`SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2001        Commission File Number 0-5392

                         FIRST COMMONWEALTH CORPORATION
              ----------------------------------------------------
             (Exact Name of Registrant as specified in its charter)`

Company Logo

`5250 South Sixth Street
                                  P.O. Box 5147
                             Springfield, IL 62705
           ----------------------------------------------------------
          (Address of principal executive offices, including zip code)

           VIRGINIA                                               54-0832816
----------------------------                                    ----------------
(State or other jurisdiction                                    (I.R.S. Employer
incorporation or organization)                               Identification No.)

Registrant's telephone number, including area code:  (217) 241-6300

Securities registered pursuant to Section 12(b) of the Act:

Title of each class                                        Name of each exchange
-------------------                                         on which registered
      None                                                 ---------------------
                                                                   None                                                                                          None

Securities registered pursuant to Section 12(g) of the Act:

                               Title of each class
                               -------------------
                      Common Stock, par value $1 per share

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 [X] No [ ]

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K (229.405 of this chapter) is not contained  herein,  and will
not be contained,  to the best of registrant's knowledge, in definitive proxy or
information  statements  incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X].

At March 1, 2002, the Registrant had outstanding  54,385 shares of Common Stock,
par value $1 per share.

DOCUMENTS INCORPORATED BY REFERENCE:  None





                         FIRST COMMONWEALTH CORPORATION
                                    FORM 10-K
                          YEAR ENDED DECEMBER 31, 2001


                                TABLE OF CONTENTS



PART I.........................................................................3


      ITEM 1.  BUSINESS........................................................3


      ITEM 2.  PROPERTIES.....................................................16


      ITEM 3.  LEGAL PROCEEDINGS..............................................17


      ITEM 4.  SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS............18


PART II.......................................................................18


      ITEM 5.  MARKET FOR COMPANY'S EQUITY AND RELATED
               SECURITY HOLDERS MATTERS.......................................18


      ITEM 6.  SELECTED FINANCIAL DATA........................................19


      ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               CONDITION AND RESULTS OF OPERATIONS............................20


      ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA....................31


      ITEM 9.  DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
               AND FINANCIAL DISCLOSURE.......................................62


PART III......................................................................62


      ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT............62


      ITEM 11.  EXECUTIVE COMPENSATION........................................65


      ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                OWNERS AND MANAGEMENT.........................................68


      ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................71


PART IV.......................................................................74


      ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                AND REPORTS ON FORM 8-K.......................................74






                                     PART I

ITEM 1.  BUSINESS


FORWARD-LOOKING INFORMATION

Any  forward-looking  statement contained herein or in any other oral or written
statement  by the company or any of its  officers,  directors  or  employees  is
qualified by the fact that actual  results of the company may differ  materially
from those  projected  in  forward-looking  statements.  Additional  information
concerning  factors that could cause actual  results to differ from those in the
forward-looking statements is contained in "Management's Discussion and Analysis
of Financial Condition and Results of Operations."


OVERVIEW

First  Commonwealth  Corporation  (the  "Registrant")  was incorporated in 1967,
under  the laws of the  State of  Virginia  to  serve  as an  insurance  holding
company.  The  Registrant and its  subsidiaries  (the  "Company")  have only one
significant  industry segment - insurance.  The Company's  dominant  business is
individual  life insurance  which  includes the servicing of existing  insurance
business in force,  the  solicitation of new individual life insurance,  and the
acquisition of other companies in the insurance business.

At December 31, 2001, the parent and significant majority-owned  subsidiaries of
the Registrant were as depicted on the following organizational chart:`

Organizational Chart

`This  document at times will refer to the  Company's  largest  shareholder,  Mr.
Jesse T. Correll and certain  companies  controlled by Mr. Correll.  Mr. Correll
holds  a  majority   ownership  of  First  Southern   Funding  LLC,  a  Kentucky
corporation,  ("FSF") and First Southern Bancorp,  Inc. ("FSBI"), a bank holding
company that operates out of 14 locations in central  Kentucky.  Mr.  Correll is
Chairman  of the  Board  of  Directors  of UTG and is  currently  UTG's  largest
shareholder  through  his  ownership  control of FSF,  FSBI and  affiliates.  At
December  31,  2001  Mr.  Correll  owns  or  controls  directly  and  indirectly
approximately 60% of UTG.

On  September  4, 2001,  FSF and FSBI (and their  principals)  restructured  the
manner in which  they  hold  shares of UTG by  forming a new  limited  liability
company  under  Kentucky  law,  First  Southern  Holdings,   LLC  ("FSH").  FSBI
contributed  to FSH shares of UTG common  stock held by it and cash in  exchange
for a 99%  membership  interest  in FSH.  FSF  contributed  to FSH shares of UTG
common stock held by it,  subject to notes  payable which were assumed by FSF in
exchange for a 1% membership interest in FSH.

The holding  companies within the group, UTG and FCC, are life insurance holding
companies. These companies became members of the same affiliated group through a
history of  acquisitions  in which life insurance  companies were involved.  The
focus of the holding  companies is the acquisition of other companies in similar
lines of business and  management of the insurance  subsidiaries.  The companies
have no activities outside the life insurance focus.

The  insurance  companies  of the group,  UG,  APPL,  and ABE all operate in the
individual  life insurance  business.  The primary focus of these  companies has
been the servicing of existing  insurance business in force and the solicitation
of new insurance business.

REC is a wholly owned subsidiary of UTG, which was  incorporated  under the laws
of the State of  Delaware  on June 1,  1971,  for the  purpose  of  dealing  and
brokering  in  securities.  REC acts as an agent for its  customers  by  placing
orders of mutual funds and variable  annuity  contracts  which are placed in the
customers' names, the mutual fund shares and variable annuity accumulation units
are held by the respective custodians, and the only financial involvement of REC
is through  receipt of commission  (load).  REC was  originally  established  to
enhance  the life  insurance  sales by  providing  an  additional  option to the
prospective  client.  The objective was to provide an insurance  sale and mutual
fund sale in tandem. REC functions at a minimum broker-dealer level. It does not
maintain any of its customer  accounts nor  receives  customer  funds  directly.
Operating activity of REC accounts for less than $100,000 of earnings annually.

North  Plaza is a wholly  owned  subsidiary  of UTG,  which owns for  investment
purposes, a shopping center in Somerset, Kentucky, approximately 12,000 acres of
timberland in Kentucky,  and a 50% partnership  interest in an additional 11,000
acres of Kentucky  timberland.  Operating  activity of North Plaza  accounts for
less than $100,000 of earnings annually.

HISTORY

FCC was  incorporated  in August  1967,  as a  Virginia  corporation.  FCC is an
intermediate holding company,  (See organizational  chart) ultimately controlled
by UTG.

UTG was incorporated  December 14, 1984, as an Illinois  corporation,  under its
former name United  Trust Inc.  (UTI) During the its first two and a half years,
UTG was engaged in an intrastate public offering of its securities, raising over
$12,000,000  net of  offering  costs.  In  1986,  UTG  formed  a life  insurance
subsidiary and by 1987 began selling life insurance products.

On June 16, 1992, UTG and its affiliates  acquired 67% of the outstanding common
stock of the now dissolved Commonwealth  Industries  Corporation,  ("CIC") for a
purchase price of $15,567,000.  Following the acquisition UTG controlled  eleven
life insurance  subsidiaries.  The Company has taken several steps to streamline
and simplify the corporate structure following the acquisitions.


On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG  shareholders.  As consideration for the shares,
FSF paid UTG $10,999,995 and certain shareholders of UTG $999,990 in cash.

Following  the above  transactions,  and together with shares of UTG acquired in
the market, FSF and affiliates became the largest shareholder of UTG.

During 1999,  the Company made several  significant  changes to  streamline  and
simplify its corporate structure.  Throughout this document,  references will be
made to these changes in the corporate structure.  Prior to these changes, there
were four holding  companies,  which  controlled four life insurance  companies.
However,  in 1999 there were two mergers and a liquidation,  reducing the number
of holding companies to two and the number of life insurance  companies to three
(refer to the  organizational  chart on page 3). The first  merger  and  company
liquidation  took place in July of 1999.  Prior to July  1999,  UTG was known as
United Trust,  Inc. ("UTI").  UTI and United Income,  Inc. ("UII") owned 100% of
the former United Trust Group,  Inc.,  (which was formed in February of 1992 and
liquidated  in July of 1999 - referred to as  "UTGL99").  Through a  shareholder
vote  and  special   meeting  on  July  26,  1999,  UII  merged  into  UTI,  and
simultaneously  with the  merger,  UTGL99 was  liquidated  and UTI  changed  its
corporate  name to United  Trust  Group,  Inc.  The second  merger  occurred  on
December  29,  1999,  when UG was the  survivor  to a merger with its 100% owned
subsidiary United Security Assurance Company ("USA").

The first merger transaction, and an anterior corresponding proposal to increase
the number of authorized shares of UTG common stock from 3,500,000 to 7,000,000,
received necessary  shareholder  approvals at a special meeting and vote held on
July 26, 1999. The Board of Directors of the respective companies concluded that
the  merger  would  benefit  the  business  operations  of UTG and UII and their
respective  stockholders by creating a larger more viable life insurance holding
group with lower administrative  costs, a simplified  corporate  structure,  and
more readily marketable securities. The second merger was completed as a part of
management's efforts to reduce costs and simplify the corporate structure.

On December 31, 1999, UTG and Jesse T. Correll entered a transaction whereby Mr.
Correll,  in combination with other  individuals,  made an equity  investment in
UTG. Under the terms of the Stock Acquisition Agreement, Mr. Correll and certain
of his affiliates  contributed  their 100% ownership of North Plaza of Somerset,
Inc. to UTG in exchange for 681,818 authorized but unissued shares of UTG common
stock.  The Board of Directors of UTG approved the  transaction at their regular
quarterly board meeting held on December 7, 1999. North Plaza of Somerset,  Inc.
owns  for  investment  purposes,  a  shopping  center  in  Somerset,   Kentucky,
approximately  12,000 acres of  timberland  in Kentucky,  and a 50%  partnership
interest in an additional 11,000 acres of Kentucky  timberland.  North Plaza has
no debt. The net assets have been valued at $7,500,000,  which equates to $11.00
per share for the new shares of UTG that were issued in the transaction.

On October 26, 2001,  APPL effected a reverse stock split,  as a result of which
(i) it became a  wholly-owned  subsidiary  of UG, and an  indirect  wholly-owned
subsidiary  of FCC and UTG,  and  (ii) its  minority  shareholders  received  an
aggregate  of  $1,055,294.50  in respect of their  shares.  Prior to the reverse
stock split, UG owned 88% of the outstanding shares of APPL.


PRODUCTS

UG's portfolio consists of two universal life insurance products. Universal life
insurance is a form of permanent  life insurance  that is  characterized  by its
flexible  premiums,  flexible face amounts,  and unbundled pricing factors.  The
primary  universal life insurance  product is referred to as the "Century 2000".
This product was  introduced to the  marketing  force in 1993 and has become the
cornerstone  of current  marketing.  This  product has a minimum  face amount of
$25,000 and currently  credits 4.5%  interest with a guaranteed  rate of 4.5% in
the first 20 years and 3% in years 21 and greater. The policy values are subject
to a $4.50 monthly policy fee, an administrative load and a premium load of 6.5%
in all years. The premium and administrative loads are a general expense charge,
which is added to a policy's  net premium to cover the  insurer's  cost of doing
business.  A premium load is assessed upon the receipt of a premium payment.  An
administrative load is a monthly maintenance charge. The administrative load and
surrender  charges  are  based on the issue  age,  sex and  rating  class of the
policy.  A  surrender  charge is  effective  for the first 14 policy  years.  In
general,  the surrender charge is very high in the early years and then declines
to zero at the end of 14 years.  Policy  loans are  available  at 7% interest in
advance.  The policy's accumulated fund will be credited the guaranteed interest
rate in relation to the amount of the policy loan.

The second universal life product referred to as the "UL90A", has a minimum face
amount of $25,000.  The  administrative  load is based on the issue age, sex and
rating class of the policy. Policy fees vary from $1 per month in the first year
to $4 per  month in the  second  and  third  years  and $3 per  month  each year
thereafter.  The UL90A  currently  credits 4.5% interest with a 4.5%  guaranteed
interest rate.  Partial  withdrawals,  subject to a remaining  minimum $500 cash
surrender value and a $25 fee, are allowed once a year after the first duration.
Policy loans are available at 7% interest in advance.  The policy's  accumulated
fund will be credited the guaranteed  interest rate in relation to the amount of
the policy loan.  Surrender  charges are based on a percentage of target premium
starting  at 120% for years 1-5 then  grading  downward to zero in year 15. This
policy   contains  a  guaranteed   interest   credit  bonus  for  the  long-term
policyholder.  From years 10 through 20, additional  interest bonuses are earned
with a total in the  twentieth  year of 1.375%.  The bonus is credited  from the
policy issue date and is contractually guaranteed.

The Company's actual  experience for earned interest,  persistency and mortality
varies from the  assumptions  applied to pricing and for  determining  premiums.
Accordingly,  differences  between the  Company's  actual  experience  and those
assumptions  applied may impact the  profitability  of the Company.  The minimum
interest  spread  between  earned and credited rates is 1% on the "Century 2000"
universal life insurance  product.  The Company monitors  investment yields, and
when necessary  adjusts  credited  interest  rates on its insurance  products to
preserve targeted interest spreads.  Credited rates are reviewed and established
by the Board of Directors of the respective life insurance subsidiaries.

APPL markets traditional non-participating products that include the 10-pay life
traditional  product and preferred whole life plans. The 10-pay life traditional
product is a limited pay product  whereby the owner pays premiums over a 10 year
period.  At the end of the  10th  year,  no  further  premiums  are paid and the
insurance remains in-force. The preferred whole life plan is a traditional whole
life  product  similar to 10-pay life plan other than  premiums are payable over
the entire life of the contract.

The Company believes its premium rates are competitive with other insurers doing
business in the states in which the Company is marketing its products.

The Company markets other products,  none of which is significant to operations.
The Company has a variety of policies in force  different from those,  which are
currently being marketed.  Interest sensitive products including  universal life
and excess  interest  whole life  ("fixed  premium  UL")  account for 57% of the
insurance in force. Approximately 22% of the insurance in force is participating
business,  which represents  policies under which the policyowner  shares in the
insurance  companies   statutory   divisible  surplus.   The  Company's  average
persistency  rate for its policies in force for 2001 and 2000 has been 91.6% and
89.8%,  respectively.  The Company does not anticipate any material fluctuations
in rates in the future that may result from competition.

Interest  sensitive  life  insurance  products have  characteristics  similar to
annuities  with  respect to the  crediting  of a current  rate of interest at or
above a guaranteed  minimum rate and the use of surrender  charges to discourage
premature  withdrawal of cash values.  Universal  life  insurance  policies also
involve variable premium charges against the policyholder's  account balance for
the cost of insurance and administrative expenses. Interest-sensitive whole-life
products  generally  have  fixed  premiums.  Interest-sensitive  life  insurance
products are designed with a combination of front-end loads,  periodic  variable
charges, and back-end loads or surrender charges.

Traditional life insurance products have premiums and benefits  predetermined at
issue;  the  premiums  are set at levels that are  designed  to exceed  expected
policyholder   benefits  and  Company   expenses.   Participating   business  is
traditional  life  insurance  with the added  feature  of an annual  return of a
portion of the premium paid by the policyholder through a policyholder dividend.
This  dividend  is set  annually  by the Board of  Directors  of each  insurance
company and is completely discretionary.


MARKETING

New business  production has been declining the past several years. In 2001, the
Companies issued 118 universal life insurance contracts and 323 traditional life
insurance contracts. In 1999 management significantly scaled back on home office
support  of  marketing  efforts  in  response  to  the  declining  new  business
production  adjusting  expense levels  relating to new business  consistent with
current production.  Management currently places little emphasis on new business
production,  believing the  Companies  could better  utilize their  resources in
other ways. In 2001, the Company  increased its emphasis on policy  retention in
an attempt to improve current persistency levels. In this regard, several of the
home office staff have become  licensed  insurance  agents enabling them broader
abilities when dealing with the customer in regards to their  existing  policies
and possible alternatives. This program is relatively new, but early indications
are generally positive.  Management will continue to monitor the results of this
program and make adjustments as deemed necessary.

Excluding  licensed home office personnel,  UG has a total of 25 general agents.
UG primarily  markets its products in the Midwest  region with most sales in the
states of  Illinois  and Ohio.  APPL has a total of 3 active  agents  who market
primarily to rural  customers in the state of West  Virginia.  ABE has no active
agents.  No  individual  sales  agent  accounted  for over 10% of the  Company's
premium volume in 2001. The Company's sales agents do not have the power to bind
the Company.

ABE is licensed to sell life insurance in Alabama, Arizona,  Illinois,  Indiana,
Louisiana and Missouri.  During 2001, Illinois and Indiana accounted for 36% and
38%, respectively of ABE's direct premiums collected.

APPL is licensed to sell life insurance in Alabama, Arizona, Arkansas, Colorado,
Georgia,  Illinois,  Indiana, Kansas, Kentucky,  Louisiana,  Missouri,  Montana,
Nebraska, Ohio, Oklahoma, Pennsylvania, Tennessee, Utah, Virginia, West Virginia
and Wyoming.  During 2001,  West  Virginia  accounted  for 87% of APPL's  direct
premiums collected.

UG is licensed to sell life insurance in Alabama, Arizona,  Arkansas,  Colorado,
Delaware,  Florida,  Georgia, Idaho, Illinois,  Indiana, Iowa, Kansas, Kentucky,
Louisiana,  Massachusetts,  Minnesota, Mississippi, Missouri, Montana, Nebraska,
Nevada,  New Mexico,  North  Carolina,  North Dakota,  Ohio,  Oklahoma,  Oregon,
Pennsylvania,  Rhode Island,  South Carolina,  South Dakota,  Tennessee,  Texas,
Utah, Virginia,  Washington,  West Virginia and Wisconsin. During 2001, Illinois
accounted for 20%, and Ohio accounted for 32% of direct premiums  collected.  No
other state accounted for more than 6% of direct premiums collected in 2001.

In 2001,  $22,864,330  of total direct  premium was  collected by the  insurance
subsidiaries.  Ohio  accounted  for 28%,  Illinois  accounted  for 18%, and West
Virginia accounted for 12% of total direct premiums collected.


UNDERWRITING

The  underwriting  procedures of the insurance  subsidiaries  are established by
management. Insurance policies are issued by the Company based upon underwriting
practices  established  for each  market in which  the  Company  operates.  Most
policies are individually underwritten.  Applications for insurance are reviewed
to determine additional  information required to make an underwriting  decision,
which depends on the amount of insurance applied for and the applicant's age and
medical history.  Additional information may include inspection reports, medical
examinations,  and statements from doctors who have treated the applicant in the
past  and,  where  indicated,   special  medical  tests.   After  reviewing  the
information  collected,  the Company  either issues the policy as applied for or
with an extra  premium  charge  because of  unfavorable  factors or rejects  the
application. Substandard risks may be referred to reinsurers for full or partial
reinsurance of the substandard risk.

The  Company's  insurance  subsidiaries  require  blood samples to be drawn with
individual  insurance  applications for coverage over $45,000 (age 46 and above)
or $95,000 (ages  16-45).  Blood samples are tested for a wide range of chemical
values and are  screened  for  antibodies  to the HIV virus.  Applications  also
contain  questions  permitted  by law  regarding  the HIV  virus,  which must be
answered by the proposed insureds.


RESERVES

The  applicable  insurance laws under which the insurance  subsidiaries  operate
require that each  insurance  company  report policy  reserves as liabilities to
meet future obligations on the policies in force. These reserves are the amounts
which,  with  the  additional  premiums  to be  received  and  interest  thereon
compounded  annually at certain assumed rates, are calculated in accordance with
applicable  law to be  sufficient  to  meet  the  various  policy  and  contract
obligations  as they mature.  These laws specify that the reserves  shall not be
less than reserves calculated using certain mortality tables and interest rates.

The liabilities for traditional life insurance and accident and health insurance
policy benefits are computed using a net level method. These liabilities include
assumptions  as  to  investment  yields,  mortality,   withdrawals,   and  other
assumptions  based on the life insurance  subsidiaries'  experience  adjusted to
reflect  anticipated trends and to include  provisions for possible  unfavorable
deviations.  The Company  makes these  assumptions  at the time the  contract is
issued or, in the case of contracts acquired by purchase,  at the purchase date.
Benefit  reserves  for  traditional  life  insurance  policies  include  certain
deferred profits on limited-payment policies that are being recognized in income
over the policy term. Policy benefit claims are charged to expense in the period
that the claims are incurred.  Current  mortality rate  assumptions are based on
1975-80 select and ultimate  tables.  Withdrawal rate assumptions are based upon
Linton  B or  Linton  C,  which  are  industry  standard  actuarial  tables  for
forecasting assumed policy lapse rates.

Benefit  reserves for  universal  life  insurance  and interest  sensitive  life
insurance  products  are  computed  under a  retrospective  deposit  method  and
represent policy account balances before applicable  surrender  charges.  Policy
benefits and claims that are charged to expense include benefit claims in excess
of related policy account balances.  Interest crediting rates for universal life
and  interest  sensitive  products  range  from 4.0% to 5.5% for the year  ended
December  31,  2001 and 4.5% to 5.5% for the years ended  December  31, 2000 and
1999.


REINSURANCE

As is customary in the insurance  industry,  the insurance  subsidiaries  of the
Company cede insurance to, and assume insurance from, other insurance  companies
under  reinsurance  agreements.  Reinsurance  agreements are intended to limit a
life insurer's maximum loss on a large or unusually  hazardous risk or to obtain
a  greater  diversification  of  risk.  The  ceding  insurance  company  remains
primarily  liable with respect to ceded insurance should any reinsurer be unable
to meet the obligations  assumed by it. However,  it is the practice of insurers
to reduce  their  exposure to loss to the extent  that they have been  reinsured
with  other  insurance  companies.  The  Company  sets a limit on the  amount of
insurance  retained on the life of any one person.  The Company  will not retain
more than $125,000,  including  accidental  death benefits,  on any one life. At
December 31, 2001, the Company had gross insurance in force of $2.630 billion of
which approximately $654 million was ceded to reinsurers.

The Company's  reinsured business is ceded to numerous  reinsurers.  The Company
believes the assuming  companies are able to honor all contractual  commitments,
based on the Company's periodic reviews of their financial statements, insurance
industry reports and reports filed with state insurance departments.

Currently,  the Company is utilizing reinsurance  agreements with Business Mens'
Assurance Company,  ("BMA") and Life Reassurance  Corporation of America, ("LIFE
RE").  Recently,  Swiss Re Life and Health America Incorporated merged into LIFE
RE and  the  merged  entity  was  renamed  Swiss  Re  Life  and  Health  America
Incorporated  ("SWISS RE").  BMA and SWISS RE currenty hold an "A"  (Excellent),
and "A++" (Superior)  rating,  respectively,  from A.M. Best, an industry rating
company.  The reinsurance  agreements were effective December 1, 1993, and cover
all new business of the Company.  The  agreements  are a yearly  renewable  term
("YRT")  treaty where the Company cedes  amounts  above its  retention  limit of
$100,000 with a minimum cession of $25,000.

UG entered a  coinsurance  agreement  with Park  Avenue Life  Insurance  Company
("PALIC") as of September 30, 1996.  Under the terms of the agreement,  UG ceded
to PALIC substantially all of its paid-up life insurance policies.  Paid-up life
insurance generally refers to non-premium paying life insurance policies.  PALIC
and  its  ultimate  parent  The  Guardian  Life  Insurance  Company  of  America
("Guardian"),  currently hold an "A"  (Excellent),  and "A+" (Superior)  rating,
respectively,  from A.M. Best, an industry  rating  company.  The agreement with
PALIC  accounts for  approximately  66% of the  reinsurance  receivables,  as of
December 31, 2001.

On  September  30,  1998,  UG  entered  into a  coinsurance  agreement  with The
Independent Order of Vikings, an Illinois fraternal  organization ("IOV"). Under
the terms of the agreement,  UG agreed to assume on a coinsurance  basis, 25% of
the reserves and liabilities arising from all inforce insurance contracts issued
by the IOV to its members.  At December 31, 2001, the IOV insurance  inforce was
approximately   $1,696,000,   with  reserves   being  held  on  that  amount  of
approximately $403,500.

On June 1, 2000, UG assumed an already  existing  coinsurance  agreement,  dated
January  1,  1992,  between  Lancaster  Life  Reinsurance  Company,  an  Arizona
corporation   ("LLRC")  and  Investors   Heritage  Life  Insurance   Company,  a
corporation  organized under the laws of the  Commonwealth of Kentucky  ("IHL").
Under the terms of the  agreement,  LLRC  agreed to assume  from IHL a 90% quota
share of new issues of credit life and  accident and health  policies  that have
been written on or after January 1, 1992 through  various  branches of the First
Southern National Bank. The maximum amount of credit life insurance that can be
assumed on any one individual's  life is $15,000.  UG assumed all the rights and
obligations  formerly  held by  LLRC as the  reinsurer  in the  agreement.  LLRC
liquidated its charter immediately following the transfer. At December 31, 2001,
IHL has insurance inforce of approximately $4,148,000.

The Company does not have any short-duration  reinsurance contracts.  The effect
of the Company's long-duration reinsurance contracts on premiums earned in 2001,
2000 and 1999 was as follows:


                                   Shown in thousands
                     -----------------------------------------------
                         2001             2000             1999
                       Premiums         Premiums         Premiums
                        Earned           Earned           Earned
                     --------------   -------------    -------------
Direct            $        20,333  $        22,970 $         25,539
Assumed                       111               76               20
Ceded                      (3,172)          (3,556)          (3,978)
                     --------------   -------------    -------------
Net premiums      $        17,272  $        19,490 $         21,581
                     ==============   =============    =============





INVESTMENTS

Investment  income  represents  a  significant  portion of the  Company's  total
income.   Investments  are  subject  to  applicable  state  insurance  laws  and
regulations, which limit the concentration of investments in any one category or
class and  further  limit the  investment  in any one issuer.  Generally,  these
limitations  are imposed as a percentage  of statutory  assets or  percentage of
statutory capital and surplus of each company.

The following table reflects net investment income by type of investment.

                                                                                December 31,
                                                        ----------------------------------------------------------
                                                               2001               2000               1999
                                                          ---------------    ----------------   ----------------
Fixed maturities and fixed maturities
  Held for sale                                         $     10,831,162   $     11,775,706   $     11,886,968
Equity securities                                                131,263            116,327             91,429
Mortgage loans                                                 2,715,834          1,777,374          1,078,028
Real estate                                                      198,314            311,027            389,181
Policy loans                                                     970,142            997,381            991,812
Other long-term investments                                            0            655,418             63,528
Short-term investments                                           114,538            156,815            147,726
Cash                                                             562,905            847,400            811,103
                                                          ---------------    ----------------   ----------------
Total consolidated investment income                          15,524,158         16,637,448         16,637,448
Investment expenses                                             (581,256)          (767,851)          (961,275)
                                                          ---------------    ----------------   ----------------
Consolidated net investment income                      $     14,942,902   $     15,869,597   $     14,498,500
                                                          ===============    ================   ================


At December 31,  2001,  the Company had a total of $200,000 in  investment  real
estate which did not produce income during 2001.

The following table  summarizes the Company's fixed  maturities  distribution at
December 31, 2001 and 2000 by ratings category as issued by Standard and Poor's,
a leading ratings analyst.


                 Fixed Maturities
                 ----------------
      Rating                       % of Portfolio
      ------                    ----------------------
                                  2001        2000
                                ----------  ----------
Investment Grade
   AAA                              61%         48%
   AA                                6%         16%
   A                                24%         27%
   BBB                               8%          9%
Below investment grade               1%          0%
                                ----------  ----------
                                   100%        100%
                                ==========  ==========



The  following  table  summarizes  the  Company's  fixed  maturities  and  fixed
maturities held for sale by major classification.

                                                                       Carrying Value
                                                      --------------------------------------------------
                                                                 2001                      2000
                                                          --------------------      --------------------
U.S. government and government agencies                $           43,087,596   $            66,795,111
States, municipalities and political subdivisions                  11,990,823                15,524,611
Collateralized mortgage obligations                                54,132,094                 9,140,804
Public utilities                                                   22,219,127                27,287,454
Corporate                                                          42,204,195                46,303,263
                                                          --------------------      --------------------
                                                       $          173,633,835   $           165,051,243
                                                          ====================      ====================

The following table shows the composition and average  maturity of the Company's
investment portfolio at December 31, 2001.

