 and 5,752,499 in              55,938                        40,646
1997
   Treasury stock, at cost, 884,389 shares in 1998 and 876,009 shares in 1997                 (4,792)                        (4,572)
(deduction)
   Accumulated other comprehensive income:
          Unrealized gain on securities available for sale                                      3,151                        2,171
          Foreign currency translation adjustment                                               (620)                        (473)
   Retained earnings                                                                            8,593                        5,541
            Total shareholders' equity                                                         62,270                       43,313
Total liabilities and shareholders' equity                                                   $799,572                     $668,992
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                       CONSOLIDATED STATEMENTS OF INCOME
          (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                            THREE MONTHS ENDED                       NINE MONTHS ENDED
<S>                                                 <C>                   <C>                 <C>               <C>           
                                                               SEPTEMBER 30,                           SEPTEMBER 30,
                                                    1998                  1997                1998              1997
Revenues:
   Premium income - life                            $1,759                $1,715              $5,667            $5,277
     Premium income - health                           --                    --                5,992               --
   Net investment income                            8,071                 7,580               23,920            21,926
   Net realized investment gains                    43                    81                  73                287
   Policy charges                                   1,906                 1,328               5,058             4,110
   Amortization of excess of net assets acquired
over                                                347                   347                 1,041             1,041
          acquisition cost
   Fees from separate accounts                      994                   417                 2,147             1,255
   Other income                                     1,263                 119                 2,698             1,014
          Total revenue                             14,383                11,587              46,596            34,910
Benefits and expenses:
   Benefits and claims - life                       2,817                 1,577               6,763             5,945
     Benefits and claims - health                     --                    --                 4,821              --
 .
   Interest credited on interest-sensitive
annuities and other                                 4,247                 4,461               13,112            12,627
          financial products
   Salaries and wages                               1,888                 1,344               5,028             4,249
   Amortization                                     1,322                 967                 3,546             2,544
   Other operating expenses                         1,939                 1,797               5,633             5,127
     Commission expense - health.                     --                  --                  784                 --
   Interest expense and financing costs             772                   646                 2,201             1,724
          Total benefits and expenses               12,985                10,792              41,888            32,216
Income before federal income taxes and preferred
stock              dividends                        1,398                 795                 4,708             2,694
Federal income tax expense                          260                   204                 1,529             779
Net income                                          1,138                 591                 3,179             1,915
Preferred stock dividends                           (71)                  (15)                (71)              (97)
Earnings available to common shareholders           $1,067                $576                $3,108            $1,818
Earnings per share:
   Net income                                       $                     $                   $                 $
                                                    0.16                  0.12                0.48              0.39
    Preferred stock dividends                       (.01)                  --                 (.01)             (.02)
   Earnings available to common shareholders        $                     $                   $                 $
                                                    0.15                  0.12                0.47              0.37
Earnings per share - assuming dilution:
   Net income                                       $                     $                   $                 $
                                                    0.15                  0.11                0.44              0.36
   Preferred stock dividends                        (.01)                         (.01)             (.01)               (.02)
   Earnings available to common shareholders        $                     $                   $                 $
                                                    0.14                  0.10                0.43              0.34
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE>
               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       (UNAUDITED, DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                                       Accumulated
                                                                                                          Other
                                                                    Common           Treasury         Comprehensive       Retained
                                                Total                Stock             Stock             Income           Earnings
<S>                                             <C>               <C>               <C>              <C>                 <C>
Balance at January 1, 1997                      $39,919           $40,481           $(3,528)         $(55)               $3,021
Comprehensive income, net of tax:
  Net income                                    1,915                                                                    1,915
  Other comprehensive income:
          Change in unrealized gain (loss) on
          securities                            2,818                                                2,818
            available for sale, net
          Change in foreign currency            (1,061)                                              (1,061)
          translation adjustment
            Other comprehensive income          1,757
              Comprehensive income              3,672
   Issuance of Common Stock Warrants            165               165

   Treasury stock acquired                      (1,076)                             (1,076)
   Preferred stock dividends                    (97)                                                                     (97)
Balance at September 30, 1997                   $42,583           $40,646           $(4,604)         $1,702              $4,839
Balance at January 1, 1998                      $43,313           $40,646           $(4,572)         $1,698              $5,541
Comprehensive income, net of tax:
   Net income                                   3,179                                                                    3,179
   Other comprehensive income:
          Change in unrealized gain (loss) on
          securities                            980                                                  980
            available for sale, net
          Change in foreign currency            (147)                                                (147)
          translation adjustment
            Other comprehensive income          833
              Comprehensive income              4,012
   Issuance of Common Stock for Savers Life     15,024            15,024
   acquisition
   Issuance of Common Stock warrants            30                30
   Issuance of Common Stock in connection with
          exercise of stock warrants            233               234                                                    (1)
   Treasury stock acquired                      (274)                               (274)
   Conversion of preferred stock into Common    4                 4
   Stock
   Reissuance of treasury stock in connection
   with                                         (1)                                 54                                   (55)
   exercise of stock options
   Preferred stock dividends                    (71)                                                              (71)

Balance at September 30, 1998                   $62,270           $55,938           $(4,792)         $2,531              $8,593
</TABLE>



See accompanying notes to consolidated financial statements.
<PAGE>
               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (UNAUDITED, DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
<S>                                                                                      <C>                               <C>
                                                                                                September 30,
                                                                                           1998                               1997
OPERATING ACTIVITIES
Net income                                                                               $3,179                             $1,915
Adjustments to reconcile net income to net cash provided by
operating activities:
   Amortization of deferred policy acquisition costs                                      2,014                              1,039
   Policy acquisition costs deferred                                                     (8,684)                            (5,323)
   Deferred federal income taxes                                                          1,529                                695
   Depreciation and amortization                                                            883                                960
   Insurance policy liabilities                                                         (7,442)                              6,990
   Net realized investment gains                                                           (73)                              (287)
   Accrued investment income                                                              (105)                                114
      Amounts due to Savers Life from brokers for security sales at                       6,519                               --
      acquisition date 
   Other                                                                                  2,880                             (1,477)
          Net cash provided by operating activities                                         700                              4,626
FINANCING ACTIVITIES
Borrowings, net of debt issuance costs of $86 in 1998 and $-- in 1997                     3,914                              5,628
Repayments on long term debt and obligations under capital lease                        (3,153)                              (402)
Premiums received on interest-sensitive annuities and other financial
products                                                                                 53,846                             38,355
   credited to policyholder account balances, net of premiums ceded
Return of policyholder account balances on interest-sensitive annuities
and other                                                                              (36,009)                           (27,986)
   financial products, net of premiums ceded . . . . . . . . . . . . . .
   . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of convertible preferred stock, net of issuance costs of $120 .                  3,610                            --
 . . . . . . . . . . . . . . . . . . .
Redemption of redeemable preferred stock . . . . . . . . . . . . . . . .                     --                           (1,855)
 . . . . . . . . . . . . . . . . . . . . . . . . . .
Reissuance of treasury stock in connection with exercise of stock options                   233                            4
and warrants . . . . . . .
Proceeds from Common and Treasury Stock sales . . . . . . . . . . . . . .                    --                            165
 . . . . . . . . . . . . . . . . . . . . . .
Purchase of Common Stock for treasury                                                     (272)                            (1,079)
          Net cash provided by financing activities                                      22,169                             12,830
INVESTING ACTIVITIES
Fixed maturity securities available for sale:
   Purchases                                                                          (190,140)                          (158,353)
   Sales                                                                                128,978                            123,113
   Maturities, calls and redemptions                                                     15,289                             23,632
Short-term investments, net                                                              36,516                            (5,116)
Other investments, net                                                                  (2,450)                            (2,681)
Purchase of Savers Life Insurance Company, less cash acquired of $518                   (2,169)                                 --
          Net cash used by investing activities                                        (13,976)                           (19,405)
Net increase (decrease) in cash                                                           8,893                            (1,949)
Cash at beginning of period                                                               4,165                              5,113
Cash at end of period                                                                   $13,058                             $3,164
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>

               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


NOTE 1 -- BASIS OF PRESENTATION

      The  accompanying  unaudited  consolidated financial statements have been
prepared in accordance with generally  accepted  accounting principles ("GAAP")
for interim financial information and with the instructions  to  Form  10-Q and
Article  10  of  Regulation  S-X.   Accordingly, they do not include all of the
information and footnotes required by  GAAP  for complete financial statements.
The results of operations for the interim periods  shown in this report are not
necessarily indicative of the results that may be expected for the fiscal year.
This  is  particularly  true  in the life insurance industry,  where  mortality
results in interim periods can  vary  substantially  from  such  results over a
longer period.  In the opinion of management, the information contained  herein
reflects  all  adjustments  necessary to make the results of operations for the
interim periods a fair statement  of such operations.  All such adjustments are
of  a  normal  recurring nature.  Certain  amounts  in  the  1997  Consolidated
Financial Statements  and Notes have been reclassified to conform with the 1998
presentation.  These reclassifications  had  no  effect  on previously reported
shareholders' equity or net income during the periods involved.

