Standard Management Reports First Quarter 2004 Results

INDIANAPOLIS, May 17 /PRNewswire-FirstCall/ -- Standard Management Corporation (the "Company," "Standard Management," or "SMAN"; Nasdaq: SMAN, http://www.sman.com/ ) reported a loss of $1.8 million or $.22 per diluted share for the first quarter of 2004. The current quarter loss was primarily caused by a loss of $2.6 million or $.32 per diluted share in our Health Services Segment, relating generally to the continued development of this segment. However, the first quarter of 2004, marked the return to profitability of our Financial Services Segment, which reported net income of $1.2 million or $.14 per diluted share.

(Logo: http://www.newscom.com/cgi-bin/prnh/20010416/STANDARDLOGO ) Chairman's Comments Financial Services

"In our fourth quarter release, we reported steps we were taking in order to increase profitability in this segment when interest rates began to rise. We are pleased to report positive results in this area." Ronald D. Hunter, the Company's Chairman and Chief Executive Officer, continued, "Annuity sales continue to be strong as we improve margins."

Health Services

"While this segment continues to incur losses as we expected, we believe it is positioned to begin to capitalize on the steps we have taken. For example, this segment added over 100 new institutions to our customer platform during the first quarter of 2004," Mr. Hunter continued. "In addition, as of the end of the first quarter of 2004, approximately 10,000 consumers were receiving products and services from this segment. Based on our business plan for this segment, management believes that with our continued commitment to building a strong foundation that it may be able to generate up to $200 million in annualized revenue by the end of 2006."

Net Income

For the quarter ended March 31, 2004, net loss was $1.8 million or $.22 per diluted share, compared to net income of $2.0 million or $.25 per diluted share for the first quarter of 2003.

Financial Services: Net income for the quarter was $1.2 million, or $.14 per diluted share, compared to net income of $3.0 million or $.39 per diluted share for the first quarter of 2003. Impacting the 2004 quarter was net realized gains of $.04 per diluted share and improved spread income of $.02 per diluted share. In comparison, the 2003 quarter was largely impacted by net realized gains of $.34 per diluted share, which is the primary reason for the reduced net income in this segment for the 2004 quarter compared to the 2003 quarter.

Health Services: First quarter 2004 net loss was $2.6 million or $.32 per diluted share, compared to a net loss of $.6 million or $.07 per diluted share for the first quarter of 2003. The 2004 quarter included expenses associated with the continued development of this segment's operating platform of $.08 per diluted share, a capital loss of $.12 per diluted share, amortization of intangible assets of $.01 per diluted share. In addition, no tax benefits were recorded on the 2004 quarter losses. Comparatively, the 2003 quarter included tax benefits of $.04 per diluted share.

Other Services: First quarter 2004 net loss was $.3 million, or $.04 per diluted share, compared to a net loss of $.5 million, or $.06 per diluted share for the first quarter of 2003.

Assets

Total assets increased 2.5% to $2.03 billion at March 31, 2004, up from $1.97 billion at December 31, 2003. Continuing the portfolio trend of the fourth quarter 2003, in anticipation of rising interest rates, to reduce extension risk, the Company repositioned nearly 5% of its portfolio during the first quarter of 2004 by selling agency guaranteed mortgage backed securities and investing in more tightly structured commercial mortgage backed securities. These actions, plus other normal portfolio activities, reduced effective duration from 4.9 years at December 31, 2003, to 4.3 years at March 31, 2004, while maintaining the same overall portfolio quality of Aa3 by Moody's.

Shareholders' Equity/Book Value

Shareholders' equity, as reported in the consolidated balance sheet, was $84.1 million at March 31, 2004, compared to $72.4 million at December 31, 2003. Diluted book value per share was reported as $10.37 at March 31, 2004, compared to $8.93 at December 31, 2003.

Standard Management is a financial holding company headquartered in Indianapolis, IN. Information about the company can be obtained by calling the Investor Relations Department at 317-574-2865 or via the Internet at http://www.sman.com/ .

The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 37A of the Securities Exchange Act of 1934, including statements regarding the company's hopes, beliefs, intentions, or strategies regarding the future. Forward-looking statements include, but are not limited to, predictions of future revenues, expectation of growth rates, new business, and acquisitions.

