<PAGE>   1
                                                                  EXHIBIT 10.18




            CONVERSION, STANDSTILL AND REGISTRATION RIGHTS AGREEMENT

                 THIS AGREEMENT dated as of July 24, 1996 between United
Companies Financial Corporation, a Louisiana corporation ("UCFC") and PennCorp
Financial Group, Inc., a Delaware corporation ("PennCorp").

                             Preliminary Statement

                 UCFC and PennCorp (as assignee of UC Life Holding Corp.) are
parties to that certain Amended and Restated Stock Purchase Agreement dated as
of January 30, 1996 (as amended or restated from time to time, the
"Agreement").  Pursuant to the Agreement, PennCorp is today issuing to UCFC a
convertible promissory note in the principal amount of $14,999,000 (the
"Note").

                 NOW, THEREFORE, in consideration of the premises and the
mutual agreements set forth herein, UCFC and PennCorp hereby agree as follows:

                 1.       UCFC shall, immediately upon receipt of the Note, and
pursuant to the procedures set forth therein, convert the Note into 483,839
shares of common stock, par value $0.01 per share, of PennCorp (the "Common
Stock"), and PennCorp shall deliver or cause to be delivered one or more
certificates for such 483,839 shares of Common Stock (the "Shares"), registered
in the name of UCFC, and in such denominations as UCFC shall have provided in
writing to PennCorp.

                 2.       The certificates evidencing the Shares shall bear a
legend substantially identical to the following:

                 "THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
                 ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
                 SECURITIES LAWS.  NEITHER THIS SECURITY NOR ANY INTEREST OR
                 PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
                 TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
                 THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
                 EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.  IN
                 ADDITION, TRANSFER OF THIS SECURITY IS RESTRICTED AS SET FORTH
                 IN THAT CERTAIN CONVERSION, STANDSTILL AND REGIS-
<PAGE>   2
                 TRATION RIGHTS AGREEMENT DATED JULY 24, 1996 BETWEEN PENNCORP
                 FINANCIAL GROUP, INC. AND UNITED COMPANIES FINANCIAL
                 CORPORATION, A COPY OF WHICH IS AVAILABLE FROM THE SECRETARY
                 OF PENNCORP FINANCIAL GROUP, INC."

Upon a sale of any of the Shares under the Shelf Registration Statement (as
defined below) as permitted by this Agreement, PennCorp agrees to instruct its
stock transfer agent to issue certificate(s) evidencing the number of Shares
being sold without the foregoing legend.

Except for sales of the Shares pursuant to the Shelf Registration Statement,
the Shares shall not be transferable unless and until PennCorp has received
such opinions of counsel as to compliance with all applicable federal and state
securities laws, and other certificate and documentation, as it may reasonably
request.

                 3.       PennCorp represents and warrants to UCFC that the
Shares, upon issuance upon conversion of the Note as contemplated by Paragraph
1 above, will be (a) duly authorized, validly issued, fully paid and
nonassessable and (b) free and clear of all liens, claims and encumbrances
other than those created by any action or inaction of UCFC.  PennCorp shall use
commercially reasonable efforts to cause the Shares to be listed on the New
York Stock Exchange, subject to notice of issuance, as promptly as practicable,
but in no event later than the end of the Lock-Up Period (as hereinafter
defined).  PennCorp further represents and warrants to UCFC that as of July 23,
1996 it had issued and outstanding 28,099,745 shares of Common Stock.


                 4.       PennCorp and UCFC each represent and warrant to the
other that (a) it has the corporate power and authority to enter into and
perform its obligations under this Agreement, (b) this Agreement has been duly
and validly authorized by all necessary action, corporate or otherwise, (c)
this Agreement has been duly executed and delivered by it, and (d) this
Agreement constitutes the valid and legally binding obligation of it,
enforceable against it in accordance with its terms, except that (i) the
enforceability hereof may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar laws now or hereinafter in
effect relating to creditors' rights generally and (ii) the remedy of specific
performance and other forms of equitable relief may be subject to certain
equitable defenses and to the discretion of the court before which proceedings
therefor may be brought.



