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


                                  FORM 10-Q


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

           FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997

[   ]    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, 1997, the Registrant had 4,870,240 shares  of  Common  Stock
outstanding.

<PAGE>
                        STANDARD MANAGEMENT CORPORATION

                                     INDEX

                                                                        PAGE
NUMBER

Part I.    FINANCIAL INFORMATION:

Item 1.    Financial Statements

           Consolidated Balance Sheet --
           September 30, 1997 (Unaudited) and December 31, 1996 (Audited)     3

           Consolidated Statement of Operations --
           For the Three Months and Nine Months Ended September 30, 1997
           and 1996 (Unaudited)                                               4

           Consolidated Statement of Shareholders' Equity --
           For the Nine Months Ended September 30, 1997 and 1996 (Unaudited)  5

           Consolidated Statement of Cash Flows --
           For the Nine Months Ended September 30, 1997 and 1996 (Unaudited)  6

           Notes to Consolidated Financial Statements (Unaudited)        7 - 10

Item 2.    Management's Discussion and Analysis of Financial Condition and
           Results of Operations                                        11 - 20

Part II.   OTHER INFORMATION:

Item 1.    Legal Proceedings                                                 21

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

SIGNATURES                                                                   23
<PAGE>
                        PART I -- FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        STANDARD MANAGEMENT CORPORATION

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

<TABLE>
<CAPTION>
                                                                                       SEPTEMBER 30,                 DECEMBER 31,
<S>                                                                                          <C>                          <C>
                                                                                                 1997                         1996
                                                                                        (UNAUDITED)                    (AUDITED)
                                   ASSETS
Investments:
    Securities available for sale:
          Fixed maturity securities, at fair value (amortized cost: $363,605 in 1997
            and $349,151 in 1996)                                                            $368,658                     $347,310
          Equity securities, at fair value (cost: $50 in 1997 and $58 in 1996)                     52                           62
   Mortgage loans, at unpaid principal balances                                                   397                        3,035
   Policy loans, at unpaid principal balances                                                   9,708                        9,903
   Real estate, at depreciated cost                                                             2,334                          546
   Other invested assets                                                                          810                          865
   Short-term investments, at cost, which approximates fair value                              13,483                        8,417
            Total investments                                                                 395,442                      370,138
Cash......                                                                                      3,164                        5,113
Accrued investment income                                                                       6,333                        6,198
Amounts due and recoverable from reinsurers                                                    68,594                       68,811
Deferred policy acquisition costs                                                              19,781                       18,078
Present value of future profits, less accumulated amortization of $5,322 in 1997
   and $3,520 in 1996                                                                          22,242                       23,806
Excess of acquisition cost over net assets acquired,
   less accumulated amortization of $397 in 1997 and  $314 in 1996                              2,508                        2,260
Other assets                                                                                    5,758                        5,463
Assets held in separate accounts                                                              145,574                      128,546
            Total assets                                                                     $669,396                     $628,413
     LIABILITIES, REDEEMABLE SECURITIES AND SHAREHOLDERS' EQUITY
Liabilities:
   Future policy benefits:
          Interest-sensitive annuities and other financial products                          $350,503                     $333,633
          Traditional life insurance                                                           87,245                       87,106
            Total future policy benefits                                                      437,748                      420,739
   Policy claims and other policyholders' benefits and funds                                    4,677                        4,585
                                                                                              442,425                      425,324
   Accounts payable and accrued expenses                                                        5,439                        6,189
   Obligations under capital lease                                                                270                          637
   Notes payable                                                                               26,024                       20,060
   Deferred federal income taxes                                                                5,347                        3,206
   Excess of net assets acquired over acquisition cost,
          less accumulated amortization of $4,880 in 1997 and $3,839 in 1996                    1,734                        2,775
   Liabilities related to separate accounts                                                   145,574                      128,546
            Total liabilities                                                                 626,813                      586,737
Class S Cumulative Convertible Redeemable Preferred  Stock, par value $10 per share:
   Authorized 300,000 shares; issued and outstanding 159,889 shares in 1996,
redemption value                                                                                   --                        1,757
          of $10.00 per share plus accumulated and unpaid dividends
Shareholders' Equity:
   Preferred Stock, no par value:
          Authorized 700,000 shares; none issued and outstanding                                   --                           --
   Common Stock and additional paid-in capital, no par value:
          Authorized 20,000,000 shares; issued 4,870,240 shares                                40,646                       40,481
   Treasury stock, at cost, 882,259 shares in 1997 and 728,229 shares in 1996                 (4,604)                      (3,528)
(deduction)
   Unrealized gain (loss) on securities available for sale                                      2,072                        (746)
   Foreign currency translation adjustment                                                      (370)                          691
   Retained earnings                                                                            4,839                        3,021
            Total shareholders' equity                                                         42,583                       39,919
Total liabilities, redeemable securities and shareholders' equity                            $669,396                     $628,413
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                             THREE MONTHS ENDED                           NINE MONTHS ENDED
<S>                                                 <C>                    <C>                   <C>                   <C>
                                                                SEPTEMBER 30,                               SEPTEMBER 30,
                                                    1997                   1996                  1997                  1996
Revenues:
   Premium income                                   $1,715                 $1,289                $5,277                $8,418
   Net investment income                            7,580                  5,037                 21,926                15,007
   Net realized investment gains                    81                     222                   287                   677
   Gain on disposal of subsidiaries                 --                     --                    --                    886
   Policy charges                                   1,328                  617                   4,110                 1,832
   Amortization of excess of net assets acquired
over                                                347                    347                   1,041                 1,041
          acquisition cost
   Fees from separate accounts                      417                    257                   1,255                 1,093
   Other income                                     119                    200                   1,014                 536
          Total revenue                             11,587                 7,969                 34,910                29,490
Benefits and expenses:
   Benefits and claims                              1,577                  1,434                 5,945                 8,657
   Interest credited on interest-sensitive
annuities and other                                 4,461                  2,641                 12,627                7,645
          financial products
   Salaries and wages                               1,344                  1,215                 4,249                 3,678
   Amortization                                     967                    564                   2,544                 1,723
   Other operating expenses                         1,797                  1,263                 5,127                 5,173
   Interest expense and financing costs             646                    153                   1,724                 430
          Total benefits and expenses               10,792                 7,270                 32,216                27,306
Income before federal income taxes, extraordinary
gain on early
   redemption of redeemable preferred stock and     795                    699                   2,694                 2,184
   preferred stock dividends
Federal income tax expense (credit)                 204                    228                   779                   (890)
Income before extraordinary gain on early
redemption of                                       591                    471                   1,915                 3,074
   redeemable preferred stock and preferred stock
   dividends
Extraordinary gain on early redemption of
redeemable                                          --                     233                               --        500
   preferred stock, net of $ -- federal income tax
NET INCOME                                          591                    704                   1,915                 3,574
Preferred stock dividends                           15                     51                    97                    163
Earnings available to common shareholders           $576                   $653                  $1,818                $3,411
Earnings per share:
   Income before extraordinary gain on early
redemption of                                       $      .11             $     .10             $      .36            $     .61
          redeemable preferred stock and preferred
          stock dividends
   Extraordinary gain on early redemption of
redeemable                                                  --                   .04                     --                  .09
          preferred stock
   NET INCOME                                              .11                   .14                    .36                  .70
    Preferred stock divid                                  .01                   .01                    .02                  .02
   Earnings available to common shareholders        $      .10             $     .13             $      .34            $     .68
Weighted average number of shares outstanding:
   Common shares                                    4,882,467              4,774,840             4,973,580             4,835,657
   Common equivalent shares                         547,603                165,242               360,914               463,842
                                                    5,430,070              4,940,082             5,334,494             5,299,499
</TABLE>

