##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 
|  |  |                                                                                         
|  |  | FOR THE QUARTERLY PERIOD ENDED September 30, 2002 or                                    
|  |  |                                                                                         
|o |  | 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
(State or other jurisdiction
of incorporation or organization)                       |  | No. 35-1773567
(I.R.S. Employer Identification No.)
|                                                                                             |  |                                                    
|10689 N. Pennsylvania Street, Indianapolis, Indiana
(Address of principal executive offices) |  | 46280
(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   x   
No   o

As of October 31, 2002, the Registrant had 7,613,479shares of Common Stock
outstanding.

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TABLE OF CONTENTS



|                                             |                                                                                               |                                                        |  |  |  |  |  | 
|-------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION              
|                                             | ITEM 1. FINANCIAL STATEMENTS                                                                 
|                                             |                                                                                               | CONSOLIDATED BALANCE SHEETS                           
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF INCOME                     
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY       
|                                             |                                                                                               | CONSOLIDATED STATEMENTS OF CASH FLOWS                 
|                                             |                                                                                               | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|                                             | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                             | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                             | ITEM 4. CONTROLS AND PROCEDURES                                                              
|PART II. OTHER INFORMATION                  
|                                             | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.                                                    
|SIGNATURES                                  
|CERTIFICATION                               
|CERTIFICATION                               
|EX-99.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-99.2 SECTION 906 CERTIFICATION OF THE CFO



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##### Table of Contents



STANDARD MANAGEMENT CORPORATION

INDEX

|         |  |                                                                                       |  |                                                                                                                        |       |             |       | 
|-------- |  | ------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | ----- | ----------- | ----- | 
|         |  |                                                                                       |  |                                                                                                                        |       | Page Number
|         |  |                                                                                       |  |                                                                                                                        |       |            
|Part I.  |  | FINANCIAL INFORMATION:                                                                |  |                                                                                                                        |       |            
|Item 1.  |  | Financial Statements                                                                  |  |                                                                                                                        |       |            
|         |  |                                                                                       |  | Consolidated Balance Sheets
September 30, 2002 (Unaudited) and December 31, 2001 (Audited)                             |       |             | 3     | 
|         |  |                                                                                       |  | Consolidated Statements of Income 
For the Three Months and Nine Months Ended September 30, 2002 and 2001 (Unaudited) |       |             | 4-5   | 
|         |  |                                                                                       |  | Consolidated Statements of Shareholders Equity 
For the Nine Months Ended September 30, 2002 and 2001 (Unaudited)    |       |             | 6     | 
|         |  |                                                                                       |  | Consolidated Statements of Cash Flows 
For the Nine Months Ended September 30, 2002 and 2001
(Unaudited)              |       |             | 7     | 
|         |  |                                                                                       |  | Notes to Consolidated Financial Statements (Unaudited)                                                                 |       |             | 8-10  | 
|Item 2.  |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  |                                                                                                                        | 11-23 |            
|Item 3.  |  | Quantitative and Qualitative Disclosures about Market Risk                            |  |                                                                                                                        | 23    |            
|Item 4.  |  | Controls and Procedures                                                               |  |                                                                                                                        | 23    |            
|Part II. |  | OTHER INFORMATION:                                                                    |  |                                                                                                                        |       |            
|Item 6.  |  | Exhibits and Reports on Form 8-K                                                      |  |                                                                                                                        | 24    |            
|         |  |                                                                                       |  | SIGNATURES                                                                                                             |       |             | 24    | 
|         |  |                                                                                       |  | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                               |       |             | 25-26 | 

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##### Table of Contents






PART I  FINANCIAL INFORMATION




ITEM 1. FINANCIAL STATEMENTS

STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES




CONSOLIDATED BALANCE SHEETS(Dollars in Thousands)

|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |           |           | 
|------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------ | ------- | ------------ | --------- | ----------- | ------- | --------- | --------- | 
|                                                                                            |                                                                         |                                                                                                  |         | September 30 |           | December 31
|                                                                                            |                                                                         |                                                                                                  |         | 2002         |           | 2001       
|                                                                                            |                                                                         |                                                                                                  |         |              |           |            
|                                                                                            |                                                                         |                                                                                                  |         | (Unaudited)  |           | (Audited)  
|ASSETS                                                                                      |                                                                         |                                                                                                  |         |              |           |             |         |          
|Investments:                                                                                |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            | Securities available for sale:                                          |                                                                                                  |         |              |           |             |         |           |          
|                                                                                            |                                                                         | Fixed maturity securities at fair value (amortized cost $1,285,957 in 2002 and
$930,831 in 2001) |         | $            | 1,306,226 |             |         | $         | 920,944   | 
|                                                                                            | Mortgage loans on real estate                                           |                                                                                                  |         | 4,633        |           |             |         | 5,023     |          
|                                                                                            | Policy loans                                                            |                                                                                                  |         | 12,688       |           |             |         | 12,946    |          
|                                                                                            | Real estate                                                             |                                                                                                  |         | 3,406        |           |             |         | 4,011     |          
|                                                                                            | Equity-indexed call options                                             |                                                                                                  |         | 1,411        |           |             |         | 3,545     |          
|                                                                                            | Short-term investments                                                  |                                                                                                  |         | 568          |           |             |         | 5,509     |          
|                                                                                            | Other invested assets                                                   |                                                                                                  |         | 926          |           |             |         | 776       |          
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            |                                                                         | Total investments                                                                                |         |              | 1,329,858 |             |         |           | 952,754   | 
|Cash                                                                                        |                                                                         |                                                                                                  | 25,832  |              |           |             | 18,144  |          
|Accrued investment income                                                                   |                                                                         |                                                                                                  | 17,020  |              |           |             | 14,152  |          
|Amounts due and recoverable from reinsurers                                                 |                                                                         |                                                                                                  | 39,200  |              |           |             | 41,969  |          
|Deferred policy acquisition costs                                                           |                                                                         |                                                                                                  | 136,169 |              |           |             | 109,844 |          
|Present value of future profits                                                             |                                                                         |                                                                                                  | 16,576  |              |           |             | 22,269  |          
|Goodwill                                                                                    |                                                                         |                                                                                                  | 6,199   |              |           |             | 5,146   |          
|Property and equipment (less accumulated depreciation of $3,384 in 2002 and $2,428 in
2001) |                                                                         |                                                                                                  | 12,599  |              |           |             | 12,148  |          
|Other assets                                                                                |                                                                         |                                                                                                  | 6,479   |              |           |             | 6,897   |          
|Assets of discontinued operations                                                           |                                                                         |                                                                                                  | 5,450   |              |           |             | 430,330 |          
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            |                                                                         | Total assets                                                                                     |         | $            | 1,595,382 |             |         | $         | 1,613,653 | 
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|LIABILITIES AND SHAREHOLDERS EQUITY                                                        |                                                                         |                                                                                                  |         |              |           |             |         |          
|Liabilities:                                                                                |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            | Insurance policy liabilities                                            |                                                                                                  | $       | 1,444,369    |           |             | $       | 1,065,763 |          
|                                                                                            | Accounts payable and accrued expenses                                   |                                                                                                  |         | 8,629        |           |             |         | 5,935     |          
|                                                                                            | Obligations of capital lease                                            |                                                                                                  |         | 884          |           |             |         | 1,152     |          
|                                                                                            | Mortgage payable                                                        |                                                                                                  |         | 6,796        |           |             |         | 6,900     |          
|                                                                                            | Notes payable                                                           |                                                                                                  |         | 14,750       |           |             |         | 19,100    |          
|                                                                                            | Deferred federal income taxes                                           |                                                                                                  |         | 8,571        |           |             |         | 6,392     |          
|                                                                                            | Liabilities of discontinued operations                                  |                                                                                                  |         | 1,130        |           |             |         | 417,522   |          
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            |                                                                         | Total liabilities                                                                                |         |              | 1,485,129 |             |         |           | 1,522,764 | 
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|Company-obligated trust preferred securities                                                |                                                                         |                                                                                                  | 20,700  |              |           |             | 20,700  |          
|Shareholders Equity:                                                                       |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            | Preferred stock, no par value:                                          |                                                                                                  |         |              |           |             |         |           |          
|                                                                                            |                                                                         | Authorized 870,000 shares; none issued and outstanding                                           |         |              |          |             |         |           |          | 
|                                                                                            | Common stock and additional paid in capital, no par value:              |                                                                                                  |         |              |           |             |         |           |          
|                                                                                            |                                                                         | Authorized 20,000,000 shares; issued 9,107,557 in 2002 and 9,039,471 in 2001                     |         |              | 63,597    |             |         |           | 63,011    | 
|                                                                                            | Treasury stock, at cost, 1,494,078 shares in 2002 and 1,492,978 in 2001 |                                                                                                  |         | (7,594       | )         |             |         | (7,589    | )        
|                                                                                            | Accumulated other comprehensive income (loss)                           |                                                                                                  |         | 8,257        |           |             |         | (6,172    | )        
|                                                                                            | Retained earnings                                                       |                                                                                                  |         | 25,293       |           |             |         | 20,939    |          
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            |                                                                         | Total shareholders equity                                                                       |         |              | 89,553    |             |         |           | 70,189    | 
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          
|                                                                                            |                                                                         | Total liabilities and shareholders equity                                                       |         | $            | 1,595,382 |             |         | $         | 1,613,653 | 
|                                                                                            |                                                                         |                                                                                                  |         |              |           |             |         |          

