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| [X] | ANNUAL      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|-----|------------------------------------------------------------------------------------------------|

| [   ] | TRANSITION      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF      1934 |
|----------------------|----------------------------------------------------------------------------------------------------|

| Missouri                             | 44-0308260               |
|--------------------------------------|--------------------------|
| (State      or other jurisdiction of | (I.R.S.      Employer    |
| incorporation      or organization)  | Identification      No.) |

| 3520 Broadway, Kansas City,      Missouri(Address      of principal executive offices) | 64111-2565(Zip      Code) |
|----------------------------------------------------------------------------------------|---------------------------|

|                              | Name      of each exchange on  |
|-----------------------------------|--------------------------------|
| Title of each class               | which registered               |
| $1.25      par value common stock | NASDAQ      Capital Market LLC |

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| PART      I…………………………………………………………………………………………………………………                                                                                                                                                 | 4                                                               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| Item      1.  Business……………………………………………………………………………………………………….                                                                                                                                                       | 4                                                               |
| Item 1A. Risk Factors      ……………………………………………………………………..…………………………..                                                                                                                                                                              | 6                                                               |
| Item 1B. Unresolved Staff      Comments……………………………………………………………..……….………….                                                                                                                                                                                                            | 13                                                              |
| Item      2.  Properties…………………………………………………………………………………..……….…………                                                                                                                                                          | 13                                                              |
| Item 3.  Legal      Proceedings…………………………………………………………………………..………………...                                                                                                                                                                             | 13                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| PART      II……………………………………………………………………………………………….…….…………                                                                                                                                                     | 15                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| Item 4.  Market for Registrant’s Common      Equity, Related Stockholder Matters and Issuer Purchases of      Equity     Securities…………………………………………………………………………………………..…….…………. | 15                                                              |
| Item 5.  Selected Financial      Data……………...…………………………………………………………….…...……..                                                                                                                                                                                        | 19                                                              |
| Item 6.  Management’s Discussion and Analysis of      Financial Condition and Results of    Operations...……....……….                                                                                                                                                                                                                                                                                                        | 20                                                              |
| Item 6A.  Quantitative and Qualitative      Disclosures About Market Risk………………………………………..…….                                                                                                                                                                                                                                                            | 69                                                              |
| Item      7.  Financial Statements and Supplementary      Data…………………………………………………..…………...                                                                                                                                                                                                                           | 72                                                              |
|      Consolidated Balance      Sheets……………………………………………………………………………..………...                                                                                                                                                                      | 72                                                              |
|      Consolidated Statements of      Income…..…………………………………………………………………..………..                                                                                                                                                                                    | 73                                                              |
|      Consolidated Statements of Stockholders’      Equity………………………………………………………..….……..                                                                                                                                                                                                    | 74                                                              |
|      Consolidated Statements of Cash      Flows…………………………………………………………………...……….                                                                                                                                                                                         | 75                                                              |
|      Notes to Consolidated Financial      Statements…………………………………………………………….……..…...                                                                                                                                                                                                | 77                                                              |
|      Schedule I – Summary of Investments – Other Than      Investments in Related Parties………………….………..…                                                                                                                                                                                                                                                           | 126                                                             |
|      Schedule II – Condensed Financial Information of      Registrant……………...………………………….…..………                                                                                                                                                                                                                          | 127                                                             |
|      Schedule III – Supplementary Insurance      Information…………………………………………………….……..…                                                                                                                                                                                                          | 131                                                             |
|      Schedule IV – Reinsurance      Information…………………………………………………………………….……...                                                                                                                                                                                   | 133                                                             |
|      Schedule V – Valuation and Qualifying      Accounts………………………………………………………….…..….                                                                                                                                                                                                      | 135                                                             |
|      Report of Independent Registered Public Accounting      Firm….……………………………………………………..                                                                                                                                                                                                                         |                136 |
| Item 8.  Changes in and Disagreements with      Accountants on Accounting and Financial      Disclosure.…………..……                                                                                                                                                                                                                                                                                                           |               138       |
| Item      8A.  Controls and      Procedures…………………………………………………………………………………….                                                                                                                                                                                   |                138 |
| Item      8B.  Other      Information…………………………………………………………………………………...……….                                                                                                                                                                        | 138                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| PART      III…………………………………………………………………………………………………………..…...                                                                                                                                                        | 141                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
|     The      information required by Items 9 through 13 is incorporated by reference      from the Company’s definitive Proxy Statement to be filed with the      Commission pursuant to Regulation 14A within 120 days after December 31,      2009.                                                                                                                                                                                          |                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| PART      IV……………………………………………………………………………………………………….……...                                                                                                                                                          | 141                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| Item      14.  Exhibits, Financial Statement      Schedules…………………………..………………………………….….…                                                                                                                                                                                                                 | 141                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |
| Signatures…………………..……………………………………………………………………...………….…….…                                                                                                                                                                | 143                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                            |

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Item1.  BUSINESS

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|   | Item      1A.  RISK      FACTORS |
|--------|--------------------------------------------|

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Item1B.  UNRESOLVED STAFFCOMMENTS

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PART II

|   | Item      4.  MARKET      FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER      PURCHASES OF EQUITYSECURITIES |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|

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|                |                          |   |                                |   | Dividend                                                   |
|---------------------|-------------------------------|--------|-------------------------------------|--------|------------------------------------------------------------|
|                | High                          |   | Low                                 |   | Paid                                                       |
|                |                          |   |                                |   |                                                       |
| 2009:               |                          |   |                                |   |                                                       |
| First      quarter  |  $      44.63            |   |  $  15.20            |   |  $      0.27            |
| Second      quarter |     40.22 |   |      19.70 |   |          0.27 |
| Third      quarter  |     37.75 |   |      25.39 |   |          0.27 |
| Fourth      quarter |     33.31 |   |      25.00 |   |          0.27 |
|                |                          |   |                                |   |  $      1.08            |
| 2008:               |                          |   |                                |   |                                                       |
| First      quarter  |  $      49.15            |   |  $  39.36            |   |  $      0.27            |
| Second      quarter |     52.85 |   |      41.51 |   |          0.27 |
| Third      quarter  |     57.93 |   |      41.16 |   |          0.27 |
| Fourth      quarter |     53.93 |   |      33.06 |   |          0.27 |
|                |                          |   |                                |   |  $      1.08            |
|                |                          |   |                                |   |                                                       |

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|                          |   | Total                                                                                                                                                                                                   |   |                                                                                                                                                                                   |   | Total      Number of                                                                                                                                                                                                |   | Maximum      Number                                                                                                                               |
|-------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|                          |   | Number      of                                                                                                                                                                                          |   |                                                                                                                                                                                   |   | Shares      Purchased                                                                                                                                                                                               |   | of      Shares that May                                                                                                                           |
|                          |   | Shares      Purchased                                                                                                                                                                                   |   | Average                                                                                                                                                                                |   | as      a Part of                                                                                                                                                                                                   |   | Yet      be Purchased                                                                                                                             |
|                          |   | Open      Market/                                                                                                                                                                                       |   | Purchase      Price                                                                                                                                                                    |   | Publicly      Announced                                                                                                                                                                                             |   | Under      the                                                                                                                                    |
| Period                        |   | Benefit      Plans                                                                                                                                                                                      |   | Paid      per Share                                                                                                                                                                    |   | Plans      or Programs                                                                                                                                                                                              |   | Plans      or Programs                                                                                                                            |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 1/01/09      - 1/31/09        |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                          24,586                                            | 2      |  $                     36.17                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 2/1/09      - 2/28/09         |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                          17,191                                            | 2      |  $                     27.92                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 3/1/09      - 3/31/09         |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                        143,769                                                       | 2      |  $                     17.64                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 4/1/09-4/30/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                          35,936                                            | 2      |  $                     24.89                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 5/1/09-5/31/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                        144,480                                                       | 2      |  $                     23.17                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 6/1/09-6/30/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                          45,560                                            | 2      |  $                     23.34                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 7/1/09-7/31/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                        114,338                                                       | 2      |  $                     26.49                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 8/1/09-8/31/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                               572                 | 2      |  $                     33.13                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 9/1/09-9/30/09                |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                                  - | 2      |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 10/1/09      - 10/31/09       |   |                                  - | 1      |  $                                  - |   |                                    - |   |                     1,000,000                 |
|                          |   |                                  - | 2      |  $                                  - |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 11/1/09      - 11/30/09       |   |                          66,871                                            | 1      |  $                     27.52                                             |   |                            66,871                                            |   |                        933,129 |
|                          |   |                               276                 | 2      |  $                     28.59                                             |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
| 12/1/09      - 12/31/09       |   |                          17,302                                            | 1      |  $                     27.82                                             |   |                            17,302                                            |   |                        915,827 |
|                          |   |                                                                                                                                                                                                    | 2      |  $                                  - |   |                                                                                                                                                                                                                |   |                                                                                                                                              |
|     Total |   |                        610,881                                                       |   |                                                                                                                                                                                   |   |                            84,173                                            |   |                                                                                                                                              |
|                          |   |                                                                                                                                                                                                    |   |                                                                                                                                                                                   |   |                                                                                                                                                                                                                |   |                                                                                                                                              |

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Item5.  SELECTED FINANCIALDATA

|                         |                                                                                                                                                          |                                                                                                              | Year      Ended December 31                                                                                       |
|------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
|                         |                                                                                                                                                          |                                                                                                              | 2009                                                                                                              |   | 2008 |   | 2007 |   | 2006 |   | 2005 |
| Income      Statement Data:  |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |
| Revenues:                    |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |
|                         | Insurance      revenues                                                                                                                                       |  $           241,664                                  |                                                                                                              |  $           236,173 |   |  $           231,894 |   |  $           235,264 |   |  $            238,503 |
|                         | Net      investment income                                                                                                                                    |               177,428                       |                                                                                                              |               177,419 |   |               190,405 |   |               196,280 |   |                194,608 |
|                         | Realized      investment gains (losses)                                                                                                                       |               (10,076)                      |                                                                                                              |               (52,271) |   |                   5,426 |   |                   5,621 |   |                    6,113 |
|                         | Other      revenues                                                                                                                                           |                 10,579            |                                                                                                              |                 13,005 |   |                 11,499 |   |                 11,349 |   |                  10,312 |
|                         |                                                                                                                                                          | Total      revenues                                                                                               |  $           419,595                                  |   |  $           374,326 |   |  $           439,224 |   |  $           448,514 |   |  $            449,536 |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
| Net      income (loss)       |  $             10,732                                                                   |                                                                                                              |  $           (17,050)                                 |   |  $             35,661 |   |  $             36,918 |   |  $              36,184 |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
| Per      Common Share Data:  |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |
|                         | Net      income (loss), basic and diluted                                                                                                                     |  $                 0.93 |                                                                                                              |  $               (1.47) |   |  $                 3.01 |   |  $                 3.11 |   |  $                  3.03 |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
|                         | Cash      dividends to stockholders                                                                                                                           |  $                 1.08 |                                                                                                              |  $                 1.08 |   |  $                 3.08 |   |  $                 1.08 |   |  $                  1.08 |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
|                         | Stockholders'      equity                                                                                                                                     |  $               54.33            |                                                                                                              |  $               46.11 |   |  $               58.17 |   |  $               57.72 |   |  $                57.07 |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
|                         |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |   |   |
|                         |                                                                                                                                                          |                                                                                                              | December      31                                                                                                  |
|                         |                                                                                                                                                          |                                                                                                              | 2009                                                                                                              |   | 2008 |   | 2007 |   | 2006 |   | 2005 |
| Balance      Sheet Data:     |                                                                                                                                                          |                                                                                                              |                                                                                                              |   |   |   |   |   |   |
| Assets                       |  $        4,176,185                                                                                              |                                                                                                              |  $        3,967,091                                                  |   |  $        4,352,108 |   |  $        4,457,795 |   |  $         4,555,379 |
| Notes      payable           |                           - |                                                                                                              |                   2,900 |   |                 10,400 |   |                 14,700 |   |                  27,282 |
| Stockholders'      equity    |               628,363                                                                   |                                                                                                              |               527,107                       |   |               684,401 |   |               684,304 |   |                680,219 |
| Life      insurance in force |  $      30,683,571                                                                                                         |                                                                                                              |  $      30,300,286                                                             |   |  $      31,135,142 |   |  $      31,261,016 |   |  $       30,949,501 |