                                                      Average
                                                     Carrying                 Average              Average
        Investments                                    Value                 Maturity               Yield
        -----------------------------------       ----------------       ------------------      ------------

        Fixed maturities and fixed
           maturities held for sale         $         169,342,539        5 years                       6.40%
        Equity securities                               4,489,494        Not applicable                2.92%
        Mortgage Loans                                 28,141,783        5 years                       9.65%
        Investment real estate                          6,404,828        Not applicable                3.10%
        Policy loans                                   13,849,678        Not applicable                7.00%
        Short-term investments                          1,102,284        190 days                      8.25%
        Cash and cash equivalents                      14,832,615        On demand                     3.80%
                                                  ----------------
        Total Investments and Cash          $         238,163,221                                      6.52%
                                                  ================


At December 31, 2001, fixed maturities and fixed maturities held for sale have a
combined market value of $176,353,850. Fixed maturities are carried at amortized
cost.  Management  has the  ability  and intent to hold these  securities  until
maturity. Fixed maturities held for sale are carried at market.

The Company holds $550,001 in short-term  investments.  Management  monitors its
investment maturities which in their opinion is sufficient to meet the Company's
cash  requirements.  Fixed  maturities  of  $17,266,473  mature  in one year and
$84,495,730 mature in two to five years.

The Company holds  $23,386,895  in mortgage  loans,  which  represents 8% of the
total assets. All mortgage loans are first position loans.  Before a new loan is
issued,  the  applicant  is  subject to  certain  criteria  set forth by Company
management  to ensure  quality  control.  These  criteria  include,  but are not
limited to, a credit report,  personal financial information such as outstanding
debt,  sources of income,  and personal  equity.  Loans issued are limited to no
more than 80% of the appraised  value of the property and must be first position
against the collateral.

The Company  has one loan of $28,536,  which is in default and in the process of
foreclosure.  The  Company  has no loans  which  are under a  repayment  plan or
restructuring.  Letters are sent to each mortgagee when the loan becomes 30 days
or  more  delinquent.  Loans  90  days  or  more  delinquent  are  placed  on  a
non-performing  status and  classified  as delinquent  loans.  Reserves for loan
losses are  established  based on  management's  analysis  of the loan  balances
compared to the expected  realizable value should  foreclosure take place. Loans
are  placed  on a  non-accrual  status  based  on a  quarterly  analysis  of the
likelihood of repayment.  All  delinquent and troubled loans held by the Company
are loans,  which were held in portfolios  by acquired  companies at the time of
acquisition.  Management believes the current internal controls  surrounding the
mortgage loan selection process provide a quality portfolio with minimal risk of
foreclosure and/or negative financial impact.

The  Company  has in  place a  monitoring  system  to  provide  management  with
information  regarding  potential troubled loans.  Management is provided with a
monthly  listing  of loans  that are 30 days or more past due along with a brief
description of what steps are being taken to resolve the delinquency. Quarterly,
coinciding with external  financial  reporting,  the Company determines how each
delinquent  loan  should be  classified.  All loans 90 days or more past due are
classified  as  delinquent.  Each  delinquent  loan is reviewed to determine the
classification  and  status  the loan  should be given.  Interest  accruals  are
analyzed  based  on the  likelihood  of  repayment.  In no event  will  interest
continue to accrue when accrued  interest along with the  outstanding  principal
exceeds the net realizable value of the property. The Company does not utilize a
specified number of days delinquent to cause an automatic non-accrual status.

In 1999, the Company began investing more of its funds in mortgage  loans.  This
is the result of increased  mortgage  opportunities  available  through FSNB, an
affiliate of Jesse Correll. Mr. Correll is the Chairman and CEO of, as well as a
director of, UTG, FCC and their three insurance company  subsidiaries.  FSNB has
been able to provide the Company with  additional  expertise  and  experience in
underwriting  commercial  and  residential  mortgage  loans,  which provide more
attractive  yields than the  traditional  bond market.  During 2001, the Company
issued  approximately  $4,535,000  in new mortgage  loans.  These new loans were
originated  through  FSNB  and  funded  by  the  Company  through  participation
agreements  with FSNB.  FSNB services the loans  covered by these  participation
agreements.  The  Company  pays FSNB a .25%  servicing  fee on these loans and a
one-time fee at loan  origination  of .50% of the original  loan amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.

A mortgage  loan  reserve is  established  and  adjusted  based on  management's
quarterly  analysis  of the  portfolio  and any  deterioration  in  value of the
underlying  property which would reduce the net realizable value of the property
below its current  carrying value.  During 2001, the Company sold mortgage loans
with a prior allowance of $140,000 and recorded a net loss of $20,000 decreasing
the allowance to $120,000  maintained  for potential  mortgage loan losses.  The
current  allowance  represents  approximately  50% of the total outstanding loan
balances on certain loans identified by management. Although most of these loans
are currently in good standing,  due to economic  depression in the region these
loans are located, a significant potential for future losses exists.

In  addition,  the Company  also  attempts to ensure that  current and  adequate
insurance on the properties  underlying the mortgages is being  maintained.  The
Company  requires  proof of  insurance  on each loan and further  requires to be
shown as a  lienholder  on the policy so that any change in  coverage  status is
reported  to the  Company.  Proof of  payment  of real  estate  taxes is another
monitoring  technique utilized by the Company.  Management  believes a change in
insurance status or non-payment of real estate taxes is an indicator that a loan
is  potentially  troubled.  Correspondence  with the  mortgagee  is performed to
determine the reasons for either of these events occurring.

The following table shows a distribution of the Company's mortgage loans by type.


Mortgage Loans                                               Amount         % of Total
------------------------------------------------------   ----------------  -------------
Commercial - insured or guaranteed                    $        1,923,365            8%
Commercial - all other                                        18,343,133           78%
Farm                                                           2,903,259           12%
Residential - insured or guaranteed                              111,655            1%
Residential - all other                                          105,483            1%


The following table shows a geographic  distribution  of the Company's  mortgage
loan  portfolio  and  investment   real  estate  and  real  estate  acquired  in
satisfaction of debt.

                         Mortgage             Real
                           Loans             Estate
                        ------------        ----------
Alabama                        15%                0%
Illinois                        0%               25%
Indiana                         3%                0%
Kentucky                       69%                0%
Louisiana                       0%                2%
North Carolina                 11%                0%
New Hampshire                   0%               73%
Other                           2%                0%
                        ------------        ----------
Total                         100%              100%
                        ============        ==========


The following table summarizes delinquent mortgage loan holdings of the Company.

Delinquent
90 days or More                                2001               2000               1999
-----------------------------------        -------------      -------------      -------------
Non-accrual status                    $       164,941     $            0     $            0
Other                                               0             83,972             58,074
Reserve on delinquent
Loans                                        (110,000)                 0            (10,000)
                                           -------------      -------------      -------------
Total delinquent                      $        54,941     $       83,972     $       48,074
                                           =============      =============      =============
Interest income past due
(delinquent loans)                    $             0     $        6,975     $        1,296
                                           =============      =============      =============

In process of restructuring           $             0     $            0     $            0
Restructuring on other
Than market terms                                   0                  0                  0
Other potential problem
Loans                                           9,299            215,481            124,883
                                           -------------      -------------      -------------
Total problem loans                   $         9,299     $      215,481     $      124,883
                                           =============      =============      =============
Interest income foregone
(restructured loans)                  $             0     $            0     $            0
                                           =============      =============      =============
In process of foreclosure             $        28,536     $            0     $            0
                                           -------------      -------------      -------------
Total foreclosed loans                $        28,536     $            0     $            0
                                           =============      =============      =============
Interest income foregone
(restructured loans)                  $         2,497     $            0     $            0
                                           =============      =============      =============


See Item 2, Properties, for description of real estate holdings.


COMPETITION

The insurance business is a highly  competitive  industry and there are a number
of other  companies,  both stock and mutual,  doing  business in areas where the
Company  operates.  Many of these  competing  insurers  are  larger,  have  more
diversified  and established  lines of insurance  coverage,  have  substantially
greater financial resources and brand recognition as well as a greater number of
agents. Other significant  competitive factors in the insurance industry include
policyholder benefits, service to policyholders, and premium rates.

The insurance  industry is a mature industry.  In recent years, the industry has
experienced  virtually  no  growth in life  insurance  sales,  though  the aging
population  has  increased  the  demand for  retirement  savings  products.  The
products  offered (see  Products) by the Company are similar to those offered by
other major companies.  The product features are regulated by the states and are
subject to  extensive  competition  among  major  insurance  organizations.  The
Company believes a strong service  commitment to  policyholders,  efficiency and
flexibility of operations,  timely service to the agency force and the expertise
of its key  executives  help reduce the  competitive  pressures  it faces in the
insurance industry.

In 1999,  Congress passed legislation  reducing or eliminating certain barriers,
which  existed  between  insurance   companies,   banks  and  brokerages.   This
legislation  opens markets for  financial  institutions  to compete  against one
another and to acquire one another across previously established barriers.  This
creates both additional  challenges and opportunities for the Company.  The full
impact of these changes on the financial  industries is still evolving,  and the
Company continues to monitor these changes and how they impact the Company.


GOVERNMENT REGULATION

The Company's  insurance  subsidiaries  are assessed  contributions  by life and
health guaranty associations in almost all states to indemnify  policyholders of
failed companies. In several states the company may reduce premium taxes paid to
recover a portion of assessments paid to the states' guaranty fund  association.
This right of  "offset"  may come under  review by the various  states,  and the
company cannot predict  whether and to what extent  legislative  initiatives may
affect this right to offset. In addition,  some state guaranty associations have
adjusted the basis by which they assess the cost of  insolvencies  to individual
companies.  The  Company  believes  that its reserve  for future  guaranty  fund
assessments  is  sufficient  to  provide  for   assessments   related  to  known
insolvencies. This reserve is based upon management's current expectation of the
availability of this right of offset, known insolvencies and state guaranty fund
assessment bases. However,  changes in the basis whereby assessments are charged
to individual  companies and changes in the  availability of the right to offset
assessments  against premium tax payments could materially  affect the company's
results.

Currently,  the  Company's  insurance  subsidiaries  are  subject to  government
regulation in each of the states in which they conduct business. Such regulation
is vested in state agencies having broad  administrative  power dealing with all
aspects of the insurance business,  including the power to: (i) grant and revoke
licenses to transact  business;  (ii) regulate and supervise trade practices and
market conduct; (iii) establish guaranty associations;  (iv) license agents; (v)
approve  policy  forms;  (vi) approve  premium rates for some lines of business;
(vii) establish reserve  requirements;  (viii) prescribe the form and content of
required financial statements and reports; (ix) determine the reasonableness and
adequacy of statutory capital and surplus;  and (x) regulate the type and amount
of permitted  investments.  Insurance regulation is concerned primarily with the
protection of policyholders. The Company cannot predict the impact of any future
proposals, regulations or market conduct investigations. The Company's insurance
subsidiaries,  UG,  APPL and ABE are  domiciled  in the  states  of  Ohio,  West
Virginia and Illinois, respectively.

The  insurance  regulatory  framework  continues  to be  scrutinized  by various
states,  the  federal  government  and the  National  Association  of  Insurance
Commissioners  ("NAIC"). The NAIC is an association whose membership consists of
the insurance  commissioners or their designees of the various states.  The NAIC
has no direct  regulatory  authority  over  insurance  companies.  However,  its
primary  purpose  is to  provide  a more  consistent  method of  regulation  and
reporting  from state to state.  This is  accomplished  through the  issuance of
model  regulations,  which  can be  adopted  by  individual  states  unmodified,
modified to meet the state's own needs or requirements, or dismissed entirely.

Most  states  also  have  insurance  holding  company  statutes,  which  require
registration and periodic reporting by insurance  companies  controlled by other
corporations   licensed   to   transact   business   within   their   respective
jurisdictions.  The insurance  subsidiaries  are subject to such legislation and
registered  as  controlled   insurers  in  those  jurisdictions  in  which  such
registration  is  required.  Statutes  vary from  state to state  but  typically
require  periodic  disclosure,  concerning  the  corporation  that  controls the
registered insurers and all subsidiaries of such corporation. In addition, prior
notice  to,  or  approval  by,  the  state  insurance   commission  of  material
intercorporate   transfers  of  assets,   reinsurance   agreements,   management
agreements (see Note 9 in the notes to the consolidated  financial  statements),
and payment of dividends (see Note 2 in the notes to the consolidated  financial
statements) in excess of specified amounts by the insurance  subsidiary,  within
the holding company system, are required.

Each year the NAIC calculates  financial ratio results (commonly  referred to as
IRIS  ratios)  for  each  company.   These  ratios  compare  various   financial
information pertaining to the statutory balance sheet and income statement.  The
results are then compared to  pre-established  normal  ranges  determined by the
NAIC. Results outside the range typically require explanation to the domiciliary
insurance department.

At  year-end  2001,  UG had one ratio  outside  the normal  range.  The ratio is
related to the decrease in premium income.  The decrease was attributable to the
continued  business decline in new business writings combined with a decrease in
renewal premiums from normal terminations of existing business.  As a result, UG
fell slightly outside the normal range for this ratio.

The NAIC's  risk-based  capital  requirements  require  insurance  companies  to
calculate  and  report  information  under a  risk-based  capital  formula.  The
risk-based  capital  formula  measures  the  adequacy of  statutory  capital and
surplus in relation to  investment  and insurance  risks such as asset  quality,
mortality  and  morbidity,  asset and  liability  matching  and  other  business
factors.  The RBC  formula  is used by state  insurance  regulators  as an early
warning  tool to  identify,  for the purpose of  initiating  regulatory  action,
insurance companies that potentially are inadequately capitalized.  In addition,
the formula  defines new minimum  capital  standards  that will  supplement  the
current  system of low fixed  minimum  capital  and  surplus  requirements  on a
state-by-state  basis.  Regulatory  compliance  is  determined by a ratio of the
insurance  company's  regulatory total adjusted capital, as defined by the NAIC,
to its authorized control level RBC, as defined by the NAIC. Insurance companies
below specific  trigger points or ratios are classified  within certain  levels,
each of which requires specific  corrective action. The levels and ratios are as
follows:

                                       Ratio of Total  Adjusted  Capital  to
                                          Authorized  Control  Level  RBC
     Regulatory Event                         (Less Than or Equal to)
     ----------------                     -------------------------------
     Company action level                                2*
     Regulatory action level                             1.5
     Authorized control level                            1
     Mandatory control level                             0.7

     * Or, 2.5 with negative trend.

At December 31, 2001, each of the insurance  subsidiaries has a Ratio that is in
excess of 4, which is 400% of the  authorized  control level;  accordingly,  the
insurance subsidiaries meet the RBC requirements.


The  State of  Florida  began an  investigation  of  industrial  life  insurance
policies in the fall of 1999 regarding policies with race-based  premiums.  This
investigation  has  quickly  spread to other  states and to other types of small
face amount  policies  and was expanded to consider the fairness of premiums for
all small policies  including  policies which did not have race-based  premiums.
The NAIC  historically  has defined a "small  face amount  policy" as one with a
face  amount of  $15,000  or less.  Under  current  reviews,  some  states  have
increased  this  amount  to  policies  of  $25,000  or less.  These  states  are
attempting  to force  insurers  to  refund  "excess  premiums"  to  insureds  or
beneficiaries of insureds based on the recent American General  settlement.  The
Company's  insurance  subsidiaries have no race-based  premium products,  but do
have  policies with face amounts under the  above-scrutinized  limitations.  The
outcome of this issue could be dramatic on the insurance  industry as a whole as
well as the Company  itself.  The Company will continue to monitor  developments
regarding  this matter to determine  to what extent,  if any, the Company may be
exposed.

During  1999,   Congress  passed  the   Gramm-Leach-Bliley   Financial  Services
Modernization  Act,  which  requires  financial   institutions,   including  all
insurers,  to take certain  steps to enhance  privacy  protections  of nonpublic
personal  information  for consumers.  It requires  financial  companies to tell
consumers how their  financial  information  is protected,  and what a company's
financial  information sharing practices are, both within a corporate family and
with  unrelated  third parties.  Companies must inform their  customers of their
privacy policies and practices at the start of their business relationship,  and
then at least once a year for the duration of the  relationship.  Companies also
must disclose the types of information that are shared. The privacy  protections
under the act became  effective  November 13, 2000.  Financial  institutions had
until July 1, 2001, to establish and implement privacy policies. The Company has
implemented  new procedures in response to this  legislation and believes it has
complied with the requirements of this legislation.

A task force of the NAIC  undertook a project to codify a  comprehensive  set of
statutory  insurance  accounting  rules and  regulations.  Project  results were
approved by the NAIC with an implementation date of January 1, 2001. Many states
in which the Company  does  business  implemented  these new rules with the same
effective  date as  proposed  by the NAIC.  The  Company  implemented  these new
regulations  effective January 1, 2001 as required.  Implementation of these new
rules  to  date  has  not  had a  material  financial  impact  on the  insurance
subsidiaries financial position or results of operations.  The NAIC continues to
modify and amend issue papers regarding codification.  The Company will continue
to monitor this issue as changes and new proposals are made.


EMPLOYEES

There are  approximately  58 persons  who are  employed  by the  Company and its
subsidiaries.


ITEM 2.  PROPERTIES

The  following   table  shows  a  breakout  of  property,   net  of  accumulated
depreciation,  owned and  occupied by the Company and the  distribution  of real
estate by type.

     Property owned                        Amount               % of Total
     Home Office                        $ 1,992,317                 18%

     Investment real estate
     Commercial                         $ 6,491,734                 60%
     Residential development            $ 2,384,564                 22%
                                        $ 8,876,298                 82%

     Grand total                       $ 10,868,615                100%
                                       ============                ====

Total  investment real estate holdings  represent  approximately 3% of the total
assets of the Company net of accumulated depreciation of $58,225 and $251,766 at
year-end  2001 and 2000  respectively.  The  Company  owns an office  complex in
Springfield, Illinois, which houses the primary insurance operations. The office
buildings  contain  57,000  square  feet of  office  and  warehouse  space.  The
properties are carried at $1,992,317.  Currently, the facilities occupied by the
Company are adequate relative to the Company's present operations.

During the fourth  quarter of 2001,  UG  purchased  real  estate from an outside
third party through the  formation of an LLC in which UG is a two-thirds  owner.
The other one-third partner is Millard V. Oakley,  who is a Director of both UTG
and FCC.  Hampshire Plaza,  LLC consists of a twenty story,  254,000 square foot
office  tower,  an attached  72,000  square foot retail  plaza,  and an attached
parking garage with approximately 350 parking spaces located in Manchester,  New
Hampshire for $6,333,336.  The Company plans to invest an additional  $2,000,000
over the next few years in order to renovate and improve  existing  office space
within the building.  The intent of these improvements would be made in order to
lease the office space in the near future. A significant portion of the existing
office leases  expires in early to mid 2002. At December 31, 2001,  the property
was carried at $6,491,734.

Residential development property is primarily located in Springfield,  Illinois,
and entails several  developments,  each targeted for a different segment of the
population.  These targets  include a  development  primarily for the first time
home buyer, an upscale  development for existing homeowners looking for a larger
home, and duplex  condominiums  for those who desire  maintenance free exteriors
and  surroundings.  The  Company's  primary  focus  in the  past has been on the
development  and sale of lots,  with an  occasional  home  construction  to help
stimulate interest.  During 2000,  management determined it would be in the long
term best  interests of the Company to  discontinue  development  and attempt to
liquidate the remaining properties.

ITEM 3.  LEGAL PROCEEDINGS

David A. Morlan,  individually and on behalf of all others similarly situated v.
Universal  Guaranty  Life Ins.,  United Trust  Assurance  Co.,  United  Security
Assurance  Co.,  United Trust Group,  Inc. and First  Commonwealth  Corporation,
(U.S. Court of Appeals for the Seventh Circuit, Appeal No. 01-3795)

On April 26, 1999,  the above  lawsuit was filed by David Morlan and Louis Black
in the Southern District of Illinois against  Universal  Guaranty Life Insurance
Company ("UG") and United Trust Assurance  Company  ("UTAC")  (merged into UG in
1992).  After the lawsuit was filed,  the plaintiffs,  who were former insurance
salesmen, amended their complaint, dropped Louis Black as a plaintiff, and added
United  Security  Assurance  Company  ("USAC"),  UTG and FCC as defendants.  The
plaintiffs are alleging that they were employees of UG, UTAC or USAC rather than
independent contractors. The plaintiffs are seeking class action status and have
asked to recover various employee  benefits,  costs and attorneys' fees, as well
as monetary damages based on the defendants' alleged failure to withhold certain
taxes.

On September 18, 2001, the case was dismissed  without  prejudice because Morlan
lacked  standing to pursue the claims against  defendants.  The plaintiffs  have
appealed the dismissal of the case to the United States Court of Appeals for the
Seventh Circuit.

In addition to the appeal, a second action was filed entitled; Julie Barrette
Ahrens,  David Dzuiban,  William Milam, David Schneiderman,  individually and on
behalf of all others similarly situated vs Universal Guaranty Life, United Trust
Assurance Company,  United Security  Assurance  Company.  United States District
Court for the Southern District of Illinois. Case No: 01-4314-JPG.

The Company continues to believe that it has meritorious  grounds to defend both
the original and related lawsuit, and it intends to defend the cases vigorously.
The Company  believes  that the defense and ultimate  resolution  of the lawsuit
should  not have a  material  adverse  effect  upon  the  business,  results  of
operations or financial condition of the Company.  Nevertheless,  if the lawsuit
were to be successful,  it is likely that such resolution  would have a material
adverse  effect on the Company's  business,  results of operations and financial
condition.  At December 31, 2001, the Company  maintains a liability of $300,000
to cover estimated legal costs associated with the defense of this matter.

ITEM 4.  SUBMISSION OF MATTERS OF A VOTE OF SECURITY HOLDERS
              None

                                     PART II


ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS



The  Company's  common  stock is  traded  in the  over-the-counter  market.  The
following table shows the high and low bid quotations for each quarterly  period
during the past two years. Such quotations represent inter-dealer quotations and
do not include  retail  markup,  markdown,  or commission  nor do they represent
actual sales. Trading in this stock is very limited.


                                          BID
    PERIOD                       LOW              HIGH

    2001
    First quarter                 86                86
    Second quarter                86                86
    Third quarter                 86                86
    Fourth quarter                86               160


                                          BID
    PERIOD                       LOW              HIGH

    2000
    First quarter                110               110
    Second quarter                85               110
    Third quarter                 80                86
    Fourth quarter                86                86


FCC has no current  plans to pay  dividends  on its common  stock and intends to
retain all earnings for investment in and growth of the Company's business.  The
payment  of  future  dividends,  if any,  will be  determined  by the  Board  of
Directors in light of existing  conditions,  including the  Company's  earnings,
financial  condition,  business  conditions and other factors deemed relevant by
the Board of Directors.  See Note 2 in the accompanying  consolidated  financial
statements for information regarding dividend restrictions.


Number of Common Shareholders as of March 1, 2002 is 3,438.



ITEM 6.  SELECTED FINANCIAL DATA

                                                  FINANCIAL HIGHLIGHTS
                                            (000's omitted, except per share data)
                                       2001                2000                1999               1998               1997
                                  ----------------    ---------------     ---------------    ---------------     --------------
Premium income
  net of reinsurance           $           17,272  $          19,490  $           21,581  $          26,396  $          28,639
Total revenues                 $           33,602  $          35,232  $           35,759  $          40,632  $          43,354
Net gain/(loss)                $            2,185 $           (1,847) $             (378) $          (1,950) $          (1,845)
Net loss per share             $            40.19  $          (33.90) $            (6.93) $          (35.74) $          (32.65)
Total assets                   $          309,900  $         314,242  $          320,875  $         328,737  $         332,572
Total long term debt           $           11,537  $          12,839  $           14,864  $          17,370  $          18,242
Dividends paid per share                     NONE               NONE                NONE               NONE               NONE



ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The purpose of this section is to discuss and analyze the Company's consolidated
results of operations,  financial condition and liquidity and capital resources.
This analysis  should be read in  conjunction  with the  consolidated  financial
statements and related notes, which appear elsewhere in this report. The Company
reports  financial results on a consolidated  basis. The consolidated  financial
statements  include the  accounts of FCC and its  subsidiaries  at December  31,
2001.

CAUTIONARY STATEMENT REGARDING-FORWARD-LOOKING STATEMENTS

Any  forward-looking  statement contained herein or in any other oral or written
statement  by the Company or any of its  officers,  directors  or  employees  is
qualified by the fact that actual  results of the Company may differ  materially
from any such  statement due to the  following  important  factors,  among other
risks and uncertainties inherent in the Company's business:

1.   Prevailing  interest  rate  levels,  which may  affect  the  ability of the
     Company to sell its products, the market value of the company's investments
     and the lapse  ratio of the  Company's  policies,  notwithstanding  product
     design features intended to enhance persistency of the Company's products.

2.   Changes in the federal  income tax laws and  regulations,  which may affect
     the relative tax advantages of the Company's products.

3.   Changes in the regulation of financial  services,  including bank sales and
     underwriting  of  insurance  products,  which may  affect  the  competitive
     environment for the Company's products.

4.   Other factors affecting the performance of the Company,  including, but not
     limited to,  market  conduct  claims,  regulatory  initiatives  or changes,
     insurance industry insolvencies,  stock market performance,  and investment
     performance.

RESULTS OF OPERATIONS

(a)  Revenues

Premiums and policy fee revenues,  net of reinsurance  premiums and policy fees,
decreased 11% when comparing 2001 to 2000 and 10% from 2000 to 1999. The Company
currently  writes little new  traditional  business,  consequently,  traditional
premiums will decrease as the amount of traditional business in-force decreases.
Collected  premiums on  universal  life and interest  sensitive  products is not
reflected  in  premiums  and  policy  revenues  because  accounting   principles
generally  accepted  in the  United  States of  America  require  that  premiums
collected  on these types of products be treated as deposit  liabilities  rather
than  revenue.  Unless the  Company  acquires a block of  in-force  business  or
marketing significantly increases on traditional business,  premium revenue will
continue to decline at a rate consistent with prior  experience.  The Companies'
average  persistency  rate for all  policies in force for 2001 and 2000 has been
approximately  91.6%  and  89.8%,  respectively.  Persistency  is a  measure  of
insurance in force retained in relation to the previous year.

During 2001,  the Company  implemented  a  conservation  effort in an attempt to
improve  the  persistency  rate of Company  policies.  Several  of the  customer
service  representatives  of the Company have become licensed  insurance agents,
allowing them to offer other products within the Company's portfolio to existing
customers.  Additionally,  stronger  efforts have been made in policy  retention
through more personal  contact with the customer  including  telephone  calls to
discuss  alternatives  and reasons for a customer's  request to surrender  their
policy.  Previously,  the Company's  agency force was primarily  responsible for
conservation efforts. With the decline in the number of agents, their ability to
reach these customers  diminished,  making conservation  efforts difficult.  The
conservation  efforts  described above are relatively new, but early results are
generally  positive.  Management will continue to monitor these efforts and make
adjustments  as seen  appropriate  to enhance the future success of the program.
The  Company is  currently  exploring  the  introduction  of a new product to be
specifically  used  by  the  licensed  customer  service  representatives  as an
alternative to the customer in the conservation  efforts.  The new product is in
the very preliminary  design stage.  Introduction of the new product will depend
on the product competitiveness and profitability.

New  business  production  decreased  steadily and  significantly  over the last
several years.  New business  production in 2001 was only 8.5% of the production
levels in 1996.  The  Company has not placed a strong  emphasis on new  business
production in recent years. Costs associated with supporting new business can be
significant.  In recent years, the insurance industry as a whole has experienced
a decline in the total number of agents who sell insurance  products,  therefore
competition has intensified for top producing sales agents. The relatively small
size of the Companies, and the resulting limitations, has made it challenging to
compete in this area.  In early 1999,  management  determined it could no longer
continue to support the costs of new  business in light of the  declining  trend
and no  indication  it would reverse  itself.  As such,  at that time,  existing
agents were  allowed to continue  marketing  Company  products,  but the Company
significantly reduced home office support and discontinued sales leads to agents
using existing inforce policies.

The Company has considered the feasibility of a marketing opportunity with First
Southern  National Bank, an affiliate of UTG's largest  shareholder.  Management
has  considered  various  products  including  annuity type  products,  mortgage
protection products and existing insurance products,  as a possibility to market
to all banking  customers.  This potential is believed to be a viable niche, but
is not expected to produce significant premium writings.