      The  nature of the insurance business of Standard Management  Corporation
("SMC") and  its  consolidated subsidiaries (the "Company") requires management
to make estimates and  assumptions  that  affect  the  amounts  reported in the
consolidated  financial  statements  and accompanying notes.  For example,  the
Company  uses significant estimates and  assumptions  in  calculating  deferred
policy acquisition  costs,  present  value  of future profits, goodwill, future
policy  benefits  and  deferred  federal  income  taxes.   Such  estimates  and
assumptions could change in the future as more information becomes known, which
could impact the amounts reported and disclosed herein.

      For further information, refer to the consolidated  financial  statements
and footnotes thereto included in the Annual Report on Form 10-K of SMC for the
year ended December 31, 1997.

NOTE 2 -- ACQUISITIONS

      On  March  12,  1998, SMC acquired Savers Life Insurance Company ("Savers
Life"), with Savers Life  surviving  as a wholly-owned subsidiary of SMC.  Each
of the 1,779,908 shares of Savers Life  Common  Stock outstanding was converted
into 1.2 shares of SMC Common Stock plus $1.50.   Each  holder  of  Savers Life
Common  Stock could elect to receive the $1.50 per share portion of the  merger
consideration in the form of additional shares of SMC Common Stock.  SMC issued
approximately  2.2 million shares with a value of approximately $14,937,000 and
paid $2,119,000  in  cash (excluding acquisition costs) to acquire Savers Life.
SMC increased the Amended  and Restated Revolving Line of Credit Agreement with
a bank (the "Amended Credit  Agreement") to an amount of $20,000,000 to finance
the acquisition of Savers Life.

      Savers  Life  underwrites,   markets   and  distributes  annuities,  life
insurance,  and  Medicare supplement health insurance  through  a  sales  force
consisting of approximately  4,000  independent brokers and is licensed to sell
products in North Carolina, South Carolina,  Virginia and Florida.  Savers Life
had  total  assets  of  $72,186,000  at  December  31,  1997  and  revenues  of
$43,047,000 for the year ended December 31, 1997.

      The  acquisition  of  Savers Life was accounted for  using  the  purchase
method of accounting and the  consolidated  financial  statements  include  the
results   of  Savers  Life  from  the  date  of  acquisition.   Under  purchase
accounting, SMC allocated the total purchase price of Savers Life to the assets
and liabilities  acquired, based on a preliminary determination of their values
and recorded the excess  of  total  purchase  price over net assets acquired as
goodwill.  SMC may adjust this allocation when  a  final  determination of fair
values is made.  Any adjustment is not expected to be material.

<PAGE>

               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


NOTE 2 -- ACQUISITIONS (CONTINUED)

      The following schedule summarizes the assets acquired and the liabilities
assumed with the Savers Life acquisition described above (in thousands):

         Assets acquired:
            Fixed maturity securities            $    7,061
            Equity securities                         2,840
            Mortgage loans on real estate             6,273
            Real estate                               1,750
            Policy loans                                  9
            Short term investments                   42,745
            Cash                                        518
            Present value of future profits           7,400
            Other assets                              7,378
               Total assets acquired                 75,974

         Liabilities assumed:
            Policy reserves                          57,889
            Deferred federal income taxes               516
            Other liabilities                         1,061
               Total  liabilities   assumed          59,466

         Net assets acquired                         16,508
         Excess of acquisition cost over net assets
         acquired                                     2,049
         Total purchase price                     $  18,557

   The  following are supplemental unaudited pro forma consolidated results  of
operations of the Company as if the acquisition of Savers Life and the transfer
of the major  medical  product line from Savers Life to World Insurance Company
("World")  through  a reinsurance  agreement  whereby  World  assumed,  through
coinsurance effective  July  1, 1997, 100% of the product line, had occurred at
January 1, 1997 presented at the  same  purchase  price, based on estimates and
assumptions considered appropriate (in thousands, except per share amounts).
                                     Nine Months Ended
                                        SEPTEMBER 30,
                                    1998      1997
              
               Revenues             $55,453   $61,696                     
               Net income             3,513     2,501
               Earnings per share      0.40      0.35
               Earnings per share,
               assuming dilution       0.38      0.33


      The above amounts are based upon certain assumptions  and estimates which
the Company believes are reasonable and do not reflect any benefit from savings
which  might  be  achieved  from combined operations. The unaudited  pro  forma
results do not necessarily represent  results  which would have occurred if the
acquisition of Savers Life and the transfer of the  major  medical product line
had  taken  place  on the basis assumed above, nor are they indicative  of  the
results of future combined operations.

<PAGE>

               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


NOTE 3 -- NOTES PAYABLE

      Notes payable of the Company were as follows (in thousands):


<TABLE>
<CAPTION>
                                         Interest            September 30,          December 31,
                                           Rate                  1998                   1997
<S>                                       <C>               <C>                   <C>
Borrowings under revolving credit          8.86%{ (1)}      $17,000               $16,000
agreements
Senior subordinated convertible notes     10.00%             10,000                10,000
due 2004
                                                            $27,000               $26,000
</TABLE>
          (1) Current weighted average rate at September 30, 1998.

      In March 1998,  SMC had borrowed an additional $4,000,000 under revolving
credit  agreements  to  purchase  Savers  Life.    In  July  1998,  SMC  repaid
$3,000,000 on the $20,000,000  Amended  Revolving Line of Credit Agreement from
the gross proceeds received in connection with the issuance of 37,300 shares of
the Series A Preferred Stock  (See Note 6).


NOTE 4 -- NET UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE

      The  components  of  the  balance  sheet   caption  "Unrealized  gain  on
securities  available  for  sale"  in shareholders' equity  are  summarized  as
follows (in thousands):
<TABLE>
<CAPTION>
                                                                   September 30,                 December 31,
<S>                                                            <C>                            <C>
                                                               1998                           1997
Fair value of securities available for sale                   $432,485                       $372,628
Amortized cost of securities available for sale                424,903                        367,427
         Gross unrealized gain on securities available for     7,582                          5,201
sale
Adjustments for:
   Deferred policy acquisition costs                           (1,658)                        (1,727)
   Present value of future profits                             (1,084)                        (209)
   Deferred federal income tax liability                       (1,689)                        (1,094)
         Net unrealized gain on securities available for sale  $3,151                         $2,171
</TABLE>

NOTE 5 -- EARNINGS PER SHARE

  As  of  December  31,  1997,  the  Company  adopted  Statement  of  Financial
Accounting Standards ("SFAS")  No. 128, "Earnings per Share."  All earnings per
share amounts for all periods presented  have  been  restated to conform to the
SFAS No. 128 requirements.  SFAS No. 128 eliminates the presentation of primary
earnings  per  share  and  replaces it with basic earnings  per  share.   Basic
earnings per share differs from primary earnings per share because common stock
equivalents are not considered  in  computing  basic earnings per share.  Fully
diluted  earnings  per  share  are replaced with diluted  earnings  per  share.
Diluted earnings per share is similar  to  fully  diluted  earnings  per share,
except in determining the number of dilutive shares outstanding for options and
warrants,  the  proceeds  that  would  be  received  upon the conversion of all
dilutive  options  and  warrants  are  assumed  to  be used to  repurchase  the
Company's common shares at the average market price of  such  stock  during the
period.  For fully diluted earnings per share, the higher of the average market
price or ending market price was used.

<PAGE>

               STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)


NOTE 5 -- EARNINGS PER SHARE (CONTINUED)

  A  reconciliation of the numerator and denominator of the earnings per  share
computation is as follows (dollars in thousands):

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
<S>                                                          <C>                          <C>
                                                                              September 30,
                                                             1998                         1997
Numerator:
Net income                                                   $3,179                       $1,915
Preferred stock dividends                                    (71)                         (97)
Numerator for basic earnings per share -
 Income  available  to  common  shareholders                 3,108                        1,818
Effect of dilutive securities:
Preferred stock dividends                                    71                           97
     Interest on  subordinated convertible debt              750                           --
Numerator for diluted earnings per share -
 Income  available  to  common  shareholders  after  assumed $3,929                       $1,915
 conversions

Denominator:
Denominator for basic earnings per share - weighted -average 6,599,428                    4,973,580
shares
Effect of dilutive securities:
 Stock options                                               288,833                      151,069
 Stock warrants                                              236,608                      209,845
 Convertible preferred stock                                      --                           --
 Subordinated convertible debt                               1,740,038                         --
 Dilutive                                                    2,265,479                    360,914
 potential common shares
Denominator  for  diluted  earnings  per  share  -  adjusted
weighted -average                                            8,864,907                    5,334,494
shares and assumed conversions
</TABLE>

      The senior  subordinated  convertible notes were not included in the 1997
computation  of  diluted  earnings  per  share  because  the  effect  would  be
antidilutive.



