SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934



For the Nine Months Ended September 30, 1996


Commission File Number 0-15330


AMVESTORS FINANCIAL CORPORATION
----------------------------------------------

(Exact name of registrant as specified in its charter)

Kansas                                         48-1021516
----------------------------     ----------------------------------------

(State or other jurisdiction of     (I.R.S. Employer Identification No.)
incorporation or organization)

                    415 Southwest 8th Avenue, Topeka, Kansas           66603
            -------------------------------------------------        ----------
                   (Address of principal executive offices)          (Zip code)


Registrant's telephone number, including area code:  (913) 232-6945
                                                     ----------------

                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  the  number  of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the close of the period covered by this report.

       Class                                   Outstanding September 30, 1996
       -------                                 -------------------------------
       Common Stock, no par value                     12,870,203 shares
<PAGE>

AMVESTORS FINANCIAL CORPORATION
INDEX


PART I    Financial Information:                                Page Number
          Consolidated Balance Sheets-
            September 30, 1996 and December 31, 1995                  2-3
          Consolidated Statements of Earnings-
            Nine months ended September 30, 1996 and 1995               4
          Consolidated Statements of Earnings-
            Three months ended September 30, 1996 and 1995              5
          Consolidated Statements of Stockholders' Equity-
            Twelve months ended December 31, 1995 and
            Nine months ended September 30, 1996                        6
          Consolidated Statements of Cash Flows-
            Nine months ended September 30, 1996 and 1995             7-8
          Notes to Consolidated Financial Statements                 9-27
          Management's Discussion and Analysis of Financial
            Condition and Results of Operations                     27-34

PART II   Other Information                                         35-39
                                       1
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                    September 30, 1996 and December 31, 1995
                                (000's Omitted)
                                  (Unaudited)




ASSETS                                              1996                1995
---------------------------------------        -------------       ------------


Investments:
  Debt securities:
  Bonds:
  Available-for-sale (cost: $2,550,902 and
         $1,947,777) .......................           $ 2,568,138   2,044,606
        Trading (cost: $45,919 and $1,489)                  46,070       1,485
                                                         2,614,208   2,046,091

Equity securities:
      Common stock:
        Available-for-sale (cost: $2,596 and $1,047)         2,503       1,181
      Preferred stock:
        Available-for-sale (cost: $28,670 and $7,566)       28,640       7,733
        Trading (cost: $2,051 and $619)                      2,068         629
                                                            33,211       9,543
  Other long-term investments                               41,358      39,491
    Short-term investments                                     372         436

   Total investments                                     2,689,149   2,095,561

Cash and cash equivalents                                   43,436      48,281
Accounts receivable (net of allowance for uncollectible
    accounts of $791 and $739)                                 708         454
Amounts receivable under reinsurance agreements            247,269     146,618
Amounts receivable on securities settlements in process      7,120      10,873
Accrued investment income                                   39,126      29,357
Deferred cost of policies produced                         182,183     140,476
Deferred cost of policies purchased                         41,676        --
Other assets                                                30,890       4,584

  Total assets ...................................      $3,281,557   2,476,204





















See notes to consolidated financial statements.
                                       2
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                    September 30, 1996 and December 31, 1995
                     (000's Omitted, except per share data)
                                  (Unaudited)



LIABILITIES AND STOCKHOLDERS' EQUITY                   1996              1995
----------------------------------------        ---------------   --------------


Liabilities:

    Policy liabilities:
      Future policy benefits                       $   3,002,153      2,259,028
      Other policy liabilities                             7,362          7,312

                                                       3,009,515      2,266,340

    Subordinated debentures payable                       65,000             -
    Notes payable                                              -          7,000
    Amounts due on securities settlements in process       5,804          1,438
    Deferred income taxes                                    537         22,901
    Accrued expenses and other liabilities                12,611          4,080

                  Total liabilities                    3,093,467      2,301,759


Commitments and contingencies

Stockholders' equity:
    Preferred stock, $1.00 par value, authorized -
      2,000,000 shares                                        -               -
    Common stock, no par value, authorized -
      25,000,000 shares; issued - 12,918,379
       shares in 1996 and 10,140,738 shares in 1995       16,438         12,904
    Paid in capital                                       98,496         64,284
    Unrealized investment gains (losses)(net of deferred
      cost of policies  produced  amortization  expense  (benefit) of $4,563 and
      $27,327  and net of  deferred  cost  of  policies  purchased  amortization
      expense (benefit) of $508 and $0 and deferred income
      tax expense (benefit) of $4,223 and $24,431)         7,819         45,372
    Retained earnings                                     68,400         54,714
                                                         191,153        177,274
    Less treasury stock                                     (234)             -
    Less leveraged employee stock ownership trust
      (LESOP)                                             (2,829)        (2,829)
         Total stockholders' equity                      188,090        174,445

         Total liabilities and stockholders' equity   $3,281,557      2,476,204

















See notes to consolidated financial statements.

                                      3
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF EARNINGS
                 Nine months ended  September  30, 1996 and 1995
                    (000's  Omitted, except per share data)
                                  (Unaudited)

                                                            1996          1995





Revenue:
    Insurance premiums and policy charges .............   $  10,451        6,554
    Net investment income .............................     139,704      114,724
    Net investment gains (losses) .....................       4,792       (993)
    Other revenue .....................................       1,473        683





    Total revenue .....................................     156,420      120,968






Benefits and expenses:
    Benefits, claims and interest credited
    to policyholders ..................................     104,500       88,588
    Amortization of deferred cost of policies produced       11,467        8,085
    Amortization of deferred cost of policies purchased       3,516         --
    General insurance expenses ........................       9,084        6,315
    Premium and other taxes, licenses and fees ........       1,879        1,256
    Other expenses ....................................         165          157


    Total benefits and expenses .......................     130,611      104,401


Operating earnings ....................................      25,809       16,567
Interest expense ......................................       2,107           57
                                                            ---------    ------
Earnings before income tax expense and
  extraordinary item ..................................      23,702       16,510
Income tax expense ....................................       8,414        5,617


Earnings before extraordinary item.....................      15,288       10,893
Extraordinary item: Loss on early extinguishment of
  debt (net of income tax benefit of $148) ............        (269)        --


Net earnings ..........................................   $  15,019    $  10,893



Earnings per share of common stock:

    Primary:

    Net earnings ......................................     $    1.19       1.05


    Fully diluted:
    Net earnings ......................................      $    1.15      1.05


Average share outstanding:

    Primary............................................       12,584      10,330
    Fully diluted.....................................        13,755      10,378


See notes to consolidated financial statements.

                                      4
<PAGE>

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF EARNINGS
                 Three months ended  September 30, 1996 and 1995
                     (000's Omitted, except per share data)
                                  (Unaudited)

                                                              1996       1995

Revenue:
    Insurance premiums and policy charges .............   $  4,098      2,038
    Net investment income .............................     50,547     38,534
    Net investment gains (losses) .....................      2,258       (687)
    Other revenue .....................................        760        493

    Total revenue .....................................     57,663     40,378


Benefits and expenses:
    Benefits, claims and interest credited
    to policyholders ..................................     37,735     29,891
    Amortization of deferred cost of policies produced       4,054      2,516
    Amortization of deferred cost of policies purchased      1,400        -
    General insurance expenses ........................      3,548      1,914
    Premium and other taxes, licenses and fees ........        779        383
    Other expenses ....................................         52         51


    Total benefits and expenses .......................     47,568     34,755


Operating earnings ....................................     10,095      5,623
Interest expense ......................................      1,373         16
                                                          --------    -------
Earnings before income tax expense and
  extraordinary item ..................................      8,722      5,607
Income tax expense ....................................      3,171      1,801





Earnings before extraordinary item ....................      5,551      3,806
Extraordinary item: Loss on early extinguishment of
  debt (net of income tax benefit of $123) ............       (222)       -


Net earnings ..........................................   $  5,329      3,806


Earnings per share of common stock:

    Primary:

    Net earnings ......................................   $    .39        .37


    Fully diluted:



    Net earnings ......................................   $    .36        .37


Average share outstanding:

    Primary ...........................................     13,636     10,410
    Fully diluted .....................................     16,939     10,410






See notes to consolidated financial statements.
                                       5
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                (000's Omitted, except share and per share data)
                                  (Unaudited)
<TABLE>
<CAPTION>

                                                                        Unrealized
                                                                        Investment
                                                  Common    Paid-in       Gains    Retained   Treasury
                                                  Stock    Capital       (Losses)  Earnings     Stock     LESOP        Total
                                                ---------  ---------      -------   -------    ------    --------    --------
<S>                                           <C>         <C>           <C>       <C>         <C>       <C>         <C>

Balance as of January 1, 1995 ................. $ 12,769      63,499      (7,813)   38,876       -        (3,135)    104,196
Net earnings .................................        -            -           -    16,599       -             -      16,599
Change in unrealized investment
  gains (losses) ..............................       -            -      53,185       -         -              -     53,185
Cash dividends to stockholders
  ($.075 per share on common
  stock) ......................................       -            -           -     (761)       -              -       (761)
Issuance of common stock:
  upon exercise of options ....................      135         785<F1>       -        -        -              -        920
Allocation of LESOP shares .....................       -           -           -        -        -            306        306
                                                ------------ ----------   -------   -------    ------    --------    --------
Balance December 31, 1995 ......................  12,904      64,284      45,372    54,714        -        (2,829)   174,445
Net earnings ...................................        -          -           -    15,019        -             -     15,019
  gains (losses) ...............................        -          -     (37,553)        -        -             -    (37,553)
Cash dividends to stockholders
  ($.12 per share on common
   stock) ......................................        -          -           -    (1,333)       -             -     (1,333)
Issuance of common stock:
 upon acquisition of company ..................     3,464     28,866           -         -        -              -    32,330
  upon exercise of options ....................        70        402<F1>       -         -        -              -       472
Issuance of warrants:
 upon acquisition of company ...................        -      5,201           -         -        -              -     5,201
Purchase of warrants ..........................         -       (257)          -         -        -              -      (257)
Acquisition of treasury shares .................        -          -           -         -     (234)             -      (234)
                                                ------------ ----------   -------   -------    ------    --------    --------
Balance September 30, 1996 ...................  $   16,438     98,496      7,819    68,400      (234)     (2,829)    188,090
                                                ============ ==========   =======   =======    ======    ========    ========
<FN>
<F1> Net of income tax benefit of $155 and $440 for the periods ended  September
30, 1996 and December 31, 1995, respectively.
</FN>
</TABLE>

See notes to consolidated financial statements.
                                       6
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                Increase  (Decrease)  in Cash and Cash  Equivalents 
                   Nine months ended September 30, 1996 and 1995
                                  (Unaudited)
                                (000's Omitted)
                                                              1996        1995





Operating Activities:
    Net earnings ........................................  $  15,019     10,893
    Adjustments to reconcile net earnings to net cash
    provided by (used in) operating activities:
      Interest credited to policyholders ................    106,722     90,145
      Amortization of (discounts) premiums on debt
       securities, net ..................................       (798)      (755)
      Amortization of deferred cost of policies produced      11,466      8,085
      Amortization of deferred cost of policies purchased      3,518          -
      Net investment (gains) losses .....................     (4,797)       993
      Accrued investment income .........................     (2,396)       664
Deferred income taxes ...................................      1,386      5,111
      Other, net ........................................      2,828      2,233





    Net cash provided by operating activities ...........   132,948     117,369





Investing Activities:
    Purchases of securities:
     Held-to-maturity ...................................        -       (5,118)
     Available-for-sale ................................. (631,813)    (232,752)
     Trading ............................................  (73,687)           -
    Proceeds from sale of securities:
     Held-to-maturity ...................................        -            -
     Available-for-sale .................................  407,285       72,830
     Trading ............................................   27,821            -
    Proceeds from maturity or redemption of securities:
     Held-to-maturity ...................................        -       26,303
     Available-for-sale .................................  120,727       56,193
     Trading ............................................    1,294           -
    Other long-term investments, net ....................    4,324       17,067
    Short-term investments, net .........................      219           60
    Capitalization of deferred cost of policies produced   (30,408)     (25,085)
    Capitalization of goodwill ..........................     (341)           -
    Acquisition, net of cash received ...................   (2,314)           -
    Construction of home office .........................   (7,691)        (997)
    Other, net ..........................................     (271)        (221)