See accompanying notes to consolidated financial statements

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF INCOME(Unaudited, Dollars in Thousands)

|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |        |        | 
|---------------------------------------------------------------------------------- | ------------------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | ------ | ------------------ | ------ | ----------------- | ---- | ------ | ------ | ---- | ------- | ------- | ------ | - | ----- | ------ | ------ | 
|                                                                                   |                                                                                |                                                                                               |        | Three Months Ended |        | Nine Months Ended
|                                                                                   |                                                                                |                                                                                               |        | September 30       |        | September 30     
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                  
|                                                                                   |                                                                                |                                                                                               |        | 2002               |        | 2001              |      | 2002   |        | 2001
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |     
|Revenues:                                                                          |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   | Premium income                                                                 |                                                                                               | $      | 1,732              |        |                   | $    | 2,538  |        |      | $       | 5,955   |        |   | $     | 7,626  |       
|                                                                                   | Net investment income                                                          |                                                                                               |        | 19,785             |        |                   |      | 14,977 |        |      |         | 55,429  |        |   |       | 42,605 |       
|                                                                                   | Call option losses                                                             |                                                                                               |        | (3,049             | )      |                   |      | (3,257 | )      |      |         | (10,040 | )      |   |       | (6,394 | )     
|                                                                                   | Net realized investment losses                                                 |                                                                                               |        | (3,672             | )      |                   |      | (3,720 | )      |      |         | (12,570 | )      |   |       | (3,775 | )     
|                                                                                   | Policy income                                                                  |                                                                                               |        | 2,139              |        |                   |      | 1,810  |        |      |         | 5,862   |        |   |       | 5,785  |       
|                                                                                   | Fees and other income                                                          |                                                                                               |        | 392                |        |                   |      | 2,096  |        |      |         | 2,100   |        |   |       | 5,556  |       
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   |                                                                                | Total revenues from continuing operations                                                     |        |                    | 17,327 |                   |      |        | 14,444 |      |         |         | 46,736 |   |       |        | 51,403 | 
|Benefits and expenses:                                                             |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   | Benefits and claims                                                            |                                                                                               |        | 2,577              |        |                   |      | 3,519  |        |      |         | 7,351   |        |   |       | 9,993  |       
|                                                                                   | Interest credited to interest-sensitive annuities and other financial products |                                                                                               |        | 11,009             |        |                   |      | 7,462  |        |      |         | 29,142  |        |   |       | 20,315 |       
|                                                                                   | Amortization                                                                   |                                                                                               |        | 8,325              |        |                   |      | (450   | )      |      |         | 14,453  |        |   |       | 4,519  |       
|                                                                                   | Commission expenses                                                            |                                                                                               |        | 156                |        |                   |      | 906    |        |      |         | 1,188   |        |   |       | 2,880  |       
|                                                                                   | Other operating expenses                                                       |                                                                                               |        | 4,002              |        |                   |      | 2,777  |        |      |         | 9,114   |        |   |       | 8,606  |       
|                                                                                   | Interest expense and financing costs                                           |                                                                                               |        | 1,102              |        |                   |      | 883    |        |      |         | 3,336   |        |   |       | 2,443  |       
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   |                                                                                | Total benefits and expenses from continuing operations                                        |        |                    | 27,171 |                   |      |        | 15,097 |      |         |         | 64,584 |   |       |        | 48,756 | 
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|Income (loss) before federal income taxes (benefits) and preferred stock
dividends |                                                                                |                                                                                               | (9,844 | )                  |        |                   | (653 | )      |        |      | (17,848 | )       |        |   | 2,647 |       
|Federal income tax expense (benefits)                                              |                                                                                |                                                                                               | (3,007 | )                  |        |                   | (375 | )      |        |      | (8,639  | )       |        |   | 51    |       
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|Income (loss) from continuing operations                                           |                                                                                |                                                                                               | (6,837 | )                  |        |                   | (278 | )      |        |      | (9,209  | )       |        |   | 2,596 |       
|Discontinued operations:                                                           |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   |                                                                                | Income from discontinued operations (less taxes of $0, $319, $550, and $865,
respectively)    |        |                    |       |                   |      |        | 619    |      |         |         | 1,068  |   |       |        | 1,680  | 
|                                                                                   |                                                                                | Gain from the sale of discontinued operations (less taxes of $1,764 and
$3,933, respectively) |        |                    | 8,285  |                   |      |        |       |      |         |         | 12,495 |   |       |        |       | 
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|Total income from discontinued operations                                          |                                                                                |                                                                                               | 8,285  |                    |        |                   | 619  |        |        |      | 13,563  |         |        |   | 1,680 |       
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|                                                                                   | Net income                                                                     |                                                                                               |        | 1,448              |        |                   |      | 341    |        |      |         | 4,354   |        |   |       | 4,276  |       
|Preferred stock dividends                                                          |                                                                                |                                                                                               |       |                    |        |                   | (65  | )      |        |      |        |         |        |   | (318  | )     
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       
|Earnings available to common shareholders                                          |                                                                                | $                                                                                             | 1,448  |                    |        | $                 | 276  |        |        | $    | 4,354   |         |        | $ | 3,958 |       
|                                                                                   |                                                                                |                                                                                               |        |                    |        |                   |      |        |        |      |         |         |        |   |       |       

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (continued)(Unaudited, Dollars in Thousands)

|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |      |     | 
|----------------------------- | ----------------------------------------- | --------------------------------------------- | - | ------------------ | ---- | ----------------- | - | ---- | --- | ---- | - | ----- | ---- |  | - | ---- | --- | 
|                              |                                           |                                               |   | Three Months Ended |      | Nine Months Ended
|                              |                                           |                                               |   | September 30       |      | September 30     
|                              |                                           |                                               |   |                    |      |                  
|                              |                                           |                                               |   | 2002               |      | 2001              |   | 2002 |     | 2001
|                              |                                           |                                               |   |                    |      |                   |   |      |     |     
|Earnings per share  basic:   |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Income (loss) from continuing operations  |                                               | $ | (.90               | )    |                   | $ | (.03 | )   |      | $ | (1.21 | )    |  | $ | .35  |    
|                              | Discontinued operations:                  |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |      |    
|                              |                                           | Income from discontinued operations           |   |                    |     |                   |   |      | .08 |      |   |       | .14  |  |   |      | .22 | 
|                              |                                           | Gain from the sale of discontinued operations |   |                    | 1.09 |                   |   |      |    |      |   |       | 1.64 |  |   |      |    | 
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Total income from discontinued operations |                                               |   | 1.09               |      |                   |   | .08  |     |      |   | 1.78  |      |  |   | .22  |    
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Net income                                |                                               |   | .19                |      |                   |   | .05  |     |      |   | .57   |      |  |   | .57  |    
|                              | Preferred stock dividends                 |                                               |   |                   |      |                   |   | (.01 | )   |      |   |      |      |  |   | (.04 | )  
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Earnings available to common shareholders |                                               | $ | .19                |      |                   | $ | .04  |     |      | $ | .57   |      |  | $ | .53  |    
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|Earnings per share  diluted: |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Income (loss) from continuing operations  |                                               | $ | (.85               | )    |                   | $ | (.04 | )   |      | $ | (1.15 | )    |  | $ | .30  |    
|                              | Discontinued operations:                  |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |      |    
|                              |                                           | Income from discontinued operations           |   |                    |     |                   |   |      | .08 |      |   |       | .13  |  |   |      | .21 | 
|                              |                                           | Gain from the sale of discontinued operations |   |                    | 1.03 |                   |   |      |    |      |   |       | 1.56 |  |   |      |    | 
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Total income from discontinued operations |                                               |   | 1.03               |      |                   |   | .08  |     |      |   | 1.69  |      |  |   | .21  |    
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Net income                                |                                               |   | .18                |      |                   |   | .04  |     |      |   | .54   |      |  |   | .51  |    
|                              | Preferred stock dividends                 |                                               |   |                   |      |                   |   |     |     |      |   |      |      |  |   |     |    
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     
|                              | Earnings available to common shareholders |                                               | $ | .18                |      |                   | $ | .04  |     |      | $ | .54   |      |  | $ | .51  |    
|                              |                                           |                                               |   |                    |      |                   |   |      |     |      |   |       |      |  |   |     

See accompanying notes to consolidated financial statements

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES




CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY(Unaudited, Dollars in Thousands)