NOTE 6 -- REDEEMABLE PREFERRED STOCK

      The Board of Directors has authorized  the  issuance  of  up  to  130,000
shares  of  preferred  stock  designated  as  Series  A  Convertible Redeemable
Preferred Stock, $100 par value per share.  The Series  A  Preferred  Stock  is
redeemable  on  July  1,  2005,  has  a  7  3/4  % annual dividend payable on a
quarterly basis, and is convertible into 11.7647 shares of SMC common stock for
each Series A Preferred Stock share (convertible into SMC common stock based on
a conversion price of $8.50 for each SMC common stock share).  Prior to July 1,
1999,  SMC may voluntarily redeem the Series A Preferred Stock  under  certain
limited  circumstances.   After  July  1,  1999, SMC may voluntarily redeem the
Series A Preferred Stock at a redemption price of 105% of the stated value
reducing to stated value beginning July 1, 2003 and thereafter.  During July,
1998, SMC issued 37,300 shares of the Series A Preferred Stock receiving 
gross proceeds of $3,730,000.  SMC,  during  July, 1998, used $3,000,000 of 
these proceeds  to  pay  down  its $20,000,000 Amended Revolving  Line of 
Credit Agreement.  During October 1998, SMC  issued  an additional 28,000
shares  of  the  Series  A  Preferred  Stock,receiving gross proceeds of 
$2,800,000, of which 26,000 shares were purchased by SMC's officers and
directors.   SMC  used  the  proceeds  to  help  fund the acquisition  of 
Midwestern National Life Insurance Company of Ohio ("Midwestern National
Life").  (See Note 8 - Completed Acquisition)





NOTE 7 -- DISPOSAL OF MEDICARE SUPPLEMENT BUSINESS

      Effective  July  1,  1998  the  Savers Life Medicare supplement business,
which represented substantially all of  the  Company's health business was sold
to Oxford Life Insurance Company ("Oxford Life")  and a quota share reinsurance
agreement was entered into between Savers Life and  Oxford Life.  In connection
with  the  sale of the Medicare supplement business, Savers  Life  received  an
initial statutory  ceding allowance of $4,200,000 which was offset by a reserve
reduction of $1,642,470  and  write  off  of present value of future profits of
$2,557,530 for GAAP.  Under the terms of the reinsurance agreement, Savers Life
will administer the Medicare supplement business  through July 1, 1999 and will
receive   administration  fee  income  as  a  result of this  transaction.  The
consummation of this transaction  resulted in the Company exiting from Medicare
supplement business it acquired with the Savers Life acquisition.



NOTE 8 -- COMPLETED ACQUISITION

      On  October  30, 1998, SMC acquired Midwestern  National  Life  Insurance
Company of Ohio ("Midwestern  National  Life")  as a wholly-owned subsidiary of
SMC.  SMC issued 696,453 shares of its common stock  valued  at $6.625, 
increased its bank debt by $6,000,000 on restructured terms and paid 
$2,886,000  in  cash (excluding acquisition costs) for an aggregate purchase
price of $13,500,000 to acquire Midwestern National Life.  SMC borrowed an
additional $6,000,000 by increasing the Amended and  Restated Revolving Line 
of Credit Agreement with a bank from $20,000,000 to $26,000,000  and  drawing
down $6,000,000 for the Midwestern National Life closing.  SMC plans to merge
Midwestern National  Life into  Standard  Life  effective  December 31, 1998
with Standard Life being the surviving entity.  Midwestern  National   Life 
reported total assets of $133,384,000  and  $125,028,000  at December 31, 
1997 and September  30,  1998, respectively and reported total revenues  of 
$11,759,000  and $6,558,000 and a net loss of $240,000 and $2,088,000 for the
ten months ended  December 31, 1997 and the nine months ended September 30, 
1998, respectively.



NOTE 9 -- RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

      As  of  January  1,  1998,  the Company adopted SFAS No. 130,  "Reporting
Comprehensive Income."  SFAS No. 130  establishes  new  rules for the reporting
and display of comprehensive income and its components; however,  the  adoption
of  SFAS  No.  130  had  no impact on the Company's net income or shareholders'
equity.  SFAS No. 130 requires  unrealized  gains  or  losses  on the Company's
securities  available  for  sale  and foreign currency translation adjustments,
which prior to adoption were reported separately in shareholders' equity, to be
included in other comprehensive income.   Prior  year financial statements have
been reclassified to conform to the requirements of SFAS No. 130.

      In June 1997, the Financial Accounting Standards  Board  ("FASB")  issued
SFAS  No.  131,  "Disclosures  about  Segments  of  an  Enterprise  and Related
Information."   SFAS  No.  131 supercedes SFAS No. 14 "Financial Reporting  for
Segments  of  a Business Enterprise"  and  defines  financial  and  descriptive
information about  a  company's  operating  segments that is to be disclosed in
financial  statements.   SFAS  No. 131 is effective  for  financial  statements
issued for fiscal years beginning  after  December 15, 1997 and will be adopted
by the Company in 1998.  Currently, the Company  considers  its  life insurance
operations to be its only material operating segment.  The Company  is  in  the
process  of  defining  additional  business  segments and developing allocation
methods to assess their performance.  Once the process is completed, additional
disclosures will be provided in accordance with SFAS No. 131.

      In June 1998, the Financial Accounting Standards  Board  ("FASB")  issued
SFAS  No.  133,  "Accounting for Derivative Instruments and Hedging Activities"
which is required  to  be  adopted in years beginning after June 15, 1999.  The
Statement permits early adoption  as  of  the  beginning  of any fiscal quarter
after its issuance.  The Company adopted the Statement effective  July 1, 1998.
At  September  30,  1998  recording  derivatives  at fair value resulted  in  a
writedown of $193,664.
<PAGE>

         STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                        ___________________

ITEM  2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND
RESULTS OF OPERATION

GENERAL

                                 The  following   discussion   highlights  the
material  factors  affecting  the  results  of  operations  and the significant
changes in balance sheet items of the Company on a consolidated  basis  for the
periods listed as well as the Company's liquidity and capital resources.   This
discussion  should  be  read  in  conjunction  with  the consolidated financial
statements  and  notes  thereto  included  in this document,  as  well  as  the
Company's Annual Report on Form 10-K for the year ended December 31, 1997.

RESULTS OF OPERATION

THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

                                  OPERATING INCOME.  The income from operations
(before net realized investment gains) was $1,095,000  for the third quarter of
1998, an increase of $558,000 or 104%, compared to $537,000  for the comparable
period  in  1997.   The  increase  resulted primarily from increased  operating
earnings from domestic operations of  $503,000  compared  to  $173,000  for the
third quarter of 1998 and 1997, respectively.   The increased domestic operating
gains  resulted  primarily  from  increased spread revenues and from  favorable
mortality experience during the third  quarter  of  1998  and  the inclusion of
Savers  Life  in  the  Company's  operating  results  from March 12, 1998,  the
acquisition date of Savers Life.

                                  PREMIUM  INCOME.   Premium   income-life   is
composed  of  premiums,  including  renewal premiums, received on ordinary life
insurance policies.  The Company's new  product sales are composed primarily of
annuity products.  Under GAAP, deposits from  interest-sensitive  annuities and
other  financial  products are not recorded as revenues.  GAAP premium  income-
life for the third  quarter of 1998 was $1,759,000 an increase of $44,000 or 3%
from $1,715,000 for the  third  quarter  of  1997.   SMC  recorded  net premium
income-life  of  $328,593  in  the  third  quarter  of 1998 for the Savers Life
acquisition which more than offsets the decline in premiums  from  the  regular
policy lapses, surrenders, and expiries in SMC's closed blocks of business.

                                  Net  domestic premium deposits received  from
the sales of interest-sensitive annuities  and  other financial products (which
are not recorded as revenues) were $23,764,000 compared  to $11,267,000 for the
third quarter of 1998 and 1997, respectively.  Gross domestic  premium deposits
received   from  interest-sensitive  annuities  and  financial  products   were
$25,372,000 for the third quarter of 1998 compared to $13,347,000 for the third
quarter of 1997.   Annuity  sales  increased in 1998 due to the introduction of
new competitive products and an increase  in  the  agency base achieved through
the recruitment of high volume agents and larger managing  general agencies and
continued   expansion  of  geographical  concentration  into  such   areas   as
California.   Since  the  Company's operating income is primarily a function of
its investment spreads, persistency  of  annuity  in  force business, mortality
experience, and operating expenses, a change in annuity  premium  deposits in a
single  period  does  not  directly  cause operating income to change, although
continued increases or decreases in annuity premiums may affect the growth rate
of total assets on which investment spreads are earned.

                                  NET INVESTMENT INCOME.  Net investment income
increased $491,000 or 6% to $8,071,000  for  the  third  quarter  of  1998 from
$7,580,000  for the comparable period of 1997.  The increase primarily resulted
from an increase  in  total  invested assets (amortized cost) from December 31,
1996 to September 30, 1998, of  $94,397,000  or  25%.   This  increase included
$67,800,000 from the Savers Life acquisition.  The weighted average  annualized
yield  of  the  Company's  investment  portfolio  (exclusive  of  realized  and
unrealized  gains  and losses) was 7.51% for the third quarter of 1998 compared
to 7.83% for the third  quarter  1997.    As  of  September  30,  1998,  yields
available on new investments were declining.