                                      2
<PAGE>   3
                 5.       UCFC agrees that it will not sell, offer to sell,
contract to sell or otherwise transfer or dispose of any of the Shares (or any
securities convertible into or exercisable or exchangeable for the Shares), or
grant any options or warrants to purchase the Shares, pursuant to which the
sale or transaction will occur during the period of 180 days after the date of
original issuance of the Shares (the "Lock-Up Period") without the prior
written consent of PennCorp.

                 6.       For so long as UCFC shall own at least 1% of
PennCorp's outstanding Common Stock, or, if shorter, until the first
anniversary of the date hereof, UCFC will not, and will cause each of its
subsidiaries not to, singly or as part of a partnership, limited partnership,
syndicate or other group (as those terms are used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) (the "Securities Exchange Act"),
directly or indirectly, without the approval of the Board of Directors of
PennCorp:

                 (a)      acquire, offer to acquire, or agree to acquire, by
purchase, gift or otherwise, any Voting Securities (as hereinafter defined)
except pursuant to a stock split, stock dividend, rights offering,
recapitalization, reclassification or similar transaction; provided, however,
that nothing in this clause (a) shall prevent UCFC from acquiring any Voting
Securities (i) solely for the purposes of hedging the Shares, (ii) solely for
the purpose of covering short positions or (iii) so long as after any such
acquisition, UCFC owns less than or equal to 2% of the outstanding Common
Stock;

                 (b)      make, or in any way participate in, any solicitation
of proxies to vote, solicit any consent or communicate with or seek to advise
or influence any person or entity with respect to the voting of, any Voting
Securities or become a participant in an election contest (as such terms are
defined or used in Rule 14a-11 under the Securities Exchange Act) with respect
to the Company;

                 (c)      form, join or encourage the formation of, any person
(within the meaning of Section 13(d)(3) of the Securities Exchange Act) with
respect to any Voting Securities;

                 (d)      deposit any Voting Securities into a voting trust or
subject any Voting Securities to any arrangement or agreement with respect to
the voting thereof;

                 (e)      initiate, propose or otherwise solicit stockholders
for the approval of one or more stockholder proposals with respect to PennCorp
as described in Rule 14a-8 under the Securities Exchange Act, or induce or





                                       3
<PAGE>   4
attempt to induce any other person to initiate any stockholder proposal;

                 (f)      vote any Voting Securities in favor of the election
to the Board of Directors of PennCorp of, or otherwise seek to elect to the
Board of Directors of PennCorp, any person not recommended by the Board of
Directors of PennCorp;

                 (g)      call or seek to have called any meeting of the
stockholders of PennCorp;

                 (h)      act to seek to control, disrupt or influence the
management, policies or affairs of PennCorp;

                 (i)      sell or otherwise transfer in any manner any Voting
Securities to any person (within the meaning of Section 13(d)(3) of the
Securities Exchange Act) who has filed prior thereto a disclosure with the
Commission under the Securities Exchange Act stating that such person owns more
than ten percent (10%) of any class of Voting Securities or who, to UCFC's
actual knowledge, owns more than ten percent (10%) of any class of Voting
Securities; or who, without the approval of the Board of Directors of PennCorp,
has publicly proposed a business combination or similar transaction with, or a
change of control of, PennCorp or who has publicly proposed a tender offer for
Voting Securities or who has discussed the possibility of proposing a business
combination or similar transaction with, or a change in control of, PennCorp
with UCFC or any of its affiliates;

                 (j)      solicit, seek to effect, negotiate with or provide
any information to any other party with respect to, or make any statement or
proposal, whether written or oral, to the Board of Directors of PennCorp or any
director or officer of PennCorp or otherwise make any public announcement or
proposal whatsoever with respect to, any form of business combination
transaction involving PennCorp, including, without limitation, a merger,
exchange offer or liquidation of PennCorp's assets, or any restructuring,
recapitalization or similar transaction with respect to PennCorp; or

                 (k)      instigate or encourage any third party to do any of
the foregoing.

                 7.       For purposes of Paragraph 6 above, "Voting
Securities" shall mean any securities of PennCorp entitled to vote or take
action by written consent, or securities convertible into or exchangeable or
exercisable for such securities.





