##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from ___________ to ___________
 Commission File Number 001-15166
 AMERUS GROUP CO.
   IOWA
    
    42-1458424(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. EmployerIdentification No.)
 699 Walnut Street
Des Moines, Iowa 50309-3948
  þ o
 þ o




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INDEX
  
 Page No.PART I  FINANCIAL INFORMATION
    
    
    4Item 1. Financial Statements
    
    
    4Consolidated Balance Sheets
June 30, 2005 (Unaudited) and December 31, 2004
    
    
    4Consolidated Statements of Income (Unaudited)
For the Three and Six Months Ended June 30, 2005 and 2004
    
    
    6Consolidated Statements of Comprehensive Income (Unaudited)
For the Three and Six Months Ended June 30, 2005 and 2004
    
    
    7Consolidated Statements of Stockholders Equity
For the Six Months Ended June 30, 2005 (Unaudited) and
the Year Ended December 31, 2004
    
    
    8Consolidated Statements of Cash Flows (Unaudited)
For the Six Months Ended June 30, 2005 and 2004
    
    
    9Notes to Consolidated Financial Statements
(Unaudited)
    
    
    11Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    36PART II  OTHER INFORMATION
    
    
    36Item 1. Legal Proceedings
    
    
    36Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 4. Submissions of Matters to a Vote of Security Holders
    
    
    38Item 6. Exhibits
    
    
    39Signatures
    
    
    40Index to Exhibits
    
    
    41Computation of Ratios of Earnings to Fixed ChargesCertificationCertificationCertificationCertification
  2




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SAFE HARBOR STATEMENT
   3




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 AMERUS GROUP CO.
 
 June 30,
    
    December 31,2005
    
    2004(unaudited)AssetsInvestments:Securities available-for-sale at fair value:Fixed maturity securities
    
    $
    16,481,895
    
    
    $
    15,646,653Equity securities
    
    
    76,006
    
    
    
    77,024Short-term investments
    
    
    11,954
    
    
    
    2,979Securities held for trading purposes at fair
value:Fixed maturity securities
    
    
    1,559,922
    
    
    
    1,718,125Equity securities
    
    
    33
    
    
    
    15,468Mortgage loans
    
    
    931,066
    
    
    
    865,733Policy loans
    
    
    485,371
    
    
    
    486,071Other investments
    
    
    346,616
    
    
    
    374,240Total investments
    
    
    19,892,863
    
    
    
    19,186,293Cash and cash equivalents
    
    
    650,045
    
    
    
    478,441Accrued investment income
    
    
    225,608
    
    
    
    222,294Premiums, fees and other receivables
    
    
    41,413
    
    
    
    39,688Income taxes receivable
    
    
    30,296
    
    
    
    Reinsurance receivables
    
    
    684,299
    
    
    
    666,493Deferred policy acquisition costs
    
    
    1,392,276
    
    
    
    1,248,009Deferred sales inducements
    
    
    177,622
    
    
    
    137,538Value of business acquired
    
    
    354,861
    
    
    
    374,792Goodwill
    
    
    228,869
    
    
    
    226,291Property and equipment
    
    
    45,393
    
    
    
    46,114Other assets
    
    
    300,533
    
    
    
    296,409Separate account assets
    
    
    224,294
    
    
    
    248,507Total assets
    
    $
    24,248,372
    
    
    $
    23,170,869
  4




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##### Table of Contents



AMERUS GROUP CO.
 
 June 30,
    
    December 31,2005
    
    2004(unaudited)Liabilities and Stockholders EquityLiabilities:Policy reserves and policyowner funds:Future life and annuity policy benefits
    
    $
    18,711,861
    
    
    $
    17,923,329Policyowner funds
    
    
    1,471,974
    
    
    
    1,419,76220,183,835
    
    
    
    19,343,091Accrued expenses and other liabilities
    
    
    1,008,665
    
    
    
    837,514Dividends payable to policyowners
    
    
    364,695
    
    
    
    322,037Policy and contract claims
    
    
    68,453
    
    
    
    70,465Income taxes payable
    
    
    
    
    
    
    9,299Deferred income taxes
    
    
    134,279
    
    
    
    145,332Notes payable
    
    
    546,637
    
    
    
    571,155Separate account liabilities
    
    
    224,294
    
    
    
    248,507Total liabilities
    
    
    22,530,858
    
    
    
    21,547,400Stockholders equity:Preferred Stock, no par value, 20,000,000 shares
authorized, none issued
    
    
    
    
    
    
    Common Stock, no par value, 230,000,000 shares
authorized; 44,569,825 shares issued and
39,091,588 shares outstanding in 2005;
44,225,902 shares issued and 39,400,663 shares
outstanding in 2004
    
    
    44,570
    
    
    
    44,226Additional paid-in capital
    
    
    1,206,088
    
    
    
    1,198,379Accumulated other comprehensive income
    
    
    128,440
    
    
    
    114,670Unearned compensation
    
    
    (2,389
    )
    
    
    (1,238
    )Retained earnings
    
    
    528,966
    
    
    
    431,911Treasury stock, at cost (5,478,237 shares in 2005
and 4,825,239 shares in 2004)
    
    
    (188,161
    )
    
    
    (164,479
    )Total stockholders equity
    
    
    1,717,514
    
    
    
    1,623,469Total liabilities and stockholders equity
    
    $
    24,248,372
    
    
    $
    23,170,869
  5




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##### Table of Contents



AMERUS GROUP CO.
 
 For The Three Months Ended June 30,
    
    
    
    
    
    
    For The Six Months Ended June 30,2005
    
    
    2004
    
    
    
    
    
    
    2005
    
    
    2004(unaudited)Revenues:Insurance premiums
    
    $
    61,001
    
    
    $
    63,791
    
    
    
    
    
    
    $
    123,547
    
    
    $
    134,528Product charges
    
    
    54,638
    
    
    
    54,284
    
    
    
    
    
    
    
    113,671
    
    
    
    103,846Net investment income
    
    
    277,040
    
    
    
    251,311
    
    
    
    
    
    
    
    545,751
    
    
    
    508,186Realized/unrealized capital gains (losses)
    
    
    6,266
    
    
    
    (44,550
    )
    
    
    
    
    
    
    (42,678
    )
    
    
    (44,635
    )Other income
    
    
    11,229
    
    
    
    12,204
    
    
    
    
    
    
    
    23,785
    
    
    
    23,906410,174
    
    
    
    337,040
    
    
    
    
    
    
    
    764,076
    
    
    
    725,831Benefits and expenses:Policyowner benefits
    
    
    244,203
    
    
    
    168,350
    
    
    
    
    
    
    
    413,786
    
    
    
    406,779Underwriting, acquisition and other expenses
    
    
    38,419
    
    
    
    38,843
    
    
    
    
    
    
    
    79,027
    
    
    
    71,543Amortization of deferred policy acquisition costs
and value of business acquired
    
    
    35,058
    
    
    
    58,278
    
    
    
    
    
    
    
    87,801
    
    
    
    106,189Dividends to policyowners
    
    
    31,864
    
    
    
    10,936
    
    
    
    
    
    
    
    51,867
    
    
    
    36,420349,544
    
    
    
    276,407
    
    
    
    
    
    
    
    632,481
    
    
    
    620,931Income from continuing operations
    
    
    60,630
    
    
    
    60,633
    
    
    
    
    
    
    
    131,595
    
    
    
    104,900Interest expense
    
    
    8,191
    
    
    
    7,936
    
    
    
    
    
    
    
    15,971
    
    
    
    16,334Income before income tax expense
    
    
    52,439
    
    
    
    52,697
    
    
    
    
    
    
    
    115,624
    
    
    
    88,566Income tax expense
    
    
    16,872
    
    
    
    3,921
    
    
    
    
    
    
    
    18,569
    
    
    
    10,050Net income from continuing operations
    
    
    35,567
    
    
    
    48,776
    
    
    
    
    
    
    
    97,055
    
    
    