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Item6.  
MANAGEMENT’S

| ·   | The      sale of life, annuity, and accident and health  products; |
|--------------------|--------------------------------------------------------------------|

| ·   | The      rate of mortality, lapse and surrenders of future policy benefits and      policyholder account balances; |
|--------------------|--------------------------------------------------------------------------------------------------------------------|

| ·   | The      rate of morbidity, disability and incurrence of other policyholder      benefits; |
|--------------------|--------------------------------------------------------------------------------------------|

| ·   | Persistency      of existing insurance policies; |
|--------------------|--------------------------------------------------|

| ·   | Interest      rates credited topolicyholders; |
|--------------------|-----------------------------------------------|

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| ·   | The      effectiveness of reinsuranceprograms; |
|--------------------|------------------------------------------------|

| ·   | The      amount of investment assets undermanagement; |
|--------------------|-------------------------------------------------------|

| ·   | Investment      spreads earned on policyholder accountbalances; |
|--------------------|-----------------------------------------------------------------|

| ·   | The      ability to maximize investment returns and minimize risks such as interest      rate risk, credit risk and equityrisk; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------|

| ·   | Timely      and cost-effective access to liquidity;and |
|--------------------|--------------------------------------------------------|

| ·   | Management      of distribution costs and operatingexpenses. |
|--------------------|--------------------------------------------------------------|

| ·   | Changes      in general economic conditions, including the performance of financial      markets and interest rates; |
|--------------------|----------------------------------------------------------------------------------------------------------------------|

| ·   | Increasing      competition and changes in consumer behavior, which may affect the      Company’s ability to sell its products and retain  business; |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Customer      and agent response to new products, distribution channels and marketing      initiatives; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Fluctuations      in experience regarding current mortality, morbidity, persistency and      interest rates relative to expected amounts used in pricing the Company’s      products; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Changes      in assumptions related to deferred acquisition costs and the value of      business acquired; |
|--------------------|------------------------------------------------------------------------------------------------------------|

| ·   | Regulatory,      accounting or tax changes that may affect the cost of, or the demand for,      the Company’s products or services;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Unanticipated      changes in industry trends and ratings assigned by nationally recognized      rating organizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------|

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| The      Company cannot give assurances that such statements will prove to be      correct.  Given these risks and uncertainties, investors should      not place undue reliance on forward-looking statements as a prediction of      actual results. |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | The      current fair value of the security as compared to amortized      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below amortized      cost; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold an equity security until it recovers      in value; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell a debt security and whether it is not more      likely than not that the Company will be required to sell a debt security      before recovery of the amortized cost basis;and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that facts and circumstances change such that it becomes more likely      than not that the Company will be required to sell the investment before      recovery of the amortized cost basis;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| Critical      Accounting Estimate | Determination      Methodology                                                                                                                                                                                    | Potential      One-Time Effect on DAC, VOBA and Related Items                                                                                                                                             |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Mortality      Experience         | Based      on Company mortality experience.  Industry experience and trends      are also considered.                                                                                                   | A      2.5% increase in expected mortality experience for all future years would      result in a reduction in DAC and VOBA, and an increase in current period      amortization expense of $4.4 million. |
| Surrender      Rates              | Based      on Company surrender experience.  Industry experience and trends      are also considered.                                                                                                   | A      10% increase in expected surrender rates for all future years would result      in a reduction in DAC and VOBA, and an increase in current period      amortization expense of $2.1 million.       |
| Interest      Spreads             | Based      on expected future investment returns and expected future crediting rates      applied to policyholder account balances; future crediting rates include      constraints imposed by policy guarantees. | A      10 basis point reduction in future interest rate spreads would result in a      reduction in DAC and VOBA, and an increase in current period amortization      expense of $3.4 million.            |
| Maintenance      Expenses         | Based      on Company experience using an internal expense allocation      methodology.                                                                                                                           | A      10% increase in future maintenance expenses would result in a reduction in      DAC and VOBA, and an increase in current period amortization expense of      $2.2 million.                         |

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|                  |                                                          |                                                                                | 2009                                                                                              |                                                                                              | %      Change                                                                          |                                                                                | 2008                                                                                    |                                                                                              | %      Change                                                                          |                                                                                | 2007                                                                     |
|-----------------------|---------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
| New      premiums:    |                                                          |                                                                                |                                                                                              |                                                                                              |                                                                                   |                                                                                |                                                                                    |                                                                                              |                                                                                   |
|                  | Individual      life insurance                                |  $        14,182                       |                                                                                              |               10            |                                                                                   |  $        12,926                       |                                                                                    |                 5 |                                                                                   |  $        12,356                       |
|                  | Immediate      annuities                                      |            22,113            |                                                                                              |               75            |                                                                                   |            12,612            |                                                                                    |               55            |                                                                                   |              8,142 |
|                  | Group      life insurance                                     |              1,599 |                                                                                              |             (23)                      |                                                                                   |              2,084 |                                                                                    |               37            |                                                                                   |              1,516 |
|                  | Group      accident and health insurance                      |            10,648            |                                                                                              |               (2)           |                                                                                   |            10,889            |                                                                                    |                 9 |                                                                                   |              9,997 |
|                  |                                                          | Total      new premiums                                                             |            48,542                          |                                                                                              |               26 |                                                                                |            38,511                |                                                                                              |               20 |                                                                                |            32,011 |
| Renewal      premiums |          142,257 |                                                                                |                 - |                                                                                              |          142,271                          |                                                                                |               (1) |                                                                                              |          143,449                          |
|                  | Total      premiums                                           |  $      190,799                                  |                                                                                              |                 6 |                                                                                   |  $      180,782                                  |                                                                                    |                 3 |                                                                                   |  $      175,460                                  |
|                  |                                                          |                                                                                |                                                                                              |                                                                                              |                                                                                   |                                                                                |                                                                                    |                                                                                              |                                                                                   |                                                                                |                                                                     |

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|                  |                                                    |                                                                          | 2009                                                                                              |                                                                         | %      Change                                                                          |                                                                          | 2008                                                                                    |                                                                                              | %      Change                                                                           |                                                                          | 2007                                                               |
|-----------------------|---------------------------------------------------------|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------------------------------------------------------------------|
| New      deposits:    |                                                    |                                                                          |                                                                                              |                                                                         |                                                                                   |                                                                          |                                                                                    |                                                                                              |                                                                                    |
|                  | Universal      life insurance                           |  $         9,873            |                                                                                              |             (10) |                                                                                   |  $       10,913                       |                                                                                    |                 - |                                                                                    |  $       10,869                       |
|                  | Variable      universal life insurance                  |             1,031 |                                                                                              |             (47) |                                                                                   |             1,942 |                                                                                    |             (22)                      |                                                                                    |             2,480 |
|                  | Fixed      deferred annuities                           |           76,612            |                                                                                              |             152  |                                                                                   |           30,413            |                                                                                    |               15            |                                                                                    |           26,348            |
|                  | Variable      annuities                                 |           16,078            |                                                                                              |             (37) |                                                                                   |           25,496            |                                                                                    |             (13)                      |                                                                                    |           29,426            |
|                  |                                                    | Total      new deposits                                                       |         103,594                                           |                                                                         |               51 |                                                                          |           68,764                      |                                                                                              |               (1) |                                                                          |           69,123 |
| Renewal      deposits |         136,048 |                                                                          |                 3 |                                                                         |         131,701                                |                                                                          |               (4) |                                                                                              |         136,644                                 |
| Total      deposits   |  $     239,642            |                                                                          |               20            |                                                                         |  $     200,465                                           |                                                                          |               (3) |                                                                                              |  $     205,767                                            |
|                  |                                                    |                                                                          |                                                                                              |                                                                         |                                                                                   |                                                                          |                                                                                    |                                                                                              |                                                                                    |                                                                          |                                                               |

----

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----

Table of Contents 

|                           |                                                                           | 2009                                     |   | 2008                                                     |
|--------------------------------|--------------------------------------------------------------------------------|------------------------------------------|--------|----------------------------------------------------------|
|                           |                                                                           |                                     |   | %                                                        |   |   |   | % |
|                           |                                                                           | Amount                                   |   |              of Total |   | Amount |   |               of Total |
| Fixed      maturity securities |  $    2,469,272                                       |                                     | 75%    |                                                     |  $    2,350,834 |   | 77% |
| Equity      securities         |             36,876 |                                     | 1%     |                                                     |             36,576 |   | 1% |
| Mortgage      loans            |           457,582            |                                     | 14%    |                                                     |           445,389 |   | 15% |
| Real      estate               |           114,076            |                                     | 3%     |                                                     |             99,576 |   | 3% |
| Policy      loans              |             85,585 |                                     | 3%     |                                                     |             88,304 |   | 3% |
| Short-term                     |           138,704            |                                     | 4%     |                                                     |             35,138 |   | 1% |
|                           | Total                                                                          |  $    3,302,095 |   | 100%                                                     |   |  $    3,055,817 |   | 100% |
|                           |                                                                           |                                     |   |                                                     |   |   |   |   |

