UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549


                                  FORM 10-Q/A


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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996

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

         For the transition period from                to

                         Commission File Number: 0-20882

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


       Indiana                                         No. 35-1773567
 (State of incorporation)                        (I.R.S. employer
identification no.)

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

                                 (317) 574-6200
                               (Telephone number)

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


As of October 31, 1996, the Registrant had 4,774,270  shares  of  Common  Stock
outstanding.
<PAGE>
                        STANDARD MANAGEMENT CORPORATION
                                     INDEX



PART I.  FINANCIAL INFORMATION:
  PAGE

Item 1.  Financial Statements

 Consolidated Balance Sheets -
 September 30, 1996 (Unaudited) and December 31, 1995 (Audited)
     3

 Consolidated Statements of Operations -
 For the Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
     5

 Consolidated Statements of Shareholders' Equity -
 For the Nine Months Ended September 30, 1996 and 1995 (Unaudited)
     6

 Consolidated Statements of Cash Flows -
 For the Nine Months Ended September 30, 1996 and 1995 (Unaudited)
     7

 Notes to Consolidated Financial Statements (Unaudited)
     8

Item 2.  Management's Discussion and Analysis of Financial Condition and
Results of Operations
    11

PART II.  OTHER INFORMATION:

Item 5.  Other Information
    22

Item 6.  Exhibits and Reports on Form 8-K
    23

Signatures
    24

Exhibit 11 - Statement re: Computation of Per Share Earnings -
    25
 For the Three Months and Nine Months Ended September 30, 1996 and 1995
(Unaudited)
<PAGE>
                            PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        STANDARD MANAGEMENT CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                            (DOLLARS IN THOUSANDS)


<TABLE>
<CAPTION>
                                                                                    September 30,               December 31,
<S>                                                                         <C>                          <C>
                                                                                    1996                        1995
                                                                                     (Unaudited)                  (Audited)
                            ASSETS
Investments:
  Securities available for sale:
     Fixed maturity securities, at fair value
        (amortized cost: $246,640 in 1996 and $225,643 in 1995)             $241,713                     $232,092
     Equity securities, at fair value (cost: $55 in 1996 and $52 in 1995)   77                           52
  Mortgage loans on real estate, at unpaid principal balances               3,016                        2,963
  Policy loans, at unpaid principal balances                                7,498                        8,509
  Real estate, at depreciated cost                                          547                          556
  Other invested assets                                                     957                          1,367
  Short-term investments, at cost, which approximates fair value            12,070                       35,058
        Total investments                                                   265,878                      280,597
Cash                                                                        4,411                        5,762
Amounts due and recoverable from reinsurers                                 65,047                       33,419
Deferred policy acquisition costs                                           17,977                       10,054
Present value of future profits, less accumulated amortization of
  $3,063 in 1996 and $2,803 in 1995                                         15,027                       15,246
Excess of acquisition cost over net assets acquired, less
  accumulated amortization of $286 in 1996 and $393 in 1995                 2,279                        3,175
Deferred federal income taxes                                               194                          -
Other assets                                                                8,681                        8,640
Assets held in separate accounts                                            126,987                      122,705
        Total assets                                                        $506,481                                      $479,598
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                        STANDARD MANAGEMENT CORPORATION

                    CONSOLIDATED BALANCE SHEETS (CONTINUED)
               (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                             September 30,                           December 31,
<S>                                                          <C>                                          <C>
                                                                     1996                                    1995
                                                                   (UNAUDITED)                       (Audited)
LIABILITIES, REDEEMABLE SECURITIES AND SHAREHOLDERS' EQUITY
Liabilities:
  Future policy benefits:
     Interest-sensitive annuities and other financial        $244,240                                     $212,500
     products
     Traditional life insurance                              79,623                                        82,762
        Total future policy benefits                         323,863                                      295,262
  Policy claims and other policyholders' benefits and funds  2,582                                          2,572
                                                             326,445                                      297,834
  Accounts payable and accrued expenses                      4,826                                          4,880
  Class action litigation and settlement liability           -                                              3,000
  Obligations under capital lease                            753                                            1,084
  Notes payable                                              5,671                                          3,107
  Deferred federal income taxes                              -                                              2,583
  Excess of net assets acquired over acquisition cost, less
     accumulated amortization of $3,492 in 1996 and
     $2,451 in 1995                                          3,122                                          4,163
  Liabilities related to separate accounts                   126,987                                      122,705
        Total liabilities                                    467,804                                      439,356
Class S Cumulative Convertible Redeemable Preferred Stock,
  par value $10 per share:
     Authorized 300,000 shares; issued and outstanding
     160,789 shares, redemption value of $10 per share plus
     accumulated and unpaid dividends
                                                             1,722                                               -
Shareholders' equity:
  Preferred stock, no par value:
     Authorized 700,000 shares; none issued and outstanding  -                                                   -
  Common stock, no par value:
     Authorized 20,000,000 shares; issued 5,752,499 shares
        in 1996 and 5,459,573 shares in 1995                 40,997                                        39,808
  Treasury stock, at cost, 978,229 shares in 1996 and
     502,025 shares in 1995 (deduction)                      (4,741)                                      (2,621)
  Unrealized gain (loss) on securities available for sale    (1,892)                                        2,582
  Foreign currency translation adjustment                    717                                            1,159
  Retained earnings (deficit)                                1,874                                          (686)
        Total shareholders' equity                           36,955                                        40,242
        Total liabilities, redeemable securities
           and shareholders' equity                          $506,481                                    $479,598
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
                        STANDARD MANAGEMENT CORPORATION

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


<TABLE>
<CAPTION>
                                                                      Three Months Ended                  Nine Months Ended
                                                                         September 30,                      September 30,
<S>                                                           <C>               <C>               <C>              <C>
                                                                   1996              1995              1996             1995
Revenues:
  Premium income                                              $     1,289       $     1,203       $     8,418      $     3,543
  Net investment income                                       4,979             4,497             14,371           13,677
  Net realized investment gains                               222               172               677              505
  Gain on disposal of subsidiaries                            -                 -                 886              -
  Policy charges                                              617               541               1,832            1,645
  Amortization of excess of net assets acquired over          347               347               1,041            1,041
acquisition cost
  Management fees and similar income from separate accounts   257               236               1,093            724
  Other income                                                258               108               1,172            257
     Total revenues                                           7,969             7,104             29,490           21,392
Benefits and expenses:
  Benefits and claims                                         1,434             1,362             8,657            4,123
  Interest credited on interest-sensitive annuities and other
     financial products                                       2,641             2,198             7,645            7,325
  Salaries and wages                                          1,215             1,117             3,678            3,322
  Amortization                                                564               430               1,723            1,351
  Other operating expenses                                    1,263             1,533             5,173            4,473
  Interest expense and financing costs                        153               24                430              77
  Class action litigation and settlement costs (credit)       -                 -                 -                (314)
     Total benefits and expenses                              7,270             6,664             27,306           20,357
Income before federal income taxes, extraordinary gain on
early                                                         699               440               2,184            1,035
  redemption of preferred stock and redeemable preferred
stock dividends
Federal income tax expense (credit)                           228               (5)               (890)            56
Income before extraordinary gain on early redemption
  of preferred stock and redeemable preferred stock dividends 471               445               3,074            979
Extraordinary gain on early redemption of redeemable
preferred stock,                                              233               -                 500              -
  net of $- federal income tax
NET INCOME                                                    704               445               3,574            979
Preferred stock dividends                                     51                -                 163              -
Earnings available to common shareholders                     $653              $445              $3,411           $979
Earnings per share:
  Income before extraordinary gain on early redemption of
     redeemable preferred stock and preferred stock dividends $ .10             $.08              $.61             $.18
  Extraordinary gain on early redemption of redeemable        .04               -                 .09              -
  preferred stock
   NET INCOME                                                 .14               .08               .70              .18
   Preferred stock dividends                                  .01                 -               .02                -
  Earnings available to common shareholders                   $.13              $.08              $.68             $.18
Weighted average number of shares outstanding:
   Common shares                                              4,774,840         5,209,439         4,835,657        5,257,535
  Common equivalent shares                                    165,242           166,956           463,842          90,671
                                                              4,940,082         5,376,395         5,299,499        5,348,206
</TABLE>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

<PAGE>
                        STANDARD MANAGEMENT CORPORATION

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
          (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)



<TABLE>
<CAPTION>
                                                                            Nine Months Ended September 30,
<S>                                                 <C>              <C>                          <C>              <C>
                                                                 Amounts                                       Shares
                                                       1996             1995                         1996             1995
Common stock:
   Balance, beginning of period                     $39,808          $39,695                      5,459,573        5,457,906
      Issuance of common stock                      100              -                            20,000           -
      5% common stock dividend                      850              -                            272,926          -
      Issuance of common stock warrants             239              -                            -                -
      Issuance of common stock in connection with
      exercise                                      -                6                            -                1,667
         of stock options
   Balance, end of period                           40,997           39,701                       5,752,499        5,459,573