|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |   |  | 
|----------------------------- | ------------------------------------- | ------------------------------------------------------------------- | -------------------------- | ----- | ------ | ------ | ---------- | ---- | ---------------- | - | ------------- | -- | ------------- | - | -------- | - | ----------- | - | ------ | ----- | - |  | 
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   | Accumulated |   |        |       |  
|                              |                                       |                                                                     |                            |       |        |        |            |      | Common stock and |   |               |    |               |   | other    |   |             |   |       
|                              |                                       |                                                                     |                            |       |        |        |            |      | additional paid  |   | Treasury      |    | comprehensive |   | Retained
|                              |                                       |                                                                     |                            |       | Total  |        | in capital |      | stock            |   | income (loss) |    | earnings     
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |              
|Balance at January 1, 2001    |                                       | $                                                                   | 62,899                     |       |        | $      | 63,019     |      |                  | $ | (7,589        | )  |               | $ | (12,008  | ) |             | $ | 19,477 |      
|Comprehensive income:         |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              | Net income                            |                                                                     |                            | 4,276 |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        | 4,276 |  
|                              | Other comprehensive income:           |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |  
|                              |                                       | Change in unrealized gain (loss) on
securities, net taxes of $5,632 |                            |       | 11,067 |        |            |      |                  |   |               |    |               |   |          |   | 11,067      |   |        |       |   | 
|                              |                                       | Change in foreign currency translation                              |                            |       | (238   | )      |            |      |                  |   |               |    |               |   |          |   | (238        | ) |        |       |   | 
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              |                                       |                                                                     | Other comprehensive income |       |        | 10,829 |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |   |  | 
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              |                                       |                                                                     | Comprehensive income       |       |        | 15,105 |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |   |  | 
|                              | Issuance of common stock and warrants |                                                                     |                            | 90    |        |        |            | 90   |                  |   |               |    |               |   |          |   |             |   |        |       |  
|                              | Preferred stock dividends             |                                                                     |                            | (318  | )      |        |            |      |                  |   |               |    |               |   |          |   |             |   |        | (318  | )
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|Balance at September 30, 2001 |                                       | $                                                                   | 77,776                     |       |        | $      | 63,109     |      |                  | $ | (7,589        | )  |               | $ | (1,179   | ) |             | $ | 23,435 |      
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|Balance at January 1, 2002    |                                       | $                                                                   | 70,189                     |       |        | $      | 63,011     |      |                  | $ | (7,589        | )  |               | $ | (6,172   | ) |             | $ | 20,939 |      
|Comprehensive income:         |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              | Net income                            |                                                                     |                            | 4,354 |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        | 4,354 |  
|                              | Other comprehensive income:           |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |  
|                              |                                       | Change in unrealized gain (loss) on
securities, net taxes of $6,292 |                            |       | 12,183 |        |            |      |                  |   |               |    |               |   |          |   | 12,183      |   |        |       |   | 
|                              |                                       | Change in foreign currency translation                              |                            |       | 2,246  |        |            |      |                  |   |               |    |               |   |          |   | 2,246       |   |        |       |   | 
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              |                                       |                                                                     | Other comprehensive income |       |        | 14,429 |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |   |  | 
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|                              |                                       |                                                                     | Comprehensive income       |       |        | 18,783 |            |      |                  |   |               |    |               |   |          |   |             |   |        |       |   |  | 
|                              | Issuance of common stock and warrants |                                                                     |                            | 837   |        |        |            | 837  |                  |   |               |    |               |   |          |   |             |   |        |       |  
|                              | Exercise of common stock options      |                                                                     |                            | (251  | )      |        |            | (251 | )                |   |               |    |               |   |          |   |             |   |        |       |  
|                              | Purchase of treasury stock            |                                                                     |                            | (5    | )      |        |            |      |                  |   |               | (5 | )             |   |          |   |             |   |        |       |  
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      
|Balance at September 30, 2002 |                                       | $                                                                   | 89,553                     |       |        | $      | 63,597     |      |                  | $ | (7,594        | )  |               | $ | 8,257    |   |             | $ | 25,293 |      
|                              |                                       |                                                                     |                            |       |        |        |            |      |                  |   |               |    |               |   |          |   |             |   |        |      

See accompanying notes to consolidated financial statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited, Dollars in Thousands)

|                                                                                                               |                                            |                                           |         |                   |          |      |         |          |          |  
|-------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----------------------------------------- | ------- | ----------------- | -------- | ---- | ------- | -------- | -------- | -
|                                                                                                               |                                            |                                           |         | Nine Months Ended
|                                                                                                               |                                            |                                           |         | September 30     
|                                                                                                               |                                            |                                           |         |                  
|                                                                                                               |                                            |                                           |         | 2002              |          | 2001
|                                                                                                               |                                            |                                           |         |                   |          |     
|Operating Activities                                                                                           |                                            |                                           |         |                   |          |      |         |         
|Net income                                                                                                     |                                            | $                                         | 4,354   |                   |          | $    | 3,958   |         
|Net income from discontinued operations                                                                        |                                            |                                           | (1,068  | )                 |          |      | (1,680  | )       
|Gain from the sale of discontinued operations                                                                  |                                            |                                           | (12,495 | )                 |          |      |        |         
|Adjustments to reconcile net income to net cash provided by operating activities:                              |                                            |                                           |         |                   |          |      |         |         
|                                                                                                               | Amortization of deferred acquisition costs |                                           |         | 14,725            |          |      |         | 4,703    |         
|                                                                                                               | Deferral of acquisition costs              |                                           |         | (50,487           | )        |      |         | (27,026  | )       
|                                                                                                               | Deferred federal income taxes              |                                           |         | (9,297            | )        |      |         | 896      |         
|                                                                                                               | Depreciation and amortization              |                                           |         | 1,121             |          |      |         | 2,409    |         
|                                                                                                               | Insurance policy liabilities               |                                           |         | 43,203            |          |      |         | 13,824   |         
|                                                                                                               | Net realized investment losses             |                                           |         | 12,570            |          |      |         | 3,775    |         
|                                                                                                               | Accrued investment income                  |                                           |         | (2,802            | )        |      |         | (1,333   | )       
|                                                                                                               | Other                                      |                                           |         | 1,065             |          |      |         | 2,080    |         
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|                                                                                                               |                                            | Net cash provided by operating activities |         |                   | 889      |      |         |          | 1,606    |  
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|Investing Activities                                                                                           |                                            |                                           |         |                   |          |      |         |         
|Fixed maturity securities available for sale:                                                                  |                                            |                                           |         |                   |          |      |         |         
|                                                                                                               | Purchases                                  |                                           |         | (1,310,081        | )        |      |         | (393,792 | )       
|                                                                                                               | Sales                                      |                                           |         | 871,118           |          |      |         | 200,543  |         
|                                                                                                               | Maturities, calls and redemptions          |                                           |         | 69,458            |          |      |         | 61,979   |         
|Short-term investments, net                                                                                    |                                            |                                           | 6,477   |                   |          |      | (7,989  | )       
|Other investments, net                                                                                         |                                            |                                           | (2,201  | )                 |          |      | (2,907  | )       
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|                                                                                                               |                                            | Net cash used by investing activities     |         |                   | (365,229 | )    |         |          | (142,166 | )
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|Financing Activities                                                                                           |                                            |                                           |         |                   |          |      |         |         
|Proceeds from the sale of discontinued operations                                                              |                                            |                                           | 25,690  |                   |          |      |        |         
|Net proceeds from issuance of trust preferred securities                                                       |                                            |                                           |        |                   |          |      | 19,318  |         
|Repayments on notes payable and mortgage payable                                                               |                                            |                                           | (4,454  | )                 |          |      | (11,500 | )       
|Redemption of preferred stock                                                                                  |                                            |                                           |        |                   |          |      | (6,530  | )       
|Premiums received on interest-sensitive and other financial products
credited to policyholder account balances |                                            |                                           | 448,197 |                   |          |      | 225,850 |         
|Return of policyholder account balances on interest-sensitive annuities and other
financial products           |                                            |                                           | (97,935 | )                 |          |      | (77,069 | )       
|Issuance of common stock and warrants                                                                          |                                            |                                           | 530     |                   |          |      | 90      |         
|Dividends on preferred stock                                                                                   |                                            |                                           |        |                   |          |      | (318    | )       
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|                                                                                                               | Net cash provided by financing activities  |                                           |         | 372,028           |          |      |         | 149,841  |         
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|Net increase in cash                                                                                           |                                            |                                           | 7,688   |                   |          |      | 9,281   |         
|Cash at beginning of period                                                                                    |                                            |                                           | 18,144  |                   |          |      | 1,840   |         
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         
|Cash at end of period                                                                                          |                                            | $                                         | 25,832  |                   |          | $    | 11,121  |         
|                                                                                                               |                                            |                                           |         |                   |          |      |         |         

See accompanying notes to consolidated financial statements.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

The following notes should be read along with the notes to the
consolidated financial statements included in the 2001 Form 10-K of Standard
Management Corporation, (we, our, Standard Management or the Company).

Standard Management is a financial services holding company that develops,
markets and/or administers, through several subsidiaries, annuity and life
insurance products domestically and unit-linked assurance products, which are
investment products with a nominal death benefit, internationally.

Note 1  Basis of Presentation

Our unaudited, consolidated financial statements reflect normal recurring
adjustments that are necessary to present fairly our financial position and
results of operations on a basis consistent with that of our prior audited
consolidated financial statements. As permitted by rules and regulations of
the Securities and Exchange Commission applicable to quarterly reports on Form
10-Q, we have condensed or omitted certain information and disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles (GAAP). We have also reclassified certain amounts from
the prior periods to conform to the 2002 presentation. These reclassifications
have no effect on net income or shareholders equity. Results for interim
periods are not necessarily indicative of the results that may be expected for
a full year.

The nature of the insurance business requires us to make estimates and
assumptions that affect the amounts reported in our consolidated financial
statements and accompanying notes. For example, we use significant estimates
and assumptions in calculating deferred policy acquisition costs, present value
of future profits, goodwill, future policy benefits and deferred federal income
taxes. If future experience differs from these estimates and assumptions, our
financial statements could be materially affected.

Recently Issued Professional Accounting Standards

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets
(SFAS 142). SFAS 142 is effective for fiscal years beginning after December
15, 2001. Under the new rules, goodwill and indefinite lived intangible assets
are no longer amortized, but are subject to impairment tests conducted at least
annually in accordance with the new standard. Intangible assets that do not
have indefinite lives continue to be amortized over their estimated useful
lives. We adopted SFAS 142 on January 1, 2002.

Goodwill is tested for impairment using a two step process prescribed in
SFAS 142. The first step is a screen for potential impairment, while the
second step measures the amount of the impairment, if any. In compliance with
the transition provision of SFAS 142, we completed the first step of the
transitional goodwill impairment test during the second quarter of 2002. A
discounted cash flow model was used to assess the goodwill of the reporting
units. The results indicate it is likely that a portion of the goodwill
related to the domestic insurance operations will be impaired using the
impairment test required by SFAS 142. An impairment that is required to be
recognized will be reflected as the cumulative effect of a change in accounting
principle. We have not yet determined the amount of the potential impairment
loss.

For the three months ended September 30, 2001, on a SFAS 142 comparable
basis, our net income, basic net income per share and diluted net income per
share would have been $.4 million, $.05 and $.05, which includes the
elimination of amortization of $.1 million or $.01 per share.

For the nine months ended September 30, 2001, on a SFAS 142 comparable
basis, our net income, basic net income per share and diluted net income per
share would have been $4.5 million, $.59 and $.54, respectively, which includes
the elimination of amortization of $.2 million or $.01 per share.