Net investment  income decreased 6% when comparing 2001 to 2000 and increased 9%
when  comparing  2000 to 1999.  During 2000,  the Company  received  $632,000 in
investment  earnings from a joint venture real estate  development  project that
was  in  its  latter   stages.   The  earnings  from  this  activity   represent
approximately 4% of the 2000 investment income.

The national  prime rate has declined from 9.5% at December 31, 2000 to 4.75% at
December 31, 2001.  This has resulted in lower  earnings on short-term  funds as
well as on longer-term investments acquired.

The overall  investment  yields for 2001,  2000 and 1999,  are 6.52%,  7.03% and
6.46%, respectively.

The Company's  investments are generally  managed to match related insurance and
policyholder liabilities.  The comparison of investment return with insurance or
investment  product crediting rates establishes an interest spread.  The Company
monitors  investment  yields, and when necessary adjusts credited interest rates
on its insurance products to preserve targeted interest spreads, ranging from 1%
to 2%. It is expected that monitoring of the interest spreads by management will
provide the necessary  margin to adequately  provide for associated costs on the
insurance  policies  the  Company  currently  has in force and will write in the
future.  At the  March  2001  Board of  Directors  meeting,  the  Boards  of the
insurance  subsidiaries lowered crediting rates one half percent on all products
that could be lowered.  With this  latest  reduction,  the vast  majority of the
Company's  rate-adjustable  products are now at their guaranteed  minimum rates,
and as such,  cannot be lowered any further.  These adjustments were in response
to  continued  declines in interest  rates in the  marketplace.  The decrease is
expected  to result in  approximately  $500,000 in  interest  crediting  savings
annually, when fully implemented.  Policy interest crediting rate changes become
effective  on an  individual  policy  basis  on  the  next  policy  anniversary.
Therefore,  it will take a full year from the time the change is determined  for
the full impact of such change to be realized.  The guaranteed minimum crediting
rates on these products range from 3% to 5.5%.

Realized investment gains, net of realized losses, were $436,280, $(260,078) and
$(530,894) in 2001, 2000 and 1999, respectively.

During 2001, the Company sold the West Virginia properties  including the former
home office  building of APPL,  realizing a gain of  $217,574.  The Company also
sold certain common stocks it had acquired in 2000 and 2001  realizing  gains of
$132,760.

During early 1999, the Company re-evaluated its real estate holdings, especially
those properties  acquired through  acquisitions of other companies and mortgage
loan  foreclosures,  and determined it would be in the long term interest of the
Company to dispose of certain of these parcels.  Parcels  targeted for sale were
generally non-income or low income producing and located in parts of the country
where management has little other reason to travel.

During  2000,  real estate  continued  to account for almost all of the realized
gain and loss  activity.  By third  quarter of 2000,  the  Company  had sold the
remaining real estate  properties  identified  for disposal in prior years.  The
Company  recorded net  realized  gains of $728,000  from these sales.  By fourth
quarter 2000, remaining real estate consisted of development real estate located
in  Springfield,  IL. In  December  2000,  management  studied  its  development
properties,  analyzing  such issues as remaining  time to fully develop  without
over  saturation,  historic  sales  trends,  management  time and  resources  to
continue  development and other  alternatives such as modifying current plans or
discontinuing entirely.  Management determined it would be in the long term best
interests of the Company to discontinue development and attempt to liquidate the
remaining  properties.  As such,  a realized  loss of $913,000  was  recorded in
December  2000 to  reduce  the  book  value of these  properties  to the  amount
management  determined  it would  accept  net of  selling  costs  to  facilitate
liquidation.  During the fourth quarter of 2000, the Company recorded a $170,000
increase to the allowance maintained for potential mortgage loan losses.

Approximately  99% of the  realized  loss in 1999 is from  two  parcels  of real
estate.  In June 1999,  the Company  sold its shopping  center in  Gulfport,  MS
realizing a loss on sale of  $401,000.  This  property was  originally  acquired
through the  foreclosure of a mortgage loan. The property was income  producing,
but due to the distance from the Company's headquarters, was difficult to manage
and required the use of an outside property manager. Given this circumstance and
the eventual need for updates and improvements, the Company determined it was in
its best long-term interest to sell the property.  At year-end the Company wrote
down another  parcel of real estate  $178,000,  that it determined to attempt to
sell,  and  ultimately  did sell during  2000.  The write down was the result of
Management's  determination  of the amount it would be willing to accept for the
property.  The  Company  had other  gains and  losses  during the  periods  that
comprised the remaining  amounts  reported but were  immaterial on an individual
basis.

On June 1, 2001,  the Company began  performing  administrative  work as a third
party  administrator  ("TPA") for an unaffiliated  life insurance  company.  The
business  being  administered  is a  closed  block  with  approximately  260,000
policies,  a majority of which are paid up. The Company  receives  monthly  fees
based on policy in force counts and certain other  activity  indicators  such as
number of premium  collections  performed.  During  2001,  the Company  received
$299,905  for this work.  These TPA revenue  fees are  included in the line item
"other  income" on the  Company's  consolidated  statements of  operations.  The
Company intends to pursue other TPA  arrangements.  Management  believes it is a
good source of  generating  additional  revenues  while  utilizing the Company's
strength, excess capacity and efficient administrative services.

(b)  Expenses

Benefits, claims and settlement expenses net of reinsurance benefits and claims,
decreased  13% in 2001 as compared to 2000 and  increased 2% in 2000 as compared
to 1999.  The  decrease  in premium  revenues  from normal  policy  terminations
resulted in lower  benefit  reserve  increases in each of the periods  presented
compared to the previous  period.  Fluctuations  in death claim  experience from
year to year typically has a significant  impact on variances in this line item.
Death claims were $1,636,000 less in 2001 than in 2000 and $2,574,000 greater in
2000 than in 1999. There is no single event that caused the mortality variances.
Policy claims vary from year to year and  therefore,  fluctuations  in mortality
are to be expected and are not considered  unusual by  management.  At the March
1999  Board of  Directors  meeting,  the  Boards of the  insurance  subsidiaries
lowered  crediting rates one half percent on all products that could be lowered.
The change resulted in interest crediting  reductions of approximately  $600,000
per year.  In March  2001,  the  Boards of the  insurance  subsidiaries  lowered
crediting rates one-half percent on all  rate-adjustable  products that could be
lowered.  With  this  latest  reduction  the  vast  majority  of  the  Company's
rate-adjustable  products have been lowered to their  guaranteed  minimum rates,
and as such,  cannot be lowered any further.  The decrease is expected to result
in approximately  $500,000 in interest  crediting savings  annually,  when fully
implemented.  These  adjustments  were in  response  to  continued  declines  in
interest rates in the marketplace. Policy interest crediting rate changes become
effective  on an  individual  policy  basis  on  the  next  policy  anniversary.
Therefore,  it will take a full year from the time the change is determined  for
the full impact to be realized.

Commissions and amortization of deferred policy  acquisition costs decreased 32%
in 2001 compared to 2000 and decreased 25% in 2000 compared to 1999. The Company
performs  actuarial analysis of the recoverability of the asset based on current
trends and known events compared to assumptions used in the establishment of the
original asset. No impairments were recorded in 2001 or 2000.

Amortization of cost of insurance acquired decreased 3% in 2001 compared to 2000
and  increased  10% in 2000  compared  to 1999.  Cost of  insurance  acquired is
established when an insurance company is acquired. The Company assigns a portion
of its cost to the right to receive future cash flows from  insurance  contracts
existing  at the  date  of the  acquisition.  The  cost  of  policies  purchased
represents the actuarially determined present value of the projected future cash
flows from the acquired  policies.  Cost of  insurance  acquired is comprised of
individual  life insurance  products  including whole life,  interest  sensitive
whole life and universal life insurance products.  Cost of insurance acquired is
amortized with interest in relation to expected future profits, including direct
charge-offs  for any excess of the unamortized  asset over the projected  future
profits.  The interest rates utilized in the amortization  calculation are 9% on
approximately 25% of the balance and 15% on the remaining balance.  The interest
rates vary due to risk  analysis  performed  at the time of  acquisition  on the
business acquired.  The amortization is adjusted  retrospectively when estimates
of current or future gross  profits to be realized  from a group of products are
revised.  The Company did not have any charge-offs during the periods covered by
this  report.  Amortization  of  cost  of  insurance  acquired  is  particularly
sensitive to changes in  persistency  of certain  blocks of insurance  in-force.
Persistency  is a measure of  insurance  in force  retained  in  relation to the
previous year. The Company's average  persistency rate for all policies in force
for  2001,  2000 and  1999  has  been  approximately  91.6%,  89.8%  and  89.4%,
respectively.

Operating  expenses  decreased 24% in 2001 compared to 2000 and increased 30% in
2000 compared to 1999.  During the fourth  quarter of 2000, Mr. Jesse T. Correll
as Board Chairman requested the resignation of James E. Melville as President of
UTG and its subsidiaries.  A special joint meeting of the Boards of Directors of
United Trust Group, Inc. and its subsidiaries was held January 8, 2001, at which
the  termination  of  the  employment   agreement  between  First   Commonwealth
Corporation  and James E. Melville,  and the termination of James E. Melville as
an officer or agent of United Trust Group, Inc. and all of its subsidiaries were
approved  by the Boards of  Directors  of each of the  companies.  An accrual of
$562,000 was established  through a charge to general  expenses at year-end 2000
for the  remaining  payments  required  pursuant to the terms of Mr.  Melville's
employment  contract and other  settlement  costs.  A $500,000  accrual was also
established  at year-end  2000 for  estimated  legal costs  associated  with the
defense of a legal  matter.  See Item 3 legal  proceedings  for a more  complete
analysis of this matter.  During the third quarter 2000,  the Company  settled a
legal matter for $550,000 and incurred an additional  $150,000 in legal fees. At
the March 27, 2000 Board of Directors meeting, United Trust Group, Inc. and each
of its affiliates accepted the resignation of Larry E. Ryherd as Chairman of the
Board of  Directors  and  Chief  Executive  Officer.  Mr.  Ryherd  had 28 months
remaining on an  employment  contract with the Company at the end of March 2000.
As such,  a charge  of  $933,000  was  incurred  in first  quarter  2000 for the
remainder of this contract.  Exclusive of the above accruals, operating expenses
declined 2% in 2001  compared to 2000 and declined 12% in 2000 compared to 1999,
primarily as the result of lower salary and related employee costs.

During  the  fourth  quarter  of  1999,  the  Company   transferred  the  policy
administration functions of its insurance subsidiary APPL from Huntington, WV to
its  Springfield,  IL location.  The transfer was completed to reduce  operating
costs. APPL policy administration was then converted to the same computer system
used to administer the other insurance subsidiaries.  Following the transfer and
system conversion,  all insurance  administration is located at the Springfield,
IL office and administered on the same computer system.  This action resulted in
cost savings of approximately  $250,000 per year in administrative costs. During
2001, the Company transferred all remaining functions from Huntington, WV to the
Springfield, IL location and sold the West Virginia property. The closing of the
Huntington  office  resulted in  approximately  $250,000  per year in  operating
expense savings.

Interest  expense  declined 21% comparing 2001 to 2000 and declined 8% comparing
2000 to 1999. At December 31, 2001, FCC had $11,536,698 in notes payable, and no
debt is owed to outside parties. During 2001 and 2000, FCC repaid $1,302,495 and
$2,025,000 of its debt through dividends received from its insurance subsidiary,
UG.


Deferred taxes are established to recognize  future tax effects  attributable to
temporary  differences  between the financial  statements and the tax return. As
these  differences  are realized in the financial  statement or tax return,  the
deferred income tax established on the difference is recognized in the financial
statements as an income tax expense or credit.

(c)  Net income (loss)

The Company had a net income (loss) of $2,185,607,  $(1,846,840)  and $(377,957)
in 2001, 2000 and 1999  respectively.  Significant one time charges and accruals
to operating expenses combined with an increase in death claims during 2000 were
the primary  differences in the 2001 to 2000 results.  The Company  continues to
monitor and adjust those items within its control.


FINANCIAL CONDITION

(a)  Assets

Investments are the largest asset group of the Company.  The Company's insurance
subsidiaries are regulated by insurance  statutes and regulations as to the type
of investments  that they are permitted to make and the amount of funds that may
be used  for any one  type  of  investment.  In  light  of  these  statutes  and
regulations,  and the Company's  business and investment  strategy,  the Company
generally  seeks to invest in United States  government  and  government  agency
securities and other high quality low risk investments.

The Company  does not own any  derivative  investments  or "junk  bonds".  As of
December 31, 2001, the carrying value of fixed maturity securities in default as
to principal or interest was immaterial in the context of consolidated assets or
shareholders'  equity.  The Company has  identified  securities  it may sell and
classified them as "investments  held for sale".  Investments  held for sale are
carried  at  market,   with  changes  in  market  value   charged   directly  to
shareholders'  equity.  To provide  additional  flexibility  and liquidity,  the
Company has categorized almost all fixed maturity  investments  acquired in 2000
and 2001 as available for sale.  It was  determined it would be in the Company's
best financial interest to classify these new purchases as available for sale to
provide additional liquidity and flexibility.

The following table  summarizes the Company's fixed  maturities  distribution at
December 31, 2001 and 2000 by ratings category as issued by Standard and Poor's,
a leading ratings analyst.


                 Fixed Maturities
                 ----------------
      Rating                       % of Portfolio
     -------                    ----------------------
                                  2001        2000
                                ----------  ----------
Investment Grade
   AAA                              61%         48%
   AA                                6%         16%
   A                                24%         27%
   BBB                               8%          9%
Below investment grade               1%          0%
                                ----------  ----------
                                   100%        100%
                                ==========  ==========



In 1999, the Company began investing more of its funds in mortgage  loans.  This
is the result of its  affiliation  with FSNB.  FSNB has been able to provide the
Company with additional expertise and experience in underwriting  commercial and
residential  mortgage  loans,  which  provide  more  attractive  yields than the
traditional bond market.  During 2001 and 2000, the Company issued approximately
$4,535,000 and $21,863,000 respectively,  in new mortgage loans. These new loans
were generated  through FSNB and its personnel and funded by the Company through
participation  agreements  with FSNB.  FSNB  services the loans covered by these
participation  agreements.  The Company pays FSNB a .25%  servicing fee on these
loans and a one-time fee at loan origination of .50% of the original loan amount
to cover costs incurred by FSNB relating to the processing and  establishment of
the loan. All mortgage loans held by the Company are first position  loans.  The
Company has one loan  totaling  $28,536 that is in default and in the process of
foreclosure at December 31, 2001.

Investment real estate holdings represent approximately 2.9% of the total assets
of the Company.  Total  investment real estate is separated into two categories:
Commercial  73% and  Residential  Development  27%.  During 2001,  UG acquired a
two-thirds  interest  in a parcel  of  commercial  real  estate  located  in New
Hampshire. The property is a 20 story office building including a parking garage
and a connected  enclosed  retail mall all totaling  326,610  square  feet.  The
property  was  acquired  for  investment  purposes  and had a carrying  value at
December 31, 2001 of $6,491,734.

Policy loans remained consistent for the periods presented.  Industry experience
for policy loans indicates few policy loans are ever repaid by the  policyholder
other than through  termination of the policy.  Policy loans are  systematically
reviewed to ensure that no individual  policy loan exceeds the  underlying  cash
value of the policy.

Deferred  policy  acquisition  costs  decreased  19% in 2001  compared  to 2000.
Deferred policy acquisition costs, which vary with, and are primarily related to
producing new business,  are referred to as ("DAC").  DAC consists  primarily of
commissions and certain costs of policy issuance and  underwriting,  net of fees
charged to the policy in excess of ultimate  fees  charged.  To the extent these
costs are recoverable  from future  profits,  the Company defers these costs and
amortizes  them with interest in relation to the present value of expected gross
profits from the contracts,  discounted  using the interest rate credited by the
policy. The Company had $141,000 in policy acquisition costs deferred,  $247,000
in interest accretion and $1,887,577 in amortization in 2001.

Cost of insurance  acquired  decreased 7% in 2001  compared to 2000. At December
31,  2001,  cost of  insurance  acquired was  $14,219,005  and net  amortization
totaled  $1,151,284  for the year.  When an insurance  company is acquired,  the
Company  assigns a portion of its cost to the right to receive future cash flows
from insurance  contracts  existing at the date of the acquisition.  The cost of
policies  purchased  represents the actuarially  determined present value of the
projected  future  cash  flows from the  acquired  policies.  Cost of  insurance
acquired is  amortized  with  interest in relation to expected  future  profits,
including  direct  charge-offs for any excess of the unamortized  asset over the
projected future profits.

(b)  Liabilities

Total liabilities  decreased 2% in 2001 compared to 2000. Policy liabilities and
accruals,  which represents  approximately  94% of total  liabilities  decreased
slightly from the prior year. The total decline is  attributable  to a shrinking
policy base and declining new business production.

Notes payable  decreased 10% in 2001 compared to 2000.  During 2001, the Company
repaid $1,302,495 of principal on its affiliated  subordinated debt. At December
31, 2001, FCC had $11,536,698 in notes payable.

(c)  Shareholders' Equity

Total shareholders' equity increased 10% in 2001 compared to 2000. This increase
was mainly attributable to the Company's net income of $2,185,607 and unrealized
gains  on  investments   held  for  sale  of  $701,393  also  influenced   total
shareholders' equity.

LIQUIDITY AND CAPITAL RESOURCES

The  Company  has  three  principal  needs for cash - the  insurance  companies'
contractual obligations to policyholders,  the payment of operating expenses and
the servicing of its long-term debt.  Cash and cash  equivalents as a percentage
of total assets were 5% and 4% as of December  31, 2001 and 2000,  respectively.
Fixed maturities as a percentage of total invested assets were 78% and 74% as of
December 31, 2001 and 2000, respectively.

Future policy  benefits are  primarily  long-term in nature and  therefore,  the
Company's  investments are predominantly in long-term fixed maturity investments
such as bonds and mortgage loans which provide  sufficient return to cover these
obligations. The Company has the ability and intent to hold these investments to
maturity;  consequently,  a significant  portion of the Company's  investment in
long-term  fixed  maturities  is reported in the  financial  statements at their
amortized cost.

Many of the Company's  products  contain  surrender  charges and other  features
which  reward  persistency  and  penalize the early  withdrawal  of funds.  With
respect to such products,  surrender  charges are generally  sufficient to cover
the Company's  unamortized deferred policy acquisition costs with respect to the
policy being surrendered.

Cash provided by (used in) operating activities was $1,603,246, $(2,645,902) and
$(1,381,527) in 2001, 2000 and 1999, respectively. Reporting regulations require
cash inflows and outflows from universal life insurance  products to be shown as
financing  activities  when  reporting on cash flows.  The net cash  provided by
operating  activities  plus  policyholder  contract  deposits less  policyholder
contract  withdrawals  equaled  $3,622,756  in  2001,  $(883,982)  in  2000  and
$1,571,847 in 1999.  Management  utilizes this  measurement  of cash flows as an
indicator of the performance of the Company's insurance operations.

Cash provided by (used in) investing  activities was $181,337,  $(3,814,275) and
$(4,974,503), for 2001, 2000 and 1999, respectively. The most significant aspect
of cash  provided  by (used in)  investing  activities  are the  fixed  maturity
transactions. Fixed maturities account for 81%, 43% and 68% of the total cost of
investments acquired in 2001, 2000 and 1999,  respectively.  The Company has not
directed  its  investable   funds  to  so-called   "junk  bonds"  or  derivative
investments.

Net cash provided by (used in) financing activities was $92,684,  $(347,279) and
$370,651 for 2001,  2000 and 1999,  respectively.  The Company  continues to pay
down on its outstanding debt. Such payments are included within this category.

Policyholder  contract  deposits  decreased  11% in 2001  compared to 2000,  and
decreased  10% in 2000 when  compared  to 1999.  The  decrease  in  policyholder
contract deposits relates to the decline in new business production  experienced
in the last few years by the Company.  Policyholder  contract  withdrawals  have
decreased  15% in 2001  compared to 2000,  and  decreased 2% in 2000 compared to
1999. The change in policyholder contract withdrawals is not attributable to any
one significant event. Factors that influence  policyholder contract withdrawals
are fluctuation of interest rates, competition and other economic factors.

At December 31, 2001, FCC had  $11,536,698  in notes  payable.  During 2001, the
Company  repaid  $1,302,495 on its  affiliated  subordinated  debt.  Contractual
obligations on the Company's long-term debt require total payments of $9,408,099
due in 4-5 years and $2,128,599 due after 5 years.

Since  FCC is a  holding  company,  funds  required  to meet  its  debt  service
requirements and other expenses are primarily provided by its subsidiaries. On a
parent only basis,  FCC's cash flow is dependent on revenues from management and
cost sharing  arrangements  with its subsidiaries  and its earnings  received on
invested assets and cash balances.  At December 31, 2001,  substantially  all of
the consolidated  shareholders equity represents net assets of its subsidiaries.
Cash  requirements of FCC primarily  relate to servicing its long-term debt. The
Company's insurance  subsidiaries have maintained adequate statutory capital and
surplus and have not used surplus  relief or financial  reinsurance,  which have
come under  scrutiny by many state  insurance  departments.  The payment of cash
dividends to shareholders is not legally restricted.  However, insurance company
dividend  payments are  regulated by the state  insurance  department  where the
company is domiciled. UG's dividend limitations are described below.

Ohio domiciled  insurance  companies require five days prior notification to the
insurance  commissioner  for  the  payment  of an  ordinary  dividend.  Ordinary
dividends are defined as the greater of: a) prior year statutory  earnings or b)
10% of statutory  capital and surplus.  For the year ended December 31, 2001, UG
had a statutory gain from  operations of $2,212,215.  At December 31, 2001, UG's
statutory capital and surplus amounted to $16,105,265.  Extraordinary  dividends
(amounts in excess of ordinary dividend  limitations)  require prior approval of
the insurance commissioner and are not restricted to a specific calculation.  UG
paid ordinary dividends of $1,400,000 to FCC during 2001.

A life  insurance  company's  statutory  capital is computed  according to rules
prescribed by the National Association of Insurance  Commissioners  ("NAIC"), as
modified by the  insurance  company's  state of domicile.  Statutory  accounting
rules are different from accounting  principles generally accepted in the United
States of America and are intended to reflect a more  conservative  view by, for
example,   requiring  immediate  expensing  of  policy  acquisition  costs.  The
achievement of long-term growth will require growth in the statutory  capital of
the Company's  insurance  subsidiaries.  The subsidiaries may secure  additional
statutory  capital  through  various  sources,   such  as  internally  generated
statutory  earnings or equity  contributions by the Company from funds generated
through debt or equity offerings.

The NAIC's  risk-based  capital  requirements  require  insurance  companies  to
calculate  and  report  information  under a  risk-based  capital  formula.  The
risk-based  capital  formula  measures  the  adequacy of  statutory  capital and
surplus in relation to  investment  and insurance  risks such as asset  quality,
mortality  and  morbidity,  asset and  liability  matching  and  other  business
factors.  The RBC  formula  is used by state  insurance  regulators  as an early
warning  tool to  identify,  for the purpose of  initiating  regulatory  action,
insurance companies that potentially are inadequately capitalized.  In addition,
the formula  defines new minimum  capital  standards  that will  supplement  the
current  system of low fixed  minimum  capital  and  surplus  requirements  on a
state-by-state  basis.  Regulatory  compliance  is  determined by a ratio of the
insurance  company's  regulatory total adjusted capital, as defined by the NAIC,
to its authorized control level RBC, as defined by the NAIC. Insurance companies
below specific  trigger points or ratios are classified  within certain  levels,
each of which requires specific  corrective action. The levels and ratios are as
follows:

                                       Ratio of Total  Adjusted  Capital  to
                                           Authorized  Control  Level  RBC
     Regulatory Event                          (Less Than or Equal to)
     ----------------                  --------------------------------------
     Company action level                                2*
     Regulatory action level                             1.5
     Authorized control level                            1
     Mandatory control level                             0.7
     * Or, 2.5 with negative trend.

At December 31, 2001, each of the insurance  subsidiaries has a Ratio that is in
excess of 4, which is 400% of the  authorized  control level;  accordingly,  the
insurance subsidiaries meet the RBC requirements.

The  Company is not aware of any  litigation  that will have a material  adverse
effect on the financial position of the Company.  In addition,  the Company does
not believe that the regulatory  initiatives  currently under  consideration  by
various regulatory  agencies will have a material adverse impact on the Company.
The Company is not aware of any material pending or threatened regulatory action
with  respect to the Company or any of its  subsidiaries.  The Company  does not
believe  that  any  insurance  guaranty  fund  assessments  will  be  materially
different from amounts already provided for in the financial statements.

Management   believes  the  overall  sources  of  liquidity  available  will  be
sufficient to satisfy its financial obligations.



REGULATORY ENVIRONMENT

The Company's  insurance  subsidiaries  are assessed  contributions  by life and
health guaranty associations in almost all states to indemnify  policyholders of
failed companies. In several states the company may reduce premium taxes paid to
recover a portion of assessments paid to the states' guaranty fund  association.
This right of  "offset"  may come under  review by the various  states,  and the
company cannot predict  whether and to what extent  legislative  initiatives may
affect  this  right to  offset.  Also,  some state  guaranty  associations  have
adjusted the basis by which they assess the cost of  insolvencies  to individual
companies.  The  Company  believes  that its reserve  for future  guaranty  fund
assessments  is  sufficient  to  provide  for   assessments   related  to  known
insolvencies. This reserve is based upon management's current expectation of the
availability of this right of offset, known insolvencies and state guaranty fund
assessment bases. However,  changes in the basis whereby assessments are charged
to individual  companies and changes in the  availability of the right to offset
assessments  against premium tax payments could materially  affect the company's
results.

Currently,  the  Company's  insurance  subsidiaries  are  subject to  government
regulation in each of the states in which they conduct business. Such regulation
is vested in state agencies having broad  administrative  power dealing with all
aspects of the insurance business,  including the power to: (i) grant and revoke
licenses to transact  business;  (ii) regulate and supervise trade practices and
market conduct; (iii) establish guaranty associations;  (iv) license agents; (v)
approve  policy  forms;  (vi) approve  premium rates for some lines of business;
(vii) establish reserve  requirements;  (viii) prescribe the form and content of
required financial statements and reports; (ix) determine the reasonableness and
adequacy of statutory capital and surplus;  and (x) regulate the type and amount
of permitted  investments.  Insurance regulation is concerned primarily with the
protection of policyholders. The Company cannot predict the impact of any future
proposals, regulations or market conduct investigations. The Company's insurance
subsidiaries,  UG,  APPL and ABE are  domiciled  in the  states  of  Ohio,  West
Virginia and Illinois, respectively.

The  insurance  regulatory  framework  continues  to be  scrutinized  by various
states,  the  federal  government  and the  National  Association  of  Insurance
Commissioners  ("NAIC"). The NAIC is an association whose membership consists of
the insurance  commissioners or their designees of the various states.  The NAIC
has no direct regulatory authority over insurance companies, however its primary
purpose is to provide a more consistent  method of regulation and reporting from
state to state. This is accomplished  through the issuance of model regulations,
which can be adopted  by  individual  states  unmodified,  modified  to meet the
state's own needs or requirements, or dismissed entirely.

Most  states  also  have  insurance  holding  company  statutes,  which  require
registration and periodic reporting by insurance  companies  controlled by other
corporations   licensed   to   transact   business   within   their   respective
jurisdictions.  The insurance  subsidiaries  are subject to such legislation and
registered  as  controlled   insurers  in  those  jurisdictions  in  which  such
registration  is  required.  Statutes  vary from  state to state  but  typically
require  periodic  disclosure,  concerning  the  corporation,  that controls the
registered insurers and all subsidiaries of such corporation. In addition, prior
notice  to,  or  approval  by,  the  state  insurance   commission  of  material
intercorporate   transfers  of  assets,   reinsurance   agreements,   management
agreements (see Note 9 in the Notes to the Consolidated  Financial  Statements),
and payment of dividends (see Note 2 in the Notes to the Consolidated  Financial
Statements) in excess of specified amounts by the insurance  subsidiary,  within
the holding company system, are required.

Each year the NAIC calculates  financial ratio results (commonly  referred to as
IRIS  ratios)  for  each  company.   These  ratios  compare  various   financial
information pertaining to the statutory balance sheet and income statement.  The
results are then compared to  pre-established  normal  ranges  determined by the
NAIC. Results outside the range typically require explanation to the domiciliary
insurance department.

At  year-end  2001,  UG had one ratio  outside  the normal  range.  The ratio is
related to the decrease in premium income.  The decrease was attributable to the
continued  business decline in new business writings combined with a decrease in
renewal premiums from normal terminations of existing business.  As a result, UG
fell slightly outside the normal range for this ratio.