    Net cash used in investing activities ............... (184,855)     (91,720)





Financing Activities:
    Premiums received ...................................  317,986      256,815
    Surrender and death benefits paid ................... (328,811)    (290,210)
    Surrender and risk charges collected ................    8,801        5,274
    Securities settlements in process ...................    8,118        4,407
    Acquisition of treasury stock .......................     (234)           -
    Cash dividends to stockholders ......................   (1,333)        (760)
    Issuance of common stock ............................      483          762
    Purchase of warrants ................................     (257)           -
    Notes payable .......................................  (22,500)           -
    Debentures payable ..................................   65,000            -
    Other, net ..........................................     (191)       4,150





    Net cash provided by (used in) financing
     activities .........................................   47,062      (19,562)





Increase (Decrease) in Cash and Cash Equivalents ........   (4,845)       6,087
Cash and Cash Equivalents:
    Beginning of year ...................................   48,281       10,621





    End of year ........................................ $  43,436       16,708


See notes to consolidated financial statements.
                                       7
<PAGE>

                AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                Increase  (Decrease)  in Cash and Cash  Equivalents 
                Nine months ended September 30, 1996 and 1995
                                  (Unaudited)
                                (000's Omitted)

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:           1996         1995

    Income tax payments (refunds) ...................   $   2,590     (1,332)


    Interest payments ...............................   $     805       --


                                                                     -------

    Change in net unrealized investment gains (losses)  $ (80,016)     43,294

    Less: Associated (increase) reduction in amortization
             of deferred policy acquisition costs ...      22,256     (10,823)

         Deferred income tax (expense) benefit ......      20,207     (10,331)

    Net change in net unrealized gains (losses) .....   $ (37,553)      22,140

                                                               -------

    Details of acquisition:
      Fair value of assets acquired .................   $ 720,362           -
      Liabilities assumed ...........................    (671,585)          -
      Common stock and warrants issued ..............     (37,531)          -


      Cash paid .....................................      11,246           -
      Less: Cash acquired ...........................      (8,932)          -


      Net cash paid for acquisition .................   $   2,314           -




See notes to consolidated financial statements.
8
<PAGE>

AMVESTORS FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  Summary of Significant Accounting Policies:
-----------------------------------------------

A.  PRINCIPLES OF CONSOLIDATION:

        The consolidated financial statements include the accounts of
AmVestors and its wholly-
        owned subsidiaries American Investors Life Insurance Company, Inc.
(American), American Investors Sales Group, Inc. (American Sales), AmVestors
Acquisition Subsidiary, Inc. (AAS), successor through merger with Financial
Benefit Group, Inc. (FBG), AmVestors Investment
        Group, Inc. (AIG), Annuity International Marketing Corporation
(AIMCOR), Financial Benefit Life Insurance Company (FBL), The Insurancemart
(TIM), and Rainbow Card Pack Publication, Inc. (RBC), (collectively the
company). All significant intercompany accounts and transactions have been
eliminated.
B.  ACCOUNTING PRINCIPLES AND PRACTICES:

        The accompanying unaudited consolidated financial statements have
been prepared on the
        basis of generally accepted accounting  principles as promulgated by the
American  Institute  of  Certified  Public  Accountants.  In the  opinion of the
company,   the  consolidated   financial   statements  contain  all  adjustments
(consisting of only normal recurring  accruals)  necessary to present fairly the
financial  position as of September 30, 1996 and the results of earnings and the
statements of cash flows for the nine month periods ended September 30, 1996 and
1995. C. INVESTMENTS:

        Debt securities  held-to-maturity  are carried at amortized cost, except
that those  securities  with an other than  temporary  impairment in value,  are
carried at estimated net realizable  value.  Debt securities  available-for-sale
are carried at  estimated  market  value,  with any  unrealized  gains or losses
recorded in stockholders' equity.
        Investments are reviewed on each balance sheet date to determine if they
are impaired.  In  determining  whether an  investment is impaired,  the company
considers  whether the decline in market  value at the balance  sheet date is an
other than temporary  decline;  if so, then the  investment's  carrying value is
reduced to a new cost basis which represents estimated net realizable value. The
decline in value is reported  as a realized  loss,  and a recovery  from the new
cost basis is recognized as a realized gain only at sale.
        The estimates of net realizable value are based on information  obtained
from published financial  information  provided by issuers,  independent sources
such as broker dealers or the company's  independent  investment advisors.  Such
amounts  represent an estimate of the consideration to be received in the future
when the defaulted company's debt is settled through the sale of their assets or
the restructuring of their debt. These estimates do not represent the discounted
present value of these future considerations.
        Investments  in common and preferred  stock are carried at market,  with
unrealized  gains  (losses)  recorded  in  stockholders'  equity for  securities
available-for-sale.
        Investments  in  debt  and  equity   securities   which  were  purchased
principally  for the  purpose of selling  such  securities  in the near term are
classified as trading  securities  and are carried at market.  Unrealized  gains
(losses) are included currently in the results of earnings.
        The cost of securities sold is determined on the identified  certificate
basis.
        Other long-term investments include policy loans and mortgage loans
on real estate which
        are carried at cost less principal  payments since date of  acquisition,
and certain partnership  investments which are carried at an amount equal to the
company's share of the partner's
        estimated  market value with any unrealized  gains or losses recorded in
net investment income.
9
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
1. Summary of Significant Accounting Policies (continued):
-----------------------------------------------------------
D.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

        Estimated  fair value amounts have been  determined by the company using
available market information and appropriate valuation methodologies. Due to the
fact that considerable
        judgment is required to interpret  market data to develop the  estimates
of fair value,  the estimates  presented are not  necessarily  indicative of the
amounts that could be realized in a current market exchange.
        The carrying values and estimated fair values of the company's
financial
        instruments as of September 30, 1996, and December 31, 1995, were as
follows:

       (000's Omitted)

                                                 1996              1995
                                                 ------           ---------
                                       Carrying    Fair    Carrying     Fair
                                        Value     Value     Value       Value
---------------------------------     ----------   ------   ---------    ------
    Assets
          Debt securities ........  $2,614,208  2,614,208 2,046,091   2,046,091
          Equity securities ......      33,211     33,211     9,543       9,543
          Other long-term investments   41,358     41,376    39,491      39,546
          Short-term investments ...       372        372       436         436
          Cash and cash equivalents .   43,436     43,436    48,281      48,281
          Accounts receivable on
           securities settlements in
            process ................     7,120      7,120    10,873      10,873
          Accounts receivable and
           accrued investment income .  39,834     39,834    29,811      29,811
    Liabilities:
          Future policy benefits -
           investment contracts ..   2,733,926  2,557,642 2,022,653   1,900,895
          Other policy liabilities .     7,362      7,362     7,312       7,312
          Subordinated debentures
           payable ........             65,000     65,000         -           -
          Notes payable ..........           -         -      7,000       7,000
          Amounts due on securities
           settlements in process .....  5,804      5,804     1,438       1,438
          Accrued expenses and other
           liabilities .........        12,611     12,611     4,080       4,080

        DEBT  SECURITIES  - Fair  values  are based on quoted  market  prices or
dealer quotes,  if available.  If a quoted market price is not  available,  fair
value is estimated using quoted market prices for similar securities.
        EQUITY  SECURITIES  - Fair  value  equals  the  carrying  value as these
securities are carried at quoted market value.
        OTHER  LONG-TERM  INVESTMENTS  - For certain  homogeneous  categories of
mortgage  loans,  fair  value  is  estimated  using  quoted  market  prices  for
securities   backed  by  similar  loans,   adjusted  for   differences  in  loan
characteristics.  Fair value of policy loans and other long-term  investments is
estimated to approximate the assets' carrying value.
        SHORT-TERM  INVESTMENTS  AND CASH AND CASH  EQUIVALENTS  - The  carrying
amounts reported in the balance sheet approximate the assets' fair value.
        AMOUNTS  RECEIVABLE ON SECURITIES  SETTLEMENTS IN PROCESS - The carrying
amount reported in the balance sheet  approximates the fair value of this asset.
10 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1. Summary of Significant Accounting Policies (continued):
-----------------------------------------------------------
        ACCOUNTS RECEIVABLE AND ACCRUED INVESTMENT INCOME - The carrying amounts
reported in the balance sheet for these assets approximates fair value.
        FUTURE POLICY  BENEFITS FOR  INVESTMENT  CONTRACTS - The fair values for
deferred  annuities  were  estimated  to be the amount  payable on demand at the
reporting date as those  investment  contracts have no defined  maturity and are
similar to a deposit  liability.  The amount  payable at the reporting  date was
calculated as the account balance less any applicable surrender charges.
        OTHER POLICY  LIABILITIES - The carrying  amount reported in the balance
sheet approximates the fair value of these liabilities.
        SUBORDINATED  DEBENTURES  PAYABLE  - The  fair  value  of the  company's
debentures has been  estimated to be an amount equal to the balance  reported in
the balance sheet.
        NOTES  PAYABLE - The fair value of the  company's  note payable has been
estimated to be an amount equal to the balance reported in the balance sheet.
        AMOUNTS DUE ON SECURITIES  SETTLEMENTS IN PROCESS - The carrying  amount
reported in the
        balance sheet approximates the fair value of this liability.
        ACCRUED EXPENSES AND OTHER LIABILITIES - The carrying amount reported
in the balance sheet approximates the fair value of these liabilities.
        The use of different market assumptions and/or estimation
methodologies could have a material effect on the estimated fair value
amounts.
E. SIGNIFICANT RISKS AND UNCERTAINTIES:
        NATURE OF OPERATIONS - The company  specializes  in the sale of deferred
annuity products, the earnings on which are not currently taxable to the annuity
owner. Any changes in tax regulations  which eliminate or  significantly  reduce
this advantage of tax deferred income would  adversely  impact the operations of
the company. The company's products are marketed nationwide through a network of
independent  agents. The company is not dependent on any one agent or agency for
a substantial amount of its business. No single agent accounted for more than 1%
of annuity sales in 1995,  and the top twenty  individual  agents  accounted for
approximately 11% of 1995 annuity sales.
        USE OF  ESTIMATES  IN THE  PREPARATION  OF  FINANCIAL  STATEMENTS  - The
preparation  of financial  statements  in  conformity  with  generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  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 may differ from those estimates.
        CERTAIN  SIGNIFICANT  ESTIMATES - Certain costs  incurred to acquire new
business  are deferred  and  amortized in relation to the  incidence of expected
gross profits over the expected life of the policies.  Determination of expected
gross profits includes  management's  estimate of certain elements over the life
of the policies,  including  investment  income,  interest to be credited to the
contract,  surrenders and resultant surrender charges, deaths and in the case of
life insurance,  mortality charges to be collected.  These estimates of expected
gross profits are used as a basis for amortizing deferred costs. These estimates
are periodically reviewed by management and, if actual experience indicates that
the  estimates  should be revised,  the total  amortization  recorded to date is
adjusted  by a charge  or credit  to  earnings. 
F.  DEFERRED  COST OF  POLICIES PRODUCED:
        The costs of producing new business  (primarily  commissions  and policy
expenses),  which vary with and are directly  related to the  production  of new
business, have been deferred. The deferred
11 <PAGE>