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Note 2  International Operations

On May 24, 2002, we signed an agreement to sell 100% of the shares of
Premier Life (Luxembourg) S.A. and the portfolio of Premiers business in
Bermuda (collectively our International Operations) to Winterthur Life, a
division of Credit Suisse Group for a sale price of approximately $27.7 million
(the Transaction). The sales price was determined through arms-length
negotiations.

On August 14, 2002, we closed the sale of our Bermuda business and
received net proceeds of $8.2 million. We recorded a gain on sale, net of
related costs, of $4.2 million in our second quarter 2002
financial statements. In connection with this closing, a purchase
price disagreement of $1.0 million exists related to the assets which
remain supporting our Bermuda shareholders equity. We are vigorously
contesting the disagreement and anticipate a favorable outcome.

On September 17, 2002, we closed the sale of Premier Life (Luxembourg)
S.A. and received net proceeds of $16.7 million. We recorded a gain on sale,
net of related costs, of $8.3 million in our third quarter 2002 financial
statements.

The disposition of our international operations segment represents a
disposal of a segment under SFAS 144, Accounting for the Impairment and
Disposal of Long-Lived Assets. Accordingly, the revenues, costs and expenses,
assets and liabilities, and cash flows of this segment have been segregated in
the Consolidated Balance Sheets, Consolidated Statements of Income and
Consolidated Statements of Cash Flows.

Note 3  Mortgage Payable, Notes Payable and Trust Preferred Securities

Our mortgage payable, notes payable and trust preferred securities were as
follows (dollars in thousands):

|                           |                                              |  |          |       |              |   |             |        |  |   |        |        | 
|-------------------------- | -------------------------------------------- |  | -------- | ----- | ------------ | - | ----------- | ------ |  | - | ------ | ------ | 
|                           |                                              |  | Interest |       | September 30 |   | December 31
|                           |                                              |  | Rate     |       | 2002         |   | 2001       
|                           |                                              |  |          |       |              |   |            
|Mortgage payable           |                                              |  | 7.38     | %     |              | $ | 6,796       |        |  | $ | 6,900  |       
|                           |                                              |  |          |       |              |   |             |        |  |   |        |       
|Notes payable:             |                                              |  |          |       |              |   |             |        |  |   |        |       
|                           | Borrowings under revolving credit agreements |  |          | 5.05  | %(1)         |   | $           | 3,750  |  |   | $      | 8,100  | 
|                           | Senior subordinated notes                    |  |          | 10.00 | %            |   |             | 11,000 |  |   |        | 11,000 | 
|                           |                                              |  |          |       |              |   |             |        |  |   |        |       
|                           |                                              |  |          |       |              | $ | 14,750      |        |  | $ | 19,100 |       
|                           |                                              |  |          |       |              |   |             |        |  |   |        |       
|Trust preferred securities |                                              |  | 10.25    | %     |              | $ | 20,700      |        |  | $ | 20,700 |       
|                           |                                              |  |          |       |              |   |             |        |  |   |        |       



---

|(1) |  | Current weighted average rate at September 30, 2002.
|--- |  | ----------------------------------------------------

Note 4  Net Unrealized Gain (Loss) on Securities Available for Sale

The components of unrealized gain (loss) on securities available for sale
in shareholders equity are summarized as follows (in thousands):

|                                                |                                   |                                                               |           |              |        |             |         |       |        |  
|----------------------------------------------- | --------------------------------- | ------------------------------------------------------------- | --------- | ------------ | ------ | ----------- | ------- | ----- | ------ | -
|                                                |                                   |                                                               |           | September 30 |        | December 31
|                                                |                                   |                                                               |           | 2002         |        | 2001       
|                                                |                                   |                                                               |           |              |        |            
|Fair value of securities available for sale     |                                   | $                                                             | 1,306,226 |              |        | $           | 920,944 |      
|Amortized cost of securities available for sale |                                   |                                                               | 1,285,957 |              |        |             | 930,831 |      
|                                                |                                   |                                                               |           |              |        |             |         |      
|                                                |                                   | Gross unrealized gain (loss) on securities available for sale |           |              | 20,269 |             |         |       | (9,887 | )
|Adjustments for:                                |                                   |                                                               |           |              |        |             |         |      
|                                                | Deferred policy acquisition costs |                                                               |           | (4,924       | )      |             |         | 2,468 |       
|                                                | Present value of future profits   |                                                               |           | (2,876       | )      |             |         | 1,410 |       
|                                                | Deferred federal income taxes     |                                                               |           | (4,212       | )      |             |         | 2,080 |       
|                                                |                                   |                                                               |           |              |        |             |         |      
|                                                |                                   | Net unrealized gain (loss) on securities available for sale   |           | $            | 8,257  |             |         | $     | (3,929 | )
|                                                |                                   |                                                               |           |              |        |             |         |      

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Note 5  Earnings Per Share

A reconciliation of income and shares used to calculate basic and diluted
earnings per share is as follows (dollars in thousands):

|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |         | 
|------------------------------------------------------------------ | --------------------------------------------------------------------------------------------- | - | ------------------ | ------- | ----------------- | - | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                                                                   |                                                                                               |   | Three Months Ended |         | Nine Months Ended
|                                                                   |                                                                                               |   | September 30       |         | September 30     
|                                                                   |                                                                                               |   |                    |         |                  
|                                                                   |                                                                                               |   | 2002               |         | 2001              |   | 2002      |         | 2001
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |     
|Income (loss):                                                     |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Income (loss) from continuing operations before income taxes       |                                                                                               | $ | (9,844             | )       |                   | $ | (653      | )       |      | $ | (17,848   | )       |  | $ | 2,647     |        
|Federal income taxes expense (benefits)                            |                                                                                               |   | (3,007             | )       |                   |   | (375      | )       |      |   | (8,639    | )       |  |   | 51        |        
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Income (loss) from continuing operations                           |                                                                                               |   | (6,837             | )       |                   |   | (278      | )       |      |   | (9,209    | )       |  |   | 2,596     |        
|Discontinued operations:                                           |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|                                                                   | Income from discontinued operations (less taxes of $0,
$319, $550 and $865, respectively)     |   |                    |        |                   |   |           | 619     |      |   |           | 1,068   |  |   |           | 1,680   | 
|                                                                   | Gain from the sale of discontinued operations (less taxes
of $1,764 and $3,933, respectively) |   |                    | 8,285   |                   |   |           |        |      |   |           | 12,495  |  |   |           |        | 
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Total discontinued operations                                      |                                                                                               |   | 8,285              |         |                   |   | 619       |         |      |   | 13,563    |         |  |   | 1,680     |        
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Net income                                                         |                                                                                               |   | 1,448              |         |                   |   | 341       |         |      |   | 4,354     |         |  |   | 4,276     |        
|Preferred stock dividends                                          |                                                                                               |   |                   |         |                   |   | (65       | )       |      |   |          |         |  |   | (318      | )      
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Earnings available to common shareholders                          |                                                                                               | $ | 1,448              |         |                   | $ | 276       |         |      | $ | 4,354     |         |  | $ | 3,958     |        
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Shares:                                                            |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Weighted average shares outstanding for basic earnings per share   |                                                                                               |   | 7,613,479          |         |                   |   | 7,545,156 |         |      |   | 7,611,629 |         |  |   | 7,545,156 |        
|Effect of dilutive securities:                                     |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|                                                                   | Stock options                                                                                 |   |                    | 196,003 |                   |   |           | 166,180 |      |   |           | 197,369 |  |   |           | 81,676  | 
|                                                                   | Stock warrants                                                                                |   |                    | 215,997 |                   |   |           | 218,065 |      |   |           | 210,335 |  |   |           | 133,802 | 
|                                                                   | Preferred stock                                                                               |   |                    |        |                   |   |           |        |      |   |           |        |  |   |           | 512,157 | 
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|                                                                   | Dilutive potential common shares                                                              |   |                    | 412,000 |                   |   |           | 384,245 |      |   |           | 407,704 |  |   |           | 727,635 | 
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        
|Weighted average shares outstanding for diluted earnings per
share |                                                                                               |   | 8,025,479          |         |                   |   | 7,929,401 |         |      |   | 8,019,333 |         |  |   | 8,272,791 |        
|                                                                   |                                                                                               |   |                    |         |                   |   |           |         |      |   |           |         |  |   |           |        

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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

The following discussion highlights the material factors affecting the
results of operations and the significant changes in balance sheet items.
Notes to the consolidated financial statements included in this report and the
notes to the consolidated financial statements included in our Form 10-K for
the year ended December 31, 2001 should be read in conjunction with both sets
of consolidated financial statements.