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Table of Contents 

|                                               |                                                                        |                                                                                                    |                                                        | 2009                                                                                                    |                                                                                                    | 2008                                                                                                    |                                                                                                    | 2007                                              |
|----------------------------------------------------|-----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|-------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|---------------------------------------------------|
| Gross      gains resulting from:                   |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |
|                                               | Sales      of investment securities                                         |  $      9,494                                                        |                                                        |  $              -            |                                                                                                    |  $         431                                        |
|                                               | Investment      securities called, put and other                            |             942                             |                                                        |          2,673                                             |                                                                                                    |          1,623                                             |
|                                               | Sales      of real estate                                                   |             661                             |                                                        |          5,154                                             |                                                                                                    |          7,118                                             |
|                                               | Other      investment gains                                                 |             124                             |                                                        |             280                             |                                                                                                    |          1,905                                             |
|                                               |                                                                        |                                                                                                    | Total      gross gains                                      |        11,221                                                        |                                                                                                    |          8,107                                             |                                                                                                    |        11,077  |
| Gross      losses resulting from:                  |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |
|                                               | Sales      of investment securities                                         |                  - |                                                        |        (1,115)                                                       |                                                                                                    |           (633)                                       |
|                                               | Investment      securities called, put and other                            |           (386)                                       |                                                        |                  - |                                                                                                    |           (939)                                       |
|                                               | Other      investment losses                                                |             (15)                            |                                                        |                  - |                                                                                                    |                  - |
|                                               |                                                                        |                                                                                                    | Total      gross losses                                     |           (401)                                       |                                                                                                    |        (1,115)                                                       |                                                                                                    |        (1,572) |
| Amortization      of DAC and VOBA                  |             159 |                                                                                                    |          3,430 |                                                                                                    |             (43)                            |
| Net      realized investment gains, exluding       |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |
|                                               |                                                                        | impairment      losses                                                                                  |        10,979            |                                                                                                    |        10,422                                                        |                                                                                                    |          9,462                                             |
|                                               |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |                                                                                                    |                                                                                                    |                                              |
| Net      impairment losses recognized in earnings: |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |
|                                               | Other-than-temporary      impairment losses on                              |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |                                                                                                    |
|                                               |                                                                        | fixed      maturity and equity securities                                                               |      (35,011)                      |                                                                                                    |      (62,693)                                                                  |                                                                                                    |        (4,036)                                                       |
|                                               | Other-than-temporary      impairment losses on                              |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |                                                                                                    |
|                                               |                                                                        | real      estate                                                                                        |        (2,114)           |                                                                                                    |                -             |                                                                                                    |                -             |
|                                               |                                                                        | Total      other-than-temporary impairment losses                                                       |      (37,125)                      |                                                                                                    |      (62,693)                                                                  |                                                                                                    |        (4,036)                                                       |
|                                               | Portion      of loss recognized in other                                    |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |                                                                                                    |
|                                               |                                                                        | comprehensive      income (loss)                                                                        |        16,070            |                                                                                                    |                  - |                                                                                                    |                  - |
| Net      impairment losses recognized in earnings  |      (21,055)                                      |                                                                                                    |      (62,693)                      |                                                                                                    |        (4,036)                                                       |
| Realized      investment losses                    |  $  (10,076)                                                 |                                                                                                    |  $  (52,271)                                 |                                                                                                    |  $      5,426                                                        |
|                                               |                                                                        |                                                                                                    |                                                        |                                                                                                    |                                                                                                    |                                                                                                    |                                                                                                    |                                              |

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Table of Contents 

| ·   | Five      securities were residential mortgage-backed securities that were written      down by a total of $0.2 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the securities and created an      other-than-temporary impairment.  Two of these securities had      been previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.5 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period.  This security was sold      during the fourth quarter of 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $0.6      million.  As the trucking industry is highly correlated with the      general economy, this company had experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary.  This security had been written down in a      previous period.  This security was sold during the fourth      quarter of 2009.  |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $5.2 million.  These issuers had also      experienced declines in value related to the mortgage credit crisis,      including significant and continuing reductions in capital and liquidity      positions.  These securities were sold during the fourth quarter      of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Four      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.3 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  Three of these securities had been previously      written down due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $0.2      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and industry.  This      security was exchanged for a replacement security during the third quarter      of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.3 million.  This company has been affected by the credit      crisis, causing reduced access to liquidity and higher borrowing      costs.  This security had been written down in a previous      period.  The Company determined that a credit-related impairment      had occurred, and this security was sold during the third quarter of      2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through Troubled      Assets Relief Program (TARP) funds.  This company has      experienced large losses in its real estate loan portfolios and has had an      increase in non-performing loans over the past year.  This      security was written down by a total of $1.5 million before it was sold      during the third quarter of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.1 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  These securities had been previously written down      due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a collateralized debt obligation (CDO) that was written down      $0.2 million.  This security had been impacted by the rapid rise      in delinquencies and foreclosures in the subprime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling had caused extreme declines in market valuations, regardless of      individual security performance.  This security had been written      down in previous periods. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and was under reorganization was written down $1.0      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written      down. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.5 million.  This company had been affected by the credit      crisis, forcing reduced access to liquidity and higher borrowing      costs.  The Company determined that a credit-related impairment      had occurred. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $2.2 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a mortgage and financial guaranty insurer that was      written down $1.6 million.  Mortgage insurers have suffered from      the deterioration in the U.S. housing market and mortgage credit      market.  Rising mortgage delinquencies and defaults have      resulted in rating downgrades for these insurers.  Recent      rating |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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Table of Contents 

|    | downgrades,      combined with the issuer’s need to raise additional capital to meet future      payments contributed to the other-than-temporary    impairment. |
|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $1.6      million.  As the trucking industry is highly correlated with the      general economy, this company had experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that develops, manufactures and markets      imaging products that was written down $1.2 million.   This      company’s past emphasis was in traditional film, which has been largely      surpassed by digital photography.  The decline in the economy      had negatively affected sales, as the consumer photography industry is a      discretionary item.  The company’s declining revenues and      liquidity position led to the other-than-temporary    impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities (from one issuer) were residential mortgage-backed securities      that were written down by a total of $0.6 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary  impairment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the security and created an      other-than-temporary impairment. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.0 million as the Company accepted a tender      offer on the Company’s holdings from an issuer during the second quarter      of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $0.4 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $3.1 million, primarily as a result of      declines in price and rating agency downgrades on debt issues from issuers      that completed leveraged buyout transactions during 2008.  One      of these securities was subsequently sold during the fourth quarter of      2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities were CDOs that were written down by a total of $5.3      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $1.9 million due to a decline in price      that had persisted for a period longer than the Company considered      temporary.  One of these securities was subsequently sold during      the fourth quarter of 2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from an originator of residential prime, Alt-A and subprime      mortgages that was written down $4.2 million.  The significant      decline in the subprime and non-conforming mortgage markets resulted in a      reduction in value for thissecurity. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from an issuer that designs, manufactures and services cars      and trucks and provides vehicle-related financing, leasing and insurance      was written down $1.2 million, largely resulting from the decline in the      U.S. automotive industry. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security that is a financial services company involved in automotive and      real estate financing and mortgage lending was written down by $0.6      million and subsequently sold during the fourth quarter of      2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Four      securities (two issuers) were perpetual preferred securities that were      written down $3.3 million.  These securities had been negatively      impacted by the housing and mortgage credit crisis and have received TARP      (Troubled Assets Relief Program)funds. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $6.5 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from the same issuer were from an investment banking firm that      filed for bankruptcy during the third quarter of 2008 and were written      down by a total of $9.2 million.  This firm was part of the      financial industry that was hit hard by the mortgage credit      crisis.  After a severe decline in equity valuations, the      inability to obtain short-term funding and the failure to find an acquirer      forced this firm to file for Chapter 11  bankruptcy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $4.9 million.  These issuers had also      experienced declines in value related to the mortgage credit crisis and      had been downgraded to a negativeoutlook. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a supplier of auto parts for light trucks and      sport-utility vehicles.  The deteriorating truck and      sport-utility vehicle markets of the auto industry, combined with the      sharp decline in value and recent ratings declines, resulted in a $2.1      million write-down. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.1 million as continued price deterioration      occurred on this security that was previously written      down.  This issuer is primarily in the radio and advertising      business. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $2.8million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a bank holding company that had recently filed for      bankruptcy.  This holding company was the parent of a large      nationwide bank that was recently taken over by the Office of Thrift      Supervision and the Federal Deposit Insurance Corporation (FDIC) was      appointed as its receiver.  As a result of the bankruptcy      filing, this security was written down $0.8  million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      of the securities were written down by a total of $3.3 million, primarily      as a result of declines in price and rating agency downgrades on debt      issues from issuers that had recently completed leveraged buyout (LBO)      transactions.  These LBO transactions greatly increased the debt      level of each issuer.  One of these securities had been written      down previously, and the other two securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs and were written down by $2.8 million, primarily due      to price declines that had persisted for periods longer than the Company      considered temporary.  Both securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $3.3 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary, rating agency downgrades and a debt restructuring      during the quarter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.8 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security was below cost by 20% or more for more than six consecutive      months and was the subject of a recent leveraged buyout that was finalized      during the fourth quarter of 2007, which greatly increased the debt level      of the company.  Accordingly, the Company wrote down this      security $3.3 million at year-end2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security filed for Chapter 11 protection and indicated that it would not      be able to fully meet all of the obligations of its      borrowings.  The Company recognized an other-than-temporary      impairment on this security at year-end 2006 of $1.1      million.  As a result of this new action, the Company recognized      an additional $0.7 million impairment in 2007.  At December 31,      2006, this security was below cost by 20% or more for more than twelve      consecutive months.  It was in a highly competitive and cyclical      industry that was experiencing weakened demand and      overcapacity.  Capital expenditures for equipment upgrades were      exceeding cash generation. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Credit      risk, relating to the uncertainty associated with the continued ability of      a given obligor to make timely payments of principal and      interest; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Interest      rate risk, relating to the market price and/or cash flow associated with      changes in market yield and curves;and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Liquidity      risk, relating to the risk that investments cannot be converted into cash      when needed or that the terms for conversion have a negative effect on the      Company. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | Fair      Value                                                                                          |                                                                                          |                                                                                                                                              |                                                                                                        | Fair      Value                                                                                                                             |                                                                                                                       |                                                                                            |
|--------|--------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | of      Securities                                                                                       |                                                                                          |                                                                                                                                              |                                                                                                        | of      Securities                                                                                                                          |                                                                                                                       |                                                                                            |
|   |                                       |                                                                                                   |                                                                                                   | Total                                                                                       |   |                                                                                            |                                                                                 | with      Gross                                                                                          |                                                                                          | Gross                                                                                                                                             |                                                                                                        | with      Gross                                                                                                                             |                                                                                                                       | Gross                                                                                           |
|   |                                       |                                                                                                   |                                                                                                   | Fair                                                                                        |   | %                                                                                               |                                                                                 | Unrealized                                                                                               |                                                                                          | Unrealized                                                                                                                                        |                                                                                                        | Unrealized                                                                                                                                  |                                                                                                                       | Unrealized                                                                                      |
|   |                                       |                                                                                                   |                                                                                                   | Value                                                                                       |   | of      Total                                                                                   |                                                                                 | Gains                                                                                                    |                                                                                          | Gains                                                                                                                                             |                                                                                                        | Losses                                                                                                                                      |                                                                                                                       | Losses                                                                                          |
|   | U.S.      Treasury securities and          |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | obligations      of U.S. Government                                                                    |  $           121,937                       |                                                                                        | 5%     |                                                                                            |  $          88,281            |                                                                                                     |  $         4,674                            |                                                                                                                                              |  $            33,656                       |                                                                                                                                        |  $            1,021                                       |
|   | Federal      agencies 1                    |                 28,321 |                                                                                                   | 1%                                                                                          |   |              28,321            |                                                                                 |                681            |                                                                                          |                         - |                                                                                                        |                        - |
|   | Federal      agency issued                 |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | residential      mortgage-backed securities 1                                                          |               172,515            |                                                                                        | 7%     |                                                                                            |            164,961            |                                                                                                     |             7,220                 |                                                                                                                                              |                  7,554 |                                                                                                                                        |                     55 |
|   |                                       |                                                                                                   | Subtotal                                                                                               |               322,773 |   | 13%                                                                                             |                                                                                 |            281,563                                |                                                                                          |           12,575                                                                                |                                                                                                        |                41,210                                            |                                                                                                                       |                1,076 |
|   | Corporate      obligations:                |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | Industrial                                                                                             |               415,946            |                                                                                        | 17%    |                                                                                            |            335,829            |                                                                                                     |           17,773                            |                                                                                                                                              |                80,117            |                                                                                                                                        |                2,602                            |
|   |                                       | Energy                                                                                                 |               200,340            |                                                                                        | 8%     |                                                                                            |            176,126            |                                                                                                     |           10,703                            |                                                                                                                                              |                24,214            |                                                                                                                                        |                1,199                            |
|   |                                       | Technology                                                                                             |                 40,864 |                                                                                        | 2%     |                                                                                            |              29,483 |                                                                                                     |             1,919                 |                                                                                                                                              |                11,381            |                                                                                                                                        |                   413            |
|   |                                       | Communications                                                                                         |                 86,264 |                                                                                        | 4%     |                                                                                            |              63,114 |                                                                                                     |             3,492                 |                                                                                                                                              |                23,150            |                                                                                                                                        |                1,374                            |
|   |                                       | Financial                                                                                              |               364,608            |                                                                                        | 15%    |                                                                                            |            202,958            |                                                                                                     |             9,247                 |                                                                                                                                              |              161,650                       |                                                                                                                                        |              15,818                                       |
|   |                                       | Consumer                                                                                               |               307,506            |                                                                                        | 12%    |                                                                                            |            251,586            |                                                                                                     |           15,210                            |                                                                                                                                              |                55,920            |                                                                                                                                        |                2,436                            |
|   |                                       | Public      utilities                                                                                  |               287,687            |                                                                                        | 12%    |                                                                                            |            233,663            |                                                                                                     |           16,012                            |                                                                                                                                              |                54,024            |                                                                                                                                        |                2,121                            |
|   |                                       |                                                                                                   | Subtotal                                                                                               |            1,703,215                 |   | 70%                                                                                             |                                                                                 |         1,292,759                                                |                                                                                          |           74,356                                                                                |                                                                                                        |              410,456                                                       |                                                                                                                       |              25,963            |
|   | Corporate      private-labeled residential |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | mortgage-backed      securities                                                                        |               200,002            |                                                                                        | 8%     |                                                                                            |              22,870 |                                                                                                     |                387 |                                                                                                                                              |              177,132                       |                                                                                                                                        |              42,930                                       |
|   | Other                                      |               229,681            |                                                                                                   | 9%                                                                                          |   |              54,519            |                                                                                 |             4,349                            |                                                                                          |              175,162                                                             |                                                                                                        |              21,677                                                        |
|   | Redeemable      preferred stocks           |                 13,601 |                                                                                                   |            -                         |   |                5,098 |                                                                                 |                  98 |                                                                                          |                  8,503                                       |                                                                                                        |                1,363                                             |
| Total  |                                       |  $        2,469,272                                       |                                                                                                   | 100%                                                                                        |   |  $     1,656,809                                                  |                                                                                 |  $       91,765                                                  |                                                                                          |  $          812,463                                                                        |                                                                                                        |  $          93,009                                                                   |
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |                                                                                                                       |                                                                                            |

