Standard Management Reports Year End And Fourth Quarter 2003 Results

INDIANAPOLIS, March 30 /PRNewswire-FirstCall/ -- Standard Management Corporation (the "Company", "Standard Management", or "SMAN") (http://www.sman.com/ ) reported a net loss of $10.5 million or $1.29 per diluted share for the year, and a net loss of $10.3 million or $1.26 per diluted share for the quarter ended December 31, 2003. The annual results were driven largely by a loss of $.88 per diluted share relating to the development of our Health Services Segment, necessary to generate planned growth initiatives, and in our Financial Services Segment charges of accelerated amortization of deferred acquisition costs ("DAC") of $.64 per diluted share on fixed annuity products.

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

"Our Financial Services Segment continues to suffer from the effects of a low interest rate environment. The primary reason for the Segment's declining profitability can be attributed to reduced spread income on our products. During 2003, aggressive actions were taken to reduce crediting rates. We believe these actions, along with product line modifications and recruiting efforts, position this segment for increased profitability when interest rates begin to rise." Ronald D. Hunter, the Company's Chairman and Chief Executive Officer, continued, "Despite the challenges, this segment generated annual sales in excess of $400 million."

Health Services

"We believe our Health Services Segment is well-positioned to benefit from a rapidly growing population utilizing pharmacy services," Mr. Hunter continued. "During its first full year of operation, this segment created over 70 new positions, from pharmacists to technicians, finalized construction of a 30,000 sq. ft. state-of-the-art processing facility which is capable of servicing over $100 million in new revenue. We believe that our investment in this segment has established a specialized platform, creating an opportunity for us to attain significant market share in the pharmaceutical services business over the next few years. We believe that by providing access to pharmacy services for clients wherever located, we can build sustained brand and company loyalty at all levels of care. In addition, the Company achieved two key objectives during the first quarter 2004: the acquisition of our institutional pharmacy and the hiring of a National Sales & Marketing Director."

Income from Continuing Operations

For the year ended December 31, 2003, loss from continuing operations was $10.2 million, or $1.26 per diluted share, compared to a loss for the year ended December 31, 2002 of $7.9 million, or $.99 per diluted share. For the quarter ended December 31, 2003, loss from continuing operations was $10.3 million, compared to a gain of $1.4 million in the prior year quarter.

Financial Services: Net loss for the year was $.2 million, or $.03 per diluted share, compared to a $5.3 million net loss or $.67 per diluted share for the comparable prior year. The current year net loss included net realized investment gains of $.67 per diluted share, charges of accelerated amortization of DAC of $.64 per diluted share on fixed annuity products, reduced spread income of $.35 per diluted share due to the decline in net investment income yield, which has declined faster than we were able to reduce credited rates on our in-force business, and $.10 per diluted share associated with lower expense capitalization due to reduced new business writings. The comparable prior year included net realized investment losses of $.75 per diluted share, charges of $.64 per diluted share from the accelerated amortization of DAC, reserve strengthening of $.18 per diluted share, $.09 per diluted share from the write-off of an agency receivable balance, and tax benefits of $.32 per diluted share over prior year.

Net loss for the quarter was $5.0 million or $.61 per diluted share, compared to a gain of $3.6 million or $.47 per diluted share in the prior year quarter. Impacting the current quarter was the $.64 per diluted share for the accelerated amortization of DAC, $.03 per diluted share associated with lower expense capitalization due to reduced new business writings, and reduced spread income of $.04 per diluted share. The prior year quarter was impacted by $.09 per diluted share for net realized investment gains, $.03 per diluted share from the write-off of an agency receivable balance, and tax benefits of $.15 per diluted share over prior year quarter.

Health Services: Current year net loss was $7.2 million or $.88 per diluted share, compared to a $1.2 million prior year loss or $.15 per diluted share. The current year loss included expenses associated with the continued development of this segment's operating platform and infrastructure, as well as ongoing concentrated marketing initiatives. Included in these expenses were one-time and non-recurring development expenses of $.16 per diluted share and $.37 per diluted share as a result of recording no tax benefits on this segment's operating loss.