Comparison of the Three Month and Nine Month Periods Ended September 30, 2002 and September 30, 2001:

The following tables and narratives summarize the results of operations by
operating segment (dollars in thousands):

|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |        |        |  
|-------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | - | ------------------ | ------ | ----------------- | - | ------ | ------ | ---- | - | ------- | ------ | - | - | ------ | ------ | -
|                                             |                                                                                                      |                                                                    |   | Three Months Ended |        | Nine months Ended
|                                             |                                                                                                      |                                                                    |   | September 30       |        | September 30     
|                                             |                                                                                                      |                                                                    |   |                    |        |                  
|                                             |                                                                                                      |                                                                    |   | 2002               |        | 2001              |   | 2002   |        | 2001
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |     
|Operating income (loss) before income taxes: |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             | Operating income (loss) from continuing
operations                                                   |                                                                    | $ | (7,732             | )      |                   | $ | 1,396  |        |      | $ | (6,838  | )      |   | $ | 4,752  |       
|                                             | Taxes (benefits) related to operating income
from continuing operations                              |                                                                    |   | (2,630             | )      |                   |   | 29     |        |      |   | (5,236  | )      |   |   | 365    |       
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             |                                                                                                      | Operating income after taxes (benefits)
from continuing operations |   |                    | (5,102 | )                 |   |        | 1,367  |      |   |         | (1,602 | ) |   |        | 4,387  |  
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             | Consolidated realized investment losses before
tax benefits                                          |                                                                    |   | (2,112             | )      |                   |   | (2,049 | )      |      |   | (11,010 | )      |   |   | (2,105 | )     
|                                             | Tax benefits related to realized investment
losses                                                   |                                                                    |   | (377               | )      |                   |   | (404   | )      |      |   | (3,403  | )      |   |   | (314   | )     
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             |                                                                                                      | Consolidated realized investment losses
after tax benefits         |   |                    | (1,735 | )                 |   |        | (1,645 | )    |   |         | (7,607 | ) |   |        | (1,791 | )
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             |                                                                                                      | Income (loss) from continuing operations                           |   | $                  | (6,837 | )                 |   | $      | (278   | )    |   | $       | (9,209 | ) |   | $      | 2,596  |  
|Discontinued operations:                     |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             | Operating income from discontinued operations
(less taxes of $0, $319, $550, and $865,
respectively) |                                                                    |   |                   |        |                   |   | 619    |        |      |   | 1,068   |        |   |   | 1,680  |       
|                                             | Gain from the sale of discontinued operations
(less taxes of $1,764 and $3,933,
respectively)        |                                                                    |   | 8,285              |        |                   |   |       |        |      |   | 12,495  |        |   |   |       |       
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             |                                                                                                      | Total discontinued operations                                      |   |                    | 8,285  |                   |   |        | 619    |      |   |         | 13,563 |   |   |        | 1,680  |  
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       
|                                             |                                                                                                      | Net income                                                         |   | $                  | 1,448  |                   |   | $      | 341    |      |   | $       | 4,354  |   |   | $      | 4,276  |  
|                                             |                                                                                                      |                                                                    |   |                    |        |                   |   |        |        |      |   |         |        |   |   |       

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Consolidated Results and Analysis:

Quarterly analysis:

Net income for the third quarter of 2002 was $1.4 million, or $.18 per diluted
share compared to $.3 million or $.04 per diluted share in the third quarter
2001. Positively impacting net income per diluted share was the sale of
Premier Life (Luxembourg) S.A. resulting in a net gain of $1.03. Negatively
impacting net income per diluted share was $.64 from the accelerated
amortization of deferred acquisition costs on fixed annuity products, $.06
associated with the write off and legal costs related to the recovery of an
agency receivable balance, $.05 of operating expenses associated with the costs
of new marketing initiatives, and $.04 from FAS 133 adjustment related to
declining treasury yields. The third quarter 2001 results were positively
affected by $.06 per diluted share due to a lower effective tax rate resulting
from the utilization of net operating loss carryforwards.

Domestic Operations (Continuing Operations) dollars in thousands:

|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |         |         | 
|------------------------------------------------------------------------------ | ----------------------------------------------------- | ---------------------------------------------------------- | ------ | ------------------ | ------- | ----------------- | ------ | ------ | ------ | ---- | ------- | ------- | ------- | - | ------ | ------- | ------- | 
|                                                                               |                                                       |                                                            |        | Three Months Ended |         | Nine Months Ended
|                                                                               |                                                       |                                                            |        | September 30       |         | September 30     
|                                                                               |                                                       |                                                            |        |                    |         |                  
|                                                                               |                                                       |                                                            |        | 2002               |         | 2001              |        | 2002   |        | 2001
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |     
|Premiums and Deposits Collected:                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Traditional life                                      |                                                            | $      | 1,732              |         |                   | $      | 2,538  |        |      | $       | 5,955   |         |   | $      | 7,626   |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Deferred annuities                                    |                                                            |        | 76,478             |         |                   |        | 49,022 |        |      |         | 247,475 |         |   |        | 118,787 |        
|                                                                               | Single premium immediate annuities and other
deposits |                                                            |        | 33,352             |         |                   |        | 23,909 |        |      |         | 114,562 |         |   |        | 57,540  |        
|                                                                               | Equity-indexed annuities                              |                                                            |        | 31,190             |         |                   |        | 16,034 |        |      |         | 85,697  |         |   |        | 49,055  |        
|                                                                               | Universal and interest-sensitive life                 |                                                            |        | 151                |         |                   |        | 152    |        |      |         | 453     |         |   |        | 468     |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               |                                                       | Subtotal  interest sensitive and other
financial products |        |                    | 141,171 |                   |        |        | 89,117 |      |         |         | 448,187 |   |        |         | 225,850 | 
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Total premiums and deposits collected                 |                                                            | $      | 142,903            |         |                   | $      | 91,655 |        |      | $       | 454,142 |         |   | $      | 233,476 |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|Statement of Operations:                                                       |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|Premium income                                                                 |                                                       | $                                                          | 1,732  |                    |         | $                 | 2,538  |        |        | $    | 5,955   |         |         | $ | 7,626  |        
|Policy income                                                                  |                                                       |                                                            | 2,139  |                    |         |                   | 1,810  |        |        |      | 5,862   |         |         |   | 5,785  |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Total policy related income                           |                                                            |        | 3,871              |         |                   |        | 4,348  |        |      |         | 11,817  |         |   |        | 13,411  |        
|Net investment income                                                          |                                                       |                                                            | 19,785 |                    |         |                   | 14,977 |        |        |      | 55,429  |         |         |   | 42,605 |        
|Call option losses                                                             |                                                       |                                                            | (3,049 | )                  |         |                   | (3,257 | )      |        |      | (10,040 | )       |         |   | (6,394 | )      
|Fees and other income                                                          |                                                       |                                                            | 392    |                    |         |                   | 2,096  |        |        |      | 2,100   |         |         |   | 5,556  |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Total revenues                                        |                                                            |        | 20,999             |         |                   |        | 18,164 |        |      |         | 59,306  |         |   |        | 55,178  |        
|Benefits and claims                                                            |                                                       |                                                            | 2,577  |                    |         |                   | 3,519  |        |        |      | 7,351   |         |         |   | 9,993  |        
|Interest credited to interest sensitive annuities
and other financial products |                                                       |                                                            | 11,009 |                    |         |                   | 7,462  |        |        |      | 29,142  |         |         |   | 20,315 |        
|Amortization                                                                   |                                                       |                                                            | 9,885  |                    |         |                   | 1,221  |        |        |      | 16,013  |         |         |   | 6,189  |        
|Commission expenses                                                            |                                                       |                                                            | 156    |                    |         |                   | 906    |        |        |      | 1,188   |         |         |   | 2,880  |        
|Other operating expenses                                                       |                                                       |                                                            | 4,002  |                    |         |                   | 2,777  |        |        |      | 9,114   |         |         |   | 8,606  |        
|Interest expense and financing costs                                           |                                                       |                                                            | 1,102  |                    |         |                   | 883    |        |        |      | 3,336   |         |         |   | 2,443  |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Total benefits and expenses                           |                                                            |        | 28,731             |         |                   |        | 16,768 |        |      |         | 66,144  |         |   |        | 50,426  |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Operating income (loss) before income taxes           |                                                            |        | (7,732             | )       |                   |        | 1,396  |        |      |         | (6,838  | )       |   |        | 4,752   |        
|Net realized investment losses, net of related costs                           |                                                       |                                                            | (2,112 | )                  |         |                   | (2,049 | )      |        |      | (11,010 | )       |         |   | (2,105 | )      
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        
|                                                                               | Income (loss) before income taxes                     |                                                            | $      | (9,844             | )       |                   | $      | (653   | )      |      | $       | (17,848 | )       |   | $      | 2,647   |        
|                                                                               |                                                       |                                                            |        |                    |         |                   |        |        |        |      |         |         |         |   |        |        

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General:Our domestic operations (continuing operations) segment consists of
revenues earned and expenses incurred from our United States operations. Our
domestic products include deferred annuities, single premium immediate
annuities and equity-indexed annuities. The profitability of this segment is
primarily a function of net investment spread (the difference between the
investment income earned on our investments less the interest we credit to our
policyholders), persistency of our in force business, mortality experience and
management of our operating expenses.

Quarterly analysiscompares the three month period ending September 30, 2002 to
the three month period ending September 30, 2001.

Year-to-date analysiscompares the nine month period ending September 30, 2002
to the nine month period ending September 30, 2001.

Premium depositsconsist of deposits from our deferred annuities, single
premium immediate annuities, equity-indexed annuities, and other financial
products that do not incorporate significant mortality features. For GAAP,
these premium deposits are not shown as premium income in the income statement.
A change in premium deposits in a single period does not directly cause our
operating income to change, although continued increases or decreases in
premiums may affect the growth rate of assets on which investment spreads are
earned.

Quarterly analysis:



| |  | Premium deposits for the third quarter of 2002 increased $52.1
million or 58%, to $141.2 million, compared to the same period
in 2001. Deferred annuity deposits increased $27.5 million or
56%, to $76.5 million. Single premium immediate annuity
deposits increased $9.4 million or 39%, to $33.4 million.
Equity-indexed annuities increased $15.2 million or 95%, to
$31.2 million.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Premium deposits for the first nine months of 2002 increased
$222.3 million or 98%, to $448.2 million, compared to the same
period in 2001. Deferred annuity deposits increased $128.7
million or 108%, to $247.5 million. Single premium immediate
annuity deposits increased $57.0 million or 99%, to $114.6
million. Equity-indexed annuities increased $36.6 million or
75%, to $85.7 million.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Premium deposits increased in the 2002 period primarily due to an expanded
distribution force, an enhanced product portfolio, and increased industry
wide fixed annuity sales.                                                                                                                                                                                                                    

Premium incomeconsists of premiums earned from 1) traditional life products
and 2) annuity products that incorporate significant mortality features.

Quarterly analysis:



| |  | Premium income for the third quarter of 2002 decreased by $.8
million or 32%, to $1.7 million compared to the same period in
2001.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Premium income for the first nine months of 2002 decreased
$1.7 million or 22%, to $6.0 million compared to the same
period in 2001.                                                                                                      
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Premium income in 2002 declined because effective August 2001, we suspended
the active marketing of our life products indefinitely. We continue,
however, to manage our existing life insurance business, which includes
renewal premiums.