----

Table of Contents

|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | Fair      Value                                                                                          |                                                                                                     |                                                                                                                                              |                                                                                             | Fair      Value                                                                                                                             |                                                                                                            |                                                                                            |
|--------|--------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | of      Securities                                                                                       |                                                                                                     |                                                                                                                                              |                                                                                             | of      Securities                                                                                                                          |                                                                                                            |                                                                                            |
|   |                                       |                                                                                                   |                                                                                                   | Total                                                                                       |   |                                                                                            |                                                                                 | with      Gross                                                                                          |                                                                                                     | Gross                                                                                                                                             |                                                                                             | with      Gross                                                                                                                             |                                                                                                            | Gross                                                                                           |
|   |                                       |                                                                                                   |                                                                                                   | Fair                                                                                        |   | %                                                                                               |                                                                                 | Unrealized                                                                                               |                                                                                                     | Unrealized                                                                                                                                        |                                                                                             | Unrealized                                                                                                                                  |                                                                                                            | Unrealized                                                                                      |
|   |                                       |                                                                                                   |                                                                                                   | Value                                                                                       |   | of      Total                                                                                   |                                                                                 | Gains                                                                                                    |                                                                                                     | Gains                                                                                                                                             |                                                                                             | Losses                                                                                                                                      |                                                                                                            | Losses                                                                                          |
|   | U.S.      Treasury securities and          |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | obligations      of U.S. Government                                                                    |  $             87,056            |                                                                                        | 4%     |                                                                                            |  $          80,252            |                                                                                                     |  $         3,518                                       |                                                                                                                                              |  $              6,804 |                                                                                                                                        |  $               399            |
|   | Federal      agencies 1                    |                 76,209 |                                                                                                   | 3%                                                                                          |   |              76,209            |                                                                                 |             4,074                            |                                                                                                     |                         - |                                                                                             |                        - |
|   | Federal      agency issued                 |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | residential      mortgage-backed securities 1                                                          |               200,485            |                                                                                        | 8%     |                                                                                            |            146,148            |                                                                                                     |             3,407                            |                                                                                                                                              |                54,337 |                                                                                                                                        |                   635 |
|   |                                       |                                                                                                   | Subtotal                                                                                               |               363,750 |   | 15%                                                                                             |                                                                                 |            302,609                                |                                                                                                     |           10,999                                                                                |                                                                                             |                61,141                                            |                                                                                                            |                1,034 |
|   | Corporate      obligations:                |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | Industrial                                                                                             |               368,713            |                                                                                        | 16%    |                                                                                            |            142,876            |                                                                                                     |             6,501                            |                                                                                                                                              |              225,837            |                                                                                                                                        |              27,368                            |
|   |                                       | Energy                                                                                                 |               189,740            |                                                                                        | 8%     |                                                                                            |              68,412 |                                                                                                     |             4,261                            |                                                                                                                                              |              121,328            |                                                                                                                                        |              15,693                            |
|   |                                       | Technology                                                                                             |                 35,317 |                                                                                        | 2%     |                                                                                            |              22,514 |                                                                                                     |             1,109                            |                                                                                                                                              |                12,803 |                                                                                                                                        |                3,056                 |
|   |                                       | Communications                                                                                         |                 66,057 |                                                                                        | 3%     |                                                                                            |              20,498 |                                                                                                     |                699            |                                                                                                                                              |                45,559 |                                                                                                                                        |                7,677                 |
|   |                                       | Financial                                                                                              |               345,564            |                                                                                        | 15%    |                                                                                            |              79,198 |                                                                                                     |             3,430                            |                                                                                                                                              |              266,366            |                                                                                                                                        |              45,793                            |
|   |                                       | Consumer                                                                                               |               279,875            |                                                                                        | 12%    |                                                                                            |              93,269 |                                                                                                     |             4,900                            |                                                                                                                                              |              186,606            |                                                                                                                                        |              27,458                            |
|   |                                       | Public      utilities                                                                                  |               255,624            |                                                                                        | 11%    |                                                                                            |            116,550            |                                                                                                     |             6,013                            |                                                                                                                                              |              139,074            |                                                                                                                                        |              10,918                            |
|   |                                       |                                                                                                   | Subtotal                                                                                               |            1,540,890                 |   | 67%                                                                                             |                                                                                 |            543,317                                |                                                                                                     |           26,913                                                                                |                                                                                             |              997,573                                                       |                                                                                                            |            137,963                       |
|   | Corporate      private-labeled residential |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | mortgage-backed      securities                                                                        |               219,700            |                                                                                        | 9%     |                                                                                            |              15,219 |                                                                                                     |                  90 |                                                                                                                                              |              204,481            |                                                                                                                                        |              52,795                            |
|   | Other                                      |               204,500            |                                                                                                   | 9%                                                                                          |   |              20,665            |                                                                                 |                545            |                                                                                                     |              183,835                                                             |                                                                                             |              37,217                                                        |
|   | Redeemable      preferred stocks           |                 21,994 |                                                                                                   |            -                         |   |                8,270 |                                                                                 |                  52 |                                                                                                     |                13,724                                                  |                                                                                             |                2,430                                             |
| Total  |                                       |  $        2,350,834                                       |                                                                                                   | 100%                                                                                        |   |  $        890,080                                  |                                                                                 |  $       38,599                                                  |                                                                                                     |  $       1,460,754                                                                                        |                                                                                             |  $        231,439                                                                              |
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |                                                                                                            |                                                                                            |

|                                                      | December      31, 2009                                                   |   | December      31, 2008 |
|-----------------------------------------------------------|--------------------------------------------------------------------------|--------|------------------------|
|                                                      |  Fair                                                               |   | %                      |   | Fair |   | % |
| Equivalent S&P Rating                                 |  Value                                                              |   | of      Total          |   | Value |   | of      Total |
| AAA                                                       |  $      601,262                       |   | 24%                    |   |  $      751,995 |   | 32% |
| AA                                                        |          150,543            |   | 6%                     |   |          194,879 |   | 8% |
| A                                                         |          696,861            |   | 29%                    |   |          658,328 |   | 29% |
| BBB                                                       |          866,902            |   | 35%                    |   |          640,582 |   | 27% |
|     Total      investment grade       |       2,315,568                            |   | 94%                    |   |       2,245,784 |   | 96% |
| BB                                                        |            78,996 |   | 3%                     |   |            74,961 |   | 3% |
| B      and below                                          |            74,708 |   | 3%                     |   |            30,089 |   | 1% |
|     Total      below investment grade |          153,704            |   | 6%                     |   |          105,050 |   | 4% |
|                                                      |  $   2,469,272                                       |   | 100%                   |   |  $   2,350,834 |   | 100% |
|                                                      |                                                                     |   |                   |   |   |   |   |

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Table of Contents 

| ·   | Intent      and ability to make all principal and interest payments when      due; |
|--------------------|------------------------------------------------------------------------------------|

| ·   | Near-term      business prospects; |
|--------------------|------------------------------------|

| ·   | Cash      flow and liquidity; |
|--------------------|-------------------------------|

| ·   | Credit      ratings; |
|--------------------|----------------------|

| ·   | Business      climate; |
|--------------------|------------------------|

| ·   | Management      changes; |
|--------------------|--------------------------|

| ·   | Litigation      and government actions; and |
|--------------------|---------------------------------------------|

| ·   | Other      similar factors. |
|--------------------|-----------------------------|

| ·   | The      current fair value of the security as compared to amortized      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below amortized      cost; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold an equity security until it recovers      in value; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell a debt security and whether it is more likely      than not that the Company will be required to sell a debt security before      recovery of the amortized cost basis;and |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