Treasury stock (at cost):
   Balance, beginning of period                     (2,621)          (2,221)                      (502,025)        (418,425)
      Treasury stock acquired                       (2,126)          (395)                        (431,026)        (82,600)
      5% common stock dividend                      -                -                            (46,402)         -
      Reissuance of treasury stock in connection
with                                                6                -                            1,224            -
         exercise of stock options
   Balance, end of period                           (4,741)          (2,616)                      (978,229)        (501,025)

Unrealized gain (loss) on securities:
   Balance, beginning of period                     2,582            (13,411)
      Change in unrealized gain (loss) on
         securities available for sale, net         (4,474)          13,692
   Balance, end of period                           (1,892)          281

Foreign currency translation adjustments:
   Balance, beginning of period                     1,159            546
      Translation adjustments for the period        (442)            804
   Balance, end of period                           717              1,350

Retained earnings (deficit):
   Balance, beginning of period                     (686)            (1,999)
      Net income                                    3,574            979
       5% common stock dividend, plus cash in lieu
of                                                  (850)            -
         fractional shares
      Loss on reissuance of treasury stock          (1)              -
      Other                                         -                (4)
      Preferred stock dividend                      (163)            -
   Balance, end of period                           1,874            (1,024)

Total shareholders' equity and common shares        $36,955          $37,692              4,774,270        4,956,881
outstanding
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE>
                        STANDARD MANAGEMENT CORPORATION

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

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                               SEPTEMBER 30,
<S>                                                                         <C>                     <C>
                                                                           1996                    1995
OPERATING ACTIVITIES
Net income                                                                  $3,574                    $979
Adjustments to reconcile net income
   to net cash provided by operating activities:
     Amortization of deferred policy acquisition costs                          837                     814
     Policy acquisition costs deferred                                      (4,519)                 (1,102)
     Class action litigation and settlement liability                            -                    (637)
     Deferred income taxes                                                    (471)                     419
     Depreciation and amortization                                              308                    (79)
     Change in future policy benefits                                         5,995                   2,679
     Net increase (decrease) in policy claims and
          other policyholders' benefits and funds                             (228)                   (215)
     Net realized investment gains                                            (677)                   (505)
     Decrease (increase) in accrued investment income                         (244)                     641
     Extraordinary gain on early redemption of redeemable
                     preferred stock                                          (500)                      -
     Other                                                                  (1,318)                   3,350
          NET CASH PROVIDED BY OPERATING ACTIVITIES                           2,757                   6,344
FINANCING ACTIVITIES
Issuance of Common Stock                                                         -                        6
Borrowings                                                                   2,600 200
Repayments on borrowings and capital lease obligation                        (364)                   (988)
Premiums received on interest-sensitive annuities
     and other financial products credited to
     policyholder account balances, net of premiums ceded                    32,153                  10,680
Return of policyholder account balances on
     interest-sensitive annuities and other
     financial products, net of premiums ceded                             (12,993)                (13,400)
Redemption of redeemable preferred stock                                      (941)                      -
Proceeds from common and treasury stock sales                                   106                      -
Purchase of common stock for treasury                                       (2,126)                   (395)
          NET CASH USED BY FINANCING ACTIVITIES                              18,435                 (3,897)
INVESTING ACTIVITIES
Fixed maturity securities available for sale:
     Purchases                                                            (136,972)               (143,025)
     Sales                                                                   94,247                 139,856
     Maturities                                                               6,381                   2,028
Short-term investments, net                                                   2,647                 (1,931)
Other investments, net                                                         (68)                   (186)
Proceeds from sale of property and equipment under
     capital lease                                                               -                    1,396
Proceeds from sale of First International Life Insurance
     Company, less cash transferred to seller of $265                        11,228                      -
          NET CASH USED BY INVESTING ACTIVITIES                            (22,537)                 (1,862)
Net increase (decrease) in cash                                             (1,351)                     585
Cash at beginning of period                                                   5,762                   1,604
Cash at end of period                                                       $4,411                  $2,189
</TABLE>

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
                        STANDARD MANAGEMENT CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
          (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

NOTE 1 - BASIS OF PRESENTATION

      The  accompanying  unaudited  consolidated financial statements have been
prepared in accordance with generally  accepted  accounting principles ("GAAP")
for interim financial information and with the instructions  to  Form  10-Q and
Article  10  of  Regulation  S-X.   Accordingly, they do not include all of the
information and footnotes required by  GAAP  for complete financial statements.
Such principles were applied on a basis consistent  with those reflected in the
Standard Management Corporation ("SMC") Annual Report on Form 10-K for the year
ended December 31, 1995.  However, certain reclassifications  have been made in
the 1995 financial statements to conform with the 1996 presentation.

      The  results of operations for the interim periods shown in  this  report
are not necessarily  indicative  of  the  results  that may be expected for the
fiscal year.  This is particularly true in the life  insurance  industry, where
mortality results in interim periods can vary substantially from  such  results
over  a  longer  period.     In  the  opinion  of  management,  the information
contained  herein  reflects  all  adjustments necessary to make the results  of
operations for the interim periods  a  fair  statement of such operations.  All
such adjustments are of a normal recurring nature.

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

      The consolidated financial statements as of and for the three  months and
nine  months  ended  September 30, 1996 include the assets and liabilities  and
results of operations of Dixie National Life Insurance Company ("Dixie National
Life") which was acquired on October 2, 1995.

      For further information,  refer  to the consolidated financial statements
and footnotes thereto included in the SMC  Annual  Report  on Form 10-K for the
year ended December 31, 1995.

NOTE 2 - COMMON STOCK

      SMC  declared  a  5%  stock  dividend on shares of its common  stock  for
shareholders of record on May 17, 1996 which was distributed to shareholders on
June 21, 1996.  All applicable number  of shares and per share amounts included
in the consolidated financial statements  have  been  retroactively adjusted to
reflect this stock dividend.

NOTE 3 - NOTES PAYABLE

      SMC  has  outstanding  borrowings  at September 30, 1996  pursuant  to  a
Revolving Line of Credit Agreement with a  bank  (the "Credit Agreement") which
provides  for it to borrow up to $6,000 in the form  of  a  five-year  reducing
revolving loan  arrangement,  which  may  be  extended  to  seven  years at the
discretion  of  the  bank.  At September 30, 1996, the total principal  balance
borrowed under the Credit Agreement was $5,600.  SMC had borrowed an additional
$2,600 since December  31,  1995  to  repurchase  its  Common Stock and Class S
Cumulative Convertible Redeemable Preferred Stock ("Class  S  Preferred Stock")
and for general corporate purposes.  Borrowings under this Credit Agreement may
be  used  for  contributions to surplus of insurance subsidiaries,  acquisition
financing, and repurchases  of Class S Preferred Stock and Common Stock of SMC.
Interest on the borrowings under  the  Credit  Agreement  is determined, at the
option of SMC, to be: (i) a fluctuating rate of interest to  the corporate base
rate announced by the bank from time to time plus 1 percent per  annum, or (ii)
a  rate at LIBOR plus 3.25 percent.  The actual weighted average interest  rate
was  8.89  percent  at September 30, 1996.  The debt is also subject to certain
restrictions and covenants  considered  ordinary  for  this  type of borrowing.
They include, among others, minimum consolidated equity, positive  net  income,
and  minimum  consolidated  statutory surplus for SMC's insurance subsidiaries.
Additional covenants
<PAGE>
                        STANDARD MANAGEMENT CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)


include limitations on acquisitions,  additional indebtedness, investments, and
mergers, consolidations and sales of assets.  As of September 30, 1996, SMC was
in compliance with all restrictions and covenants in the Credit Agreement.

NOTE 4 - REDEEMABLE PREFERRED STOCK

      In connection with the class action  lawsuit  settlement  in  March 1995,
300,000  shares  designated  as  Class S Preferred Stock, $10.00 per share  par
value, were issued February 8, 1996.  The Class S Preferred Stock is redeemable
in  February 2003, has an 11 percent  annual  cumulative  dividend  payable  in
February  2003,  and  is  convertible  into SMC common stock at $7.62 per share
until  February 1998 and $10.00 per share  thereafter,  subject  to  adjustment
under a formula intended to protect against dilution.

      SMC  may voluntarily redeem the Class S Preferred Stock prior to February
2003 at par  value  plus accumulated and unpaid dividends.  As of September 30,
1996, SMC has repurchased and retired 139,211 shares of Class S Preferred Stock
at a cost of $941 primarily paid through borrowings under the Credit Agreement.
These repurchases resulted  in  an  extraordinary  gain  on early redemption of
redeemable  preferred  stock  of  $233 and $500 for the three  and  nine  month
periods ended September 30, 1996, respectively.