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

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


<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED SEPTEMBER 30,
<S>                                                  <C>                      <C>                  <C>                   <C>
                                                               AMOUNTS                                        SHARES
                                                        1997                     1996                   1997                  1996
Common Stock and additional paid-in capital:
    Balance, beginning of period                     $40,481                  $39,808              5,752,499             5,459,573
          Issuance of common stock                        --                      100                     --                20,000
          5% common stock dividend                        --                      850                     --               272,926
          Issuance of common stock warrants              165                      239                     --                    --
   Balance, end of period                             40,646                   40,997              5,752,499             5,752,499
Treasury stock (at cost):
   Balance, beginning of period                      (3,528)                  (2,621)              (728,229)             (502,025)
          Treasury stock acquired                    (1,079)                  (2,126)                     --             (431,026)
          5% common stock dividend                        --                       --              (154,903)              (46,402)
          Reissuance of treasury stock in
connection with                                            4                        6                    873                 1,224
            exercise of stock options
   Balance, end of period                            (4,604)                  (4,741)              (882,259)             (978,229)
Unrealized gain (loss) on securities:
   Balance, beginning of period                        (746)                    2,582
          Change in unrealized gain (loss) on
securities                                             2,818                  (4,474)
            available for sale, net
   Balance, end of period                              2,072                  (1,892)
Foreign currency translation adjustments:
   Balance, beginning of period                          691                    1,159
          Translation adjustments for the            (1,061)                    (442)
period
   Balance, end of period                              (370)                      717
Retained earnings:
   Balance, beginning of period                        3,021                    (686)
          Net income                                   1,915                    3,574
          5% common stock dividend, plus cash
in lieu of                                                --                    (850)
            fractional shares
          Preferred stock dividend                      (97)                      (1)
          Loss on reissuance of treasury stock            --                    (163)
   Balance, end of period                              4,839                    1,874
Total shareholders' equity and common shares
   outstanding                                       $42,583                  $36,955              4,870,240             4,774,270
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>

                        STANDARD MANAGEMENT CORPORATION

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


<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
<S>                                                                                   <C>                                <C>
                                                                                                September 30,
                                                                                           1997                               1996
OPERATING ACTIVITIES
Net income                                                                               $1,915                             $3,574
Adjustments to reconcile net income to net cash provided by
operating activities:
   Amortization of deferred policy acquisition costs                                      1,039                                837
   Policy acquisition costs deferred                                                    (5,323)                            (4,519)
   Deferred federal income taxes                                                            695                              (471)
   Depreciation and amortization                                                            960                                308
   Future policy benefits and reinsurance recoverable                                     6,858                              5,995
   Policy claims and other policyholders' benefits and funds                                132                              (228)
   Net realized investment gains                                                          (287)                              (677)
   Accrued investment income                                                                135                              (244)
   Extraordinary gain on early redemption of redeemable preferred stock                      --                              (500)
   Other                                                                                (1,477)                            (1,318)
          NET CASH PROVIDED BY OPERATING ACTIVITIES                                       4,626                              2,757
FINANCING ACTIVITIES
Borrowings                                                                                5,628                              2,600
Repayments on long term debt and capital lease obligation                                 (402)                              (364)
Premiums received on interest-sensitive annuities and other financial
products                                                                                 38,355                             32,153
   credited to policyholder account balances, net of premiums ceded
Return of policyholder account balances on interest-sensitive annuities
and other                                                                              (27,986)                           (12,993)
   financial products, net of premiums ceded
Redemption of redeemable preferred stock                                                (1,855)                              (941)
Reissuance of treasury stock in connection with exercise of stock options                     4                                 --
Proceeds from common and treasury stock sales                                               165                                106
Purchase of Common Stock for treasury                                                   (1,079)                            (2,126)
          NET CASH PROVIDED BY FINANCING ACTIVITIES                                      12,830                             18,435
INVESTING ACTIVITIES
Fixed maturity securities available for sale:
   Purchases                                                                          (158,353)                          (136,972)
   Sales                                                                                123,113                             94,247
   Maturities                                                                            23,632                              6,381
Short-term investments, net                                                             (5,066)                              2,647
Other investments, net                                                                  (2,681)                               (68)
Proceeds from sale of First International Life Insurance Company,
   less cash transferred to seller of $265                                                   --                             11,228
          NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                             (19,405)                           (22,537)
Net increase (decrease) in cash                                                         (1,949)                            (1,351)
Cash at beginning of period                                                               5,113                              5,762
Cash at end of period                                                                    $3,164                             $4,411
</TABLE>


See accompanying notes to consolidated financial statements.
<PAGE>

                        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.
The results of operations  for the interim periods shown in this report are not
necessarily indicative of the results that may be expected for the fiscal year.
This is particularly true in  the  life  insurance  industry,  where  mortality
results  in  interim  periods  can vary substantially from such results over  a
longer period.  In the opinion of  management, the information contained herein
reflects all adjustments necessary to  make  the  results of operations for the
interim periods a fair statement of such operations.   All such adjustments are
of  a  normal  recurring  nature.   Certain  amounts  in the 1996  Consolidated
Financial Statements and Notes have been reclassified to  conform with the 1997
presentation.

      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 profit, 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, 1997 include the assets  and  liabilities  and
results  of  operations  of Shelby Life Insurance Company ("Shelby Life") which
was  acquired  and merged into  Standard  Life  Insurance  Company  of  Indiana
("Standard Life"), a wholly-owned subsidiary of Standard Management Corporation
("Standard Management"), the parent company, effective November 1, 1996.

      For further  information,  refer to the consolidated financial statements
and footnotes thereto included in  the  Annual  Report  on Form 10-K/A No. 2 of
Standard Management for the year ended December 31, 1996.

NOTE 2 -- COMMON STOCK

      Standard Management declared a 5% stock dividend on  shares  of  Standard
Management Common Stock ("SMC Common Stock") for shareholders of record  on May
17,  1996  which  was  distributed  on June 21, 1996.  All applicable number of
shares and per share amounts included  in the consolidated financial statements
and notes have been retroactively adjusted  to  reflect this stock dividend for
all periods presented.

NOTE 3 -- NOTE PAYABLE

      In connection with the acquisition of Shelby  Life,  Standard  Management
borrowed   $4,000   from  an  insurance  company  pursuant  to  a  subordinated
convertible debt agreement which was due in December 2003 and required interest
payments in cash at 12%  per  annum,  or,  if  Standard  Management  chose,  in
non-cash  additional subordinated convertible debt notes at 14% per annum until
December 31,  2000.   At  June  30,  1997,  this  subordinated convertible debt
agreement was amended at the principal amount of $4,372  which is due July 2004
unless previously converted, and requires interest payments  in cash on January
1  and  July  1  of  each  year  at 10% per annum.  At June 30, 1997,  Standard
Management borrowed an additional  $5,628 from an insurance company pursuant to
another subordinated convertible debt  agreement  (collectively,  the  "Notes")
which  is  due  July  2004  unless  previously converted, and requires interest
payments in cash on January 1 and July  1  of  each  year  at  10%  per  annum.
Proceeds  from the additional borrowings were used for contributions to surplus
of  insurance   subsidiaries  of  $2,400,  redemption  of  Class  S  Cumulative
Convertible  Redeemable   Preferred   Stock  ("Class  S  Preferred  Stock")  of
approximately $1,840 (SEE NOTE 4), and  the balance for other general corporate
purposes.  The Notes are convertible into  SMC  Common  Stock  at  the  rate of
$5.747 per share.

<PAGE>

                        STANDARD MANAGEMENT CORPORATION

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

      The  Notes  may  be prepaid in whole or in part at the option of Standard
Management commencing on July 1, 2000 at redemption prices equal to 105% of the
principal amount (plus accrued interest) and declining to 102% of the principal
amount plus accrued interest.   The  Notes may be prepaid prior to July 1, 2000
under  certain  limited  circumstances.   The  Notes  are  subject  to  certain
restrictions and covenants  including,  among  other  things,  certain  minimum
financial  ratios,  minimum  consolidated equity requirements for SMC, positive
net income, minimum statutory  surplus requirements for the Company's insurance
subsidiaries and certain limitations  on acquisitions, additional indebtedness,
investments, mergers, consolidations and sales of assets.

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% 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.

         Standard Management may voluntarily redeem the Class S Preferred Stock
prior to February 2003 at redemption value of $10.00 per share plus accumulated
and unpaid  dividends.   In  February  1996,  Standard  Management 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 private negotiated transactions.  Through
July  31,  1997, Standard Management had repurchased and retired 141,761 shares
of Class S Preferred  Stock  on  the  open  market  at  a  cost of $964.  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.   Effective  as  of  August  1,  1997,  Standard Management
redeemed  all  of  the  issued  and  outstanding  Class  S Preferred  Stock  at
redemption value of $10.00 per share plus accumulated and unpaid dividends.