                                  NET  REALIZED INVESTMENT GAINS.  Net realized
investment gains decreased $38,000 or 47% to $43,000 from $81,000 for the third
quarter  of  1998  and  1997,  respectively.   Net  realized  investment  gains
fluctuate from period to period  and arise when securities are sold in response
to  changes  in  the  investment environment  which  provide  opportunities  to
maximize return on the  investment  portfolio  without  adversely affecting the
quality  and  overall  yield  of  the  investment  portfolio.  The  pretax  net
unrealized gain on the Company's securities available  for  sale was $7,582,000
at  September  30,  1998.  In the absence of decreases in interest  rates,  the
Company may be unable  to  realize  gains  on  its  investment portfolio at the
levels of prior years or could recognize losses from  sales of securities prior
to  maturity.   The  change  in  market value of the Company's  fixed  maturity
securities  is  not  expected  to have  a  significant  effect  on  results  of
operations because the Company has the present intent and practice to hold most
of its available-for-sale fixed  maturity securities to maturity, the Company's
asset/liability management activity  is  designed to monitor and adjust for the
effects of changes in market interest rates,  and  the  Company's  focus  is to
manage its net spread revenue.




                                  POLICY   CHARGES.    Policy   charges,  which
represent  the amounts assessed against policyholder account balances  for  the
cost of insurance,  policy administration and surrenders, increased $578,000 or
44% to $1,906,000 for  the third quarter of 1998 compared to $1,328,000 for the
third quarter of 1997.   The increase in policy charges resulted primarily from
an increase in policy surrender charges on certain deferred annuity products in
1998 when compared to 1997 and from the inclusion of Savers Life in the results
of operations from March 12, 1998, the acquisition date of Savers Life.

                                  FEES   FROM  SEPARATE  ACCOUNTS.   Fees  from
separate accounts consist of the investment  management fees earned by Standard
Management  International  on  its  separate  account   assets  and  investment
contracts.  Management fees and similar income from separate accounts increased
$577,000 or 138% to $994,000 for the third quarter of 1998  from  $417,000  for
the third quarter of 1997.  The increase is due primarily to an increase in the
value  of  assets  held  in separate accounts from $148,064,000 at December 31,
1997 to $182,308,000 at September  30,  1998.  Net deposits from sales of unit-
linked  products  by  Standard  Management International  were  $8,780,000  and
$3,675,000 for the third quarter  of  1998 and 1997, respectively.  Such income
fluctuates in relationship to total separate  account  assets  and  the  return
earned on such assets.

                                  OTHER INCOME.  Other income, which represents
primarily   fee  income  from  products  marketed  by  Savers  Life,  increased
$1,144,000 or  961%  to  $1,263,000  for  the third quarter of 1998 compared to
$119,000 for the comparable 1997 period.  The  increase primarily resulted from
the inclusion of Savers Life in the Company's operating  results from March 12,
1998, the acquisition date of Savers Life.

                                  BENEFIT AND CLAIMS.  Benefits and claims-life
include life insurance and payout annuity benefits paid and  changes  in policy
reserves.   Benefits and claims-life increased  $1,240,000 or 79% to $2,817,000
for the third  quarter  of  1998 from $1,577,000 for the third quarter of 1997.
Throughout the Company's history, it has experienced both periods of higher and
lower benefit claims.  Such volatility  is  not  uncommon in the life insurance
industry  and,  over  extended  periods  of  time,  periods  of  higher  claims
experience  tend  to  be  offset  by periods of lower claims  experience.   The
increase primarily resulted from the  inclusion of Savers Life in the Company's
operating results from March 12, 1998, the acquisition date of Savers Life.

                                  INTEREST   CREDITED   ON   INTEREST-SENSITIVE
ANNUITIES    AND    OTHER    FINANCIAL    PRODUCTS.    Interest   credited   on
interest-sensitive annuities and other financial  products  was  $4,247,000 for
the third quarter of 1998, a decrease of $214,000 or 5% from $4,461,000 for the
comparable  prior  year  period.   At September 30, 1998, the weighted  average
interest credited rate for Standard  Life's  currently  marketed  annuities and
other  financial  product liabilities was 5.38% compared to 5.81% at  September
30, 1997.

                                  AMORTIZATION.  Amortization expense primarily
includes  charges  to  operations  for  the  amortization  of  deferred  policy
acquisition costs, the  present  value of future profits and the excess of cost
over net assets acquired.  Amortization  expense  increased  $355,000 or 37% to
$1,322,000 for the third quarter of 1998 from $967,000 for the third quarter of
1997.   The  increase  in current year amortization expense resulted  primarily
from increased amortization  of  deferred  policy  acquisition  costs  as gross
profits  from  business  sold  in  recent  years began to emerge, and increased
surrenders and a corresponding increase in the  amortization of deferred policy
acquisition costs.  The increase in amortization expense also includes $121,000
of such expense for the third quarter of 1998 from including Savers Life in the
Company's operating results from March 12, 1998, the acquisition date of Savers
Life.

                                  OTHER OPERATING  EXPENSES.   Other  operating
expenses  increased $142,000 or 8% to $1,939,000 for the third quarter of  1998
from $1,797,000 for the third quarter of 1997.  The increase in other operating
expenses resulted  primarily  from  including  Savers  Life  in  the  Company's
operating results from March 12, 1998, the acquisition date of Savers Life.


                                  INTEREST   EXPENSE   AND   FINANCING   COSTS.
Interest  expense and financing costs increased $126,000 or 20% to $772,000 for
the third quarter  of  1998  from  $646,000 for the third quarter of 1997.  The
increase  in interest expense and financing costs  during  1998  resulted  from
additional  borrowings of $5,600,000 in June 1997 and $4,000,000 in March 1998.
In July 1998,  $3,000,000  of borrowings were repaid which partially offset the
increase in interest expense in the third quarter of 1998.








NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

                                  OPERATING INCOME.  The income from operations
(before net realized investment  gains) was $3,106,000 in the first nine months
of 1998, an increase of $1,380,000  or  80%,  compared  to  $1,726,000  for the
comparable  period  in  1997.   The  increase resulted primarily from increased
operating earnings from domestic operations of $1,026,000 to $1,565,000 for the
first nine months of 1998 compared to  $539,000  for  the  first nine months of
1997.  The increased domestic operating gains resulted primarily from increased
spread revenues and from favorable mortality experience during  the  first nine
months  of  1998  and  the  inclusion of Savers Life in the Company's operating
results from March 12, 1998, the acquisition date of Savers Life.

                                  PREMIUM   INCOME.    Premium  income-life  is
composed  of premiums, including renewal premiums, received  on  ordinary  life
insurance policies.   The Company's new product sales are composed primarily of
annuity products.  Under  GAAP,  deposits from interest-sensitive annuities and
other financial products are not recorded  as  revenues.   GAAP premium income-
life for the first nine months of 1998 was $5,667,000, an increase  of $390,000
or 7% from $5,277,000 for the first nine months of 1997.  Premium income-health
of  $5,992,000  for  the  first  nine  months  of 1998 is premiums received  on
Medicare supplement insurance obtained as part of  the Savers Life acquisition.
This premium income is included in the Company's operating  results  from March
12,  1998,  the  acquisition  date  of  Savers  Life  through July 1, 1998, the
effective date the Medicare supplement business was sold to Oxford Life.

                                  Net domestic premium  deposits  received from
the  sales of interest-sensitive annuities and other financial products  (which
are not  recorded as revenues) were $53,846,000 compared to $37,622,000 for the
first nine  months  of  1998  and  1997,  respectively.  Gross domestic premium
deposits received from interest-sensitive annuities and financial products were
$60,106,000  for  the  nine  months  ended  September   30,  1998  compared  to
$44,408,000  for  the  nine  months  ended September 30, 1997.   Annuity  sales
increased in 1998 due to the introduction  of  new  competitive products and an
increase  in the agency base achieved through the recruitment  of  high  volume
agents  and  larger  managing  general  agencies  and  continued  expansion  of
geographical  concentration into such areas as California.  Since the Company's
operating income is primarily a function of its investment spreads, persistency
of annuity in force  business,  mortality experience, and operating expenses, a
change in annuity premium deposits  in  a single period does not directly cause
operating  income  to  change, although continued  increases  or  decreases  in
annuity premiums may affect the growth rate of total assets on which investment
spreads are earned.

                                  NET INVESTMENT INCOME.  Net investment income
increased $1,994,000 or  9%  to  $23,920,000  for the first nine months of 1998
from  $21,926,000 for the comparable period of 1997.   The  increase  primarily
resulted  from  an  increase  in  total  invested  assets (amortized cost) from
December 31, 1996 to September 30, 1998 of $94,397,000  or  25%.  This increase
included $67,800,000 from  the Savers Life acquisition.  The  weighted  average
annualized  yield  of the Company's investment portfolio (exclusive of realized
and unrealized gains  and  losses)  was 7.54% for the first nine months of 1998
and 7.66% for the comparable  period  of  1997.     As  of  September 30, 1998,
yields available on new investments were declining.

