UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                    FORM 10-Q


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

For the quarterly period ended                                     June 30, 1999
--------------------------------------------------------------------------------

                                       OR

          ( ) 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                                                 001-14067

                          LINCOLN HERITAGE CORPORATION
             (Exact name of registrant as specified in its charter)

             Texas                                      36-3427454
(State or other jurisdiction                (I.R.S. Employer Identification No.)
    of incorporation or
        organization)

                   1250 Capital of TX Hwy, Bldg. 3, Suite 100
                                Austin, TX 78746
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (512) 328-0075
              (Registrant's telephone number, including area code)

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




             Title of class of                          Number of shares
               common stock                     outstanding as of  July 31, 1999
----------------------------------------      ----------------------------------
       Common stock, $0.01 par value                       4,524,700

<PAGE>

LINCOLN HERITAGE CORPORATION
FORM 10-Q
                                      INDEX


PART I.   FINANCIAL INFORMATION

Item 1.   Condensed Consolidated Financial Statements (unaudited)..............3

          Condensed Consolidated Balance Sheets--June 30, 1999
          (Unaudited) and December 31, 1998....................................3

          Condensed Consolidated Statements of Operations (Unaudited)
          --Three Months and Six Months Ended June 30, 1999 and 1998...........5

          Condensed Consolidated Statements of Shareholders'Equity
          and Comprehensive Income  (Unaudited)--Six Months Ended
          June 30, 1999 and 1998...............................................6

          Condensed Consolidated Statements of Cash Flows
          (Unaudited) --Six Months Ended June 30, 1999 and 1998................7

          Notes to Condensed Consolidated Financial Statements.................8

Item 2.   Management's Discussion and Analysis of Financial
          Condition and Results of Operation...................................9

          Overview.............................................................9

          Results of Operations...............................................10

          Liquidity and Capital Resources.....................................11

          Factors Affecting the Company's Business and Prospects..............12

Item 3.   Quantitative and Qualitative Disclosure About Market Risk...........13

PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings...................................................14

Item 2.   Changes in Securities and Use of Proceeds...........................14

Item 3.   Defaults Upon Senior Securities.....................................14

Item 4.   Submission of Matters to a Vote of Security Holders.................14

Item 5.   Other Information...................................................14

Item 6.   Exhibits and Reports on Form 8-K....................................14

SIGNATURES....................................................................15

EXHIBIT INDEX.................................................................16



<PAGE>
<TABLE>

PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements

                          LINCOLN HERITAGE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS


<CAPTION>
                                                           (Unaudited)
                                                             June 30,              December 31,
                                                               1999                    1998
                                                          ---------------         ---------------

                                     ASSETS
<S>                                                    <C>                      <C>

Fixed maturities available-for-sale
     at fair value(amortized cost
     $81,992,903 and $68,201,939)                      $   77,415,954          $   65,628,083
Equity securities at fair value
     (amortized cost $6,634,426 and $7,939,451)             6,014,705               7,121,000
Policyholder loans                                         18,984,120              17,257,122
Cash and cash equivalents                                  24,482,701              43,824,537
                                                        --------------          --------------
       Total cash and investments                         126,897,480             133,830,742

Accrued investment income                                     668,378                 463,616
Accounts receivable from related party                      2,588,582               1,535,926
Funds withheld by ceding company                              533,320                 526,434
Deferred policy acquisition costs, net                     17,859,876              16,881,478
Fixed assets, net                                           1,369,495               1,218,352
Cost of policies acquired, net                              3,070,495               3,833,659
Goodwill, net                                               1,376,528               1,413,550
Deferred tax assets, net                                    4,225,388               3,364,638
Other assets                                                  456,848               1,004,118
                                                        --------------          --------------
       Total                                           $  159,046,390          $  164,072,513
                                                        ==============          ==============
</TABLE>
              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.
<PAGE>
<TABLE>

                          LINCOLN HERITAGE CORPORATION

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (CONTINUED)


<CAPTION>
                                          (Unaudited)
                                           June 30,               December 31,
                                              1999                   1998
                                        ---------------        ----------------

                      LIABILITIES AND SHAREHOLDERS' EQUITY

<S>                                      <C>                     <C>
Policy liabilities:
    Future policy benefits               $  109,550,547          $  104,201,323
    Policyholder deposits                    39,954,895              47,163,465
    Claims and benefits payable                 500,000                 650,000
    Premiums received in advance                577,232                 409,937
                                         --------------          --------------
       Total policy liabilities             150,582,674             152,424,725