Policy incomerepresents 1) mortality income and administrative fees earned on
universal life products and 2) surrender income earned on terminated universal
life and annuity policies.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






Quarterly analysis:



| |  | Policy income, in the third quarter of 2002, increased $.3
million or 18%, to $2.1 million compared to the same period in
2001.
|- |  | -------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Policy income for the first nine months of 2002 increased $.1
million or 1%, to $5.9 million compared to the same period in
2001.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | The increase in policy income is primarily due to additional surrender
income in the quarterly and year-to-date periods.         

Net investment incomeincludes interest earned on invested assets which
fluctuates with changes in 1) the amount of average invested assets supporting
insurance liabilities and 2) the average yield earned on those invested assets.

Quarterly analysis:



| |  | Net investment income for the third quarter of 2002 increased
by $4.8 million or 32%, to $19.8 million compared to the same
period in 2001. Net investment income increased as a result of
a $386.2 million or 44% increase in weighted average invested
assets for the period.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The net investment yields earned on average invested assets
were 6.28% and 6.97% for the third quarter of 2002 and 2001,
respectively.                                                                                                                                         

Year-to-date analysis:



| |  | Net investment income for the first nine months of 2002
increased $12.8 million or 30%, to $55.4 million compared to
the same period in 2001. Net investment income increased as a
result of a $317.3 million or 39% increase in weighted average
invested assets for the period.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The net investment yields earned on average invested assets
were 6.54% and 6.98% for the first nine months of 2002 and
2001, respectively.                                                                                                                                       
| 
|  |  | Net investment income for 2002 was unfavorably impacted from defaulted bonds
and lower earned rates on current year investment purchases.                                                                                                                                        

Call option lossesrelate to equity-indexed products that are hedged with call
options to limit risk against unusually high crediting rates from favorable
returns in the equity market. The market value of these options fluctuate from
period to period and are substantially offset by amounts credited to
policyholder account balances.

Quarterly analysis:



| |  | Call option losses for the third quarter of 2002 decreased by
$.2 million to $3.0 million compared to the same period in
2001.
|- |  | ------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Call option losses for the first nine months of 2002 increased
by $3.6 million to $10.0 million compared to the same period
in 2001.   
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Call option losses in 2002 were due to a decline in the market value of our
call options as a result of changes in the S & P 500 Index.

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See also Interest credited to interest sensitive annuities and other financial
products for information regarding the impact of our equity-indexed products.

Fees and other incomeconsist of fee income related to servicing unaffiliated
blocks of business, experience refunds and commission income.

Quarterly analysis:



| |  | Fees and other income in the third quarter of 2002 decreased
$1.7 million or 81%, to $.4 million. This decrease includes a
decline of $1.3 million in commission income.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Fees and other income for the first nine months of 2002
decreased $3.5 million or 62%, to $2.1 million. This decrease
includes a decline of $2.6 million in commission income.                   
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | The decline in commission income in 2002 was due to the termination of a
marketing and administration contract. This decrease is substantially offset
by a decline in related commission expense.

Benefits and claimsinclude 1) mortality experience, 2) benefits from other
policies that incorporate significant mortality features and 3) changes in
future policy reserves. Throughout our history, we have experienced periods of
higher and lower benefit claims. This volatility is not uncommon in the life
insurance industry and, over extended periods of time, periods of higher claims
experience tend to offset periods of lower claim experience.

Quarterly analysis:



| |  | Benefits and claims for the third quarter of 2002 decreased
$.9 million or 27%, to $2.6 million compared to the same
period in 2001.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Benefits and claims for the first nine months of 2002
decreased $2.6 million or 26%, to $7.4 million compared to the
same period in 2001.                                     
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Benefits and claims declined in 2002 due to favorable mortality experience,
and less traditional life business from our decision to suspend active
marketing of life products.

Interest credited to interest sensitive annuities and other financial products
represents interest credited to insurance liabilities of the deferred
annuities, single premium immediate annuities, equity-indexed annuities and
other financial products. This expense fluctuates with changes in 1) the
average interest-sensitive insurance liabilities, 2) the average credited rate
on those liabilities and 3) the market value fluctuations of call options.

Quarterly analysis:



| |  | During the third quarter of 2002, interest credited increased $3.5
million to $11.0 million, an increase of 48% compared to the same period
in 2001. This increase is primarily due to a 53%, or $439.5 million,
increase in average interest sensitive liabilities offset by a decrease in
weighted average credited rates from 5.39% to 4.52%.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | In addition to these items, credited interest on equity-indexed products
increased by $.6 million as a result of equity market improvements, offset
by a $.5 million decrease in the reserve for future equity benefits.                                                                                                                        

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Year-to-date analysis:



| |  | During the first nine months of 2002, interest credited increased $8.8
million to $29.1 million, an increase of 43% compared to the same period
in 2001. This increase is primarily due to a 43%, or $324.0 million,
increase in average interest sensitive liabilities, offset by a decrease
in weighted average credited rates from 5.31% to 4.86%.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | In addition to these items, credited interest on equity-indexed products
increased $2.5 million as a result of equity market improvements.                                                                                                                                                                                                           

Amortizationincludes 1) amortization related to the present value of our
policies purchased from our acquired insurance business, 2) amortization of
deferred acquisition costs (DAC) related to capitalized costs of our
insurance business sold, and 3) amortization of goodwill for the 2001 period.

Quarterly analysis:



| |  | Amortization for the third quarter of 2002 was $10.0 million,
an increase of $8.7 million compared to the same period in
2001. This increase primarily relates to a $7.8 million
acceleration of DAC amortization due to DAC unlocking.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Amortization for the first nine months of 2002 was $16.0
million, an increase of $9.8 million compared to the same
period in 2001. This increase reflects a $2.0 million
increase from the recognition of additional gross profits from
increased sales of annuity products during recent periods and
a $7.8 million increase related to DAC unlocking.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Acquisition costs for deferred annuity contracts and equity indexed
annuity contracts are required to be amortized over the lives of the
contracts in relation to the incidence of estimated gross profits. Estimated
gross profits on fixed and equity indexed annuity contracts include
investment spread, surrender income, expense margins, and realized investment
gains/losses. Gross profit estimates are evaluated regularly, with historical
gross profit estimates adjusted to actual results and projected gross profit
estimates updated to reflect current expectations. DAC amortization is
adjusted both retrospectively and prospectively (unlocked) in accordance
with the revised profit stream, and retrospective adjustments are reported in
the current reporting period. DAC unlocking in the current period created a
charge to earnings of $7.8 million.

Commission expensesrepresent commission expenses, net of deferrable amounts.

Quarterly analysis:



| |  | Commission expenses decreased $.7 million to $.2 million.
|- |  | ---------------------------------------------------------

Year-to-date analysis:



| |  | Commission expenses decreased by $1.7 million to $1.2 million.                                                 
|- |  | ---------------------------------------------------------------------------------------------------------------
| 
|  |  | Commission expenses declined in 2002 due to the termination of a marketing
and administration contract in 2002.

Other operating expensesconsist of general operating expenses, including
salaries, net of deferrable amounts.

Quarterly analysis:



| |  | Other operating expenses for the third quarter of 2002
increased $1.2 million to $4.0 million compared to the same
period in 2001.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------

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Year-to-date analysis:



| |  | Other operating expenses for the first nine months of 2002
increased $.5 million to $9.1 million compared to the same
period in 2001.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------

The increase in other operating expenses is primarily due to increased legal
expenses, costs associated with new marketing initiatives, and the elimination
of management fees from our international operations.

Interest expense and financing costsrepresents interest expense incurred and
the amortization of related debt issuance costs.

Quarterly analysis:



| |  | Interest expense and financing costs increased by $.2 million or 25%, to
$1.1 million for the third quarter of 2002 compared to the same period for
2001. Average borrowings increased $11.5 million to $46.0 million in the
2002 period and included the impact of our trust preferred offering and
our mortgage payable.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | The interest rate incurred on average borrowings were 9.58% and 10.25% for
the third quarter of 2002 and 2001, respectively.                                                                                                                                                                                              

Year-to-date analysis:



| |  | Interest expense and financing costs increased by $.9 million or 37%, to
$3.3 million. Average borrowings increased $15.3 million to $46.2 million
in the 2002 period and included the impact of our trust preferred offering
and our mortgage payable.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | The interest rate incurred on average borrowings were 9.64% and 10.56% for
the first nine months of 2002 and 2001, respectively.                                                                                                                       

Net realized investment losses, net of related costsfluctuate from period to
period and generally arise when securities are sold in response to changes in
the investment environment. Realized investment losses can affect the timing
of the amortization of deferred acquisition costs and the present value of
future profits.