STANDARD MANAGEMENT CORPORATION (Unaudited, dollars in thousands, except per share amounts) CONDENSED CONSOLIDATED FINANCIAL INFORMATION Three Months Ended March 31 2004 2003 RESULTS OF OPERATIONS Revenues $30,434 $33,126 Net income (loss): Financial Services $1,155 $3,046 Health Services (2,617) (555) Other Services (305) (481) Net income (loss) $(1,767) $2,010 PER SHARE DATA (Diluted) Net income (loss): Financial Services $0.14 $0.39 Health Services (0.32) (0.07) Other Services (0.04) (0.06) Net income (loss) $(0.22) $0.25 Weighted average shares outstanding 8,114,443 7,870,298 Weighted average shares outstanding (Diluted) 8,114,443 7,900,038 March 31 December 31 BALANCE SHEET 2004 2003 (Audited) Total assets $2,025,118 $1,973,871 Senior and subordinated debt 24,908 21,000 Trust preferred securities 20,700 20,700 Shareholders' equity As reported 84,120 72,447 Book value per share (Diluted) (1) As reported 10.37 8.93 (1) Considers conversion of options and warrants using the treasury stock method and stock price as of respective balance sheet date. STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) ASSETS March 31 December 31 2004 2003 (Unaudited) (Audited) Investments: Securities available for sale: Fixed maturity securities, at fair value (amortized cost $1,672,315 in 2004 and $1,638,048 in 2003) $1,712,119 $1,644,837 Mortgage loans on real estate 3,925 3,937 Policy loans 11,981 12,308 Real estate 1,013 943 Equity-indexed call options 15,293 19,711 Other invested assets 2,730 590 Short-term investments 589 2,690 Total investments 1,747,650 1,685,016 Cash and cash equivalents 17,027 17,296 Accrued investment income 16,513 17,002 Amounts due and recoverable from reinsurers 35,741 36,277 Deferred policy acquisition costs 158,373 166,411 Present value of future profits 11,517 16,508 Goodwill and intangibles 12,403 10,961 Property and equipment (less accumulated depreciation of $5,713 in 2004 and $5,286 in 2003) 12,532 12,770 Federal income tax recoverable 5,359 6,429 Other assets 8,003 5,201 Total assets $2,025,118 $1,973,871 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Insurance policy liabilities $1,861,518 1,841,545 Accounts payable and accrued expenses 16,938 7,217 Obligations under capital lease 416 551 Mortgage payable 6,750 6,795 Notes payable 24,908 21,000 Deferred income taxes 9,768 3,616 Payable to subsidiary trust issuer of "company-obligated trust preferred securities" 20,700 20,700 Total liabilities 1,940,994 1,901,424 Shareholders Equity: Common stock and additional paid in capital, no par value: Authorized 20,000,000 shares; issued 9,629,524 in 2004 and 9,629,167 in 2003 68,078 68,078 Treasury stock, at cost, 1,515,078 shares in 2004 and 2003 (7,671) (7,671) Accumulated other comprehensive income 16,142 2,702 Retained earnings 7,571 9,338 Total shareholders' equity 84,120 72,447 Total liabilities and shareholders' equity $2,025,118 $1,973,871 STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited, Dollars in Thousands, Except Per Share Amounts) Three Months Ended March 31 2004 2003 Revenues: Premium income $2,535 $1,877 Net investment income 21,470 21,146 Call option income (loss) 1,198 (3,098) Net realized investment gain 97 9,927 Policy income 3,374 2,233 Sales of goods 1,651 692 Fees and other income 109 349 Total revenues 30,434 33,126 Benefits and expenses: Benefits and claims 2,335 2,354 Interest credited to interest-sensitive annuities and other financial products 15,203 11,651 Amortization 5,392 3,583 Amortization - sales inducements 337 441 Amortization - net realized investment gains 521 5,855 Other operating expenses 5,410 4,370 Cost of goods sold 1,641 800 Interest expense and financing costs 1,017 1,025 Total benefits and expenses 31,856 30,079 Income (loss) before federal income tax expense (1,422) 3,047 Federal income tax expense 345 1,037 Net income (loss) $(1,767) $2,010 Earnings per share: Basic $(.22) $.26 Diluted (.22) .25

CONTACT: Michael B. Berry, Investor Relations of Standard ManagementCorporation, +1-317-574-2865

Web site: http://www.smancorp.com/