Income tax payable                               35,800                  49,800
Accounts payable and accrued expenses           314,711                 656,089
Accounts payable to related party                86,591                 163,292
Other liabilities                               949,807               1,964,045
                                         --------------          --------------
       Total liabilities                    151,969,583             155,257,951

Shareholders' equity:

Preferred stock  ($.01 par value;
1,000,000 shares authorized,none
issued)                                               -                       -
Common stock  ($.01 par value;
10,000,000 shares authorized,
4,524,700 and 4,520,000 shares
issued and outstanding, respectively)            45,247                  45,200
Additional paid-in capital                    4,913,628               4,734,350
Retained earnings                             5,632,245               6,273,924
Accumulated other comprehensive
loss                                        (3,514,313)             (2,238,912)
                                         ---------------         ---------------
       Total shareholders' equity             7,076,807               8,814,562
                                         ---------------         ---------------

       Total                             $  159,046,390          $  164,072,513
                                         ===============         ===============

</TABLE>
         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.
 <PAGE>
<TABLE>

                                                    LINCOLN HERITAGE CORPORATION

                                     CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)


<CAPTION>
                                                       Three Months Ended                  Six Months Ended
                                                            June 30,                           June 30,
                                                 -------------------------------    -------------------------------
                                                      1999             1998               1999            1998
                                                 ---------------  --------------    --------------  ---------------

<S>                                              <C>              <C>               <C>             <C>
REVENUES

Life premiums                                    $   11,307,182   $  13,476,192     $  21,020,454   $   20,732,952
Net investment income                                 2,355,602       2,580,793         5,154,510        4,832,949
Realized investment gains,net                         1,539,818         617,289           854,695        1,068,203
Other revenue                                            57,222          94,702           132,508          147,866
                                                 --------------   -------------     --------------  ---------------
       Total revenues                                15,259,824      16,768,976        27,162,167       26,781,970

BENEFITS AND EXPENSES

Death benefits                                        3,905,156       4,333,168         9,556,081        8,289,937
Surrender benefits                                      573,103         412,454           889,516          478,585
Increase in future policy benefits                    3,968,140       6,568,018         5,349,225        8,408,048
Interest paid on policyholder deposits                  349,625         255,646           708,625          782,683
Commissions                                           3,807,030       3,979,975         7,842,414        6,936,106
General expenses                                      2,805,694       1,831,179         4,892,212        3,343,763
General expenses reimbursed by related party           (683,294)       (759,275)       (1,392,740)      (1,315,032)
Taxes, licenses and fees                                305,678         250,169           629,309          417,848
Amortization of cost of policies purchased              290,262         275,719           638,164          573,573
Change in deferred acquisition costs, net            (1,225,308)       (512,615)         (978,398)      (1,149,634)
                                                 ---------------  --------------    --------------  ---------------
       Total benefits and expenses                   14,096,086      16,634,438        28,134,408       26,765,877

Income (loss) before federal income taxes             1,163,738         134,538          (972,741)          16,093


Income taxes(benefits)                                  395,671          14,016          (330,562)           4,724
                                                 ---------------  --------------    --------------  ---------------

Net income (loss)                                $      768,067   $     120,522     $    (641,679)  $       11,369
                                                 ===============  ==============    ==============  ===============

Basic earnings (loss) per share                  $         0.17   $        0.03     $       (0.14)  $            -
                                                 ===============  ==============    ==============  ===============

Diluted earnings (loss) per share                $         0.17   $        0.03     $       (0.14)  $            -
                                                 ===============  ==============    ==============  ===============

Weighted average shares outstanding:

Basic                                                 4,522,332       4,000,000         4,521,167        4,000,000
Diluted                                               4,571,787       4,000,000         4,521,167        4,000,000

</TABLE>
         The accompaning notes are an integral part of these condensed
                       consolidated financial statements.
<PAGE>
<TABLE>

                                                    LINCOLN HERITAGE CORPORATION

                                      CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                                      AND COMPREHENSIVE INCOME

                                                             (UNAUDITED)

<CAPTION>
                                                                                              Accumulated
                                                                             Additional          Other
                                                             Common            Paid-In       Comprehensive      Retained
                                             Total            Stock            Capital           (loss)         Earnings