----

Table of Contents 

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the facts and circumstances change such that it becomes more      likely than not that the Company will be required to sell the investment      before recovery of the amortized cost basis;and |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Table of Contents 

|                               |                                                               |                                                                                                          | Fair                                                               |                                                                                                          | Amortized                                                                                   |                                                                                                                            | Unrealized                                                                       |                                                                            | %             |
|------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------|
|                               |                                                               |                                                                                                          | Value                                                              |                                                                                                          | Cost                                                                                        |                                                                                                                            | Losses                                                                           |                                                                            | of      Total |
| Residential & Non-agency MBS 1 |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |
| Investment      Grade:             |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |
|                               | Vintage      2003 and earlier                                      |  $       78,263                                                       |                                                               |  $       80,303                                                       |                                                                                        |  $           (2,040)                                                |                                                                             | 4%                                                                              |
|                               | 2004                                                               |           67,494                                            |                                                               |           80,074                                            |                                                                                        |             (12,580)                                                |                                                                             | 22%                                                                             |
|                               | 2005                                                               |           30,729                                            |                                                               |           42,761                                            |                                                                                        |             (12,032)                                                |                                                                             | 21%                                                                             |
|                               | 2006                                                               |             3,706                                 |                                                               |             4,318                                 |                                                                                        |                  (612)                     |                                                                             | 1%                                                                              |
|                               | 2007                                                               |                   - |                                                               |                   - |                                                                                        |                      - |                                                                             |              - |
|                               |                                                               | Total      investment grade                                                                                   |         180,192            |                                                                                                          |         207,456                                     |                                                                                                                            |             (27,264) |                                                                            | 48%           |
|                               |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |                                                                            |          |
| Below      Investment Grade:       |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |
|                               | Vintage      2003 and earlier                                      |                   - |                                                               |                   - |                                                                                        |                      - |                                                                             |              - |
|                               | 2004                                                               |                   - |                                                               |                   - |                                                                                        |                      - |                                                                             |              - |
|                               | 2005                                                               |           30,897                                            |                                                               |           50,565                                            |                                                                                        |             (19,668)                                                |                                                                             | 34%                                                                             |
|                               | 2006                                                               |             2,669                                 |                                                               |             5,715                                 |                                                                                        |               (3,046)                                     |                                                                             | 5%                                                                              |
|                               | 2007                                                               |             3,944                                 |                                                               |             5,859                                 |                                                                                        |               (1,915)                                     |                                                                             | 3%                                                                              |
|                               |                                                               | Total      below investment grade                                                                             |           37,510 |                                                                                                          |           62,139                          |                                                                                                                            |             (24,629) |                                                                            | 42%           |
|                               |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |                                                                            |          |
| Other StructuredSecurities:        |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |
| Investment      grade              |         106,822            |                                                                                                          |         110,327            |                                                                                                          |               (3,505) |                                                                                                                            | 6%                                                                               |
| Below      investment grade        |           42,659 |                                                                                                          |           44,965 |                                                                                                          |               (2,306) |                                                                                                                            | 4%                                                                               |
|                               | Total      other                                                   |         149,481                                                       |                                                               |         155,292                                                       |                                                                                        |               (5,811)                                     |                                                                             | 10%                                                                             |
| Total      structured securities   |  $     367,183                       |                                                                                                          |  $     424,887                       |                                                                                                          |  $         (57,704)                       |                                                                                                                            | 100%                                                                             |
|                               |                                                               |                                                                                                          |                                                               |                                                                                                          |                                                                                        |                                                                                                                            |                                                                             |                                                                            |          |

----

Table of Contents 

|                               |                                                                                                        |                                                                                                                                        | Fair                                                                                                                                        |                                                                                                                                        | Amortized                                                                                                                                   |                                                                                                                                        | Unrealized                                                                                                                                  |                                                                            | %                                                                               |
|------------------------------------|-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
|                               |                                                                                                        |                                                                                                                                        | Value                                                                                                                                       |                                                                                                                                        | Cost                                                                                                                                        |                                                                                                                                        | Losses                                                                                                                                      |                                                                            | of      Total                                                                   |
| Residential & Non-agency MBS 1 |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Investment      Grade:             |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
|                               | Vintage      2003 and earlier                                                                               |  $          105,722                                                                  |                                                                                                                                        |  $          113,645                                                                  |                                                                                                                                        |  $            (7,923)                                                      |                                                                                                                                        | 9%                                                                              |
|                               | 2004                                                                                                        |                63,843                                            |                                                                                                                                        |                81,142                                            |                                                                                                                                        |              (17,299)                                                      |                                                                                                                                        | 21%                                                                             |
|                               | 2005                                                                                                        |                61,672                                            |                                                                                                                                        |                94,517                                            |                                                                                                                                        |              (32,845)                                                      |                                                                                                                                        | 39%                                                                             |
|                               | 2006                                                                                                        |                  7,740                                 |                                                                                                                                        |                12,890                                            |                                                                                                                                        |                (5,150)                                           |                                                                                                                                        | 6%                                                                              |
|                               | 2007                                                                                                        |                  2,005                                 |                                                                                                                                        |                  2,005                                 |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               |                                                                                                        | Total      investment grade                                                                                                                 |              240,982                                                       |                                                                                                                                        |              304,199                                                       |                                                                                                                                        |              (63,217)                                                      |                                                                            | 75%                                                                             |
|                               |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                            |                                                                            |
| Below      Investment Grade:       |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
|                               | Vintage      2003 and earlier                                                                               |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               | 2004                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               | 2005                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               | 2006                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               | 2007                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                                                                                        |              - |
|                               |                                                                                                        | Total      below investment grade                                                                                                           |                        - |                                                                                                                                        |                        - |                                                                                                                                        |                        - |                                                                            |              - |
|                               |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                            |                                                                            |
| Other StructuredSecurities:        |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |
| Investment      grade              |              135,625                       |                                                                                                                                        |              156,232                                                       |                                                                                                                                        |              (20,607)                                                      |                                                                                                                                        | 24%                                                                                                                                         |
| Below      investment grade        |                  3,270 |                                                                                                                                        |                  4,031                                 |                                                                                                                                        |                   (761)                           |                                                                                                                                        | 1%                                                                                                                                          |
|                               | Total      other                                                                                            |              138,895                                                       |                                                                                                                                        |              160,263                                                       |                                                                                                                                        |              (21,368)                                                      |                                                                                                                                        | 25%                                                                             |
| Total      structured securities   |  $          379,877                                  |                                                                                                                                        |  $          464,462                                                                  |                                                                                                                                        |  $          (84,585)                                                                 |                                                                                                                                        | 100%                                                                                                                                        |
|                               |                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                                                                                        |                                                                            |                                                                            |

----

Table of Contents 

|                             |                                                                                              |                                          |                                                                                              | Less than 12 months                                                   |                                                                                        | 12 months or longer                                                   |                                                                  | Total                                                 |
|----------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|-------------------------------------------------------|
|                             |                                                                                              |                                          |                                                                                              | Fair                                                                  |                                                                                        | Unrealized                                                            |                                                                  | Fair                                                  |   | Unrealized |   | Fair |   | Unrealized |
| Bonds:                           |                                                                                              | Value                                         |                                                                                              | Losses                                                                |                                                                                        | Value                                                                 |                                                                  | Losses                                                |   | Value |   | Losses |
|                             | U.S.      Treasury securities and                                                                 |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | obligations      of U.S. Government           |  $   30,616                                                                   |                                                                  |  $        913                                  |                                                                  |  $     3,040                            |                                                  |  $        108 |   |  $         33,656 |   |  $     1,021 |
|                             | Federal      agency issued                                                                        |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | residential      mortgage-backed securities 1 |         1,363                                             |                                                                  |                4 |                                                                  |         6,191                 |                                                  |              51 |   |               7,554 |   |              55 |
|                             |                                                                                              |                                          | Subtotal                                                                                          |       31,979                            |                                                                                        |            917 |                                                                  |         9,231 |   |            159 |   |             41,210 |   |         1,076 |
|                             | Corporate      obligations:                                                                       |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | Industrial                                    |       55,724                                                        |                                                                  |            562                       |                                                                  |       24,393                            |                                                  |         2,040 |   |             80,117 |   |         2,602 |
|                             |                                                                                              | Energy                                        |       12,392                                                        |                                                                  |            167                       |                                                                  |       11,822                            |                                                  |         1,032 |   |             24,214 |   |         1,199 |
|                             |                                                                                              | Technology                                    |         4,012                                             |                                                                  |              76            |                                                                  |         7,369                 |                                                  |            337 |   |             11,381 |   |            413 |
|                             |                                                                                              | Communications                                |         2,353                                             |                                                                  |              44            |                                                                  |       20,797                            |                                                  |         1,330 |   |             23,150 |   |         1,374 |
|                             |                                                                                              | Financial                                     |       35,437                                                        |                                                                  |            568                       |                                                                  |     126,213                                       |                                                  |       15,250 |   |           161,650 |   |       15,818 |
|                             |                                                                                              | Consumer                                      |       21,753                                                        |                                                                  |            898                       |                                                                  |       34,167                            |                                                  |         1,538 |   |             55,920 |   |         2,436 |
|                             |                                                                                              | Public      utilities                         |       34,108                                                        |                                                                  |            731                       |                                                                  |       19,916                            |                                                  |         1,390 |   |             54,024 |   |         2,121 |
|                             | Total      corporate obligations                                                                  |     165,779               |                                                                                              |         3,046                 |                                                                                        |     244,677                                       |                                                                  |       22,917            |   |           410,456 |   |       25,963 |
|                             | Corporate      private-labeled residential                                                        |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | mortgage-backed      securities               |       18,319                                                        |                                                                  |         2,266                                       |                                                                  |     158,813                                       |                                                  |       40,664 |   |           177,132 |   |       42,930 |
|                             | Other                                                                                             |       25,747    |                                                                                              |            940 |                                                                                        |     149,415                                       |                                                                  |       20,737            |   |           175,162 |   |       21,677 |
| Redeemable      preferred stocks |            831                             |                                          |                2       |                                                                  |         7,672                                       |                                                                  |         1,361                 |                                                  |               8,503 |   |         1,363 |
| Fixed      maturity securities   |     242,655                                                                   |                                          |         7,171                                             |                                                                  |     569,808                                                             |                                                                  |       85,838                            |                                                  |           812,463 |   |       93,009 |
| Equity      securities           |                 - |                                          |                 - |                                                                  |         1,986                                       |                                                                  |            186 |                                                  |               1,986 |   |            186 |
|                             |                                                                                              |                                          | Total                                                                                             |  $      242,655                                                  |                                                                                        |  $     7,171                            |                                                                  |  $      571,794                                  |   |  $   86,024 |   |  $       814,449 |   |  $   93,195 |
|                             |                                                                                              |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |   |   |