    78,516Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,899Net income before cumulative effect of change in accounting
    
    
    35,567
    
    
    
    48,776
    
    
    
    
    
    
    
    97,055
    
    
    
    82,415Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )Net income
    
    $
    35,567
    
    
    $
    48,776
    
    
    
    
    
    
    $
    97,055
    
    
    $
    81,905Net income from continuing operations per common share:Basic
    
    $
    0.91
    
    
    $
    1.24
    
    
    
    
    
    
    $
    2.46
    
    
    $
    2.00Diluted
    
    $
    0.83
    
    
    $
    1.20
    
    
    
    
    
    
    $
    2.27
    
    
    $
    1.93Net income per common share:Basic
    
    $
    0.91
    
    
    $
    1.24
    
    
    
    
    
    
    $
    2.46
    
    
    $
    2.08Diluted
    
    $
    0.83
    
    
    $
    1.20
    
    
    
    
    
    
    $
    2.27
    
    
    $
    2.02Weighted average common shares outstanding:Basic
    
    
    39,264,504
    
    
    
    39,327,182
    
    
    
    
    
    
    
    39,412,211
    
    
    
    39,342,363Diluted
    
    
    42,751,912
    
    
    
    40,760,364
    
    
    
    
    
    
    
    42,845,240
    
    
    
    40,619,242
  6




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AMERUS GROUP CO.
 
 For The Three Months Ended June 30,
    
    
    
    
    
    
    For The Six Months Ended June 30,2005
    
    
    2004
    
    
    
    
    
    
    2005
    
    
    2004(unaudited)Net income
    
    $
    35,567
    
    
    $
    48,776
    
    
    
    
    
    
    $
    97,055
    
    
    $
    81,905Other comprehensive income (loss), before tax:Unrealized gains (losses) on securities:Unrealized holding gains (losses) arising during period
    
    
    143,592
    
    
    
    (197,725
    )
    
    
    
    
    
    
    20,050
    
    
    
    (130,748
    )Reclassification adjustment for (gains) losses
included in net income
    
    
    860
    
    
    
    (4,421
    )
    
    
    
    
    
    
    1,134
    
    
    
    34,935Other comprehensive income (loss), before tax
    
    
    144,452
    
    
    
    (202,146
    )
    
    
    
    
    
    
    21,184
    
    
    
    (95,813
    )Income tax (expense) benefit related to items of other
comprehensive income
    
    
    (50,558
    )
    
    
    70,751
    
    
    
    
    
    
    
    (7,414
    )
    
    
    33,53493,894
    
    
    
    (131,395
    )
    
    
    
    
    
    
    13,770
    
    
    
    (62,279
    )Comprehensive income (loss)
    
    $
    129,461
    
    
    $
    (82,619
    )
    
    
    
    
    
    $
    110,825
    
    
    $
    19,626
  7




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##### Table of Contents



AMERUS GROUP CO.
 
 AccumulatedAdditional
    
    Other
    
    
    
    
    
    
    
    
    
    
    
    
    
    TotalPaid-In
    
    Comprehensive
    
    Unearned
    
    Retained
    
    Treasury
    
    StockholdersCommon Stock
    
    Capital
    
    Income
    
    Compensation
    
    Earnings
    
    Stock
    
    EquityBalance at December 31, 2003
    
    $
    43,836
    
    
    $
    1,184,237
    
    
    $
    84,519
    
    
    $
    (1,361
    )
    
    $
    255,006
    
    
    $
    (156,426
    )
    
    $
    1,409,8112004:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192,642
    
    
    
    
    
    
    
    192,642Net unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    33,959
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    33,959Net
unrealized gain on derivatives designated as cash flow hedges
    
    
    
    
    
    
    
    
    
    
    420
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    420Stock issued
under various incentive plans, net of forfeitures
    
    
    390
    
    
    
    14,142
    
    
    
    
    
    
    
    123
    
    
    
    
    
    
    
    1,100
    
    
    
    15,755Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,153
    )
    
    
    (9,153
    )Dividends declared on common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,737
    )
    
    
    
    
    
    
    (15,737
    )Minimum pension liability adjustment
    
    
    
    
    
    
    
    
    
    
    (4,228
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,228
    )Balance at December 31, 2004
    
    
    44,226
    
    
    
    1,198,379
    
    
    
    114,670
    
    
    
    (1,238
    )
    
    
    431,911
    
    
    
    (164,479
    )
    
    
    1,623,4692005 (unaudited):Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    97,055
    
    
    
    
    
    
    
    97,055Net unrealized gain on securities
    
    
    
    
    
    
    
    
    
    
    13,896
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,896Net
unrealized loss on derivatives designated as cash flow hedges
    
    
    
    
    
    
    
    
    
    
    (126
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (126
    )Stock issued
under various incentive plans, net of forfeitures
    
    
    344
    
    
    
    7,709
    
    
    
    
    
    
    
    (1,151
    )
    
    
    
    
    
    
    902
    
    
    
    7,804Purchase of treasury stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,584
    )
    
    
    (24,584
    )Balance at June 30, 2005
    
    $
    44,570
    
    
    $
    1,206,088
    
    
    $
    128,440
    
    
    $
    (2,389
    )
    
    $
    528,966
    
    
    $
    (188,161
    )
    
    $
    1,717,514
  8




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##### Table of Contents



AMERUS GROUP CO.
 
 
 For The Six Months Ended June 30,2005
    
    
    2004(unaudited)Cash flows from operating activitiesNet income
    
    $
    97,055
    
    
    $
    81,905Adjustments to reconcile net income to net cash
provided by operating activities:Cumulative effect of change in accounting
    
    
    
    
    
    
    510Gain on sale of discontinued operations
    
    
    
    
    
    
    (3,899
    )Product charges
    
    
    (113,671
    )
    
    
    (103,846
    )Interest credited to policyowner account
balances
    
    
    251,539
    
    
    
    233,800Change in option value of indexed products
and market value adjustments on total
return strategy annuities
    
    
    (12,589
    )
    
    
    (13,555
    )Realized/unrealized capital losses
    
    
    42,678
    
    
    
    44,635DAC and VOBA amortization
    
    
    87,801
    
    
    
    106,189DAC and VOBA capitalized
    
    
    (242,496
    )
    
    
    (186,658
    )Change in:Accrued investment income
    
    
    (3,314
    )
    
    
    (2,039
    )Reinsurance receivables
    
    
    (66,884
    )
    
    
    (84,928
    )Securities held for trading purposes:Fixed maturities
    
    
    127,774
    
    
    
    209,725Equity securities
    
    
    15,413
    
    
    
    (3,883
    )Liabilities for future policy benefits
    
    
    (85,412
    )
    
    
    34,302Accrued expenses and other liabilities
    
    
    171,153
    
    
    
    304,054Policy and contract claims and other
policyowner funds
    
    
    49,261
    
    
    
    105,585Income taxes:Current
    
    
    (39,595
    )
    
    
    (14,301
    )Deferred
    
    
    (15,671
    )
    
    
    7,654Other, net
    
    
    28,918
    
    
    
    (13,899
    )Net cash provided by operating activities
    
    
    291,960
    
    
    
    701,351Cash flows from investing activities:Purchase of fixed maturities available-for-sale
    
    
    (2,507,941
    )
    
    
    (3,192,310
    )Proceeds from sale of fixed maturities available-for-sale
    
    
    1,078,389
    
    
    
    1,627,612Maturities, calls and principal reductions of
fixed maturities available-for-sale
    
    
    702,208
    
    
    
    700,210Purchase of equity securities
    
    
    (3,986
    )
    
    
    (42,255
    )Proceeds from sale of equity securities
    
    
    4,625
    
    
    
    39,429Change in short-term investments, net
    
    
    (8,381
    )
    
    
    19,859Purchase of mortgage loans
    
    
    (122,181
    )
    
    
    (54,242
    )
 9




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##### Table of Contents



AMERUS GROUP CO.
 