NOTE 5 - NET UNREALIZED GAIN (LOSS) ON SECURITIES AVAILABLE FOR SALE

      The components of the balance  sheet  caption  "Unrealized gain (loss) on
securities  available  for  sale"  in shareholders' equity  are  summarized  as
follows:
<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30,             December 31,
                                                                              1996                     1995
<S>                                                                                <C>                       <C>
Fair value of securities available for sale                                        $241,790                  $232,144
Amortized cost of securities available for sale                                      246,695                   225,695
                  Gross unrealized gain (loss) on securities                         (4,905)                     6,449
available for sale
Adjustments for:
                  Deferred policy acquisition costs                                    1,860                   (2,380)
                  Present value of future profits                                        155                     (174)
                  Deferred federal income tax recoverable                                996                   (1,311)
(liability)
                  Minority interest                                                        2                       (2)
                                                                 Net               $(1,892)                  $2,582
unrealized gain (loss) on securities available for sale
</TABLE>

NOTE 6 - INCOME TAXES

      The effective consolidated federal  income  tax expense (credit) rate for
SMC and subsidiaries (the "Company") was 33 percent  and  (41)  percent for the
three and nine months ended September 30, 1996, compared to (1) percent  and  5
percent  for  the  three  and  nine months ended September 30, 1995.  The large
credit for the nine months ended  September  30,  1996  is primarily due to tax
benefits  of $1,420 related to the sale of First International  Life  Insurance
Company ("First  International")  (SEE  NOTE  7).  Also, the effective rates in
1995 are less than the statutory rates primarily  because  the  amortization of
excess  of  net  assets  acquired  over  acquisition  cost  resulting from  the
acquisition  of  Standard  Management  International is not subject  to  United
States income tax.  The Company also has  received  the  benefits  of a special
deduction  available  to small life insurance companies and the utilization  of
operating loss carryforwards  in  1995.   The benefits of the special deduction
available to small life insurance companies  is  no  longer  available  because
consolidated assets now exceed $500,000.



<PAGE>
                        STANDARD MANAGEMENT CORPORATION

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (CONTINUED)



NOTE 7 - DISPOSAL OF SUBSIDIARIES

      On  March 18, 1996, Standard Life Insurance Company of Indiana ("Standard
Life"), a wholly-owned  subsidiary  of  SMC,  completed the sale of a duplicate
charter associated with its wholly-owned subsidiary,  First  International,  to
Guardian Insurance and Annuity Co., Inc. ("GIAC"), a subsidiary of The Guardian
Life  Insurance Company of America, New York, New York.  Standard Life received
sale proceeds of $10,393, including $1,500 for the charter and
licenses  associated  with  First  International.  Standard Life realized a net
pre-tax gain of $1,042 and a tax benefit  of  $1,420 on this sale or $2,462 for
the  nine months ended September 30, 1996.  In addition,  First  International,
Standard  Life  and  GIAC have entered into a series of agreements that include
provisions for Standard  Life  to  continue  to  administer First International
policies  in force at the date of sale and for Standard  Life  to  continue  to
receive the  profit  stream from the majority of First International's in force
business at the date of such sale.

      In an unrelated matter, the Company decided in February 1996 to terminate
the reinsurance agreement  between  Standard  Reinsurance of North America Ltd.
("Standard  Reinsurance")  and  Salamandra  Joint-Stock  Insurance  Company  in
Ukraine  ("Salamandra"),  and not to renew the  Barbados  license  of  Standard
Reinsurance due to an insignificant amount of reinsurance premium volume.  This
resulted in the termination  of  Standard Reinsurance operations and the write-
off of SMC's investment in Standard  Reinsurance  and certain intangible assets
of Standard Reinsurance amounting to $156 for the nine  months  ended September
30, 1996.

      The  combined  effect  of  the  gain  on sale of First International  and
related contracts, and the Standard Reinsurance  write-offs, was an increase in
revenues  of  $886  and  a  tax benefit of $1,420, for  net  income  effect  of
approximately $2,306 or $.44  per share for the nine months ended September 30,
1996.

NOTE 8 - SUBSEQUENT EVENT

      On November 8, 1996, Standard  Life  acquired  through merger Shelby Life
from DLAC, a life insurance company located in Memphis,  Tennessee (the "Shelby
Merger").  The purchase price was approximately $14,650; including  $13,000  in
cash,  250,000  shares  of  restricted  SMC Common Stock (valued at $1,250) and
acquisition  costs  of  $400  associated with  the  purchase  of  Shelby  Life.
Financing for the Shelby Merger  was  provided  by  senior  debt of $10,000 and
$4,000 in subordinated convertible debt.

      For  GAAP  purposes,  Shelby  Life  had  $109,892  in  total  assets  and
shareholder's  equity of $16,407 at September 30, 1996, and revenues of  $8,718
and net income of $1,301 for the nine months ended September 30, 1996.



<PAGE>
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 of the
Company on a consolidated basis for the periods listed as well as the Company's
liquidable  and  capital   resources.    This  discussion  should  be  read  in
conjunction  with  the  consolidated financial  statements  and  notes  thereto
included in this document,  as well as the Company's Annual Report on Form 10-K
for the year ended December 31, 1995.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

      OPERATING INCOME.  The income (loss) from operations (before net realized
investment gains) was $342,000  for  the  third  quarter  of  1996, or $.07 per
share,  compared  to  of  $323,000 for the third quarter of 1995, or  $.06  per
share.  The change resulted from international operations producing income from
operations of $105,000 compared  to  a  loss  from  international operations of
$(73,000)  for  the  third  quarter  of  1996  and  1995,  respectively.    The
international operating gains resulted primarily from increased management fees
on an increasing separate account base due to portfolio sales in 1996 and 1995,
coupled  with  a decrease in marketing costs in 1996 when compared to the third
quarter of 1995.   The income from operations in the United States decreased to
$237,000 in 1996 compared to $396,000 in 1995.  The decline was attributable to
an increase in interest  expense from borrowings to repurchase Common Stock and
Class S Preferred Stock and  additional  costs  to  convert  the operations and
expand the marketing effort in Dixie National Life.

      PREMIUM  INCOME.   Premium  income  is  composed  of premiums,  including
renewal premiums, received on ordinary life insurance policies.   The Company's
new  product  sales  are  composed primarily of annuity products.  Under  GAAP,
deposits from interest-sensitive annuities and other financial products are not
recorded as revenues.  GAAP  premium  income  for the third quarter of 1996 was
$1,289,000, an increase of $86,000 or 7 percent  from  $1,203,000 for the third
quarter  of  1995.  The inclusion of Dixie National Life's  premium  income  of
$432,000 in 1996 in the results of operations for periods after October 2, 1995
is offset by   the  decline  in premiums from the cession of a portion of First
International's  life  insurance   business  and  the  regular  policy  lapses,
surrenders and expiries in the Company's closed blocks of business.

      Net premiums received from the  sales of interest-sensitive annuities and
other financial products (which are not  recorded as revenues) were $13,358,000
compared to $3,664,000 for the third quarter  of  1996  and 1995, respectively.
The increase in net premium received is partially due to  an  increase in gross
domestic  premium  deposits.   Gross  domestic  premium deposits received  from
interest-sensitive annuities and financial products  were  $15,982,000  for the
three  months  ended  September  30,  1996 compared to $8,409,000 for the three
months  ended  September  30,  1995.   The increase  is  partially  due  to  an
aggressive  marketing campaign implemented  by  Standard  Life  with  increased
crediting interest  rates.   Also  contributing to the increase in premiums was
the  continued development of the Company's  distribution  system.   Since  the
Company's  operating  income is primarily a function of its investment spreads,
persistency of annuity  in  force business, mortality experience, and operating
expenses, a change in premium  deposits  in  a  single period does not directly
cause operating income to change, although continued  increases or decreases in
premiums may affect the growth rate of total assets on which investment spreads
are earned.

      The  Company  also decreased the quota-share portion  of  business  ceded
pursuant to a reinsurance  agreement,  under  which  70 percent of a portion of
Standard  Life's  annuity  business  pursuant  to the terms  of  the  agreement
produced after December 31, 1994 was ceded, to 50 percent at September 1, 1995,
which was further decreased to 25 percent effective  April  1,  1996.   Premium
deposits  ceded  pursuant to this reinsurance agreement reduced net premium  by
$2,625,000 in the third quarter of 1996 compared to $4,746,000 in 1995.

<PAGE>
      NET INVESTMENT  INCOME.   Net  investment income increased $482,000 or 11
percent to $4,979,000 for the third quarter  of  1996,  from $4,497,000 for the
comparable period of 1995.  The increase resulted primarily from an increase in
the  average  annualized yield of the Company's investment  portfolio  to  7.57
percent from 7.22 percent for the third quarter of 1996 and 1995, respectively.

      NET REALIZED  INVESTMENT  GAINS.  Net realized investment gains increased
$50,000 or 29 percent to $222,000  from  $172,000 for the third quarter of 1996
and 1995, respectively.  Net realized investment gains fluctuate from period to
period  and  arise when securities are sold  in  response  to  changes  in  the
investment environment  which  provide  opportunities to maximize return on the
investment portfolio without adversely affecting  the quality and overall yield
of  the investment portfolio.  No significant writedowns  on  investments  were
recorded in 1995 or 1996.