Quarterly analysis:



| |  | Net realized investment losses, net of related costs were $2.1
million in the third quarter of 2002 and included portfolio
write-downs of $5.0 million of corporate bonds. These
write-downs were partially offset by net realized gains from
the sale of corporate and agency bonds, and amortization of
$1.6 million.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year-to-date analysis:



| |  | Net realized investment losses, net of related costs were
$11.0 million in the first nine months of 2002, and included
portfolio write-downs of $12.7 million of corporate bonds and
collateral bond obligations offset by net realized gains from
the sale of corporate and agency bonds, and amortization of
$1.6 million.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
|  |  | Approximately 96% of our fixed maturity securities are classified as
investment grade at September 30, 2002.                                                                                                                                                                                                                

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






International Operations (Discontinued Operations) dollars in thousands:

|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |        |        | 
|-------------------------------- | ------------------------- | ------------------------------------- | - | ------------------ | - | ----------------- | ----- | ----- | ----- | ---- | ----- | ------ | ------ | - | ----- | ------ | ------ | 
|                                 |                           |                                       |   | Three Months Ended |   | Nine Months Ended
|                                 |                           |                                       |   | September 30       |   | September 30     
|                                 |                           |                                       |   |                    |   |                  
|                                 |                           |                                       |   | 2002               |   | 2001              |       | 2002  |       | 2001
|                                 |                           |                                       |   |                    |   |                   |       |       |       |     
|Premiums and Deposits Collected: |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|                                 | Traditional life          |                                       | $ |                   |   |                   | $     | 25    |       |      | $     | 18     |        |   | $     | 146    |       
|                                 | Separate account deposits |                                       |   |                   |   |                   |       | 8,047 |       |      |       | 32,384 |        |   |       | 61,888 |       
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|                                 |                           | Total premiums and deposits collected |   | $                  |  |                   |       | $     | 8,072 |      |       | $      | 32,402 |   |       | $      | 62,034 | 
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|Statement of Operations:         |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|Premium income                   |                           | $                                     |  |                    |   | $                 | 25    |       |       | $    | 18    |        |        | $ | 146   |       
|Net investment income            |                           |                                       |  |                    |   |                   | 138   |       |       |      | 103   |        |        |   | 418   |       
|Separate account fees            |                           |                                       |  |                    |   |                   | 2,474 |       |       |      | 3,569 |        |        |   | 6,728 |       
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|                                 |                           | Total revenues                        |   |                    |  |                   |       |       | 2,637 |      |       |        | 3,690  |   |       |        | 7,292  | 
|Benefits and claims              |                           |                                       |  |                    |   |                   | 9     |       |       |      | (186  | )      |        |   | (59   | )     
|Amortization                     |                           |                                       |  |                    |   |                   | 853   |       |       |      | 272   |        |        |   | 2,017 |       
|Commission expenses              |                           |                                       |  |                    |   |                   | (25   | )     |       |      | 97    |        |        |   | 46    |       
|Other operating expenses         |                           |                                       |  |                    |   |                   | 863   |       |       |      | 1,889 |        |        |   | 2,743 |       
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|                                 |                           | Total benefits and expenses           |   |                    |  |                   |       |       | 1,700 |      |       |        | 2,072  |   |       |        | 4,747  | 
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       
|                                 |                           | Income before income taxes            |   | $                  |  |                   |       | $     | 937   |      |       | $      | 1,618  |   |       | $      | 2,545  | 
|                                 |                           |                                       |   |                    |   |                   |       |       |       |      |       |        |        |   |       |       

General:Our international operations (discontinued operations) include
revenues earned and expenses incurred from abroad, primarily Europe, and
include fees collected on our deposits from unit-linked assurance products.
The profitability of this segment primarily depends on the amount of separate
account assets under management, the management fee charged on those assets and
management of our operating expenses.

Quarterly analysisgenerally compares the three month period ending September
30, 2002 to the three month period ending September 30, 2001, however,
effective September 17, 2002 we concluded the sale of our international
operations. In accordance with the sale agreement we do not reflect
international operation activity in our financial statements subsequent to June
30, 2002. Therefore, quarterly analysis is not applicable for the three months
ended September 30, 2002.

Year-to-dateanalysis compares the six month period ending September 30, 2002
to the nine month period ending September 30, 2001. Explanations provided
include substantive information regarding our international operations and
reflect six months of activity in the 2002 period compared to nine months of
activity in the 2001 period.

Separate account depositsconsist of deposits from our unit-linked assurance
products. For GAAP these separate account deposits are not shown as premium
income in the income statement. A change in separate account deposits in a
single period does not directly cause our operating income to change, although
continued increases or decreases in separate account deposits may affect the
growth rate of separate account assets on which fees are earned.

Year-to-date analysis:



| |  | Separate account deposits for the 2002 period, decreased $29.5 million or
48%, to $32.4 million compared to the same period in 2001.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------

The decrease in deposits in 2002 is primarily due to the volatile global equity
environment.

Net investment incomerepresents income earned on our corporate assets such as
cash, short-term investments and fixed securities. Standard Management
International is required to hold a certain level of cash and short-term
investments in order to comply with local insurance laws.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






Year-to-date analysis:



| |  | Net investment income for the 2002 period decreased $.3 million or
75%, to $.1 million compared to the same period in 2001. Corporate
assets averaged $5.3 million and $13.3 million for the nine month
period ending September 30, 2002 and 2001, respectively.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | The net investment yields earned on average invested assets were 2.58%
and 4.27% for the 2002 and 2001 periods, respectively.                                                                                                                                   

Corporate assets consist primarily of cash and short-term investments.

Fees from separate accountsrepresent the net fees earned on our unit-linked
assurance products. The fees include asset based administrative fees, premium
based administrative fees and the amortization of front end loads (deferred
revenue) into income. Asset based fees fluctuate in relation to separate
account assets, and premium based fees fluctuate in relation to premium
collections for certain products. Deferred revenue amortization fluctuates
subject to mandated amortization rules.

Year-to-date analysis:



| |  | Fees from separate accounts for the 2002 period decreased $3.2 million
or 47%, to $3.6 million compared to the same period in 2001. Average
separate account assets decreased $192.5 million or 41% to $280.2 million.
Fees were unfavorably impacted by $.7 million due to changes in the value
of foreign currencies relative to the United States dollar.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Amortization includes the amortization of deferred acquisition costs, such as
sales commissions and other costs, directly related to selling new business and
foreign exchange translation.

Year-to-date analysis:



| |  | Amortization for the 2002 period decreased $1.7 million or 87%, to $.3 million compared to the
same period in 2001. This decrease is partially related to the favorable impact of $.8 million
from changes in the value of foreign currencies relative to the United States dollar. Excluding
the impact of foreign currencies, amortization decreased $.9 million in the 2002 period primarily
due to less fees from separate accounts.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Commission expensesrepresent commission expenses, net of deferrable amounts.

Year-to-date analysis:



| |  | Commission expenses were $97 thousand and $46 thousand for the 2002 and 2001 periods, respectively.
|- |  | ---------------------------------------------------------------------------------------------------

Due to the nature of our business, most incurred commissions are deferred.

Other operating expensesconsist of general operating expenses, including
salaries, net of deferrable amounts.

Year-to-date analysis:



| |  | Other operating expenses were $1.9 million and $2.8 million for the
2002 and 2001 periods, respectively.
|- |  | --------------------------------------------------------------------------------------------------------

Foreign currency translationcomparisons between 2002 and 2001 are impacted by
the strengthening and weakening of the United States dollar relative to foreign
currencies, primarily the Euro. The impact of these translations has been
quantified on fees from separate accounts and amortization.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






Liquidity and Capital Resources

Liquidity of Standard Management (Parent Company)

Standard Management is a financial services holding company whose
liquidity requirements are met through payments received from our subsidiaries.
These payments have included 1) surplus debenture interest, 2) dividends, 3)
management fees, 4) equipment rental fees, 5) lease income and 6) allocation of
taxes through a tax sharing agreement, all of which are subject to restrictions
under applicable insurance laws and are used to pay our operating expenses and
meet our debt service obligations. These internal sources of liquidity have
been supplemented in the past by external sources such as revolving credit
agreements and long-term debt and equity financing in the capital markets.

Potential Cash Available in 2002

We anticipate that available cash from our existing working capital,
surplus debenture interest, dividends, management fees, equipment rental fees
and lease income will be more than adequate to meet our anticipated parent
company cash requirements in 2002. The following describes our potential
sources of cash in 2002.

Surplus Debenture Interest. We loaned $27.0 million to Standard Life
Insurance Company of Indiana (Standard Life) pursuant to unsecured surplus
debenture agreements (surplus debentures) which requires Standard Life to
make quarterly interest payments at a variable corporate base rate plus 2% per
annum, and annual principal payments of $1.0 million per year beginning in 2007
and concluding in 2033. 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. We currently anticipate these quarterly approvals will
be granted. Assuming the approvals are granted and the September 30, 2002
interest rate of 6.75% continues, we expect to receive interest income of $1.8
million from the surplus debentures in 2002.

Dividends paid from Standard Life 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 1) net
gain from operations or 2) 10% of surplus, in each case as shown in its
preceding annual statutory financial statements. In 2001, we received
dividends of $1.6 million and $.5 million from Standard Life and Savers
Marketing, respectively. In 2002, we could receive dividends of approximately
$4.4 million from Standard Life.

Management Fees. Pursuant to a management services agreement, Standard
Life paid $3.6 million during 2001 for certain management services related to
the production of business, investment of assets and evaluation of
acquisitions. In addition, Dixie National Life Insurance Company (Dixie
Life) paid Standard Life $1.1 million in 2001, respectively, for certain
management services provided. Both of these agreements provide that they may
be modified or terminated by the applicable Departments of Insurance in the
event of financial hardship of Standard Life or Dixie Life. In 2002, we expect
to receive management fees of $3.6 million from Standard Life.

Pursuant to the management services agreement, Premier Life (Luxembourg)
paid $1.2 million during 2001 for certain management, technical support and
administrative services. In 2002, we expect to receive management fees of $.4
million from Premier Life (Bermuda) and $.1 million from Premier Life
(Luxembourg). These fees were terminated upon the sale of our international
operations.

Equipment Rental Fees. In 2001 we charged subsidiaries $1.1 million for
the use of our equipment. In 2002, we expect to receive $1.1 million of
equipment rental fees from Standard Life.

Lease Income. Effective January 1, 2002, we entered into a lease
agreement with Standard Life who leases approximately 43,000 square feet of our
office space located at 10689 North Pennsylvania Street. In 2002, we expect to
receive lease income of $.8 million from Standard Life.

Tax Sharing Payments. Effective January 1, 2000 we entered into a tax
sharing agreement with Savers Marketing Corporation (Savers Marketing) and
Standard Management International S.àr.l. (Standard Management International)
that allocates the consolidated federal income tax liability. During 2001,
Savers Marketing and Standard Management International
paid $.5 million and $.8 million, respectively, in accordance with this
agreement. We do not expect tax sharing payments in 2002 to be material.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






Estimated Cash Required in 2002

The following are the characteristics of our mortgage payable, notes
payable and trust preferred securities, including estimated required payments
in 2002.