Net loss for the quarter was $4.1 million or $.50 per diluted share, compared to a loss from the prior year quarter of $.8 million or $.10 per diluted share. The current quarter included the same impact of $.37 per diluted share associated with recording no tax benefits for the year, and $.04 per diluted share relating to one-time and non-recurring development expenses.

Other Services: Current year net loss per diluted share was $.35, compared to the prior year net loss of $.17 per diluted share. The current year was negatively impacted by a higher effective tax rate and the reduced net commission income due to the sale of a small marketing service subsidiary which period over period impact the results by $.22 and $.03 per diluted share respectively. Also impacting the current year by $.03 per diluted share was deferred debt write-offs associated with recent refinancing activities. The prior period was negatively impacted by $.13 per diluted share from net realized investment losses.

Assets

Total assets increased 15% to $1.97 billion at December 31, 2003, up from $1.72 billion at December 31, 2002. Investment grade securities increased from 97.1% of the portfolio to 98.7% during 2003. In anticipation of rising interest rates, to reduce extension risk, the Company repositioned nearly 15% of its portfolio during 2003 by selling agency guaranteed mortgage backed securities and investing in more tightly structured agency backed planned amortization class collateralized mortgage obligations (PACs) and commercial mortgage backed securities. The overall quality of the fixed income portfolio is rated Aa3 by Moody's.

Shareholders' Equity/Book Value

Shareholders' equity, excluding unrealized investment gains and losses, was $69.7 million at December 31, 2003 compared to $76.0 million at December 31, 2002. Diluted book value per share, excluding unrealized investment gains and losses, was $8.55 per share at December 31, 2003 compared to $9.62 per share at December 31, 2002.

Shareholders' equity as reported in the consolidated balance sheet was $72.4 million at December 31, 2003 compared to $87.7 million at December 31, 2002. Diluted book value per share was reported as $8.89 at December 31, 2003 compared to $11.10 at December 31, 2002.

Other Services: Consists of revenues and expenses primarily related to corporate operations and financing costs.

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, expectation of growth rates, new business, and acquisitions.

STANDARD MANAGEMENT CORPORATION (Audited, dollars in thousands, except per share amounts) CONDENSED CONSOLIDATED FINANCIAL INFORMATION Three Months Ended Year to Date December 31 December 31 2003 2002 2003 2002 RESULTS OF OPERATIONS Revenues $38,073 $21,606 $136,573 $68,224 Income (loss) from continuing operations: Financial Services $(5,023) $3,609 $(187) $(5,317) Health Services (4,087) (764) (7,161) (1,156) Other Services (1,192) (1,493) (2,848) (1,385) Income (loss) from continuing operations (10,302) 1,352 (10,196) (7,858) Income from discontinued operations - - - 1,068 Gain (loss) on sale of discontinued operations - - (275) 6,872 Cumulative effect of accounting change for goodwill impairment - - - (1,212) Net income (loss) $(10,302) $1,352 $(10,471) $(1,130) PER SHARE DATA (Diluted) Income (loss) from continuing operations: Financial Services $(0.61) $0.47 $(0.03) $(0.67) Health Services (0.50) (0.10) (0.88) (0.15) Other Services (0.15) (0.19) (0.35) (0.17) Income (loss) from continuing operations (1.26) 0.18 (1.26) (0.99) Income from discontinued operations - - - 0.13 Gain (loss) on sale of discontinued operations - - (0.03) 0.87 Cumulative effect of accounting change for goodwill impairment - - - (0.15) Net income (loss) $(1.26) $0.18 $(1.29) $(0.14) Weighted average shares outstanding 8,114,196 7,659,871 8,031,749 7,623,690 Weighted average shares outstanding (Diluted) 8,207,796 7,696,218 8,135,814 7,938,554 December 31 December 31 BALANCE SHEET 2003 2002 Total assets $1,973,871 $1,715,147 Senior and subordinated debt 21,000 13,000 Trust preferred securities 20,700 20,700 Shareholders' equity: Excluding unrealized gain on securities 69,745 75,995 As reported 72,447 87,734 Book value per share (Diluted) (1): Excluding unrealized gain on securities $8.55 $9.62 As reported 8.89 11.10