----

Table of Contents 

|                             |                                                                                              |                                          |                                                                                              | Less than 12 months                        |                                                                  | 12 months or longer                                                   |                                                                  | Total                                      |
|----------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------|---------------------------------------------------------------------------------------------------|--------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|--------------------------------------------|
|                             |                                                                                              |                                          |                                                                                              | Fair                                       |                                                                  | Unrealized                                                            |                                                                  | Fair                                       |   | Unrealized |   | Fair |   | Unrealized |
| Bonds:                           |                                                                                              | Value                                         |                                                                                              | Losses                                     |                                                                  | Value                                                                 |                                                                  | Losses                                     |   | Value |   | Losses |
|                             | U.S.      Treasury securities and                                                                 |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | obligations      of U.S. Government           |  $     1,591                                                        |                                       |  $        260            |                                                                  |  $     5,213                            |                                       |  $        139 |   |  $           6,804 |   |  $        399 |
|                             | Federal      agency issued                                                                        |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | residential      mortgage-backed securities 1 |       28,933                                                        |                                       |            419 |                                                                  |       25,404                            |                                       |            216 |   |             54,337 |   |            635 |
|                             |                                                                                              |                                          | Subtotal                                                                                          |       30,524 |                                                                  |            679 |                                                                  |       30,617 |   |            355 |   |             61,141 |   |         1,034 |
|                             | Corporate      obligations:                                                                       |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | Industrial                                    |     152,873                                                                   |                                       |       11,301                            |                                                                  |       72,964                            |                                       |       16,067 |   |           225,837 |   |       27,368 |
|                             |                                                                                              | Energy                                        |     104,230                                                                   |                                       |       12,571                            |                                                                  |       17,098                            |                                       |         3,122 |   |           121,328 |   |       15,693 |
|                             |                                                                                              | Technology                                    |         5,828                                             |                                       |         1,352                 |                                                                  |         6,975                 |                                       |         1,704 |   |             12,803 |   |         3,056 |
|                             |                                                                                              | Communications                                |       27,885                                                        |                                       |         3,584                 |                                                                  |       17,674                            |                                       |         4,093 |   |             45,559 |   |         7,677 |
|                             |                                                                                              | Financial                                     |     171,513                                                                   |                                       |       18,408                            |                                                                  |       94,853                            |                                       |       27,385 |   |           266,366 |   |       45,793 |
|                             |                                                                                              | Consumer                                      |     124,295                                                                   |                                       |       14,605                            |                                                                  |       62,311                            |                                       |       12,853 |   |           186,606 |   |       27,458 |
|                             |                                                                                              | Public      utilities                         |     124,053                                                                   |                                       |         8,339                 |                                                                  |       15,021                            |                                       |         2,579 |   |           139,074 |   |       10,918 |
|                             | Total      corporate obligations                                                                  |     710,677               |                                                                                              |       70,160 |                                                                  |     286,896                                       |                                                                  |       67,803 |   |           997,573 |   |     137,963 |
|                             | Corporate      private-labeled residential                                                        |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | mortgage-backed      securities               |     114,480                                                                   |                                       |       15,261                            |                                                                  |       90,001                            |                                       |       37,534 |   |           204,481 |   |       52,795 |
|                             | Other                                                                                             |     125,491               |                                                                                              |       16,342 |                                                                  |       58,344                            |                                                                  |       20,875 |   |           183,835 |   |       37,217 |
| Redeemable      preferred stocks |         9,786                                             |                                          |         1,237                                             |                                       |         3,938                 |                                                                  |         1,193                 |                                       |             13,724 |   |         2,430 |
| Fixed      maturity securities   |     990,958                                                                   |                                          |     103,679                                                                   |                                       |     469,796                                       |                                                                  |     127,760                                       |                                       |        1,460,754 |   |     231,439 |
| Equity      securities           |                 - |                                          |                 - |                                       |         1,755                 |                                                                  |            417 |                                       |               1,755 |   |            417 |
|                             |                                                                                              |                                          | Total                                                                                             |  $      990,958                       |                                                                  |  $      103,679                                                  |                                                                  |  $      471,551                       |   |  $      128,177 |   |  $    1,462,509 |   |  $      231,856 |
|                             |                                                                                              |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |   |   |

----

Table of Contents 

| ·   | 84      security issues representing 36% of the issues with unrealized losses,      including 93% being rated as investment grade, were below cost for less      than one year; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 96      security issues representing 41% of the issues with unrealized losses,      including 80% being rated as investment grade, were below cost for one      year or more and less than three years;and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 52      security issues representing 23% of the issues with unrealized losses,      including 81% being rated as investment grade, were below cost for three      years or more. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 293      security issues representing 61% of the issues with unrealized losses,      including 94% being rated as investment grade, were below cost for less      than one year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 65      security issues representing 13% of the issues with unrealized losses,      including 88% being rated as investment grade, were below cost for one      year or more and less than three years;and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 125      security issues representing 26% of the issues with unrealized losses,      including 92% being rated as investment grade, were below cost for three      years or more. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |                                                                                             |                                                |                                                                                                                                        | December      31, 2009                                                                           |
|------------------------------------------------------------|--------------------------------------------------------------------------------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   | Gross |
|                                                       |                                                                                             |                                                |                                                                                                                                        | Amortized                                                                                        |   | Fair |   | Unrealized |
| Securities      owned without realized impairment:         | Cost                                                                                             |                                                | Value                                                                                                                                       |                                                                                             | Losses |
| Unrealized      losses of 10% or less                      |  $          633,514                       |                                                |  $          608,280                                                                  |                                                                                             |  $         25,234 |
| Unrealized      losses of 20% or less and greater than 10% | 109,379                                                                                          |                                                | 94,348                                                                                                                                      |                                                                                             | 15,031 |
|                                                       | Subtotal                                                                                         | 742,893                                             |                                                                                                                                        | 702,628                                                                                          |   | 40,265 |
| Unrealized      losses greater than 20%:                   |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
|                                                       | Investment      grade                                                                            |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           | 13,125                                                                                                                                      |                                                                                             | 9,821 |   | 3,304 |
|                                                       |                                                                                             | Six      months or more and less than twelve months | 25,413                                                                                                                                      |                                                                                             | 19,627 |   | 5,786 |
|                                                       |                                                                                             | Twelve      months or greater                       |                34,906                                            |                                                                                             |                22,225 |   | 12,681 |
|                                                       |                                                                                             |                                                | Total      investment grade                                                                                                                 | 73,444                                                                                           |   | 51,673 |   | 21,771 |
|                                                       | Below      investment grade                                                                      |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Six      months or more and less than twelve months | 4,654                                                                                                                                       |                                                                                             | 2,954 |   | 1,700 |
|                                                       |                                                                                             | Twelve      months or greater                       |                15,139                                            |                                                                                             |                11,139 |   | 4,000 |
|                                                       |                                                                                             |                                                | Total      below investment grade                                                                                                           | 19,793                                                                                           |   | 14,093 |   | 5,700 |
|                                                       | Unrealized      losses greater than 20%                                                          | 93,237                                              |                                                                                                                                        | 65,766                                                                                           |   | 27,471 |
| Subtotal                                                   |  $          836,130                       |                                                |  $          768,394                                                                  |                                                                                             |  $         67,736 |
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   |   |
| Securities      owned with realized impairment:            |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
| Unrealized      losses of 10% or less                      |  $              4,850 |                                                |  $              4,634                                            |                                                                                             |  $              216 |
| Unrealized      losses of 20% or less and greater than 10% | 10,594                                                                                           |                                                | 8,720                                                                                                                                       |                                                                                             | 1,874 |
|                                                       | Subtotal                                                                                         | 15,444                                              |                                                                                                                                        | 13,354                                                                                           |   | 2,090 |
| Unrealized      losses greater than 20%:                   |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
|                                                       | Investment      grade                                                                            |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Six      months or more and less than twelve months |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Twelve      months or greater                       |                17,937                                            |                                                                                             |                12,298 |   |               5,639 |
|                                                       |                                                                                             |                                                | Total      investment grade                                                                                                                 |                17,937 |   |                12,298 |   |               5,639 |
|                                                       | Below      investment grade                                                                      |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           | 514                                                                                                                                         |                                                                                             | 362 |   | 152 |
|                                                       |                                                                                             | Six      months or more and less than twelve months |                  5,859                                 |                                                                                             |                  3,944 |   |               1,915 |
|                                                       |                                                                                             | Twelve      months or greater                       |                31,760                                            |                                                                                             |                16,097 |   |             15,663 |
|                                                       |                                                                                             |                                                | Total      below investment grade                                                                                                           | 38,133                                                                                           |   | 20,403 |   | 17,730 |
|                                                       | Unrealized      losses greater than 20%                                                          | 56,070                                              |                                                                                                                                        | 32,701                                                                                           |   | 23,369 |
| Subtotal                                                   |  $            71,514            |                                                |  $            46,055                                                       |                                                                                             |  $         25,459 |
| Total      unrealized losses                               |  $          907,644                       |                                                |  $          814,449                                                                  |                                                                                             |  $         93,195 |
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   |   |

----

|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    | December      31, 2008                                                                                                      |
|------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   | Gross |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    | Amortized                                                                                                                   |   | Fair |   | Unrealized |
| Securities      owned without realized impairment:         | Cost                                                                                                                                         |                                                                                                        | Value                                                                                                                                                   |                                                                                                                        | Losses |
| Unrealized      losses of 10% or less                      |  $          891,477                                                                   |                                                                                                        |  $          847,458                                                                              |                                                                                                                        |  $         44,019 |
| Unrealized      losses of 20% or less and greater than 10% |              397,403                                                        |                                                                                                        |              339,664                                                                   |                                                                                                                        |             57,739 |
|                                                       | Subtotal                                                                                                                                     |           1,288,880                                       |                                                                                                                                                    |           1,187,122                                                       |   |           101,758 |
| Unrealized      losses greater than 20%:                   |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
|                                                       | Investment      grade                                                                                                                        |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |              296,683                                                                   |                                                                                                                        |              207,314 |   |             89,369 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                46,194                                                        |                                                                                                                        |                28,918 |   |             17,276 |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      investment grade                                                                                                                             |              342,877                                       |   |              236,232 |   |           106,645 |
|                                                       | Below      investment grade                                                                                                                  |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                45,346                                                        |                                                                                                                        |                27,269 |   |             18,077 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                  4,547                                             |                                                                                                                        |                  2,098 |   |               2,449 |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      below investment grade                                                                                                                       |                49,893                            |   |                29,367 |   |             20,526 |
|                                                       | Unrealized      losses greater than 20%                                                                                                      |              392,770                       |                                                                                                                                                    |              265,599                                       |   |           127,171 |
| Subtotal                                                   |  $       1,681,650                                                                                   |                                                                                                        |  $       1,452,721                                                                                              |                                                                                                                        |  $       228,929 |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   |   |
| Securities      owned with realized impairment:            |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
| Unrealized      losses of 10% or less                      |  $                      - |                                                                                                        |  $                     -                  |                                                                                                                        |  $                   - |
| Unrealized      losses of 20% or less and greater than 10% |                  5,676                                  |                                                                                                        |                  4,725                                             |                                                                                                                        |                  951 |
|                                                       | Subtotal                                                                                                                                     |                  5,676 |                                                                                                                                                    |                  4,725                 |   |                  951 |
| Unrealized      losses greater than 20%:                   |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
|                                                       | Investment      grade                                                                                                                        |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                  6,476                                             |                                                                                                                        |                  4,635 |   |               1,841 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      investment grade                                                                                                                             |                  6,476                 |   |                  4,635 |   |               1,841 |
|                                                       | Below      investment grade                                                                                                                  |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                     563                             |                                                                                                                        |                     428 |   |                  135 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      below investment grade                                                                                                                       |                     563 |   |                     428 |   |                  135 |
|                                                       | Unrealized      losses greater than 20%                                                                                                      |                  7,039 |                                                                                                                                                    |                  5,063                 |   |               1,976 |
| Subtotal                                                   |  $            12,715                                                        |                                                                                                        |  $              9,788                                                        |                                                                                                                        |  $           2,927 |
| Total      unrealized losses                               |  $       1,694,365                                                                                   |                                                                                                        |  $       1,462,509                                                                                              |                                                                                                                        |  $       231,856 |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   |   |