 For The Six Months Ended June 30,2005
    
    2004(unaudited)Proceeds from repayment and sale of mortgage loans
    
    
    56,446
    
    
    
    185,341Purchase of other invested assets
    
    
    (65,358
    )
    
    
    (37,473
    )Proceeds from sale of other invested assets
    
    
    46,699
    
    
    
    77,024Change in policy loans, net
    
    
    700
    
    
    
    8,559Proceeds from sale of discontinued operations
    
    
    
    
    
    
    15,000Other assets, net
    
    
    (3,403
    )
    
    
    611Net cash used in investing activities
    
    
    (822,183
    )
    
    
    (652,635
    )Cash flows from financing activities:Deposits to policyowner account balances
    
    
    1,610,235
    
    
    
    1,099,912Withdrawals from policyowner account balances
    
    
    (867,110
    )
    
    
    (907,933
    )Change in debt, net
    
    
    482
    
    
    
    (50,263
    )Stock issued under various incentive plans, net of
forfeitures
    
    
    7,804
    
    
    
    3,780Purchase of treasury stock
    
    
    (24,584
    )
    
    
    (9,153
    )Retirement of senior notes
    
    
    (125,000
    )
    
    
    Proceeds from revolving credit agreement
    
    
    100,000
    
    
    
    Net cash provided by financing activities
    
    
    701,827
    
    
    
    136,343Net increase in cash
    
    
    171,604
    
    
    
    185,059Cash and cash equivalents at beginning of period
    
    
    478,441
    
    
    
    274,150Cash and cash equivalents at end of period
    
    $
    650,045
    
    
    $
    459,209Supplemental disclosure of cash activities:Interest paid
    
    $
    16,942
    
    
    $
    16,261Income taxes paid
    
    $
    69,904
    
    
    $
    18,372Supplemental disclosure of non-cash operating activities:Capitalization of deferred sales inducements
    
    $
    54,618
    
    
    $
    23,091
  10




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##### Table of Contents



AMERUS GROUP CO.
 
 
 (1) CONSOLIDATION AND BASIS OF PRESENTATION
    For The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands, except share data)Net income, as reported
    
    $
    35,567
    
    
    $
    48,776
    
    
    $
    97,055
    
    
    $
    81,905Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects
    
    
    (556
    )
    
    
    (919
    )
    
    
    (1,215
    )
    
    
    (2,081
    )Pro forma net income
    
    $
    35,011
    
    
    $
    47,857
    
    
    $
    95,840
    
    
    $
    79,824Earnings per share:Basic  as reported
    
    $
    0.91
    
    
    $
    1.24
    
    
    $
    2.46
    
    
    $
    2.08Basic  pro forma
    
    $
    0.89
    
    
    $
    1.22
    
    
    $
    2.43
    
    
    $
    2.03Diluted  as reported
    
    $
    0.83
    
    
    $
    1.20
    
    
    $
    2.27
    
    
    $
    2.02Diluted  pro forma
    
    $
    0.82
    
    
    $
    1.17
    
    
    $
    2.24
    
    
    $
    1.97
 11




---



##### Table of Contents



(2) EARNINGS PER SHARE
 SM SM
   For The Three Months Ended June 30,2005
    
    
    
    
    
    
    
    
    
    2004Number of
    
    Per Share
    
    
    
    
    
    Number of
    
    Per ShareNet Income
    
    Shares
    
    Amount
    
    Net Income
    
    Shares
    
    Amount($ in thousands, except share data)Basic EPSNet Income from Continuing Operations
    
    $
    35,567
    
    
    
    39,265
    
    
    $
    0.91
    
    
    $
    48,776
    
    
    
    39,327
    
    
    $
    1.24Effect of dilutive securitiesOptions and other stock based compensation
    
    
    
    
    
    
    833
    
    
    
    (0.01
    )
    
    
    
    
    
    
    656
    
    
    
    (0.02
    )PRIDES
    
    
    
    
    
    
    1,579
    
    
    
    (0.04
    )
    
    
    
    
    
    
    777
    
    
    
    (0.02
    )OCEANs
    
    
    
    
    
    
    1,075
    
    
    
    (0.03
    )
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    35,567
    
    
    
    42,752
    
    
    $
    0.83
    
    
    $
    48,776
    
    
    
    40,760
    
    
    $
    1.20
 For The Six Months Ended June 30,2005
    
    
    
    
    
    
    
    
    
    2004Number of
    
    Per Share
    
    
    
    
    
    Number of
    
    Per ShareNet Income

    Shares
    
    Amount
    
    Net Income
    
    Shares
    
    Amount($ in thousands, except share data)Basic EPSNet Income from Continuing Operations
    
    $
    97,055
    
    
    
    39,412
    
    
    $
    2.46
    
    
    $
    78,516
    
    
    
    39,342
    
    
    $
    2.00Effect of dilutive securitiesOptions and other stock based compensation
    
    
    
    
    
    
    859
    
    
    
    (0.04
    )
    
    
    
    
    
    
    626
    
    
    
    (0.03
    )PRIDES
    
    
    
    
    
    
    1,541
    
    
    
    (0.09
    )
    
    
    
    
    
    
    651
    
    
    
    (0.04
    )OCEANs
    
    
    
    
    
    
    1,033
    
    
    
    (0.06
    )
    
    
    
    
    
    
    
    
    
    
    Diluted EPS
    
    $
    97,055
    
    
    
    42,845
    
    
    $
    2.27
    
    
    $
    78,516
    
    
    
    40,619
    
    
    $
    1.93
 12




---



##### Table of Contents



(3) CLOSED BLOCK
   June 30,
    
    December 31,2005
    
    2004($ in thousands)Liabilities:Future life and annuity policy benefits
    
    $
    2,779,280
    
    
    $
    2,804,222Policyowner funds
    
    
    7,780
    
    
    
    8,096Accrued expenses and other liabilities
    
    
    10,361
    
    
    
    32,140Dividends payable to policyowners
    
    
    157,777
    
    
    
    161,475Policy and contract claims
    
    
    12,044
    
    
    
    14,705Policyowner dividend obligation
    
    
    199,417
    
    
    
    152,975Total Liabilities
    
    
    3,166,659
    
    
    
    3,173,613Assets:Fixed maturity securities available-for-sale at fair value
    
    
    2,009,461
    
    
    
    2,028,790Mortgage loans
    
    
    66,190
    
    
    
    70,686Policy loans
    
    
    330,758
    
    
    
    335,573Other investments
    
    
    
    
    
    
    34Cash and cash equivalents
    
    
    49,921
    
    
    
    8,473Accrued investment income
    
    
    32,747
    
    
    
    32,637Premiums and fees receivable
    
    
    53,091
    
    
    
    59,369Other assets
    
    
    
    
    
    
    17Total Assets
    
    
    2,542,168
    
    
    
    2,535,579Maximum future earnings to be recognized from assets and
liabilities of the Closed Block
    
    $
    624,491
    
    
    $
    638,034
 13




---



##### Table of Contents



For The Three Months Ended June 30,2005
    
    2004($ in thousands)Operations:Insurance premiums
    
    $
    42,998
    
    
    $
    44,684Product charges
    
    
    1,445
    
    
    
    1,311Net investment income
    
    
    40,361
    
    
    
    36,235Realized gains (losses) on investments
    
    
    (40
    )
    
    
    (4,473
    )Policyowner benefits
    
    
    (45,282
    )
    
    
    (58,495
    )Underwriting, acquisition and other expenses
    
    
    (631
    )
    
    
    (918
    )Dividends to policyowners
    
    
    (29,823
    )
    
    
    (9,019
    )Contribution from the Closed Block before income taxes
    
    $
    9,028
    
    
    $
    9,325
 For The Six Months Ended June 30,2005
    
    2004($ in thousands)Operations:Insurance premiums
    
    $
    84,885
    
    
    $
    97,280Product charges
    
    
    3,146
    
    
    
    1,401Net investment income
    
    
    74,780
    
    
    