<S>                                     <C>               <C>              <C>               <C>              <C>
Balance, December 31, 1998              $  8,814,562      $     45,200     $  4,734,350      $ (2,238,912)    $  6,273,924


Comprehensive loss, net of tax:

       Net loss                             (641,679)                -                -                 -         (641,679)
       Change in unrealized losses on
       available for sale and equity
       securities, net of applicable
       income tax benefit of $657,028     (1,275,401)                -                -        (1,275,401)               -
                                        -------------

       Total comprehensive (loss)         (1,917,080)                -                -                 -                -
                                        -------------

Issuance of shares for stock options          17,625                47           17,578                 -                -


Effect of stock options granted
under stock option plans, net of
applicable income tax effect of
$83,300                                      161,700                 -          161,700                 -
                                        -------------     -------------    -------------     -------------    -------------



Balance, June 30, 1999                  $  7,076,807      $     45,247     $  4,913,628      $ (3,514,313)    $  5,632,245
                                        =============     =============    =============     ==============   =============


Balance December 31, 1997               $  6,882,711      $     10,000     $  2,075,576      $     538,870    $  4,258,265


Comprehensive income, net of tax:

       Net income                             11,369                 -                -                 -           11,369
       Change in unrealized losses on
       available for sale and equity
       securities, net of applicable
       income tax benefit of $483,313       (938,197)                -                -          (938,197)               -
                                        -------------

       Total comprehensive (loss)           (926,828)                -                -                 -                -
                                        -------------

Transfer to common stock in
connection with stock split and
stock dividend                                     -            30,000          (30,000)                -                -

Effect of stock options granted under
stock option plan, net of applicable
income tax effect of $35,276                  68,479                 -           68,479                 -                -


Balance, June 30, 1998                  $  6,024,362      $     40,000     $  2,114,055      $   (399,327)    $  4,269,634
                                        =============     =============    =============     =============    =============

</TABLE>
         The accompanying notes are an integral part of these condensed
                       consolidated financial statements.
<PAGE>
<TABLE>

                                                    LINCOLN HERITAGE CORPORATION

                                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                           FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
                                                             (UNAUDITED)


                                                                            1999                    1998
                                                                      ---------------         ----------------

<S>                                                                   <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES

       Net income (loss)                                              $     (641,679)         $        11,369
       Adjustments to reconcile net income to cash provided
       by (used in) operating activities:
              Realized investment gains                                     (854,695)              (1,068,203)
              Accretion of discount on investments                          (240,255)                (671,705)
              Depreciation and amortization                                  812,685                  683,513
              Deferred income taxes                                         (287,022)              (1,246,303)
              Stock options                                                  245,000                  103,755
              Accrued investment income                                     (204,762)                (150,902)
              Accounts receivable from related parties                    (1,052,656)                 (81,493)
              Funds withheld by ceding company                                (6,886)                       -
              Deferred acquisition costs                                    (978,398)              (1,149,634)
              Other assets                                                   672,270               (1,187,837)
              Future policy benefits and deposit funds                    (1,859,346)                (403,973)
              Claims and benefits payable                                   (150,000)                (300,000)
              Premiums received in advance                                   167,295                   36,695
              Federal income tax payable                                     (14,000)              (1,975,165)
              Accounts payable and accrued expenses                         (341,378)                (135,503)
              Accounts payable to related party                              (76,701)                 (17,090)
              Other liabilities                                           (1,014,238)                 218,596
                                                                      ---------------         ----------------
                  Net cash used in operating activities                   (5,824,766)              (7,333,880)
                                                                      ---------------         ----------------

CASH FLOWS FROM INVESTING ACTIVITIES

       Proceeds from sales of available-for-sale investments              44,719,113              257,160,881
       Purchases of available-for-sale investments                       (56,238,168)            (252,567,521)
       Policyholder loans, net                                            (1,726,998)              (3,640,600)
       Purchase of fixed assets                                             (288,642)                 (67,825)
       Acquisition of subsidiary                                                   -               (5,041,514)
                                                                      ---------------         ----------------
                  Net cash used in investing activities                  (13,534,695)              (4,156,579)
                                                                      ---------------         ----------------

CASH FLOWS FROM FINANCING ACTIVITIES

       Issuance of shares for stock options                                   17,625                        -
                                                                      ---------------         ----------------
   Net cash provided by financing activities                                  17,625                        -
                                                                      ---------------         ----------------