The NAIC's  risk-based  capital  requirements  require  insurance  companies  to
calculate  and  report  information  under a  risk-based  capital  formula.  The
risk-based  capital  formula  measures  the  adequacy of  statutory  capital and
surplus in relation to  investment  and insurance  risks such as asset  quality,
mortality  and  morbidity,  asset and  liability  matching  and  other  business
factors.  The RBC  formula  is used by state  insurance  regulators  as an early
warning  tool to  identify,  for the purpose of  initiating  regulatory  action,
insurance companies that potentially are inadequately capitalized.  In addition,
the formula  defines new minimum  capital  standards  that will  supplement  the
current  system of low fixed  minimum  capital  and  surplus  requirements  on a
state-by-state  basis.  Regulatory  compliance  is  determined by a ratio of the
insurance  company's  regulatory total adjusted capital, as defined by the NAIC,
to its authorized control level RBC, as defined by the NAIC. Insurance companies
below specific  trigger points or ratios are classified  within certain  levels,
each of which requires specific  corrective action. The levels and ratios are as
follows:

                                             Ratio of Total Adjusted Capital to
                                                Authorized Control Level RBC
     Regulatory Event                             (Less Than or Equal to)
     ----------------                           ----------------------------

     Company action level                                   2*
     Regulatory action level                                1.5
     Authorized control level                               1
     Mandatory control level                                0.7

     * Or, 2.5 with negative trend.

At December 31, 2001, each of the insurance  subsidiaries has a Ratio that is in
excess of 4, which is 400% of the  authorized  control level;  accordingly,  the
insurance subsidiaries meet the RBC requirements.

The  State of  Florida  began an  investigation  of  industrial  life  insurance
policies in the fall of 1999 regarding policies with race-based  premiums.  This
investigation  has  quickly  spread to other  states and to other types of small
face amount  policies  and was expanded to consider the fairness of premiums for
all small policies  including  policies which did not have race-based  premiums.
The NAIC  historically  has defined a "small  face amount  policy" as one with a
face  amount of  $15,000  or less.  Under  current  reviews,  some  states  have
increased  this  amount  to  policies  of  $25,000  or less.  These  states  are
attempting  to force  insurers  to  refund  "excess  premiums"  to  insureds  or
beneficiaries of insureds based on the recent American General  settlement.  The
Company's  insurance  subsidiaries have no race-based  premium products,  but do
have  policies with face amounts under the  above-scrutinized  limitations.  The
outcome of this issue could be dramatic on the insurance  industry as a whole as
well as the Company  itself.  The Company will continue to monitor  developments
regarding  this matter to determine  to what extent,  if any, the Company may be
exposed.

During  2000,   Congress  passed  the   Gramm-Leach-Bliley   Financial  Services
Modernization  Act,  which  requires  financial   institutions,   including  all
insurers,  to take certain  steps to enhance  privacy  protections  of nonpublic
personal information for consumers.  The law is one of the most sweeping systems
of privacy  protection and regulation ever imposed in our nation's  history.  It
requires financial  companies to tell consumers how their financial  information
is protected,  and what a company's financial information sharing practices are,
both within a corporate family and with unrelated third parties.  Companies must
inform their  customers of their privacy  policies and practices at the start of
their business  relationship,  and then at least once a year for the duration of
the relationship. Companies also must disclose the types of information that are
shared.  The privacy  protections  under the act became  effective  November 13,
2000. Financial  institutions had until July 1, 2001, to establish and implement
privacy  policies.  The Company has implemented new procedures and complied with
the requirements of this legislation.

A task force of the NAIC  undertook a project to codify a  comprehensive  set of
statutory  insurance  accounting  rules and  regulations.  Project  results were
approved by the NAIC with an implementation date of January 1, 2001. Many states
in which the Company  does  business  implemented  these new rules with the same
effective  date as  proposed  by the NAIC.  The  Company  implemented  these new
regulations  effective January 1, 2001 as required.  Implementation of these new
rules did not have a material  financial  impact on the  insurance  subsidiaries
financial  position or results of  operations.  The NAIC continues to modify and
amend issue papers regarding codification.  The Company will continue to monitor
this issue as changes and new proposals are made.


ACCOUNTING AND LEGAL DEVELOPMENTS

The Financial  Accounting Standards Board ("FASB") has issued Statement No. 141,
Business Combinations,  Statement No. 142, Goodwill and Other Intangible Assets,
Statement No. 143,  Accounting for Asset Retirement  Obligations,  and Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Statement 141 improves the transparency of accounting and reporting for business
combinations by requiring that all business  combinations be accounted for under
a single method - the purchase method. Use of the pooling-of-interests method is
no longer permitted. Statement 141 requires that the purchase method be used for
business  combinations  initiated after June 30, 2001. The adoption of Statement
141 did not affect the Company's  financial  position or results of  operations,
since the Company has had no such  business  combinations  during the  reporting
period.

Statement  142 requires  that  goodwill no longer be amortized to earnings,  but
instead be reviewed for impairment.  This change provides investors with greater
transparency  regarding  the  economic  value  of  goodwill  and its  impact  on
earnings.  The amortization of goodwill ceased for the Company upon the adoption
of the  statement at January 1, 2002.  The adoption of Statement 142 will result
in an expense  reduction  of  approximately  $403,664  per year,  subject to any
impairment write-down that might arise from a management review.

Statement  143 requires  entities to record the fair value of a liability for an
asset  retirement  obligation  in the period in which it is  incurred.  When the
liability is initially recorded, the entity capitalizes a cost by increasing the
carrying  amount of the related  long-lived  asset.  Over time, the liability is
accreted  to its  present  value  each  period,  and  the  capitalized  cost  is
depreciated  over the useful life of the related asset.  Upon  settlement of the
liability,  an entity either settles the  obligation for its recorded  amount or
incurs a gain or loss upon  settlement.  The  standard is  effective  for fiscal
years  beginning  after June 15, 2002.  The  adoption of Statement  143 will not
affect the  Company's  financial  position or results of  operations,  since the
Company has no such asset retirement obligations.

Statement 144 requires that one accounting  model be used for long-lived  assets
to be disposed of by sale,  whether  previously held and used or newly acquired,
and  broadens  the  presentation  of  discontinued  operations  to include  more
disposal  transactions.   In  addition,  this  statement  requires  entities  to
recognize an impairment loss if the carrying amount of a long-lived asset is not
recoverable from its undiscounted  cash flows, and to measure an impairment loss
as the difference  between the carrying amount and fair value of the asset. This
statement  removes any previous  requirements to allocate goodwill to long-lived
assets   to  be  tested   for   impairment,   and  it   further   prescribes   a
probability-weighted  cash flow  estimation  approach to deal with situations in
which  alternative  courses  of  action  to  recover  the  carrying  amount of a
long-lived asset are under  consideration.  The provisions of this Statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.  The adoption of Statement  144 will not affect the Company's
financial  position  or results of  operations,  since the  Company  has no such
disposals or impairments to long-lived assets.


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Listed below are the  financial  statements  included in this Part of the Annual
Report on SEC Form 10-K:

                                                                        Page No.
FIRST COMMONWEALTH CORPORATION AND CONSOLIDATED SUBSIDIARIES


     Independent Auditors' Report for the
        Years ended December 31, 2001, 2000, 1999..........................32



     Consolidated Balance Sheets...........................................33



     Consolidated Statements of Operations.................................34



     Consolidated Statements of Shareholders' Equity.......................35



     Consolidated Statements of Cash Flows.................................36



     Notes to Consolidated Financial Statements.........................37-61







                          Independent Auditors' Report



Board of Directors and Shareholders
First Commonwealth Corporation


     We have  audited  the  accompanying  consolidated  balance  sheets of First
Commonwealth  Corporation  (a  Virginia  corporation)  and  subsidiaries  as  of
December  31,  2001  and  2000,  and  the  related  consolidated  statements  of
operations,  shareholders' equity, and cash flows for each of the three years in
the  period  ended  December  31,  2001.  These  financial  statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States of America.  Those standards  require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

     In our opinion,  the financial statements referred to above present fairly,
in  all  material  respects,   the  consolidated  financial  position  of  First
Commonwealth  Corporation and subsidiaries as of December 31, 2001 and 2000, and
the consolidated  results of their operations and their  consolidated cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.

     We have also audited  Schedule I as of December 31, 2001, and Schedules II,
IV and V as of December 31, 2001 and 2000, of First Commonwealth Corporation and
subsidiaries  and  Schedules  II,  IV and V for each of the  three  years in the
period then ended.  In our  opinion,  these  schedules  present  fairly,  in all
material respects, the information required to be set forth therein.




                                                  KERBER, ECK & BRAECKEL LLP




Springfield, Illinois
March 13, 2002





                           CONSOLIDATED BALANCE SHEET
                         FIRST COMMONWEALTH CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                        As of December 31, 2001 and 2000

                                     ASSETS
                                                                                            2001              2000
                                                                                        --------------   ---------------
Investments:
    Fixed maturities held to maturity, at amortized cost
      (market $77,725,410 and $122,623,563)                                           $    75,005,395  $    121,922,963
    Investments held for sale:
      Fixed maturities, at market (cost $97,584,094 and $42,914,186)                       98,628,440        43,128,280
      Equity securities, at market (cost $3,934,512 and $5,505,832)                         3,852,716         5,126,271
    Mortgage loans on real estate at amortized cost                                        23,386,895        32,896,671
    Investment real estate, at cost, net of accumulated depreciation                        8,876,298         3,933,357
    Policy loans                                                                           13,608,456        14,090,900
    Short-term investments                                                                    550,001         1,654,567
                                                                                        --------------   ---------------
                                                                                          223,908,201       222,753,009

Cash and cash equivalents                                                                  14,837,274        12,960,007
Investment in parent                                                                          350,000           350,000
Receivable from affiliate                                                                          37           291,934
Accrued investment income                                                                   2,938,529         3,461,199
Reinsurance receivables:
    Future policy benefits                                                                 33,776,688        35,083,244
    Policy claims and other benefits                                                        4,042,779         3,911,258
Cost of insurance acquired                                                                 14,219,005        15,370,289
Deferred policy acquisition costs                                                           6,353,919         7,853,496
Cost in excess of net assets purchased,
  net of accumulated amortization                                                           6,895,110         7,647,847
Income taxes receivable:
    Current                                                                                   174,893           195,068
    Deferred                                                                                        0         1,148,545
Property and equipment, net of accumulated depreciation                                     2,284,117         2,567,619
Other assets                                                                                  118,963           648,002
                                                                                        --------------   ---------------
        Total assets                                                                  $   309,899,515  $    314,241,517
                                                                                        ==============   ===============

                        LIABILITIES AND SHAREHOLDERS' EQUITY
Policy liabilities and accruals:
    Future policy benefits                                                            $   244,526,762  $    248,089,964
    Policy claims and benefits payable                                                      2,781,920         2,639,248
    Other policyholder funds                                                                1,255,990         1,445,857
    Dividend and endowment accumulations                                                   12,972,024        13,416,427
Notes payable                                                                              11,536,698        12,839,193
Income taxes payable, deferred                                                                272,444                 0
Other liabilities                                                                           4,541,184         5,357,543
                                                                                        --------------   ---------------
        Total liabilities                                                                 277,887,022       283,788,232
                                                                                        --------------   ---------------
Minority interests in consolidated subsidiaries                                                     0         1,326,992
                                                                                        --------------   ---------------


Shareholders' equity:
Common stock - $1 par value per share.
    Authorized 62,500 shares - 54,385 and 54,393 shares issued
    and outstanding after deducting treasury shares of 1,100 and 1,092                         54,385            54,393
Additional paid-in capital                                                                 51,860,574        51,861,366
Accumulated deficit                                                                       (20,515,821)      (22,701,428)
Accumulated other comprehensive income (deficit)                                              613,355           (88,038)
                                                                                        --------------   ---------------
        Total shareholders' equity                                                         32,012,493        29,126,293
                                                                                        --------------   ---------------
        Total liabilities and shareholders' equity                                    $   309,899,515  $    314,241,517
                                                                                        ==============   ===============



                            See accompanying notes.



                         FIRST COMMONWEALTH CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                       Three Years Ended December 31, 2001



                                                                   2001              2000             1999
                                                               --------------   ---------------   --------------

Revenues:

    Premiums and policy fees                                 $    20,444,514  $     23,045,858  $    25,559,708
    Reinsurance premiums and policy fees                          (3,172,098)       (3,556,172)      (3,978,565)
    Net investment income                                         14,942,902        15,869,597       14,498,500
    Realized investment gains(losses), net                           436,280          (260,078)        (530,894)
    Other income                                                     950,858           132,843          210,422
                                                               --------------   ---------------   --------------
                                                                  33,602,456        35,232,048       35,759,171


Benefits and other expenses:

    Benefits, claims and settlement expenses:
       Life                                                       19,857,018        23,798,002       23,301,541
       Reinsurance benefits and claims                            (2,349,102)       (3,376,091)      (3,610,459)
       Annuity                                                     1,244,663         1,210,783        1,390,592
       Dividends to policyholders                                  1,015,055         1,003,954        1,170,710
    Commissions and amortization of deferred
       policy acquisition costs                                    1,921,974         2,834,313        3,759,898
    Amortization of cost of insurance acquired                     1,151,284         1,185,307        1,072,773
    Operating expenses                                             6,483,157         9,304,655        7,499,188
    Interest expense                                                 987,886         1,243,819        1,344,888
                                                               --------------   ---------------   --------------
                                                                  30,311,935        37,204,742       35,929,131
                                                               --------------   ---------------   --------------

Income (loss) before income taxes
    and minority interest                                          3,290,521        (1,972,694)        (169,960)
Income tax credit (expense)                                       (1,055,732)           90,811         (170,957)
Minority interest in (income) loss
    of consolidated subsidiaries                                     (49,182)           35,043          (37,040)
                                                               --------------   ---------------   --------------
Net income (loss)                                            $     2,185,607  $     (1,846,840) $      (377,957)
                                                               ==============   ===============   ==============


Basic income (loss) per share from continuing
   operations and net income (loss)                          $         40.19  $         (33.90) $         (6.93)
                                                               ==============   ===============   ==============


Basic weighted average shares outstanding                             54,385            54,485           54,539
                                                               ==============   ===============   ==============


                            See accompanying notes.




                         FIRST COMMONWEALTH CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                       Three Years Ended December 31, 2001

                                                 2001                                 2000                                1999
                                           ------------------------------       ------------------------------      ------------------------------

Common stock
    Balance, beginning of year             $        54,393                      $        54,538                     $        54,539
    Issued during year                                   0                                    0                                   0
    Treasury shares acquired                            (8)                                (145)                                 (1)
                                             --------------                       --------------                      --------------
    Balance, end of year                   $        54,385                      $        54,393                     $        54,538
                                             ==============                       ==============                      ==============


Additional paid-in capital
    Balance, beginning of year             $    51,861,366                      $    51,875,721                     $    51,875,820
    Issued during year                                   0                                    0                                   0
    Treasury shares acquired                          (792)                             (14,355)                                (99)
                                             --------------                       --------------                      --------------
    Balance, end of year                   $    51,860,574                      $    51,861,366                     $    51,875,721
                                             ==============                       ==============                      ==============


Accumulated deficit
    Balance, beginning of year             $   (22,701,428)                     $   (20,854,588)                    $   (20,476,631)
    Net income(loss)                             2,185,607  $    2,185,607           (1,846,840)$    (1,846,840)           (377,957) $     (377,957)
                                             --------------                       --------------                      --------------
    Balance, end of year                   $   (20,515,821)                     $   (22,701,428)                    $   (20,854,588)
                                             ==============                       ==============                      ==============


Accumulated other comprehensive deficit
    Balance, beginning of year             $       (88,038)                     $    (1,915,335)                    $      (631,344)
    Other comprehensive income (deficit)
      Unrealized holding gain (loss) on
        securities net of minority interest
        and reclassification adjustment            701,393         701,393            1,827,297       1,827,297          (1,283,991)     (1,283,991)
                                             --------------   -------------       --------------  --------------      --------------   -------------
    Comprehensive income (deficit)                          $    2,887,000                      $       (19,543)                     $   (1,661,948)
                                                              =============                       ==============                       =============
    Balance, end of year                   $       613,355                      $       (88,038)                    $    (1,915,335)
                                             ==============                       ==============                      ==============

Total shareholders' equity, end of year    $    32,012,493                      $    29,126,293                     $    29,160,336
                                             ==============                       ==============                      ==============

                            See accompanying notes.



                         FIRST COMMONWEALTH CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       Three Years Ended December 31, 2001

                                                                               2001             2000             1999
                                                                          ---------------   --------------   -------------
Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net income (loss)                                                    $      2,185,607  $    (1,846,840) $     (377,957)
   Adjustments to reconcile net loss to net cash provided by
     (used in) operating activities net of changes in assets and
     liabilities resulting from the sales and purchases of subsidiaries:
    Amortization/accretion of fixed maturities                                   150,579          152,917         489,491
    Realized investment (gains) losses, net                                     (436,280)         260,078         530,894
    Policy acquisition costs deferred                                           (141,000)        (273,000)       (720,000)
    Amortization of deferred policy acquisition costs                          1,640,577        2,197,040       2,783,012
    Amortization of cost of insurance acquired                                 1,151,284        1,185,307       1,072,773
    Amortization of costs in excess of net assets purchased                      403,664          403,664         432,550
    Depreciation                                                                 360,688          424,591         480,505
    Minority interest                                                             49,182          (35,043)         37,040
    Charges for mortality and administration of
      universal life and annuity products                                     (9,344,711)     (10,151,024)    (10,696,014)
    Interest credited to account balances                                      5,749,098        6,109,491       6,300,667
    Change in accrued investment income                                          522,670          (42,900)        102,782
    Change in reinsurance receivables                                          1,175,305          928,890         606,509
    Change in policy liabilities and accruals                                 (2,478,697)      (3,289,810)     (1,255,020)
    Change in income taxes                                                     1,055,732          109,189        (351,803)
    Change in indebtedness (to) from affiliates, net                             291,897         (137,316)       (198,112)
    Change in other assets and liabilities, net                                 (732,349)       1,358,864        (618,844)
                                                                          ---------------   --------------   -------------
Net cash provided by (used in) operating activities                            1,603,246       (2,645,902)     (1,381,527)
                                                                          ---------------   --------------   -------------

Cash flows from investing activities:
   Proceeds from investments sold and matured:
    Fixed maturities held for sale matured                                    27,205,225        5,607,700       1,430,000
    Fixed maturities matured                                                  50,952,814       27,103,149      31,032,290
    Equity securities                                                          6,312,727          189,270               0
    Mortgage loans                                                            14,738,313        4,279,622       4,715,678
    Real estate                                                                1,894,082        4,470,385       2,705,093
    Policy loans                                                               2,912,296        2,918,627       3,169,753
    Other long-term investments                                                        0          906,278               0
    Short-term                                                                 2,229,528        1,042,826       1,336,251
                                                                          ---------------   --------------   -------------
    Total proceeds from investments sold and matured                         106,244,985       46,517,857      44,389,065
   Cost of investments acquired:
    Fixed maturities held for sale                                           (84,801,095)     (19,996,972)    (31,366,755)
    Fixed maturities                                                          (1,124,925)      (1,486,255)     (2,020,803)
    Equity securities                                                         (4,608,649)      (2,669,899)       (161,255)
    Mortgage loans                                                            (5,325,569)     (21,862,521)     (9,257,836)
    Real estate                                                               (6,711,273)        (852,331)       (635,303)
    Policy loans                                                              (2,429,852)      (2,858,415)     (3,186,825)
    Short-term                                                                (1,124,961)        (497,393)     (2,500,000)
                                                                          ---------------   --------------   -------------
    Total cost of investments acquired                                      (106,126,324)     (50,223,786)    (49,128,777)
   Purchase of property and equipment                                           (138,388)               0               0
   Sale of property and equipment                                                201,064         (108,346)       (234,791)
                                                                          ---------------   --------------   -------------
 Net cash provided by (used in) investing activities                              181,337       (3,814,275)     (4,974,503)
                                                                          ---------------   --------------   -------------

Cash flows from financing activities:
    Policyholder contract deposits                                            11,361,882       12,724,345      14,176,188
    Policyholder contract withdrawals                                         (9,342,372)     (10,962,425)    (11,222,814)
    Payments of principal on notes payable                                    (1,302,495)      (2,025,000)     (2,505,800)
    Purchase of stock of affiliates                                             (623,531)         (69,699)        (76,823)
    Purchase of treasury shares                                                     (800)         (14,500)           (100)
                                                                          ---------------   --------------   -------------
Net cash provided by (used in) financing activities                               92,684         (347,279)        370,651
                                                                          ---------------   --------------   -------------

Net increase (decrease) in cash and cash equivalents                           1,877,267       (6,807,456)     (5,985,379)
Cash and cash equivalents at beginning of year                                12,960,007       19,767,463      25,752,842
                                                                          ---------------   --------------   -------------
Cash and cash equivalents at end of year                                $     14,837,274  $    12,960,007  $   19,767,463
                                                                          ===============   ==============   =============

                            See accompanying notes.


FIRST COMMONWEALTH CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A.   ORGANIZATION  - At  December  31,  2001,  the parent  and  significant
          majority-owned  subsidiaries of First Commonwealth Corporation were as
          depicted on the following organizational chart.`

Organizational Chart

`The  Company's  significant  accounting  policies,  consistently  applied in the
preparation  of  the  accompanying   consolidated   financial  statements,   are
summarized as follows:

     B.   NATURE OF OPERATIONS - First Commonwealth  Corporation is an insurance
          holding company,  which sells insurance products through its insurance
          subsidiaries.  The Company's principal market is the Midwestern United
          States.  The Company's  dominant business is individual life insurance
          which includes the servicing of existing  insurance business in force,
          the  solicitation of new individual life insurance and the acquisition
          of other companies in the insurance business.

     C.   BUSINESS  SEGMENTS - The  Company  has only one  significant  business
          segment - insurance.

     D.   BASIS  OF  PRESENTATION  - The  financial  statements  of FCC  and its
          subsidiaries   have  been  prepared  in  accordance   with  accounting
          principles  generally  accepted in the United  States of America which
          differ from  statutory  accounting  practices  permitted  by insurance
          regulatory authorities.

     E.   PRINCIPLES OF  CONSOLIDATION - The consolidated  financial  statements
          include  the  accounts  of  the  Registrant  and  its   majority-owned
          subsidiaries. Other investments in affiliates are carried at cost. All
          significant   intercompany   accounts  and   transactions   have  been
          eliminated.

     F.   INVESTMENTS - Investments are shown on the following bases:

          Fixedmaturities  -- at cost,  adjusted for  amortization of premium or
          discount and other-than-temporary market value declines. The amortized
          cost of such  investments  differs from their market values;  however,
          the Company has the  ability and intent to hold these  investments  to
          maturity,  at which  time  the  full  face  value  is  expected  to be
          realized.

          Investments  held  for sale -- at  current  market  value,  unrealized
          appreciation  or  depreciation  is charged  directly to  shareholders'
          equity.

          Mortgage  loans on real  estate -- at unpaid  balances,  adjusted  for
          amortization  of premium or  discount,  less  allowance  for  possible
          losses.

          Real  estate -  Investment  real  estate  at cost less  allowance  for
          depreciation  and, as  appropriate,  provisions  for possible  losses.
          Foreclosed   real  estate  is  adjusted  for  any  impairment  at  the
          foreclosure date.  Accumulated  depreciation on investment real estate
          was  $58,225  and   $251,766  as  of  December   31,  2001  and  2000,
          respectively.

          Policy loans -- at unpaid balances including  accumulated interest but
          not in excess of the cash surrender value.

          Short-term  investments -- at cost, which approximates  current market
          value.

          Realized  gains and losses on sales of  investments  are recognized in
          net income on the specific identification basis.

          Unrealized gains and losses on investments carried at market value are
          recognized   in   other   comprehensive   income   on   the   specific
          identification basis.

     G.   CASH EQUIVALENTS - The Company  considers  certificates of deposit and
          other short-term  instruments with an original  purchased  maturity of
          three months or less cash equivalents.


     H.   REINSURANCE - In the normal  course of business,  the Company seeks to
          limit its  exposure  to loss on any  single  insured  and to recover a
          portion of  benefits  paid by ceding  reinsurance  to other  insurance
          enterprises  or  reinsurers  under  excess  coverage  and  coinsurance
          contracts.  The Company  retains a maximum of $125,000 of coverage per
          individual  life.

          Amounts paid or deemed to have been paid for reinsurance contracts are
          recorded  as  reinsurance  receivables.  Reinsurance  receivables  are
          recognized in a manner consistent with the liabilities relating to the
          underlying  reinsured  contracts.  The cost of reinsurance  related to
          long-duration  contracts  is  accounted  for  over  the  life  of  the
          underlying reinsured policies using assumptions  consistent with those
          used to account for the underlying policies.

     I.   FUTURE POLICY  BENEFITS AND EXPENSES - The liabilities for traditional
          life insurance and accident and health  insurance  policy benefits are
          computed  using  a  net  level  method.   These  liabilities   include
          assumptions as to investment yields, mortality, withdrawals, and other
          assumptions  based  on the  life  insurance  subsidiaries'  experience
          adjusted to reflect  anticipated  trends and to include provisions for
          possible unfavorable  deviations.  The Company makes these assumptions
          at the  time the  contract  is  issued  or,  in the case of  contracts
          acquired by purchase, at the purchase date. Future policy benefits for
          individual  life  insurance  and annuity  policies are computed  using
          interest  rates  ranging from 2% to 6% for life  insurance and 2.5% to
          9.25% for annuities.  Benefit  reserves for traditional life insurance
          policies include certain deferred profits on limited-payment  policies
          that are being  recognized  in income  over the  policy  term.  Policy
          benefit  claims are  charged to expense in the period  that the claims
          are incurred.  Current mortality rate assumptions are based on 1975-80
          select and ultimate tables. Withdrawal rate assumptions are based upon
          Linton B or Linton C, which are industry standard actuarial tables for
          forecasting assumed policy lapse rates.

          Benefit  reserves for universal life insurance and interest  sensitive
          life  insurance  products are computed under a  retrospective  deposit
          method  and  represent  policy  account  balances  before   applicable
          surrender  charges.  Policy  benefits  and claims  that are charged to
          expense  include  benefit  claims in excess of related  policy account
          balances.  Interest  crediting  rates for universal  life and interest
          sensitive  products  range  from  4.5% to 5.5%  for  the  years  ended
          December 31, 2001, 2000 and 1999, respectively.

     J.   POLICY  AND  CONTRACT  CLAIMS - Policy  and  contract  claims  include
          provisions  for reported  claims in process of  settlement,  valued in
          accordance  with the terms of the policies and  contracts,  as well as
          provisions  for  claims   incurred  and  unreported   based  on  prior
          experience  of the  Company.  Incurred  but not  reported  claims were
          $900,894 and $900,114 as of December 31, 2001 and 2000, respectively.

     K.   COST OF INSURANCE  ACQUIRED - When an  insurance  company is acquired,
          the  Company  assigns  a portion  of its cost to the right to  receive
          future cash flows from insurance contracts existing at the date of the
          acquisition. The cost of policies purchased represents the actuarially
          determined  present value of the projected  future cash flows from the
          acquired   policies.   The  Company   utilized  9%  discount  rate  on
          approximately   75%  of  the  business   and  15%  discount   rate  on
          approximately  25% of the  business.  Cost of  insurance  acquired  is
          amortized  with  interest  in relation  to  expected  future  profits,
          including direct  charge-offs for any excess of the unamortized  asset
          over the projected future profits.  The interest rates utilized in the
          amortization  calculation are 9% on  approximately  75% of the balance
          and 15% on the  remaining  balance.  The  interest  rates  vary due to
          differences in the blocks of business.  The  amortization  is adjusted
          retrospectively  when  estimates of current or future gross profits to
          be realized from a group of products are revised.