    71,969Realized gains (losses) on investments
    
    
    90
    
    
    
    (3,643
    )Policyowner benefits
    
    
    (95,403
    )
    
    
    (113,665
    )Underwriting, acquisition and other expenses
    
    
    (1,188
    )
    
    
    (2,007
    )Dividends to policyowners
    
    
    (47,991
    )
    
    
    (32,418
    )Contribution from the Closed Block before income taxes
    
    $
    18,319
    
    
    $
    18,917
 (4) DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
  14




---



##### Table of Contents



Six Months Ended June 30, 2005Total Return
    
    IndexedProducts
    
    Products
    
    Other
    
    Total($ in thousands)Fixed maturity securities held for trading
    
    $
    (12,388
    )
    
    $
    
    
    
    $
    (992
    )
    
    $
    (13,380
    )Options
    
    
    
    
    
    
    (28,068
    )
    
    
    20
    
    
    
    (28,048
    )Market value adjustment to liabilities
    
    
    2,431
    
    
    
    10,119
    
    
    
    39
    
    
    
    12,589Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    77
    
    
    
    77DAC amortization impact of
net adjustments above
    
    
    991
    
    
    
    4,579
    
    
    
    
    
    
    
    5,570Pre-tax total
    
    
    (8,966
    )
    
    
    (13,370
    )
    
    
    (856
    )
    
    
    (23,192
    )Income taxes
    
    
    3,138
    
    
    
    4,679
    
    
    
    300
    
    
    
    8,117After-tax total
    
    $
    (5,828
    )
    
    $
    (8,691
    )
    
    $
    (556
    )
    
    $
    (15,075
    )
 Six Months Ended June 30, 2004Total Return
    
    IndexedProducts
    
    Products
    
    Other
    
    Total($ in thousands)Fixed maturity securities held for trading
    
    $
    (16,092
    )
    
    $
    
    
    
    $
    (3,407
    )
    
    $
    (19,499
    )Options
    
    
    
    
    
    
    14,297
    
    
    
    (2,209
    )
    
    
    12,088Market value adjustment to liabilities
    
    
    9,244
    
    
    
    481
    
    
    
    3,830
    
    
    
    13,555Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    (813
    )
    
    
    (813
    )DAC amortization impact of
net adjustments above
    
    
    147
    
    
    
    (5,095
    )
    
    
    573
    
    
    
    (4,375
    )Pre-tax total
    
    
    (6,701
    )
    
    
    9,683
    
    
    
    (2,026
    )
    
    
    956Income taxes
    
    
    2,345
    
    
    
    (3,389
    )
    
    
    710
    
    
    
    (334
    )After-tax total
    
    $
    (4,356
    )
    
    $
    6,294
    
    
    $
    (1,316
    )
    
    $
    622
 (5) FEDERAL INCOME TAXES
  15




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##### Table of Contents



(6) COMMITMENTS AND CONTINGENCIES
    (7) EMPLOYEE BENEFIT PLANS
  16




---



##### Table of Contents



Six Months Ended June 30,2005
    
    2004($ in thousands)Components of net periodic benefit cost:Service cost
    
    $
    157
    
    
    $
    163Interest cost
    
    
    2,944
    
    
    
    3,100Expected return on plan assets
    
    
    (2,431
    )
    
    
    (2,428
    )Amortization of prior service cost
    
    
    44
    
    
    
    44Amortization of actuarial loss
    
    
    356
    
    
    
    124Net periodic benefit cost
    
    
    1,070
    
    
    
    1,003Curtailment
    
    
    
    
    
    
    (951
    )Total expense
    
    $
    1,070
    
    
    $
    52
 (8) ACCOUNTING DEVELOPMENTS
  (9) OPERATING SEGMENTS
     17




---



##### Table of Contents



1)
    
    Realized/unrealized gains and losses on open block assets.2)
    
    Market value changes and amortization of assets and liabilities associated with
the accounting for derivatives, such as:
 
    
    Unrealized gains and losses on open block options and securities held
for trading.
    
    Change in option value of indexed products and market value adjustments
on total return strategy annuities.
    
    Cash flow hedge amortization.
 3)
    
    Amortization of deferred policy acquisition costs (DAC) and value of business
acquired (VOBA) related to the unrealized and realized gains and losses on the open
block investments and the derivative adjustments.4)
    
    Other income from non-insurance operations.5)
    
    Interest expense.6)
    
    Income tax expense.7)
    
    Income from discontinued operations.8)
    
    Cumulative effect of changes in accounting.
    18




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##### Table of Contents



Three Months Ended June 30, 2005Protection
    
    Accumulation
    
    
    
    
    
    TotalProducts
    
    Products
    
    All Other
    
    ConsolidatedRevenues:Insurance premiums
    
    $
    59,569
    
    
    $
    1,056
    
    
    $
    376
    
    
    $
    61,001Product charges
    
    
    40,646
    
    
    
    13,992
    
    
    
    
    
    
    
    54,638Net investment income
    
    
    92,983
    
    
    
    183,553
    
    
    
    504
    
    
    
    277,040Realized/unrealized losses on closed
block investments
    
    
    (40
    )
    
    
    
    
    
    
    
    
    
    
    (40
    )Other income:Income from Independent Marketing Organizations
    
    
    
    
    
    
    7,153
    
    
    
    
    
    
    
    7,153Other
    
    
    857
    
    
    
    2,663
    
    
    
    544
    
    
    
    4,064194,015
    
    
    
    208,417
    
    
    
    1,424
    
    
    
    403,856Benefits and expenses:Policyowner benefits
    
    
    79,174
    
    
    
    132,895
    
    
    
    427
    
    
    
    212,496Underwriting, acquisition, and other expenses:Operating expenses
    
    
    19,486
    
    
    
    6,901
    
    
    
    6,460
    
    
    
    32,847Expenses from Independent Marketing Organizations
    
    
    
    
    
    
    5,572
    
    
    
    
    
    
    
    5,572Amortization of DAC and VOBA, net of
open block gain adjustment of $8,208
    
    
    22,107
    
    
    
    21,159
    
    
    
    
    
    
    
    43,266Dividends to policyowners
    
    
    31,862
    
    
    
    2
    
    
    
    
    
    
    
    31,864152,629
    
    
    
    166,529
    
    
    
    6,887
    
    
    
    326,045Segment pre-tax operating income
    
    $
    41,386
    
    
    $
    41,888
    
    
    $
    (5,463
    )
    
    
    77,811Realized/unrealized losses on open block assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,517
    )Unrealized gains on open block options and
trading investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,823Change in option value of indexed
products and market value adjustments on
total return strategy annuities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,745
    )Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38Amortization of DAC and VOBA due to open
block gains and losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,208Other income from non-insurance operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,630Interest (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,191
    )Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,872
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    35,567
 19




---



##### Table of Contents



Three Months Ended June 30, 2004Protection
    
    Accumulation
    
    
    
    
    
    TotalProducts
    
    Products
    
    All Other
    
    ConsolidatedRevenues:Insurance premiums
    
    $
    62,427
    
    
    $
    859
    
    
    $
    505
    
    
    $
    63,791Product charges
    
    
    41,640
    
    
    
    12,644
    
    
    
    
    
    
    
    54,284Net investment income
    
    
    81,186
    
    
    
    168,218
    
    
    
    1,907
    
    
    
    251,311Realized/unrealized losses on closed
block investments
    
    
    (4,473
    )
    
    
    
    
    
    
    
    
    
    
    (4,473
    )Other income:Income from Independent Marketing Organizations
    
    
    
    
    
    
    7,327
    
    
    
    
    
    
    
    7,327Other
    
    
    928
    
    
    
    2,626
    
    
    
    (37
    )
    
    
    3,517181,708
    
    
    
    191,674
    
    
    
    2,375
    
    
    
    375,757Benefits and expenses:Policyowner benefits
    
    
    91,205
    
    
    
    114,261
    
    
    
    (179
    )
    