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1. Summary of Significant Accounting Policies (continued):
-------------------------------------------------------------
costs related to  investment-type  deferred  annuity  contracts are amortized in
relation to the  incidence of expected  gross  profits over the expected life of
the policies.  For single premium life insurance,  deferred  policy  acquisition
costs are amortized  over the life of the  policies,  but not more than 20 years
for  policies  issued  before  January l,  1987,  and not more than 30 years for
policies issued after December 31, 1986, based on the expected gross profits for
the  amortization  periods.  The  deferred  costs  related to  traditional  life
contracts are amortized over the premium paying period for the related  policies
using the same actuarial  assumptions as to interest,  mortality and withdrawals
as are used to calculate the reserves for future benefits.
        Net investment gains (losses)  realized in the first nine months of 1996
and 1995 resulted in the company experiencing investment margins greater than or
less than those estimated. As a result, $362,011 and $229,637 of the unamortized
balance of cost  deferred on policies  produced  was expensed in the nine months
ended September 30, 1996 and 1995, respectively. The amount charged off is based
on actual  gross  profits  earned to date in  relation  to total  gross  profits
expected to be earned over the life of the related contracts.
        Estimates of the expected gross profits to be realized in future
years include the
        anticipated  yield on  investments.  Cost deferred on policies  produced
will be adjusted in the future based on actual investment income earned.
G.  DEFERRED COST OF POLICIES PURCHASED:
        At the date of acquisition of a company, a portion of the purchase price
is  allocated  to the right to  receive  future  cash  flows  from the  existing
insurance  contracts.  The amount allocated  represents the present value of the
projected future cash flows from the acquired  policies.  These projections take
into account mortality, surrenders, operating expenses, investment yields on the
investments  held to back the  policy  liabilities  and other  factors  known or
expected at the valuation date based on the judgment of management.
        The deferred cost of policies  purchased is amortized in relation to the
incidence of expected cash flows over the expected  life of the policies.  If it
is  determined  that the present value of future cash flows is  insufficient  to
recover the deferred  cost of policies  purchased,  its  carrying  value will be
reduced with a corresponding charge to earnings.
H.  GOODWILL:
        Goodwill  represents  the excess of the amount paid to acquire a company
over the fair value of the net assets  acquired.  This balance is amortized on a
straight-line  basis  over a 30-year  period.  If it is  determined  through  an
estimate of future  earnings that the goodwill has been  impaired,  its carrying
value will be reduced with a corresponding charge to earnings.
I.  FUTURE POLICY BENEFITS:
        Liabilities for future policy benefits under life insurance policies,
other than single
        premium  life  insurance,  have been  computed by the net level  premium
method based upon  estimated  future policy  benefits  (excluding  participating
dividends),  investment yield,  mortality and withdrawals  giving recognition to
risk of adverse  deviation.  Interest rates range from 41\2% to 101\2% depending
on the year of issue, with mortality and withdrawal assumptions based on company
and industry experience prevailing at the time of issue.
        For single premium life insurance and single premium annuities, the
future policy
        benefits are equal to the accumulation of the single premiums at the
credited rate of interest and for single premium whole life, less any
mortality charges.
J.  PARTICIPATING POLICIES:
        The  company  issued  participating  policies  in past  years  on  which
dividends  are paid to  policyholders  as  determined  annually  by the Board of
Directors.  The amount of dividends  declared but  undistributed  is included in
other  liabilities.  Policy  benefit  reserves do not  include a  provision  for
estimated future participating dividends.
12 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1. Summary of Significant Accounting Policies (continued):
-------------------------------------------------------------
K.  DEPRECIATION:
        The home office  buildings are  depreciated on the  straight-line  basis
over estimated  lives of up to 40 years.  Other  depreciation is provided on the
straight-line basis over useful lives ranging from 5 to 8 years.
L.  INCOME TAXES:
        The company and its subsidiaries prepare and file their income tax
returns on a
        consolidated basis.
        The company  provides  for the  recognition  of deferred  tax assets and
liabilities  for the expected  future tax  consequences of events that have been
reported in the financial statements on the liability method.
M.  EARNINGS PER SHARE:
        Primary  earnings per share of common stock are computed by dividing net
earnings by the sum of the weighted average number of shares  outstanding during
the period plus dilutive  common stock  equivalents  applicable to stock options
and warrants calculated using the treasury stock method.  Fully diluted earnings
per share assumes the conversion of the convertible  debentures outstanding with
applicable  reduction  in  interest  expenses  related  to  the  debentures. 
N. CONSOLIDATED STATEMENTS OF CASH FLOWS:
        For purposes of reporting cash flows, cash and cash equivalents includes
cash and money market accounts.
O.  NEW ACCOUNTING STANDARDS:
        Effective  January 1, 1995,  the company  adopted the provisions of SFAS
No. 119,  "Disclosure About Derivative  Financial  Instruments and Fair Value of
Financial  Instruments."  This Statement  requires  disclosure about the amount,
nature, and terms of derivative financial instruments.  Since the company has no
derivative financial
        instruments as defined in the Statement, the adoption of this accounting
standard did not result in any additional financial statement disclosure.
        Effective  November 30, 1995,  the company  adopted the provisions of "A
Guide to Implementation  of Statement 115 on Accounting for Certain  Investments
in Debt and Equity  Securities" and transferred all bonds with an amortized cost
of $1,159,390,768  classified as  held-to-maturity  to  available-for-sale.  The
effect of the adoption was an increase in  stockholders'  equity of  $21,218,205
(net of related amortization of deferred policy acquisition costs of $12,792,403
and  deferred  income  taxes of  $11,425,188).  Net  earnings for the year ended
December  31,  1995 were not  affected by the  adoption  of this  implementation
guide.
        Effective for fiscal years  beginning  after December 15, 1995, SFAS No.
121, "Accounting for the Impairment of Long Lived Assets" establishes accounting
standards for the  impairment of long-lived  assets,  certain  intangibles,  and
goodwill related to those assets.  The company does not expect this Statement to
have a material affect on its consolidated financial statements.
        Effective  for financial  statements  for fiscal years  beginning  after
December 15, 1995, SFAS No. 123, "Accounting for Stock-Based Compensation," will
require  increased   disclosure  of  compensation  expense  arising  from  stock
compensation  plans. The Statement  encourages rather than requires companies to
adopt a new method that  accounts for stock  compensation  awards based on their
estimated fair value at the date they are granted.  Companies will be permitted,
however,  to  continue  accounting  under  APB  Opinion  No.  25 which  requires
compensation  cost be recognized  based on the difference,  if any,  between the
quoted market price of the stock on the date of grant and the amount an employee
must pay to acquire the stock.  The company  will  continue to apply APB Opinion
No. 25 in its consolidated  financial statements and will disclose pro forma net
income  and  earnings  per share in a  footnote  to its  consolidated  financial
statements, determined as if the new method were applied.
13 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

1. Summary of Significant Accounting Policies (continued):
-----------------------------------------------------------
P.  RECLASSIFICATIONS:
        Certain reclassifications have been made to conform the September 30,
1995 and  December  31, 1995  financial  statements  to the  September  30, 1996
presentation.
2. Investments:
-----------------
A summary of investment income is as follows:
                                                            (000's Omitted)
                            For the Nine Month Period
                               Ended September 30,
                                                             1996        1995

Debt securities .......................................   $ 135,403     109,827
Equity securities .....................................       1,057          70
Other long-term investments ...........................       3,590       5,258
Short-term investments ............. ..................       1,641       1,173


                                                            141,691     116,328
Less investment expenses ..............................       1,987       1,604

Net investment income .................................   $ 139,704     114,724


                                                            (000's Omitted)
                            For the Nine Month Period
                               Ended September 30,
                                                              1996        1995

Net investment gains (losses): Realized investment gains (losses):
    Debt securities, available-for-sale ..............    $   3,404      (1,409)
    Debt securities, held-to-maturity .................        --           304
    Debt securities, trading ............... ..........         360          --

    Equity securities, available-for-sale .............         707         461
    Equity securities, trading ........................         282          --
    Other ..........................................           (122)       (349)

Net realized investment gains (losses) ................       4,631        (993)

 Unrealized investment gains (losses):
    Debt securities, trading ..........................         154          --
    Equity securities, trading .........................          7          --

Net unrealized investment gains (losses) ..............         161          --

Net investment gains (losses) .........................   $   4,792        (993)

        Certain  limited  partnership  investments  are  included in income from
other long-term  investments.  These funds (commonly referred to as hedge funds)
are managed by outside investment advisors.  The investment  guidelines of these
partnerships  provide for a broad range of  investment  alternatives,  including
stocks,  bonds,  futures,  options,  commodities,  and various  other  financial
instruments.  These  investments were purchased with the strategy that yields in
excess of the S&P 500 Index may be obtained.  The partnerships are carried at an
amount equal to the company's share of the partnerships'  estimated market value
with related  unrealized gains and losses recorded in net investment  income. In
accordance with the permitted  guidelines,  the  investments  purchased by these
partnerships  may  experience   greater  than  normal   volatility  which  could
materially affect the company's earnings for any given period.
                                       14
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
------------------------------
        The maturity of the company's debt and equity securities portfolio as of
September 30, 1996 was as follows:

                                                       (000's Omitted)
                                                   As of September 30, 1996
                                             Available-for-Sale        Trading
                                                   Estimated           Estimated
                                        Amortized    Market    Amortized  Market
                                          Cost       Value       Cost    Value
                                      ---------      ------   ---------   ------

Debt securities:
 One year or less ...............         $   62,830    63,220       -         -
 Two years through five years ..........     492,805   502,395    4,336    4,333
 Six years through ten years ...........   1,387,807 1,395,011   41,151   41,307
 Eleven years and after .........            607,460   607,512      432      430
                                           2,550,902 2,568,138   45,919   46,070
Equity securities ..................          31,266    31,143    2,051    2,068
                                          $2,582,168 2,599,281   47,970   48,138

        These tables include mortgage-backed securities based on the
    estimated cash flows of the underlying mortgages.
        The book value,  estimated market value and unrealized  market gains and
losses of debt and equity  securities as of September 30, 1996, and December 31,
1995, were as follows:
                                                      (000's Omitted)
                                                                     Estimated
                                        Amortized Unrealize Unrealize   Market
                                          Cost      Gains   Losses       Value
    September 30, 1996 Bonds, available-for-sale:
  Corporate debt obligations
  Investment grade .................   $1,485,166   27,233   17,544   1,494,855
  High-yield .......................      198,655    3,646    2,896     199,405
                                        1,683,821   30,879   20,440   1,694,260
  U.S. Treasury obligations ........       47,491      305      378      47,418
  Mortgage-backed securities
  Investment grade .................      812,937   13,688    5,155     821,470
  High-yield .......................        6,653     --      1,663       4,990
   Bonds, available-for-sale .......    2,550,902   44,872   27,636   2,568,138
 Bonds, trading:
  Corporate debt obligations
  Investment grade .................        7,344       40       45       7,339
  High-yield .......................       38,575      314      158      38,731
    Bonds, trading .................       45,919      354      203      46,070
   Total bonds .....................    2,596,821   45,226   27,839   2,614,208
Equity securities ..................       33,317    1,276    1,382      33,211
                                       $2,630,138   46,502   29,221   2,647,419
                                       15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

2. Investments (continued):
-----------------------------
                                                      (000's Omitted)
 
                                                                       Estimated
                                      Amortized   Unrealized Unrealized   Market
                                        Cost          Gains   Losses      Value
     December 31, 1995
  Bonds, available-for-sale:
  Corporate debt obligations
  Investment grade                   $1,076,873       63,321     724   1,139,470
  High-yield                            147,878        5,468   1,810     151,536
                                      1,224,751       68,789   2,534   1,291,006
  U.S. Treasury obligations              51,743          942      21      52,664
  Mortgage-backed securities
  Investment grade                      661,652       32,062       1     693,713
  High-Yield                              9,631          -     2,408       7,223
  Bonds, available-for-sale           1,947,777      101,793   4,964   2,044,606
 Bonds, trading:
  Corporate debt obligations
  Investment grade                          458          -         7         451
  High-yield                              1,031            5       2       1,034
   Bonds, trading                         1,489            5       9       1,485
     Total bonds                      1,949,266      101,798   4,973   2,046,091
  Equity securities                       9,232          614     303       9,543
                                     $1,958,498      102,412  5,276    2,055,634
        The preceding  table  includes the carrying  value and estimated  market
value of debt securities which the company has determined to be impaired (othe r
than temporary decline in value) as follows:
                                               (000's Omitted)
                                     Accumulated                      Estimated
                         Original       Write        Carrying           Market
                           Cost         Downs          Value             Value

September 30, 1996     $  7,545         7,545             -                 -
December 31, 1995      $  7,545         7,545             -                 -

        The  company  defines  high-yield  securities  as those  corporate  debt
obligations rated below investment grade by Standard & Poor's and Moody's or, if
unrated,  those that meet the  objective  criteria  developed  by the  company's
independent  investment  advisory firm.  Management  believes that the return on
high-yield securities  adequately  compensates the company for additional credit
and liquidity  risks that  characterize  such  investments.  In some cases,  the
ultimate  collection  of principal  and timely  receipt of interest is dependent
upon  the  issuer  attaining  improved  operating  results,  selling  assets  or
obtaining financing.
16 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