                                                   2001                 2000                1999
                                              ----------------    -----------------    ----------------
Cost of insurance acquired,
Beginning of year                           $     15,370,289    $     16,555,596      $   17,628,369
   Interest accretion                              1,333,668           1,423,266           1,495,074
   Amortization                                   (2,484,952)         (2,608,573)         (2,567,847)
                                              ----------------    -----------------    ----------------
   Net amortization                               (1,151,284)         (1,185,307)         (1,072,773)
                                              ----------------    -----------------    ----------------

Cost of insurance acquired,
  End of year                               $     14,219,005    $     15,370,289     $    16,555,596
                                              ================    =================    ================

          Estimated net amortization  expense of cost of insurance  acquired for
          the next five years is as follows:

                                                                   Interest                             Net
                                                                  Accretion      Amortization      Amortization
                                                                  ---------      ------------      ------------
           2002                                                 $ 1,243,000       $ 2,202,000      $  959,000
           2003                                                   1,176,000         2,001,000         825,000
           2004                                                   1,092,000         1,774,000         682,000
           2005                                                   1,033,000         1,630,000         597,000
           2006                                                     980,000         1,505,000         525,000


          L. DEFERRED  POLICY  ACQUISITION  COSTS - Commissions  and other costs
          (salaries of certain employees involved in the underwriting and policy
          issue  functions,  and medical and inspection  fees) of acquiring life
          insurance  products  that vary with and are  primarily  related to the
          production  of new  business  have  been  deferred.  Traditional  life
          insurance   acquisition   costs   are   being   amortized   over   the
          premium-paying  period  of  the  related  policies  using  assumptions
          consistent with those used in computing policy benefit reserves.

          For universal  life  insurance and interest  sensitive  life insurance
          products,   acquisition   costs  are  being  amortized   generally  in
          proportion  to the  present  value  of  expected  gross  profits  from
          surrender  charges and  investment,  mortality,  and expense  margins.
          Under SFAS No. 97, "Accounting and Reporting by Insurance  Enterprises
          for Certain Long-Duration  Contracts and for Realized Gains and Losses
          from the Sale of Investments,"  the Company makes certain  assumptions
          regarding the mortality, persistency,  expenses, and interest rates it
          expects to experience in future periods.  These  assumptions are to be
          best  estimates and are to be  periodically  updated  whenever  actual
          experience  and/or  expectations  for the future  change from  initial
          assumptions.   The  amortization  is  adjusted   retrospectively  when
          estimates  of current or future  gross  profits to be realized  from a
          group of products are revised.


          The following table summarizes  deferred policy  acquisition costs and
          related data for the years shown.

                                                  2001                 2000                  1999
                                            -----------------    -----------------     -----------------
          Deferred, beginning of year       $      7,853,496     $      9,777,536      $     11,840,548

          Acquisition costs deferred:
            Commissions                              108,000              184,000               566,000
            Other expenses                            33,000               89,000               154,000
                                            -----------------    -----------------     -----------------
            Total                                    141,000              273,000               720,000

          Interest accretion                         247,000              328,000               436,000
          Amortization charged to income          (1,887,577)          (2,525,040)           (3,219,012)
                                            -----------------    -----------------     -----------------
            Net amortization                      (1,640,577)          (2,197,040)           (2,783,012)
                                            -----------------    -----------------     -----------------
            Change for the year                   (1,499,577)          (1,924,040)           (2,063,012)
                                            -----------------    -----------------     -----------------

          Deferred, end of year             $      6,353,919     $      7,853,496      $      9,777,536
                                            =================    =================     =================


          Traditional life insurance  acquisition costs are being amortized over
          the  premium-paying  period of the related policies using  assumptions
          consistent with those used in computing policy benefit reserves.

          The following  table reflects the  components of the income  statement
          for the line item  commissions  and  amortization  of deferred  policy
          acquisition costs.

                                                        2001              2000              1999
                                                     ----------        ----------        ----------
           Net amortization of deferred
             policy acquisition costs               $ 1,640,577       $ 2,197,040       $ 2,783,012
           Commissions                                  281,397           637,273           976,886
                                                     ----------        ----------        ----------
             Total                                  $ 1,921,974       $ 2,831,313       $ 3,759,898
                                                     ==========        ==========        ==========


          Estimated  net  amortization  expense of deferred  policy  acquisition
          costs for the next five years is as follows:

                            Interest                             Net
                           Accretion      Amortization      Amortization
                          ----------      ------------      ------------
           2002          $  217,000      $  1,372,000      $  1,155,000
           2003             193,000         1,053,000           860,000
           2004             172,000         1,025,000           853,000
           2005             154,000           878,000           724,000
           2006             137,000           744,000           607,000



     M.   COST IN EXCESS OF NET ASSETS  PURCHASED - Cost in excess of net assets
          purchased  is the excess of the amount paid to acquire a company  over
          the  fair  value of its net  assets.  Costs in  excess  of net  assets
          purchased  are  amortized  on the  straight-line  basis over a 40-year
          period.  Management continually reviews the value of goodwill based on
          estimates  of  future  earnings.  As part of this  review,  management
          determines  whether  goodwill  is  fully  recoverable  from  projected
          undiscounted net cash flows from earnings of the subsidiaries over the
          remaining  amortization  period.  If management were to determine that
          changes  in  such  projected  cash  flows  no  longer   supported  the
          recoverability of goodwill over the remaining amortization period, the
          carrying  value of  goodwill  would be  reduced  with a  corresponding
          charge  to  expense  (no  such  changes  have  occurred).  Accumulated
          amortization of cost in excess of net assets  purchased was $7,655,520
          and $7,251,856 as of December 31, 2001 and 2000, respectively.

     N.   PROPERTY AND EQUIPMENT -  Company-occupied  property,  data processing
          equipment and  furniture and office  equipment are stated at cost less
          accumulated  depreciation of $5,480,294 and $5,871,464 at December 31,
          2001  and  2000,   respectively.   Depreciation   is   computed  on  a
          straight-line  basis for financial  reporting purposes using estimated
          useful lives of three to 30 years.  Depreciation expense was $296,900,
          $355,328 and $352,449 for the years ended December 31, 2001,  2000 and
          1999 respectively.

     O.   INCOME TAXES - Income taxes are reported under  Statement of Financial
          Accounting Standards Number 109. Deferred income taxes are recorded to
          reflect the tax consequences on future periods of differences  between
          the tax bases of assets and liabilities and their financial  reporting
          amounts at the end of each such period.

     P.   EARNINGS  PER SHARE -  Earnings  per  share are based on the  weighted
          average  number  of  common  shares   outstanding  during  each  year,
          retroactively  adjusted  to  give  effect  to  all  stock  splits,  in
          accordance with Statement of Financial  Accounting  Standards No. 128.
          The  computation  of diluted  earnings  per share is the same as basic
          earnings  per share  since the  Company  has no  dilutive  instruments
          outstanding.

     Q.   TREASURY  SHARES - The Company  holds 1,100 and 1,092 shares of common
          stock  as  treasury  shares  with  a  cost  basis  of  $3,479,400  and
          $3,478,600 at December 31, 2001 and 2000, respectively.

     R.   PARTICIPATING  INSURANCE - Participating  business  represents 22% and
          23% of the ordinary  life  insurance in force at December 31, 2001 and
          2000,   respectively.   Premium  income  from  participating  business
          represents  26%,  27%,  and 29% of total  premiums for the years ended
          December  31,  2001,  2000  and  1999,  respectively.  The  amount  of
          dividends  to  be  paid  is  determined  annually  by  the  respective
          insurance  subsidiary's  Board of  Directors.  Earnings  allocable  to
          participating  policyholders are based on legal requirements that vary
          by state.

     S.   RECOGNITION   OF  REVENUES   AND  RELATED   EXPENSES  -  Premiums  for
          traditional life insurance products, which include those products with
          fixed and  guaranteed  premiums and benefits,  consist  principally of
          whole  life  insurance  policies,  and  certain  annuities  with  life
          contingencies  are  recognized as revenues when due.  Limited  payment
          life insurance policies defer gross premiums received in excess of net
          premiums,   which  is  then   recognized   in  income  in  a  constant
          relationship  with insurance in force.  Accident and health  insurance
          premiums  are  recognized  as  revenue  pro rata over the terms of the
          policies.  Benefits and related expenses  associated with the premiums
          earned are  charged to expense  proportionately  over the lives of the
          policies through a provision for future policy benefit liabilities and
          through  deferral  and  amortization  of deferred  policy  acquisition
          costs. For universal life and investment products,  generally there is
          no requirement  for payment of premium other than to maintain  account
          values at a level  sufficient to pay  mortality  and expense  charges.
          Consequently,  premiums for  universal  life  policies and  investment
          products  are not  reported as revenue,  but as  deposits.  Policy fee
          revenue for universal life policies and investment  products  consists
          of charges for the cost of insurance  and policy  administration  fees
          assessed  during the period.  Expenses  include  interest  credited to
          policy  account  balances  and  benefit  claims  incurred in excess of
          policy account balances.


     T.   RECLASSIFICATIONS  - Certain prior year amounts have been reclassified
          to conform to the 2001  presentation.  Such  reclassifications  had no
          effect on previously reported net loss, total assets, or shareholders'
          equity.

     U.   USE OF ESTIMATES - In preparing  financial  statements  in  conformity
          with accounting  principles generally accepted in the United States of
          America  management is required to make estimates and assumptions that
          affect the reported amounts of assets and liabilities,  the disclosure
          of  contingent  assets and  liabilities  at the date of the  financial
          statements,  and the reported  amounts of revenues and expenses during
          the  reporting   period.   Actual  results  could  differ  from  those
          estimates.


2.  SHAREHOLDER DIVIDEND RESTRICTION

At December 31, 2001,  substantially  all of consolidated  shareholders'  equity
represents  net assets of FCC's  subsidiaries.  The payment of cash dividends to
shareholders  by FCC is not legally  restricted.  However,  the state  insurance
department  regulates  insurance  company dividend payments where the company is
domiciled. UG's dividend limitations are described below.

Ohio domiciled  insurance  companies require five days prior notification to the
insurance  commissioner  for  the  payment  of an  ordinary  dividend.  Ordinary
dividends are defined as the greater of: a) prior year statutory  earnings or b)
10% of statutory  capital and surplus.  For the year ended December 31, 2001, UG
had a statutory gain from  operations of $2,212,215.  At December 31, 2001, UG's
statutory capital and surplus amounted to $16,105,265.  Extraordinary  dividends
(amounts in excess of ordinary dividend  limitations)  require prior approval of
the insurance commissioner and are not restricted to a specific calculation.

3.  INCOME TAXES

Until 1984, the insurance  companies were taxed under the provisions of the Life
Insurance Company Income Tax Act of 1959 as amended by the Tax Equity and Fiscal
Responsibility  Act of 1982. These laws were superseded by the Deficit Reduction
Act of 1984. All of these laws are based  primarily upon statutory  results with
certain  special  deductions  and other items  available  only to life insurance
companies. Under the provision of the pre-1984 life insurance company income tax
regulations, a portion of "gain from operations" of a life insurance company was
not subject to current  taxation but was  accumulated,  for tax  purposes,  in a
special tax memorandum account  designated as "policyholders'  surplus account".
Federal income taxes will become payable on this account at the then current tax
rate when and if distributions  to shareholders,  other than stock dividends and
other limited exceptions, are made in excess of the accumulated previously taxed
income maintained in the "shareholders surplus account".

The following table summarizes the companies with this situation and the maximum
amount of income, which has not been taxed in each.


                            Shareholders'          Untaxed
       Company                 Surplus             Balance
----------------------     -----------------    --------------
         ABE           $          5,457,880  $      1,149,693
        APPL                      7,098,824         1,525,367
         UG                      28,897,113         4,363,821


The payment of taxes on this income is not  anticipated;  and,  accordingly,  no
deferred taxes have been established.


The life insurance company  subsidiaries file a consolidated  federal income tax
return. The holding companies of the group file separate returns.

Life insurance  company taxation is based primarily upon statutory  results with
certain  special  deductions  and other items  available  only to life insurance
companies. Income tax expense consists of the following components:

                                              2001                 2000                1999
                                         ----------------    -----------------    ----------------
Current tax expense                  $            20,175  $           27,748  $               941
Deferred tax expense (credit)                  1,035,557            (118,559)             170,016
                                         ----------------    -----------------    ----------------
                                     $         1,055,732  $          (90,811)  $          170,957
                                         ================    =================    ================

The  Companies  have net operating  loss  carryforwards  for federal  income tax
purposes expiring as follows:

                              UG                FCC
                         -------------     ---------------
       2019          $      1,165,779  $                0
       2020                         0             525,451
                         -------------     ---------------
       TOTAL         $      1,165,779  $          525,451
                         =============     ===============


The Company has  established  a deferred tax asset of $591,931 for its operating
loss carryforwards and has established an allowance of $183,908. UG must average
approximately  $65,000  of  taxable  income  per year to fully  realize  the net
operating loss  carryforward  for which no allowance is established.  Management
believes  future  earnings of UG will be  sufficient  to fully  utilize this net
operating loss carryforward.  FCC must average  approximately $28,000 of taxable
income to fully realize its net operating loss  carryforwards.  FCC's  operating
loss  carryforward  does  not  expire  until  the  year  2020.   Management  has
established  an allowance of $183,908  for FCC's loss  carryforwards.  The total
allowances established on deferred tax assets decreased $195,518 in 2001.

The provision or (credit) for income taxes differed from the amounts computed by
applying the  applicable  United States  statutory rate of 35% before taxes as a
result of the following differences:

                                                             2001               2000               1999
                                                        ----------------   ----------------   ----------------
Tax computed at statutory rate                       $     1,151,682    $      (690,443)    $      (59,486)
Changes in taxes due to:
  Cost in excess of net assets purchased                     141,282            141,282            151,393
  Current year loss for which no benefit realized                  0            546,231                  0
  Benefit of prior losses                                   (159,456)          (139,061)            (6,309)
  Other                                                      (77,776)            51,180             85,359
                                                        ----------------   ----------------   ----------------
Income tax expense (credit)                          $     1,055,732     $      (90,811)    $      170,957
                                                        ================   ================   ================



The following table summarizes the major components, which comprise the deferred
tax liability as reflected in the balance sheets:

                                                 2001                  2000
                                            ----------------      ---------------
Investments                             $          23,896     $        (403,535)
Deferred policy acquisition costs               2,223,872             2,748,724
Cost of insurance acquired                      4,976,652             5,379,601
Agent balances                                          0                (6,239)
Property and equipment                            (61,250)              (68,250)
Due premiums                                     (741,968)             (864,195)
Future policy benefits                         (3,587,365)           (4,369,310)
Net operating loss carryforward                  (408,023)             (716,175)
Other liabilities                                (646,605)           (1,185,691)
Federal tax DAC                                (1,506,765)           (1,663,475)
                                            ----------------      ---------------
Deferred tax liability (asset)          $         272,444     $      (1,148,545)
                                            ================      ===============




4.  ANALYSIS OF INVESTMENTS, INVESTMENT INCOME AND INVESTMENT GAIN

A. NET INVESTMENT INCOME - The following table reflects net investment income by
type of investment:

                                                                             December 31,
                                                       ----------------------------------------------------------
                                                               2001               2000               1999
                                                          ---------------    ----------------   ----------------
Fixed maturities held to maturity and fixed
  Maturities held for sale                              $     10,831,162   $     11,775,706   $     11,886,968
Equity securities                                                131,263            116,327             91,429
Mortgage loans                                                 2,715,834          1,777,374          1,078,028
Real estate                                                      198,314            311,027            389,181
Policy loans                                                     970,142            997,381            991,812
Other long-term investments                                            0            655,418             63,528
Short-term investments                                           114,538            156,815            147,726
Cash                                                             562,905            847,400            811,103
                                                          ---------------    ----------------   ----------------
Total consolidated investment income                          15,524,158         16,637,448         15,459,775
Investment expenses                                             (581,256)          (767,851)          (961,275)
Consolidated net investment income                      $     14,942,902   $     15,869,597   $     14,498,500
                                                          ===============    ================   ================


At December 31,  2001,  the Company had a total of $200,000 in  investment  real
estate which did not produce income during 2001.


The  following  table  summarizes  the  Company's  fixed  maturity  holdings and
investments held for sale by major classifications:

                                                                                   Carrying Value
                                                                      -----------------------------------------
                                                                               2001                 2000
                                                                          ---------------      ---------------
 Investments held for sale:
     Fixed maturities
         U.S. Government, government agencies and authorities           $      6,904,757     $     35,444,312
         State, municipalities and political subdivisions                     11,788,567              206,006
         Collateralized mortgage obligations                                     128,471            5,962,594
         Public utilities                                                     22,219,127                    0
         All other corporate bonds                                            33,964,473            1,515,368
                                                                          ---------------      ---------------
                                                                        $     75,005,395     $     43,128,280
                                                                          ===============      ===============

     Equity securities
         Banks, trust and insurance companies                           $      1,100,000     $      3,139,020
         Industrial and miscellaneous                                          2,752,716            1,987,251
                                                                          ---------------      ---------------
                                                                        $      3,852,716     $      5,126,271
                                                                          ===============      ===============

 Fixed maturities held to maturity:
     U.S. Government, government agencies and authorities               $     36,182,839     $     31,350,799
     State, municipalities and political subdivisions                            202,256           15,318,605
     Collateralized mortgage obligations                                      54,003,623            3,178,210
     Public utilities                                                                  0           27,287,454
     All other corporate bonds                                                 8,239,722           44,787,895
                                                                          ---------------      ---------------
                                                                        $     98,628,440     $    121,922,963
                                                                          ===============      ===============


By insurance  statute,  the majority of the  Company's  investment  portfolio is
invested  in  investment  grade  securities  to  provide  ample  protection  for
policyholders.  The  Company  does not  invest  in  so-called  "junk  bonds"  or
derivative investments.

Below  investment  grade debt  securities  generally  provide  higher yields and
involve  greater  risks than  investment  grade debt  securities  because  their
issuers  typically  are more highly  leveraged  and more  vulnerable  to adverse
economic  conditions than  investment  grade issuers.  In addition,  the trading
market for these  securities is usually more limited than for  investment  grade
debt securities.  Debt securities classified as below-investment grade are those
that receive a Standard & Poor's rating of BB or below.



The  following  table  summarizes  by  category  securities  held that are below
investment grade at amortized cost:

       Below Investment
      Grade Investments                2001             2000           1999
 -----------------------------     --------------    ------------   ------------
Public Utilities                 $     2,091,138   $           0  $     251,878
CMO                                       43,189         239,165              0
Corporate                                271,420          23,000        276,649
                                   --------------    ------------   ------------
Total                            $     2,405,747   $     262,165  $     528,527
                                   ==============    ============   ============

B.   INVESTMENT SECURITIES

     The amortized cost and estimated market values of investments in securities
     including investments held for sale are as follows:

                                              Cost or            Gross             Gross           Estimated
                                             Amortized        Unrealized        Unrealized           Market
2001                                           Cost              Gains            Losses             Value
-------------------------------------      --------------    --------------    --------------    ---------------
Investments held for sale:
  U.S. Government and govt.
    Agencies and authorities             $    35,240,384   $       942,455   $             0   $     36,182,839
  States, municipalities and
    Political subdivisions                       192,059            10,197                 0            202,256
  Collateralized mortgage
    Obligations                               53,777,577           447,019          (220,973)        54,003,623
  All other corporate bonds                    8,374,074               321          (134,673)         8,239,722
                                           --------------    --------------    --------------    ---------------
                                              97,584,094         1,399,992          (355,646)        98,628,440
  Equity securities                            2,903,268           953,448            (4,000)         3,852,716
                                           --------------    --------------    --------------    ---------------
  Total                                  $   100,487,362   $     2,353,440   $      (359,646)  $    102,481,156
                                           ==============    ==============    ==============    ===============

Fixed maturities held to maturity:
  U.S. Government and govt.
    Agencies and authorities             $     6,904,757   $       280,101   $          (893)  $      7,183,965
  States, municipalities and
    Political subdivisions                    11,788,567           360,714          (119,497)        12,029,784
  Collateralized mortgage
    Obligations                                  128,471             4,820                 0            133,291
  Public utilities                            22,219,127           859,864           (70,947)        23,008,044
  All other corporate bonds                   33,964,473         1,410,244            (4,391)        35,370,326
                                           --------------    --------------    --------------    ---------------
  Total                                  $    75,005,395   $     2,915,743   $      (195,728)  $     77,725,410
                                           ==============    ==============    ==============    ===============



                                              Cost or            Gross             Gross           Estimated
                                             Amortized        Unrealized        Unrealized           Market
2000                                           Cost              Gains            Losses             Value
-------------------------------------      --------------    --------------    --------------    ---------------
Investments held for sale:
  U.S. Government and govt.
    Agencies and authorities             $    35,281,562   $       245,119   $       (82,369)  $     35,444,312
  States, municipalities and
    Political subdivisions                       190,593            15,413                 0            206,006
  Collateralized mortgage
    Obligations                                5,919,553            58,179           (15,138)         5,962,594
  Public utilities                                     0                 0                 0                  0
  All other corporate bonds                    1,522,478                 0            (7,110)         1,515,368
                                           --------------    --------------    --------------    ---------------
                                              42,914,186           318,711          (104,617)        43,128,280
  Equity securities                            5,410,207           637,191          (921,127)         5,126,271
                                           --------------    --------------    --------------    ---------------
  Total                                  $    48,324,393   $       955,902   $    (1,025,744)  $     48,254,551
                                           ==============    ==============    ==============    ===============

Fixed maturities held to maturity:
  U.S. Government and govt.
    Agencies and authorities             $    31,350,799   $       148,229   $      (282,088)  $     31,216,940
  States, municipalities and
    Political subdivisions                    15,318,605           299,028           (45,335)        15,572,298
  Collateralized mortgage
    Obligations                                3,178,210            35,628            (3,323)         3,210,515
  Public utilities                            27,287,454           460,241          (220,316)        27,527,379
  All other corporate bonds                   44,787,895           505,860          (197,324)        45,096,431
                                           --------------    --------------    --------------    ---------------
  Total                                  $   121,922,963   $     1,448,986   $      (748,386)  $    122,623,563
                                           ==============    ==============    ==============    ===============

     The  amortized  cost  and  estimated  market  value of debt  securities  at
     December 31,  2001,  by  contractual  maturity,  is shown  below.  Expected
     maturities will differ from contractual  maturities  because  borrowers may
     have the  right  to call or  prepay  obligations  with or  without  call or
     prepayment penalties.

       Fixed Maturities Held for Sale                                    Estimated
                                                     Amortized            Market
             December 31, 2001                         Cost                Value
---------------------------------------------      --------------      --------------
Due in one year or less                          $     2,050,564     $     2,070,454
Due after one year through five years                 30,977,228          31,727,237
Due after five years through ten years                10,621,666          10,659,999
Due after ten years                                      157,059             167,127
Collateralized mortgage obligations                   53,777,577          54,003,623
                                                   --------------      --------------
Total                                            $    97,584,094     $    98,628,440
                                                   ==============      ==============



                                                                         Estimated
     Fixed Maturities Held to Maturity               Amortized            Market
             December 31, 2001                         Cost                Value
---------------------------------------------      --------------      --------------
Due in one year or less                          $    15,196,020     $    15,398,291
Due after one year through five years                 52,768,493          55,169,490
Due after five years through ten years                 3,315,143           3,509,525
Due after ten years                                    3,597,268           3,514,813
Collateralized mortgage obligations                      128,471             133,291
                                                   --------------      --------------
Total                                            $    75,005,395     $    77,725,410
                                                   ==============      ==============

     An analysis of sales,  maturities and principal repayments of the Company's
     fixed maturities  portfolio for the years ended December 31, 2001, 2000 and
     1999, is as follows:



                                            Cost or            Gross             Gross             Proceeds
                                           Amortized          Realized          Realized             From
Year ended December 31, 2001                  Cost             Gains             Losses              Sale
-------------------------------------    ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   calls and tenders:
     Held for sale                     $     20,479,560   $       10,440   $             0    $     20,490,000
     Held to maturity                        51,025,358           34,690          (107,234)         50,952,814
Sales:
      Held for sale                           6,518,181          197,044                 0           6,715,225
      Held to maturity                                0                0                 0                   0
                                         ---------------    -------------    ---------------    ---------------
  Total                                $     78,023,099   $      242,174   $      (107,234)   $     78,158,039
                                         ===============    =============    ===============    ===============



                                            Cost or            Gross             Gross             Proceeds
                                           Amortized          Realized          Realized             From
Year ended December 31, 2000                  Cost             Gains             Losses              Sale
-------------------------------------    ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   calls and tenders:
     Held for sale                     $      5,611,476   $           71   $        (3,847)   $      5,607,700
     Held to maturity                        27,047,819           59,463            (4,133)         27,103,149
Sales:
      Held for sale                                   0                0                 0                   0
      Held to maturity                                0                0                 0                   0
                                         ---------------    -------------    ---------------    ---------------
  Total                                $     32,659,295   $       59,534   $        (7,980)   $     32,710,849
                                         ===============    =============    ===============    ===============



                                            Cost or            Gross             Gross             Proceeds
                                           Amortized          Realized          Realized             From
Year ended December 31, 1999                  Cost             Gains             Losses              Sale
-------------------------------------    ---------------    -------------    ---------------    ---------------
Scheduled principal repayments,
   calls and tenders:
     Held for sale                     $      1,430,000   $            0   $             0    $      1,430,000
     Held to maturity                        31,037,532           16,480           (21,722)         31,032,290
Sales:
      Held for sale                                   0                0                 0                   0
      Held to maturity                                0                0                 0                   0
                                         ---------------    -------------    ---------------    ---------------
  Total                                $     32,467,532   $       16,480   $        (21,722)  $     32,462,290
                                         ===============    =============    ===============    ===============


C.   INVESTMENTS  ON DEPOSIT - At  December  31,  2001,  investments  carried at
     approximately  $12,657,000  were on deposit  with various  state  insurance
     departments.


5.   DISCLOSURES ABOUT FAIR VALUES OF FINANCIAL INSTRUMENTS

The financial  statements  include various  estimated fair value  information at
December 31, 2001 and 2000,  as required by  Statement  of Financial  Accounting
Standards  107,  Disclosure  about Fair Value of  Financial  Instruments  ("SFAS
107"). Such information,  which pertains to the Company's financial instruments,
is based on the requirements set forth in that Statement and does not purport to
represent the aggregate net fair value of the Company.

The following  methods and  assumptions  were used to estimate the fair value of
each class of financial  instrument  required to be valued by SFAS 107 for which
it is practicable to estimate that value:

(a)  Cash and Cash equivalents

The carrying amount in the financial statements  approximates fair value because
of the relatively  short time period between the  origination of the instruments
and their expected realization.

(b)  Fixed maturities and investments held for sale

Quoted market  prices,  if available,  are used to determine the fair value.  If
quoted  market  prices are not  available,  management  estimates the fair value
based  on the  quoted  market  price  of a  financial  instrument  with  similar
characteristics.

(c)  Mortgage loans on real estate

The fair values of  mortgage  loans are  estimated  using  discounted  cash flow
analysis and interest  rates being offered for similar  loans to borrowers  with
similar credit ratings.

(d)  Investment real estate and real estate acquired in satisfaction of debt

An estimate of fair value is based on management's review of the individual real
estate holdings.  Management utilizes sales of surrounding  properties,  current
market  conditions  and  geographic  considerations.  Management  conservatively
estimates the fair value of the portfolio is equal to the carrying value.

(e)  Policy loans

It is not  practicable to estimate the fair value of policy loans,  as they have
no stated  maturity and their rates are set at a fixed spread to related  policy
liability  rates.  Policy loans are carried at the  aggregate  unpaid  principal
balances in the consolidated  balance sheets, and earn interest at rates ranging
from 4% to 8%.  Individual  policy  liabilities  in all  cases  equal or  exceed
outstanding policy loan balances.

(f)  Short-term investments

For short-term instruments, the carrying amount is a reasonable estimate of fair
value.  Short-term  instruments  represent  collateral notes and certificates of
deposit with various banks that are protected under FDIC.

(g)  Notes payable

For  borrowings  subject to  floating  rates of  interest,  carrying  value is a
reasonable estimate of fair value. For fixed interest rate borrowings fair value
was determined  based on the borrowing rates currently  available to the Company
for loans with similar terms and maturities.