                                  NET REALIZED INVESTMENT GAINS.   Net realized
investment  gains  decreased $214,000 or 75% to $73,000 from $287,000  for  the
first nine months of  1998  and  1997,  respectively.   Net realized investment
gains  fluctuate from period to period and arise when securities  are  sold  in
response  to  changes in the investment environment which provide opportunities
to maximize return  on the investment portfolio without adversely affecting the
quality  and  overall yield  of  the  investment  portfolio.   The  pretax  net
unrealized gain  on  the Company's securities available for sale was $7,582,000
at September 30, 1998.   In  the  absence  of  decreases in interest rates, the
Company  may  be  unable to realize gains on its investment  portfolio  at  the
levels of prior years  or could recognize losses from sales of securities prior
to maturity.  The change  in  market  value  of  the  Company's  fixed maturity
securities  is  not  expected  to  have  a  significant  effect  on results  of
operations because the Company has the present intent and practice to hold most
of its available-for-sale fixed maturity securities to maturity, the  Company's
asset/liability  management activity is designed to monitor and adjust for  the
effects of changes  in  market  interest  rates  and  the Company's focus is to
manage its net spread revenue.

                                  POLICY   CHARGES.   Policy   charges,   which
represent the amounts assessed against policyholder  account  balances  for the
cost of insurance, policy administration and surrenders, increased  $948,000 or
23%  to  $5,058,000  for  the  nine months ended September 30, 1998 compared to
$4,110,000 for the nine months ended  September  30,  1997.   The  increase  in
policy charges resulted from an increase in policy surrender charges on certain
deferred  annuity products in 1998 when compared to 1997 and from the inclusion
of Savers Life  in the Company's results of operations from March 12, 1998, the
acquisition date of Savers Life.


                                  FEES   FROM  SEPARATE  ACCOUNTS.   Fees  from
separate accounts consist of the investment  management fees earned by Standard
Management  International  on  its  separate  account   assets  and  investment
contracts.  Management fees and similar income from separate accounts increased
$892,000 or 71% to $2,147,000 for the first nine months of 1998 from $1,255,000
for  the  first  nine  months  of  1997.  The increase is due primarily  to  an
increase in the value of assets held  in separate accounts from $148,064,000 at
December 31, 1997 to $182,308,000 at September  30,  1998.   Net  deposits from
sales  of  unit-linked  products  by  Standard  Management  International  were
$28,845,000 and $10,752,000 for the nine months ended September  30,  1998  and
1997,  respectively.   Such income fluctuates in relationship to total separate
account assets and the return earned on such assets.

                                  OTHER   INCOME.    Other income, which
represents primarily fee income from products marketed by Savers Life, increased
$1,684,000 or 166% to $2,698,000 for the first nine months of 1998 compared  to
$1,014,000  for  the  comparable  1997 period.  The increase primarily resulted
from the inclusion of Savers Life in the Company's operating results from March
12, 1998, the acquisition date of Savers Life.

                                  BENEFIT AND CLAIMS.  Benefits and claims-life
include life insurance and payout annuity  benefits  paid and changes in policy
reserves.  Benefits and claims-life increased $818,000 or 14% to $6,763,000 for
the  first nine months of 1998 from $5,945,000 for the  first  nine  months  of
1997.   The  increase  in  benefits  and claims-life resulted from benefits and
claims incurred primarily from the inclusion  of  Savers  Life in the Company's
operating results from March 12, 1998, the acquisition date  of Savers Life and
an  increase  in  benefit  and  claims  expense  from international operations.
Benefits and claims-health of $4,821,000 for the nine  months  ended  September
30,  1998  are  benefits  and  claims incurred on Medicare supplement insurance
obtained as part of the Savers Life  acquisition.   These  benefits and claims-
health are included in the Company's operating results from March 12, 1998, the
acquisition date of Savers Life through July 1, 1998, the effective date of the
sale  of  the  Medicare  supplement  business to Oxford Life.   Throughout  the
Company's history, it has experienced  both periods of higher and lower benefit
claims.  Such volatility is not uncommon  in  the  life insurance industry and,
over extended periods of time, periods of higher claims  experience  tend to be
offset by periods of lower claims experience.

INTEREST   CREDITED    ON  INTEREST-SENSITIVE  ANNUITIES  AND  OTHER  FINANCIAL
PRODUCTS.   Interest  credited   on   interest-sensitive  annuities  and  other
financial products was $13,112,000 for  the  first  nine  months  of  1998,  an
increase  of  $485,000  or  4%  from  $12,627,000 for the comparable prior year
period.   The increase resulted from the  inclusion  of  Savers  Life  interest
credited in the Company's operating results from March 12, 1998 the acquisition
date of Savers  Life.   At  September  30,  1998, the weighted average interest
credited  rate  for  Standard  Life's currently marketed  annuities  and  other
financial product liabilities was  5.38%  compared  to  5.81%  at September 30,
1997.

                                  AMORTIZATION.  Amortization expense primarily
includes  charges  to  operations  for  the  amortization  of  deferred  policy
acquisition costs, the present value of future profits and the excess  of  cost
over net assets acquired.  Amortization expense increased $1,002,000 or 39%  to
$3,546,000 for the first nine months of 1998 from $2,544,000 for the first nine
months  of  1997.   The  increase in current year amortization expense resulted
primarily from increased amortization  of  deferred policy acquisition costs as
gross profits from business sold in recent years began to emerge, and increased
surrenders and a corresponding increase in the  amortization of deferred policy
acquisition  costs.   The current year increase in  amortization  expense  also
includes $316,000 of such  expense  from including Savers Life in the Company's
operating results from March 12, 1998, the acquisition date of Savers Life.

                                  OTHER  OPERATING  EXPENSES.   Other operating
expenses increased $506,000 or 10% to $5,633,000 for the first nine  months  of
1998  from $5,127,000 for the first nine months of 1997.  The increase in other
operating  expenses  resulted  primarily  from  including Savers Life operating
expenses  in  the  Company's  operating  results  from   March  12,  1998,  the
acquisition date of Savers Life.

                                  COMMISSION  EXPENSE  -  HEALTH.    Commission
expense  -  health of $784,000 for the nine months ended September 30, 1998  is
commission expense  on  Medicare  supplement  insurance obtained as part of the
Savers Life acquisition.  This commission expense  is included in the Company's
operating  results from March 12, 1998, the acquisition  date  of  Savers  Life
through July 1, 1998, the effective date of the sale of the Medicare supplement
business to Oxford Life.

                                  INTEREST   EXPENSE   AND   FINANCING   COSTS.
Interest expense and financing costs increased $477,000 or 28% to $2,201,000 in
the  nine  months  ended  September 30, 1998 from $1,724,000 in the nine months
ended September 30, 1997.  The increase in interest expense and financing costs
during 1998 resulted from additional  borrowings of $5,600,000 in June 1997 and
$4,000,000 in March 1998.  In July 1998,  $3,000,000  of borrowings were repaid
which partially offset the increase in interest expense in the third quarter of
1998.




LIQUIDITY AND CAPITAL RESOURCES

                                  SMC  is an international  financial  services
holding company.  The liquidity requirements  of  SMC  are  met  primarily from
management  fees,  equipment  rental  fees  and payments for other charges  and
dividends and interest on Surplus Debentures  received  from SMC's subsidiaries
as well as SMC's working capital.  These are SMC's primary  source  of funds to
pay  operating  expenses  and  meet  debt service obligations.  The payment  of
dividends and interest on Surplus Debentures  and  management and other fees by
Standard Life Insurance Company of Indiana ("Standard  Life") to SMC is subject
to   restrictions  under  the  insurance  laws  of  Indiana,  Standard   Life's
jurisdiction  of  domicile.   Dixie  National  Life  Insurance  Company ("Dixie
National  Life") is a subsidiary of Standard Life.  Accordingly, any  dividends
paid by Dixie  National  Life  to  Standard  Life  may  be  paid to SMC only if
Standard  Life is entitled to pay dividends to SMC.  The payment  of  dividends
and management  fees by Savers Life to SMC is subject to restrictions under the
insurance laws of  North  Carolina,  Savers  Life's  jurisdiction  of domicile.
These  internal  sources  of  liquidity  have been supplemented in the past  by
external sources such as lines of credit and  revolving  credit  agreements and
long-term debt and equity financing in the capital markets.

                                  The  Company reported on a consolidated  GAAP
basis net cash provided by operations of  $7,764,000  and  $1,726,000  for  the
years  ended  December  31,  1997  and  1996,  respectively.  Although deposits
received  on  the Company's interest-sensitive annuities  and  other  financial
products are not  included  in cash flow from operations under GAAP, such funds
are available for use by the  Company.  Cash  provided  by  operations plus net
deposits  received,  less  net  account  balances returned to policyholders  on
interest-sensitive annuities and other financial products, resulted in positive
cash flow of $19,649,000 and $26,717,000 for  the years ended December 31, 1997
and 1996, respectively.  Cash generated on a consolidated basis is available to
SMC only to the extent that it is generated at SMC level or is available to SMC
through   dividends,  interest,  management  fees  or   other   payments   from
subsidiaries.