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,
<S>                                                                  <C>                             <C>
                                                                     1997                            1996
Fair value of securities available for sale                          $368,710                        $347,372
Amortized cost of securities available for sale                      363,655                         349,209
                                                               Gross 5,055                           (1,837)
unrealized gain (loss) on securities available for sale
Adjustments for:
 Deferred policy acquisition costs                                   (1,789)                         696
 Present value of future profits                                     (123)                           20
 Deferred federal income tax recoverable (liability)                 (1,071)                         375
                                                                 Net $2,072                          $(746)
unrealized gain (loss) on securities available for sale
</TABLE>

NOTE 6 -- INCOME TAXES

   The effective consolidated federal income  tax expense (credit) rate for the
Company was 26% and 29% for the three and nine months ended September 30, 1997,
compared to 33% and (41)% for the three and nine  months  ended  September  30,
1996.   The effective rates in 1997 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 S.A.
("Standard Management International") is not subject to U.S. income  tax.   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).

<PAGE>

                        STANDARD MANAGEMENT CORPORATION

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

NOTE 7 -- DISPOSAL OF SUBSIDIARIES

   On  March  18, 1996, Standard Life 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 Group,
New York, New York.  Standard Life  received  proceeds  of  $10,393,  including
$1,500  for  the  charter  and  licenses  associated  with First International.
Standard Life realized a net pretax gain of $1,042 and  a tax benefit of $1,420
on this sale or $2,462 ($.46 per share) for the nine months ended September 30,
1996.  In addition, First International, Standard Life and  GIAC  have  entered
into a series of other 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 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  the  Company's investment in Standard  Reinsurance  and  certain
intangible assets of  Standard  Reinsurance  amounting to $156 ($.03 per share)
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 -- SAVERS LIFE ACQUISITION

   The Company  entered  into  an  Agreement  and  Plan  of  Merger dated as of
December  19,  1996, as amended to date (the "Merger Agreement"),  with  Savers
Life Insurance Company  ("Savers  Life").   The  closing  of  the  transactions
contemplated  by  the  Merger  Agreement  was  subject  to  normal  conditions,
including  approval  by (i) the Company's stockholders of the issuance  ("Share
Issuance") of shares of  the  Company's  Common  Stock  pursuant  to the merger
contemplated  by  the  Merger  Agreement  and  upon  payment of the Performance
Premium (as defined in the Merger Agreement), (ii) Savers  Life stockholders of
the  Merger  Agreement  and  (iii)  applicable  regulatory  authorities.    The
Company's  stockholders  approved  the  Share  Issuance at the Company's Annual
Meeting of Stockholders held on October 22, 1997.   By  action  of the Board of
Directors  of Savers Life, the Special Meeting of Stockholders of  Savers  Life
called for October  22,  1997,  at  which  the Savers Life stockholders were to
consider approval of the Merger Agreement, was adjourned to an unspecified date
before action was taken on the proposal to approve  the  Merger Agreement.  The
Merger Agreement provided that it terminated if the merger  was not consummated
by November 5, 1997.  The Company and Savers Life have engaged  in  discussions
regarding  the  possibility of reinstating the Merger Agreement, including  the
possibility of a restructured agreement.

NOTE 9 -- RECENTLY ISSUED ACCOUNTING STANDARDS

   In February 1997,  the  Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings
per Share." SFAS No. 128 is  required  to  be adopted on December 31, 1997.  At
that time, the Company will be required to change  the method currently used to
compute  earnings per share and to restate prior periods.  SFAS  No.  128  will
eliminate  the  presentation  of primary earnings per share and replace it with
basic  earnings per share.  Basic  earnings  per  share  differs  from  primary
earnings  per  share  because  common  stock  equivalents are not considered in
computing basic earnings per share.  Fully diluted  earnings  per share will be
replaced  with  diluted  earnings  per  share.  Diluted earnings per  share  is
similar to fully diluted earnings per share,  except  in determining the number
of  dilutive  shares outstanding for options and warrants,  the  proceeds  that
would be received  upon the conversion of all dilutive options and warrants are
assumed to be used to  repurchase  the  Company's  common shares at the average
market price of such stock during the period.  For fully  diluted  earnings per
share, the higher of the average market price or ending market price  is  used.
The  impact  is expected to result in an increase in primary earnings per share
for the quarter  ended September 30, 1997 of $.02 per share and the nine months
ended September 30,  1997  and  1996  of $.03 and $.06 per share, respectively.
There will be no change in the primary earnings per share for the quarter ended
September 30, 1996.  The impact of SFAS  No.  128  on  the calculation of fully
diluted earnings per share for these quarters is not expected to be material.

   In  June  1997,  the  FASB  issued  SFAS  No. 130, "Reporting  Comprehensive
Income."   SFAS No. 130 defines the financial statement  presentation  for  all
changes in a  company's  equity  during  a  period  except those resulting from
investments by owners and distributions to owners.  SFAS  No.  130 is effective
for financial statements issued for fiscal years beginning after  December  15,
1997  and will be adopted by the Company in the first quarter of 1998.  Because
the statement  is  merely a change in presentation, the Company does not expect
the adoption of this  statement to have any impact on the amount of net income,
earnings per share or total shareholders' equity reported.

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

NOTE 10 -- RESTATEMENT

   The   Company   has  restated  the  previously  issued  September  30,  1996
consolidated financial statements for recognition of administration fee income.
Effective May 31, 1996,  Standard  Life  terminated  by recapture a reinsurance
agreement with National Mutual Life Insurance Company  ("National Mutual").  In
connection  with  this  transaction,  the  Company recorded the  collection  of
administration fees of $375 from National Mutual for services provided in prior
years  as  a  reduction  to present value of future  profits.   Previously  the
administration fees were recorded  as  revenues.   The following summarizes the
net effect of the restatement:


<TABLE>
<CAPTION>
                                                         THREE MONTHS ENDED                            NINE MONTHS ENDED
<S>                                           <C>                     <C>                    <C>                   <C>
                                                         SEPTEMBER 30, 1996                           SEPTEMBER 30, 1996
                                                     AS                                            AS
                                                 PREVIOUSLY                                    PREVIOUSLY
                                                  REPORTED                RESTATED              REPORTED              RESTATED
Income before federal income taxes,
extraordinary gain
     on early redemption of redeemable        $699                    $699                   $2,559                $2,184
preferred stock
     and preferred stock dividends
Net income                                    704                     704                    3,821                 3,574
Net income per share                          .14                     .14                    .74                   .70
</TABLE>


<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________

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, 1996.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                  OPERATING INCOME.  The income from operations
(before net realized investment gains) was $537,000  for  the  third quarter of
1997,  compared  to  $342,000 for the comparable period in 1996.  The  increase
resulted  primarily  from   international   operations  producing  income  from
operations of $364,000 for the third quarter  of  1997 compared to $105,000 for
the  third  quarter  of  1996.   The  international  operating  gains  resulted
primarily  from increased fees from separate accounts and  decreased  operating
expenses, primarily due to the strengthening of the U.S. dollar.

                                  PREMIUM  INCOME.   Premium income is composed
of  premiums, including renewal premiums, received on ordinary  life  insurance
policies.   SMC'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 1997 was $1,715,000, an  increase of $426,000 or 33% from $1,289,000
for the third quarter of 1996.  This  increase is attributable to the inclusion
of Shelby Life in the results of operations for periods after November 1, 1996.
SMC recorded net premium income of $568,000  in  the  third quarter of 1997 for
the Shelby Life block which more than offsets the decline  in premiums from the
regular  policy  lapses,  surrenders  and  expiries in SMC's closed  blocks  of
business.

                                  Net premium  deposits received from the sales
of interest-sensitive annuities and other financial  products  (which  are  not
recorded  as  revenues)  were $13,229,000 compared to $13,358,000 for the third
quarter of 1997 and 1996,  respectively.   The  decrease in premium deposits is
partially due to a decrease in gross domestic premium deposits.  Gross domestic
premium  deposits  received  from interest-sensitive  annuities  and  financial
products were $15,308,000 for the third quarter of 1997 compared to $15,982,000
for the third quarter of 1996.   Since  SMC's  operating  income is primarily a
function of its investment spreads, persistency of annuity  in  force business,
mortality  experience,  and  operating  expenses,  a change in annuity  premium
deposits in a single period does not directly cause operating income to change,
although continued increases or decreases in annuity  premiums  may  affect the
growth rate of total assets on which investment spreads are earned.