      The  net unrealized gain (loss) on the Company's securities available for
sale before  taxes and other adjustments was $(4,905,000) at September 30, 1996
compared to $6,449,000  at  December  31,  1995, reflecting the general rise in
interest rates during the quarter which generally  caused  the  fair  value  of
fixed maturity securities to decrease.  In the absence of decreases in interest
rates the Company may be unable to realize gains on its investment portfolio at
the  levels  of  prior years or could recognize losses from sales of securities
prior to maturity.   The change in market value of the Company's fixed maturity
securities  is  not expected  to  have  a  significant  effect  on  results  of
operations because the Company has the present intent and practice to hold most
of  its available-for-sale  fixed  maturity  securities  to  maturity  and  the
Company's asset/liability management activity is designed to monitor and adjust
for the effects of changes in market interest rates.

      POLICY  CHARGES.   Policy  charges,  which represent the amounts assessed
against  policyholder  account  balances  for the  cost  of  insurance,  policy
administration and surrenders,  increased $76,000 or 14 percent to $617,000 for
the third quarter of 1996 compared to $541,000  for  the third quarter of 1995.
The increase in policy charges resulted from the inclusion  of  Dixie  National
Life in operating results for periods after October 2, 1995 and an increase  in
policy  surrender  charges  on  flexible  premium deferred annuities ("FPDAs"),
which offset the absence of policy charges  from the Company's closed blocks of
universal life business which were sold to GIAC  through a reinsurance contract
effective January 1, 1996.

      AMORTIZATION  OF  EXCESS OF NET ASSETS ACQUIRED  OVER  ACQUISITION  COST.
Amortization of excess of  net assets acquired over acquisition cost ("negative
goodwill") is recorded to amortize into earnings the negative goodwill recorded
in connection with the acquisition  of  Standard  Management  International  in
1993.   The  negative goodwill is being amortized on a straight-line basis over
five years.  Amortization  of  negative  goodwill  was  $347,000  for the third
quarter of 1996 and 1995.

      MANAGEMENT  FEES  AND  SIMILAR INCOME FROM SEPARATE ACCOUNTS.  Management
fees  and similar income is recorded  from  investment  management  fee  income
recorded  by  Standard  Management International on its separate account assets
and investment contracts.   Management  fees  and  similar income from separate
accounts increased $21 or 9 percent to $257,000 for  the  third quarter of 1996
from $236,000 for the third quarter of 1995.  This increase is due primarily to
an increase in the value of assets held in separate accounts  from  $94,301,000
at  December  31,  1994  to  $126,987,000  at  September 30, 1996 and to higher
service fees being levied on certain transactions.

      OTHER INCOME.  Other income primarily includes administration fee income,
reserve adjustments and experience refunds in connection  with  the  agreements
with  GIAC  and  override  commissions received from unaffiliated companies  by
Standard  Marketing  Corporation   ("Standard   Marketing"),   a   wholly-owned
subsidiary  which  is  a  wholesale  distributor  of life insurance and annuity
products.  Other income increased $150,000 or 139 percent  to  $258,000 for the
third quarter of 1996 compared to $108,000 for the comparable 1995 period.  The
increase resulted primarily from the administration fee income of  $145,000  in
the  third  quarter of 1996; there was no such income in the comparable quarter
in 1995.

      BENEFITS  AND  CLAIMS.   Benefits  and  claims include life insurance and
payout  annuity  benefits paid and changes in policy  reserves.   Benefits  and
claims increased $72,000  or  5  percent to $1,434,000 for the third quarter of
1996 from $1,362,000 for the third  quarter  of  1995.   The  increase resulted
primarily from  the inclusion of Dixie National Life's benefits  and  claims in
the  results  of  operations in 1996. Throughout the Company's history, it  has
experienced both periods  of  higher and lower benefit claims.  Such volatility
is not uncommon in the life insurance  industry  and,  over extended periods of
time, periods of higher claims experience tend to be offset by periods of lower
claims experience.

      INTEREST  CREDITED ON INTEREST SENSITIVE ANNUITIES  AND  OTHER  FINANCIAL
PRODUCTS.   Interest   credited  on  interest  sensitive  annuities  and  other
financial products was $2,641,000 for the third quarter of 1996, an increase of
$443,000 or 20 percent from  $2,198,000  for  the comparable prior year period.
The  increase  resulted  primarily  from  the Company's  increase  of  credited
interest rates on new annuity sales and the  growth  in  account values inforce
for FPDAs.  At September 30, 1996, the weighted average interest  credited rate
for Standard Life's annuities and other financial product liabilities  was 5.40
percent compared to 5.27 percent at December 31, 1995.  Crediting rates offered
on  new  business  can  be  changed  at any time in response to competition and
market interest rates.

      SALARIES AND WAGES.  Salaries and  wages  were  $1,215,000  for the third
quarter  of 1996, an increase of $98,000 or 9 percent from $1,117,000  for  the
comparable  prior  year  period.   This  fluctuation was caused primarily by an
increase in the number and average wages of  employees in the United States due
to   the  acquisition  of Dixie National Life and  the  increase  in  incentive
compensation expense for  the  increase  in  income  for  the nine months ended
September 30, 1996.

      AMORTIZATION.  Amortization expense includes charges  to  operations  for
the  amortization  of  deferred  policy acquisition costs, the present value of
future profits and the excess of cost  over  net assets acquired.  Amortization
expense increased $134,000 or 31 percent to $564,000  for  the third quarter of
1996 from $430,000 for the third quarter of 1995.  The increase in current year
amortization expense resulted primarily from the amortization  of present value
of future profits for the acquisition of Dixie National Life.

      OTHER OPERATING EXPENSES.  Other operating expenses decreased $270,000 or
18 percent to $1,263,000 for the third quarter of 1996 from $1,533,000  for the
third  quarter  of  1995.   The  decrease  in other operating expenses resulted
primarily  from  a  decrease  in  marketing  expenses   and   a   reduction  in
international  expenses,  which  offset  the  expenses  of Dixie National  Life
included in the results for the third quarter of 1996.

      INTEREST  EXPENSE  AND FINANCING COSTS.  Interest expense  and  financing
costs increased $129,000 or 538% to $153,000 in 1996 from $24,000 in 1995.  The
increase in interest expense  and financing costs during 1996 resulted from the
borrowings on the Credit Agreement  related  to  the repurchase of Common Stock
and  Class  S  Preferred  Stock.   The borrowings under  the  Credit  Agreement
occurred after September 30, 1995.

      FEDERAL INCOME TAXES.  Federal  income  tax expense (credit) was $228,000
for the third quarter of 1996, compared to $(5,000)  for  the  third quarter of
1995.  The change is primarily due to tax benefits to First International being
recorded in 1995 from the utilization of tax loss carryforwards  for  which  no
tax  benefit had previously been recognized.  Also, the effective rates in 1995
are less  than the statutory rates primarily because the amortization of excess
of net assets  acquired over acquisition cost resulting from the acquisition of
Standard Management  International  is not subject to United States income tax.
The Company also has received the benefits  of a special deduction available to
small  life  insurance  companies  and  the  utilization   of   operating  loss
carryforwards  in  1995.   The  benefits of the special deduction available  to
small life insurance companies is  no  longer  available  because  consolidated
assets now exceed $500,000,000.

      EXTRAORDINARY  GAIN  ON  EARLY REDEMPTION OF REDEEMABLE PREFERRED  STOCK.
Extraordinary gains are recorded  on  the  early  redemption  of  the  Class  S
Preferred  Stock  for the amount by which the Company is able to repurchase the
Class S Preferred Stock  below  its  book  value  plus  accumulated  and unpaid
dividends.   The  Company  will continue to repurchase these shares as long  as
holders of the Class S Preferred  Stock  are  willing  to sell at a substantial
discount  to  book value.  The extraordinary gain was $233,000  for  the  three
months ended September  30,  1996  compared to no gain for the prior comparable
period.

NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995

      OPERATING  INCOME.   The income  from  operations  (before  net  realized
investment gains, gain on disposal of subsidiaries and reduction in accruals of
certain legal expenses) was  $369,000  in  1996, compared to $294,000 for 1995.
The change resulted primarily from international  operations  producing  income
from  operations  of  $440,000  compared  to  a loss of $(396,000) for the nine
months  ended  September  30, 1996 and 1995, respectively.   The  international
operating  gains  resulted primarily  from  increased  management  fees  on  an
increasing separate  account  base due to portfolio sales in 1995 and 1996, and
increased  value  of  assets under  management,  coupled  with  a  decrease  in
marketing  costs in 1996  when  compared  to  1995.   The  income  (loss)  from
operations in  the  United  States  decreased  to $(71,000) in 1996 compared to
$690,000 in 1995.  The decline was attributable  to  an  increase  in  interest
expense from borrowings to repurchase Common Stock and Class S Preferred  Stock
and  additional costs to convert the operations and expand the marketing effort
in Dixie National Life.