NET DECREASE IN CASH AND                                                (19,341,836)              (11,490,459)
       CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                            43,824,537               62,667,707
                                                                      --------------          ----------------

CASH AND CASH EQUIVALENTS, END OF PERIOD                              $    24,482,701         $    51,177,248
                                                                      ===============         ================

SUPPLEMENTAL CASH FLOW INFORMATION
       FEDERAL INCOME TAXES PAID                                      $       14,000          $     1,975,165
                                                                      ===============         ================

</TABLE>
         The accompanying notes are an integral part of these condensed
                       consolidated fiancial statements.
<PAGE>

                          LINCOLN HERITAGE CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 -- BASIS OF PRESENTATION

The  accompanying   condensed consolidated   financial  statements  include  the
accounts of Lincoln  Heritage  Corporation  (the  "Company")  and its direct and
indirect wholly owned subsidiaries: Memorial Service Life Insurance Company, New
Life  Insurance  Company,  and Lincoln  Memorial Life Insurance  Company.  These
condensed  consolidated  financial  statements  have been prepared in accordance
with generally  accepted  accounting  principles  ("GAAP") for interim financial
information and the  instructions to Form 10-Q and Rule 10-01 of Regulation S-X,
which differ from  statutory  accounting  practices  prescribed  or permitted by
regulatory authorities.  Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting  principles for complete
financial  statements.  All  intercompany  accounts and  transactions  have been
eliminated in consolidation. Certain prior period amounts have been reclassified
to conform with the current period presentation.

     The  accompanying  condensed  consolidated  financial  statements and notes
thereto as of June 30, 1999 are unaudited and should be read in conjunction with
the Company's  audited  financial  statements  included in the Company's  Annual
Report  filed with the  Securities  and Exchange  Commission  for the year ended
December  31, 1998.  The  unaudited  interim  condensed  consolidated  financial
statements  have been  prepared  on the same  basis as the  annual  consolidated
financial statements and, in the opinion of management, reflect all adjustments,
which include only normal recurring adjustments, necessary to present fairly the
Company's  financial  position,  results of operations and cash flows as of June
30,  1999  and for the  three  and six  months  ended  June  30,  1999  and 1998
respectively.  The results for the three and six months  ended June 30, 1999 are
not  necessarily  indicative  of the results to be expected  for the year ending
December 31, 1999.

NOTE 2 -- STOCK SPLITS AND EARNINGS PER SHARE

On April 6, 1998, the Company effected a 3.2-for-1 stock split, in the form of a
stock  dividend,  and on August 18,  1998,  the Company  declared and paid a 25%
stock dividend.  The earnings per share of the Company for all periods presented
have been computed as if these stock splits and dividends occurred at January 1,
1998. The diluted earnings per share is computed using the treasury stock method
unless the effect is anti-dilutive.

NOTE 3 -- INVESTMENTS

     In the six month period ended June 30, 1999, the Company  recognized losses
for  declines  in market  value  associated  with the  Company's  investment  in
Autobond  Acceptance  Corporation  ("Autobond").  Management  believes  that the
decline in market value is other than  temporary  and due to reasons  other than
market  fluctuations and has recognized  losses of $974,000 and $2.6 million for
the three and six months ended June 30,  1999,  respectively.  These  recognized
losses bring Autobond to current market value as of June 30, 1999.

<PAGE>

         The  amortized  cost and  estimated  fair value of fixed  maturity  and
equity securities available-for-sale as of June 30, 1999, are as follows:

<TABLE>
<CAPTION>
                                                                 Gross              Gross              Estimated
                                              Amortized        Unrealized         Unrealized              Fair
                                                 Cost            Gains             Losses                 Value
<S>                                         <C>               <C>               <C>                 <C>
Fixed maturity securities
   Corporate bonds                          $   12,590,664    $     372,118     $    (466,925)      $   12,495,857
   Mortgage backed securities                   53,010,284           16,879        (3,245,313)          49,781,850
   U.S. government                              16,391,955          160,141        (1,413,850)          15,138,246
                                            --------------    -------------     --------------      --------------
     Total fixed maturity securities            81,992,903          549,138        (5,126,088)          77,415,954


Equity securities                                6,634,426                -          (619,720)           6,014,705
                                            --------------    -------------     --------------      --------------


     Total                                  $   88,627,329 $        549,138     $  (5,745,808)      $   83,430,659
                                            ==============    =============     ==============      ==============
</TABLE>

NOTE 4 -- PROPOSED ACQUISITION; SUBSEQUENT EVENTS

On April 30, 1999,the Company entered into an agreement to purchase all the out-
standing shares of Funeral  Security  Life Insurance  Company  ("FSLife") for $5
million. FSLife has approximately $31 million in assets and $30 million in liab-
ilities.  The completion  of the purchase is subject to regulatory  approval and
is expected to be accounted for using the purchase method.