                                  In  April  1993,  SMC instituted a program to
repurchase Common Stock from time to time.  The purpose of the stock repurchase
program is to enhance shareholder value.  SMC had repurchased  1,174,558 shares
of  Common Stock for $6,120,000 as of October 31, 1998.  At October  31,  1998,
SMC was authorized to purchase an additional 325,442 shares under this program.

                                  At  October 31, 1998, SMC had "parent company
only" cash and short-term investments of  $182,000.   During  July,  1998,  SMC
received  gross proceeds of $3,730,000 from the sale of 37,300 shares of Series
A  Convertible  Redeemable  Preferred  Stock.   SMC,  during  July,  1998, used
$3,000,000 of these proceeds to pay down its $20,000,000  Amended Revolving
Line  of  Credit  Agreement.   SMC's "parent company only" operating expenses
(not including interest  expense)  were  $3,420,000 and $3,470,000 for the 
years ended December 31, 1997 and 1996, respectively.

                                  Pursuant to the management services agreement
with  SMC,  Standard  Life paid SMC a monthly fee of $167,000  (annual  fee  of
$2,000,000)  during 1997  and  the  first  nine  months  of  1998  for  certain
management services related to the production of business, investment of assets
and evaluation  of acquisitions.  Pursuant to the management services agreement
with Standard Life,  Dixie  National  Life  paid  monthly  payments  of $83,000
(annual  fee  of  $1,000,000)  to  Standard  Life in 1997 and in the first nine
months of 1998 Dixie National Life paid monthly  payments  of  $100,000 (annual
fee  of  $1,200,000).     Both  of  these agreements provide that they  may  be
modified or terminated by the Indiana  and Mississippi Departments of Insurance
in the event of financial hardship of Standard Life or Dixie National Life.

                                  A management  services  agreement between SMC
and Savers Life was approved by the North Carolina Department  of  Insurance on
March  11,  1998.   The management services agreement calls for the payment  of
$83,000 per month by Savers Life to SMC for financial and regulatory reporting,
investment of assets and the production of business.  SMC had agreed to receive
no fee, nor shall Savers  Life  have  an obligation to pay such fee, unless the
capital  and  surplus  of  Savers Life is greater  than  $7,000,000  after  the
acquisition of Savers Life.   In addition, as a condition of the acquisition of
Savers Life, SMC entered into an  agreement  with the North Carolina Department
of Insurance to maintain statutory capital and  surplus  of  Savers  Life of at
least  $6,000,000.   The  amount  of  capital  and  surplus  of  Savers Life at
September 30, 1998 was $9,767,000.  As a result, in September 1998, Savers Life
paid SMC management fees of $500,000 for April 1998 through September 1998, and 
will pay a monthly management fee of $83,000 beginning October 1, 1998.







                                  Pursuant to the management services agreement
with  SMC,  Premier  Life  (Luxembourg), a wholly-owned subsidiary of  Standard
Management International, paid  SMC  a  management  fee  of $25,000 per quarter
during  1997  and  the  first  nine months of 1998 for certain  management  and
administrative services.  The agreement  provides  that  it  may be modified or
terminated by either SMC or Premier Life (Luxembourg).

                                  At April 1, 1995, SMC sold its  property  and
equipment  to  an  unaffiliated  leasing/financing  company  for $1,396,000 and
subsequently entered into a capital lease obligation whereby SMC pays a monthly
rental  amount of $45,000.  During the second quarter of 1998,  the  lease  was
terminated  and  the property and equipment was repurchased for $116,000.   SMC
charges a monthly  equipment  rental fee to its subsidiaries for this equipment
and additional equipment purchased  after  April  1,  1995.   The amount of the
rental income received from SMC's subsidiaries was $787,000 and  $1,145,000 for
the  nine  months  ended  September 30, 1998 and year ended December 31,  1997,
respectively.

                                  The  Amended  Credit Agreement permits SMC to
borrow up to $20,000,000 in the form of a seven-year  reducing  revolving  loan
arrangement.   SMC  has  agreed  to  pay a non-use fee of .50% per annum on the
unused portion of the commitment.  In  connection with the original and Amended
Credit Agreement, SMC issued warrants to  the bank to purchase 73,500 shares of
Common Stock.  Borrowing under the Amended  Credit  Agreement  may  be used for
contributions to surplus of insurance subsidiaries, acquisition financing,  and
repurchases  of Common Stock.  The debt is secured by a Pledge Agreement of all
of the issued  and  outstanding  shares  of  common  stock of Standard Life and
Standard  Marketing.   Interest  on  the  borrowing  under the  Amended  Credit
Agreement is determined, at the option of SMC, to be: (i) a fluctuating rate of
interest based on the corporate base rate announced by  the  bank  from time to
time  plus 1% per annum, or (ii) a rate at LIBOR plus 3.25%.  Annual  principal
repayments  of  $3,333,000  begin  in  March  2000  and conclude in March 2005.
Indebtedness incurred under the Amended Credit Agreement  is subject to certain
restrictions  and  covenants  including,  among  other things, certain  minimum
financial  ratios,  minimum statutory surplus requirements  for  the  insurance
subsidiaries, minimum  consolidated  equity  requirements  for  SMC and certain
investment  and indebtedness limitations.  At September 30, 1998,  SMC  was  in
compliance with all restrictions and covenants in the Amended Credit Agreement.
At September  30,  1998,  SMC had borrowed $17,000,000 under the Amended Credit
Agreement at a weighted average interest rate of 8.86%.

                                  In  connection with the acquisition of Shelby
Life, the Company borrowed $4,000,000 from  an  insurance company pursuant to a
subordinated convertible debt agreement which was  due  in  December  2003.  At
September 30, 1997, this subordinated convertible debt agreement was amended to
the  principal  amount  of  $4,372,000 which is due July 2004 unless previously
converted, and requires interest  payments  in  cash on January 1 and July 1 of
each year at 10% per annum.  At September 30, 1997,  the  Company  borrowed  an
additional   $5,628,000   from   an   insurance  company  pursuant  to  another
subordinated convertible debt agreement  (collectively,  the  "Notes") which is
due  July 2004 unless previously converted, and requires interest  payments  in
cash on  January 1 and July 1 of each year at 10% per annum.  Proceeds from the
additional  borrowings  were  used  for  contributions  to surplus of insurance
subsidiaries  of  $2,400,000,  redemption  of  Class  S  Preferred   Stock   of
approximately  $1,840,000 and the balance for other general corporate purposes.
The Notes are convertible  at  any  time  at the option of the note holder into
Common Stock at the rate of $5.747 per share.   The  Notes  may  be  prepaid in
whole  or  in  part at the option of the Company commencing on July 1, 2000  at
redemption prices equal to 102% of the principal amount (plus accrued interest)
and declining to  101%  of  the  principal amount (plus accrued interest).  The
Notes may be prepaid prior to July  1, 2000 at a redemption price equal to 101%
of  the  principal  amount  (plus  accrued   interest)  under  certain  limited
circumstances.  The subordinated convertible debt  agreements contain terms and
financial  covenants  substantially  similar  to those in  the  Amended  Credit
Agreement.

                                  Assuming the  current level of debt under the
Amended  Credit  Agreement and current interest rates  at  September  30,  1998
(weighted average  rate  of  8.86%)  SMC  annual  debt service in 1998 would be
approximately $1,506,000 in interest paid.

                                  From the funds borrowed  by  SMC  pursuant to
the  Amended Credit Agreement and the subordinated convertible debt agreements,
$13,000,000  was  loaned  to  Standard  Life  pursuant  to an Unsecured Surplus
Debenture Agreement (the "Surplus Debenture") which requires  Standard  Life to
make  quarterly  interest  payments  to  SMC  at a variable corporate base rate
(8.25% at September 30, 1998) plus 2% per annum,  and annual principal payments
of $1,000,000 per year beginning in 2007 and concluding  in 2019.  The interest
and  principal  payments  are  subject  to  quarterly approval by  the  Indiana
Department of Insurance, depending upon satisfaction of certain financial tests
relating to levels of Standard Life's capital  and surplus and general approval
of  the  Commissioner of the Indiana Department of  Insurance.   SMC  currently
anticipates  these quarterly approvals will be granted.  Assuming the approvals
are granted and  the  September  30,  1998 interest rate of 10.25% continues in
1998, SMC will receive interest income of $1,365,000 from the Surplus Debenture
during 1998.



                                  Dividends  from  Standard  Life  to  SMC  are
limited  by  laws  applicable  to insurance companies.  As an Indiana domiciled
insurance company, Standard Life  may  pay  a dividend or distribution from its
surplus profits, without the prior approval of  the Commissioner of the Indiana
Department  of Insurance, if the dividend or distribution,  together  with  all
other dividends and distributions paid within the preceding twelve months, does
not exceed the  greater of (i) net gain from operations or (ii) 10% of surplus,
in each case as shown  in  its preceding annual statutory financial statements.
Also,  regulatory  approval is  required  when  dividends  to  be  paid  exceed
unassigned statutory  surplus.   For the year ended December 31, 1997, Standard
Life reported statutory net gain from  operations before realized capital gains
of $2,374,000 and statutory surplus of $25,923,000,  which  includes unassigned
surplus  of  $1,693,000.  Standard Life paid dividends of $1,600,000  in  1997.
During 1998, Standard  Life  can  pay  dividends  of  approximately  $2,500,000
without regulatory approval.