2. Investments (continued):
----------------------------

        The amortized cost,  estimated market value and unrealized  market gains
and losses by type of  mortgage-backed  security as of September  30, 1996,  and
December 31, 1995 were as follows:

                                                     (000's Omitted)
                                                                      Estimated
                                         Amortized Unrealized Unrealized Market
             September 30, 1996            Cost     Gains       Losses   Value
---------------------------------    --------   ------   ----------   ----------
   Government agency mortgage-backed securities:
    Planned amortization classes ...........   $   -        -        -        -
    Targeted amortization classes and
     accretion directed classes ............       -        -        -        -
    Sequential classes ......................      -        -        -        -
    Pass-throughs ..........................      25        2        -       27
         Total government agency
         mortgage-backed securities .....         25        2        -       27
 Government-sponsored enterprise mortgage-backed securities:
    Planned amortization classes ........    527,198   10,204     2,904 534,498
    Targeted amortization classes and
     accretion directed classes .......       44,703      464         -  45,167
    Sequential classes ..................      8,942       96         -   9,038
    Pass-throughs ................... ...      3,348       31         -   3,379
         Total government-sponsored enterprise
            mortgage-backed securities ......584,191   10,795     2,904 592,082
Other mortgage-backed securities:
    Planned amortization classes ...... .     15,248      117        30  15,335
    Sequential classes .........  .......    191,960    2,501     2,217 192,244
    Pass-throughs ..................               8        1        -        9
    Subordinated classes ...............      28,158      272     1,667  26,763
      Total other mortgage-backed securities 235,374    2,891     3,914 234,351
Total mortgage-backed securities ........   $819,590   13,688     6,818 826,460
                                       17
<PAGE>


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
---------------------------


                                                       (000's Omitted)
                                                                      Estimated
                                     Amortized  Unrealized  Unrealized  Market
       December 31, 1995               Cost        Gains       Losses    Value

Government agency mortgage-backed securities:
    Planned amortization classes ...  $ 71,164    1,823            -     72,987
    Targeted amortization classes and
     accretion directed classes .......  7,833      360            -      8,193
    Pass-throughs ......................    32        3            -         35
        Total government agency
           mortgage-backed securities   79,029    2,186            -     81,215
Government sponsored enterprise mortgage-backed securities:
    Planned amortization classes ..... 403,359   23,750            -    427,109
    Sequential classes ..........       19,546    1,405            -     20,951
    Pass-throughs .................      3,258       21            -      3,279
 Total government sponsored enterprise
    mortgage-backed securities ..      426,163   25,176            -    451,339

Other mortgage-backed securities:
    Planned amortization classes ....   18,574      172             -    18,746
    Sequential classes ..........      134,245    4,484             1   138,728
    Pass-throughs ...............           11        -             -        11
    Subordinated classes .........      13,261       44         2,408    10,897
   Total other mortgage-backed
securities                             166,091    4,700         2,409   168,382
Total mortgage-backed securities ...  $671,283   32,062         2,409   700,936

        Certain mortgage-backed securities are subject to significant prepayment
risk.  This is due to the fact that in  periods  of  declining  interest  rates,
mortgages may be repaid more rapidly than  scheduled,  as individuals  refinance
higher rate mortgages to take advantage of the lower
        current rates. As a result,  holders of  mortgage-backed  securities may
receive large prepayments on their investments which they are unable to reinvest
at an  interest  rate  comparable  to  the  rate  on  the  prepaying  mortgages.
Mortgage-backed pass-through securities and sequential
        classes,  which  comprised  24.9% and 23.4% of the carrying value of the
company's  mortgage-backed  securities as of September 30, 1996 and December 31,
1995, respectively, are sensitive to this prepayment risk.
        A portion of the company's mortgage-backed securities portfolio
consists of planned
        amortization  class  ("PAC"),  targeted  amortization  class ("TAC") and
accretion  directed class ("AD")  instruments.  These securities are designed to
amortize in a more predictable manner by shifting the primary risk of prepayment
to  investors  in  other  tranches  (support  classes)  of  the  mortgage-backed
security.  PAC, TAC and  ADsecurities  comprised 71.6% and 74.6% of the carrying
value of the company's  mortgage-backed  securities as of September 30, 1996 and
December 31, 1995.
        As of  September  30,  1996,  71.3%  of  the  company's  mortgage-backed
securities  were issued by either  government  agencies or  government-sponsored
enterprises,  compared  to  75.3% as of  December  31,  1995.  The  credit  risk
associated  with these  securities is generally less than other  mortgage-backed
securities.  With  the  exception  of seven  issues,  with a  carrying  value of
$28,989,648 as of September 30, 1996, all of the company's  investments in other
mortgage-backed securities are rated A or better by Standard& Poor's or Moody's.
                                       18
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
2. Investments (continued):
---------------------------

        The  amounts  shown  as  "estimated   market"  are  primarily  based  on
quotations  obtained from  independent  sources such as broker  dealers who make
markets  in  similar  securities.  Unless  representative  trades of  securities
actually occur at the balance sheet date,  these quotes are generally  estimates
of  market  value  based  on  an  evaluation  of  appropriate  factors  such  as
institution-size  trading in similar securities,  yield, credit quality,  coupon
rate,  maturity,  type of issue and other market data. Losses are recogni zed in
the period they occur based upon specific review of the securities portfolio and
other factors.
        The  consideration  received  on sales of debt  and  equity  securities,
carrying value and realized gains and losses on those sales were as follows:

                                                   (000's Omitted)
                                               For the Nine Month Period
                                                  Ended September 30,
                                          -------------------------------
                                                 1996         1995
Consideration received ...............       $ 557,219       175,505
Carrying value .......................         552,467       176,149
Change in unrealized gains (losses) on
trading securities ...................             161            -
Net investment gains (losses) ........         $ 4,913          (644)
Investment gains .....................        $ 13,262         1,533
Investment losses ....................          (8,510)       (2,177)
Change in unrealized gains (losses) on
trading securities ...................             161             -
Net investment gains (losses) ........         $ 4,913          (644)

        The above table  contains no sales of  securities  which the company had
classified as held-to-maturity.
        Net unrealized gains (losses) on debt securities held-to-maturity,
debt securities
        available-for-sale,   debt   securities   trading,   equity   securities
available-for-sale and equity securities trading changed as follows:



                                             (000's) Omitted
                                        Net Unrealized Gains (Losses)
                          Debt        Debt                   Equity
                        Securities   Securities   Debt     Securities   Equity
                         Held-to-    Available- Securities Available- Securities
                        Maturity    for-Sale     Trading    for-Sale    Trading

Balance as of January 1, 1995..    $ (91,493)      (14,092)      -    187      -
1995 Net Change                       91,493       110,921      (4)   114     10
Balance as of December 31, 1995            -        96,829      (4)   301     10
1996 Net Change                            -       (79,593)    155   (424)     7
Balance as of September 30, 1996..  $      -        17,236     151   (123)    17
                                       19
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

3. Other Assets:
----------------

        Other assets consist of the following:
                                                         (000's Omitted)
                                                   September 30, December 31,
                                                       1996          1995
       Property and equipment at cost:
         Home office properties
          (including land of $1,067).......          $  14,780          3,643
         Furniture and equipment...........              4,887          3,711
         Automobiles.......................                174             99
                                                        19,841          7,453
         Less accumulated depreciation....               5,854          3,650
                                                        13,987          3,803
        Goodwill............................            12,654             68
        Other...............................             4,249            713
                                                      $ 30,890          4,584
4. Reinsurance:
---------------
        The company  reinsures  portions  of  insurance  it writes.  The maximum
amount of risk retained by the company on any one life is $150,000.
        A summary of reinsurance data follows (000's Omitted):
 For the                                                               Ceded to
 Period                                      Gross        Other           Net
 Ended          Descriptions                 Amount     Companies        Amount
September 30,   Life insurance in force    $303,309      228,696         74,613
        1996    Insurance premiums and
                policy charges.......        11,012          561         10,451

September 30,   Life insurance in force     318,346      243,301         75,015
        1995    Insurance premiums and
                policy charges.......         7,267          713          6,554
September 30,   Future policy benefits... 3,002,153      246,515      2,755,638
   1996

 December 31,   Future policy benefits... 2,259,028      145,183      2,113,845
  1995

        The  company  is  contingently  liable for the  portion of the  policies
reinsured  under each of its existing  reinsurance  agreements  in the event the
reinsurance  companies are unable to pay their  portion of any reinsured  claim.
Management believes that any liability from this contingency is unlikely.
        The company had  amounts  receivable  under  reinsurance  agreements  of
$247,268,922  and  $146,617,611 as of September 30, 1996, and December 31, 1995,
respectively.
        Of the total amounts  receivable,  $142,716,659  and  $144,965,371  were
associated with a coinsurance agreement entered into in 1989, which ceded 90% of
the risk on the company's  block of single  premium whole life policies  written
prior to 1989 to Employers Reassurance Corporation (ERC). The agreement provides
that ERC  assumes  90% of all risks  associated  with each  policy in the block.
Reimbursement received from ERC for amounts paid by the company on the reinsured
risks totalled  $8,222,668  and $6,787,793 for periods ended  September 30, 1996
and 1995, respectively.
                                       20
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

4. Reinsurance (continued):
--------------------------
        The following table identifies the components of the amounts  receivable
from ERC:

                                                     (000's Omitted)
                                              September 30,       December 31,
                                                   1996               1995

  Reserve for future policy benefits........    $140,322           143,558
  Reimbursement for benefit payments and
   administrative allowance.................         693             1,407
                                                $141,015           144,965

        FBL and Philadelphia Life Insurance Company are parties to a
reinsurance agreement under which FBL ceded 100% of the risk on certain
single premium deferred annuity policies on a coinsurance basis. As of
September 30, 1996, the company had amounts receivable of $104,522,263 resulting
from this agreement.
5. Convertible Subordinated Debentures:
---------------------------------------

        On July 12, 1996,  the company  closed on an offering of  $65,000,000 of
Convertible  Subordinated  Debentures.  These  securities  were placed in Europe
pursuant to Regulation S under the Securities Act of 1933. The debentures pay an
annual  cash  yield  of 3%  payable  semi-annually,  are  convertible  into  the
company's common stock at $17.125,  and mature in seven years unless  previously
converted or redeemed.  The debentures are  redeemable,  in whole or in part, at
the option of the holders,  on September 30, 2001, at 124.25% of their principal
amount  (which in essence  reflects  deferred  interest at a compounded  rate of
4.25%),  plus  accrued  but unpaid  cash  interest at the coupon rate of 3%. The
debentures are redeemable,  at the company's  option,  on or after September 30,
1999, at certain  specified  declining  redemption  prices  (starting at 103% of
principal  value) plus accrued but unpaid cash  interest (at the rate of 3%) and
accrued deferred interest (at a compounded rate of 4.25%). The debentures may be
redeemed  any time  after  August 15,  1996,  at the  company's  option at their
principal  amount plus  accrued  cash  interest (at the rate of 3%), but with no
payment for accrued  deferred  interest,  if the  average  closing  price of the
company's common stock equals or exceeds $23.12 for 20 consecutive trading days.
        The debentures are unsecured obligations of the company, subordinated
to all existing and future senior indebtedness. Approximately $35,000,000 of
the net proceeds of the offering were used to repay existing bank debt,
$20,000,000  was  contributed to American and the balance will be used for other
general corporate purposes.
6. Credit Agreement:
--------------------
        On  April  8,  1996,  the  company  entered  into a  $35,000,000  credit
agreement  with The  First  National  Bank of  Chicago  (First  Chicago),  Fleet
National  Bank  (Fleet)  and  Boatmen's  First  National  Bank  of  Kansas  City
(Boatmen's),  as Lenders.  On that same date,  the company  borrowed  the entire
$35,000,000,  using the  proceeds  to repay  existing  bank debt,  fund the cash
portion of the acquisition of FBG and for general corporate purposes.
        On July 12, 1996 the company  paid off the  existing  bank debt from the
proceeds of the Convertible Subordinated Debentures.