Effective  July 23,  1999,  the Company  entered  into an  agreement to sell its
insurance subsidiary,  New Life Insurance Company ("New Life") for approximately
$5 million. The completion of the sale is subject to regulatory approval.  Since
all of the  business  of New  Life is  reinsured  by  another  of the  Company's
insurance subsidiaries,  the sale of New Life is not expected to have a material
adverse effect on the  Company's  financial  position,  results  of  operations,
or cash flows.

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

Overview

         The  Company  is a holding  company  for  operating  subsidiaries  that
consist  primarily of life insurance  companies.  The life  insurance  companies
primarily write policies sold by the Company's  affiliate,  National Prearranged
Services,  Inc.  ("NPS"),  in connection with NPS's sale of prearranged  funeral
contracts.

         The Company's revenues are derived primarily from premiums on insurance
policies generated by NPS. In the event of a decline in NPS's preneed sales, the
Company's  future  revenue  growth  could be impacted  if the Company  could not
replace the NPS sales  force with its own or another  marketing  entity's  sales
force on a cost-effective or timely basis.

         The Company's expenses consist principally of benefits paid or accrued,
commissions  on the  sale of  policies  and  general  and  administrative  costs
associated with life insurance company operations.  The Company anticipates that
benefit costs and commissions  will continue to increase as the Company executes
its growth plans.

<PAGE>

         The Company's  insurance  subsidiaries  are subject to a high degree of
regulation from various state insurance administrators.  Such regulation governs
(among  other  things):  investment  policies;   financial  reporting;   capital
adequacy;  terms of policies;  and the ability of the Company's  subsidiaries to
pay dividends and management fees to the Company. In addition,  NPS's activities
in selling  prearranged  funeral contracts are highly regulated in the states in
which NPS does business.  These  regulatory  aspects and future changes  therein
could materially affect the Company's financial position,  results of operations
or cash flows.

         The Company's strategy is to increase  shareholder value by growing its
insurance  business  through:  (i)  selected   acquisitions  of  life  insurance
companies and in-force life insurance policies and annuities; and (ii) increases
in life insurance policies arising out of prearranged  funeral contracts sold by
NPS. The  Company's  ability to acquire  such  companies  and  policies  will be
dependent  upon (among  other  things) its ability to  identify,  negotiate  and
complete  transactions  of favorable  values,  arrange  necessary  financing and
integrate   and  manage  the   acquisitions,   including   preserving   customer
relationships.  There can be no  assurance  that the Company  will  successfully
execute its strategy.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 1999 and 1998

         Premium  income  decreased  approximately  $2.2  million and  increased
approximately  $288,000, or 16% and 1%, in the three-month and six-month periods
ended June 30, 1999,  respectively,  compared to the  corresponding  periods  of
1998. The decrease for the three-month  period reflected a shift in the relative
proportion of policies from single pay to limited pay policies. The increase for
the six-month period reflected higher overall volume of new policies issued  for
both limited pay and single pay policies for the six-month period ended June 30,
1999 compared to the six-month period ended June 30, 1998.

         Net investment  income decreased  approximately  $225,000 and increased
approximately  $322,000,  or 9% and 7%, in the three-month and six-month periods
ended June 30,1999, respectively, compared to the corresponding periods of 1998.
The decrease in the  three-month  period was due to changes in the portfolio mix
of investments away from high yield bonds to a greater investment in convertible
bonds. The increase for the six-month  period was attributable to a higher level
of invested assets over the comparable period in 1998 due to  the  purchase of a
block of life and annuity policies in April 1998.