                                  As   a  North  Carolina  domiciled  insurance
company, Savers Life may pay a dividend  or  distribution  from its capital and
surplus,  without  the  prior  approval  of the North Carolina Commissioner  of
Insurance, if the dividend or distribution  together  with  all other dividends
and distributions paid within the preceding twelve months, does  not exceed the
lesser of (I) net gain from operations or (ii) 10% of capital and  surplus,  in
each  case  as  shown  in  its preceding annual statutory financial statements.
Savers Life was not allowed  to  pay  a  dividend in 1996 or 1997 without prior
North Carolina Department of Insurance approval due to its statutory net losses
in 1995 and 1996.  Savers Life will not be  permitted  to pay dividends in 1998
without such approval.

                                  SMC anticipates the available  cash  from its
existing  working  capital,  plus  anticipated 1998 dividends, management fees,
rental income and interest payments on its Surplus Debenture receivable will be
more  than  adequate  to  meet  its  anticipated  "parent  company  only"  cash
requirements for 1998.

                                  SMC  has a note receivable of $2,858,000 from
an affiliate and a note payable of $2,858,000  to  a different affiliate.  This
note receivable and note payable are eliminated in the  consolidated  financial
statements.

                                  U.S.  INSURANCE  OPERATIONS.   The  principal
liquidity  requirements  of  Standard  Life are its contractual obligations  to
policyholders, dividend, rent, management fee and Surplus Debenture payments to
SMC and other operating expenses.  The primary  source  of  funding  for  these
obligations  has  been  cash  flow  from premium income, net investment income,
investment sales and maturities and sales  of  annuity products.  These sources
of liquidity for Standard Life significantly exceed  scheduled uses.  Liquidity
is also affected by unscheduled benefit payments including  death  benefits and
policy withdrawals and surrenders.  The amount of withdrawals and surrenders is
affected  by  a  variety  of factors such as renewal interest crediting  rates,
interest rates for competing  products,  general  economic conditions, Standard
Life's A.M. Best Company, Inc. ("A.M. Best") rating  (currently rated "B+") and
events in the industry that affect policyholders' confidence.

                                  The policies and annuities issued by Standard
Life contain provisions that allow policyholders to withdraw or surrender their
policies under defined circumstances.  These policies  and  annuities generally
contain provisions which apply penalties or otherwise restrict  the  ability of
policyholders  to  make  such withdrawals or surrenders.  Standard Life closely
monitors the surrender and  policy  loan activity of its insurance products and
manages the composition of its investment  portfolios,  including liquidity, in
light of such activity.

                                  Changes  in  interest rates  may  affect  the
incidence  of  policy surrenders and other withdrawals.   In  addition  to  the
potential effect on liquidity, unanticipated withdrawals in a changing interest
rate environment  could  adversely affect earnings if the Company were required
to sell investments at reduced  values  to meet liquidity demands.  The Company
manages the asset and liability portfolios  in  order  to  minimize the adverse
earnings  effect of changing market interest rates.  The Company  seeks  assets
that  have duration  characteristics  similar  to  the  liabilities  that  they
support.   The  Company  also  prepares cash flow projections and performs cash
flow tests under various market interest rate scenarios to assist in evaluating
liquidity  needs  and  adequacy.  The  Company's  U.S.  insurance  subsidiaries
currently expect available  liquidity  sources  and  future  cash  flows  to be
adequate to meet the demand for funds.

                                  Statutory  surplus  is  computed according to
rules  prescribed  by  the  National  Association  of  Insurance  Commissioners
("NAIC"), as modified by the Indiana Department of Insurance, or the  states in
which  the insurance subsidiaries do business.  Statutory accounting rules  are
different   from   GAAP  and  are  intended  to  reflect  a  more  conservative
perspective.  With respect  to  new  business,  statutory  accounting practices
require  that:  (I) acquisition costs (primarily commissions and  policy  issue
costs) and (ii) reserves  for future guaranteed principal payments and interest
in excess of statutory rates,  be  expensed  in  the  year  the new business is
written.  These items cause a reduction in statutory surplus ("surplus strain")
in the year written for many insurance products.  The Company designs its 
products to minimize such first-year losses, but  certain  products continue 
to cause a statutory loss in the year written.  For each product,  the 
Company  controls the amount of  new net  premiums written to manage the effect
of such surplus  strain.   The  Company's  long-term  growth  goals contemplate
continued growth in its insurance businesses.  To achieve these  growth  goals,
the  Company's  U.S.  insurance  subsidiaries  will  need to increase statutory
surplus.  Additional statutory surplus may be secured  through  various sources
such as internally generated statutory earnings, equity sales, infusions by the
Company with funds generated through debt or equity offerings or  mergers  with
other  life  insurance  companies.  If additional capital is not available from
one or more of these sources, the Company believes that it could reduce surplus
strain  through the use of  reinsurance  or  through  reduced  writing  of  new
business.

                                  Commencing  January  1,  1995,  Standard Life
began  to  reinsure  a  portion  of  its  annuity  business.   This reinsurance
agreement  has allowed the Company to write volumes of business that  it  would
not otherwise  have  been able to write due to regulatory restrictions based on
its ratio of surplus to  liabilities as determined by regulatory authorities in
the State of Florida.  By  reinsuring  a  portion  of the annuity business, the
liability growth is slowed, thereby avoiding the erosion of surplus that occurs
in  periods  of  increasing  sales.   If  the  Company's ratio  of  surplus  to
liabilities falls below 4%, the State of Florida  could  prohibit  the  Company
from  writing  new  business  in  Florida.   Standard  Life's  largest  annuity
reinsurer at September 30, 1998, Winterthur, is rated "A" ("Excellent") by A.M.
Best.  From January 1, 1995 to August 31, 1995, approximately 70% of certain of
Standard  Life's  annuity business produced was ceded.  Standard Life decreased
the quota-share portion  of  business  ceded  to 50% at September 1, 1995,  25%
effective April 1, 1996  and further reduced it  to  0% on October 1, 1998,  to
reflect the reduced need for additional capital and increase  current  earnings
potential.  In addition, Standard Life's ability to retain business was further
increased  by  the capital contribution of $2,400,000 in the second quarter  of
1997.

                                  Management  believes  that  operational  cash
flow  of  Standard  Life  will  be sufficient to meet its anticipated needs for
1998.   As of September 30, 1998,  Standard  Life  had  statutory  capital  and
surplus for  regulatory  purposes  of  $26,889,000  compared  to $25,923,000 at
December  31, 1997.  Standard Life produced statutory net gain from  operations
of $1,041,000  and  $2,374,000 for the nine months ended September 30, 1998 and
the year ended December  31, 1997, respectively.  SMC contributed $2,400,000 to
Standard Life in the second   quarter  of  1997  to  facilitate  growth  in new
premiums  written.   As  the  life  insurance  and annuity business produced by
Standard  Life  and Dixie National Life increases,  Standard  Life  expects  to
continue  to  satisfy   statutory  capital  and  surplus  requirements  through
statutory profits and through additional capital contributions  by  SMC. 
Net cash flow from operations on a statutory  basis  of Standard Life, after
payment of benefits and operating expenses, was $19,588,000  and $17,921,000 for
the years ended  December  31,  1997 and December 31, 1996, respectively.  
If the need arises for cash which is not readily available, additional 
liquidity could be obtained from the sale of invested assets.

                                  State insurance regulatory authorities impose
minimum risk-based capital ("RBC")  requirements  on insurance enterprises that
were  developed by the NAIC. The formulas for determining  the  amount  of  RBC
specify  various  weighting  factors  that are applied to financial balances or
various levels of activity based on the  perceived  degree of risk.  Regulatory
compliance  is  determined  by a ratio (the "RBC Ratio")  of  the  enterprise's
regulatory total adjusted capital,  as  defined  by the NAIC, to its authorized
control level RBC, as defined by the NAIC. Enterprises  below  specific trigger
points  or ratios are classified within certain levels, each of which  requires
specified  corrective  action.   The  RBC  Ratio  for  Standard  Life and Dixie
National Life were in excess of 400% of the minimum RBC requirements and Savers
Life  was  in  excess  of  300%;  accordingly,  the  subsidiaries meet the  RBC
requirements.

                                  Standard Life's acquisition  of  Shelby Life,
and  merger  of Shelby Life into Standard Life, effective November 1,  1996  is
anticipated to  have  a  positive  effect on Standard Life's liquidity and cash
flows.  Shelby Life ceased writing new  business  effective  November  1, 1996,
thus  reducing the surplus strain normally associated with the issuance of  new
policies.   The  anticipated  profits  from  Shelby Life's book of business are
expected to exceed the related interest expense  connected with the $13,000,000
of  Surplus  Debentures  issued  by  Standard  Life  in  connection   with  the
acquisition of Shelby Life.