----

Table of Contents 

|                                                      |                                                                     |   |                |   |  Gross                                                                         |   |                |
|-----------------------------------------------------------|--------------------------------------------------------------------------|--------|---------------------|--------|-------------------------------------------------------------------------------------|--------|---------------------|
|                                                      |  Fair                                                               |   |  %             |   |  Unrealized                                                                    |   |  %             |
| Equivalent S&P Rating                                 |  Value                                                              |   |  of      Total |   |  Losses                                                                        |   |  of      Total |
| AAA                                                       |  $      273,810                       |   | 34%                 |   |  $        24,801                       |   | 27%                 |
| AA                                                        |            38,618 |   | 5%                  |   |              3,023 |   | 3%                  |
| A                                                         |          148,706            |   | 18%                 |   |            11,041            |   | 12%                 |
| BBB                                                       |          235,671            |   | 29%                 |   |            24,047            |   | 26%                 |
|     Total      investment grade       |  $      696,805                       |   | 86%                 |   |  $        62,912                       |   | 68%                 |
| BB                                                        |            49,136 |   | 6%                  |   |              4,032 |   | 4%                  |
| B      and below                                          |            66,522 |   | 8%                  |   |            26,065            |   | 28%                 |
|     Total      below investment grade |          115,658            |   | 14%                 |   |            30,097            |   | 32%                 |
|                                                      |  $      812,463                       |   | 100%                |   |  $        93,009                       |   | 100%                |
|                                                      |                                                                     |   |                |   |                                                                                |   |                |

----

Table of Contents 

|                                                      |                                                                     |   |                |   |  Gross                                                                         |   |                |
|-----------------------------------------------------------|--------------------------------------------------------------------------|--------|---------------------|--------|-------------------------------------------------------------------------------------|--------|---------------------|
|                                                      |  Fair                                                               |   |  %             |   |  Unrealized                                                                    |   |  %             |
| Equivalent S&P Rating                                 |  Value                                                              |   |  of      Total |   |  Losses                                                                        |   |  of      Total |
| AAA                                                       |  $      400,841                       |   | 27%                 |   |  $        65,896                       |   | 28%                 |
| AA                                                        |            81,619 |   | 6%                  |   |            12,330            |   | 5%                  |
| A                                                         |          386,835            |   | 26%                 |   |            42,547            |   | 18%                 |
| BBB                                                       |          499,864            |   | 34%                 |   |            84,521            |   | 37%                 |
|     Total      investment grade       |  $   1,369,159                                       |   | 93%                 |   |  $      205,294                                  |   | 88%                 |
| BB                                                        |            67,694 |   | 5%                  |   |            17,742            |   | 8%                  |
| B      and below                                          |            23,901 |   | 2%                  |   |              8,403 |   | 4%                  |
|     Total      below investment grade |            91,595 |   | 7%                  |   |            26,145            |   | 12%                 |
|                                                      |  $   1,460,754                                       |   | 100%                |   |  $      231,439                                  |   | 100%                |
|                                                      |                                                                     |   |                |   |                                                                                |   |                |

|                                                  |                                                                          |                                                               | December      31, 2009                                                              |
|-------------------------------------------------------|-------------------------------------------------------------------------------|--------------------------------------------------------------------|-------------------------------------------------------------------------------------|
|                                                  |                                                                          |                                                               |                                                                                |   | Gross |
| Fixed      maturity security securities               | Fair                                                                          |                                                               | Unrealized                                                                          |
| available      for sale:                              | Value                                                                         |                                                               | Losses                                                                              |
|                                                  | Due      in one year or less                                                  |  $       10,483            |                                                                                |  $               26 |
|                                                  | Due      after one year through five years                                    |           65,359 |                                                                                |              4,842 |
|                                                  | Due      after five years through ten years                                   |         220,600            |                                                                                |            12,402 |
|                                                  | Due      after ten years                                                      |         295,339            |                                                                                |            30,521 |
|                                                  |                                                                          | Total                                                              |         591,781                             |   |            47,791 |
| Residential      mortgage and asset-backed securities |         212,179                       |                                                               |            43,855            |
| Redeemable      preferred stocks                      |             8,503 |                                                               |              1,363 |
|                                                  |                                                                          | Total                                                              |  $     812,463                                        |   |  $        93,009 |
|                                                  |                                                                          |                                                               |                                                                                |   |   |

|                                                  |                                                               |                                                    | December      31, 2008                                                              |                                                                     |                                                          |
|-------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------|-------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------|
|                                                  |                                                               |                                                    |                                                                                |                                                                     | Gross                                                         |
| Fixed      maturity security securities               | Fair                                                               |                                                    | Unrealized                                                                          |
| available      for sale:                              | Value                                                              |                                                    | Losses                                                                              |
|                                                  | Due      in one year or less                                       |  $       46,704 |                                                                                |  $          1,188 |
|                                                  | Due      after one year through five years                         |         324,178 |                                                                                |            42,218 |
|                                                  | Due      after five years through ten years                        |         472,169 |                                                                                |            73,157 |
|                                                  | Due      after ten years                                           |         343,121 |                                                                                |            59,002 |
|                                                  |                                                               | Total                                                   |      1,186,172                                             |                                                                     |          175,565 |
| Residential      mortgage and asset-backed securities |         260,858            |                                                    |            53,444            |
| Redeemable      preferred stocks                      |           13,724 |                                                    |              2,430 |
|                                                  |                                                               | Total                                                   |  $  1,460,754                                                        |                                                                     |  $      231,439            |
|                                                  |                                                               |                                                    |                                                                                |                                                                     |                                                          |

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| ·   | Four      securities are subprime or Alt-A residential mortgage-backed      securities.  Residential mortgage-backed securities have      suffered indiscriminate price depreciation in the current market,      regardless of individual performance or vintage.  However, all      of these securities continue to perform within their contractual      obligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a senior tranche of an asset-backed security structure backed      primarily by subprime mortgages on residential properties.  This      security has also been affected by the price depreciation in the current      market but continues to perform within its contractual      obligations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a senior tranche of a residential mortgage-backed security      backed by Alt-A non-conforming mortgages on residential      properties.  The issuer was closed by the Office of Thrift      Supervision in July of 2009, but it continues to service prior securitized      loans as a subsidiary of a bank that acquired it in March of      2009.  This security continues to perform within its contractual      obligations. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities from three issuers are from financial institutions that have      been impacted by the housing and mortgage credit crisis.  The      government has supported these institutions through TARP      funds.  All of these securities continue to perform within their      contractual obligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from a financial institution that has been impacted by the      housing and mortgage credit crisis but has not received TARP      assistance.  This security continues to perform within its      contractual obligations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from an international banking institution that has been      negatively impacted by the effects of both the global credit deterioration      and the U.S. housing and mortgage credit crisis.  This      institution is being supported by the UK Government’s Asset Protection      Scheme.  This security continues to perform within its      contractual obligations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is a CDO that has been impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance.  This security continues to      perform within its contractualobligations. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from a specialty retailer of items for the home, such as      appliances and electronics.  This security is backed by a      revolving pool of secured customer installment loans and private label      credit card receivables originated and serviced by the sponsor      company.  This company has been negatively impacted by the      general rise in consumer defaults and delinquency rates and a recent      ratings downgrade.  However, this security continues to perform      within its contractual obligations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                    |                                                                    |                                                         |                                                          | 2009                                                         |                                                         | 2008                                                                                                                |                                                                    | 2007                                                                                                                |
|---------------------------------------------------------|-------------------------------------------------------------------------|--------------------------------------------------------------|---------------------------------------------------------------|--------------------------------------------------------------|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
| Insurance      revenues:                                |                                                                    |                                                         |                                                          |                                                         |                                                         |
|                                                    | Premiums                                                                |  $      68,992            |                                                          |  $      60,160            |                                                         |  $      55,412                                                                   |
|                                                    | Contract      charges                                                   |        105,716            |                                                          |        109,007            |                                                         |        111,422                                                                   |
|                                                    | Reinsurance      ceded                                                  |        (42,621)           |                                                          |        (42,687)           |                                                         |        (42,644)                                                                  |
|                                                    |                                                                    |                                                         | Total      insurance revenues                                 |        132,087            |                                                         |        126,480                                                                   |                                                                    |        124,190                                                                   |
| Investment      revenues:                               |                                                                    |                                                         |                                                          |                                                         |                                                         |
|                                                    | Net      investment income                                              |        164,133            |                                                          |        164,243            |                                                         |        176,666                                                                   |
|                                                    | Realized      investment gains, excluding                               |                                                         |                                                          |                                                         |                                                         |                                                                                                                |
|                                                    |                                                                    | impairment      losses                                       |          10,561  |                                                         |          10,107 |                                                                                                                |            9,445 |
|                                                    | Net      impairment losses recognized in earnings:                      |                                                         |                                                          |                                                         |                                                         |                                                                                                                |
|                                                    |                                                                    | Total      other-than-temporary impairment losses            |        (32,731)            |                                                         |        (60,094)           |                                                                                                                |          (3,625)           |
|                                                    |                                                                    | Portion      of impairment losses recognized in              |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |
|                                                    |                                                                    |                                                         | other      comprehensive income (loss)                        |          13,949 |                                                         |                    - |                                                                    |                    - |
|                                                    | Net      impairment losses recognized in earnings:                      |        (18,782)           |                                                          |        (60,094)           |                                                         |          (3,625)                                                       |
|                                                    |                                                                    |                                                         | Total      investment revenues                                |        155,912            |                                                         |        114,256                                                                   |                                                                    |        182,486                                                                   |
| Other      revenues                                     |          10,323            |                                                         |          12,734  |                                                         |          11,214 |
|                                                    |                                                                    |                                                         | Total      revenues                                           |        298,322            |                                                         |        253,470                                                                   |                                                                    |        317,890                                                                   |
|                                                    |                                                                    |                                                         |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |                                                                                                                |
| Policyholder      benefits                              |        102,480                       |                                                         |        101,275             |                                                         |          93,200 |
| Interest      credited to policyholder account balances |          86,713            |                                                         |          86,899  |                                                         |          91,215 |
| Amortization      of deferred acquisition costs         |                                                                    |                                                         |                                                          |                                                         |                                                         |
|                                                    | and      value of business acquired                                     |          25,961 |                                                          |          28,875 |                                                         |          27,568                                                        |
| Operating      expenses                                 |          65,969            |                                                         |          61,070  |                                                         |          55,283 |
|                                                    |                                                                    |                                                         | Total      benefits and expenses                              |        281,123            |                                                         |        278,119                                                                   |                                                                    |        267,266                                                                   |
|                                                    |                                                                    |                                                         |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |                                                                                                                |
| Income      (loss) before income tax expense (benefit)  |          17,199            |                                                         |        (24,649)            |                                                         |          50,624 |
|                                                    |                                                                    |                                                         |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |                                                                                                                |
| Income      tax expense (benefit)                       |            5,981 |                                                         |          (8,724) |                                                         |          15,822 |
|                                                    |                                                                    |                                                         |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |                                                                                                                |
| Net      income (loss)                                  |  $      11,218                       |                                                         |  $    (15,925)                       |                                                         |  $      34,802            |
|                                                    |                                                                    |                                                         |                                                          |                                                         |                                                         |                                                                                                                |                                                                    |                                                                                                                |