     Net  realized  gains   increased   approximately   $923,000  and  decreased
approximately  $214,000,  or 149%  and 20%,  in the  three-month  and  six-month
periods ended June 30, 1999,  respectively,  versus the corresponding periods of
1998. Gains were recognized in the three-month and six-month  periods ended June
30,  1999 due to the  higher  levels  of  invested  assets  and  changes  in the
portfolio mix of investments discussed above.  However,  these gains were offset
by losses of  approximately  $974,000 and $2.6 million for the  three-month  and
six-month  periods ended June 30, 1999,  respectively,  reflecting  management's
recognition  of  a  decline  in  market  value  associated  with  the  Company's
investment  in  Autobond.  Management  believes  that the decline was other than
temporary and due to reasons other than market  fluctuations  and has recognized
losses  sufficient  to reduce the  Company's  investment  in Autobond to current
market value as of June 30, 1999.
<PAGE>

         Benefits decreased  approximately $2.9 million and $1.4 million, or 25%
and  8%,  in  the  three-month  and  six-month  periods  ended  June  30,  1999,
respectively, compared to the corresponding periods of 1998.  The  decrease  for
the three-month  period reflected a return to  normal  mortality experience when
compared  to the  elevated  level of  death claims experienced  during the first
quarter of 1999.The decrease for the six-month period was offset by higher over-
all volume of new  policies  issued  and  a greater than anticipated increase in
death claims during the first quarter of 1999.

         Commissions decreased approximately $173,000 and increased $906,000, or
4% and 13%,  in the  three-month  and  six-month  periods  ended June 30,  1999,
respectively, compared to the  corresponding  periods  of  1998.  These  changes
were  attributable to higher sales  volumes  and  changes in the mix of policies
sold.
     General expenses, net of expenses reimbursed,  increased approximately $1.1
million and $1.5  million,  or 98% and 73%,  in the  three-month  and  six-month
periods ended June 30, 1999, respectively, compared to the corresponding periods
of 1998. These increases were attributable to higher administrative  expenses as
a result of increased sales volumes, support for increased levels of acquisition
activities and regulatory reporting requirements, and the forfeiture of deposits
and other expenses  associated with the Company's  withdrawal of its proposal to
acquire Harbourton Reassurance, Inc.

         The  change  in  deferred  acquisition  costs  decreased  approximately
$713,000 and increased  $171,000 for the three-month and six-month periods ended
June 30, 1999,  respectively, compared to the corresponding periods of 1998. The
decrease for  the  three-month  period  was  due to  the  capitalization  of the
costs of acquiring new business at a higher rate than  the  amortization of such
costs due to a higher  volume  of limited pay  policies.  The  increase  for the
six-month  period was due  to higher  volume  of business  and higher  levels of
death claims and policy lapses.

Liquidity and Capital Resources

         The Company's insurance subsidiaries generally generate sufficient cash
receipts from premium collections and investment income to satisfy the Company's
obligations.  The  Company  believes  that  the  investment  portfolios  of  its
insurance  subsidiaries  provide sufficient liquidity to meet its operating cash
requirements.

     The Company's cash requirements for 1999 and in the future will depend upon
mortality  experience,  acquisitions,  timing of  expansion  plans  and  capital
expenditures.  Pursuant to its initial  public  offering in November  1998,  the
Company  issued 520,000 shares of common stock and realized net proceeds of $2.6
million.  The Company  believes  that  interest  earned on the net  proceeds and
anticipated revenue from operations should be adequate for the Company's working
capital  requirements of its existing  business over the next twelve months.  In
the event that the Company's  plans or assumptions  change,  or if its resources
available  to meet  unanticipated  changes in  business  conditions  prove to be
insufficient  to  fund  operations,  the  Company  could  be  required  to  seek
additional  financing prior to that time. On April 30, 1999, the Company entered
into an  agreement to purchase all the  outstanding  shares of Funeral  Security
Life Insurance Company ("FSLife") for $5 million. The purchase is expected to be
funded  from  existing  working  capital.  Effective  July 23,  1999 the Company
entered  into an  agreement  to sell  its  insurance  subsidiary,  New  Life for
approximately  $5  million.  The  Company  expects to realize  net  proceeds  of
approximately $700,000 from the sale of New Life.

         Total cash and investments  decreased  approximately  $6.9 million from
$133.8 million at December 31, 1998 to $126.9 million at June 30, 1999.  Changes
in the separate components of investment assets were due to the portfolio mix of
the  Company's  investment  assets and  changes  in the fair  value of  actively
managed fixed maturity and equity securities.