                                  SMC's acquisition of Savers Life at March 12,
1998  is  anticipated  to  have  a  positive effect on SMC's liquidity and cash
flows.  SMC anticipates that existing  working  capital,  unused  proceeds from
borrowings  under  the  Amended Credit Agreement and management fees by  Savers
Life will be adequate to  cover debt service on the additional borrowings under
the Amended Credit Agreement through 1998.






                                  INTERNATIONAL  OPERATIONS.   The consolidated
balance sheet of the Company at September 30, 1998, includes a $347,000  credit
representing  the  negative  goodwill  on  the  purchase of Standard Management
International which will be amortized into future  earnings.  This amortization
is a non-cash credit to the Company statements of operations.

                                  Standard Management  International  dividends
are  limited to its accumulated earnings without regulatory approval.  Standard
Management  International  and  Premier Life (Luxembourg) were not permitted to
pay dividends in 1997 due to accumulated  losses.   Premier  Life (Bermuda) did
not  pay dividends in 1997.  SMC does not anticipate any dividends  from  these
companies in 1998.

                                  Due  to  the  nature  of unit-linked products
issued  by  Standard  Management  International, which represent  over  90%  of
Standard Management International portfolio's assets, the investment risk rests
with the policyholder.  Investment  risk  for Standard Management International
exists where Standard Management International  makes investment decisions with
respect  to  the  remaining traditional business and  for  the  assets  backing
certain actuarial and  regulatory  reserves.   The investments underlying these
liabilities  mostly  represent  short-term  investments   and   fixed  maturity
securities.   These  short-term  investments and fixed maturity securities  are
normally bought and/or disposed of only on the advice of independent consulting
actuaries who perform an annual analysis  comparing  anticipated  cash flows on
the insurance portfolio with the cash flows from the fixed maturity securities.
Any resulting material mismatches are then covered by adjusting the  securities
in the investment portfolio as appropriate.




FACTORS THAT MAY AFFECT FUTURE RESULTS

                                  MERGERS,   ACQUISITIONS  AND  CONSOLIDATIONS.
The U.S. insurance industry has experienced an  increasing  number  of mergers,
acquisitions,  consolidations  and  sales  of  certain  business  lines.  These
consolidations  have been driven by a need to reduce costs of distribution  and
overhead and maintain  business in force.  Additionally, increased competition,
regulatory capital requirements  and  technology costs have also contributed to
the  level of consolidation in the industry.   These  forces  are  expected  to
continue as is the level of industry consolidation.

                                  FOREIGN  CURRENCY  RISK.  Standard Management
International policyholders invest in assets denominated  in  a  wide  range of
currencies.  Policyholders effectively bear the currency risk, if any, as these
investments   are   matched   by  policyholder  separate  account  liabilities.
Therefore, their investment and  currency risk is limited to premiums they have
paid.  Policyholders are not permitted to invest directly into options, futures
and  derivatives.   Standard  Management  International  could  be  exposed  to
currency  fluctuations  if  currencies   within   the  conventional  investment
portfolio  or  certain  actuarial  reserves  are mismatched.   The  assets  and
liabilities  of  this portfolio and the reserves  are  continually  matched  by
Standard Management  International  and at regular intervals by the independent
actuary.   In  addition,  Premier  Life (Luxembourg)  shareholders'  equity  is
denominated in Luxembourg francs.  Premier Life (Luxembourg) does not hedge its
translation risk because its shareholders'  equity  will  remain  in Luxembourg
francs for the foreseeable future and no significant realized foreign  exchange
gains or losses are anticipated.

                                  UNCERTAINTIES  REGARDING  INTANGIBLE  ASSETS.
Included  in  the  Company's  financial statements as of September 30, 1998 are
certain assets that are valued  for  financial  statement purposes primarily on
the basis of assumptions established by the Company's management.  These assets
include deferred acquisition costs, present value  of  future profits, costs in
excess  of  net  assets  acquired and organization and deferred  debt  issuance
costs.  The total value of  these  assets  reflected  in the September 30, 1998
consolidated  balance  sheet  aggregated  $55,437,000 or 7%  of  the  Company's
assets.   The Company has established procedures  to  periodically  review  the
assumptions  utilized  to value these assets and determine the need to make any
adjustments in such values  in the Company's consolidated financial statements.
The  Company  has determined that  the  assumptions  utilized  in  the  initial
valuation of these  assets are consistent with the operations of the Company as
of September 30, 1998.

                                  REGULATORY      ENVIRONMENT.       Currently,
prescribed  or  permitted  statutory  accounting  principles  ("SAP")  may vary
between  states and between companies.  The NAIC is in the process of codifying
SAP to promote  standardization  of  methods  utilized throughout the industry.
Completion  of  this project might result in changes  in  statutory  accounting
practices for the Company's insurance subsidiaries; however, it is not expected
that such changes would materially affect the Company's insurance subsidiaries'
statutory capital requirements.




                                  FINANCIAL  SERVICES DEREGULATION.  The United
States  Congress  is currently considering a number  of  legislative  proposals
intended to reduce  or  eliminate  restrictions on affiliations among financial
services organizations.  Proposals are extant which would allow banks to own or
affiliate with insurers and securities  firms.   An increased presence of banks
in the life insurance and annuity businesses may increase  competition in these
markets.   The  Company  cannot  predict the impact of these proposals  on  the
earnings of the Company.

                                  SAFE   HARBOR  PROVISIONS.   All  statements,
trend analyses, and other information contained  in  this  Quarterly  Report on
Form 10-Q or any document incorporated by reference herein relative to  markets
for  the Company's products and trends in the Company's operations or financial
results,  as  well  as  other  statements including words such as "anticipate,"
"believe," "plan,""estimate,""expect,""intend,"  and other similar expressions,
constitute forward-looking statements under the Private  Securities  Litigation
Reform Act of 1995.  These forward-looking statements are subject to known  and
unknown  risks,  uncertainties and other factors which may cause actual results
to be materially different  from  those  contemplated  by  the  forward-looking
statements.   Such  factors include, among other things:  (1) general  economic
conditions and other  factors, including prevailing interest rate levels, stock
market performance and  health  care inflation, which may affect the ability of
the Company to sell its products, the market value of the Company's investments
and  the  lapse rate and profitability  of  the  Company's  policies;  (2)  the
Company's ability  to achieve anticipated levels of operational efficiencies at
recently acquired companies,  as well as through other cost-saving initiatives;
(3)  customer response to new products,  distribution  channels  and  marketing
initiatives;  (4) mortality, morbidity, usage of health care services and other
factors which may affect the profitability of the Company's insurance products;
(5) changes in  the Federal income tax laws and regulation which may affect the
relative tax advantages  of  some  of  the  Company's  products; (6) increasing
competition  in the sale of the Company's products; (7) regulatory  changes  or
actions, including those relating to regulation of financial services affecting
(among  other things)  bank  sales  and  underwriting  of  insurance  products,
regulation  of  the  sale,  underwriting and pricing of insurance products, and
health care regulation affecting  the  Company's  supplemental health insurance
products; (8) the availability and terms of future  acquisitions;  and  (9) the
risk  factors  or  uncertainties  listed  from  time  to  time  in any document
incorporated by reference herein.
<PAGE>

         STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                        ___________________

                          PART II.  OTHER INFORMATION




ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.


(a)  EXHIBITS

     10.39                   Quota Share Reinsurance Agreement between Savers
                             Life and the Oxford Life Insurance Company dated
                             September 24, 1998 and effective July 1, 1998.

     10.40                   Addendum No.5 to Reinsurance Agreement between 
                             Standard Life Insurance Company of Indiana and 
                             Winterthur Life Re Insurance Company dated
                             August 20,1998 and effective October 1, 1998.

     10.41                   Employment Agreement between Robert B. Neal and
                             Standard Management Corporation dated October  2,
                             1998 and effective October 2, 1998.


     Exhibit 27              Financial Data Schedule, which is submitted 
                             electronically pursuant to Regulation S-K to
                             the  Securities  and  Exchange Commission 
                             (the "Commission") for information only and not
                             filed.



(b)  REPORTS ON FORM 8-K

     A report on Form 8-K dated October  13, 1998, was filed with the 
     Commission to report under Item 5 the signing of the Third Amendment  to  
     the  Stock  Purchase  Agreement  dated  as of October 8, 1998 to 
     purchase Midwestern National Life Insurance Company of Ohio.
<PAGE>

         STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

                        ___________________

                                  SIGNATURES

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


Dated:  November 12, 1998


                                          STANDARD MANAGEMENT CORPORATION
                                                   (Registrant)

                                         By:/s/   RONALD D. HUNTER
                                         Ronald D. Hunter
                                         Chairman of the Board, President and
                                         Chief Executive Officer
                                         (Principal Executive Officer)

                                         By:/s/   GERALD R. HOCHGESANG
                                         Gerald R. Hochgesang
                                         Senior Vice President
                                         (Chief Accounting Officer)