    
    205,287Underwriting, acquisition, and other expenses:Operating expenses
    
    
    19,115
    
    
    
    7,106
    
    
    
    6,403
    
    
    
    32,624Expenses from Independent Marketing Organizations
    
    
    
    
    
    
    6,219
    
    
    
    
    
    
    
    6,219Amortization of DAC and VOBA, net of
open block loss adjustment of $7,002
    
    
    25,527
    
    
    
    25,749
    
    
    
    
    
    
    
    51,276Dividends to policyowners
    
    
    10,934
    
    
    
    2
    
    
    
    
    
    
    
    10,936146,781
    
    
    
    153,337
    
    
    
    6,224
    
    
    
    306,342Segment pre-tax operating income
    
    $
    34,927
    
    
    $
    38,337
    
    
    $
    (3,849
    )
    
    
    69,415Realized/unrealized losses on open block assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,851
    )Unrealized losses on open block options and
trading investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (31,226
    )Change in option value of indexed
products and market value adjustments on
total return strategy annuities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,288Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (351
    )Amortization of DAC and VOBA due to open
block gains and losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,002
    )Other income from non-insurance operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,360Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    60,633Interest (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,936
    )Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,921
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    48,776
 20




---



##### Table of Contents



Six Months Ended June 30, 2005Protection
    
    Accumulation
    
    
    
    
    
    TotalProducts
    
    Products
    
    All Other
    
    ConsolidatedRevenues:Insurance premiums
    
    $
    121,052
    
    
    $
    1,536
    
    
    $
    959
    
    
    $
    123,547Product charges
    
    
    87,723
    
    
    
    25,948
    
    
    
    
    
    
    
    113,671Net investment income
    
    
    179,869
    
    
    
    365,199
    
    
    
    683
    
    
    
    545,751Realized/unrealized losses on closed
block investments
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    90Other income:Income from Independent Marketing Organizations
    
    
    
    
    
    
    16,164
    
    
    
    
    
    
    
    16,164Other
    
    
    1,718
    
    
    
    5,204
    
    
    
    1,064
    
    
    
    7,986390,452
    
    
    
    414,051
    
    
    
    2,706
    
    
    
    807,209Benefits and expenses:Policyowner benefits
    
    
    168,375
    
    
    
    257,623
    
    
    
    454
    
    
    
    426,452Underwriting, acquisition, and other expenses:Operating expenses
    
    
    37,879
    
    
    
    14,161
    
    
    
    13,484
    
    
    
    65,524Expenses from Independent Marketing Organizations
    
    
    
    
    
    
    13,503
    
    
    
    
    
    
    
    13,503Amortization of DAC and VOBA, net of
open block gain adjustment of $5,383
    
    
    46,978
    
    
    
    46,206
    
    
    
    
    
    
    
    93,184Dividends to policyowners
    
    
    51,864
    
    
    
    3
    
    
    
    
    
    
    
    51,867305,096
    
    
    
    331,496
    
    
    
    13,938
    
    
    
    650,530Segment pre-tax operating income
    
    $
    85,356
    
    
    $
    82,555
    
    
    $
    (11,232
    )
    
    
    156,679Realized/unrealized losses on open block assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,340
    )Unrealized losses on open block options and
trading investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41,428
    )Change in option value of indexed
products and market value adjustments on
total return strategy annuities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,589Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    77Amortization of DAC and VOBA due to open
block gains and losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,383Other income from non-insurance operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (365
    )Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    131,595Interest (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,971
    )Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,569
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    97,055
 21




---



##### Table of Contents



Six Months Ended June 30, 2004Protection
    
    Accumulation
    
    
    
    
    
    TotalProducts
    
    Products
    
    All Other
    
    ConsolidatedRevenues:Insurance premiums
    
    $
    132,143
    
    
    $
    1,582
    
    
    $
    803
    
    
    $
    134,528Product charges
    
    
    77,099
    
    
    
    26,747
    
    
    
    
    
    
    
    103,846Net investment income
    
    
    162,444
    
    
    
    342,481
    
    
    
    3,261
    
    
    
    508,186Realized/unrealized losses on closed
block investments
    
    
    (3,643
    )
    
    
    
    
    
    
    
    
    
    
    (3,643
    )Other income:Income from Independent Marketing Organizations
    
    
    
    
    
    
    14,063
    
    
    
    
    
    
    
    14,063Other
    
    
    1,834
    
    
    
    5,377
    
    
    
    1,471
    
    
    
    8,682369,877
    
    
    
    390,250
    
    
    
    5,535
    
    
    
    765,662Benefits and expenses:Policyowner benefits
    
    
    184,600
    
    
    
    235,079
    
    
    
    (158
    )
    
    
    419,521Underwriting, acquisition, and other expenses:Operating expenses
    
    
    36,073
    
    
    
    13,438
    
    
    
    11,317
    
    
    
    60,828Expenses from Independent Marketing Organizations
    
    
    
    
    
    
    10,715
    
    
    
    
    
    
    
    10,715Amortization of DAC and VOBA, net of
open block loss adjustment of $5,742
    
    
    44,768
    
    
    
    55,679
    
    
    
    
    
    
    
    100,447Dividends to policyowners
    
    
    36,418
    
    
    
    2
    
    
    
    
    
    
    
    36,420301,859
    
    
    
    314,913
    
    
    
    11,159
    
    
    
    627,931Segment pre-tax operating income
    
    $
    68,018
    
    
    $
    75,337
    
    
    $
    (5,624
    )
    
    
    137,731Realized/unrealized losses on open block assets
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (33,581
    )Unrealized losses on open block options and
trading investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,411
    )Change in option value of indexed
products and market value adjustments on
total return strategy annuities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,555Cash flow hedge amortization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (813
    )Amortization of DAC and VOBA due to open
block gains and losses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,742
    )Other income from non-insurance operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,161Income from continuing operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104,900Interest (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,334
    )Income tax (expense)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,050
    )Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,899Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    81,905
 22




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##### Table of Contents



Item 2. Managements Discussion And Analysis Of Financial Condition And Results Of Operations
 Form
10-Q.
 NATURE OF OPERATIONS
  FINANCIAL HIGHLIGHTS
  For The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands, except share data)Segment pre-tax operating income:Protection Products
    
    $
    41,386
    
    
    $
    34,927
    
    
    $
    85,356
    
    
    $
    68,018Accumulation Products
    
    
    41,888
    
    
    
    38,337
    
    
    
    82,555
    
    
    
    75,337Other operations
    
    
    (5,463
    )
    
    
    (3,849
    )
    
    
    (11,232
    )
    
    
    (5,624
    )Total segment pre-tax operating income
    
    
    77,811
    
    
    
    69,415
    
    
    
    156,679
    
    
    
    137,731Non-segment expense, net (A)
    
    
    42,244
    
    
    
    20,639
    
    
    
    59,624
    
    
    
    55,826Net income
    
    $
    35,567
    
    
    $
    48,776
    
    
    $
    97,055
    
    
    $
    81,905Diluted net income per share
    
    $
    0.83
    
    
    $
    1.20
    
    
    $
    2.27
    
    
    $
    2.02
 June 30,
    
    December 31,2005
    
    2004Total assets
    
    $
    24,248,372
    
    
    $
    23,170,869Stockholders equity
    
    $
    1,717,514
    
    
    $
    1,623,469
 
 (A)
    
    Non-segment expense, net consists primarily of open block realized/unrealized gains and
losses, derivative related market value adjustments, non-insurance operations, interest
expense, income taxes, discontinued operations and cumulative effect of change in accounting. 23




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##### Table of Contents



PROTECTION PRODUCTS
  24




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##### Table of Contents



For The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands)Revenues:Insurance premiums
    
    $
    59,569
    
    
    $
    62,427
    
    
    $
    121,052
    
    
    $
    132,143Product charges
    
    
    40,646
    
    
    
    41,640
    
    
    
    87,723
    
    
    
    77,099Net investment income
    
    
    92,983
    
    
    
    81,186
    
    
    