                                       4
<PAGE>   5
                 8.(a) PennCorp shall cause to be filed with the Securities and
Exchange Commission (the "Commission") on or prior to 120 days after the date
hereof, a shelf registration statement pursuant to Rule 415 under the
Securities Act (as may then be amended) (the "Shelf Registration Statement") on
Form S-1 or Form S-3, as determined by PennCorp, to cover resales of Transfer
Restricted Securities (as hereinafter defined).  UCFC shall have provided the
information required pursuant to Section 8(b) hereof.  PennCorp shall use its
reasonable best efforts to cause such Shelf Registration Statement to be
declared effective by the Commission on or prior to 180 days after the Closing
Date.  PennCorp shall use its commercially reasonable efforts to keep such
Shelf Registration Statement continuously effective for a period ending two
years from the effective date thereof or such shorter period that will
terminate when each of the Transfer Restricted Securities covered by the Shelf
Registration Statement shall cease to be a Transfer Restricted Security.

                 If there shall occur any event that would cause the Shelf
Registration Statement (i) to contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or (ii) to be not effective and
usable for resale of Transfer Restricted Securities during the period that such
Shelf Registration Statement is required to be effective and usable, PennCorp
shall as promptly as practicable file an amendment to the Shelf Registration
Statement, in the case of clause (i), correcting any such misstatement or
omission, and in the case of either clause (i) or (ii), use its reasonable best
efforts to cause such amendment to be declared effective and such Shelf
Registration Statement to become usable as soon as practicable thereafter, and
the foregoing two year period during which such Shelf Registration Statement is
to be kept effective shall be extended by a period equal to the period it was
not effective.

                 Notwithstanding anything to the contrary in this Section 8,
PennCorp may prohibit offers and sales of Transfer Restricted Securities
pursuant to the Shelf Registration Statement at any time if (A)(i) it is in
possession of material non-public information, (ii) the Board of Directors of
PennCorp determines (based on advice of counsel) that such prohibition is
necessary in order to avoid a requirement to disclose such material non-public
information and (iii) the Board of Directors of PennCorp determines in good
faith that disclosure of such material non-public information would not be in
the best interests of PennCorp and its shareholders or (B) PennCorp has made a
public announcement relating to an acquisition or business combination
transaction including PennCorp and/or one or





                                       5
<PAGE>   6
more of its subsidiaries (i) that is material to PennCorp and its subsidiaries
taken as a whole and (ii) the Board of Directors of PennCorp determines in good
faith that offers and sales of Transfer Restricted Securities pursuant to the
Shelf Registration Statement prior to the consummation of such transaction (or
such earlier date as the Board of Directors shall determine) is not in the best
interests of PennCorp and its shareholders or (C) (i) disclosure is required in
the Shelf Registration Statement of financial information of any person or
entity other than PennCorp or its subsidiaries and affiliates pursuant to
Article 3 or Article 11 of Regulation S-X under the Securities Act and (ii) any
of such required financial information (including related audit reports and
consents of independent accountants) is not available to PennCorp after use of
commercially reasonable efforts to obtain such financial information) (the
period during which any such prohibition of offers and sales of Transfer
Restricted Securities pursuant to the Shelf Registration Statement is in effect
pursuant to clause (A) or (B) of this subparagraph (a) is referred to herein as
a "Suspension Period").  A Suspension Period shall commence on and include the
date on which PennCorp provides written notice to UCFC that offers and sales of
Transfer Restricted Securities cannot be made thereunder in accordance with
this Section 8 and shall end on the date on which UCFC is advised in writing by
PennCorp that offers and sales of Transfer Restricted Securities pursuant to
the Shelf Registration Statement and use of the prospectus constituting a part
of the Shelf Registration Statement may be resumed; provided, however, that the
aggregate number of days in all Suspension Periods during any calendar year
shall not exceed 90.

                 (b)      UCFC may not include any of its Transfer Restricted
Securities in any Shelf Registration Statement pursuant to this Agreement
unless UCFC furnishes to PennCorp in writing, within 10 business days after
receipt of a request therefor, such public information concerning UCFC as
PennCorp may reasonably request for use in connection with any Shelf
Registration Statement or prospectus or preliminary prospectus included
therein.