7. Retirement Plans:
--------------------
        The company  sponsors an Employee  Stock  Ownership  Plan (ESOP) for all
full-time  employees  with  one year of  service.  Qualifying  participants  may
contribute an amount not to exceed 10% of covered compensation. The company made
no  contributions to this plan during either the nine months ended September 30,
1996 or 1995.
        The company  sponsors a Leveraged  Employee Stock Ownership Plan (LESOP)
for all full-time employees with one year of service.
21
<PAGE>

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

7. Retirement Plans (continued):
--------------------------------
        The LESOP has acquired 370,244 shares of the company's stock through the
proceeds of a note payable to American.  The note bears  interest at 7.0% and is
payable in annual installments through December 30, 2002. The note had an unpaid
principal balance of $3,010,882 as of September 30, 1996, and December 31, 1995.
        Each year the company will make  contributions to the LESOP which are to
be used to make loan  interest and  principal  payments.  On December 31 of each
year,  a  portion  of the  common  stock  will  be  allocated  to  participating
employees.  Of the 355,540 shares of the company's common stock now owned by the
LESOP,  113,323 shares have been allocated to the  participating  employees with
the remaining 242,217 shares being held by American as collateral for the loan.
        The unallocated portion of the company's common stock owned by the
LESOP has been
        recorded  as a  separate  reduction  of  stockholders'  equity.  Accrued
contributions  to the LESOP were  $245,214,  and  $229,173,  for the nine months
ended September 30, 1996, and 1995, respectively.
        During 1992, the company's Board of Directors approved  retirement plans
for its  members  and  members  of the  Board of  Directors  of  certain  of its
subsidiaries.  The plans provide that retired  Directors shall serve as Advisory
Members  to the  Board  at a fee of $750  per  meeting  attended  and a  monthly
lifetime  benefit in the amount of $750 be paid to each qualified  Director upon
retirement.  In addition,  the company has agreed to continue any life insurance
policies being provided as of the date of retirement.
        To qualify  for this  benefit,  a Director  must reach the age of 60 and
meet  years of  service  requirements  thereafter.  The plan  also  calls  for a
mandatory retirement on the date the Director's term expires following age 70.
        A liability in the amount of $432,748, representing the present value of
future benefits, has been established.  Charges (credits) to earnings related to
the plans were $(2,889) and  $(87,761)  for the nine months ended  September 30,
1996 and 1995, respectively.
        Effective January 1, 1993, the company adopted an Age-Weighted Money
Purchase Plan for all full-time employees with one year of service. The full
cost of this plan will be paid by the company with qualifying participants
receiving contributions based upon their age at plan implementation and
current salary. Contributions to the Age-Weighted Money Purchase Plan for the
nine months  ended  September  30,  1996,  and 1995 were  $273,099  and $166,292
respectively.
8. Stockholders' Equity:
------------------------
        Dividends by American and FBLto AmVestors are limited by laws applicable
to insurance  companies.  Under Kansas law, American may pay a dividend from its
surplus profits,  without prior consent of the Kansas Commissioner of Insurance,
if the  dividend  does not exceed the  greater of 10% of  statutory  capital and
surplus at the end of the  preceding  year or all of the statutory net gain from
operations  of the preceding  year,  provided that such dividend does not exceed
its unassigned surplus (surplus profits) at the end of the preceding year. As of
December 31,  1995,  surplus  profits of American  were  $16,764,059  and 10% of
statutory  capital  and  surplus was  $9,828,859.  American is also  required to
maintain,  on a statutory  basis,  paid-in capital stock and surplus (capital in
excess of par value and  unassigned  surplus) of $400,000  each. As of September
30, 1996, and December 31, 1995,  American's  statutory  capital and surplus was
$95,762,493 and $98,288,590,  respectively. Statutory net income (loss) for 1995
was $5,984,601 .
        Under Florida  insurance law and  regulations,  the aggregate  dividends
that FBL may pay without prior regulatory  approval is limited to the greater of
the sum of statutory  net operating  profits and net realized  capital gains for
the  preceding  calendar  year  (provided  there is  available  surplus from net
operating profits and net realized capital gains) or 10%
22 <PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

8. Stockholders' Equity (continued):
-----------------------------------
of its available and  accumulated  statutory  surplus derived from net operating
profits and net realized  capital  gains.  After payment of a dividend,  FBLmust
have 115% of required statutory surplus.
        On December 31, 1995, FBLhad accumulated  statutory surplus derived from
net operating  profits and net realized capital gains of $23.7 million.  The sum
of  statutory  net profits  and net  realized  capital  gains for 1995 were $3.4
million. As of September 30, 1996,  available surplus from net operating profits
and net realized capital gains was $2.4 million.  Required  statutory surplus as
of September 30, 1996 was $19.6 million and actual surplus was $34.6 million.
        In  connection   with  the  original   establishment   of  the  Interest
Maintenance  Reserve  (IMR),  the  Commissioner  of  Insurance  of  Kansas,  the
company's  domiciliary  state,  ordered that  American  prepare its December 31,
1992,  NAIC Annual  Statement Form to equitably  allocate 1992 capital gains and
losses, not included in the calculation of the Asset Valuation Reserve (AVR), on
other than government securities, fifty (50%) percent to surplus and fifty (50%)
percent  to IMR,  after  calculation  of the AVR  pursuant  to the  instructions
provided  by  the  NAIC.  This  differs  from  prescribed  statutory  accounting
practices.
        This  represented  a  permitted   accounting   practice  for  regulatory
purposes, the effect of which was to increase statutory surplus by $8,168,000 as
of December 31, 1992 ($5,743,000 as of September 30, 1996).
        In addition,  American  received  permission  from the  Commissioner  of
Insurance of Kansas to amortize  the effects of changing to Actuarial  Guideline
No. 32  concerning  the  Commissioners  Annuity  Reserve  Valuation  Method  for
individual  annuity  contracts over a three-year period beginning in 1995 rather
than to record the full amount of the change of  $2,176,000.  The effect of this
permitted  accounting  practice was to increase statutory surplus by $943,150 as
of December 31, 1995 ($867,675 as of September 30, 1996).
        On March 17, 1989,  the Board of  Directors  of the company  adopted the
1989 Nonqualified  Stock Option Plan. These options have an exercise price equal
to the closing price of the company's common stock on the date of grant and none
may be  exercised  beyond  ten years  from the grant  date.  A total of  899,423
options to acquire  common  stock are  outstanding  under the 1989  Nonqualified
Plan.
        The 1989 Nonqualified Plan is administered by the Board of Directors and
officers  of the  company  and  its  subsidiaries.  The  terms  of the  options,
including the number of shares,  and the exercise  price are subject to the sole
discretion of the Board of Directors.
        Changes during the periods were as follows:

                              For the Period Ended
                           September 30, December 31,
                                                      1996             1995



 Options outstanding, beginning of period..........  841,341            859,837
  Options granted.................................   130,000             87,500
  Options exercised............................      (55,418)          (105,996)
  Options cancelled............................      (16,500)                 -
  Options outstanding, end of period..............   899,423            841,341
  Outstanding options exercisable at end of period.  769,423            779,841
  Options reserved for future grants at end of
  period.....                                        206,247             44,747
 Option prices per share:
   Exercised, during the period................  $4.84-$10.00      $4.84-$10.63
   Outstanding, end of period...............     $4.84-$13.50      $4.84-$12.66
23
<PAGE>

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

8. Stockholders' Equity (continued):
------------------------------------
        On March 17, 1989,  the Board of  Directors  also adopted the 1989 Stock
Appreciation  Rights Plan (the SAR Plan) and the 1989 Restricted Stock Plan (the
Restricted  Stock Plan). The SAR Plan authorized the Board of Directors to grant
stock appreciation  rights to employees,  officers and directors in such amounts
and with such  exercise  prices  as it shall  determine.  No stock  appreciation
rights granted under the SAR Plan may be exercised more than five years from its
date of grant.  The SAR Plan authorized a maximum of 125,000 shares to be issued
pursuant to stock appreciation rights granted thereunder.
                                                   For the Period Ended
                                                 September 30,     December 31,
                                                     1996             1995

 Rights outstanding, beginning of period.               -              -
 Rights granted..........................               -              -
 Rights exercised........................               -              -
 Rights expired..........................               -              -
 Rights cancelled........................               -              -
 Rights outstanding, end of period.......               -              -
 Rights reserved for future grants
  at end of period.......................            5,000              5,000

        The  company   recorded  no  compensation   expense  relating  to  stock
appreciation  rights for the nine months ended  September  30,  1996,  and 1995,
respectively.
        The  Restricted  Stock Plan  authorizes  the Board of  Directors to make
restricted stock awards to employees,  officers and directors in such amounts as
it shall  determine.  The stock  issued  pursuant  to such  awards is subject to
restrictions  on  transferability  for a period  of five  years.  Such  stock is
subject  to a  five-year  vesting  schedule,  and the  company  is  required  to
repurchase all vested stock from a grantee if such grantee's employment with the
company  is  terminated  prior to the lapse of the  transfer  restrictions.  The
Restricted  Stock  Plan  authorizes  a maximum  of  125,000  shares to be issued
thereunder.  No  restricted  stock  awards  have been  granted  pursuant  to the
Restricted Stock Plan.
        On March 28, 1996,  the Board of  Directors  of the company  adopted the
1996  Incentive  Stock  Option Plan (the Plan).  These  options have an exercise
price equal to the closing  price of the  company's  common stock on the date of
grant and none may be  exercised  beyond ten years  from the date of grant.  The
Plan  authorized  a maximum of 950,000  shares to be issued.  A total of 673,000
options to acquire common stock are outstanding.
        The 1996 Incentive Stock Option Plan is administered by the Board of
Directors of the
        company. The term of the options, including the number of shares and the
exercise price are subject to the sole discretion of the Board of Directors.

                                                      For the Period Ended
                                                    September 30,  December 31,
                                                          1996          1995
Options outstanding, beginning of period.............          -            -
Options granted......................................    673,000            -
Options outstanding, end of period...................    673,000            -
Outstanding options exercisable at end of period.....          -            -
Options reserved for future grants at end of period..    297,000            -
Option prices per share:
    Outstanding, end of period.......................     $12.875           -
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

8. Stockholders' Equity (continued):
------------------------------------
        In  conjunction  with a previous  bank  borrowing,  the  company  issued
ten-year  warrants to purchase a total of 170,002  shares of its common stock as
summarized in the following table:
      Warrant       Issue         Number        Exercise   Expiration
       Holder        Date       of Shares        Price        Date
   Morgan Guaranty  12/8/88        75,000      $ 3.9688      12/9/98
                    4/30/92        95,002        6.3855       5/1/02
                                  170,002

        In conjunction  with the acquisition of FBG, the company issued warrants
to purchase  663,708 shares of its common stock.  These warrants are exercisable
at $16.42 per share of common stock and expire on April 2, 2002.
        In addition to the above, the company assumed warrants previously issued
by FBGto purchase a total of 270,689 shares of its common stock as summarized in
the following table:
            Warrant          Issue          Number       Exercise    Expiration
            Holder            Date         of Shares       Price         Date
    Wabash Life Insurance     2/18/92       63,176       $1.9786       2/19/97
    Company                  12/20/92       63,176        1.4839     12/20/2002
                              5/18/93      120,335        1.5582      3/18/2003
                                           246,687


   Other                       Various      24,002     1.3460-3.7188   Various
                                           270,689

9. Other Revenue:
------------------
        Effective  December 1, 1989,  the  company  entered  into a  coinsurance
agreement with Employers  Reassurance  Corporation  (ERC) which reinsured 90% of
the risk on the  company's  block of SPWL policies  written  prior to 1989.  The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the block. These policies continue to be administered by American. In return,
American receives an administrative allowance of $31.50 per policy per year. The
total  allowance  received  during the nine months ended  September 30, 1996 and
1995 was $85,937 and $92,103, respectively.
        Other revenue for the nine months ended September 30, 1996 includes
override commissions of $902,471 attributable to the marketing efforts of
AIMCORand  TIM,  $306,812  of rental  income  received  by FBL and  $105,537  of
advertising revenues received by RBC.
10. Income Taxes:
-----------------
        The provision for income taxes charged to operations was as follows:

                                                 (000's Omitted)
                                               For the nine Months
                                               Ended September 30,
                                                1996           1995
Current income tax expense (benefit).......   $5,001            506
Deferred income tax expense (benefit)......    3,413          5,111
  Total income tax expense.................   $8,414          5,617
 25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

11. Acquisition:
------------------
        On September 8, 1995, the company signed a merger agreement  pursuant to
which it acquired all of the  outstanding  capital  stock of  Financial  Benefit
Group,  Inc.,  (FBG) a Delaware  corporation,  for $5.31 per  share,  payable in
2,722,223  shares of the company's  common stock,  warrants to purchase  663,708
shares of the company's common stock and cash.
        FBG was an insurance  holding  company  which owned all of the shares of
Financial  Benefit Life Insurance  Company,  a Florida  domiciled  insurer which
specializes in the sale and  underwriting of annuity products and is admitted in
41  jurisdictions,  which  includes 39 states,  the District of Columbia and the
U.S. Virgin Islands.  FBG also owned all of the shares of Annuity  International
Marketing  Corporation and The  Insurancemart,  Inc. both of which specialize in
the distribution and marketing of annuities.
        The merger received the approval of the shareholders of both FBG and the
company,  and became effective on April 8, 1996. The consolidated  statements of
earnings  for the nine months  ended  September  30, 1996 include the results of
operations of FBG for the six month period ended September 30, 1996.
        The  transaction  has been accounted for using the purchase  method with
any resulting  goodwill  being  amortized on a straight line basis over a period
not to exceed 30 years. The opening  consolidated  balance sheet of the acquired
entities follows:
                                                    (000's Omitted)
ASSETS
Investments...........................................  $ 524,165
Cash and cash equivalents..............................     8,932
Accounts receivable....................................       815
Amounts receivable under reinsurance agreements........   112,875
Accrued investment income..............................     7,373
Deferred cost of policies purchased....................    45,700
Deferred income taxes..................................     5,023
Goodwill...............................................    12,485
Other assets...........................................     2,994
-------------
Total assets..........................................  $ 720,362

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Policy liabilities..................................... $ 650,174
Notes payable..........................................    15,500
Accrued expenses and other liabilities.................     5,911
Total liabilities.....................................    671,585
Stockholders' Equity:
Common stock, no par value
Paid in capital.......................................     48,777
Total stockholders' equity..........................       48,777
Total liabilities and stockholders' equity...........   $ 720,362

        The  following  table sets forth certain  unaudited pro forma  operating
data of the company for the nine months ended  September 30, 1996 and 1995. This
pro forma data  assumes the  acquisition  of FBG occurred on January 1, 1996 and
1995, respectively.
26 <PAGE>

        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-(Continued)

11. Acquisition (continued):
-----------------------------
                                              Nine Months ended September 30,
                                                 1996              1995
                                         (in thousands, except per share data)
Pro Forma Operating Data:
Total revenue..................................  $162,861       170,026
Earnings before extraordinary item.............    14,231        19,325
Net earnings...................................    13,814        19,325
Earnings per share of common stock:
    Primary:
     Earnings before extraordinary item........     $1.06          1.46
     Net earnings..............................     $1.02          1.46
     Fully diluted:
     Earnings before extraordinary item........     $1.03          1.45
     Net earnings..............................     $1.00          1.45
 Average shares outstanding:
    Primary....................................    13,486        13,251
   Fully diluted...............................    14,659        13,299

12. Contingencies:
------------------

        The  company's  insurance  subsidiaries  are  subject to state  guaranty
association assessments in all states in which it is admitted.  Generally, these
associations guarantee specified amounts payable to residents of the state under
policies  issued by insolvent  insurers.  Most state laws permit  assessments or
some  portion  thereof to be credited  against  future  premium  taxes.  Charges
(credits)   relating  to  the  guaranty  fund   assessments   impacted  1995  by
approximately $1,001,000. The company expects that further charges to income may
be required in the future and will record such amounts  when they become  known.
ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
General
        The company  specializes in the sale of deferred  annuity  products as a
retirement savings vehicle for individuals. During each of the past three years,
sales of deferred  annuities  have  accounted  for at least 96% of the company's
premiums received, while sales of Single Premium Immediate Annuities (SPIAs) and
Flexible  Premium  Universal Life policies  (FPULs) have accounted for virtually
all remaining premiums received.
        The  company's   operating  earnings  are  derived  primarily  from  its
investment results, including realized gains (losses), less interest credited to
annuity contracts and expenses.  Under Generally Accepted Accounting  Principals
(GAAP),   premiums   received  on  deferred   annuities,   SPIAs   without  life
contingencies  and  FPULs,  are not  recognized  as revenue at the time of sale.
Similarly,  policy acquisition costs (principally  commissions)  related to such
sales are not  recognized  as expenses but are  capitalized  as deferred cost of
policies produced,  or "DAC". As a result of this deferral of costs and the lack
of revenue  recognition for premiums received,  no profit or loss is realized on
these contracts at the time of sale.  Premiums  received on deferred  annuities,
SPIAs  without  life  contingencies  and FPULs are  reflected  on the  company's
balance  sheet by an increase in assets equal to the premiums  received and by a
corresponding increase in future policy liabilities.
        The company's earnings depend, in significant part, upon the persistency
of its  annuities.  Over the life of the annuity,  net  investment  income,  net
investment gains (losses) and policy charges are realized as revenue, and DAC is
amortized as an expense.  The tim-
27 <PAGE>
ing of DAC amortization is based on
the projected  realization of profits including realized gains (losses) for each
type of annuity contract and is periodically adjusted for actual experience.  If
a policy is terminated prior to its expected maturity, any remaining related DAC
is expensed in the current  period.  Most of the company's  annuity  policies in
force have  surrender  charges which are designed to discourage and mitigate the
effect of  premature  withdrawals.  As a result,  the  impact on  earnings  from
surrenders  will depend  upon the extent to which  available  surrender  charges
offset the associated amortization of DAC.
        Recent  periods  of  low  interest  rates  have  reduced  the  company's
investment  yields.  As a result of the lower  investment  yields,  the  company
elected to reduce  credited  interest rates on certain of its annuity  products.
Certain  annuities  issued by the  company  include a  "bailout"  feature.  This
feature  generally allows  policyowners to withdraw their entire account balance
without  surrender  charge for a period of 45 to 60 days  following  the initial
determination  of a renewal  crediting rate below a  predetermined  level.  If a
policyowner  elects not to withdraw funds during this period,  surrender charges
are  reinstated.  In 1994 and 1993, the company deemed it advisable,  due to the
general decline in interest rates and the yield on its investment portfolio,  to
reduce credited  interest rates on certain annuity contracts below the "bailout"
level. The aggregate  account values of annuity contracts on which the crediting
rate was reduced below the "bailout"  level  totalled  $109.8 million and $326.2
million during 1994 and 1993, respectively.  As a result, $18.3 million, or 17%,
and $139.6 million,  or 43%, of such policies were  surrendered  during 1994 and
1993,  respectively.  The  company  was able to offset  the  negative  impact of
"bailout"  surrenders on its earnings  through the  realization  of gains on the
sale of its securities. Excluding surrenders from "bailout" products, American's
annuity  withdrawal  rates  were 9% for 1994 and 7% for  1993.  Although,  as of
September 30, 1996,  approximately  $249.0 million, or 14% of American's annuity
account values  contained a "bailout"  provision,  the current credited rates on
these  policies  are above the  "bailout"  rate.  The  "bailout"  rate on $246.9
million of this amount is 6% or less. As of that same date,  approximately $22.3
million,  or  4.4%  of  FBL's  annuity  account  values  contained  a  "bailout"
provision,  the current credited rates on these policies are above the "bailout"
rate. The "bailout" rate on the entire $22.3 million is 5.5% or less, with $18.7
million  at 4.5% or less.  If the  company  reduces  credited  rates  below  the
"bailout" rates on policies  containing  "bailout"  provisions in the future, it
intends to pay any resulting  surrenders  from cash  provided by operations  and
premiums  received.  In  the  event  such  sources  are  not  sufficient  to pay
surrenders, the company would have to sell securities at the then current market
prices.  The company  expects that  withdrawals  on its annuity  contracts  will
increase as such contracts  approach  maturity.  There is no certainty as to the
company's  ability  to  realize  investment  gains in the  future to offset  the
adverse impact on earnings, should future "bailout" surrenders occur.
28
<PAGE>
MARGIN ANALYSIS
        The  company's  earnings are impacted by realized  investment  gains and
losses and by the associated  amortization of deferred cost of policies produced
and purchased.  The actual timing and pattern of such amortization is determined
by the actual  profitability to date (which includes  realized  investment gains
and  losses) and the  expected  future  profitability  on a  particular  annuity
contract.  To the extent investment income is accelerated through realization of
investment  gains,  the  corresponding  amortization  of deferred  costs is also
accelerated  as the  stream of  profitability  on the  underlying  annuities  is
effectively  accelerated.  When investment  losses are realized,  the reverse is
true.  The  following  margin  analysis  depicts the  effects of realized  gains
(losses) on the company's operating earnings:
<TABLE>
<CAPTION>

                                                  For the Nine Months Ended September 30,
                                                        1996                  1995
                                                             (dollars in millions)
                                                              (percent of average
                                                          invested assets annualized)
<S>                                         <C>            <C>      <C>           <C>
Average invested assets <F1> .............   $  2,471.8     100.0%  $  1,962.5     100.0%
Insurance premiums and policy charges ....   $     10.5        .56% $      6.6       .45%
Net investment income <F2> ...............        139.7       7.54       114.7       7.79
Net investment gains (losses), core ......          2.7        .15          -         -
Policyholder benefits ....................       (104.5)     (5.64)      (88.6)     (6.02)
Gross interest margin ....................         48.4       2.61        32.7       2.22
Associated amortization of deferred
 cost of policies produced ...............        (10.7)      (.57)       (8.3)      (.56)
Associated amortization of deferred
 cost of policies purchased ..............         (4.0)      (.21)          -         -
Net interest margin ......................         33.7       1.82        24.4       1.66
Net investment gains (losses), other .....          2.1        .11        (1.0)      (.07)
Associated amortization of deferred
 cost of policies produced ...............          (.8)      (.04)         .2        .02
Associated amortization of deferred
 cost of policies purchased ..............           .4        .02           -         -
Net margin from investment gains (losses),
 other ...................................          1.7        .09         (.8)
Total net margin .........................         35.4       1.91        23.6       1.60
Expenses, net ............................         (9.6)      (.52)       (7.1)      (.48)
Operating earnings .......................         25.8       1.39        16.5       1.12
Interest expense .........................          2.1        .11           -         -
Earnings before income taxes and
 extraordinary items .....................         23.7       1.28        16.5       1.12
Income tax expense .......................          8.3        .45         5.6        .38
Earnings before extraordinary item .......         15.4        .83        10.9        .74
Extraordinary item .......................          (.4)      (.02)          -         -
Net earnings .............................   $     15.0        .81% $     10.9        .74%
Operating earnings .......................   $     25.8       1.39% $     16.5       1.12%
Less: Net margin from investment gains
 (losses), other .........................          1.7        .09         (.8)      (.05)
Operating earnings excluding net margin
 from investment gains (losses), other ...   $     24.1       1.30% $     17.3       1.17%
<FN>
<F1>Average of cash, invested assets (before SFAS 115 adjustment) and net
amounts due to
   or from brokers on unsettled security trades at the beginningand end of
period for
   1995 and time weighted for 1996 for acquisition of FBG effective April 1,
1996.
<F2>Net investment income is presented net of investment expense.
Note: Numbers may not add due to rounding.
</FN>
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>

                                                       For the Quarter Ended September 30,
                                                      1996                      1995
                                                              (dollars in millions)
                                                              (percent of average
                                                           invested assets annualized)
<S>                                       <C>            <C>        <C>                <C>