                                  NET INVESTMENT INCOME.  Net investment income
increased  $2,543,000  or 50% to $7,580,000 for the third quarter of 1997  from
$5,037,000 for the comparable  period of 1996.  The increase primarily resulted
from an increase in the weighted  average  annualized yield of SMC's investment
portfolio (exclusive of realized and unrealized gains and losses) to 7.83% from
7.57% for the third quarter of 1997 and 1996, respectively, and the increase in
total invested assets (amortized cost) of approximately  41%  from December 31,
1995 to September 30, 1997, most of which (approximately $100,000,000) occurred
in  the fourth quarter of 1996 due to the acquisition of Shelby  Life.   As  of
September 30, 1997, yields available on new investments were declining.

                                  NET  REALIZED INVESTMENT GAINS.  Net realized
investment gains decreased $141,000 or 64%  to  $81,000  from  $222,000 for the
third  quarter  of 1997 and 1996, respectively.  Net realized investment  gains
fluctuate from period  to period and arise when securities are sold in response
to  changes  in  the investment  environment  which  provide  opportunities  to
maximize return on  the  investment  portfolio  without adversely affecting the
quality  and  overall  yield  of  the  investment portfolio.   The  pretax  net
unrealized  gain  (loss)  on  SMC's securities  available  for  sale  increased
$6,892,000 to $5,055,000 at September  30, 1997 from a gross unrealized loss of
$(1,837,000) at December 31, 1996.  In the  absence  of  decreases  in interest
rates,  SMC 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 SMC's fixed maturity securities is
not expected to  have a significant effect on results of operations because SMC
has the present intent  and  practice  to  hold  most of its available-for-sale
fixed  maturity  securities  to  maturity and SMC'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 $711,000 or
115% to $1,328,000 for  the  third quarter of 1997 compared to $617,000 for the
third quarter of 1996.  The increase  in policy charges resulted primarily from
an  increase in policy charges for Standard  Life's  universal  life  insurance
products  of  $489,000  due  to  the inclusion of Shelby Life in the results of
operations for periods after November 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 each of the third quarters of 1997 and 1996.

                                  FEES  FROM  SEPARATE  ACCOUNTS.    Fees  from
separate accounts consist of the investment management fees earned by  Standard
Management   International  on  its  separate  account  assets  and  investment
contracts.  Management fees and similar income from separate accounts increased
$160,000 or 62% to $417,000 for the third quarter of 1997 from $257,000 for the
third quarter  of  1996.   The  increase is due primarily to an increase in the
value of assets held in separate  accounts  from  $122,705,000  at December 31,
1995  to  $145,574,000  at  September  30,  1997.   Such  income fluctuates  in
relationship  to total separate account assets and the return  earned  on  such
assets.

                                  OTHER INCOME.  Other income decreased $81,000
or 41% to $119,000  for  the third quarter of 1997 compared to $200,000 for the
comparable 1996 period.  The  decrease resulted primarily from the reduction in
commission income received by Standard  Marketing,  a  wholesale distributor of
life  insurance  and annuity products, from the sale of unaffiliated  insurance
products.

                                  BENEFIT  AND  CLAIMS.   Benefits  and  claims
include  life  insurance and payout annuity benefits paid and changes in policy
reserves.  Benefits  and claims increased $143,000 or 10% to $1,577,000 for the
third quarter of 1997  from  $1,434,000  for  the  third  quarter of 1996.  The
increase  in  benefits  and claims results from the inclusion  of  Shelby  Life
(approximately $335,000 in  the  third  quarter  of  1997)  in  the  results of
operations  for  periods after November 1, 1996.  Throughout SMC'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  $4,461,000 for
the third quarter of 1997, an increase of $1,820,000 or 69% from $2,641,000 for
the  comparable  prior year period.  The increase resulted primarily  from  the
inclusion of interest  credited  of  $939,000 in the third quarter of 1997 from
Shelby Life products and the increases  in  annuity policy reserves from sales.
At September 30, 1997, the weighted average interest credited rate for Standard
Life's currently marketed annuities and other financial product liabilities was
5.81% compared to 5.40% at September 30, 1996.

                                  SALARIES AND  WAGES.  Salaries and wages were
$1,344,000 for the third quarter of 1997, an increase  of  $129,000 or 11% from
$1,215,000  for  the  comparable prior year period.  This increase  was  caused
primarily by an increase  in the number of employees in 1997 and an increase in
incentive compensation expense in the third quarter of 1997 of $39,000 based on
operating income for the third quarter of 1997.

                                  AMORTIZATION.  Amortization expense primarily
includes  charges  to  operations  for  the  amortization  of  deferred  policy
acquisition costs, the present  value  of future profits and the excess of cost
over net assets acquired.  Amortization  expense  increased  $403,000 or 71% to
$967,000 for the third quarter of 1997 from $564,000 for the third  quarter  of
1996.   The  increase  in  current year amortization expense resulted primarily
from increased amortization  of  deferred  policy  acquisition  costs  as gross
profits  from  business  sold  in  recent  years  began  to  emerge,  increased
surrenders  and  their  corresponding  increase in the amortization of deferred
policy acquisition costs, and from the amortization  of present value of future
profits of $125,000 in the third quarter of 1997 for the  acquisition of Shelby
Life.

                                  OTHER  OPERATING EXPENSES.   Other  operating
expenses increased $534,000 or 42% to $1,797,000  for the third quarter of 1997
from $1,263,000 for the third quarter of 1996.  The increase in other operating
expenses resulted primarily from the growth in the  Company's inforce business,
primarily through the acquisition of Shelby Life effective November 1, 1996 and
increased expenditures for marketing of the life insurance business.

                                  INTEREST   EXPENSE   AND   FINANCING   COSTS.
Interest expense and financing costs increased $493,000  or 322% to $646,000 in
the  third  quarter of 1997 from $153,000 in the third quarter  of  1996.   The
increase in interest expense and financing costs during 1997 resulted primarily
from increased  borrowing  of  $10,100,000 on an Amended and Restated Revolving
Line  of  Credit  Agreement  with  a  bank  ("Amended  Credit  Agreement")  and
borrowings  of $4,000,000 from an insurance  company  in  connection  with  the
acquisition of  Shelby  Life  and  additional  borrowings of $5,600,000 in June
1997.

                                  EXTRAORDINARY  GAIN  ON  EARLY  REDEMPTION OF
REDEEMABLE  PREFERRED  STOCK.   Extraordinary gains were recorded on the  early
redemption of the Class S Preferred  Stock for the amount by which SMC was able
to repurchase the Class S Preferred Stock below its book value plus accrued and
unpaid dividends.  SMC recorded no extraordinary  gain for the third quarter of
1997 compared to $233,000 for the third quarter of  1996.   Effective August 1,
1997, SMC redeemed all of its issued and outstanding Class S Preferred Stock at
redemption value of $10.00 per share plus accumulated and unpaid dividends.


NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

                                  OPERATING INCOME.  The income from operations
(before net realized investment gains and gain on disposal of subsidiaries) was
$1,726,000  in  the  first  nine months of 1997, compared to $369,000  for  the
comparable period in 1996.  The  change  resulted primarily, from operations in
the United States producing income from operations  of  $539,000  compared to a
loss of $71,000 for the first nine months of 1997 and 1996, respectively.   The
increase  is  primarily due to an increase in interest spreads on an increasing
asset  base.  The  income  from  international  operations  also  increased  to
$1,187,000 for the first nine months of 1997 compared to $440,000 for the first
nine months of 1996.  The international operating gains resulted primarily from
increased  fees  from  separate  accounts  and  decreased  operating  expenses,
primarily due to the strengthening of the U.S. dollar.