<PAGE>

         Receivables from related parties increased  approximately  $1.1 million
from $1.5  million at  December  31,  1998 to $2.6  million at June 30, 1999 due
primarily to receivables due under the Company's cost sharing arrangement.

         Cost of policies acquired,  net, decreased  approximately $763,000 from
$3.8  million at  December  31,  1998 to $3.1  million  at June 30,  1999 due to
amortization of costs.

         Other  assets  decreased  approximately  $547,000  from $1.0 million at
December 31, 1998 to $457,000 at June 30, 1999 due to the forfeiture of deposits
and other expenses  associated with the Company's  withdrawal of its proposal to
acquire Harbourton Reassurance, Inc.

         Policyholder  deposits decreased  approximately $7.2 million from $47.2
million at December  31, 1998 to $40.0  million at June 30,  1999.  Policyholder
deposits are comprised primarily of blocks of annuities acquired in prior years.
The decrease was due primarily to  surrenders of policies and the absence of the
issuance of new annuity policies.

         Other  liabilities  decreased  approximately  $1.0  million  from  $2.0
million at December  31, 1998 to 1.0 million at June 30, 1999 due  primarily  to
the application of unapplied customer payments to policies.

Factors Affecting the Company's Business and Prospects

Seasonality

         Historically,  the Company's revenues and operating results have varied
from quarter to quarter and are expected to continue to fluctuate in the future.
These  fluctuations  have been due to a number of  factors,  including  a higher
mortality rate of the Company's insureds during the winter months.

Year 2000 Issues
         Many current installed computer systems and software products are coded
to accept  only  two-digit  entries in the date code  field and cannot  reliably
distinguish  dates  beginning  on January  1, 2000 from dates  prior to the year
2000. Many companies'  software and computer  systems may need to be upgraded or
replaced in order to correctly process dates beginning in 2000.

         Company Readiness

          The Company's  information  technology personnel recently assessed the
Company's  readiness to manage Year 2000 issues.  This  included a review of all
current  computer  systems in use, as well as  communications  with  significant
vendors and other third  parties to determine  the extent to which the Company's
operations are  vulnerable to third  parties'  failure to correct their own Year
2000  issues.  Based  on the  overall  assessment  performed,  the  Company  has
determined that it will not need to  significantly  modify or replace any of its
current  systems in order to comply with Year 2000 issues.  In  addition,  based
upon  communications  with  significant  vendors  and other third  parties,  the
Company is not aware of any  material  impact on their  systems  relating to the
transition to the Year 2000. However,  the Company has no means of ensuring that
these  entities  will be Year 2000  ready.  The  inability  of third  parties to
complete their Year 2000 programs in a timely manner could materially impact the
Company. The effect of non-compliant third parties is not determinable.

<PAGE>

         Year 2000 Costs

         The  Company's  total  costs of Year 2000  efforts  to date and  future
anticipated costs have not been and are not expected to be material.

         Risks Associated with the Company's Year 2000 Issues

         The Company expects its internal  systems to be Year 2000 compliant and
believes that the worst case  scenario  would result from vendors or other third
parties failing to achieve Year 2000 compliance.  Due to the general uncertainty
inherent  in the Year 2000  problem,  the  Company  cannot  predict  whether the
consequence  of Year 2000  failures will have a material  adverse  effect on the
Company's business, financial condition or results of operations. However, based
on  the  Company's  assessment  of its  internal  systems,  communications  with
significant  vendors and other third  parties,  the Company does not expect Year
2000 problems to result in a material adverse effect on the Company's  financial
position,  results of operations or cash flows. In the event significant vendors
are not Year 2000  compliant,  the Company  will have a backup  power supply and
internal resources to address Year 2000 problems.

Forward-Looking Statements

         This report contains  forward-looking  statements within the meaning of
the "safe harbor" provisions of the Private Securities  Litigation Reform Act of
1995. Such forward-looking  statements are based on the beliefs of the Company's
management as well as on assumptions made by and information currently available
to the Company at the time such  statements  were made.  The Company can give no
assurance that the  expectations  indicated by such  forward-looking  statements
will be realized. If any of management's  assumptions should prove incorrect, or
if any of the  risks  and  uncertainties  underlying  such  expectations  should
materialize,  the  Company's  actual  results may differ  materially  from those
indicated by the forward-looking statements.