The estimated fair values of the Company's financial  instruments required to be
valued by SFAS 107 are as follows as of December 31:

                                                  2001                               2000
                                   ----------------------------------------------------------------------
                                                         Estimated                          Estimated
                                        Carrying            Fair           Carrying           Fair
Assets                                   Amount            Value            Amount            Value
                                      --------------   ---------------  ---------------   --------------
Fixed maturities                    $    75,005,395  $     77,725,410 $    121,922,963  $   122,623,563
Fixed maturities held for sale           98,628,440        98,628,440       43,128,280       43,128,280
Equity securities                         3,852,716         3,852,716        5,126,271        5,126,271
Mortgage loans on real estate            23,386,895        23,360,333       32,896,671       32,841,254
Investment in real estate                 8,876,298         8,876,298        3,933,357        3,933,357
Policy loans                             13,608,456        13,608,456       14,090,900       14,090,900
Short-term investments                      550,001           550,001        1,654,567        1,654,567

Liabilities
Notes payable                            11,536,698        13,376,349       12,839,193       12,102,720


6.  STATUTORY EQUITY AND INCOME FROM OPERATIONS


The Company's  insurance  subsidiaries are domiciled in Ohio,  Illinois and West
Virginia and prepare their  statutory-based  financial  statements in accordance
with accounting  practices  prescribed or permitted by the respective  insurance
department.  These principles differ  significantly  from accounting  principles
generally  accepted  in the United  States of  America.  "Prescribed"  statutory
accounting practices include state laws, regulations, and general administrative
rules,  as well as a variety of  publications  of the  National  Association  of
Insurance  Commissioners  ("NAIC").  "Permitted"  statutory accounting practices
encompass all accounting  practices that are not prescribed;  such practices may
differ  from state to state,  from  company to company  within a state,  and may
change  in the  future.  The  NAIC  currently  is in the  process  of  codifying
statutory  accounting  practices,  the result of which is expected to constitute
the only source of "prescribed"  statutory accounting  practices.  The new rules
promulgated by the codifying of statutory  accounting practices become effective
January  1, 2001.  Accordingly,  these  uniform  rules  will  change  prescribed
statutory  accounting  practices  and will  result in changes to the  accounting
practices that insurance  enterprises use to prepare their  statutory  financial
statements.  Implementation  of the codification  rules will not have a material
financial  impact on the  financial  condition of the Company's  life  insurance
subsidiaries.  UG's total  statutory  shareholders'  equity was  $16,105,265 and
$14,288,015  at December 31, 2001 and 2000,  respectively.  The  Company's  life
insurance subsidiaries reported combined statutory operating income before taxes
(exclusive of intercompany  dividends) of $2,913,000,  $2,901,000 and $3,843,000
for 2001, 2000 and 1999, respectively.


7.  REINSURANCE

As is  customary  in the  insurance  industry,  the  insurance  affiliates  cede
insurance  to,  and assume  insurance  from,  other  insurance  companies  under
reinsurance  agreements.  Reinsurance  agreements  are  intended to limit a life
insurer's  maximum  loss on a large or unusually  hazardous  risk or to obtain a
greater  diversification of risk. The ceding insurance company remains primarily
liable with respect to ceded  insurance  should any  reinsurer be unable to meet
the obligations assumed by it. However, it is the practice of insurers to reduce
their  exposure to loss to the extent that they have been  reinsured  with other
insurance  companies.  The  Company  sets a limit  on the  amount  of  insurance
retained  on the life of any one person.  The Company  will not retain more than
$125,000,  including accidental death benefits, on any one life. At December 31,
2001,  the  Company  had gross  insurance  in force of $2.630  billion  of which
approximately $654 million was ceded to reinsurers.

The Company's  reinsured business is ceded to numerous  reinsurers.  The Company
believes the assuming  companies are able to honor all contractual  commitments,
based on the Company's periodic reviews of their financial statements, insurance
industry reports and reports filed with state insurance departments.

Currently,  the Company is utilizing reinsurance  agreements with Business Mens'
Assurance Company,  ("BMA") and Life Reassurance  Corporation of America, ("LIFE
RE").  Recently,  Swiss Re Life and Health America Incorporated merged into LIFE
RE and  the  merged  entity  was  renamed  Swiss  Re  Life  and  Health  America
Incorporated  ("SWISS RE").  BMA and SWISS RE currenty hold an "A"  (Excellent),
and "A++" (Superior)  rating,  respectively,  from A.M. Best, an industry rating
company.  The reinsurance  agreements were effective December 1, 1993, and cover
all new business of the Company.  The  agreements  are a yearly  renewable  term
("YRT")  treaty where the Company cedes  amounts  above its  retention  limit of
$100,000 with a minimum cession of $25,000.

UG entered a  coinsurance  agreement  with Park  Avenue Life  Insurance  Company
("PALIC") as of September 30, 1996.  Under the terms of the agreement,  UG ceded
to PALIC substantially all of its paid-up life insurance policies.  Paid-up life
insurance generally refers to non-premium paying life insurance policies.  PALIC
and  its  ultimate  parent  The  Guardian  Life  Insurance  Company  of  America
("Guardian"),  currently hold an "A"  (Excellent),  and "A+" (Superior)  rating,
respectively,  from A.M. Best, an industry  rating  company.  The agreement with
PALIC  accounts for  approximately  66% of the  reinsurance  receivables,  as of
December 31, 2001.


On  September  30,  1998,  UG  entered  into a  coinsurance  agreement  with The
Independent Order of Vikings, an Illinois fraternal  organization ("IOV"). Under
the terms of the agreement,  UG agreed to assume on a coinsurance  basis, 25% of
the reserves and liabilities arising from all inforce insurance contracts issued
by the IOV to its members.  At December 31, 2001, the IOV insurance  inforce was
approximately   $1,696,000,   with  reserves   being  held  on  that  amount  of
approximately $403,500.

On June 1, 2000, UG assumed an already  existing  coinsurance  agreement,  dated
January  1,  1992,  between  Lancaster  Life  Reinsurance  Company,  an  Arizona
corporation   ("LLRC")  and  Investors   Heritage  Life  Insurance   Company,  a
corporation  organized under the laws of the  Commonwealth of Kentucky  ("IHL").
Under the terms of the  agreement,  LLRC  agreed to assume  from IHL a 90% quota
share of new issues of credit life and  accident and health  policies  that have
been written on or after January 1, 1992 through  various  branches of the First
Southern National Bank. The maximum amount of credit life insurance that can be
assumed on any one individual's  life is $15,000.  UG assumed all the rights and
obligations  formerly  held by  LLRC as the  reinsurer  in the  agreement.  LLRC
liquidated its charter immediately following the transfer. At December 31, 2001,
IHL has insurance inforce of approximately $4,148,000.

The Company does not have any short-duration  reinsurance contracts.  The effect
of the Company's long-duration reinsurance contracts on premiums earned in 2001,
2000 and 1999 was as follows:

                                   Shown in thousands
                     -----------------------------------------------
                         2001             2000             1999
                       Premiums         Premiums         Premiums
                        Earned           Earned           Earned
                     --------------   -------------    -------------
Direct            $        20,333  $        22,970 $         25,539
Assumed                       111               76               20
Ceded                      (3,172)          (3,556)          (3,978)
                     --------------   -------------    -------------
Net premiums      $        17,272  $        19,490 $         21,581
                     ==============   =============    =============

8.  COMMITMENTS AND CONTINGENCIES

The insurance  industry has  experienced  a number of civil jury verdicts  which
have been  returned  against life and health  insurers in the  jurisdictions  in
which the Company does business involving the insurers' sales practices, alleged
agent misconduct,  failure to properly supervise agents, and other matters. Some
of the lawsuits have resulted in the award of substantial  judgments against the
insurer,  including material amounts of punitive damages. In some states, juries
have substantial discretion in awarding punitive damages in these circumstances.

Under the insurance guaranty fund laws in most states, insurance companies doing
business in a  participating  state can be assessed up to prescribed  limits for
policyholder  losses  incurred  by  insolvent  or  failed  insurance  companies.
Although the Company cannot predict the amount of any future  assessments,  most
insurance guaranty fund laws currently provide that an assessment may be excused
or deferred if it would  threaten an  insurer's  financial  strength.  Mandatory
assessments may be partially recovered through a reduction in future premium tax
in some states. The Company does not believe such assessments will be materially
different from amounts already provided for in the financial statements.

The  State of  Florida  began an  investigation  of  industrial  life  insurance
policies in the fall of 1999 regarding policies with race-based  premiums.  This
investigation  has  quickly  spread to other  states and to other types of small
face amount  policies  and was expanded to consider the fairness of premiums for
all small policies  including  policies which did not have race-based  premiums.
The NAIC  historically  has defined a "small  face amount  policy" as one with a
face  amount of  $15,000  or less.  Under  current  reviews,  some  states  have
increased  this  amount  to  policies  of  $25,000  or less.  These  states  are
attempting  to force  insurers  to  refund  "excess  premiums"  to  insureds  or
beneficiaries of insureds based on the recent American General  settlement.  The
Company's  insurance  subsidiaries have no race-based  premium products,  but do
have  policies with face amounts under the  above-scrutinized  limitations.  The
outcome of this issue could be dramatic on the insurance  industry as a whole as
well as the Company  itself.  The Company will continue to monitor  developments
regarding  this matter to determine  to what extent,  if any, the Company may be
exposed.

On November 20, 1998, FSF and affiliates acquired 929,904 shares of common stock
of UTG from UTG and certain UTG  shareholders.  As consideration for the shares,
FSF paid UTG  $10,999,995  and  certain  shareholders  of UTG  $999,990 in cash.
Included in the stock acquisition  agreement is an earnings covenant whereby UTG
warrants UTG and its subsidiaries and affiliates will have future earnings of at
least  $30,000,000  for a  five-year  period  beginning  January 1,  1998.  Such
earnings  are  computed  based  on  statutory  results  excluding  inter-company
activities such as  inter-company  dividends plus realized and unrealized  gains
and losses on real estate, mortgage loans and unaffiliated common stocks. At the
end of the covenant period,  an adjustment is to be made equal to the difference
between the then market value and statutory  carrying value of real estate still
owned that existed at the beginning of the covenant period.  Should UTG not meet
the covenant  requirements,  any  shortfall  will first be reduced by the actual
average  tax  rate for UTG for the  period,  then  will be  further  reduced  by
one-half of the percentage,  if any,  representing UTG's ownership percentage of
the  insurance  company  subsidiaries.  This  result  will  then be  reduced  by
$250,000.  The  remaining  amount  will be paid by UTG in the form of UTG common
stock valued at $15.00 per share with a maximum number of shares to be issued of
500,000. However, there shall be no limit to the number of shares transferred to
the extent  that there are legal  fees,  settlements,  damage  payments or other
losses as a result of certain legal action taken. The price and number of shares
shall be adjusted for any  applicable  stock  splits,  stock  dividends or other
recapitalizations.  At December  31,  2001,  the  Company had total  earnings of
$14,505,204  applicable  to  this  covenant.  With  one  year  remaining  on the
covenant,  it appears highly  unlikely UTG will meet the earnings  requirements,
resulting  in UTG  being  required  to  issue  additional  shares  to FSF or its
assigns.  Combining current results with  management's  expectation for 2002, it
appears at this time UTG will be  required to issue  500,000  shares at December
31, 2002 to satisfy this covenant.

David A. Morlan,  individually and on behalf of all others similarly situated v.
Universal  Guaranty  Life Ins.,  United Trust  Assurance  Co.,  United  Security
Assurance  Co.,  United Trust Group,  Inc. and First  Commonwealth  Corporation,
(U.S. Court of Appeals for the Seventh Circuit, Appeal No. 01-3795)

On April 26, 1999,  the above  lawsuit was filed by David Morlan and Louis Black
in the Southern District of Illinois against  Universal  Guaranty Life Insurance
Company ("UG") and United Trust Assurance  Company  ("UTAC")  (merged into UG in
1992).  After the lawsuit was filed,  the plaintiffs,  who were former insurance
salesmen, amended their complaint, dropped Louis Black as a plaintiff, and added
United  Security  Assurance  Company  ("USAC"),  UTG and FCC as defendants.  The
plaintiffs are alleging that they were employees of UG, UTAC or USAC rather than
independent contractors. The plaintiffs are seeking class action status and have
asked to recover various employee  benefits,  costs and attorneys' fees, as well
as monetary damages based on the defendants' alleged failure to withhold certain
taxes.

On September 18, 2001, the case was dismissed  without  prejudice because Morlan
lacked  standing to pursue the claims against  defendants.  The plaintiffs  have
appealed the dismissal of the case to the United States Court of Appeals for the
Seventh Circuit.

In addition to the appeal,  a second action was filed  entitled;  Julie Barrette
Ahrens,  David Dzuiban,  William Milam, David Schneiderman,  individually and on
behalf of all others similarly situated vs Universal Guaranty Life, United Trust
Assurance Company,  United Security  Assurance  Company.  United States District
Court for the Southern District of Illinois. Case No: 01-4314-JPG.

The Company continues to believe that it has meritorious  grounds to defend both
the original and related lawsuit, and it intends to defend the cases vigorously.
The Company  believes  that the defense and ultimate  resolution  of the lawsuit
should  not have a  material  adverse  effect  upon  the  business,  results  of
operations or financial condition of the Company.  Nevertheless,  if the lawsuit
were to be successful,  it is likely that such resolution  would have a material
adverse  effect on the Company's  business,  results of operations and financial
condition.  At December 31, 2001, the Company  maintains a liability of $300,000
to cover estimated legal costs associated with the defense of this matter.

9.  RELATED PARTY TRANSACTIONS

At a December  17, 2001 joint  meeting of the board of directors of UTG, FCC and
their  insurance  subsidiaries,   the  boards  of  directors  of  the  insurance
subsidiaries discussed and decided to further explore and pursue a possible sale
of the insurance  charters of each of APPL and ABE. In the alternative to a sale
of the APPL charter,  the boards also discussed and decided to further explore a
possible  merger of APPL into UG.  Regardless  of whether a merger is ultimately
pursued or the charters of each  subsidiary are sold, UG would likely assume and
reinsure  the  existing  insurance  policies of those  subsidiaries  in any such
transaction.

During the fourth  quarter of 2001,  UG  purchased  real  estate from an outside
third party through the  formation of an LLC in which UG is a two-thirds  owner.
The other one-third partner is Millard V. Oakley,  who is a Director of both UTG
and FCC.  Hampshire Plaza,  LLC consists of a twenty story,  254,000 square foot
office  tower,  an attached  72,000  square foot retail  plaza,  and an attached
parking garage with approximately 350 parking spaces located in Manchester,  New
Hampshire  for  $6,333,336.  At December 31,  2001,  the property was carried at
$6,491,734.

On October 26, 2001,  APPL effected a reverse stock split,  as a result of which
(i) it became a  wholly-owned  subsidiary  of UG, and an  indirect  wholly-owned
subsidiary  of FCC and UTG,  and  (ii) its  minority  shareholders  received  an
aggregate  of  $1,055,294.50  in respect of their  shares.  Prior to the reverse
stock split, UG owned 88% of the outstanding shares of APPL.

On December 31, 1999, UTG and Jesse T. Correll entered a transaction whereby Mr.
Correll,  in combination with other  individuals,  made an equity  investment in
UTG.  Under the terms of the Stock  Acquisition  Agreement,  the  Correll  group
contributed  their 100%  ownership  of North Plaza of  Somerset,  Inc. to UTG in
exchange for 681,818  authorized  but unissued  shares of UTG common stock.  The
Board of Directors of UTG approved the  transaction  at their regular  quarterly
board meeting held on December 7, 1999.  North Plaza of Somerset,  Inc. owns for
investment  purposes,  a shopping  center in Somerset,  Kentucky,  approximately
12,000 acres of timberland  in Kentucky,  and a 50%  partnership  interest in an
additional 11,000 acres of Kentucky timberland. North Plaza has no debt. The net
assets were valued at $7,500,000,  which equates to $11.00 per share for the new
shares of UTG that were issued in the transaction.

Mr.  Correll is Chairman of the Board of  Directors of UTG and  currently  UTG's
largest  shareholder  through his ownership control of FSF, FSBI and affiliates.
Mr. Correll is the majority  shareholder of FSF and FSBI, a bank holding company
that operates out of 14 locations in central Kentucky. At December 31, 2001, Mr.
Correll owns or controls directly and indirectly approximately 60% of UTG.

Following  necessary  regulatory  approval,  on December  29,  1999,  UG was the
survivor  to a merger  with its 100%  owned  subsidiary,  USA.  The  merger  was
completed  as a part of  management's  efforts to reduce  costs and simplify the
corporate structure.

On July 26, 1999, the shareholders of UTG and UII approved a merger  transaction
of the two  companies.  Prior to the merger,  UTG owned 53% of UTGL99 (refers to
the former  United Trust Group,  Inc.,  which was formed in February of 1992 and
liquidated in July of 1999) an insurance  holding company,  and UII owned 47% of
UTGL99.  Additionally,  UTG held an equity  investment  in UII.  At the time the
decision  to merge  was  made,  neither  UTG nor UII had any  other  significant
holdings or business dealings.  The Board of Directors of each company concluded
a merger of the two companies would be in the best interests of the shareholders
by  creating  a larger  more  viable  life  insurance  holding  group with lower
administrative  costs,  a  simplified  corporate  structure,  and  more  readily
marketable securities.  Following the merger approval, UTG issued 817,517 shares
of authorized but unissued common stock to former UII  shareholders,  net of any
dissenter  shareholders in the merger.  Following the merger,  UTGL99, which was
then 100% owned by UTG, was  liquidated and UTG changed its name to United Trust
Group, Inc.

Under the  current  structure,  FCC pays a  majority  of the  general  operating
expenses of the affiliated group. FCC then receives management, service fees and
reimbursements from the various affiliates.

United  Income,  Inc.  ("UII")  had a service  agreement  with  United  Security
Assurance  Company  ("USA").  The agreement was originally  established upon the
formation  of USA which  was a 100%  owned  subsidiary  of UII.  Changes  in the
affiliate  structure have resulted in USA no longer being a direct subsidiary of
UII, though still a member of the same affiliated  group.  The original  service
agreement  remained in place  without  modification.  USA paid UII monthly  fees
equal to 22% of the amount of collected first year premiums,  20% in second year
and 6% of the renewal  premiums in years three and after.  UII had a subcontract
agreement with UTG to perform services and provide personnel and facilities. The
services  included  in  the  agreement  were  claim  processing,   underwriting,
processing and servicing of policies, accounting services, agency services, data
processing and all other  expenses  necessary to carry on the business of a life
insurance company.  UII's subcontract agreement with UTG states that UII pay UTG
monthly  fees equal to 60% of collected  service fees from USA as stated  above.
The service fees received from UII were recorded in UTG's  financial  statements
as other income.  With the merger of UII into UTG in July 1999, the sub-contract
agreement ended and UTG assumed the direct contract with USA. This agreement was
terminated upon the merger of USA into UG in December 1999.

USA paid $677,807  under their  agreement  with UII for 1999.  UII paid $223,753
under their agreement with UTG for 1999.  Additionally,  UII paid FCC $30,000 in
1999 for  reimbursement  of costs  attributed to UII. These  reimbursements  are
reflected as a credit to general expenses.

UTG  paid  FCC  $550,000,   $750,000  and  $600,000  in  2001,  2000  and  1999,
respectively for reimbursement of costs attributed to UTG.

On January 1, 1993,  FCC  entered an  agreement  with UG  pursuant  to which FCC
provides management services necessary for UG to carry on its business.  UG paid
$6,156,903,   $6,061,515  and  $6,251,340  to  FCC  in  2001,   2000  and  1999,
respectively.

ABE pays fees to FCC pursuant to a cost sharing and  management  fee  agreement.
FCC provides management services for ABE to carry on its business. The agreement
requires ABE to pay a percentage of the actual expenses incurred by FCC based on
certain activity indicators of ABE business to the business of all the insurance
company  subsidiaries  plus a management fee based on a percentage of the actual
expenses  allocated to ABE. ABE paid fees of $332,673,  $371,211 and $392,005 in
2001, 2000 and 1999, respectively under this agreement.

APPL has a  management  fee  agreement  with FCC  whereby FCC  provides  certain
administrative  duties,  primarily data processing and investment  advice.  APPL
paid  fees  of  $444,000,   $444,000  and  $300,000  in  2001,  2000  and  1999,
respectively under this agreement.

Respective domiciliary insurance departments have approved the agreements of the
insurance companies and it is Management's opinion that where applicable,  costs
have been  allocated  fairly  and such  allocations  are based  upon  accounting
principles generally accepted in the United States of America.

Since the Company's affiliation with FSF, UG has acquired mortgage loans through
participation  agreements  with FSNB.  FSNB  services the loans covered by these
participation  agreements.  UG pays a .25%  servicing  fee on these  loans and a
one-time fee at loan  origination  of .50% of the original  loan amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.
UG paid $79,730,  $34,721 and $11,578 in servicing fees and $22,626, $91,392 and
$0 in origination fees to FSNB during 2001, 2000 and 1999, respectively.


The  Company  reimbursed  expenses  incurred by Mr.  Correll  and Mr.  Attkisson
relating  to travel and other  costs  incurred  on behalf of or  relating to the
Company.  The Company  paid  $145,407,  $96,599  and  $39,336 in 2001,  2000 and
1999,respectively  to First  Southern  Bancorp,  Inc. in  reimbursement  of such
costs.  In addition,  beginning in 2001,  the Company began  reimbursing  FSBI a
portion of salaries for Mr. Correll and Mr.  Attkisson.  The  reimbursement  was
approved  by the UTG board of  directors  and  totaled  $128,411  in 2001  which
included salaries and other benefits.


10.  NOTES PAYABLE

At December 31, 2001 and 2000, the Company has  $11,536,698  and  $12,839,193 in
long term debt outstanding, respectively. The debt is comprised of the following
components:

                                                   2001            2000
                                               -------------   -------------
Affiliated subordinated 20 yr. Notes         $    2,128,599 $     3,431,094
Other affiliated notes payable                    9,408,099       9,408,099
                                               -------------   -------------
                                             $   11,536,698 $    12,839,193
                                               =============   =============
A.  Affiliated subordinated debt

The affiliated  subordinated  debt is owed to UTG and was incurred June 16, 1992
as a part  of the  acquisition  of the  now  dissolved  Commonwealth  Industries
Corporation, (CIC). On October 22, 2001, FCC made a $1,302,495 principal payment
on this debt which bears an  interest  rate of 8 1/2% per annum,  with  interest
payable  semiannually.  A lump sum principal payment on the balance of the notes
remains due June 16, 2012.

B.  Other affiliated notes payable

All affiliated notes payable of FCC are due to its parent, UTG.

In November 1997, FCC borrowed  $1,000,000 to facilitate the prepayment of a May
1998 principal  payment due on existing  senior debt. The note bears interest at
the rate of 1% over the prime rate of interest as  published  in the Wall Street
Journal, with interest payments due quarterly and principal due upon maturity of
the note on  November 8, 2006.  During  fiscal  year 2000,  the Company  retired
$500,000 of principal on this note. No principal payments were made on this note
during fiscal year 2001.

In November  1998,  FCC borrowed  $2,608,099  to  facilitate  the  prepayment of
principal on its subordinated  10-year debt. The note bears interest at the rate
of 7.50%,  with interest  payments due quarterly and principal due upon maturity
of the note on December  31,  2005.  In addition,  FCC  borrowed  $6,300,000  to
facilitate  the prepayment of principal on the existing  senior debt.  This note
bears interest at the rate of 9/16% over the prime rate of interest as published
in the Wall Street Journal,  with interest  payments due quarterly and principal
due upon maturity of the note on December 31, 2006.  During fiscal year 2001, no
principal payments were made on these two notes.

Scheduled principal reductions on the Company's debt for the next five years is as follows:

                                               Year                        Amount
                                      -----------------------       ---------------------
                                      2002                       $                     0
                                      2003                                             0
                                      2004                                             0
                                      2005                                     2,608,099
                                      2006                                     6,800,000


11.  OTHER CASH FLOW DISCLOSURE

On a cash  basis,  the Company  paid  $944,392,  $1,264,784  and  $1,353,653  in
interest  expense for the years 2001, 2000 and 1999,  respectively.  The Company
paid $1,370,  $(200,000)  and $516,200 in federal income tax for the years 2001,
2000 and 1999, respectively.


12.  CONCENTRATION OF CREDIT RISK

The Company maintains cash balances in financial  institutions that at times may
exceed federally  insured limits.  The Company  maintains its primary  operating
cash accounts  with First  Southern  National  Bank, an affiliate of the largest
shareholder  of UTG. In  aggregate  at December  31,  2001 these  accounts  hold
approximately  $4,550,000  for which there are no pledges or guarantees  outside
FDIC  insurance  limits.  The  Company  has not  experienced  any losses in such
accounts and believes it is not exposed to any  significant  credit risk on cash
and cash equivalents.

13.  NEW ACCOUNTING STANDARDS

The Financial  Accounting Standards Board ("FASB") has issued Statement No. 141,
Business Combinations,  Statement No. 142, Goodwill and Other Intangible Assets,
Statement No. 143,  Accounting for Asset Retirement  Obligations,  and Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

Statement 141 improves the transparency of accounting and reporting for business
combinations by requiring that all business  combinations be accounted for under
a single method - the purchase method. Use of the pooling-of-interests method is
no longer permitted. Statement 141 requires that the purchase method be used for
business  combinations  initiated after June 30, 2001. The adoption of Statement
141 did not affect the Company's  financial  position or results of  operations,
since the Company has had no such  business  combinations  during the  reporting
period.

Statement  142 requires  that  goodwill no longer be amortized to earnings,  but
instead be reviewed for impairment.  This change provides investors with greater
transparency  regarding  the  economic  value  of  goodwill  and its  impact  on
earnings.  The amortization of goodwill ceased for the Company upon the adoption
of the  statement at January 1, 2002.  The adoption of Statement 142 will result
in an expense  reduction  of  approximately  $403,664  per year,  subject to any
impairment write-down that might arise from a management review.

Statement  143 requires  entities to record the fair value of a liability for an
asset  retirement  obligation  in the period in which it is  incurred.  When the
liability is initially recorded, the entity capitalizes a cost by increasing the
carrying  amount of the related  long-lived  asset.  Over time, the liability is
accreted  to its  present  value  each  period,  and  the  capitalized  cost  is
depreciated  over the useful life of the related asset.  Upon  settlement of the
liability,  an entity either settles the  obligation for its recorded  amount or
incurs a gain or loss upon  settlement.  The  standard is  effective  for fiscal
years  beginning  after June 15, 2002.  The  adoption of Statement  143 will not
affect the  Company's  financial  position or results of  operations,  since the
Company has no such asset retirement obligations.

Statement 144 requires that one accounting  model be used for long-lived  assets
to be disposed of by sale,  whether  previously held and used or newly acquired,
and  broadens  the  presentation  of  discontinued  operations  to include  more
disposal  transactions.   In  addition,  this  statement  requires  entities  to
recognize an impairment loss if the carrying amount of a long-lived asset is not
recoverable from its undiscounted  cash flows, and to measure an impairment loss
as the difference  between the carrying amount and fair value of the asset. This
statement  removes any previous  requirements to allocate goodwill to long-lived
assets   to  be  tested   for   impairment,   and  it   further   prescribes   a
probability-weighted  cash flow  estimation  approach to deal with situations in
which  alternative  courses  of  action  to  recover  the  carrying  amount of a
long-lived asset are under  consideration.  The provisions of this Statement are
effective  for  financial  statements  issued for fiscal years  beginning  after
December 15, 2001.  The adoption of Statement  144 will not affect the Company's
financial  position  or results of  operations,  since the  Company  has no such
disposals or impairments to long-lived assets.

14. PROPOSED MERGER

On June 5,  2001,  UTG and FCC  jointly  announced  their  respective  Boards of
Directors  approved  a  definitive  agreement  whereby  UTG  would  acquire  the
remaining common shares (approximately 18%) of FCC, which UTG does not currently
own.  Under the terms of the  agreement,  FCC will be merged  with and into UTG,
with UTG continuing as the surviving entity in the merger.

Pursuant  to the merger  agreement,  UTG will pay $250 in cash for each share of
FCC common stock not held by United Trust Group.  The  transaction is subject to
various  conditions  precedent set forth in the merger agreement,  including the
approval of the transaction by the  shareholders of FCC. FCC plans to submit the
transaction to the vote of the FCC  shareholders to be held at a special meeting
to be called for that purpose.  Shareholders  of FCC are urged to read the Proxy
Statement when it becomes available.

15.  REVERSE STOCK SPLIT OF APPALACHIAN LIFE INSURANCE COMPANY

On June 5, 2001, the board of directors of APPL, a West Virginia corporation and
then 88% owned indirect subsidiary of FCC, approved,  subject to shareholder and
any required regulatory approvals,  a reverse split of the common stock of APPL.
Under the terms of the reverse  stock split,  any  shareholder  of APPL who owns
less than 118,700  shares prior to the effective time of the reverse split would
receive a cash payment based upon $6.50 per share  (pre-reverse  stock split) of
APPL,  and APPL would  become a wholly  owned  subsidiary  of UG, a wholly owned
subsidiary of FCC.

The reverse  stock split was  effected on October 26, 2001.  At that time,  APPL
became a wholly owned subsidiary of UG, a wholly owned subsidiary of FCC.