                                  PREMIUM INCOME.  GAAP premium income  for the
first nine months of 1997 was $5,277,000, a decrease of $3,141,000 or 37%  from
$8,418,000 for the first nine months of 1996.  This decrease is attributable to
the  recapture  of  premiums  ceded  of  $4,234,000  due to the termination and
recapture  of  the  reinsurance agreement with National Mutual  in  the  second
quarter of 1996, which offsets increases in premium income for the inclusion of
Shelby Life in the results  of  operations  for periods after November 1, 1996.
SMC recorded net premium income of $1,328,000  in the first nine months of 1997
for the Shelby Life block which more than offsets  the decline in premiums from
the regular policy lapses, surrenders and expiries in  SMC's  closed  blocks of
business.

                                  Net premium deposits received from the  sales
of  interest-sensitive  annuities  and  other financial products (which are not
recorded as revenues) were $38,355,000 compared  to  $32,153,000  for the first
nine  months of 1997 and 1996, 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 $45,141,000 for  the  nine  months  ended September 30,
1997 compared to $39,781,000 for the nine months ended September 30, 1996.  The
increase  in  gross  premium deposits is the result of an aggressive  marketing
campaign implemented by  Standard  Life with the introduction of attractive new
annuity  products and the effects of  increasing  first  year  crediting  rates
approximately   1%   commencing   during  the  third  quarter  of  1996.   Also
contributing to the increase in premiums  is  the introduction of new products,
the  competitiveness  of  SMC's products, the continued  development  of  SMC's
distribution system through  marketing  support  from Standard Marketing and an
increase in the agency base achieved through the recruitment of larger managing
general agencies and expanding geographical concentration  into  the  Mid-South
and California.

                                  SMC also decreased the quota-share portion of
business ceded pursuant to a reinsurance agreement from 70% to 50% at September
1,  1995,  which was further decreased to 25% effective April 1, 1996.  Premium
deposits ceded  pursuant  to  this  reinsurance  agreement  reduced net premium
deposits by $6,786,000 in the first nine months of 1997 compared  to $7,628,000
in the first nine months of 1996.

                                  NET INVESTMENT INCOME.  Net investment income
increased  $6,919,000 or 46% to $21,926,000 for the first nine months  of  1997
from $15,007,000  for  the  comparable  period of 1996.  The increase primarily
resulted from an increase in the weighted  average  annualized  yield  of SMC's
investment portfolio (exclusive of realized and unrealized gains and losses) to
7.66% from 7.28% for the first nine months of 1997 and 1996, respectively,  and
the  increase  in  total  invested assets (amortized cost) of approximately 41%
from December 31, 1995 to September  30,  1997,  most  of  which (approximately
$100,000,000) occurred in the fourth quarter of 1996 due to  the acquisition of
Shelby Life.

                                  NET REALIZED INVESTMENT GAINS.   Net realized
investment  gains decreased $390,000 or 58% to $287,000 from $677,000  for  the
first nine months  of  1997  and  1996,  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, SMC completed the sale of a duplicate charter  associated  with
First  International  to  GIAC.  SMC  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
administer First International policies in force at the date of such sale.

                                  In   an  unrelated  matter,  SMC  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 pre-tax  and  $2,306,000  after-tax in the
first quarter of 1996.

                                  POLICY  CHARGES.   Policy  charges  increased
$2,278,000 or 124% to $4,110,000 for the nine months ended September  30,  1997
compared  to  $1,832,000  for  the  nine  months ended September 30, 1996.  The
increase in policy charges resulted from an  increase  in  policy  charges  for
Standard  Life's  universal  life  insurance  products of $1,473,000 due to the
inclusion  of  Shelby  Life  in  the results of operations  for  periods  after
November  1, 1996 and an increase in  policy  surrender  charges  on  FPDAs  of
$447,000.   The increase in annuity policy withdrawals and surrender charges on
flexible premium  deferred  annuities  generally  corresponds  to the aging and
growth of SMC's annuity business in force.

                                  FEES  FROM  SEPARATE  ACCOUNTS.    Fees  from
separate  accounts  increased $162,000 or 15% to $1,255,000 for the first  nine
months of 1997 from $1,093,000 for the first nine months of 1996.  The increase
is due primarily to an  increase  in  the  value  of  assets  held  in separate
accounts  from  $122,705,000  at December 31, 1995 to $145,574,000 at September
30, 1997.  Such income fluctuates  in  relationship  to  total separate account
assets and the return earned on such assets.

                                  BENEFIT  AND  CLAIMS.   Benefits  and  claims
decreased  $2,712,000 or 31% to $5,945,000 for the first nine  months  of  1997
from $8,657,000  for  the  first nine months of 1996.  The decrease in benefits
and claims resulted from an increase in change in policy reserves of $4,234,000
related  to the termination and  recapture  of  a  reinsurance  agreement  with
National Mutual  in  the  third  quarter  of  1996.   This  decrease offset the
increase   in   benefits   and  claims  from  the  inclusion  of  Shelby   Life
(approximately $1,132,000 in  the  first nine months of 1997) in the results of
operations for periods after November  1,  1996.   Throughout SMC'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 $12,627,000 for
the first nine months of 1997, an increase of $4,982,000 or 65% from $7,645,000
for the comparable prior year period.  The increase resulted primarily from the
inclusion of interest credited of $2,846,000 in the first nine  months  of 1997
from  Shelby Life products, increases in interest credited rates on new annuity
sales and  the  increases  in  the growth in policy reserves for annuities from
sales.  At September 30, 1997, the  weighted average interest credited rate for
Standard  Life's  currently  marketed annuities  and  other  financial  product
liabilities was 5.61% compared to 5.40% at September 30, 1996.

                                  SALARIES  AND WAGES.  Salaries and wages were
$4,249,000 for the first nine months of 1997,  an  increase  of $571,000 or 16%
from $3,678,000 for the comparable prior year period.  This increase was caused
primarily by an increase in the number of employees in 1997 and  an increase in
incentive  compensation  expense  in the first nine months of 1997 of  $216,000
based on operating income for the nine months ended September 30, 1997.

                                  AMORTIZATION.  Amortization expense increased
$821,000 or 48% to $2,544,000 for the first nine months of 1997 from $1,723,000
for the first nine months of 1996.   The  increase in current year amortization
expense resulted primarily from the amortization  of  present  value  of future
profits  of  $537,000  in the first nine months of 1997 for the acquisition  of
Shelby Life.

                                  OTHER  OPERATING  EXPENSES.   Other operating
expenses  decreased  $46,000 or 1% to $5,127,000 for the first nine  months  of
1997 from $5,173,000 for  the first nine months of 1996.  The decrease in other
operating expenses resulted  primarily  from eliminating in 1997 the additional
cost  to  convert  the operations and expand  the  marketing  effort  in  Dixie
National Life incurred  in  the  first  nine  months of 1996 and a reduction in
international operating expenses due to the strengthening of the U.S. dollar.

                                  INTEREST   EXPENSE   AND   FINANCING   COSTS.
Interest expense and financing costs increased $1,294,000 or 301% to $1,724,000
in the nine months ended September 30, 1997 from  $430,000  in  the nine months
ended September 30, 1996.  The increase in interest expense and financing costs
during 1997 resulted primarily from increased borrowing of $10,100,000  on  the
Amended Credit Agreement and borrowings of $4,000,000 from an insurance company
in  connection with the acquisition of Shelby Life and additional borrowings of
$5,600,000 in June 1997.

                                  FEDERAL  INCOME  TAXES.   Federal  income tax
expense  (credit)  was $779,000 for the first nine months of 1997, compared  to
$(890,000) for the first  nine  months  of  1996.   The large credit in 1996 is
primarily  due  to  tax benefits of $1,420,000 related to  the  sale  of  First
International.

                                  EXTRAORDINARY  GAIN  ON  EARLY  REDEMPTION OF
REDEEMABLE  PREFERRED  STOCK.   Extraordinary gains were recorded on the  early
redemption of the Class S Preferred  Stock for the amount by which SMC was able
to repurchase the Class S Preferred Stock below its book value plus accrued and
unpaid dividends.  SMC recorded no extraordinary gain for the first nine months
of 1997 compared to $500,000 for the nine  months  ended  September  30,  1996.
Effective  August  1,  1997,  SMC  redeemed  all  of its issued and outstanding
Class  S  Preferred  Stock  at  redemption  value  of  $10.00  per  share  plus
accumulated and unpaid dividends.