      PREMIUM  INCOME.  GAAP premium income for the nine months ended September
30,  1996 was $8,418,000,  an  increase  of  $4,875,000  or  138  percent  from
$3,543,000  for  the  nine  months  ended September 30, 1995.  This increase is
mainly attributable to recapture of premiums  ceded  of  $4,234,000  due to the
termination and recapture of a reinsurance agreement with National Mutual  Life
Insurance  Company ("National Mutual") and the inclusion of Dixie National Life
in the results  of operations for periods after October 2, 1995.  These amounts
offset the decline  in  premiums  from  the  cession  of  a  portion  of  First
International's   life  insurance  business  and  the  regular  policy  lapses,
surrenders and expiries in the Company's closed blocks of business.

      Net premiums  received from the sales of interest-sensitive annuities and
other financial products  (which are not recorded as revenues) were $32,153,000
compared to $10,680,000 for  the nine months ended September 30, 1996 and 1995,
respectively.  The increase in premium deposits is partially due to an increase
in gross domestic premium deposits.   Gross  domestic premium deposits received
from interest-sensitive annuities and financial  products  were $39,781,000 for
the nine months ended September 30, 1996 compared to $26,641,000  for  the nine
months  ended  September  30,  1995.   The  increase  is  partially  due  to an
aggressive  marketing  campaign  implemented  by  Standard  Life with increased
crediting interest rates.  Also contributing to the increase  in  premiums  was
the continued development of the Company's distribution system.

      As  previously  mentioned,  the  Company  also  decreased the quota-share
portion of business ceded pursuant to a reinsurance agreement  from  70 percent
to  50 percent at September 1, 1995, which was further decreased to 25  percent
effective  April  1, 1996.  Premium deposits ceded pursuant to this reinsurance
agreement reduced net  premium by $7,628,000 in the nine months ended September
30, 1996 compared to $15,961,000 in 1995.

      NET INVESTMENT INCOME.   Net  investment  income  increased $694,000 or 5
percent  to  $14,371,000  for  the nine months ended September  30,  1996  from
$13,677,000 for the comparable period of 1995.  The increase primarily resulted
from an increase in total invested  assets  (amortized cost) of approximately 9
percent from 1995 to 1996, offset by a decline  in the average annualized yield
on the Company's invested assets to 7.28 percent from 7.36 percent for the nine
months ended September 30, 1996 and 1995, respectively.   The decline in yields
is primarily due to lower interest rates available on new investments  in 1995.
The  continued growth in the Company's total invested assets reflects increased
sales  of  FPDAs  and  the  inclusion  of Dixie National Life in the results of
operations effective October 2, 1995 which  was  offset  by the invested assets
ceded in the GIAC reinsurance transaction.

      NET REALIZED INVESTMENT GAINS.  Net realized investment  gains  increased
$172,000  or  34  percent  to  $677,000 from $505,000 for the nine months ended
September  30,  1996 and 1995, respectively.   Net  realized  investment  gains
fluctuate from period  to period and arise when securities are sold in response
to  changes  in  the investment  environment  which  provide  opportunities  to
maximize return on  the  investment  portfolio  without adversely affecting the
quality and overall yield of the investment portfolio.

      GAIN  ON  DISPOSAL  OF  SUBSIDIARIES.  On March  18,  1996,  the  Company
completed the sale of a duplicate  charter  associated with First International
to  GIAC.   The  Company  received  sale  proceeds  of  $10,393,000,  including
$1,500,000 for the charter and licenses associated with First International. In
addition, First International, Standard Life  and  GIAC  have  entered  into  a
series  of  agreements  that include provisions for Standard Life to retain the
economic interest in certain  First  International  policies  and to administer
First International policies in force at the date of such sale.

      In an unrelated matter, the Company decided in February 1996 to terminate
the reinsurance agreement between Standard Reinsurance and Salamandra,  and not
to  renew  the  Barbados  license of Standard Reinsurance.  This resulted in  a
first quarter 1996 write-off  of  SMC's  investment in Standard Reinsurance and
certain intangible assets of Standard Reinsurance amounting to $156,000.

      The  combined  effect  of  the  pre-tax  gain   on   the  sale  of  First
International  and related contracts, and the Standard Reinsurance  write-offs,
was $886,000 in the first quarter of 1996.


      POLICY CHARGES.   Policy  charges  increased  $187,000  or  11 percent to
$1,832,000 for the nine months ended September 30, 1996 compared to  $1,645,000
for  the nine months ended September 30, 1995.  The increase in policy  charges
resulted  from  an  increase  in  policy  surrender  charges  on  FPDAs and the
inclusion of Dixie National Life in operating results for periods after October
2,  1995  which offset the absence of policy charges from the Company's  closed
blocks of universal life business which were sold to GIAC through a reinsurance
contract effective January 1, 1996.

      MANAGEMENT  FEES  AND  SIMILAR INCOME FROM SEPARATE ACCOUNTS.  Management
fees and similar income from separate accounts increased $369,000 or 51 percent
to $1,093,000 for the nine months  ended  September  30, 1996 from $724,000 for
the nine months ended September 30, 1995.  This increase is due primarily to an
increase in the value of assets held in separate accounts  from  $94,301,000 at
December  31, 1994 to $126,987,000 at September 30, 1996 and to higher  service
fees being  levied  on  certain transactions.  Net deposits from sales of unit-
linked  products  by Standard  Management  International  were  $9,159,000  and
$25,764,000  for  the   nine   months   ended  September  30,  1996  and  1995,
respectively.

      OTHER  INCOME.   Other  income  increased  $915,000  or  356  percent  to
$1,172,000 for the nine months ended September  30,  1996  compared to $257,000
for  the  comparable  1995  period.  The increase resulted primarily  from  the
administration fee income and  reserve  and  experience  refund  adjustments in
connection with the agreements with GIAC and increased commissions  received by
Standard Marketing from the sale of unaffiliated products.

      BENEFITS  AND  CLAIMS.  Benefits and claims increased $4,534,000  or  110
percent to $8,657,000  for  the  nine  months  ended  September  30,  1996 from
$4,123,000  for  the  nine  months  ended  September  30,  1995.   The increase
resulted  primarily from an increase in reserves of $4,234,000 related  to  the
termination  and recapture of a reinsurance agreement with National Mutual, and
slightly higher life insurance benefit claims due to adverse claims experience.
Throughout the Company's history, it has experienced both periods of higher and
lower benefit  claims.   Such  volatility is not uncommon in the life insurance
industry  and,  over  extended  periods  of  time,  periods  of  higher  claims
experience tend to be offset by periods of lower claims experience.

      INTEREST CREDITED ON INTEREST  SENSITIVE  ANNUITIES  AND  OTHER FINANCIAL
PRODUCTS.   Interest  credited  on  interest  sensitive  annuities  and   other
financial products was $7,645,000 for the nine months ended September 30, 1996,
an  increase  of $320,000 or 4 percent from $7,325,000 for the comparable prior
year period.  The  increase  resulted  primarily from the Company's increase of
credited interest rates on new annuity sales and the increases in the growth in
policy  reserves  for  FPDAs.  At September  30,  1996,  the  weighted  average
interest  credited rate for  Standard  Life's  annuities  and  other  financial
product liabilities  was  5.40 percent compared to 5.27 percent at December 31,
1995.

      SALARIES AND WAGES.   Salaries  and  wages  were  $3,678,000 for the nine
months ended September 30, 1996, an increase of $356,000  or  11  percent  from
$3,322,000  for  the comparable prior year period.  This fluctuation was caused
primarily by an increase  in  the  number and average wages of employees in the
United States due to the acquisition of Dixie National Life and the increase in
incentive compensation for the increase  in  income  for  the nine months ended
September 30, 1996.

      AMORTIZATION.  Amortization expense increased $372,000  or  28 percent to
$1,723,000 for the nine months ended September 30, 1996 from $1,351,000 for the
nine   months   ended  September  30,  1995.   The  increase  in  current  year
amortization expense resulted primarily from increased amortization of deferred
acquisition costs  as gross profits from business sold in recent years began to
emerge,  increased  surrenders   and   their   corresponding  increase  in  the
amortization  of  deferred  acquisition costs, and  from  the  amortization  of
present value of future profits  for  the  acquisition  of Dixie National Life.
These items more than offset reduced amortization of excess  of  cost  over net
assets  acquired  and  present value of future profits due to the sale of First
International.

      OTHER OPERATING EXPENSES.  Other operating expenses increased $700,000 or
16 percent to $5,173,000  for  the  nine  months  ended September 30, 1996 from
$4,473,000 for the nine months ended September 30, 1995.  The increase in other
operating expenses resulted primarily from the expenses  of Dixie National Life
included in the results for the nine months ended September  30,  1996  and the
increased expenses related to potential acquisitions.