    179,869
    
    
    
    162,444Realized gains (losses) on closed block investments
    
    
    (40
    )
    
    
    (4,473
    )
    
    
    90
    
    
    
    (3,643
    )Other income
    
    
    857
    
    
    
    928
    
    
    
    1,718
    
    
    
    1,834Total revenues
    
    
    194,015
    
    
    
    181,708
    
    
    
    390,452
    
    
    
    369,877Benefits and expenses:Policyowner benefits
    
    
    79,174
    
    
    
    91,205
    
    
    
    168,375
    
    
    
    184,600Underwriting, acquisition and other expenses
    
    
    19,486
    
    
    
    19,115
    
    
    
    37,879
    
    
    
    36,073Amortization of DAC and VOBA, net of open block
gain/loss adjustment
    
    
    22,107
    
    
    
    25,527
    
    
    
    46,978
    
    
    
    44,768Dividends to policyowners
    
    
    31,862
    
    
    
    10,934
    
    
    
    51,864
    
    
    
    36,418Total benefits and expenses
    
    
    152,629
    
    
    
    146,781
    
    
    
    305,096
    
    
    
    301,859Pre-tax operating income  Protection Products segment
    
    $
    41,386
    
    
    $
    34,927
    
    
    $
    85,356
    
    
    $
    68,018
  Sales.
 Sales Activity by ProductFor The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands)Traditional life insurance:Interest-sensitive whole life
    
    $
    127
    
    
    $
    1,411
    
    
    $
    233
    
    
    $
    4,829Term and other life
    
    
    3,348
    
    
    
    3,580
    
    
    
    6,405
    
    
    
    7,155Universal life
    
    
    3,390
    
    
    
    9,235
    
    
    
    8,261
    
    
    
    16,769Indexed life
    
    
    24,184
    
    
    
    19,291
    
    
    
    42,210
    
    
    
    36,594Total
    
    $
    31,049
    
    
    $
    33,517
    
    
    $
    57,109
    
    
    $
    65,347
  25




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##### Table of Contents



Premiums and Product Charges.
  Persistency.
 Net Investment Income.
 Mortality and Benefit Expense.
 Underwriting, Acquisition and Other Expenses.
 Amortization of DAC and VOBA.
 Dividends to Policyowners.
  26




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##### Table of Contents



Outlook.
 ACCUMULATION PRODUCTS
  For The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands)Revenues:Immediate annuity and supplementary contract premiums
    
    $
    1,056
    
    
    $
    859
    
    
    $
    1,536
    
    
    $
    1,582Product charges
    
    
    13,992
    
    
    
    12,644
    
    
    
    25,948
    
    
    
    26,747Net investment income
    
    
    183,553
    
    
    
    168,218
    
    
    
    365,199
    
    
    
    342,481Other income
    
    
    2,663
    
    
    
    2,626
    
    
    
    5,204
    
    
    
    5,377Total revenues
    
    
    201,264
    
    
    
    184,347
    
    
    
    397,887
    
    
    
    376,187Benefits and expenses:Policyowner benefits
    
    
    132,895
    
    
    
    114,261
    
    
    
    257,623
    
    
    
    235,079Underwriting, acquisition and other expenses
    
    
    6,901
    
    
    
    7,106
    
    
    
    14,161
    
    
    
    13,438Amortization of DAC and VOBA
    
    
    21,159
    
    
    
    25,749
    
    
    
    46,206
    
    
    
    55,679Dividends to policyowners
    
    
    2
    
    
    
    2
    
    
    
    3
    
    
    
    2Total benefits and expenses
    
    
    160,957
    
    
    
    147,118
    
    
    
    317,993
    
    
    
    304,198IMO Operations:Other income
    
    
    7,153
    
    
    
    7,327
    
    
    
    16,164
    
    
    
    14,063Other expenses
    
    
    5,572
    
    
    
    6,219
    
    
    
    13,503
    
    
    
    10,715Net IMO operating income (loss)
    
    
    1,581
    
    
    
    1,108
    
    
    
    2,661
    
    
    
    3,348Pre-tax operating income  Accumulation Products segment
    
    $
    41,888
    
    
    $
    38,337
    
    
    $
    82,555
    
    
    $
    75,337
  Deposits.
 27




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##### Table of Contents



Deposits by ProductFor The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    

    2004
    
    2005
    
    2004($ in thousands)AnnuitiesDeferred fixed annuities:Traditional fixed annuities
    
    $
    69,478
    
    
    $
    78,577
    
    
    $
    138,360
    
    
    $
    160,747Indexed annuities
    
    
    643,026
    
    
    
    348,482
    
    
    
    1,146,096
    
    
    
    645,357Variable annuities
    
    
    593
    
    
    
    806
    
    
    
    1,138
    
    
    
    1,658Total annuities
    
    
    713,097
    
    
    
    427,865
    
    
    
    1,285,594
    
    
    
    807,762Funding agreements
    
    
    26,200
    
    
    
    85,000
    
    
    
    26,200
    
    
    
    85,000Total
    
    
    739,297
    
    
    
    512,865
    
    
    
    1,311,794
    
    
    
    892,762Reinsurance ceded
    
    
    (2,264
    )
    
    
    (3,871
    )
    
    
    (4,234
    )
    
    
    (7,067
    )Total deposits, net of reinsurance
    
    $
    737,033
    
    
    $
    508,994
    
    
    $
    1,307,560
    
    
    $
    885,695
  Product Charges.
 Persistency.
 Product Spread.
 28




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##### Table of Contents



For The Six Months Ended June 30,2005
    
    2004Asset earned rate
    
    
    5.76
    %
    
    
    5.74
    %Liability credited rate
    
    
    3.58
    %
    
    
    3.67
    %Product spread
    
    
    2.18
    %
    
    
    2.07
    %
   Underwriting, Acquisition and Other Expenses.
 Amortization of DAC and VOBA.
 IMO Operations.
 Outlook.
 OTHER
  29




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##### Table of Contents



INCOME STATEMENT RECONCILIATION
  For The Three Months Ended June 30,
    
    For The Six Months Ended June 30,2005
    
    2004
    
    2005
    
    2004($ in thousands)
    
    ($ in thousands)Segment pre-tax operating income:Protection Products
    
    $
    41,386
    
    
    $
    34,927
    
    
    $
    85,356
    
    
    $
    68,018Accumulation Products
    
    
    41,888
    
    
    
    38,337
    
    
    
    82,555
    
    
    
    75,337Other operations
    
    
    (5,463
    )
    
    
    (3,849
    )
    
    
    (11,232
    )
    
    
    (5,624
    )Total segment pre-tax operating income
    
    
    77,811
    
    
    
    69,415
    
    
    
    156,679
    
    
    
    137,731Non-segment items  increases (decreases) to income:Realized and unrealized gains (losses) on assets and liabilities:Realized/unrealized gains (losses) on open block assets
    
    
    (1,517
    )
    
    
    (8,851
    )
    
    
    (1,340
    )
    
    
    (33,581
    )Unrealized gains (losses) on open block options and
trading investments
    
    
    7,823
    
    
    
    (31,226
    )
    
    
    (41,428
    )
    
    
    (7,411
    )Change in option value of indexed products
and market value adjustments on total return
strategy annuities
    
    
    (31,745
    )
    
    
    37,288
    
    
    
    12,589
    
    
    
    13,555Cash flow hedge amortization
    
    
    38
    
    
    
    (351
    )
    
    
    77
    
    
    
    (813
    )(Amortization) restoration of DAC and VOBA due to
open block realized/unrealized gains and losses
    
    
    8,208
    
    
    
    (7,002
    )
    
    
    5,383
    
    
    
    (5,742
    )Other income (loss) from non-insurance operations
    
    
    12
    
    
    
    1,360
    
    
    
    (365
    )
    
    
    1,161Income from continuing operations
    
    
    60,630
    
    
    
    60,633
    
    
    
    131,595
    
    
    