Mortgage Payable:

The following are characteristics of our mortgage payable agreement at
September 30, 2002:



| |  | outstanding balance of $6.8 million;                                                            
|- |  | ------------------------------------------------------------------------------------------------
| 
| |  | interest rate of 7.38% per annum;                                                               
| 
| |  | principal and interest payments: $56 thousand per month through December 2011;                  
| 
| |  | interest payments required in 2002 based on current balances will be $.5 million;               
| 
| |  | note may be prepaid on or before January 2005 at 105% and declining to 101% after December 2008.

Notes Payable:

The following are characteristics of our amended credit agreement at September 30, 2002:



| |  | outstanding balance of $3.75 million;                                                                                                                                         
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | weighted average interest rate of 5.05%;                                                                                                                                      
| 
| |  | principal payments: $.6 million and $3.75 million paid in March 2002
and September 2002, respectively. The remaining principal payment of
$3.75 million is due in August 2003.
| 
| |  | subject to certain restrictions and financial and other covenants;                                                                                                            
| 
| |  | interest payments required in 2002 based on current balances will be $.3 million.                                                                                             

The following are characteristics of our subordinated debt agreement at September 30, 2002:



| |  | outstanding balance of $11.0 million;                                                                           
|- |  | ----------------------------------------------------------------------------------------------------------------
| 
| |  | interest rate is greater of 1) 10% per annum or 2) six month London
Inter-Bank Offered Rate (LIBOR) plus 1.5%;
| 
| |  | due October 2007;                                                                                               
| 
| |  | interest payments required in 2002 based on current balances will be $1.1 million.                              

Trust Preferred Securities:

The following are characteristics of our trust preferred securities at September 30, 2002:



| |  | outstanding balance of $20.7 million;                                                                    
|- |  | ---------------------------------------------------------------------------------------------------------
| 
| |  | annual distribution rate of 10.25%; distributions may be deferred up to 20 consecutive quarters;         
| 
| |  | matures August 9, 2031;                                                                                  
| 
| |  | may be redeemed on or after August 9, 2006 at $10 per security plus accumulated and unpaid distributions;
| 
| |  | distributions required in 2002 based on current balances will be $2.1 million;                           
| 
| |  | distributions are classified as interest expense.                                                        

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General: On a consolidated basis we reported net cash provided by
operations of $.9 million and $1.6 million for the first nine months of 2002
and 2001, respectively. At September 30, 2002, we had parent company only
cash and short-term investments of $4.1 million which are available for general
corporate purposes. Annual parent company operating expenses (not including
interest expense) were $4.3 million and $4.5 million for 2001 and 2000,
respectively.

Liquidity of Insurance Operations

United States Insurance Operations (Continuing Operations). The principal
liquidity requirements of Standard Life are its 1) contractual obligations to
policyholders, 2) surplus debenture interest, dividends, management fees and
rental fees to Standard Management and 3) 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, 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 rating and events in the
industry that affect policyholders confidence.

Certain 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
activity of its insurance products and manages the composition of its
investment portfolios, including liquidity, to ensure it has sufficient cash
resources in light of such activity.

Changes in interest rates may affect our 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 our earnings if we were required to sell investments at
reduced values to meet liquidity demands. We manage our asset and liability
portfolios in order to minimize the adverse earnings effect of changing market
interest rates. We seek assets that have duration characteristics similar to
the liabilities that they support. We also prepare cash flow projections and
perform cash flow tests under various market interest rate scenarios to assist
in evaluating liquidity needs and adequacy. Our United States 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 as modified by the Indiana
Department of Insurance, or the state in which our 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: 1) acquisition costs (primarily
commissions and policy issue costs) and 2) 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 or surplus strain in the year written for many insurance
products. We design our products to minimize such first-year losses, but
certain products continue to cause a statutory loss in the year written. For
each product, we control the amount of net new premiums written to manage the
effect of such surplus strain. Our long-term growth goals contemplate continued
growth in our insurance businesses. To achieve these growth goals, our United
States insurance subsidiaries will need to increase statutory surplus.
Additional statutory surplus may be secured through various sources such as
internally generated statutory earnings, infusions with funds generated through
our debt or equity offerings, or mergers with other life insurance companies.
If additional capital is not available from one or more of these sources, we
believe that we could reduce surplus strain through the use of reinsurance or
through reduced writing of new business.

We believe that the operational cash flow of Standard Life will be
sufficient to meet our anticipated needs for 2002. As of September 30, 2002,
Standard Life had statutory capital and surplus for regulatory purposes of
$57.8 million. As the annuity business produced by Standard Life increases,
Standard Life expects to satisfy statutory capital and surplus requirements
through statutory profits and through additional capital contributions by
Standard Management. Net cash flow from operations on a statutory basis of
Standard Life, after payment of benefits and operating expenses, was $335.7
million and $149.2 million for the first nine months of 2002 and 2001,
respectively. If the need arises for cash, which is not readily available,
additional liquidity could be obtained from the sale of invested assets.

International Operations (Discontinued Operations).Standard Management
International and Premier Life (Luxembourg) were not permitted to pay dividends
in 2001 due to accumulated losses.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES






Forward-looking Statements

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 our products and trends in our 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, but are not limited to:



| |  | general economic conditions and other factors, including prevailing interest rate levels, stock market performance
which may affect the ability to sell our products, the market value of our investments and the lapse rate and
profitability of our policies;
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | customer response to new products, distribution channels and marketing initiatives;                                                                                                                                                                            
| 
| |  | mortality, morbidity and other factors which may affect the profitability of our insurance products;                                                                                                                                                           
| 
| |  | changes in the Federal income tax laws and regulation which may affect the relative tax advantages of some of our
products;                                                                                                                                    
| 
| |  | increasing competition in the sale of our products;                                                                                                                                                                                                            
| 
| |  | regulatory changes or actions, including those relating to regulation of financial services affecting bank sales and
underwriting of insurance products, regulation of the sale, underwriting and pricing of insurance products;                               
| 
| |  | the availability and terms of future acquisitions; and                                                                                                                                                                                                         
| 
| |  | the risk factors or uncertainties listed from time to time in any document incorporated by reference herein.                                                                                                                                                   




ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks and the way they are managed are summarized in our
discussion and analysis of financial condition and results of operations in our
December 31, 2001 Form 10-K. There have been no material changes in 2002 to
these risks or the management of these risks.




ITEM 4. CONTROLS AND PROCEDURES

Our Chief Executive Officer and Chief Financial Officer have evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-4c under the Securities Exchange Act of 1934) as of a date within 90 days
of the filing date of this Quarterly Report on Form 10-Q (the Evaluation
Date). They have concluded that, as of the Evaluation Date, our disclosure
controls and procedures were adequate and effective. There were no significant
changes in our internal controls or in other factors that could significantly
affect disclosure controls and procedures subsequent to the Evaluation Date.

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES









PART II. OTHER INFORMATION




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

(a)  Exhibits

|     |  |                                                                              
|---- |  | -----------------------------------------------------------------------------
|99.1 |  | Certification of Chief Executive Officer, pursuant to 18 U.S.C.
Section 1350.
|99.2 |  | Certification of Chief Financial Officer, pursuant to 18 U.S.C.
Section 1350.

(b)  Reports on Form 8-K

On August 30, 2002, we filed a Current Report on Form 8-K reporting the
unaudited pro forma consolidated balance sheet as of June 30, 2002, and the
unaudited pro forma consolidated statements of income for the six month period
ended June 30, 2002 and the year ended December 31, 2001 giving effect to the
sale of our Bermuda operations to Winterthur Life, a division of Credit Suisse
Group.

On October 2, 2002 we filed a Current Report on Form 8-K reporting the
unaudited pro forma consolidated balance sheet as of June 30, 2002, and the
unaudited pro forma consolidated statements of income for the six month period
ended June 30, 2002 and the year ended December 31, 2001, giving effect to the
sale of our Premier Life (Luxembourg) S.A. business to Winterthur Life, a
division of Credit Suisse Group.




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: October 31, 2002 |  |                                              |  |                                                                                                 
|                        |  |                                              |  |                                                                                                 
|                        |  | STANDARD MANAGEMENT CORPORATION
(Registrant)
|                       
|                        |  | By:                                          |  | /s/ RONALD D. HUNTER                                                                            
|                        |  |                                              |  |                                                                                                 
|                        |  |                                              |  | Ronald D. Hunter
Chairman of the Board and Chief Executive Officer
(Principal Executive Officer)
|                        |  |                                              |  |                                                                                                 
|                        |  | By:                                          |  | /s/ GERALD R. HOCHGESANG                                                                        
|                        |  |                                              |  |                                                                                                 
|                        |  |                                              |  | Gerald R. Hochgesang
Senior Vice President and Treasurer
(Chief Accounting Officer)             

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STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES









CERTIFICATION

I, Ronald D. Hunter, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Standard Management
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

/s/ Ronald D. Hunter




Ronald D. Hunter
Chairman and Chief Executive Officer


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CERTIFICATION

I, Paul B. Pete Pheffer, certify that:

1.     I have reviewed this quarterly report on Form 10-Q of Standard Management
Corporation;

2.     Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.     The registrants other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



| |                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared;
|
| | b) evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the Evaluation Date); and                                                                                                  
|
| | c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrants auditors and the audit
committee of registrants board of directors (or persons performing the
equivalent function):



| |                                                                                                                                                                                                                                                                                                  
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material
weaknesses in internal controls; and
|
| | b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: October 31, 2002

/s/Paul B. Pete Pheffer




Paul B. Pete Pheffer
President and Chief Financial Officer


26