      INTEREST  EXPENSE  AND  FINANCING  COSTS.  Interest expense and financing
costs increased $353,000 or 458 percent to  $430,000  for the nine months ended
September 30, 1996 from $77,000 for the nine months ended  September  30, 1995.
The  increase  in  interest  expense  and  financing costs during 1996 resulted
primarily from the borrowings on the Credit  Agreement.   The  borrowings under
the Credit Agreement occurred after September 30, 1995.

      FEDERAL INCOME TAXES.  Federal income tax expense (credit) was $(890,000)
for the nine months ended September 30, 1996, compared to $56,000  for the nine
months ended September 30, 1995.  The large credit in 1996 is primarily  due to
tax  benefits  related to the sale of First International.  Also, the effective
rates  in  1995 are  less  than  the  statutory  rates  primarily  because  the
amortization  of  excess of net assets acquired over acquisition cost resulting
from the acquisition  of  Standard  Management  International is not subject to
United  States income tax.  The Company also has received  the  benefits  of  a
special  deduction   available  to  small  life  insurance  companies  and  the
utilization of operating  loss  carryforwards  in  1995.   The  benefits of the
special  deduction  available  to small life insurance companies is  no  longer
available because consolidated assets now exceed $500,000,000.

      CLASS ACTION LITIGATION AND  SETTLEMENT  COSTS.   Class action litigation
and settlement costs were recorded to reflect the estimated costs of litigation
and settlement of the shareholder class action lawsuit, based  on  the terms of
the settlement agreement and assumptions as to the future estimated  legal  and
other  costs  to  settle  the  lawsuit, which was settled in March 1995, and to
register  the  Class S Preferred Stock  which  was  distributed  to  the  class
participants in  February  1996.   There  were  no  class action litigation and
settlement  expenses  in the nine months ended September  30,  1996  and  1995.
However, with the signing  of  the Settlement Agreement with the 22 persons who
previously excluded themselves from  the  class  and  the  reevaluation  of the
future  estimated  legal and other costs to settle the lawsuit, SMC recorded  a
reduction of $314,000  in  the  second  quarter of 1995 in the estimated future
costs to settle the lawsuit and register the Class S Preferred Stock.

      EXTRAORDINARY GAIN ON EARLY REDEMPTION  OF  REDEEMABLE  PREFERRED  STOCK.
The  extraordinary  gain  was  $500,000 for the nine months ended September 30,
1996 compared to no gain for the prior comparable period.

LIQUIDITY AND CAPITAL RESOURCES

      SMC is an insurance holding  company.   The liquidity requirements of SMC
are met primarily from management fees, equipment  rental  income  and payments
for other charges and dividends received from SMC's subsidiaries as well as SMC
working  capital.   These  are  SMC's  primary source of funds to pay operating
expenses  and meet debt service obligations.   The  payment  of  dividends  and
management  and  other  fees by Standard Life to SMC is subject to restrictions
under the insurance laws  of Indiana, Standard Life's jurisdiction of domicile.
These internal sources of liquidity  have  been  supplemented  in  the  past by
external  sources  such as lines of credit and revolving credit agreements  and
long-term debt and equity financing in the capital markets.

      The Company reported  on  a  consolidated GAAP basis net cash provided by
operations of $2,757,000 and $6,344,000 for the nine months ended September 30,
1996  and 1995, respectively.  Although  deposits  received  on  the  Company's
interest-sensitive  annuities  and other financial products are not included in
cash flow from operations under  GAAP,  such funds are available for use by the
Company.  Cash provided by operations plus  net  deposits  received,  less  net
account  balances returned to policyholders on interest sensitive annuities and
other financial  products,  resulted  in  positive cash flow of $21,917,000 and
$3,624,000 for the nine months ended September 30, 1996 and 1995, respectively.
Cash generated on a consolidated basis is available  to  SMC only to the extent
that  it  is  generated at SMC level or is available to SMC through  dividends,
interest, management fees or other payments from subsidiaries.

      In April  1993,  SMC  instituted a program to repurchase its Common Stock
from time to time.  The purpose  of  the stock repurchase program is to enhance
shareholder value.  The Company has repurchased  979,453  shares  of its Common
Stock  for $4,747,000 as of September 30, 1996.  The repurchases in  1996  have
been paid  through  additional  borrowings  under  the  Credit  Agreement.   At
September 30, 1996, the Company is authorized to purchase an additional 521,771
shares under this program.

      In  February  1996,  SMC  instituted a program to repurchase from time to
time up to 300,000 shares of its  Class S Preferred Stock in the open market or
privately negotiated transactions.  As of October 31, 1996, SMC has repurchased
and retired 139,211 shares of its Class S Preferred Stock for $941,000.

      On May 1, 1996, the Board of  Directors  declared  a  stock dividend of 5
percent  on shares of its common stock for shareholders of record  on  May  17,
1996.  The  stock  dividend was distributed on June 21, 1996, with shareholders
receiving shares of common stock equivalent to 5 percent of common shares owned
as of May 17, 1996 and  cash  equivalent  for fractional shares.  The number of
shares  issued  pursuant  to this action was 272,926,  plus  cash  in  lieu  of
fractional shares.

      At October 31, 1996,  SMC  had  "parent company only" cash and short-term
investments  of $1,077,000.  These funds  are  available  to  the  Company  for
general  corporate   purposes  including  repayment  of  debt  outstanding  and
additional capital infusions  into  Standard Life.  SMC's "parent company only"
operating expenses (not including class  action litigation and settlement costs
and interest expense) were $2,369,000 and  $2,007,000 for the nine months ended
September 30, 1996 and 1995, respectively.

      Pursuant to the management services agreement  with  SMC,  Standard  Life
paid  SMC a monthly fee of $150,000 during 1996 and 1995 for certain management
services  related  to  the  production  of  business,  investment of assets and
evaluation  of  acquisitions.   The  agreement  was  approved  by  the  Indiana
Department of Insurance with the stipulation that Dixie National Life would pay
an annual fee of at least $1,500,000 to Standard Life  during 1996.  Management
service  agreements between Standard Life and Dixie National  Life,  have  been
approved by  the Mississippi Department of Insurance which call for the payment
of fees of $1,524,000  during 1996.  Both of these agreements provide that they
may be modified or terminated  by  the  department of insurance in the event of
financial hardship of Standard Life or Dixie  National  Life.   The  management
service  agreement  between  Standard  Life  and  Dixie National Life currently
requires  a  monthly  payment  of $100,000.  The management  service  agreement
between SMC and Standard Life for  1997  will be renegotiated before the end of
1996 and submitted for approval to the Indiana Department of Insurance.

      Pursuant to the management services  agreement  with  SMC,  Premier  Life
(Luxembourg)  paid  SMC a management fee of $25,000 per quarter during 1996 and
1995  for  certain  management  and  administrative  services.   The  agreement
provides that it may  be  modified  or terminated by either SMC or Premier Life
(Luxembourg).

      At  April  1,  1995,  SMC  sold  its   property   and   equipment   to  a
leasing/financing  company  for  $1,396,000  and  subsequently  entered  into a
capital  lease  obligation whereby SMC pays a monthly rental amount of $45,000.
SMC charges a monthly equipment rental fee to its subsidiaries of $77,000.

      In July 1996,  SMC  announced  that  Standard Life signed an agreement to
purchase  Shelby  from  DLAC for approximately  $14,250,000,  plus  acquisition
costs, including $13,000,000  in  cash  and  250,000  shares  of restricted SMC
Common Stock.  The purchase of Shelby closed on November 8, 1996 and Shelby was
merged  into  Standard  Life  on that date.  Financing for the transaction  was
provided  by  senior  debt  of $10,000,000  and  the  balance  in  subordinated
convertible debt.  The Company's  original  Credit  Agreement was combined with
the new senior debt in a new credit agreement ("Amended Credit Agreement"), the
terms  of which are substantially the same as the original  Credit  Agreement's
terms.

      The Amended Credit Agreement provides for SMC to borrow up to $16,000,000
in the form  of  a  seven-year  reducing  revolving  loan arrangement.  SMC has
agreed to pay a non-use fee of .50 percent per annum on  the  unused portion of
the commitment.  In connection with the original and Amended Credit  Agreement,
SMC issued warrants to the bank to purchase 61,500 shares of SMC Common  Stock.
Borrowings under the Amended Credit Agreement may be used for contributions  to
surplus  of  insurance  subsidiaries, acquisition financing, and repurchases of
Class S Preferred and Common  Stock  of  SMC.   The debt is secured by a Pledge
Agreement  of  all  of the issued and outstanding shares  of  common  stock  of
Standard Life and Standard  Marketing.   Interest  on  the borrowings under the
Credit Agreement is determined, at the option of SMC, to  be: (i) a fluctuating
rate of interest to the corporate base rate announced by the  bank from time to
time  plus  1  percent  per  annum, or (ii) a rate at LIBOR plus 3.25  percent.
Annual principal repayments of  $2,667,000  begin in November 1998 and conclude
in November 2003.  Indebtedness incurred under  the Credit Agreement is subject
to certain restrictions and covenants including,  among  other  things, certain
minimum  financial  ratios,  minimum  statutory  surplus requirements  for  the
insurance  subsidiaries,  minimum  consolidated  equity  requirements  for  the
Company and certain investment and indebtedness limitations.   As  of September
30, 1996, the Company was in compliance with all restrictions and covenants  in
the  Credit Agreement.  At November 8, 1996, SMC had borrowed $15,700,000 under
the Amended  Credit  Agreement  at interest rates ranging from 8.875 percent to
9.25 percent.