LIQUIDITY AND CAPITAL RESOURCES

                                  Standard Management is  an  insurance holding
company.  The liquidity requirements of Standard Management are  met  primarily
from management fees, equipment rental fees and payments for other charges  and
dividends   and   interest   on   Surplus  Debentures  received  from  Standard
Management's subsidiaries as well as  Standard  Management's  working  capital.
These  are  Standard  Management's  primary  source  of  funds to pay operating
expenses  and  meet  debt  service obligations.  The payment of  dividends  and
interest on Surplus Debentures  and  management and other fees by Standard Life
to Standard Management 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.

                                  SMC reported on a consolidated GAAP basis net
cash  provided  by  operations of $1,726,000 and $6,331,000 for the years ended
December 31, 1996 and  1995, respectively.  Although deposits received on SMC'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 SMC.
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  $26,717,000  and
$6,003,000 for the years ended December 31, 1996 and 1995,  respectively.  Cash
generated on a consolidated basis is available to Standard Management  only  to
the extent that it is generated at Standard Management level or is available to
Standard  Management  through  dividends,  interest,  management  fees or other
payments from subsidiaries.

                                  In April 1993, Standard Management instituted
a program to repurchase SMC Common Stock from time to time.  The purpose of the
stock repurchase program is to enhance shareholder value.  Standard  Management
had  repurchased  1,134,356  shares  of  SMC Common Stock for $5,826,000 as  of
October 31, 1997.  Of these repurchases 419,026  shares  were  paid for through
additional borrowing under the Amended Credit Agreement, 39,016 shares from the
proceeds  of  the  Notes and the remainder were paid from working capital.   At
October 31, 1997, Standard  Management was authorized to purchase an additional
365,644 shares under this program.

                                  Between  February 1996 and July 1997 Standard
Management  repurchased  141,761  shares  of Class  S  Preferred  Stock  at  an
aggregate price of $964,000 primarily through  additional  borrowings under the
Amended Credit Agreement.  On August 1, 1997, Standard Management  redeemed all
of  its  issued  and  outstanding  shares  of  Class  S Preferred Stock for  an
aggregate redemption price of $1,840,000, redemption value  of $10.00 per share
plus accumulated and unpaid dividends.  Such redemption was financed  from  the
proceeds of the Notes.

                                  At  October 31, 1997, Standard Management had
"parent company only" cash and short-term  investments  of  $1,261,000.   These
funds  are  available  to  Standard  Management for general corporate purposes.
Standard Management's "parent company  only"  operating expenses (not including
class  action  litigation  and  settlement  costs and  interest  expense)  were
$3,470,000  and $2,793,000 for the years ended  December  31,  1996  and  1995,
respectively.

                                  Pursuant to the management services agreement
with Standard  Management, Standard Life paid Standard Management 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 management service agreement between Standard  Management and Standard Life
for 1997 has been renegotiated to increase the monthly  fee to $166,667 (annual
fee  of  $2,000,000).   This  amended  management  service agreement  has  been
approved by the Commissioner of the Indiana Department  of Insurance.  Pursuant
to  the  management service agreement with Standard Life, Dixie  National  Life
paid fees  of $1,524,000 for the year ended December 31, 1996.  The Mississippi
Department of  Insurance  has  approved  a  decrease  of the monthly payment to
$83,333 (annual fee of $1,000,000) from Dixie National Life to Standard Life in
1997.  Both of these agreements provide that they may be modified or terminated
by  the  Indiana  and  Mississippi departments of insurance  in  the  event  of
financial hardship of Standard Life or Dixie National Life.

                                  Pursuant to the management services agreement
with Standard Management,  Premier Life (Luxembourg), a wholly-owned subsidiary
of Standard Management International, paid Standard Management 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  Standard  Management  or  Premier   Life  (Luxembourg).
Standard Management does not plan to modify this agreement in 1997.

                                  At  April 1, 1995, Standard  Management  sold
its  property and equipment to an unaffiliated  leasing/financing  company  for
$1,396,000  and  subsequently  entered  into a capital lease obligation whereby
Standard  Management  pays  a  monthly  rental  amount  of  $45,000.   Standard
Management charges a monthly equipment rental  fee to its subsidiaries for this
equipment and additional equipment purchased after  April  1, 1995.  The amount
of  the  rental  income  received  from Standard Management's subsidiaries  was
$854,000 and $853,000 for the nine months  ended  September  30,  1997 and year
ended December 31, 1996, respectively.

                                  On  November 8, 1996, Standard Life  acquired
through merger Shelby Life from DLAC for  approximately  $14,650,000, including
$13,000,000 in cash, 250,000 shares of restricted SMC Common  Stock  (valued at
$1,250,000)  and $400,000 of acquisition costs.  Financing for the Shelby  Life
transaction was provided by senior debt of $10,000,000 under the Amended Credit
Agreement and $4,000,000 in subordinated convertible debt described below.

                                  The Amended Credit Agreement permits Standard
Management to  borrow  up  to  $16,000,000 in the form of a seven-year reducing
revolving loan arrangement.  Standard  Management  has  agreed to pay a non-use
fee of .50% per annum on the unused portion of the commitment.   In  connection
with  the  original  and  Amended  Credit Agreement, Standard Management issued
warrants to the bank to purchase 61,500  shares of SMC Common Stock.  Borrowing
under the Amended Credit Agreement may be  used for contributions to surplus of
insurance  subsidiaries, acquisition financing,  and  repurchases  of  Class  S
Preferred and  SMC  Common Stock.  The debt is secured by a Pledge Agreement of
all of the issued and  outstanding  shares of common stock of Standard Life and
Standard  Marketing.   Interest  on the  borrowing  under  the  Amended  Credit
Agreement is determined, at the option  of  Standard  Management,  to be: (i) a
fluctuating rate of interest based on the corporate base rate announced  by the
bank from time to time plus one percent per annum, or (ii) a rate at LIBOR plus
3.25%.   Annual  principal  repayments of $2,667,000 begin in November 1998 and
conclude in November 2003.  Indebtedness  incurred  under  the  Amended  Credit
Agreement  is  subject  to  certain restrictions and covenants including, among
other  things, certain minimum  financial  ratios,  minimum  statutory  surplus
requirements  for  the  insurance  subsidiaries,  minimum  consolidated  equity
requirements  for  Standard  Management and certain investment and indebtedness
limitations.  At September 30, 1997, Standard Management was in compliance with
all restrictions and covenants  in  the Amended Credit Agreement.  At September
30, 1997, Standard Management had borrowed $16,000,000 under the Amended Credit
Agreement at a weighted average interest  rate  of  9.178%.  SMC has received a
commitment to increase the Amended Credit Agreement to  $20,000,000  to finance
the acquisition of Savers Life.

                                  In connection with the acquisition of  Shelby
Life,  SMC  borrowed  $4,000,000  from  an  insurance  company  pursuant  to  a
subordinated  convertible  debt  agreement  which  was due in December 2003 and
required  interest payments in cash at 12% per annum,  or,  if  SMC  chose,  in
non-cash additional  subordinated convertible debt notes at 14% per annum until
December 31, 2000.  At  September  30, 1997, this subordinated convertible debt
agreement was amended at the principal  amount  of $4,372,000 which is due July
2004 unless previously converted, and requires interest  payments  in  cash  on
January 1 and July 1 of each year at 10% per annum.  At June 30, 1997, Standard
Management borrowed an additional $5,628,000 from an insurance company pursuant
to  another subordinated convertible debt agreement (collectively, the "Notes")
which  is  due  July  2004  unless  previously converted, and requires interest
payments in cash on January 1 and July  1  of  each  year  at  10%  per  annum.
Proceeds  from the additional borrowings were used for contributions to surplus
of insurance  subsidiaries of $2,400,000, redemption of Class S Preferred Stock
of approximately  $1,840,000  and  the  balance  for  other  general  corporate
purposes.   The  Notes  are  convertible  into SMC Common Stock at the rate  of
$5.747 per share.  The Notes may be prepaid  in  whole or in part at the option
of Standard Management commencing on July 1, 2000 at redemption prices equal to
105% of the principal amount (plus accrued interest)  and  declining to 101% of
the principal amount (plus accrued interest).  The Notes may  be  prepaid prior
to  July  1,  2000  under  certain  limited  circumstances.   The  subordinated
convertible debt agreements contain terms and financial covenants substantially
similar to those in the Amended Credit Agreement.