Average invested assets <F1> ............   $  2,692.0     100.0%     $   1,973.6        100.0%
Insurance premiums and policy charges ...   $      4.1        .61%    $       2.0           .41%
Net investment income <F2> ..............         50.5       7.51            38.5          7.81
Net investment gains (losses), core .....          1.1        .16           -            -
Policyholder benefits ...................        (37.7)     (5.61)          (29.9)        (6.06)
Gross interest margin ...................         18.0       2.68            10.7          2.16
Associated amortization of deferred
 cost of policies produced ..............         (3.7)      (.55)           (2.7)         (.55)
Associated amortization of deferred
 cost of policies purchased .............         (1.4)      (.21)          -            -
Net interest margin .....................         12.9       1.91             8.0          1.62
Net investment gains (losses) ...........          1.2        .17             (.7)         (.14)
Associated amortization of deferred
 cost of policies produced ..............          (.3)      (.04)             .2           .04
Associated amortization of deferred
 cost of policies purchased .............        -         -                -            -
Net margin from investment gains (losses)           .9        .13             (.5)         (.10)
Total net margin ........................         13.7       2.04             7.5          1.52
Expenses, net ...........................         (3.6)      (.54)           (1.9)         (.38)
Operating earnings ......................         10.1       1.50             5.6          1.14
Interest expense ........................          1.4        .20           -            -
Earnings before income taxes and
 extraordinary item .....................          8.7       1.30             5.6          1.14
Income tax expense (benefit) ............          3.0        .45             1.8           .37
Earnings before extraordinary item ......          5.7        .84             3.8           .77
Extraordinary item ......................          (.3)      (.05)              -             -
Net earnings ............................   $      5.3        .79%       $    3.8           .77%
Operating earnings ......................   $     10.1       1.50%       $    5.6          1.14%
Less: Net margin from investment gains
 (losses) ...............................           .9        .13             (.5)         (.10)
Operating earnings excluding net margin
 from investment gains (losses), other ..   $      9.2       1.37%      $     6.1          1.24%

<FN>
<F1>Average of cash, invested assets (before SFAS 115 adjustment) and net
amounts due to
   or from brokers on unsettled security trades at the beginningand end of
period for
   1995 and time weighted for 1996 for acquisition of FBG effective April 1,
1996.
<F2>Net investment income is presented net of investment expense.
</TABLE>
Note: Numbers may not add due to rounding.
30
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended September 30, 1996, and 1995
        INSURANCE  PREMIUMS AND POLICY CHARGES increased $3.9 million or 59%, to
$10.5  million in 1996,  due  primarily to a $3.5 million  increase in surrender
charges  received  on  increased  surrenders  of  annuity  policies,   resulting
primarily from the acquisition of FBG.
        NET INVESTMENT  INCOME increased $25.0 million or 22%, to $139.7 million
in 1996.  This  increase  reflects an increase in average  invested  assets from
$1,962.5  million  in 1995 to  $2,471.8  million  in  1996  offset  in part by a
decrease in the average  yield on invested  assets from 7.8% for the nine months
ended  September 30, 1995, to 7.5% for the same period in 1996.  The increase in
average  invested  assets can be attributed to the acquisition of FBG. The yield
in both periods was impacted by an investment in investment partnerships.  These
partnerships  form a fund of funds  totalling $18.8 million and $22.4 million on
September 30, 1996 and 1995,  respectively.  This fund of funds is structured in
an attempt to  consistently  provide  returns in excess of the Standard & Poor's
(S&P) 500 over  time  without  regard  to the  general  direction  of  financial
markets.  This fund  generated  income of $1.4  million in the 1996 nine  months
compared with $3.0 million in 1995.
        NET INVESTMENT GAINS (LOSSES) were $4.8 million in 1996, compared with a
$1.0  million  loss in 1995.  Gains and losses may be realized  upon  securities
which are disposed of for various  reasons.  The net gains  realized in 1996 are
the result of general portfolio management while the net losses realized in 1995
result primarily from writedowns of $1.0 million on securities deemed to have an
other than temporary dimunition in value. Unrealized gains in the company's bond
portfolio  were $17.4  million,  $96.8 million and $50.8 million as of September
30, 1996, December 31, 1995 and September 30, 1995, respectively.
        BENEFITS,  CLAIMS AND INTEREST CREDITED TO POLICYHOLDERS increased $15.9
million,  or 18%,  to $104.5  million in 1996 from $88.6  million in 1995.  This
increase results  primarily from an increase in annuity  liabilities to $2,823.7
million on September 30, 1996, from $2,033.2 million on September 30, 1995. This
increase  was  partially  offset by a  decrease  in the  average  interest  rate
credited on the  company's  annuity  liabilities,  from 6.0% as of September 30,
1995, to 5.8% as of September 30, 1996. Both the increase in annuity liabilities
and the decrease in the average  interest rate credited on those  liabilities is
largely due to the acquisition of FBG.
        AMORTIZATION  OF  DEFERRED  COST OF  POLICIES  PRODUCED  increased  $3.4
million,  or  42%,  to  $11.5  million  in  1996  from  $8.1  million  in  1995.
Amortization  associated  with gross interest  margin  increased $2.4 million to
$10.7 million in 1996 from $8.3 million in 1995, with the remaining change being
attributable to investment  gains.  Costs incurred during 1996 and deferred into
future policy periods were $30.4 million, compared with $25.1 million in 1995.
        Amortization  of deferred  cost of policies  purchased  of $3.5  million
represents  the  amortization  of the purchase  price  allocated to the policies
acquired in the acquisition of FBG.
        General  insurance  expenses  increased  $2.8  million,  or 44%, to $9.1
million for the 1996 nine months from $6.3  million for the same period in 1995.
This increase is due primarily to the acquisition of FBG.
        Interest expense increased $2.1 million reflecting the borrowing of $7.0
million in December,  1995 and an additional  $28.0 million in April,  1996. The
funds  borrowed in 1996 were used to fund the  acquisition  of FBG.  The company
closed on an offering of $65.0 million of convertible subordinated debentures in
July, 1996 of which $35.2 of the proceeds were used to repay existing bank debt.
        Income tax expense  increased  $2.8 million to $8.4 million in 1996 from
$5.6 million in
31
<PAGE>
1995.  Taxes were provided at an effective rate of 35%
on 1996 income and 34% on 1995 income.
        Three Months Ended  September 30, 1996, and 1995 INSURANCE  PREMIUMS AND
        POLICY CHARGES increased $2.1 million or
1.05%,  to $4.1 million in 1996,  due  primarily  to a $1.8 million  increase in
surrender  charges  received  on  increased   surrenders  of  annuity  policies,
resulting primarily from the acquisition of FBG.
        NET INVESTMENT  INCOME  increased $12.0 million or 31%, to $50.5 million
in 1996.  This  increase  reflects an increase in average  invested  assets from
$1,973.6  million  in 1995 to  $2,692.0  million  in  1996  offset  in part by a
decrease in the average yield on invested  assets from 7.8% for the three months
ended  September 30, 1995, to 7.5% for the same period in 1996.  The increase in
average  invested  assets can be attributed to the acquisition of FBG. The yield
in both periods was impacted by an investment in investment partnerships.  These
partnerships  form a fund of funds  totalling $18.8 million and $22.4 million on
September 30, 1996 and 1995,  respectively.  This fund of funds is structured in
an attempt to  consistently  provide  returns in excess of the S&P 500 over time
without  regard  to the  general  direction  of  financial  markets.  This  fund
generated a net loss of $.1 million in the 1996 quarter  compared with income of
$1.0 million in 1995.
        NET INVESTMENT GAINS (LOSSES) were $2.3 million in 1996, compared with a
$.7 million loss in 1995. Gains and losses may be realized upon securities which
are  disposed of for various  reasons.  The net losses  realized in 1996 are the
result of general  portfolio  management  while the net losses  realized in 1995
resulted  primarily from writedowns of $1.0 million on securities deemed to have
an other than temporary  dimunition in value.  Unrealized gains in the company's
bond  portfolio  were  $17.4  million,  $96.8  million  and $50.8  million as of
September 30, 1996, December 31, 1995 and September 30, 1995, respectively.
        BENEFITS,  CLAIMS AND INTEREST CREDITED TO POLICYHOLDERS  increased $7.8
million,  or 26%,  to $37.7  million  in 1996 from $29.9  million in 1995.  This
increase results  primarily from an increase in annuity  liabilities to $2,823.7
million on September 30, 1996, from $2,033.2 million on September 30, 1995. This
increase  was  partially  offset by a  decrease  in the  average  interest  rate
credited on the  company's  annuity  liabilities,  from 6.0% as of September 30,
1995, to 5.8% as of September 30, 1996. Both the increase in annuity liabilities
and the decrease in the average  interest rate credited on those  liabilities is
largely due to the acquisition of FBG.
        Amortization  of  deferred  cost of  policies  produced  increased  $1.6
million, or 64%, to $4.1 million in 1996 from $2.5 million in 1995. Amortization
associated with gross interest margin  increased $1.0 million to $3.7 million in
1996 from $2.7 million in 1995, with the remaining change being  attributable to
investment  gains.  Costs  incurred  during 1996 and deferred into future policy
periods were $10.1 million, compared with $9.0 million in 1995.
        Amortization  of deferred  cost of policies  purchased  of $1.4  million
represents  the  amortization  of the purchase  price  allocated to the policies
acquired in the acquisition of FBG.
        General  insurance  expenses  increased  $1.6  million,  or 84%, to $3.5
million for the 1996 three months from $1.9 million for the same period in 1995.
This increase is due primarily to the acquisition of FBG.
        Interest expense increased $1.4 million reflecting the borrowing of $7.0
million in December,  1995 and an additional  $28.0 million in April,  1996. The
funds  borrowed in 1996 were used to fund the  acquisition  of FBG.  The company
closed on an offering of $65.0 million of convertible subordinated debentures in
July,  1996 of which $35.2 of the proceeds
32 <PAGE>
were used to repay existing bank debt.
        Income tax expense increased $1.4 million to $3.2 million in 1996
from $1.8 million in 1995. Taxes were provided at an effective rate of 36% on
1996 income and 32% on 1995 income.
LIQUIDITY AND CAPITAL RESOURCES
        The company is an insurance holding company whose principal asset is the
common  stock  of  its  insurance  subsidiaries.   The  company's  primary  cash
requirements  are to pay  operating  expenses,  stockholder  dividends  and debt
service.
        As a holding company, the company relies on funds received from American
and FBLto meet its cash  requirements at the holding company level.  The company
receives funds from American in the form of commissions  paid to American Sales,
investment fees paid to AIG, rent, administrative,  printing and data processing
charges and dividends.  The insurance laws of Kansas and Florida generally limit
the  ability  of  American  and FBLto pay cash  dividends  in excess of  certain
amounts  without  prior  regulatory  approval  and  also  require  that  certain
agreements  relating  to the  payment of fees and charges to the company by it's
insurance subsidiaries be approved by the Insurance Commissioner of the state of
domicile.
        The  liquidity  requirements  of  American  and FBLare  met by  premiums
received from annuity sales, net investment  income received,  and proceeds from
investments upon maturity, sale or redemption. The primary uses of funds are the
payment of surrenders,  policy benefits,  operating expenses and commissions, as
well as the purchase of assets for investment.
        For purposes of the  company's  consolidated  statements  of cash flows,
financing  activities include premiums received from sales of SPDAs,  surrenders
and death benefits  paid,  and surrender and policy  charges  collected on these
contracts.  The net  cash  provided  by (used  in)  these  particular  financing
activities  for the nine months ended  September 30, 1996,  and 1995,  was $47.1
million and $(19.6) million, respectively.
        The  increase in net cash  provided by annuity  contracts  without  life
contingencies  in the first nine months of 1996 resulted  primarily from a $61.2
million  increase in premiums  received  from $256.8  million to $318.0  million
partially  offset by an $38.6 million  increase in surrender and death  benefits
paid from $290.2 million to $328.8 million.
        Net cash provided by the company's operating activities was $132.9
million and $117.4
        million in 1996 and 1995, respectively.
        Cash provided by financing and operating activities and by the sale
and maturity of
        portfolio investments is used primarily to purchase portfolio
investments and for the
        payment of acquisition costs (commissions and expenses associated
with the sale and issue of policies). To meet its anticipated liquidity
requirements, the company purchases
        investments taking into account the anticipated future cash flow
requirements of its
        underlying  liabilities.  In addition,  the company invests a portion of
its assets in short-term  investments  and  maturities of less than one year (3%
and 4% as of September  30, 1996,  and  December  31, 1995,  respectively).  The
weighted average duration of the company's investment portfolio was 4.5 years as
of September 30, 1996.
        The company  continually  assesses its capital  requirements in light of
business  developments  and various  capital and surplus  adequacy  ratios which
affect insurance companies.  During the past five years, the company has met its
capital needs and those of American through several  different sources including
bank borrowing, the sale of convertible debentures and both preferred and common
stock.
        Recent regulatory actions against certain large life insurers
encountering financial
        difficulty have prompted the various state guaranty associations to
begin assessing life insurance companies for the resulting losses. For
further information regarding the
33
<PAGE>

