EXHIBIT 10.40

                                                                  EXECUTION COPY



                                     WAIVER

                           Dated as of August 14, 1998

                                       to

                                CREDIT AGREEMENT

                           Dated as of March 12, 1997


     PENNCORP FINANCIAL GROUP, INC., a Delaware corporation (the "Company"), the
lenders signatory to the Credit Agreement  referred to below (the "Banks"),  the
Managing  Agents and the Co-Agents  named therein (the "Agents") and THE BANK OF
NEW YORK, as administrative  agent for the Banks (the  "Administrative  Agent"),
hereby agree as follows:

     1. Credit  Agreement.  Reference  is hereby  made to the Credit  Agreement,
dated as of March 12,  1997,  among the Company,  the Banks,  the Agents and the
Administrative  Agent (as amended,  modified or waived prior to the date hereof,
the "Credit  Agreement").  Terms used in this Waiver  (this  "Waiver")  that are
defined in the Credit  Agreement and are not otherwise  defined  herein are used
herein with the  meanings  therein  ascribed to them.  The Credit  Agreement  as
modified by this Waiver is and shall continue to be in full force and effect and
is hereby in all respects confirmed, approved and ratified.

     2. Waivers.  (a) The Banks hereby waive  compliance with Section 8.01(a) of
the Credit Agreement to the extent that any  non-compliance  results solely from
the failure to deliver the financial statements, balance sheets and certificates
required  by such  Section  8.01(a)  within 45 days  after the end of the fiscal
quarter of the Company ending June 30, 1998; provided that,  notwithstanding the
foregoing,  the Company shall deliver such financial statements,  balance sheets
and certificates to each of the Banks no later than August 24, 1998.

     (b) The Banks  hereby  waive  compliance  with  Section  8.10 of the Credit
Agreement for the period (the "Waiver  Period") from and including June 30, 1998
to and  including  September  28,  1998 to the  extent  that any  non-compliance
results  solely  from the  write-down  of the book  value of  Pennsylvania  Life
Insurance Company, Union Bankers Insurance Company,  Constitution Life Insurance
Company,  Marquette Life Insurance  Company,  KIVEX, Inc. and/or Forum Benefits,
Inc. (collectively,  the "Held for Sale Companies",  being the assets designated
by the Company as "Held for Sale") in connection  with the potential sale of the
Held for Sale Companies;  provided that,  notwithstanding the foregoing,  during
such Waiver  Period,  the Company shall not permit the Leverage  Ratio to exceed
46% at any time and provided,  further,  that,  for the period (the  "Restricted
Payment Period") from and including  August 14, 1998 to and including  September
28, 1998,  the Company shall


<PAGE>

not (i) make, or permit any Subsidiary to make,  any Restricted  Payment or (ii)
incur any Indebtedness (other than the Loans under the Credit Agreement).

     (c) The Banks  hereby  waive  compliance  with  Section  8.13 of the Credit
Agreement  for the Waiver Period to the extent that any  non-compliance  results
solely from the  write-down of the book value of any or all of the Held For Sale
Companies  in  connection  with the  potential  sale  thereof ;  provided  that,
notwithstanding the foregoing,  during such Waiver Period, the Company shall not
permit the Net Worth of the Company and its Consolidated Subsidiaries to be less
than  $625,000,000 at any time and provided,  further,  that, for the Restricted
Payment  Period,  the Company  shall not (i) make,  or permit any  Subsidiary to
make,  any  Restricted  Payment or (ii) incur any  Indebtedness  (other than the
Loans under the Credit Agreement).

     For purposes hereof, "Restricted Payment" shall mean any payment on account
of any purchase, redemption, retirement, exchange or conversion of (i) any share
of capital stock of the Company or any security convertible into, or any option,
warrant or other right to acquire,  any share of capital stock of the Company or
(ii) the Subordinated Notes or any other subordinated Indebtedness.

     3. Fees.  The Company agrees to pay, on August 14, 1998, a fee to each Bank
that  executes  this Waiver on or before  August 14, 1998,  such fee to be in an
amount for each such Bank equal to 0.05% of such Bank's Commitment on August 14,
1998. Such fees, once paid, shall not be refundable in whole or in part.