                                  Assuming an increase in the current  level of
debt  under  the  Amended  Credit Agreement to $20,000,000 and current interest
rates  at  September  30, 1997  (weighted  average  rate  of  9.178%)  Standard
Management annual debt  service  would  be approximately $2,800,000 in interest
paid.  In addition, Standard Management has  1997  obligations  under a capital
lease of $539,000.

                                  From   the   funds   borrowed   by   Standard
Management  pursuant  to  the  Amended  Credit  Agreement  and the subordinated
convertible debt agreements, $13,000,000 was loaned to Standard  Life  pursuant
to  a Surplus Debenture which requires Standard Life to make quarterly interest
payments  to  Standard Management at a variable corporate base rate plus 2% per
annum, and annual  principal  payments of $1,000,000 per year beginning in 2007
and concluding in 2019.  The interest  and  principal  payments  are subject to
quarterly  approval  by  the  Indiana  Department of Insurance, depending  upon
satisfaction of certain financial tests  relating  to levels of Standard Life's
capital  and surplus and general approval of the Commissioner  of  the  Indiana
Department  of  Insurance.   Standard  Management  currently  anticipates these
quarterly  approvals will be granted.  Assuming the approvals are  granted  and
the September  30,  1997  interest  rate  of 10.50% continues in 1997, Standard
Management  will  receive  interest  income  of  $1,357,000  from  its  Surplus
Debenture receivable for 1997.

                                  Dividends  from  Standard  Life  to  Standard
Management  are  limited  by  laws applicable to insurance  companies.   As  an
Indiana domiciled insurance company,  Standard  Life  may  pay  a  dividend  or
distribution  from  its  surplus  profits,  without  the  prior approval of the
Commissioner  of  the  Indiana  Department  of  Insurance, if the  dividend  or
distribution, together with all other dividends and  distributions  paid within
the  preceding twelve months, does not exceed the greater of (I) net gain  from
operations  or  (ii)  10%  of  surplus,  in each case as shown in its preceding
annual statutory financial statements.  Also,  regulatory  approval is required
when dividends to be paid exceed unassigned statutory surplus.   For  the  year
ended  December  31,  1996,  Standard  Life  reported  statutory  net gain from
operations  of  $1,427,000,  statutory  surplus  of  $22,970,000 and unassigned
surplus of $1,140,000.  Standard Life paid a dividend  of  $1,000,000 on May 1,
1997.  Standard Life anticipates paying additional dividends  of  approximately
$600,000 in the remainder of 1997 and the approval of the Commissioner  of  the
Indiana Department of Insurance will be required.

                                  Standard Management anticipates the available
cash  from  its  existing  working  capital,  plus  anticipated 1997 dividends,
management fees, rental income and interest payments  on  its Surplus Debenture
receivable will be more than adequate to meet its anticipated  "parent  company
only" cash requirements for 1997.

                                  Standard Management 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
Standard  Management  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 that affect policyholders' confidence.

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

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

                                  Statutory  surplus  is  computed according to
rules  prescribed  by  the  NAIC,  as  modified  by  the Indiana Department  of
Insurance,  or  the  states  in which the insurance subsidiaries  do  business.
Statutory accounting rules are  different from GAAP and are intended to reflect
a more conservative perspective.   With  respect  to  new  business,  statutory
accounting practices require that: (I) acquisition costs (primarily commissions
and  policy  issue  costs)  and  (ii)  reserves for future guaranteed principal
payments and interest in excess of statutory rates, be expensed in the year the
new business is written.  These items cause  a  reduction  in statutory surplus
("surplus  strain")  in  the  year  written  for many insurance products.   SMC
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, SMC
controls  the amount of net new premiums written 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.

                                  Standard  Life  produced statutory net income
of $1,114,000 and $3,291,000 for the nine months ended  September  30, 1997 and
the  year  ended  December  31,  1996,  respectively.   As  a  result, Standard
Management did not make cash capital contributions to Standard Life during 1996
to  maintain  adequate  levels  of  statutory  capital  and  surplus.  However,
Standard  Management  contributed  $2,400,000  to Standard Life in  the  second
quarter of 1997 to facilitate growth in new premiums  written.   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,  1997,
Winterthur, is rated "A" ("Excellent")  by A.M.  Best.  From January 1, 1995 to
August  31,  1995,  approximately 70% of certain  of  Standard  Life's  annuity
business produced was  ceded.   Standard Life decreased the quota-share portion
of business ceded to 50% at September  1,  1995  and  further reduced it to 25%
effective April 1, 1996 to reflect the reduced need for  additional capital and
increase  current  earnings potential.  This reduction was possible  since  the
surplus strain experienced  by  Standard  Life  was  not as great as originally
anticipated as a result of lower than expected sales in  1995  and the increase
in  surplus  resulting  from  the  sale  of  First International.  In addition,
Standard Life's ability to retain business was further increased by the capital
contribution of $2,400,000 in the second quarter  of  1997.   Winterthur limits
dividends  and  other  transfers  by  Standard  Life to Standard Management  or
affiliated companies in certain circumstances.

                                  Management  believes  that  operational  cash
flow  of Standard Life will be sufficient to meet  its  anticipated  needs  for
1997.   As  of  September  30,  1997,  Standard  Life had statutory capital and
surplus  for  regulatory  purposes of $25,923,000 compared  to  $22,970,000  at
December 31, 1996.  The increase  is  primarily due to the capital contribution
of $2,400,000 from Standard Management  in  the  second  quarter of 1997 and an
increase  in  admitted  goodwill under statutory accounting practices  for  its
investment in Dixie National  Life.  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 Standard
Management.   During  1996,  Standard  Management  did  not  make  any  capital
contributions to Standard Life, other than the SMC 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
$17,921,422  and  $4,263,011   for  the  years  ended  December  31,  1996  and
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.

                                  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 RBC specify
various weighting  factors  that  are  applied to financial balances or various
levels  of  activity  based  on  the  perceived  degree  of  risk.   Regulatory
compliance  is determined by a ratio (the  "RBC  Ratio")  of  the  enterprise's
regulatory total  adjusted  capital,  as defined by the NAIC, to its authorized
control level RBC, as defined by the NAIC.  Enterprises  below specific trigger
points or ratios are classified within certain levels, each  of  which requires
specified corrective action.  Each of SMC's insurance subsidiaries  has  an RBC
Ratio  that is at least 400% of the minimum RBC requirements; accordingly,  the
subsidiaries meet the RBC requirements.

                                  Standard  Life's  acquisition of Shelby Life,
and merger of Shelby Life into Standard Life, effective  November  1,  1996  is
anticipated  to  have  a  positive effect on Standard Life's liquidity and cash
flows.  Shelby Life ceased  writing  new  business  effective November 1, 1996,
thus reducing the surplus strain normally associated  with  the issuance of new
policies.   The  anticipated  profits from Shelby Life's book of  business  are
expected to exceed the related  interest expense connected with the $13,000,000
of  Surplus  Debentures  issued  by  Standard   Life  in  connection  with  the
acquisition  of  Shelby  Life.  The statutory net income  of  Shelby  Life  was
$1,660,855 for the year ended December 31, 1995 and $851,472 for the ten months
ended October 31, 1996.

                                  INTERNATIONAL  OPERATIONS.   The consolidated
balance  sheet  of  SMC  at  September  30, 1997, includes a $1,734,000  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 SMC statements of operations.

                                  Standard  Management  International dividends
are limited to its accumulated earnings without regulatory  approval.  Standard
Management  International and Premier Life (Luxembourg) were not  permitted  to
pay dividends  in  1996  and  1995  due  to  accumulated  losses.  Premier Life
(Bermuda) did not pay dividends in 1996 and 1995.  SMC does  not anticipate any
dividends from these companies in 1997.

