EXHIBIT 10(AG) - MATERIAL CONTRACTS

National Western Life Insurance Company
Domestic Marketing Officer Bonus Program

The Bonus Program ("Program") is designed to reward Domestic Marketing officers
for their performance in achieving pre-determined sales targets while assisting
the Company in managing to its profit criteria. The Plan incorporates three
measurable performance factors: (1) sales, which are defined as net placed
annualized target premium for Life business and as total placed premium for
Annuity business, (2) persistency, and (3) expense management.

Each of the above performance factors will have an assigned target level for
purposes of the Program. Succeeding years under the Program will have agreed
upon target levels by year. Assuming a "par" performance (i.e. achieving each
target level), the weighting of the bonus (applied to base salary) is 50% for
sales performance, 25% for persistency performance, and 25% for expense
management performance. Actual results compared to the targets can either
increase or decrease these percentages as explained in each of the following
sections.

Sales Component (50% of base salary):

The sales component of the Program is further subdivided between Life production
and Annuity production. For 2002, the Domestic sales goals are:

Life -- $7,300,000 net placed annualized target premium

Annuities -- $333,000,000 net placed total premium

The New Business Market Summary Report (NWAR60) will be the source of sales
results for purposes of this Program. Based upon these sales goals, the bonus
percentage corresponding with the Life and Annuity sales production levels
achieved in 2002 will be applied to 50% of each Domestic Marketing officer's
base salary in accordance with the following grid:

 

Life Placed

Bonus

 

Annuity Placed

Bonus

 

Target Premium

%

 

Total Premium

%

             

$3,300,000

10%

 

$290,000,000

10%

 

$4,300,000

20%

 

$300,000,000

20%

 

$5,300,000

30%

 

$310,000,000

30%

 

$6,300,000

40%

 

$320,000,000

40%

 

$7,300,000

50%

 

$333,000,000

50%

 

$8,300,000

60%

 

$400,000,000

60%

 

$9,300,000

70%

 

$466,000,000

70%

 

$10,300,000

80%

 

$533,000,000

80%

 

$11,300,000

90%

 

$600,000,000

90%

 

$12,300,000

100%

 

$666,000,000

100%

           

Assuming an officer salary of $100,000 and 2002 production of $6,300,000 of Life
placed target premium and $466,000,000 of Annuity placed total premium, the
officer's 2002 sales bonus component under the Program would be $55,000
($100,000 x 50% x 40% for Life business plus $100,000 x 50% x 70% for Annuity
business).

Persistency Component (25% of base salary):

Similar to the sales component, the persistency component of the Program is
further subdivided between Life business and Annuity business. The target
persistency performance factors have been supplied by Actuarial and are as
follows:

For Life business:

First year annual lapse rate of 18.0%

Second year annual lapse rate of 11.0%

Third year annual lapse rate of 10.0%

For Annuity business:

First year annual lapse rate of 2.0%

Second year annual lapse rate of 6.0%

Third year annual lapse rate of 9.0%

 

The persistency calculations will be done a rolling basis by applying a monthly
factor, which equates over twelve months to the annual lapse rate, to each
month's sales from the month of sale and each successive month thereafter.
Accordingly, the persistency calculation will be a weighting of each month's
sales amount and its corresponding duration at the time of measurement. For
purposes of the Program, the persistency calculation will only be applied to
business placed beginning in January 2002 and following (i.e. inforce Annuity
business as of 12/31/01 will not be part of the persistency calculation).

Based upon these persistency performance factors, the bonus percentage
corresponding with the Life and Annuity persistency levels achieved in 2002 will
be applied to 25% of each Domestic Marketing officer's base salary in accordance
with the following grid:

 

Life Business

Bonus

 

Annuity Business

Bonus

 

Persistency

%

 

Persistency

%

             

Target - 4%

10%

 

Target - 1.00%

10%

 

Target - 3%

20%

 

Target - 0.75%

20%

 

Target - 2%

30%

 

Target - 0.50%

30%

 

Target - 1%

40%

 

Target - 0.25%

40%

 

Target

50%

 

Target

50%

 

Target + 1%

60%

 

Target + 0.25%

60%

 

Target + 2%

70%

 

Target + 0.50%

70%

 

Target + 3%

80%

 

Target + 0.75%

80%

 

Target + 4%

90%

 

Target + 1.00%

90%

 

Target + 5%

100%

 

Target + 1.25%

100%

           

 

Assuming an officer salary of $100,000 and 2002 persistency of Target + 1% for
Life business and Target - 0.50% for Annuity business, the officer's 2002
persistency bonus component under the Program would be $22,500 ($100,000 x 25% x
60% for Life business plus $100,000 x 25% x 30% for Annuity business).

Target persistency, for purposes of this Program, will be the rolling
persistency amounts calculated by Paul Facey using the 2002 through 2004 sales
goals.

Expense Component (25% of base salary):

The expense component of the program is based upon actual expense management
versus budgeted expenses. Budgeted expenses are those amounts approved by the
Budget Committee as part of the annual budgeting process and include all cost
centers associated with Domestic Marketing.

Based upon the approved budgeted expenses, the bonus percentage corresponding
with the actual expense levels achieved in 2002 will be applied to 25% of each
Domestic Marketing officer's base salary in accordance with the following grid:

 

Expense

Bonus

 

Management

%

       

104% of Budget

20%

 

103% of Budget

40%

 

102% of Budget

60%

 

101% of Budget

80%

 

Budget

100%

 

98% of Budget

120%

 

96% of Budget

140%

 

94% of Budget

160%

 

92% of Budget

180%

 

90% of Budget

200%

     

Assuming an officer salary of $100,000 and 2002 actual expenses at 96% of
Budget, the officer's 2002 expense management bonus component under the Program
would be $35,000 ($100,000 x 25% x 140%).

From the above examples, the officer with a $100,000 base salary would receive a
2002 bonus under the program of $112,500 ($55,000 sales plus $22,500 persistency
plus $35,000 expense management) reflecting sales and expense management above
"par" and persistency below "par".

Administration:

Bonus amounts under the program will be earned and paid monthly assuming "par"
levels with true up for actual results performed quarterly. The quarterly true
up of the bonus amount will be based upon year-to-date results. In the event
that actual year-to-date results are below minimum Program performance factor
levels, the Company may, at its discretion, suspend the monthly bonus payments
until such time as the year-to-date results reach the minimum Program
performance levels. Bonus amounts paid in a previous month(s) will not be
recouped from the participants in the event of suspension of monthly payments
except at the end of the Program year if unearned.