      In connection with the acquisition  of  Shelby,  SMC  borrowed $4,000,000
from  an unaffiliated insurance company pursuant to a subordinated  convertible
debt agreement which is due in December, 2003 and requires interest payments in
cash at  12  percent  per  annum,  or,  if  SMC chooses, in non-cash additional
subordinated convertible debt notes at 14 percent  per annum until December 31,
2000.  The subordinated convertible notes are convertible into SMC Common Stock
at  the  rate of $6.00 per share through November 1997,  and  $5.75  per  share
thereafter.   SMC  may  prepay  the subordinated convertible debt with not less
than  thirty  days  notice  at any time.   The  subordinated  convertible  debt
agreement contains terms and financial covenants substantially similar to those
in the Amended Credit Agreement.

      Assuming the continuation  of current debt level under the Amended Credit
Agreement ($15,700,000) and current  interest  rates  (weighted average rate of
9.1425  percent) and assuming SMC elects the non-cash interest  payment  option
under the  subordinated  convertible debt, annual debt service in 1997 would be
approximately $1,435,000 in  interest paid on the Amended Credit Agreement.  In
addition, SMC will also pay $539,000  in  rental payments relating to a capital
lease obligation in 1997.

      From the funds borrowed by SMC pursuant  to  the Amended Credit Agreement
and  the  subordinated convertible debt agreement, $13,000,000  was  loaned  to
Standard Life  pursuant  to  an Unsecured Surplus Debenture Agreement ("Surplus
Debenture") which requires Standard Life to make quarterly interest payments to
SMC at a variable corporate base  rate  plus  2  percent  per annum, and annual
principal payments of $1,000,000 per year beginning in 2007  and  concluding in
2019.  The interest and principal payments are subject to quarterly approval by
the  Indiana  Department  of Insurance, depending upon satisfaction of  certain
financial tests relating to  levels  of Standard Life's capital and surplus and
general approval of the Commissioner of  the  Indiana  Department of Insurance.
The Company currently anticipates these quarterly approvals  will  be  granted.
Assuming  the  approvals are granted and the November 8, 1996 interest rate  of
10.25% continues  in  1997, Standard Management will receive interest income of
$1,332,500 from its Surplus Debenture receivable for 1997.

      Dividends from Standard  Life  to  SMC  are limited by laws applicable to
insurance companies.  As an Indiana domiciled insurance  company, Standard Life
may pay a dividend or distribution from its surplus profits,  without the prior
approval  of  the  Indiana  Commissioner  of  Insurance,  if  the  dividend  or
distribution,  together with all other dividends and distributions paid  within
the preceding twelve  months,  does not exceed the greater of (i) net gain from
operations  or (ii) 10 percent of  surplus,  in  each  case  as  shown  in  its
preceding annual  statutory  financial statements.  For the year ended December
31, 1995, Standard Life reported statutory net gain from operations of $124,000
and statutory surplus of $10,186,000.   During  1996,  Standard  Life  can  pay
dividends  of $1,019,000 without regulatory approval; Standard Life must notify
the Indiana  regulatory  authorities  of their intent to pay dividends at least
thirty  days  prior  to payment.  Regulatory  approval  will  be  required  for
additional dividend payments  in  excess of this amount by Standard Life during
1996.  On June 20, 1996, Standard Life  paid an ordinary dividend on $1,000,000
to SMC which was not disapproved by the Indiana Department of Insurance.  Also,
regulatory approval is required when dividends  to  be  paid  exceed unassigned
surplus.  At September 30, 1996, unassigned surplus (deficit) was $(1,512,000).
Until  unassigned  surplus  returns to a positive amount, all future  dividends
will require regulatory approval.

      SMC anticipates the available  cash  from  its  existing working capital,
plus anticipated 1996 dividends, management fees, rental  income  and  interest
payments  on  its  Surplus Debentures receivable will be more than adequate  to
meet its anticipated "parent company only" cash requirements for 1996.

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

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

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

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

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

      During  the  first  nine months of 1996, the Company produced a statutory
net  income of $2,953,000.   As  a  result,  SMC  has  not  made  cash  capital
contributions to Standard Life during 1996 in order to maintain adequate levels
of statutory  capital  and  surplus.   In  March  1996,  Standard Life sold its
subsidiary, First International, and realized an increase  in statutory capital
and surplus of approximately $4,951,000 from the statutory gain on the sale and
related reinsurance transactions.

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


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

      Management believes that operational  cash  flow of Standard Life will be
sufficient to meet its anticipated needs for 1996.   As  of September 30, 1996,
Standard  Life  had  statutory capital and surplus for regulatory  purposes  of
$14,656,000  compared to  $12,877,000  at  December  31,  1995.   As  the  life
insurance and  annuity  business  produced  by Standard Life and Dixie National
Life increases, Standard Life expects to continue  to satisfy statutory capital
and  surplus  requirements  through statutory profits,  through  the  continued
reinsurance of a portion of its  new  business,  and through additional capital
contributions  by  the  Company.  During 1996, SMC has  not  made  any  capital
contributions to Standard Life, other than the Common Stock associated with the
Shelby merger.  Net cash  flow from operations on a statutory basis of Standard
Life, after payment of benefits  and  operating  expenses,  was $30,042,000 and
$4,263,000 for the nine months ended September 30, 1996 and year ended December
31,  1995,  respectively.   If  the need arises for cash which is  not  readily
available, additional liquidity could  be  obtained  from  the sale of invested
assets.

      Standard Life's acquisition of Shelby, and merger of Shelby into Standard
Life,  effective November 1, 1996 is anticipated to have a positive  effect  on
Standard  Life's  liquidity  and  cash  flows.   Shelby  will cease writing new
business effective November 1, 1996, thus reducing the surplus  strain normally
associated  with  the  issuance of new policies.  The anticipated profits  from
Shelby's book of business  are  expected to exceed the related interest expense
connected with the $13,000,000 of Surplus Debentures issued by Standard Life in
connection with the acquisition of  Shelby.  The statutory net income of Shelby
was $1,661,000 for the year ended December  31,  1995 and $692,000 for the nine
months ended September 30, 1996.

      INTERNATIONAL OPERATIONS.  The balance sheet  of the Company at September
30, 1996, includes a $3,122,000 credit representing the  negative  goodwill  on
the  purchase of Standard Management International which will be amortized into
future  earnings.   This  amortization  is  a  non-cash  credit  to the Company
statement of operations.

      Standard  Management  International  may  pay  dividends from accumulated
earnings without regulatory approval.    Premier Life  (Bermuda)  did  not  pay
dividends in 1995 and 1994.  Standard Management International and Premier Life
(Luxembourg)  were  not  permitted  to  pay  dividends  in 1995 and 1994 due to
accumulated losses.

      Due to the nature of unit-linked products issued by  Standard  Management
International,  which  represent  over  95  percent  of the Standard Management
International  portfolio,  the  investment  risk rests with  the  policyholder.
Investment  risk for Standard Management International  exists  where  Standard
Management  International  makes  investment  decisions  with  respect  to  the
remaining traditional business and for the assets backing certain actuarial and
regulatory reserves.   The  investments  underlying  these  liabilities  mostly
represent  short-term  investments and fixed maturity securities.  These short-
term investments and fixed  maturity securities are normally only bought and/or
disposed of on the advice of  independent  consulting  actuaries who perform an
annual  exercise  comparing anticipated cash flows on the  insurance  portfolio
with the cash flows from the fixed maturity securities.  Any resulting material
mis-matches are then  covered  by  buying  and/or  selling  the  securities  as
appropriate.


FACTORS THAT MAY AFFECT FUTURE RESULTS

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

      FOREIGN  CURRENCY  RISK.  Standard Management International policyholders
invest in assets denominated  in  a  wide  range  of currencies.  Policyholders
effectively bear the currency risk, if any, as these investments are matched by
policyholder  separate account liabilities.  Therefore,  their  investment  and
currency risk is  limited  to  premiums  they have paid.  Policyholders are not
permitted to invest directly into options,  futures  and derivatives.  Standard
Management  International  could  be  exposed  to  currency   fluctuations   if
currencies  within  the  conventional investment portfolio or certain actuarial
reserves are mismatched.   The assets and liabilities of this portfolio and the
reserves are continually matched by the company and at regular intervals by the
independent actuary.  In addition,  Premier  Life  (Luxembourg)'s shareholder's
equity is denominated in Luxembourg francs.  Premier Life (Luxembourg) does not
hedge it's translation risk, but this is currently being  reviewed  to  protect
SMC  against  currency  fluctuations.   At  September  30,  1996,  there  is an
unrealized gain from foreign currency translation adjustment of $717,000.