     4. Effective Date. The waivers provided for herein shall be effective as of
the date first  written  above,  but shall not become  effective as of such date
until this Waiver has been executed by the Company,  the Majority  Banks and the
Administrative Agent.

     5.  Governing  Law.  This Waiver  shall be governed  by, and  construed  in
accordance with, the law of the State of New York.

     6. Counterparts. This Waiver may be executed in any number of counterparts,
all of which taken together shall constitute one and the same instrument and any
of the parties hereto may execute this Waiver by signing any such counterpart.

<PAGE>

     IN WITNESS  WHEREOF,  the parties hereto have caused this Waiver to be duly
executed as of the day and year first above written.


                                       PENNCORP FINANCIAL GROUP, INC.


                                       By: /s/James P. McDermott
                                       -------------------------
                                       Name:  James P. McDermott
                                       Title: EVP & CFO


                                       THE BANK OF NEW YORK, as
                                       Administrative Agent and as a Bank


                                       By: /s/Lizanne T. Eberle
                                       ------------------------
                                       Name:  Lizanne T. Eberle
                                       Title: Vice President


                                       THE CHASE MANHATTAN BANK, as a
                                       Managing Agent and as a Bank


                                       By: /s/Helen L. Newcomb
                                       -----------------------
                                       Name:  Helen L. Newcomb
                                       Title: Vice President


                                       THE FIRST NATIONAL BANK OF CHICAGO,
                                       as a Managing Agent and as a Bank


                                       By: /s/ Bruce E. Cox
                                       ------------------------
                                       Name:   Bruce E. Cox
                                       Title:  Vice President


                                       NATIONSBANK, N.A., as a Managing Agent
                                       and as a Bank


                                       By: /s/Jim V. Miller
                                       ------------------------
                                       Name:  Jim V. Miller
                                       Title: Senior Vice President 


                                       FLEET NATIONAL BANK, as a Co-Agent
                                       and as a Bank


                                       By: /s/William A. Bagby
                                       ------------------------
                                       Name:  William A. Bagby
                                       Title: Senior Vice President


                                       MELLON BANK, N.A., as a Co-Agent
                                       and as a Bank


                                       By: 
                                       ------------------------
                                       Name:
                                       Title:


                                       BANK OF MONTREAL, as a Co-Agent
                                       and as a Bank


                                       By: /s/Brian L. Banke
                                       ------------------------
                                       Name:  Brian L. Banke
                                       Title: Director
<PAGE>

                                       CIBC INC., as a Co-Agent and as a Bank


                                       By: /s/Edward C. Neu
                                       ------------------------
                                       Name:  Edward Neu
                                       Title: Executive Director
                                              CIBC Oppenheimer Corp., as agent


                                       DRESDNER BANK AG, NEW YORK BRANCH &
                                       GRAND CAYMAN BRANCH, as a Co-Agent
                                       and as a Bank


                                       By: 
                                       ------------------------
                                       Name:
                                       Title:


                                       SUNTRUST BANK, CENTRAL FLORIDA
                                       NATIONAL ASSOCIATION


                                       By: 
                                       ------------------------
                                       Name:
                                       Title:


                                       BANK ONE, TEXAS N.A.


                                       By: /s/Robert Humphreys
                                       ------------------------
                                       Name:  Robert Humphreys
                                       Title: Vice President


                                       FIRST UNION NATIONAL BANK


                                       By: /s/Thomas L. Stitchberry
                                       ----------------------------
                                       Name:  Thomas L. Stitchberry
                                       Title: Senior Vice President


                                       LTCB TRUST COMPANY


                                       By: /s/Jun Ebihara
                                       ------------------------
                                       Name:  Jun Ebihara
                                       Title: Senior Vice President


                                       ING (U.S.) CAPITAL CORPORATION


                                       By: /s/T.D. Prangley
                                       ------------------------
                                       Name:  T.D. Prangley
                                       Title: Vice President