16.       COMPREHENSIVE INCOME

                                                                                          Tax
                                                                  Before-Tax           (Expense)          Net of Tax
              2001                                                  Amount            or Benefit            Amount
              ----------------------------------------------   -----------------   ------------------   ----------------

              Unrealized holding gains during
                  Period                                    $        1,419,407  $          (496,792) $          922,615
              Less: reclassification adjustment
                  For gains realized in net income                    (340,341)                                (221,222)
                                                                                            119,119
                                                               -----------------   ------------------   ----------------
              Net unrealized gains                                   1,079,066             (377,673)            701,393
                                                               -----------------   ------------------   ----------------
              Other comprehensive income                    $        1,079,066 $           (377,673) $          701,393
                                                               =================   ==================   ================


                                                                                          Tax
                                                                  Before-Tax           (Expense)          Net of Tax
              2000                                                  Amount            or Benefit            Amount
              ----------------------------------------------   -----------------   ------------------   ----------------

              Unrealized holding gains during
                  Period                                    $        1,866,783  $                 0 $         1,866,783
              Less: reclassification adjustment
                  for gains realized in net income                     (39,486)                   0             (39,486)
                                                               -----------------   ------------------   ----------------
              Net unrealized gains                                   1,827,297                    0           1,827,297
                                                               -----------------   ------------------   ----------------
              Other comprehensive income                    $        1,827,297  $                 0  $        1,827,297
                                                               =================   ==================   ================



                                                                                          Tax
                                                                  Before-Tax           (Expense)          Net of Tax
              1999                                                  Amount            or Benefit            Amount
              ----------------------------------------------   -----------------   ------------------   ----------------

              Unrealized holding losses during
                  Period                                    $       (1,283,991) $                 0  $       (1,283,991)

              Less: reclassification adjustment
                  for losses realized in net income                          0                    0                   0
                                                               -----------------   ------------------   ----------------
              Net unrealized losses                                 (1,283,991)                   0          (1,283,991)
                                                               -----------------   ------------------   ----------------
              Other comprehensive deficit                   $       (1,283,991) $                 0  $       (1,283,991)
                                                               =================   ==================   ================


In 1999 and 2000 the  Company's  deferred  tax asset was  carried at zero net of
allowances.  In 2001,  the  Company  established  a deferred  tax  liability  of
$385,432 for the unrealized gain based on the applicable United States statutory
rate of 35%.


16.  SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
                                                                                  2001
                                        --------------------- ---------------------- --------------------- ----------------------
                                                1st                    2nd                   3rd                    4th
                                            -----------------      -----------------      ----------------       ----------------
Premium and policy fees, net             $       4,554,451              4,768,808              4,137,361              3,811,796
Net investment income                            3,966,217              3,886,349              3,557,158              3,533,178
Total revenues                                   8,318,267              8,914,604              7,920,861              8,448,724
Policy benefits including dividends              4,979,508              5,265,348              4,651,241              4,871,537
Commissions and
  amortization of DAC and COI                      958,938                726,159                580,251                807,910
Operating expenses                               1,342,077              1,587,138              1,499,503              2,054,439
Operating  income (loss)                           759,150              1,078,061                641,733                811,577
Net income (loss)                                  283,406                934,585                280,695                686,921
Basic earnings (loss) per share                       5.21                  17.18                   5.16                  12.63
                                                                                  2000
                                        --------------------- ---------------------- --------------------- ----------------------
                                                1st                    2nd                   3rd                    4th
                                            -----------------      -----------------      ----------------       ----------------
Premium and policy fees, net             $       5,337,148              5,201,585              4,470,307              4,480,646
Net investment income                            4,224,386              3,939,681              3,867,571              3,837,959
Total revenues                                   9,818,600              9,186,532              8,349,765              7,877,151
Policy benefits including dividends              6,201,943              5,580,580              5,206,574              5,647,551
Commissions and
  amortization of DAC and COI                    1,239,870                876,936                649,180              1,253,634
Operating expenses                               2,685,721              1,614,768              2,026,587              2,977,579
Operating  income (loss)                          (638,936)               797,831                167,537             (2,299,126)
Net income (loss)                                 (371,009)               561,121                (16,814)            (2,020,138)
Basic earnings (loss) per share                      (6.80)                 10.29                  (0.31)                (37.08)

                                                                                  1999
                                        --------------------- ---------------------- --------------------- ----------------------
                                                1st                    2nd                   3rd                    4th
                                            -----------------      -----------------      ----------------       ----------------
Premiums and policy fees, net            $       6,007,511              5,705,270              5,337,120              4,531,242
Net investment income                            3,633,479              3,592,440              3,615,934              3,656,647
Total revenues                                   9,686,009              9,029,285              8,936,918              8,106,959
Policy benefits including dividends              6,193,473              5,970,833              5,107,765              4,980,313
Commissions and
  amortization of DAC and COI                    1,376,551              1,064,328              1,063,435              1,328,357
Operating expenses                               2,039,613              1,837,828              1,784,267              1,837,480
Operating income (loss)                           (280,350)              (168,450)               652,209               (373,369)
Net income (loss)                                 (148,594)              (355,116)               670,460               (544,707)
Basic earnings (loss) per share                      (2.72)                 (6.51)                 12.29                  (9.99)

ITEM 9.  DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

              None

                                    PART III


ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

THE BOARD OF DIRECTORS

In accordance with the laws of Virginia and the Certificate of Incorporation and
Bylaws of FCC, as amended,  FCC is managed by its executive  officers  under the
direction  of the Board of  Directors.  The  Board  elects  executive  officers,
evaluates their  performance,  works with  management in  establishing  business
objectives  and  considers  other  fundamental  corporate  matters,  such as the
issuance of stock or other  securities,  the  purchase or sale of a business and
other  significant  corporate  business  transactions.  In the fiscal year ended
December 31, 2001, the Board met five times. All directors attended at least 75%
of all meetings of the board, except Millard Oakley.

The Board of  Directors  has an Audit  Committee  consisting  of Messrs.  Albin,
Collins,  O'Keefe,  and  Teater.  The Audit  Committee  performs  such duties as
outlined in the Company's Audit Committee  Charter.  The Audit Committee reviews
and acts or reports to the Board with respect to various auditing and accounting
matters, the scope of the audit procedures and the results thereof, the internal
accounting and control systems of FCC, the nature of services  performed for FCC
and the fees to be paid to the  independent  auditors,  the performance of FCC's
independent and internal auditors and the accounting practices of FCC. The Audit
Committee  also  recommends  to the full Board of  Directors  the auditors to be
appointed by the Board. The Audit Committee met twice in 2001.

The compensation of FCC's executive  officers is determined by the full Board of
Directors (see report on Executive Compensation).

Under  FCC's  Certificate  of  Incorporation,  the  Board  of  Directors  may be
comprised of between five and  twenty-one  directors.  At December 31, 2001, The
Board consisted of eleven directors. Shareholders elect Directors to serve for a
period of one year at FCC's Annual Shareholders' meeting.

Directors  and  officers of UTG file  periodic  reports  regarding  ownership of
Company  securities  with the  Securities  and Exchange  Commission  pursuant to
Section 16(a) of the Securities  Exchange Act of 1934 as amended,  and the rules
promulgated thereunder.

The following  information  with respect to business  experience of the Board of
Directors has been  furnished by the  respective  directors or obtained from the
records of FCC.

AUDIT COMMITTEE REPORT TO SHAREHOLDERS

In  connection  with the  December  31,  2001  financial  statements,  the audit
committee:  (1) reviewed and discussed  the audited  financial  statements  with
management; (2) discussed with the auditors the matters required by Statement on
Auditing  Standards No. 61; and (3) received and discussed with the auditors the
matters  required by Independence  Standards  Board  Statement No.1.  Based upon
these reviews and discussions,  the audit committee  recommended to the Board of
Directors that the audited financial statements be included in the Annual Report
on Form 10-K filed with the SEC.

                  John S. Albin  -  Committee Chairman
                  John W. Collins
                  Robert V. O'Keefe
                  Robert W. Teater



DIRECTORS

Name, Age                  Position with the Company, Business Experience and Other Directorships

John S. Albin  73          Director of FCC since 1992 and UTG since 1984; farmer in Douglas and Edgar counties,  Illinois,  since 1951; Chairman
                           of the Board of Longview  State Bank since 1978;  President  of the  Longview  Capitol  Corporation,  a bank
                           holding company,  since 1978;  Chairman of First National Bank of Ogden,  Illinois,  since 1987; Chairman of
                           the State Bank of Chrisman since 1988;  Director and Secretary of Illini Community  Development  Corporation
                           since 1990; Commissioner of Illinois Student Assistance Commission since 1996.

Randall L. Attkisson 56    Director of FCC and UTG since 1999;  President and Chief Operating  Officer of FCC and UTG since 2001; Chief
                           Financial Officer,  Treasurer,  Director of First Southern Bancorp, Inc. since 1986; Treasurer,  Director of
                           First  Southern  Funding,  LLC (formerly  First  Southern  Funding  Inc.) since 1992;  Director of The River
                           Foundation,  Inc. since 1990; President of Randall L. Attkisson & Associates from 1982 to 1986; Commissioner
                           of Kentucky  Department  of Banking & Securities  from 1980 to 1982;  Self-employed  Banking  Consultant  in
                           Miami, FL from 1978 to 1980.

John W. Collins  75        Director of FCC and certain affiliate companies since 1982; Director of UTG since 2000;  Consultant and past
                           President of Collins-Winston Group, an executive search firm, since 1976.

Jesse T. Correll  45       Chairman  and CEO of FCC and UTG since  2000;  Director  of FCC and UTG  since  1999;  Chairman,  President,
                           Director of First  Southern  Bancorp,  Inc.  since 1983;  President,  Director or Manager of First  Southern
                           Funding since 1992;  President,  Director of The River Foundation since 1990;  President,  Director and sole
                           member  manager of Dyscim LLC  (formerly  Dyscim  Holdings  Company,  Inc.) since  1990;  Director of Thomas
                           Nelson,  Inc. since 2001;  Director of Computer  Services,  Inc. since 2001;  Director of Global Focus since
                           2001; Young Life Dominican Republic Committee Member since 2000. Jesse Correll is the son of Ward Correll.

Ward F. Correll   73       Director of FCC since 1999 and UTG since 2000; President,  Director of Tradeway,  Inc. of Somerset, KY since
                           1973; President,  Director of Cumberland Lake Shell, Inc. of Somerset, KY since 1971; President, Director of
                           Tradewind Shopping Center,  Inc. of Somerset,  KY since 1966; Director of First Southern Bancorp since 1988;
                           Director or Manager of First Southern Funding since 1991;  Director of The River Foundation of Stanford,  KY
                           since 1990; and Director First Southern  Insurance  Agency of Stanford,  KY since 1987.  Ward Correll is the
                           father of Jesse Correll.

Thomas F. Darden  47       Director of FCC and UTG since 2001;  Managing  Partner of Cherokee  Investment  Partners  LLC, a real estate
                           investment  firm, and President and CEO of Cherokee  Sanford  Group,  Inc. an affiliated  predecessor  since
                           1983; Director of BTI Telecom,  Inc. since 1998; Director of Waste Industries,  Inc. since 1997; Director of
                           Winston Hotels,  Inc. since 1994; Trustee of Shaw University since 1993; Member of the Board of Governors of
                           Research,  Triangle  Institute since 1998; Former Chairman of the Triangle Transit  Authority,  serving from
                           1993 to 1998 and Chairman from 1996 to 1997;  Prior to 1996,  twice appointed to the North Carolina Board of
                           Transportation.
..
Luther C. Miller  71       Director of FCC since 1984 and UTG since 2000;  Executive  Vice  President  and  Secretary  of FCC from 1984
                           until 1992; officer and director of certain affiliate companies until 1992.

Millard V. Oakley  71      Director of FCC and UTG since 1999;  Presently  serves on Board of  Directors  and  Executive  Committee  of
                           Thomas Nelson,  a publicly held publishing  company based in Nashville,  TN; Director of First National Bank
                           of the Cumberlands, Livingston-Cooksville,  TN; Lawyer with limited law practice since 1980; State Insurance
                           Commissioner  for  State  of  Tennessee  from  1975  to  1979;  General  Counsel,  United  States  House  of
                           Representatives,  Washington,  D.C., Congressional Committee on Small Business from 1971-1973; four elective
                           terms as County Attorney for Overton County,  TN; delegate to National  Democratic  Convention in 1964; four
                           elective terms in the Tennessee  General Assembly from 1956 to 1964;  Lawyer in Livingston,  TN from 1953 to
                           1971; Elected to the Tennessee Constitutional Convention in 1952.

Robert V. O'Keefe 80       Director of FCC since 1993 and UTG since 2000;  Director and Treasurer of UTG from 1988 to 1992; Director of
                           Cilcorp,  Inc.  from 1982 to 1994;  Director  of  Cilcorp  Ventures,  Inc.  from 1985 to 1994;  Director  of
                           Environmental Science and Engineering Co. from 1990 to 1994.

William W. Perry  45       Director of FCC and UTG since 2001;  Owner of SES  Investments,  Ltd.,  an oil and gas  investments  company
                           since 1991;  President of EGL  Resources,  Inc.,  an oil and gas  operations  company based in Texas and New
                           Mexico since 1992;  President of Midland Yucca Realty,  a Texas real estate  investment  company since 1993;
                           Chairman of Perry & Perry,  Inc., a Texas oil and gas consulting  company since 1977; Member of the Board of
                           Managers of Tall City Equity Fund since 2001;  President of Champion Title Group, a Florida based consulting
                           business  since  1999;  involved  with,  Young  Life,  youth  organization  as a  leader,  Chairman  of  the
                           international Committee and National Board since 1977.

Robert W. Teater  75       Director of FCC since 1992 and UTG since 1987;  member of Columbus School Board 1991-2001;  Former Director,
                           Ohio  Department of Natural  Resources;  Founder,  Teater-Gebhardt  and  Associates,  Inc., a  comprehensive
                           consulting  firm in natural  resources  development;  Combat  veteran and retired Major  General,  Ohio Army
                           National Guard.

EXECUTIVE OFFICERS OF THE COMPANY

More detailed information on the following officers of the Company appears under "Directors":

Jesse T. Correll           Chairman of the Board and Chief Executive Officer
Randall L. Attkisson       President and Chief Operating Officer

Other officers of FCC are set forth below:

Name, Age                  Position with FCC and, Business Experience

James P. Rousey 43         Executive Vice President and Chief  Administrative  Officer since September 2001;  Regional CEO and Director
                           of First Southern  National Bank from 1988 to 2001.  Board Member with the Illinois  Fellowship of Christian
                           Athletes since 2001.

Theodore C. Miller 39      Corporate  Secretary since December 2000, Senior Vice President and Chief Financial Officer since July 1997;
                           Vice  President  and  Treasurer  since October 1992;  Vice  President  and  Controller of certain  Affiliate
                           Companies from 1984 to 1992.

Brad M. Wilson  50         Senior Vice President and Chief Information Officer since 1992; Chief  Administrative  Officer from December
                           2000 to September 2001.

ITEM 11.  EXECUTIVE COMPENSATION

Executive Compensation Table

The following table sets forth certain information  regarding  compensation paid
to or earned by FCC's Chief Executive Officer and each of the Executive Officers
of FCC whose salary plus bonus  exceeded  $100,000  during the last fiscal year:
Compensation for services provided by the named executive officers to FCC and
its affiliates is paid by FCC as set forth in their employment agreements.  (See
also Employment Contracts for Messrs. Melville and Ryherd).

                                                      SUMMARY COMPENSATION TABLE


Name and                                   Annual Compensation         Other Annual (1)        All Other (1)
Principal Position             Year      Salary ($)      Bonus ($)     Compensation ($)       Compensation ($)                                                                                                      ($)

Jesse T. Correll (2)           2001          56,250              -              -                  -
Chairman of the Board          2000               -              -              -                  -
Chief Executive Officer        1999               -              -              -                  -

Brad M. Wilson                 2001         160,000          3,000              -                3,150
Senior Vice President          2000         157,500          3,227              -                3,150
Chief Information Officer      1999         147,700          3,000            3,665              3,150

Theodore C. Miller             2001         100,000          5,000              -                3,000
Corporate Secretary            2000          91,749              -              -                2,752
Senior Vice President          1999          86,783              -            3,179              2,603
Chief Financial Officer


(1)  Other  annual   compensation   consists  of  interest  earned  on  deferred
     compensation   amounts  and  UTG's  matching   contribution  to  the  First
     Commonwealth Corporation Employee Savings Trust 401(k) Plan.

(2)  On March 27, 2000, Mr. Jesse T. Correll assumed the position as Chairman of
     the Board and Chief  Executive  Officer of UTG and each of its  affiliates.
     Mr. Correll did not receive a salary,  bonus or other  compensation for his
     duties with UTG and each of its affiliates in the year 2000. In March 2001,
     the  Board of  Directors  approved  an annual  salary  for Mr.  Correll  of
     $75,000, with payments to begin on April 1, 2001.


Option/SAR  Grants  /Aggregated  Option/SAR  Exercises  in Last  Fiscal Year and
FY-End Option/SAR Values

At December  31, 2001 there were no shares of the common stock of FCC subject to
unexercised options held by the named executive officers.  There were no options
or stock  appreciation  rights granted to the named  executive  officers for the
past three fiscal years.

Compensation of Directors

FCC's standard  arrangement for the compensation of directors  provide that each
director shall receive an annual retainer of $2,400,  plus $300 for each meeting
attended and  reimbursement  for  reasonable  travel  expenses.  FCC's  director
compensation  policy also  provides  that  directors who are employees of FCC or
directors or officers of FSF and its affiliates do not receive any  compensation
for their services as directors except for  reimbursement  for reasonable travel
expenses for attending each meeting.

Employment Contracts

FCC  entered  into an  employment  agreement  dated July 31,  1997 with Larry E.
Ryherd.  Formerly,  Mr.  Ryherd  had served as  Chairman  of the Board and Chief
Executive Officer of UTG and its affiliates,  until his resignation on March 27,
2000.  Pursuant to the agreement,  Mr. Ryherd agreed to serve as Chairman of the
Board and Chief  Executive  Officer  of UTG and in  addition,  to serve in other
positions of the  affiliated  companies if appointed or elected.  The  agreement
provides  for an  annual  salary  of  $400,000  as  determined  by the  Board of
Directors.  The term of the agreement is for a period of five years.  Mr. Ryherd
has  deferred  portions of his income under a plan  entitling  him to a deferred
compensation  payment which was paid to him on January 2, 2000, in the amount of
$240,000,  which included  interest at the rate of approximately  8.5% annually.
Additionally,  Mr.  Ryherd was granted an option to purchase up to 13,800 of the
Common Stock of UTG at $17.50 per share. The option was immediately  exercisable
and  transferable.  At December 31, 2000,  all previously  granted  options have
expired.  In accordance with the employment  agreement,  Mr. Ryherd continues to
receive his annual  Salary of $400,000  until the agreement  expiration  date of
July 31, 2002. The entire $933,333  payable to Mr. Ryherd,  from the date of his
resignation  until the end of his  employment  agreement  was accrued,  and thus
expensed, by FCC in the first quarter of 2000.

FCC  entered  into an  employment  agreement  dated July 31,  1997 with James E.
Melville  pursuant to which Mr.  Melville is  employed  as  President  and Chief
Operating Officer and in addition, to serve in other positions of the affiliated
companies if appointed or elected at an annual  salary of $238,200.  The term of
the agreement  expires July 31, 2002. Mr. Melville has deferred  portions of his
income under a plan entitling him to a deferred  compensation  payment which was
paid to him on January 2, 2000 of $400,000 which  includes  interest at the rate
of approximately 8.5% annually. Additionally, Mr. Melville was granted an option
to purchase up to 30,000  shares of the Common Stock of UTG at $17.50 per share.
The option is immediately  exercisable and  transferable.  At December 31, 2000,
all previously  granted options have expired.  Mr. Melville continues to receive
his annual Salary of $238,200  until the agreement  expiration  date of July 31,
2002.  An  accrual  of  $562,000  was  established  through a charge to  general
expenses at year-end 2000 for the remaining  payments  required  pursuant to the
terms of Mr. Melville's employment contract and other settlement costs.

There are no other employment  agreements in effect with any executive  officers
or employees of the Company.


REPORT ON EXECUTIVE COMPENSATION

Introduction

The compensation of FCC's executive  officers is determined by the full Board of
Directors.  The  Board of  Directors  strongly  believes  that  FCC's  executive
officers  directly impact the short-term and long-term  performance of FCC. With
this belief and the corresponding  objective of making decisions that are in the
best interest of FCC's  shareholders,  the Board of Directors places significant
emphasis on the design and administration of FCC's executive compensation plans.

Executive Compensation Plan Elements

Base  Salary.  The  Board of  Directors  establishes  base  salaries  at a level
intended to be within the competitive market range of comparable  companies.  In
addition  to the  competitive  market  range,  many  factors are  considered  in
determining  base  salaries,  including  the  responsibilities  assumed  by  the
executive, the scope of the executive's position, experience, length of service,
individual performance and internal equity considerations. In addition to a base
salary,  increased  compensation of current and future executive officers of the
Company  will  be  determined  using a  "performance  based"  philosophy.  FCC's
financial  results are analyzed and future  increases  to  compensation  will be
proportionately based on the profitability of the Company.

Stock  Options.  Stock  options  are granted at the  discretion  of the Board of
Directors.  There were no options granted to the named executive officers during
the last three fiscal years.

Deferred Compensation. There are currently no deferred compensation arrangements
with any executive officers or employees of the Company.

Chief Executive Officer

On March 27, 2000, Mr. Jesse T. Correll  assumed the position of Chairman of the
Board and Chief Executive  Officer of UTG and each of its affiliates.  Under Mr.
Correll's  leadership,  he declined to receive a salary, bonus or other forms of
compensation  for his  duties  with UTG and each of its  affiliates  in the year
2000.  In March 2001,  the Board of Directors  approved an annual salary for Mr.
Correll of $75,000,  with payments to begin on April 1, 2001. As a reflection of
Mr.  Correll's  leadership,  the  compensation  of current and future  executive
officers of the Company will be  determined  by the Board of  Directors  using a
"performance  based"  philosophy.  The Board of Directors  will  consider  UTG's
financial results and future salary decisions will be  proportionately  based on
the profitability of the Company.

Conclusion

The Board of Directors  believes  this  Executive  Compensation  Plan provides a
competitive and motivational  compensation package to the executive officer team
necessary to produce the results FCC strives to achieve.  The Board of Directors
also believes the Executive  Compensation  Plan  addresses both the interests of
the shareholders and the executive team.

                   BOARD OF DIRECTORS

John S. Albin                          Luther C. Miller
Randall L. Attkisson                   Millard V. Oakley
John W. Collins                        Robert V. O'Keefe
Jesse T. Correll                       William W. Perry
Ward F. Correll                        Robert W. Teater
Thomas F. Darden



PERFORMANCE GRAPH

The following graph compares the cumulative  total  shareholder  return on FCC's
Common  Stock  during the five  fiscal  years ended  December  31, 2001 with the
cumulative total return on the NASDAQ Composite Index Performance and the NASDAQ
Insurance  Stock Index (1). The graph assumes that $100 was invested on December
31, 1996 in each of the Company's  common stock, the NASDAQ Composite Index, and
the NASDAQ Insurance Stock Index, and that any dividends were reinvested.`

Performance Graph

`(1)  FCC selected  the NASDAQ  Composite  Index  Performance  as an  appropriate
     comparison  because  FCC's  Common  Stock is not listed on any exchange but
     FCC's Common Stock is traded in the over-the-counter  market.  Furthermore,
     FCC  selected  the NASDAQ  Insurance  Stock Index as the second  comparison
     because there is no similar single "peer company" in the NASDAQ system with
     which  to   compare   stock   performance   and  the   closest   additional
     line-of-business  index which could be found was the NASDAQ Insurance Stock
     Index.  Trading activity in FCC's Common Stock is limited,  which may be in
     part a result of FCC's low profile from not being  listed on any  exchange,
     and its  reported  operating  losses.  The Return  Chart is not intended to
     forecast or be indicative of possible future performance of FCC's stock.

The foregoing graph shall not be deemed to be incorporated by reference into any
filing of FCC under the Securities Act of 1933 or the Securities Exchange Act of
1934,  except to the extent that FCC specifically  incorporates such information
by reference.


Compensation Committee Interlocks and Insider Participation

The following  persons  served as directors of the Company  during 2001 and were
officers or employees of the Company or its  subsidiaries  during 2001: Jesse T.
Correll  and  Randall  L.  Attkisson.   Accordingly,   these   individuals  have
participated in decisions  related to compensation of executive  officers of the
Company and its subsidiaries.

During 2001,  Jesse T. Correll and Randall L. Attkisson.  executive  officers of
the Company, were also members of the Board of Directors of UTG.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL HOLDERS OF SECURITIES

The following  tabulation sets forth the name and address of the entity known to
be the  beneficial  owners of more than 5% of FCC's Common Stock and shows:  (i)
the total number of shares of Common Stock  beneficially owned by such person as
of March 1, 2002 and the nature of such  ownership;  and (ii) the percent of the
issued and outstanding shares of Common Stock so owned as of the same date.


           Title                                                      Number of Shares                 Percent
            of                  Name and Address                        and Nature of                    of
           Class               of Beneficial Owner                  Beneficial Ownership              Class (1)

         Common             United Trust Group, Inc.                       44,465                       81.8%
         Stock $1.00        5250 South Sixth Street
         par value          Springfield, Illinois  62703

(1)  The  percentage of  outstanding  shares is based on 54,385 shares of common
     stock outstanding.


SECURITY OWNERSHIP OF MANAGEMENT

The  following  tabulation  shows  with  respect  to each of the  directors  and
nominees of FCC, with respect to FCC's chief executive officer and each of FCC's
executive  officers whose salary plus bonus  exceeded  $100,000 for fiscal 2001,
and with respect to all executive  officers and directors of FCC as a group: (i)
the total  number of shares of all classes of stock of FCC or any of its parents
or subsidiaries,  beneficially  owned as of March 1, 2002 and the nature of such
ownership;  and (ii) ) the percent of the issued and outstanding shares of stock
so owned, and granted stock options available as of the same date.


   Title               Directors, Named Executive              Number of Shares                   Percent
    of                 Officers, & All Directors &               and Nature of                      of
  Class               Executive Officers as a Group                Ownership                     Class (1)

UTG's                 John S. Albin                                  10,503  (4)                     *
Common                Randall L. Attkisson                                0  (2)                     *
Stock, no             John W. Collins                                     0                          *
par value             Jesse T. Correll                            2,002,823  (3)                   56.9%
                      Ward F. Correll                                98,523  (5)                   2.8%
                      Thomas F. Darden                                    0                          *
                      Luther C. Miller                                    0                          *
                      Theodore C. Miller                                  0                          *
                      Millard V. Oakley                              16,471                          *
                      Robert V. O'Keefe                                 300  (6)                     *
                      William W. Perry                                    0                          *
                      James P. Rousey                                     0                          *
                      Robert W. Teater                                7,380  (7)                     *
                      Brad M. Wilson                                      0                          *
                      All directors and executive officers
                      as a group (fourteen in number)             2,136,000                        60.7%


FCC's                 John S. Albin                                       0                          *
Common                Randall L. Attkisson                                0     (2)                  *
Stock, $1.00          John W. Collins                                     0                          *
par value             Jesse T. Correll                                1,217     (3)                2.2%
                      Ward F. Correll                                     0                          *
                      Thomas F. Darden                                    0                          *
                      Luther C. Miller                                    0                          *
                      Theodore C. Miller                                 15                          *
                      Millard V. Oakley                                   0                          *
                      Robert V. O'Keefe                                   0                          *
                      William W. Perry                                    0                          *
                      James P. Rousey                                     0                          *
                      Robert W. Teater                                    0                          *
                      Brad M. Wilson                                      2                          *
                      All directors and executive officers            1,234                        2.3%
                      as a group (fourteen in number)


(1)  The percentage of outstanding  shares for UTG is based on 3,519,065  shares
     of Common Stock  outstanding.  The percentage of outstanding shares for FCC
     is based on 54,385 shares of Common Stock outstanding.

(2)  Randall L.  Attkisson is an associate and business  partner of Mr. Jesse T.
     Correll and holds minority ownership  positions in certain of the companies
     listed as owning UTG and FCC Common Stock including First Southern  Funding
     LLC and First Southern Bancorp, Inc. Ownership of these shares is reflected
     in the ownership of Jesse T. Correll.