    104,900Interest expense
    
    
    (8,191
    )
    
    
    (7,936
    )
    
    
    (15,971
    )
    
    
    (16,334
    )Income tax expense
    
    
    (16,872
    )
    
    
    (3,921
    )
    
    
    (18,569
    )
    
    
    (10,050
    )Net income from continuing operations
    
    
    35,567
    
    
    
    48,776
    
    
    
    97,055
    
    
    
    78,516Income from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,899Cumulative effect of change in accounting, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (510
    )Net income
    
    $
    35,567
    
    
    $
    48,776
    
    
    $
    97,055
    
    
    $
    81,905
 Realized and Unrealized Gains (Losses) on Assets and Liabilities.
  30




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##### Table of Contents



Income Tax Expense.
 Discontinued Operations.
 Change in Accounting.
 ACCOUNTING DEVELOPMENTS
  31




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##### Table of Contents



LIQUIDITY AND CAPITAL RESOURCES
 AmerUs Group Co.
     32




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##### Table of Contents



Insurance Subsidiaries
      33




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  34




---



##### Table of Contents



6 months
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expected2005
    
    2006
    
    2007
    
    2008
    
    2009
    
    2010
    
    Thereafter
    
    Cash Flows
    
    Fair Value($ in thousands)Fixed maturity securities
available-for-sale
    
    $
    611
    
    
    $
    946
    
    
    $
    1,049
    
    
    $
    1,167
    
    
    $
    929
    
    
    $
    660
    
    
    $
    10,490
    
    
    $
    15,852
    
    
    $
    16,482Average interest rate
    
    
    6.4
    %
    
    
    6.4
    %
    
    
    6.4
    %
    
    
    5.9
    %
    
    
    6.0
    %
    
    
    5.6
    %
    
    
    5.8
    %Fixed maturity securities
held for trading purposes
    
    $
    94
    
    
    $
    163
    
    
    $
    177
    
    
    $
    220
    
    
    $
    232
    
    
    $
    145
    
    
    $
    529
    
    
    $
    1,560
    
    
    $
    1,560Average interest rate
    
    
    3.4
    %
    
    
    2.7
    %
    
    
    3.4
    %
    
    
    3.0
    %
    
    
    2.3
    %
    
    
    3.1
    %
    
    
    3.9
    %Mortgage loans
    
    $
    26
    
    
    $
    61
    
    
    $
    58
    
    
    $
    71
    
    
    $
    63
    
    
    $
    73
    
    
    $
    579
    
    
    $
    931
    
    
    $
    973Average interest rate
    
    
    7.0
    %
    
    
    7.1
    %
    
    
    7.1
    %
    
    
    7.1
    %
    
    
    7.0
    %
    
    
    7.0
    %
    
    
    6.8
    %Total
    
    $
    731
    
    
    $
    1,170
    
    
    $
    1,284
    
    
    $
    1,458
    
    
    $
    1,224
    
    
    $
    878
    
    
    $
    11,598
    
    
    $
    18,343
    
    
    $
    19,015
  35




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##### Table of Contents



Item 4. Controls and Procedures
   
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
   36




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  (c) Total number
    
    (d) Maximum numberof shares (or
    
    (or approximate dollar(a) Total
    
    (b) Average
    
    units) purchased
    
    value) of sharesnumber of
    
    price paid
    
    as part of publicly
    
    (or units) that mayshares (or units)
    
    per share
    
    announced plans
    
    yet be purchased underPeriod
    
    purchased (1)
    
    (or units)
    
    or programs
    
    the plans or programs (3)01/01/2005-01/31/2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    2,027,50002/01/2005-02/28/2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,027,50003/01/2005-03/31/2005
    
    
    441,236
    (2)
    
    
    47.36
    
    
    
    414,000
    
    
    
    1,613,50004/01/2005-04/30/2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,613,50005/01/2005-05/31/2005
    
    
    107,500
    
    
    
    46.48
    
    
    
    107,500
    
    
    
    1,506,00006/01/2005-06/30/2005
    
    
    436
    
    
    
    47.83
    
    
    
    436
    
    
    
    6,000,000Total
    
    
    549,172
    
    
    $
    47.19
    
    
    
    521,936
 
 (1)
    
    Does not include shares withheld from employee stock awards to satisfy applicable tax withholding obligations.(2)
    
    The March 2005 shares purchased included 27,236 shares which were not part of the repurchase program.(3)
    
    On June 24, 2005, our board of directors authorized a repurchase program of up to 6 million shares of our
outstanding common stock. The program terminated and replaced a previous program which authorized repurchase of up to
3 million shares. There is no expiration date for this program. 37




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##### Table of Contents



Item 4. Submission of Matters to a Vote of Security Holders
  Election of Thomas F. GaffneyFor:
    
    
    24,222,063Withheld:
    
    
    2,622,528Election of Louis A. HollandFor:
    
    
    24,848,086Withheld:
    
    
    1,996,505Election of Ward M. KleinFor:
    
    
    24,228,720Withheld:
    
    
    2,615,871Election of Andrew J. Paine, Jr.For:
    
    
    24,225,191Withheld:
    
    
    2,619,400Election of Jack C. PesterFor:
    
    
    25,045,222Withheld:
    
    
    1,799,369Election of Heidi L. SteigerFor:
    
    
    25,050,859Withheld:
    
    
    1,793,732Issue Shares in Conjunction with the Companys Stock Incentive PlanFor:
    
    
    22,798,266Against:
    
    
    3,259,343Abstaining:
    
    
    786,982Performance-Based Procedures to be Followed in Granting Incentive Compensation AwardsFor:
    
    
    19,465,855Against:
    
    
    3,775,343Abstaining:
    
    
    739,334
 38




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##### Table of Contents



Ratification of Ernst & Young LLPFor:
    
    
    25,567,639Against:
    
    
    1,059,137Abstaining:
    
    
    217,815
  
 Item 6. Exhibits
  39




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##### Table of Contents



SIGNATURES
  DATED: July 29, 2005
    
    AMERUS GROUP CO.By
    
    /s/ Melinda S. UrionMelinda S. UrionExecutive Vice President,Chief Financial Officer and Treasurer(Principal Financial Officer)By
    
    /s/ Brenda J. CushingBrenda J. CushingSenior Vice President and Controller(Principal Accounting Officer)
 40




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##### Table of Contents



AMERUS GROUP CO. AND SUBSIDIARIES
 
 INDEX TO EXHIBITS
 ExhibitNo.
    
    Description2.1
    
    Combination and Investment Agreement, dated February 18, 2000, among American Mutual
Holding Company, AmerUs Life Holdings, Inc., Indianapolis Life Insurance Company and The
Indianapolis Life Group of Companies, Inc., filed as Exhibit 2.1 to AmerUs Life Holdings,
Inc.s report on Form 8-K/A on March 6, 2000, is hereby incorporated by reference.2.2
    
    Purchase Agreement, dated as of February 18, 2000, by and between American Mutual
Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.5 on Form 10-K, dated March 8, 2000, is hereby
incorporated by reference.2.3
    
    Agreement and Plan of Merger, dated December 17, 1999, by and between American Mutual
Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.6 on Form 10-K, dated March 8, 2000, is hereby
incorporated by reference.2.4
    
    Amendment No. 1 to Agreement and Plan of Merger, dated February 18, 2000, by and between
American Mutual Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.7 on Form 10-K, dated March 8, 2000, is
hereby incorporated by reference.2.5
    
    Letter Agreement, dated December 17, 1999, by and between American Mutual Holding
Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.8 on Form 10-K, dated March 8, 2000, is hereby incorporated by
reference.2.6
    
    Notification Agreement, dated as of February 18, 2000, by and among American Mutual
Holding Company, AmerUs Life Holdings, Inc. and Bankers Trust Company, filed as Exhibit 2.9 on Form 10-K, dated March 8,
2000, is hereby incorporated by reference.2.7
    