         The  following  factors that are not within the  Company's  control and
that may have a direct bearing on operating results include, but are not limited
to: (i) general  economic  conditions  and other factors,  including  prevailing
interest rate levels and stock market performance,  which may affect the ability
of the  Company  to  sell  its  products,  the  market  value  of the  Company's
investments and the lapse rate and profitability of the Company's policies; (ii)
the Company's ability to achieve anticipated levels of operational  efficiencies
at  recently   acquired   companies,   as  well  as  through  other  cost-saving
initiatives; (iii) mortality,  morbidity, and other factors which may affect the
profitability of the Company's insurance  products;  (iv) changes in the federal
income tax laws and  regulations  which may affect the cost of or demand for the
Company's  products;  (v)  increasing  competition  in the sale of the Company's
products;  (vi)  regulatory  changes or  actions,  including  those  relating to
regulation of financial  services  affecting (among other things) bank sales and
underwriting of insurance  products,  regulation of the sale,  underwriting  and
pricing  of  insurance  products;  (vii)  the  availability  and terms of future
acquisitions;  (viii)  unanticipated events associated with Year 2000 compliance
relating to work on  development  or  modification  to  computer  systems and to
software,  including work  performed by suppliers or vendors;  and (ix) the risk
factors  or  uncertainties  listed  in the  Company's  other  filings  with  the
Securities and Exchange Commission.

         Additionally,  the  Company  may  not  be  successful  in  identifying,
acquiring,   and  integrating   additional   start-up   locations  and  possible
acquisitions,   implementing  improved  management  and  accounting  information
systems and controls and may be dependent upon additional  capital and equipment
purchases for future  growth.  There may be other risks and  uncertainties  that
management is not able to predict.

         When  used  in  this  report,   the  words   "anticipate,"   "believe,"
"estimate," "expect," "intends," and similar expressions,  as they relate to the
Company are intended to identify forward-looking statements,  although there may
be certain forward-looking statements not accompanied by such expressions.


Item 3.  Quantitative and Qualitative Disclosure About Market Risk.

         There have been no material  changes from the  information  provided in
the Company's Annual Report on Form 10-K for the year ended December 31,1998.

<PAGE>

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

         Not applicable.

Item 2.  Changes in Securities and Use of Proceeds

         Not applicable

Item 3.  Defaults Upon Senior Securities

         Not applicable.

Item 4.  Submission of Matters to a Vote of Security Holders

         The annual  meeting of shareholders  of the Company was held on May 20,
1999.  Of 4,520,200 shares issued,  outstanding and  eligible to be voted at the
meeting, holders of 4,502,625 shares, constituting a quorum, were represented in
person or by proxy  at the  meeting.  One matter was submitted to a vote of  the
security holders at the meeting.

     Election of Class I Directors.  The only matter  submitted was the election
of two Class I director nominees to the Board of Directors,  each to continue in
office until the year 2002. Upon tabulation of the votes cast, it was determined
that both director  nominees had been elected.  The voting results are set forth
below:
                                  Against or         Broker
      Name            For          Withheld         Non-votes        Abstentions
  Paul J. Gallant    4,502,125          500               -                 -
  Clifton Mitchell   4,502,125          500               -                 -

         Because the Company has a staggered  Board,  the term of office of the
following  named Class II and Class III directors, who were not up for election
at the 1999 annual meeting, continued after the meeting:

         Class II (to continue in office until 2000)
                  Randall K. Sutton
                  Mark A. Turken

         Class III (to continue in office until 2001)
                  Brent D. Cassity
                  Howard A. Wittner

     Effective  June  28,  1999,  Mark A. Turken  resigned  from  the  Board  of
Directors. The Company is in the process of selecting a replacement director and
anticipates that this process will be completed by the end of August, 1999.



Item 5.  Other Information

         Not applicable.

Item 6.  Exhibits and Reports on Form 8-K

         (a)      Exhibits:
                  See Exhibit Index attached hereto.

         (b)      Reports on Form 8-K:
                  None.

<PAGE>

                                   SIGNATURES

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



                                   LINCOLN HERITAGE CORPORATION
                                           (Registrant)


August 16, 1999                    By:    /s/ Clifton Mitchell
                                    President and Chief Executive Officer
                                    (Principal Financial and Accounting Officer)

<PAGE>
<TABLE>

                                  EXHIBIT INDEX

<S>              <C>
Ex. No.          Description

   27.1          Financial Data Schedule for the six months ended June 30, 1999.
</TABLE>