(3)  The share ownership of Mr. Correll  includes 112,704 shares of United Trust
     Group common stock owned by him  individually  and 150,545 shares of United
     Trust Group common stock held by Dyscim,  LLC. Mr.  Correll owns all of the
     outstanding  membership  interests of Dyscim,  LLC, and  therefore has sole
     voting  and  dispositive  power  over  the  shares  held by it.  The  share
     ownership of Mr. Correll also includes  72,750 shares of United Trust Group
     common stock held by WCorrell,  Limited Partnership,  a limited partnership
     in which Mr. Correll serves as managing  general  partner and, as such, has
     sole voting and dispositive  power over the shares held by it. In addition,
     by virtue of his ownership of voting  securities of First Southern Funding,
     LLC and First Southern Bancorp,  Inc., and in turn, their ownership of 100%
     of the outstanding  membership  interests of First Southern  Holdings,  LLC
     (the holder of 1,483,791  shares of United Trust Group common  stock),  Mr.
     Correll  may be deemed to  beneficially  own the total  number of shares of
     United Trust Group common stock owned by First Southern  Holdings,  and may
     be deemed to share with First  Southern  Holdings  the right to vote and to
     dispose  of  such  shares.  Mr.  Correll  owns  approximately  82%  of  the
     outstanding  membership  interests  of  First  Southern  Funding;  he  owns
     directly  approximately  38%,  companies he controls own approximately 23%,
     and he has the  power  to vote but  does  not own an  additional  3% of the
     outstanding voting stock of First Southern Bancorp.  First Southern Bancorp
     and First  Southern  Funding in turn own 99% and 1%,  respectively,  of the
     outstanding membership interests of First Southern Holdings. Mr. Correll is
     also a manager of First Southern  Capital Corp.,  LLC, and thereby may also
     be deemed to  beneficially  own the  183,033  shares of United  Trust Group
     common  stock held by First  Southern  Capital,  and may be deemed to share
     with it the right to vote and to dispose of such shares. Share ownership of
     Mr.  Correll in United  Trust Group  common  stock does not include  18,575
     shares  of  United  Trust  Group  common  stock  held  by  First   Southern
     Investments, LLC, of which Dyscim, LLC is a member.

     First Southern Bancorp owns 1,217 shares of FCC's common stock.

(4)  Includes 392 shares owned directly by Mr. Albin's spouse.

(5)  Cumberland Lake Shell,  Inc. owns 98,523 shares of UTG Common Stock, all of
     the outstanding voting shares of which are owned by Ward F. Correll and his
     wife.  As a result  Ward F.  Correll  may be deemed to share the voting and
     dispositive power over these shares. Ward F. Correll is the father of Jesse
     T.  Correll.  There are 72,750 shares of UTG Common Stock owned by WCorrell
     Limited  Partnership in which Jesse T. Correll  serves as managing  general
     partner and, as such, has sole voting and dispositive power over the shares
     of Common Stock held by it. The aforementioned  72,750 shares are deemed to
     be beneficially owned by and listed under Jesse T. Correll in this section.

(6)  Includes 300 shares owned directly by Mr. O'Keefe's spouse.

(7)  Includes 210 shares owned directly by Mr. Teater's spouse.

* Less than 1%.

Except as indicated above, the foregoing persons hold sole voting and investment power.




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

RELATED PARTY TRANSACTIONS

At a December  17, 2001 joint  meeting of the board of directors of UTG, FCC and
their  insurance  subsidiaries,   the  boards  of  directors  of  the  insurance
subsidiaries discussed and decided to further explore and pursue a possible sale
of the insurance  charters of each of APPL and ABE. In the alternative to a sale
of the APPL charter,  the boards also discussed and decided to further explore a
possible  merger of APPL into UG.  Regardless  of whether a merger is ultimately
pursued or the charters of each  subsidiary are sold, UG would likely assume and
reinsure  the  existing  insurance  policies of those  subsidiaries  in any such
transaction.

During the fourth  quarter of 2001,  UG  purchased  real  estate from an outside
third party through the  formation of an LLC in which UG is a two-thirds  owner.
The other one-third partner is Millard V. Oakley,  who is a Director of both UTG
and FCC.  Hampshire Plaza,  LLC consists of a twenty story,  254,000 square foot
office  tower,  an attached  72,000  square foot retail  plaza,  and an attached
parking garage with approximately 350 parking spaces located in Manchester,  New
Hampshire  for  $6,333,336.  At December 31,  2001,  the property was carried at
$6,491,734.

On October 26, 2001,  APPL effected a reverse stock split,  as a result of which
(i) it became a  wholly-owned  subsidiary  of UG, and an  indirect  wholly-owned
subsidiary  of FCC and UTG,  and  (ii) its  minority  shareholders  received  an
aggregate  of  $1,055,294.50  in respect of their  shares.  Prior to the reverse
stock split, UG owned 88% of the outstanding shares of APPL.

On December 31, 1999, UTG and Jesse T. Correll entered a transaction whereby Mr.
Correll,  in combination with other  individuals,  made an equity  investment in
UTG.  Under the terms of the Stock  Acquisition  Agreement,  the  Correll  group
contributed  their 100%  ownership  of North Plaza of  Somerset,  Inc. to UTG in
exchange for 681,818  authorized  but unissued  shares of UTG common stock.  The
Board of Directors of UTG approved the  transaction  at their regular  quarterly
board meeting held on December 7, 1999.  North Plaza of Somerset,  Inc. owns for
investment  purposes,  a shopping  center in Somerset,  Kentucky,  approximately
12,000 acres of timberland  in Kentucky,  and a 50%  partnership  interest in an
additional 11,000 acres of Kentucky timberland. North Plaza has no debt. The net
assets were valued at $7,500,000,  which equates to $11.00 per share for the new
shares of UTG that were issued in the transaction.

Mr.  Correll is Chairman of the Board of  Directors of UTG and  currently  UTG's
largest  shareholder  through his ownership control of FSF, FSBI and affiliates.
Mr. Correll is the majority  shareholder of FSF and FSBI, a bank holding company
that operates out of 14 locations in central Kentucky. At December 31, 2001, Mr.
Correll owns or controls directly and indirectly approximately 60% of UTG.

Following  necessary  regulatory  approval,  on December  29,  1999,  UG was the
survivor  to a merger  with its 100%  owned  subsidiary,  USA.  The  merger  was
completed  as a part of  management's  efforts to reduce  costs and simplify the
corporate structure.

On July 26, 1999, the shareholders of UTG and UII approved a merger  transaction
of the two  companies.  Prior to the merger,  UTG owned 53% of UTGL99 (refers to
the former  United Trust Group,  Inc.,  which was formed in February of 1992 and
liquidated in July of 1999) an insurance  holding company,  and UII owned 47% of
UTGL99.  Additionally,  UTG held an equity  investment  in UII.  At the time the
decision  to merge  was  made,  neither  UTG nor UII had any  other  significant
holdings or business  dealings.  The Board of  Directors  of each  company  thus
concluded a merger of the two  companies  would be in the best  interests of the
shareholders by creating a larger more viable life insurance  holding group with
lower administrative  costs, a simplified corporate structure,  and more readily
marketable securities.  Following the merger approval, UTG issued 817,517 shares
of its authorized but unissued common stock to former UII  shareholders,  net of
any  dissenter  shareholders  in the merger.  Immediately  following the merger,
UTGL99,  which was then 100% owned by UTG,  was  liquidated  and UTG changed its
name to United Trust Group, Inc. ("UTG").

Under the  current  structure,  FCC pays a  majority  of the  general  operating
expenses of the affiliated group. FCC then receives management, service fees and
reimbursements from the various affiliates.

United  Income,  Inc.  ("UII")  had a service  agreement  with  United  Security
Assurance  Company  ("USA").  The agreement was originally  established upon the
formation  of USA which  was a 100%  owned  subsidiary  of UII.  Changes  in the
affiliate  structure have resulted in USA no longer being a direct subsidiary of
UII, though still a member of the same affiliated  group.  The original  service
agreement  remained in place  without  modification.  USA paid UII monthly  fees
equal to 22% of the amount of collected first year premiums,  20% in second year
and 6% of the renewal  premiums in years three and after.  UII had a subcontract
agreement with UTG to perform services and provide personnel and facilities. The
services  included  in  the  agreement  were  claim  processing,   underwriting,
processing and servicing of policies, accounting services, agency services, data
processing and all other  expenses  necessary to carry on the business of a life
insurance company.  UII's subcontract agreement with UTG states that UII pay UTG
monthly  fees equal to 60% of collected  service fees from USA as stated  above.
The service fees received from UII were recorded in UTG's  financial  statements
as other income.  With the merger of UII into UTG in July 1999, the sub-contract
agreement ended and UTG assumed the direct contract with USA. This agreement was
terminated upon the merger of USA into UG in December 1999.

USA paid $677,807  under their  agreement  with UII for 1999.  UII paid $223,753
under their agreement with UTG for 1999.  Additionally,  UII paid FCC $30,000 in
1999 for  reimbursement  of costs  attributed to UII. These  reimbursements  are
reflected as a credit to general expenses.

UTG  paid  FCC  $550,000,   $750,000  and  $600,000  in  2001,  2000  and  1999,
respectively for reimbursement of costs attributed to UTG.

On January 1, 1993,  FCC  entered an  agreement  with UG  pursuant  to which FCC
provides management services necessary for UG to carry on its business.  UG paid
$6,156,903,   $6,061,515  and  $6,251,340  to  FCC  in  2001,   2000  and  1999,
respectively.

ABE pays fees to FCC pursuant to a cost sharing and  management  fee  agreement.
FCC provides management services for ABE to carry on its business. The agreement
requires ABE to pay a percentage of the actual expenses incurred by FCC based on
certain activity indicators of ABE business to the business of all the insurance
company  subsidiaries  plus a management fee based on a percentage of the actual
expenses  allocated to ABE. ABE paid fees of $332,673,  $371,211 and $392,005 in
2001, 2000 and 1999, respectively under this agreement.

APPL has a  management  fee  agreement  with FCC  whereby FCC  provides  certain
administrative  duties,  primarily data processing and investment  advice.  APPL
paid  fees  of  $444,000,   $444,000  and  $300,000  in  2001,  2000  and  1999,
respectively under this agreement.

Respective domiciliary insurance departments have approved the agreements of the
insurance companies and it is Management's opinion that where applicable,  costs
have been  allocated  fairly  and such  allocations  are based  upon  accounting
principles generally accepted in the United States of America.

Since the Company's affiliation with FSF, UG has acquired mortgage loans through
participation  agreements  with FSNB.  FSNB  services the loans covered by these
participation  agreements.  UG pays a .25%  servicing  fee on these  loans and a
one-time fee at loan  origination  of .50% of the original  loan amount to cover
costs incurred by FSNB relating to the processing and establishment of the loan.
UG paid $79,730,  $34,721 and $11,578 in servicing fees and $22,626, $91,392 and
$0 in origination fees to FSNB during 2001, 2000 and 1999, respectively.

The  Company  reimbursed  expenses  incurred by Mr.  Correll  and Mr.  Attkisson
relating  to travel and other  costs  incurred  on behalf of or  relating to the
Company.  The Company  paid  $145,407,  $96,599  and  $39,336 in 2001,  2000 and
1999,respectively  to First  Southern  Bancorp,  Inc. in  reimbursement  of such
costs.  In addition,  beginning in 2001,  the Company began  reimbursing  FSBI a
portion of salaries for Mr. Correll and Mr.  Attkisson.  The  reimbursement  was
approved  by the UTG board of  directors  and  totaled  $128,411  in 2001  which
included salaries and other benefits.


RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS

Kerber,  Eck and  Braeckel  LLP ("KEB")  served as FCC's  independent  certified
public  accounting  firm for the fiscal  year ended  December  31,  2001 and for
fiscal year ended December 31, 2000. In serving its primary  function as outside
auditor for FCC, KEB performed  the following  audit  services:  examination  of
annual consolidated financial statements; assistance and consultation on reports
filed  with  the  Securities  and  Exchange   Commission  and;   assistance  and
consultation  on  separate  financial  reports  filed  with the State  insurance
regulatory  authorities pursuant to certain statutory  requirements.  Audit Fees
billed for these audit  services in the year 2001  totaled  $165,000,  and audit
fees billed for quarterly reviews of the Company's financial  statements totaled
$16,979.  No other  services were performed by, and therefore no other fees were
billed by, KEB for services performed in the current year.

FCC does not expect that a  representative  of KEB will be present at the Annual
Meeting of  Shareholders  of FCC. No  accountants  have been selected for fiscal
year  2002  because  FCC  generally  chooses   accountants  shortly  before  the
commencement of the annual audit work.



                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  The following documents are filed as a part of the report:

     (1)  Financial Statements: See Item 8, Index to Financial Statements

     (2)  Financial Statement Schedules

          Schedule I - Summary of  Investments  - other than invested in related
          parties.

          Schedule II - Condensed financial information of registrant

          Schedule IV - Reinsurance

          Schedule V - Valuation and Qualifying Accounts

          NOTE: Schedules other than those listed above are omitted because they
          are not required or the  information  is  disclosed  in the  financial
          statements or footnotes.


(b)  Reports on Form 8-K filed during fourth quarter.

               None


(c)  Exhibits:

     Index to Exhibits (see pages 75 and 76).




                                INDEX TO EXHIBITS


Exhibit
Number


3(a) (1) Articles of Incorporation for the Company dated August 25, 1967.

3(b) (1) Amended  Articles of  Incorporation  for the Company  dated January 27,
         1988.

3(c) (1) Charter Agreement for the Company dated May 22, 1991.

3(d) (1) Amended Articles of Incorporation for the Company dated March 12, 1993.

3(e) (1) Code of By-Laws for the Company dated September 30, 1992.

10(a)(2) Coinsurance  Agreement  dated  September  30, 1996  between  Universal
         Guaranty Life  Insurance  Company and First  International  Life  Insurance
         Company, including assumption reinsurance agreement exhibit and amendments.

10(b)(1) Subcontract  Agreement  dated  September 1, 1990 between United Trust,
         Inc. and United Income, Inc.

10(c)(1) Service  Agreement  dated  November  8, 1989  between  United  Security
         Assurance Company and United Income, Inc.

10(d)(1) Management  and  Consultant  Agreement  dated as of  January  1,  1993
         between  First   Commonwealth   Corporation  and  Universal  Guaranty  Life
         Insurance Company

10(e)(1) Management  Agreement  dated  December 20, 1981  between  Commonwealth
         Industries Corporation, and Abraham Lincoln Insurance Company

10(f)(1) Reinsurance  Agreement dated January 1, 1991 between Universal Guaranty
         Life Insurance Company and Republic Vanguard Life Insurance Company


10(g)(1) Reinsurance  Agreement  dated  July 1, 1992  between  United  Security
         Assurance Company and Life Reassurance Corporation of America

10(h)(3) Employment  Agreement dated as of July 31, 1997 between Larry E. Ryherd
         and First Commonwealth Corporation

10(i)(3) Employment  Agreement  dated  as of July  31,  1997  between  James E.
         Melville and First Commonwealth Corporation

10(j)(1) Agreement  dated June 16,  1992  between  John K.  Cantrell  and First
         Commonwealth Corporation

10(k)(1) Stock Purchase  Agreement  dated February 20, 1992 between United Trust
         Group, Inc. and Sellers


                                INDEX TO EXHIBITS

Exhibit
Number

10(l)(1) Amendment No. One dated April 20, 1992 to the Stock Purchase  Agreement
         between the Sellers and United Trust Group, Inc.

10(m)(1) Security  Agreement  dated June 16, 1992  between  United Trust Group,
         Inc. and the Sellers

10(n)(1) Stock  Purchase  Agreement  dated June 16, 1992  between  United  Trust
         Group, Inc. and First Commonwealth Corporation

99(a)    Audit Committee Charter



      Footnotes:

     (1)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 1993.

     (2)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 1996.

     (3)  Incorporated  by reference  from the  Company's  Annual Report on Form
          10-K, File No. 0-5392, as of December 31, 1997.





                         FIRST COMMONWEALTH CORPORATION
                       SUMMARY OF INVESTMENTS - OTHER THAN
                         INVESTMENTS IN RELATED PARTIES
                             As of December 31, 2001

                                                                                                    Schedule I


                         Column A                           Column B           Column C           Column D
------------------------------------------------------   ----------------   ----------------   ----------------

                                                                                                  Amount at
                                                                                                 Which Shown
                                                                                                 in Balance
                                                              Cost               Value              Sheet
                                                         ----------------   ----------------   ----------------
Fixed maturities:
    Bonds:
      United States Government and
         government agencies and authorities           $       6,904,757  $       7,183,965  $       6,904,757
      State, municipalities, and political
         subdivisions                                         11,788,567         12,029,784         11,788,567
      Collateralized mortgage obligations                        128,471            133,291            128,471
      Public utilities                                        22,219,127         23,008,044         22,219,127
      All other corporate bonds                               33,964,473         35,370,326         33,964,473
                                                         ----------------   ----------------   ----------------
    Total fixed maturities                                    75,005,395  $      77,725,410         75,005,395
                                                                            ================

Investments held for sale:
    Fixed maturities:
      United States Government and
         government agencies and authorities                  35,240,384  $      36,182,839         36,182,839
      State, municipalities, and political
         subdivisions                                            192,059            202,256            202,256
      Collateralized mortgage obligations                     53,777,577         54,003,623         54,003,623
      Public utilities                                                 0                  0                  0
      All other corporate bonds                                8,374,074          8,239,722          8,239,722
                                                         ----------------   ----------------   ----------------
                                                              97,584,094  $      98,628,440         98,628,440
                                                                            ================

    Equity securities:
      Banks, trusts and insurance companies                    1,000,000  $       1,100,000          1,100,000
      All other corporate securities                           2,934,512          2,752,716          2,752,716
                                                         ----------------   ----------------   ----------------
                                                               3,934,512  $       3,852,716          3,852,716
                                                                            ================


Mortgage loans on real estate                                 23,386,895                            23,386,895
Investment real estate                                         8,876,298                             8,876,298
Policy loans                                                  13,608,456                            13,608,456
Other long-term investments                                            0                                     0
Short-term investments                                           550,001                               550,001
                                                         ----------------                      ----------------
    Total investments                                  $     222,945,651                     $     223,908,201
                                                         ================                      ================







FIRST COMMONWEALTH CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT                                         Schedule II
NOTES TO CONDENSED FINANCIAL INFORMATION


(a)   The condensed financial  information should be read in conjunction with the consolidated  financial statements and notes of First
      Commonwealth Corporation and Consolidated Subsidiaries.









                         FIRST COMMONWEALTH CORPORATION
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                           PARENT ONLY BALANCE SHEETS
                        As of December 31, 2001 and 2000

                                                                                     Schedule II


                                                                     2001              2000
                                                                ---------------   ---------------

ASSETS

    Investment in affiliates                                  $     43,928,067  $     43,820,542
    Cash and cash equivalents                                          705,309           400,749
    Income taxes recoverable                                            13,705            22,817
    Deferred income taxes                                              524,737         1,044,167
    Other assets                                                        25,784            51,730
                                                                ---------------   ---------------
          Total assets                                         $     45,197,602  $     45,340,005
                                                                ===============   ===============




LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
    Notes payable                                             $     11,536,698  $     12,839,193
    Indebtedness to subsidiaries and affiliates, net                    40,733           205,626
    Other liabilities                                                1,607,678         3,168,893
                                                                ---------------   ---------------
         Total liabilities                                          13,185,109        16,213,712
                                                                ---------------   ---------------




Shareholders' equity:
    Common stock, net of treasury shares                                54,385            54,393
    Additional paid-in capital, net of treasury                     51,860,574        51,861,366
    Accumulated deficit                                            (20,515,821)      (22,701,428)
    Accumulated other comprehensive income (deficit)                   613,355           (88,038)
                                                                ---------------   ---------------
         Total shareholders' equity                                 32,012,493        29,126,293
                                                                ---------------   ---------------
         Total liabilities and shareholders' equity           $     45,197,602  $     45,340,005
                                                                ===============   ===============












                         FIRST COMMONWEALTH CORPORATION
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                      PARENT ONLY STATEMENTS OF OPERATIONS
                       Three Years Ended December 31, 2001


                                                                                               Schedule II



                                                                2001            2000             1999
                                                            -------------   --------------   --------------

Revenues:

    Management fees from affiliates                       $    7,230,903  $     6,549,685  $     6,633,876
    Interest income                                               22,629          125,655           94,057
    Other income                                                 101,684          109,182          116,748
                                                            -------------   --------------   --------------
                                                               7,355,216        6,784,522        6,844,681


Expenses:

    Interest expense                                             987,886        1,243,819        1,344,888
    Operating expenses                                         4,459,313        6,763,645        5,277,169
                                                            -------------   --------------   --------------
                                                               5,447,199        8,007,464        6,622,057
                                                            -------------   --------------   --------------

    Operating income (loss)                                    1,908,017       (1,222,942)         222,624

    Income tax credit (expense)                                 (528,542)         218,422          (66,372)
    Equity in income (loss) of subsidiaries                      806,132         (842,320)        (534,209)
                                                            -------------   --------------   --------------
         Net income (loss)                                $    2,185,607  $    (1,846,840) $      (377,957)
                                                            =============   ==============   ==============


Basic income (loss) per share from continuing
   operations and net inome (loss)                        $        40.19  $        (33.90) $         (6.93)
                                                            =============   ==============   ==============


Basic weighted average shares outstanding                         54,385           54,485           54,539
                                                            =============   ==============   ==============








                         FIRST COMMONWEALTH CORPORATION
                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                      PARENT ONLY STATEMENTS OF CASH FLOWS
                       Three Years Ended December 31, 2001
                                                                                                      Schedule II

                                                                       2001               2000              1999
                                                                  ----------------   ---------------   ---------------

Increase (decrease) in cash and cash equivalents
Cash flows from operating activities:
   Net income (loss)                                            $       2,185,607  $     (1,846,840) $       (377,957)
   Adjustments to reconcile net income (loss) to net
     cash provided by operating activities:
    Equity in (income) loss of subsidiaries                              (806,132)          842,320           534,209
    Change in income taxes recoverable (payable)                            9,112                 0           (39,291)
    Change in deferred income taxes                                       519,430          (218,422)           74,189
    Change in indebtedness (to) from affiliates, net                     (164,893)       (1,263,989)          497,749
    Change in other assets and liabilities                             (1,535,269)          658,482          (431,977)
                                                                  ----------------   ---------------   ---------------
 Net cash provided by (used in) operating activities                       207,855        (1,828,449)          256,922
                                                                  ----------------   ---------------   ---------------

Cash flows from financing activities:
    Payments of principal on notes payable                             (1,302,495)       (2,025,000)       (2,505,800)
    Dividend received from subsidiary                                   1,400,000         2,000,000         3,266,000
    Purchase of treasury stock                                               (800)          (14,500)             (100)
                                                                  ----------------   ---------------   ---------------
Net cash provided by (used in) financing activities                        96,705           (39,500)          760,100
                                                                  ----------------   ---------------   ---------------

Net increase (decrease) in cash and cash equivalents                      304,560        (1,867,949)        1,017,022
Cash and cash equivalents at beginning of year                            400,749         2,268,698         1,251,676
                                                                  ----------------   ---------------   ---------------
Cash and cash equivalents at end of year                        $         705,309  $        400,749  $      2,268,698
                                                                  ================   ===============   ===============





















                         FIRST COMMONWEALTH CORPORATION
                                   REINSURANCE
          As of December 31, 2001 and the year ended December 31, 2001

                                                                                                        Schedule IV



--------------------------------------------------------------------------------------------------------------------


            Column A                 Column B         Column C         Column D          Column E        Column F
                                  ---------------  ---------------  ---------------   ---------------  -------------

                                                                                                        Percentage
                                                      Ceded to         Assumed                          of amount
                                                       other          from other                        assumed to
                                    Gross amount     companies        companies         Net amount         net

--------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                     $  2,630,460,130 $    653,610,000 $  1,632,820,870  $  3,609,671,000          45.2%
                                  ===============  ===============  ===============   ===============



Premiums and policy fees:

   Life insurance               $     20,150,537 $      3,135,311 $        109,457  $     17,124,683           0.6%

   Accident and health
     insurance                           170,923           36,787                0           134,136           0.0%
                                  ---------------  ---------------  ---------------   ---------------

                                $     20,321,460 $      3,172,098 $        109,457  $     17,258,819           0.6%
                                  ===============  ===============  ===============   ===============

















                         FIRST COMMONWEALTH CORPORATION
                                   REINSURANCE
          As of December 31, 2000 and the year ended December 31, 2000

                                                                                                        Schedule IV



--------------------------------------------------------------------------------------------------------------------


            Column A                 Column B         Column C         Column D          Column E        Column F
                                  ---------------  ---------------  ---------------   ---------------  -------------

                                                                                                        Percentage
                                                      Ceded to         Assumed                          of amount
                                                       other          from other                        assumed to
                                    Gross amount     companies        companies         Net amount         net

--------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                     $  2,878,693,447 $    734,621,000 $  1,020,170,553  $  3,164,243,000          32.2%
                                  ===============  ===============  ===============   ===============



Premiums and policy fees:

   Life insurance               $     22,789,885 $      3,518,015 $         76,069  $     19,347,939           0.4%

   Accident and health
     insurance                           179,904           38,157                0           141,747           0.0%
                                  ---------------  ---------------  ---------------   ---------------

                                $     22,969,789 $      3,556,172 $         76,069  $     19,489,686           0.4%
                                  ===============  ===============  ===============   ===============

















                         FIRST COMMONWEALTH CORPORATION
                                   REINSURANCE
          As of December 31, 1999 and the year ended December 31, 1999

                                                                                                       Schedule IV



------------------------------------------------------------------------------------------------------------------


            Column A                 Column B         Column C         Column D          Column E       Column F
                                  ---------------  ---------------  ---------------   ---------------  -----------

                                                                                                       Percentage
                                                      Ceded to         Assumed                         of amount
                                                       other          from other                       assumed to
                                    Gross amount     companies        companies         Net amount        net

------------------------------------------------------------------------------------------------------------------






Life insurance
   in force                     $  3,142,274,477 $    831,024,000 $  1,008,903,523  $  3,320,154,000        30.4%
                                  ===============  ===============  ===============   ===============



Premiums and policy fees:

   Life insurance               $     25,345,843 $      3,929,888 $         20,324  $     21,436,279         0.1%

   Accident and health
     insurance                           193,541           48,677                0           144,864         0.0%
                                  ---------------  ---------------  ---------------   ---------------

                                $     25,539,384 $      3,978,565 $         20,324  $     21,581,143         0.1%
                                  ===============  ===============  ===============   ===============

















                         FIRST COMMONWEALTH CORPORATION
                        VALUATION AND QUALIFYING ACCOUNTS
         As of and for the years ended December 31, 2001, 2000 and 1999

                                                                                     Schedule V


                                          Balance at     Additions
                                          Beginning      Charges                      Balances at
             Description                  Of Period     and Expenses   Deductions    End of Period
--------------------------------------------------------------------------------------------------


December 31, 2001

Allowance for doubtful accounts -
     mortgage loans                      $    240,000   $     30,000  $    150,000  $      120,000                                                                            $              $




December 31, 2000

Allowance for doubtful accounts -
     mortgage loans                      $     70,000   $    170,000  $          0  $      240,000                                                                            $              $




December 31, 1999

Allowance for doubtful accounts -
    mortgage loans                       $     70,000   $          0  $          0  $       70,000                                                                            $              $








                                                     SIGNATURES

Pursuant to the  requirements  of Section 13 or 15(d) 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.

                                                FIRST COMMONWEALTH CORPORATION
                                                          Registrant


 John S. Albin                                                         Date:  March 26, 2002
John S. Albin, Director

/s/  Randall L. Attkisson                                              Date:  March 26, 2002
Randall L. Attkisson, President, Chief
  Operating Officer and Director

/s/  John W. Collins                                                   Date:  March 26, 2002
John W. Collins, Director

/s/  Jesse T. Correll                                                  Date:  March 26, 2002
Jesse T. Correll, Chairman, Chief
  Executive Officer and Director

/s/  Ward F. Correll                                                   Date:  March 26, 2002
Ward F. Correll, Director

/s/  Thomas F. Darden                                                  Date:  March 26, 2002
Thomas F. Darden, Director

/s/  Luther C. Miller                                                  Date:  March 26, 2002
Luther C. Miller, Director

/s/  Millard V. Oakley                                                 Date:  March 26, 2002
Millard V. Oakley, Director

/s/  Robert V. O'Keefe                                                 Date:  March 26, 2002
Robert V. O'Keefe, Director

/s/  William W. Perry                                                  Date:  March 26, 2002
William W. Perry, Director

/s/  Robert W. Teater                                                  Date:  March 26, 2002
Robert W. Teater, Director

/s/  Theodore C. Miller                                                Date:  March 26, 2002
Theodore C. Miller, Corporate Secretary
  and Chief Financial Officer`