(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, Except Per Share Amounts) December 31 2003 2002 ASSETS Investments: Securities available for sale: Fixed maturity securities, at fair value (amortized cost: $1,637,962 in 2003 and $1,350,961 in 2002) $1,644,837 $1,379,792 Mortgage loans on real estate 3,937 6,348 Policy loans 12,308 12,722 Real estate 943 1,252 Equity-indexed call options 19,711 3,904 Other invested assets 2,690 1,076 Short-term investments 590 713 Total investments 1,685,016 1,405,807 Cash and cash equivalents 17,296 60,197 Accrued investment income 17,002 16,255 Amounts due and recoverable from reinsurers 36,277 38,951 Deferred policy acquisition costs 166,411 153,954 Present value of future profits 16,508 14,949 Goodwill 10,961 6,417 Property and equipment (less accumulated depreciation of $5,286 in 2003 and $3,903 in 2002) 12,770 12,832 Federal income tax recoverable 6,429 - Other assets 5,201 5,785 Total assets $1,973,871 $1,715,147 LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Insurance policy liabilities $1,841,545 $1,570,348 Accounts payable and accrued expenses 7,217 5,561 Obligations under capital lease 551 804 Mortgage payable 6,795 6,757 Notes payable 21,000 13,000 Current income taxes 0 3,811 Deferred income taxes 3,616 6,432 Total liabilities 1,880,724 1,606,713 Company-obligated trust preferred securities 20,700 20,700 Shareholders' Equity: Common stock and additional paid in capital, no par value Authorized 20,000,000 shares; issued 9,629,167 in 2003 and 9,369,752 in 2002 68,078 63,857 Treasury stock, at cost, 1,515,078 shares in 2003 and 2002 (7,671) (7,671) Accumulated other comprehensive income 2,702 11,739 Retained earnings 9,338 19,809 Total shareholders' equity 72,447 87,734 Total liabilities and shareholders' equity $1,973,871 $1,715,147 STANDARD MANAGEMENT CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands, Except Per Share Amounts) Year Ended December 31 2003 2002 2001 Revenues: Premium income $8,929 $9,173 $9,419 Net investment income 83,009 75,839 58,539 Call option income (loss) 11,951 (10,089) (5,906) Net realized investment gains (loss) 17,876 (19,841) (10,351) Policy income 10,839 8,084 7,721 Sales of goods 2,948 1,850 - Fee and other income 1,021 3,208 7,348 Total revenues from continuing operations 136,573 68,224 66,770 Benefits and expenses: Benefits and claims 12,977 9,938 12,975 Interest credited to interest-sensitive annuities and other financial products 71,600 42,650 30,227 Amortization 33,916 10,622 5,127 Commission expenses 64 1,206 3,871 Operating expenses 21,920 15,228 10,669 Cost of goods sold 2,445 1,554 - Interest expense and financing costs 4,474 4,351 3,492 Total benefits and expenses from continuing operations 147,396 85,549 66,360 Income (loss) before federal income taxes (benefits) and preferred stock dividends (10,823) (17,325) 409 Federal income tax expense (benefit) (627) (9,467) 195 Income (loss) from continuing operations before discontinued operations (10,196) (7,858) 214 Discontinued operations: Income from discontinued operations less taxes of $0, $585 and ($185), respectively - 1,068 1,566 Gain (loss) from the sale of discontinued operations less taxes of $0, $4,125, and $0, respectively (275) 6,872 - Total income (loss) from discontinued operations (275) 7,940 1,566 Cumulative effect of accounting change for goodwill impairment - (1,212) - Net income (loss) (10,471) (1,130) 1,780 Preferred stock dividends - - (318) Earnings (loss) available to common shareholders $(10,471) $(1,130) $1,462

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

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