    Amendment No. 2 to Agreement and Plan of Merger, dated April 3, 2000, by and between American
Mutual Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.10 on Form 10-Q,
dated May 15, 2000, is hereby incorporated by reference.2.8
    
    Amendment No. 1 to the Purchase Agreement, dated April 3, 2000, by and between American
Mutual Holding Company and AmerUs Life Holdings, Inc., filed as Exhibit 2.11 on Form 10-Q,
dated May 15, 2000, is hereby incorporated by reference.2.9
    
    Amendment to Combination and Investment Agreement dated February 18, 2000 among American
Mutual Holding Company, AmerUs Life Holdings, Inc., Indianapolis Life Insurance Company and
The Indianapolis Life Group of Companies, Inc., dated September 18, 2000, filed as Exhibit 2.2
to Form 8-K12G3 of the Registrant dated September 21, 2000, is hereby incorporated by
reference.2.10
    
    Stock Purchase Agreement, dated January 1, 2002, by and among AmerUs Annuity Group Co., and
the Stockholders of Family First Advanced Estate Planning and Family First Insurance Services,
filed as Exhibit 2.13 on Form 10-Q dated August 12, 2002, is hereby incorporated by reference.3.1
    
    Amended and Restated Articles of Incorporation of the Registrant as of May 20, 2004, filed as Exhibit 3.1 on Form 10-Q, dated May 5, 2005, is hereby incorporated by reference.3.2
    
    Amended and Restated Bylaws of the Registrant, filed as Exhibit 3.2 on Form 10-Q, dated
August 6, 2004, is hereby incorporated by reference.4.1
    
    Amended and Restated Trust Agreement dated as of February 3, 1997 among AmerUs Life Holdings,
Inc., Wilmington Trust Company, as property trustee, and the administrative trustees named
therein (AmerUs Capital I business trust), filed as Exhibit 3.6 to the registration statement
of AmerUs Life Holdings, Inc. and AmerUs Capital I on Form S-1, Registration Number 333-13713,
is hereby incorporated by reference.4.2
    
    Indenture dated as of February 3, 1997 between AmerUs Life Holdings, Inc. and Wilmington
Trust Company relating to the Companys 8.85% Junior Subordinated Debentures, Series A, filed
as Exhibit 4.1 to the registration statement of AmerUs Life Holdings, Inc. and AmerUs Capital
I on Form S-1, Registration Number, 333-13713, is hereby incorporated by reference.4.3
    
    Guaranty Agreement dated as of February 3, 1997 between AmerUs Life Holdings, Inc., as
guarantor, and Wilmington Trust Company, as trustee, relating to the 8.85% Capital Securities,
Series A, issued by AmerUs Capital I, filed as Exhibit 4.4 to the registration statement on Form S-1, Registration Number, 333-13713, is hereby
incorporated by reference.
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##### Table of Contents



ExhibitNo.
    
    Description4.4
    
    Certificate of Trust of AmerUs Capital III filed as Exhibit 4.7 to the registration statement of
AmerUs Life Holdings, Inc., AmerUs Capital II and AmerUs Capital III, on Form S-3 (No.
333-50249), is hereby incorporated by reference.4.5
    
    Senior Indenture, dated as of June 16, 1998, by and between AmerUs Life Holdings, Inc. and
First Union National Bank, as Indenture Trustee, relating to the AmerUs Life Holdings, Inc.s
6.95% Senior Notes, filed as Exhibit 4.14 on Form 10-Q, dated August 13, 1998, is hereby
incorporated by reference.4.6
    
    Subordinated Indenture, dated as of July 27, 1998, by and between AmerUs Life Holdings, Inc.
and First Union National Bank, as Indenture Trustee, relating to AmerUs Life Holdings, Inc.s
6.86% Junior Subordinated Deferrable Interest Debentures, filed as Exhibit 4.15 on Form 10-Q,
dated August 13, 1998, is hereby incorporated by reference.4.7
    
    First Supplement to Indenture dated February 3, 1997 among American Mutual Holding Company,
AmerUs Life Holdings, Inc. and Wilmington Trust Company as Trustee, relating to the Companys
8.85% Junior Subordinated Debentures, Series A, dated September 20, 2000, filed as Exhibit
4.14 on Form 10-Q dated November 14, 2000, is hereby incorporated by reference.4.8
    
    Assignment and Assumption Agreement to Amended and Restated Trust Agreement, dated February
3, 1997 between American Mutual Holding Company and AmerUs Life Holdings, Inc., dated
September 20, 2000, filed as Exhibit 4.15 on Form 10-Q dated November 14, 2000, is hereby
incorporated by reference.4.9
    
    Assignment and Assumption to Guaranty Agreement, dated February 3, 1997 between American
Mutual Holding Company and AmerUs Life Holdings, Inc., dated September 20, 2000, filed as
Exhibit 4.16 on Form 10-Q, dated November 14, 2000, is hereby incorporated by reference.4.10
    
    First Supplement to Senior Indenture dated June 16, 1998, relating to AmerUs Life Holdings,
Inc.s 6.95% Senior Notes, among American Mutual Holding Company, AmerUs Life Holdings, Inc.
and First Union National Bank, as Trustee, dated September 20, 2000, filed as Exhibit 4.23 on
Form 10-Q, dated November 14, 2000, is hereby incorporated by reference.4.11
    
    Indenture dated as of March 6, 2002 between AmerUs Group Co. and BNY Midwest Trust Company,
as Trustee, filed as Exhibit 4.1 on form 8-K/A, dated February 28, 2002, is hereby
incorporated by reference.4.12
    
    Form of Purchase Contract Agreement between AmerUs Group Co. and Wachovia Bank, National
Association (formerly known as First Union National Bank), as Purchase Contract Agent, filed
as Exhibit 4.1 on Form 8-A12B, dated May 22, 2003, is hereby incorporated by reference.4.13
    
    Form of Pledge Agreement among AmerUs Group Co., BNY Midwest Trust Company, as Collateral
Agent, Custodial Agent and Securities Intermediary and Wachovia Bank, National Association
(formerly known as First Union National Bank), as Purchase Contract Agent, filed as Exhibit
4.2 on Form 8-A12B dated May 22, 2003, is hereby incorporated by reference.4.14
    
    Form of Remarketing Agreement among AmerUs Group Co., Wachovia Bank, National Association
(formerly known as First Union National Bank), as Purchase Contract Agent, and the Remarketing
Agent named therein, filed as Exhibit 4.3 on Form 8-A12B dated May 22, 2003, is hereby
incorporated by reference.4.15
    
    Form of Income PRIDES (included in Exhibit 4.1 as Exhibit A thereto), filed as Exhibit 4.1 on
Form 8-A12B, dated May 22, 2003, is hereby incorporated by reference.4.16
    
    Officers Certificate attaching form of Senior Notes initially due 2008, filed as Exhibit 4.7
on Form 8-A12B, dated May 22, 2003, is hereby incorporated by reference.4.17
    
    Indenture dated as of December 15, 2004 between AmerUs Group Co. and BNY Midwest Trust
Company, as Trustee, filed as Exhibit 4.1 on Form 8-K, dated December 15, 2004, is hereby
incorporated by reference.4.18
    
    Form of Optionally Convertible Equity-Linked Accreting Note (OCEANsSM) due March
6, 2032, filed as Exhibit 4.2 on Form 8-K, dated December 15, 2004, is hereby incorporated by
reference.11.1
    
    Statement Re: Computation of Per Share Earnings is included in note 2 to the consolidated
financial statements.12*
    
    Computation of Ratios of Earnings to Fixed Charges.31.1*
    
    Certification of Chief Executive Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e).31.2*
    
    Certification of Chief Financial Officer of Periodic Report Pursuant to Rule 13a-15(e) or Rule 15d-15(e).
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##### Table of Contents



ExhibitNo.
    
    Description32.1*
    
    Certification of Chief Executive Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.32.2*
    
    Certification of Chief Financial Officer of Periodic Report Pursuant to 18 U.S.C. Section 1350.
 
 *
    
    Included herein 43