      UNCERTAINTIES  REGARDING  INTANGIBLE  ASSETS.   Included in the Company's
financial  statements  as  of September 30, 1996 are certain  assets  that  are
valued for financial statement  purposes  primarily on the basis of assumptions
established  by  the  Company's  management.   These  assets  include  deferred
acquisition costs, present value of future profits,  costs  in  excess  of  net
assets  acquired  and organization and deferred debt issuance costs.  The total
value of these assets  reflected in the September 30, 1996 consolidated balance
sheet aggregated $32,331,000  or  6  percent  of  its  assets.  The Company has
established procedures to periodically review the assumptions utilized to value
these assets and determine the need to make any adjustments  in  such values in
the  Company's  consolidated financial statements.  The Company has  determined
that the assumptions  utilized  in  the  initial  valuation of these assets are
consistent with the current operations of the Company as of September 30, 1996.
In February 1996, the Company decided to terminate  the  operations of Standard
Reinsurance,  which resulted in the write-off of SMC's investment  in  Standard
Reinsurance and  certain  intangible  assets  in  the  third  quarter  of  1996
amounting to $156,000.

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

      ACCOUNTING  PRONOUNCEMENTS.   Effective  January  1,  1996,  the  Company
adopted SFAS No. 123, "Accounting for Stock-Based  Compensation."  SFAS No. 123
requires  expanded  disclosures of stock-based compensation  arrangements  with
employees and encourages,  but  does  not  require,  compensation  cost  to  be
measured  based on the fair value of the equity instruments awarded.  Companies
are permitted,  however, to continue to apply Accounting Principles Board (APB)
Opinion No. 25, which recognizes compensation cost based on the intrinsic value
of the equity instrument  awarded.   The  Company  will  continue  to apply APB
Opinion  No.  25  to  its  stock-based  compensation  awards  to  employees and
directors  and  will  disclose the required pro forma effect on net income  and
earnings per share in its  consolidated financial statements for the year ended
December 31, 1996.

      SAFE HARBOR PROVISIONS.   Forward-looking  statements  in  this Quarterly
Report  on Form 10-Q are made pursuant to the "safe harbor" provisions  of  the
Private Securities  Litigation Reform Act of 1995.  There are certain important
factors that could cause results to differ materially from those anticipated by
some of the statements  made  above.  Investors are cautioned that all forward-
looking statements involve risks  and  uncertainty.  In addition to the factors
discussed above, among the other factors  that  could  cause  actual results to
differ  materially  are  the  following:   economic environment, interest  rate
changes,  product development, regulatory changes,  the  results  of  financing
efforts,  acquisitions   completed   or  attempted,  the  Company's  accounting
policies,  competition  and  the  acquisition   of   Shelby  Life.   Additional
information concerning those and other factors is contained  in  the  Company's
Securities  and  Exchange Commission filings, including but not limited to  the
Annual Report on Form  10-K,  copies  of  which  are available from the Company
without charge.


<PAGE>
                          PART II - OTHER INFORMATION

ITEM 5.                                              OTHER INFORMATION

      Pursuant to SEC rules, the following discloses  the  information required
to  be  disclosed  on Form 8-K with respect to the acquisition  of  Shelby  and
merger into Standard Life on November 8, 1996.

(a) See Note 8 of Notes to Consolidated Financial Statements on page 12 of this
    Form 10-Q for a description of the acquisition of Shelby and merger
    into Standard Life on November 8, 1996.

(b)  The following financial statements are filed pursuant to SEC rules on Form
     8-K:

     Financial Statements of Shelby:

     SMC  has  found it to be impractical to complete as of
     the  date  of   this  Form  10-Q  filing  the  audited
     financial statements  of  Shelby required by Item 7(a)
     of  Form 8-K.  SMC will file  the  required  financial
     statements  as  soon  as  they are available but in no
     event later than January 13, 1997.

     Pro Forma Financial Information:

     SMC has found it to be impractical  to  complete as of
     the date of this Form 10-Q the preparation  and filing
     of  the  pro  forma financial information required  by
     Item  7(b)  of  Form  8-K  as  the  audited  financial
     statements of Shelby required by Item 7(a) of Form 8-K
     are  currently being  prepared.   SMC  will  file  the
     required  pro  forma  financial  data as soon as it is
     available but in no event later than January 13, 1997.


<PAGE>
ITEM  6.   EXHIBITS AND REPORTS ON FORM 8-K.

(a)        EXHIBITS
EXHIBIT 4.4              Amended  and  Restated Registration  Rights  Agreement
                         dated as of November  8,  1996  by and between SMC and
                         Fleet National Bank.

EXHIBIT 4.5              Form of Fleet National Bank Warrant.

EXHIBIT 4.7              Registration Rights Agreement dated  as of November 8,
                         1996  by  and  between SMC and Great American  Reserve
                         Insurance Company ("Great American Reserve").

EXHIBIT 10.17            Second Amendment  to  Promissory  Note  from Ramesh H.
                         Bhat to SMC in the amount of $43 executed  October  8,
                         1996 and due December 15, 1996.

EXHIBIT 10.28            Amended   and   Restated   Revolving  Line  of  Credit
                         Agreement dated as of November 8, 1996 between SMC and
                         Fleet National Bank.

EXHIBIT 10.29            Note Agreement dated as of November  8,  1996  between
                         SMC and Fleet National Bank in the amount of $16,000.

EXHIBIT 10.30            Amended  and  Restated  Pledge  Agreement  dated as of
                         November 8, 1996 between SMC and Fleet National Bank.

EXHIBIT 10.32            Note  Agreement  dated as of November 8, 1996  by  and
                         between SMC and Great  American  Reserve in the amount
                         of $4,000.

EXHIBIT 10.33            Senior  Subordinated  Convertible  Note  dated  as  of
                         November 8, 1996 by and between SMC and Great American
                         Reserve in the amount of $4,000.

EXHIBIT 10.34            Surplus Debenture dated as of November  8, 1996 by and
                         between  SMC  and  Standard  Life  in  the  amount  of
                         $13,000.

EXHIBIT 11               Statement regarding computation of per share earnings.

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

(b)                      REPORTS ON FORM 8-K

The Company filed a Current Report on  Form  8-K  dated August 1, 1996 with the
Commission to report under Item 5 the signing of the  Stock  Purchase Agreement
to purchase Shelby Life.


<PAGE>
                                  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: August 29, 1997

                                            STANDARD MANAGEMENT CORPORATION
                                            (Registrant)




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



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


















<PAGE>
                                                                     EXHIBIT 11

                           STANDARD MANAGEMENT CORPORATION

                STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
             (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                                   Three Months Ended                    Nine Months Ended
                                                                       SEPTEMBER 30,                       SEPTEMBER 30,
<S>                                                                <C>                <C>               <C>               <C>
                                                                        1996        1995{ (1)}               1996       1995{ (1)}
PRIMARY
Weighted average common shares outstanding                         4,774,840          5,209,439         4,685,406         5,257,535
5 percent common stock dividend                                           -                  -            150,251                -
Common equivalent shares related to:
   Stock warrants at average market price                            135,381            155,770            98,643            86,030
   Stock options at average market price                              29,861             11,186            16,659             4,641
   Net issuable shares for modified treasury stock
      method (after assumed buyback of 20 percent of
      outstanding stock options and warrants)                             -                  -            348,540                -
WEIGHTED AVERAGE PRIMARY SHARES OUTSTANDING                        4,940,082          5,376,395         5,299,499         5,348,206
Income before extraordinary gain on early redemption of
   preferred stock and redeemable preferred stock                      $471               $445            $3,074               $979
dividends as reported
Reduction in interest expense and increase in short-term
   investment income for modified treasury stock method                   -                  -                131                -
                                                                         471                445             3,205               979
Extraordinary gain on early redemption of redeemable                     233                 -                500 -
preferred stock
Net income (as adjusted)                                                 704                445             3,705               979
Preferred stock dividends as reported                                   (51)                 -              (163)                -
Preferred stock dividends reduction for modified stock
   method                                                                 -                  -                 46                -
Earnings available to common shareholders (as adjusted)                $653               $445            $3,588              $979
Earnings Per Share:
    Income before extraordinary gain on early redemption
of                                                                      0.10               0.08              0.61              0.18
      redeemable preferred stock and preferred stock
dividends
   Extraordinary gain on early redemption of redeemable
preferred                                                               0.04                  -              0.09                 -
      stock
    NET INCOME                                                          0.14               0.08              0.70              0.18
   Preferred stock dividend                                           (0.01)                  -            (0.02)                 -
Earnings available to common shareholders                              $0.13              $0.08             $0.68             $0.18
</TABLE>


(1)   Share amounts have been retroactively adjusted for the effect of the 5
      percent stock dividend distributed on June 21, 1996, to shareholders of
      record on May 17, 1996.