                 (c)      All expenses incident to PennCorp's performance of or
compliance with its obligations to register and list the Shares, and maintain
the effectiveness thereof, as set forth in this Agreement will be borne by UCFC
(and, if applicable, reimbursed to PennCorp promptly following receipt by UCFC
of appropriate documentation); provided, however, that UCFC's obligation to pay
expenses pursuant to this Section 8(c) shall not exceed 50% of the first
$50,000 of expenses, with all other expenses being borne by PennCorp.  Such
expenses shall include, without limitation, (i) all registration and filing
fees (including





                                       6
<PAGE>   7
those of the Commission and the National Association of Securities Dealers,
Inc.)), (ii) fees and expenses of compliance with all applicable state
securities or "blue sky" laws, (iii) printing and engraving expenses, (iv) fees
and disbursements of counsel and independent accountants for PennCorp, (v)
listing fees on any applicable stock exchange or trading system, and (vi)
rating agency fees.

                 (d)      For purposes of this Section 8, "Transfer Restricted
Securities" shall mean each Share, until each such Share (A) has been
effectively registered under the Securities Act and disposed of in accordance
with the Shelf Registration Statement covering it, (B) is distributed to the
public pursuant to Rule 144, (C) is sold or is available to be sold pursuant to
Rule 144(k) (or any similar provisions then in force) under the Securities Act
or otherwise or (D) is sold pursuant to Rule 904 of Regulation S under the
Securities Act.

                 9.  If, after the end of the Lock-Up Period and on or prior to
the first anniversary of the date hereof (the "Payment Period"), UCFC desires
to sell any or all of the Shares in one or more transactions, then in each case
UCFC shall promptly so notify PennCorp, and request PennCorp's assistance in
such sale, and PennCorp shall provide such assistance.  As consideration for
such assistance, UCFC shall pay to PennCorp, with respect to each such sale
consummated during the Payment Period, promptly following the consummation of
any such sale, $600,000 (or, if less than all of the Shares are sold, then a
percentage of $600,000 calculated by multiplying $600,000 by a fraction, the
numerator of which is the number of Shares so sold, and the denominator of
which is 483,839, appropriately adjusted for stock splits, stock dividends, and
other similar transactions) (such $600,000, or any portion thereof, the
"Specified Fee"); provided, however, that no portion of the Specified Fee shall
be paid unless the net amount received by UCFC in any such sale (net of
brokerage commissions, fees and expenses contemplated by Section 8(c) hereof)
and other direct selling expenses, and net of the Specified Fee) is greater
than $31.00 per Share.

                 10.(a)  All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier or air
courier guaranteeing overnight delivery:





                                       7
<PAGE>   8
                 If to UCFC:

                 United Companies Financial Corporation
                 P.O. Box 1591 (70821)
                 4041 Essen Lane
                 Baton Rouge, Louisiana 70809
                 Telephone:  (504) 924-6007 (ext. 2282)
                 Telecopy:  (504) 924-4324
                 Attention:  Dale E. Redman

                 If to PennCorp:

                 c/o PennCorp Financial, Inc.
                 3 Bethesda Metro Center
                 Suite 1600
                 Bethesda, Maryland  20814
                 Telephone: (301) 656-1777
                 Telecopy:  (301) 657-4770
                 Attention:  General Counsel

                 11.      This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, applicable to contracts
executed in and to be performed entirely within that state.





                                       8
<PAGE>   9
                 IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.

                                UNITED COMPANIES FINANCIAL
                                  CORPORATION
            
            
                                By: /s/ DALE E. REDMAN
                                   --------------------------------------------
                                   Name: Dale E. Redman
                                   Title:Executive Vice President
                                              and Chief Financial
                                                  Officer
            
            
                                PENNCORP FINANCIAL GROUP, INC.
            
            
                                By: /s/ SCOTT SILVERMAN
                                   --------------------------------------------
                                   Name: Scott Silverman
                                   Title:Senior Vice President,
                                            General Counsel and
                                            Secretary





                                       9