                                  Due  to  the  nature of unit-linked  products
issued by Standard Management International, which  represent  over  91% 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 bought and/or disposed of only on the advice of independent consulting
actuaries who perform an annual analysis  comparing  anticipated  cash flows on
the insurance portfolio with the cash flows from the fixed maturity securities.
Any resulting material mismatches are then covered by adjusting the  securities
in the investment portfolio as appropriate.



<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________

FACTORS THAT MAY AFFECT FUTURE RESULTS

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

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

                                  UNCERTAINTIES  REGARDING  INTANGIBLE  ASSETS.
Included  in  SMC's  financial  statements as of September 30, 1997 are certain
assets that are valued for financial  statement purposes primarily on the basis
of assumptions established by SMC'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, 1997 consolidated balance
sheet aggregated $42,948,000  or  6%  of  SMC's  assets.   SMC  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 SMC's
consolidated  financial  statements.  SMC has determined that  the  assumptions
utilized in the initial valuation  of  these  assets  are  consistent  with the
operations of SMC as of September 30, 1997.

                                  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 SMC's  insurance  subsidiaries;  however, it is not expected that
such  changes would materially affect SMC's insurance  subsidiaries'  statutory
capital requirements.

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

                                  RECENTLY  ISSUED  ACCOUNTING  STANDARDS.   In
February 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS No. 128
is  required  to  be  adopted  on December 31, 1997.  At that time, SMC will be
required to change the method currently  used to compute earnings per share and
to restate prior periods.  Under the new requirements  for  calculating primary
earnings  per  share, the dilutive effect of stock options and  stock  warrants
will be excluded.   The  impact is expected to result in an increase in primary
earnings per share for the  first nine months ended September 30, 1997 and 1996
of $.03 and $.06 per share, respectively.   The  impact  of SFAS No. 128 on the
calculation  of  fully  diluted  earnings per share for these  periods  is  not
expected to be material.

                                  PROPOSED  ACQUISITION  OF  SAVERS  LIFE.  The
Company  entered into a Merger  Agreement  dated  as of  December  19, 1996, as 
amended   to   date  with  Savers  Life.   The  closing  of  the   transactions
contemplated  by  the  Merger  Agreement  was  subject  to  normal  conditions,
including  approval by (i) the Company's stockholders of the  issuance  ("Share
Issuance") of  shares of the Company's  Common  Stock  pursuant  to  the  merger
contemplated by the Merger Agreement and upon payment of the Performance Premium
(as defined in the Merger Agreement),  (ii) Savers Life stockholders of the 
Merger  Agreement  and  (iii) applicable regulatory  authorities.   The  
Company's  stockholders approved the Share Issuance at the Company's Annual 
Meeting of Stockholders  held on October 22,  1997.   By  action  of the Board 
of Directors of Savers Life, the  Special Meeting of Stockholders of  Savers  
Life  called for October 22, 1997, at which the Savers Life stockholders were to
consider approval of the Merger Agreement, was adjourned to an unspecified date 
before action was taken on the proposal to approve the Merger Agreement.  The 
Merger Agreement provided that it terminated if the merger was not consummated 
by November  5, 1997.  The Company and Savers Life have engaged in discussions 
regarding the possibility  of  reinstating the Merger  Agreement,  including the
possibility of a restructured agreement.   If the Company and Savers  Life  do  
not  reinstate  the agreement or enter into a restructured agreement, the 
Company's net income in  1997  is  expected  to  be impacted  due  to  costs  
associated  with  the  Merger Agreement, including an estimated  $550,000  to  
$700,000 in legal and accounting  fees,  printing  and mailing costs and filings
fees.

                                  SAFE   HARBOR   PROVISIONS.   Forward-looking
statements in this 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 immediately above, among the other  factors  that  could
cause   actual  results  to  differ  materially  are  the  following:  economic
environment,  interest  rate  changes  generally  and  credited  rates  on  new
business, sales volume, product development, regulatory changes, the results of
financing  efforts,  SMC's  accounting  policies,  competition, the reinsurance
agreement with GIAC and the acquisition of Shelby Life.
<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________


                          PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

SMC is involved in various legal proceedings in the normal course of business.
In most cases, such proceedings involve claims  under  insurance  policies  or
other  contracts  of  SMC.  The  outcomes  of these legal proceedings are  not
expected to have a material  adverse  effect  on  the  consolidated  financial
position, liquidity, or future results of operations of  SMC  based  on  SMC's
current understanding of the relevant facts and law.

As reported previously in the Form 10-Q/A for the  quarterly period ended June
30, 1997, SMC is a party to Quinn v. SMC, an action filed on June 19, 1997  in
the Superior Court of Marion County Indiana.  SMC disputes Mr. Quinn's claims.
SMC filed its Answer and Counterclaim against Mr. Quinn on September 11, 1997.
Mr.  Quinn  is  a former officer and director of SMC.  The ultimate outcome of
the action cannot presently be determined.  Accordingly, no provision for  any
liability  that  may  result  has  been  made  in  the  financial  statements.
Management believes  that  the  conclusion  of such litigation will not have a
material adverse effect on SMC's consolidated financial condition.


<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________

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

(a)  EXHIBITS

Exhibit 10.14        Promissory Note  from  Ronald  D.  Hunter  to  SMC  in the 
                     amount of $775,500 executed October 28, 1997.

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

                                  A  report on Form 8-K dated January 24, 1997,
as amended by the Company's reports on  Form  8-K/A  filed  February  19, 1997,
April 10, 1997, May 20, 1997 and August 29, 1997, was filed with the Commission
to  report  under  Item 7, the financial statements of Shelby Life for the  two
years  ended December  31,  1995  and  the  pro  forma  condensed  consolidated
financial statements as of September 30, 1996.
<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________


                                  SIGNATURES

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


Dated:  November 14, 1997


                                          STANDARD MANAGEMENT CORPORATION
                                                   (Registrant)

                                         By:     RONALD D. HUNTER

                                         Ronald D. Hunter
                                         Chairman of the Board, President and
                                         Chief Executive Officer
                                         (Principal Executive Officer)

                                         By:   GERALD R. HOCHGESANG
                                         Gerald R. Hochgesang
                                         Senior Vice President
                                         (Chief Accounting Officer)
<PAGE>

                  STANDARD MANAGEMENT CORPORATION

                        ___________________

                                                                     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
<S>                                                  <C>                    <C>                  <C>                  <C>
                                                             SEPTEMBER 30,                              SEPTEMBER 30,
                                                          1997                   1996                 1997           1996 (1)
Weighted average common shares outstanding           4,882,467              4,774,840            4,973,580            4,685,406
5 percent common stock dividend                             --                     --                   --              150,251
Common equivalent shares related to:
   Stock warrants at average market price              274,503                135,381              209,845               98,643
   Stock options at average market price               273,100                 29,861              151,069               16,659
   Net issuable shares for modified treasury
stock
         method (after assumed buyback of 20% of            --                     --                   --              348,540
         outstanding stock options and warrants)
WEIGHTED AVERAGE PRIMARY SHARES OUTSTANDING          5,430,070              4,940,082            5,334,494            5,299,499
Income before extraordinary gain on early
redemption of
   redeemable preferred stock and preferred               $591                   $471               $1,915               $3,074
stock dividends
   as reported
Reduction in interest expense and increase in
short-term                                                  --                     --                   --                  131
   investment income for modified treasury stock
method............................................
                                                           591                    471                1,915                3,205
Extraordinary gain on early redemption of
redeemable                                                  --                    233                   --                  500
   preferred stock
NET INCOME (AS ADJUSTED)                                   591                    704                1,915                3,705
Preferred stock dividends as reported                     (15)                   (51)                 (97)                (163)
Preferred stock dividends reduction for modified
treasury                                                    --                     --                   --                   46
   stock method
Earnings available to common shareholders (as             $576                   $653               $1,818               $3,588
adjusted).........................................
Earnings Per Share:
   Income before extraordinary gain on early
redemption
         of redeemable preferred stock and       $    .11               $     .10            $     .36            $     .61
preferred stock
         dividends
   Extraordinary gain on early redemption of
redeemable                                             --                     .04                   --                  .09
         preferred stock
   NET INCOME                                         .11                     .14                  .36                  .70
   Preferred stock dividends                         (.01)                   (.01)                (.02)                (.02)
   Earnings available to common shareholders     $    .10               $     .13            $     .34            $     .68
</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.