effects  of  guaranty  fund  assessments,  see Note 12 of Notes to  Consolidated
Financial Statements.
        REINSURANCE.  The  company  had  amounts  receivable  under  reinsurance
agreements of $247.3  million and $146.6  million as of September 30, 1996,  and
December  31, 1995,  respectively.  Of the  amounts,  $141.0  million and $145.0
million,  respectively,  were  associated with ERC. In 1989, the company entered
into a coinsurance  agreement which ceded 90% of the risk on the company's block
of Single Premium Whole Life (SPWL)  policies  written prior to 1989 to ERC. The
agreement provides that ERC assumes 90% of all risks associated with each policy
in the  block.  Under  the  terms of the  contract,  the  company  continues  to
administer  the policies and is reimbursed for all payments made under the terms
of those  policies.  The  company  also  receives a fee from the  reinsurer  for
administering  such policies.  Cash settlements under the contract are made with
ERC on a monthly basis. If ERC were to become  insolvent,  American would remain
responsible for the payment of all policy liabilities.
        FBL and Philadelphia Life Insurance Company are parties to a reinsurance
agreement  under  which  FBLceded  100% of the risk on  certain  single  premium
deferred annuity policies on a coinsurance  basis. As of September 30, 1996, the
company had amounts receivable of $104.5 million resulting from this agreement.
        In  addition,  the  company  is a party  to two  assumption  reinsurance
agreements with other reinsurers.
        EFFECT OF INFLATION AND CHANGES IN INTEREST RATES.  The company does not
believe that inflation has had a material effect on its consolidated  results of
operations  during  the past  three  years.  The  company  seeks to  manage  its
investment  portfolio,  in  part,  to  reduce  its  exposure  to  interest  rate
fluctuations.  In  general,  the  market  value of the  company's  fixed  income
securities  increases or decreases  directly with  interest  rate  changes.  For
example,  if interest  rates  decline (as was the case in 1995),  the  company's
fixed income  investments  generally  will increase in market  value,  while net
investment income will decrease.  Conversely, if interest rates rise (as was the
case in 1996), fixed income investments generally will decrease in market value,
while net investment income will increase.
        In a rising  interest rate  environment,  the company's  average cost of
funds would  increase  over time as it prices its new and renewing  annuities to
maintain a generally  competitive  market  rate.  During such a rise in interest
rates,  new  funds  would be  invested  in bonds  with  higher  yields  than the
liabilities  assumed.  In a declining  interest rate environment,  the company's
cost of funds would  decrease over time,  reflecting  lower  interest  crediting
rates on its fixed annuities.
        In  addition  to the  increase in the  company's  average  cost of funds
caused by a rising interest rate  environment,  surrenders of annuities that are
no longer protected by surrender charges increase. While the company experienced
a decrease in total  surrenders  during 1994,  the decrease was primarily due to
the large number of bailout surrenders in 1993. Throughout 1994, the company saw
an increase in surrenders of policies  which no longer were covered by surrender
charges.  Management believes the increased surrenders  experienced in 1994 were
due to the  increasing  interest rates  throughout  1994.  This trend  continued
throughout  1995 and into 1996.  Management  believes that  surrenders are lower
during periods of declining interest rates.
34 <PAGE>

PART II. OTHER INFORMATION
AMVESTORS FINANCIAL CORPORATION

Item 1.           Legal Proceedings
--------------------------------

        The company has no material legal proceedings pending against it.
Item 2.           Changes in Securities
-------------------------------------

        None
Item 3.           Defaults upon Senior Securities
-------------------------------------------------

        None
Item 4.           Submission of Matters to a Vote of Security Holders
------------------------------------------------------------------------

        None
Item 5.           Other Information
--------------------------------

        None
Item 6.           Exhibits and Reports on Form 8-K
---------------------------------------------------

        (a)Exhibits (numbered in accordance with Item 601 of Regulations
S-K).
<TABLE>
<CAPTION>
Exhibit                                                  Page Number or Incorporation
 Number        Description                                    by Reference
<C>           <C>                                       <C>
 (2)(a)       Plan and Agreement of Union dated           Exhibit (2) to Registration
              July 10, 1986, between AmVestors            Statement on Form S-2,
              Financial Corporation and American          File No. 2-82811 dated
              Investors Life Insurance Company,           November 26, 1996.
              Inc.

 (2)(b)       Resolutions of the Board of                 Exhibit (2)(a) to Form 10-Q
              Directors dated January 7, 1988,            dated May 11, 1988.
              providing for succession to the
              position of Chairman of the Board
              of Directors

 (2)(c)       Agreement and Plan of Merger dated          Exhibit (2.1)to Registration

              September 8, 1995, between Financial        Statement on Form S-4,
              Benefit Group, Inc., AmVestors              File No. 333-01309 dated
              Financial Corporation and AmVestors         March 1, 1996
              Acquisition Subsidiary, Inc. as Amended

 (3)(a)       Articles of Incorporation as Amended        Exhibit (3)(a) to Form 10-Q
              and Restated                                dated October 26, 1993

 (3)(b)       Bylaws of the company                       Exhibit (4.2) to Registration
                                                         Statement on Form S-8, File
                                                         No. 33-31155 dated September
                                                         19, 1989

 (4)(a)      Specimen Common Stock Certificate            Exhibit (4)(a) to Form 10-K
                                                          dated March 30, 1995.
</TABLE>
35

<PAGE>                   
<TABLE>
<CAPTION>
Exhibit                                                  Page Number or Incorporation
 Number        Description                                    by Reference
<C>        <C>                                      <C>
  (4)(b)   Common Stock Purchase Warrant            Exhibit (10)(o) to Form 10-K
           expiring December 9, 1998                dated April 12, 1989

  (4)(c)   Common Stock Purchase Warrant            Exhibit (10)(v) to Form 10-Q
                                                    dated May 13, 1992

  (4)(d)   1995 Agents Stock Option Plan            Exhibit (4.1) to Registration
                                                    Statement on Form S-3, File
                                                    No. 333-02211 dated April 2,
                                                    1996

  (4)(e)   AmVestors Financial Corporation 1996     Exhibit (4)(a) to Registration
           Incentive Stock Option Plan              Statement on Form S-8, File
                                                    No. 333-14571 dated October 21,
                                                    1996

  (4)(f)   Form of 3% Convertible Subordinated      Exhibit (4.2) to Registration
           Debentures due 2003                      Statement on Form S-3, File No.
                                                    333-10101 dated August 29, 1996

 (10)(a)  Form of Indemnification Agreement between   Exhibit (10)(a) to Form 10-K
          company and its officers and directors      dated March 29, 1988

 (10)(b)  1989 Non-Qualified Stock Option Plan      Exhibit (10)(q) to Form 10-K
          adopted March 17, 1989                    dated April 12, 1989

 (10)(c)  Stock  Appreciation  Rights Plan adopted  Exhibit (10)(r) to Form 10-K
          March 17, 1989 dated April 12, 1989

 (10)(d)  Restricted Stock Plan adopted             Exhibit (4.4) to Registration
          March 17, 1989                            Statement on Form S-8, File
                                                    No. 33-31155 dated September
                                                    19, 1989

 (10)(e)  Employment Agreement dated December 17,   Exhibit (10)(l) to Form 10-K
          1992, among the company, it's             dated March 30, 1993
          subsidiaries and Mark V. Heitz

 (10)(f)  Employment Agreement dated October 3,     Exhibit (10)(a) to Form 10-Q
          1994, among the company, its              dated November 10, 1994
          subsidiaries and Ralph W. Laster, Jr.

 (10)(g)  Bonus Compensation Agreement dated        Exhibit (10)(b) to Form 10-Q
          September 30, 1994, between the company   dated November 10, 1994
          and Ralph W. Laster, Jr.

 (10)(h)  Bonus Compensation Agreement dated        Exhibit (10)(c) to Form 10-Q
          September 30, 1994, between the company   dated November 10, 1994
          and Mark V. Heitz

 (10)(i)  Credit Agreement dated December 29, 1994,  Exhibit (10)(i) to Form 10-K
          between  the  company,  First  National    dated  March 30, 1995 of
          Bank Chicago and Boatmen's First National
          Bank of Kansas City
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
Exhibit                                                  Page Number or Incorporation
 Number        Description                                    by Reference
<C>           <C>                                           <C>
 (10)(j)     Amendment No. 1 to Credit Agreement dated        Exhibit (10)(a) to Form 10-Q
             December 29, 1994, between the company,          dated August 11, 1995
             First National Bank of Chicago and
             Boatmen's First National Bank of
             Kansas City

 (10)(k)     1994 Stock Purchase Plan for Non-Employee        Exhibit (10)(j) to Form 10-K
             Directors effective February 24, 1994            dated March 30, 1995

 (10)(l)     Incentive Compensation Plan between the          Exhibit (10)(k) to Form 10-K
             company and certain designated employees         dated March 30, 1995
             effective for the calendar year 1994

 (10)(m)     1995 Special Incentive Bonus Agreement           Exhibit (10)(m) to Form 10-K
             dated April 27, 1995, between the company        dated March 14, 1996
             and Ralph W. Laster, Jr.

 (10)(n)     1995 Special Incentive Bonus Agreement           Exhibit (10)(n) to Form 10-K
             dated April 27, 1995, between the company        dated March 14, 1996
             and Mark V. Heitz

 (10)(o)     Credit Agreement dated April 8, 1996              Exhibit (10)(o) to Form 10-Q
             between the company, First National               dated August 14, 1996
             Bank of Chicago, Boatmen's First
             National Bank of Kansas City and Fleet
             National Bank of Boston

 (10)(p)     Employment Agreement dated April 8,                    PP 40-42
             1996, between the company and
             Frank T. Crohn

 (10)(q)     Employment Agreement dated April 8,                    PP 43-45
             1996, between the company and
             Donna J. Rubertone

 (11)        Calculation of Earnings per Share                      P 46

 (20)(a)     Reports on Form 8-K
             There were reports on Form 8-K for
             the three months ended September 30, 1996
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
Exhibit                                                  Page Number or Incorporation
 Number        Description                                    by Reference
<C>      <C>                                       <C>

 (22)     Wholly-owned subsidiaries of the
          registrant:

          American Investors Life Insurance
          Company, Inc.
          415 Southwest Eighth Avenue
          Topeka, Kansas 66603

          American Investors Sales Group, Inc.
          (formerly Gateway Corporation)
          415 Southwest Eighth Avenue
          Topeka, Kansas 66603

          AmVestors Investment Group, Inc.
          (formerly American Investors Sales
          Group, Inc.)
          415 Southwest Eighth Avenue
          Topeka, Kansas 66603

          AmVestors Acquisition Subsidiary, Inc.
          415 Southwest Eighth Avenue
          Topeka, Kansas 66603

          Annuity International Marketing Corporation
          7251 West Palmetto Park Road
          Boca Raton, Florida 33433

          The Insurancemart, Inc.
          7251 West Palmetto Park Road
          Boca Raton, Florida 33433

          Rainbow Card Pack Publication, Inc.
          7251 West Palmetto Park Road
          Boca Raton, Florida 33433

 (27)     Financial Data Schedule
</TABLE>
38
<PAGE>

                                   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.

AMVESTORS FINANCIAL CORPORATION

                                          By: /c/ Ralph W. Laster, Jr.
                                          -----------------------------
                                          Ralph W. Laster, Jr.
                                          Chairman of the Board
                                          Chief Executive Officer
                                          (Principal Executive Officer
                                          and Chief Financial Officer)
                                          (Principal Accounting Officer)

Date:  November 13, 1996
      --------------------