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|                  |                                                         |                                                         | 2009                                                                                    |                                                                                    | %      Change                                                                          |                                                         | 2008                                                                                              |                                                                                    | %      Change                                                                          |                                                                    | 2007                                                         |
|-----------------------|--------------------------------------------------------------|--------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------------------------------------------------------------------|--------------------------------------------------------------|
| New      premiums:    |                                                         |                                                         |                                                                                    |                                                                                    |                                                                                   |                                                         |                                                                                              |                                                                                    |                                                                                   |
|                  | Individual      life insurance                               |  $        5,423 |                                                                                    |               (4) |                                                                                   |  $        5,632 |                                                                                              |               (2) |                                                                                   |  $        5,773            |
|                  | Immediate      annuities                                     |          22,113 |                                                                                    |               75  |                                                                                   |          12,612 |                                                                                              |               55  |                                                                                   |            8,142 |
|                  |                                                         | Total      new premiums                                      |          27,536                            |                                                                                    |               51 |                                                         |          18,244                                      |                                                                                    |               31 |                                                                    |          13,915 |
| Renewal      premiums |          41,456 |                                                         |               (1) |                                                                                    |          41,916                           |                                                         |                 1 |                                                                                    |          41,497                           |
| Total      premiums   |  $      68,992            |                                                         |               15  |                                                                                    |  $      60,160                                      |                                                         |                 9 |                                                                                    |  $      55,412                                      |
|                  |                                                         |                                                         |                                                                                    |                                                                                    |                                                                                   |                                                         |                                                                                              |                                                                                    |                                                                                   |                                                                    |                                                         |

|                  |                                        |                                                              | 2009                                                                                              |                                                                         | %      Change                                                                          |                                                              | 2008                                                                                    |                                                                                              | %      Change                                                                           |                                                              | 2007                                                   |
|-----------------------|---------------------------------------------|-------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-------------------------------------------------------------------|--------------------------------------------------------|
| New      deposits:    |                                        |                                                              |                                                                                              |                                                                         |                                                                                   |                                                              |                                                                                    |                                                                                              |                                                                                    |
|                  | Universal      life insurance               |  $       9,873            |                                                                                              |             (10) |                                                                                   |  $     10,913                       |                                                                                    |                 - |                                                                                    |  $     10,869                       |
|                  | Variable      universal life insurance      |           1,031 |                                                                                              |             (47) |                                                                                   |           1,942 |                                                                                    |             (22)                      |                                                                                    |           2,480 |
|                  | Fixed      deferred annuities               |         76,612            |                                                                                              |             152  |                                                                                   |         30,413            |                                                                                    |               15            |                                                                                    |         26,348            |
|                  | Variable      annuities                     |         16,078            |                                                                                              |             (37) |                                                                                   |         25,496            |                                                                                    |             (13)                      |                                                                                    |         29,426            |
|                  |                                        | Total      new deposits                                           |       103,594                                                       |                                                                         |               51 |                                                              |         68,764                                  |                                                                                              |               (1) |                                                              |         69,123 |
| Renewal      deposits |       136,048 |                                                              |                 3 |                                                                         |       131,701                                            |                                                              |               (4) |                                                                                              |       136,644                                             |
| Total      deposits   |  $   239,642            |                                                              |               20            |                                                                         |  $   200,465                                                       |                                                              |               (3) |                                                                                              |  $   205,767                                                        |
|                  |                                        |                                                              |                                                                                              |                                                                         |                                                                                   |                                                              |                                                                                    |                                                                                              |                                                                                    |                                                              |                                                   |

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| ·   | Five      securities were residential mortgage-backed securities that were written      down by a total of $0.2 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the securities and created an      other-than-temporary impairment.  Two of these securities had      been previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.4 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period.  This security was sold      during the fourth quarter of 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $0.6      million.  As the trucking industry is highly correlated with the      general economy, this company had experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary.  This security had been written down in a      previous period.  This security was sold during the fourth      quarter of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $4.2 million.  These issuers had also      experienced declines in value related to the mortgage credit crisis,      including significant and continuing reductions in capital and liquidity      positions.  These securities were sold during the fourth quarter      of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Four      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.3 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  These securities had been previously written down      due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $0.2      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and industry.  This      security was exchanged for a replacement security during the third quarter      of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.3 million.  This company has been affected by the credit      crisis, causing reduced access to liquidity and higher borrowing      costs.  This security had been written down in a previous      period.  The Company determined that a credit-related impairment      had occurred, and this security was sold during the third quarter of      2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through TARP      funds.  This company has experienced large losses in its real      estate loan portfolios and has had an increase in non-performing loans      over the past year.  This security was written down by a total      of $1.1 million before it was sold during the third quarter of      2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.1 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  These securities had been previously written down      due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a CDO that was written down $0.2 million.  This      security has been impacted by the rapid rise in delinquencies and      foreclosures in the subprime and Alt-A mortgage markets, along with a      decline in the fair value of securities issued by financial      institutions.  Ongoing CDO liquidations and investor selling had      caused extreme declines in market valuations, regardless of individual      security performance.  This security had been written down in      previous periods. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and was under reorganization was written down $1.0      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written      down. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.5 million.  This company had been affected by the credit      crisis, forcing reduced access to liquidity and higher borrowing      costs.  The Company determined that a credit-related impairment      had occurred. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $1.8 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a mortgage and financial guaranty insurer that was      written down $1.6 million.  Mortgage insurers have suffered from      the deterioration in the U.S. housing market and mortgage credit      market.  Rising |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|    | mortgage      delinquencies and defaults have resulted in rating downgrades for these      insurers.  Recent rating downgrades, combined with the issuer’s      need to raise additional capital to meet future payments contributed to      the other-than-temporaryimpairment. |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $1.6      million.  As the trucking industry is highly correlated with the      general economy, this company has experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that develops, manufactures and markets      imaging products that was written down $1.2 million.   This      company’s past emphasis was in traditional film, which has been largely      surpassed by digital photography.  The decline in the economy      has negatively affected sales, as the consumer photography industry is a      discretionary item.  The company’s declining revenues and      liquidity position led to the other-than-temporary    impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities (from one issuer) were residential mortgage-backed securities      that were written down by a total of $0.5 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary  impairment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the security and created an      other-than-temporary impairment. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.0 million as the Company accepted a tender      offer on the Company’s holdings from an issuer during the second quarter      of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $0.4 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $2.8 million, primarily as a result of      declines in price and rating agency downgrades on debt issues from issuers      that completed leveraged buyout transactions during 2008.  One      of these securities was subsequently sold during the fourth quarter of      2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $1.9 million due to a decline in price      that had persisted for a period longer than the Company considered      temporary.  One of these securities was subsequently sold during      the fourth quarter of 2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from an originator of residential prime, Alt-A and subprime      mortgages that was written down $4.2 million.  The significant      decline in the subprime and non-conforming mortgage markets resulted in a      reduction in value for thissecurity. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security is from an issuer that designs, manufactures and services cars      and trucks and provides vehicle-related financing, leasing and insurance      was written down $1.2 million, largely resulting from the decline in the      U.S. automotive industry. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security that is a financial services company involved in automotive and      real estate financing and mortgage lending was written down by $0.6      million and subsequently sold during the fourth quarter of      2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Four      securities (two issuers) were perpetual preferred securities that were      written down $3.3 million.  These securities had been negatively      impacted by the housing and mortgage credit crisis and have received TARP      funds. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $6.5 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from the same issuer were from an investment banking firm that      filed for bankruptcy during the third quarter of 2008 and were written      down by a total of $9.2 million.  This firm was part of the      financial industry that was hit hard by the mortgage credit      crisis.  After a severe decline in equity valuations, the      inability to obtain short-term funding and the failure to find an acquirer      forced this firm to file for Chapter 11  bankruptcy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services and were written down by      a total of $3.9 million.  These issuers had also experienced      declines in value related to the mortgage credit crisis and had been      downgraded to a negative outlook. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a supplier of auto parts for light trucks and      sport-utility vehicles.  The deteriorating truck and      sport-utility vehicle markets of the auto industry, combined with the      sharp decline in value and recent ratings declines, resulted in a $2.1      million write-down. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.1 million as continued price deterioration      occurred on this security that was previously written down.  The      issuer is primarily in the radio and advertising  business. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $2.3million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a bank holding company that recently filed for      bankruptcy.  This holding company was the parent of a large      nationwide bank that was recently taken over by the Office of Thrift      Supervision and the FDIC was appointed as its receiver.  As a      result of the bankruptcy filing, this security was written down $0.8      million. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      of the securities were written down by a total of $3.0 million, primarily      as a result of declines in price and rating agency downgrades on debt      issues from issuers that had recently completed LBO      transactions.  These LBO transactions greatly increased the debt      level of each issuer.  One of these securities had been written      down previously, and the other two securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs and were written down by $2.6 million, primarily due      to price declines that had persisted for periods longer than the Company      considered temporary.  Both securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $3.3 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary, rating agency downgrades and a debt restructuring      during the quarter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.8 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security was below cost by 20% or more for more than six consecutive      months and was the subject of a recent leveraged buyout that was finalized      during the fourth quarter of 2007, which greatly increased the debt level      of the company.  Accordingly, the Company wrote down this      security $2.8 million at year-end2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security filed for Chapter 11 protection and indicated that it would not      be able to fully meet all of the obligations of its      borrowings.  The Company recognized an other-than-temporary      impairment on this security at year-end 2006 of $1.1      million.  As a result of this new action, the Company recognized      an additional $0.7 million impairment in 2007.  At December 31,      2006, this security was below cost by 20% or more for more than twelve      consecutive months.  It was in a highly competitive and cyclical      industry that was experiencing weakened demand and      overcapacity.  Capital expenditures for equipment upgrades were      exceeding cash generation. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                |                                                                                    |                                                                                    | 2009                                                                                    |                                                                                    | 2008                                                                                    |                                                                                    | 2007                                                         |
|-------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|--------------------------------------------------------------|
| Insurance      revenues:            |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |
|                                | Premiums                                                                                |  $      57,011                                       |                                                                                    |  $      56,208                                       |                                                                                    |  $      54,062                                       |
|                                | Reinsurance      ceded                                                                  |          (9,149)                           |                                                                                    |          (7,445)                           |                                                                                    |          (8,286)                           |
|                                |                                                                                    | Total      insurance revenues                                                           |          47,862                            |                                                                                    |          48,763                            |                                                                                    |          45,776 |
| Investment      revenues:           |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |
|                                | Net      investment income                                                              |               554 |                                                                                    |               525 |                                                                                    |               426 |
| Other      revenues                 |               255 |                                                                                    |               268 |                                                                                    |               278 |
|                                |                                                                                    | Total      revenues                                                                     |          48,671                            |                                                                                    |          49,556                            |                                                                                    |          46,480 |
|                                |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                         |
| Policyholder      benefits          |          33,799                            |                                                                                    |          32,956                            |                                                                                    |          30,061                            |
| Operating      expenses             |          18,449                            |                                                                                    |          18,950                            |                                                                                    |          19,309                            |
|                                |                                                                                    | Total      benefits and expenses                                                        |          52,248                            |                                                                                    |          51,906                            |                                                                                    |          49,370 |
|                                |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                         |
| Loss      before income tax benefit |          (3,577)                           |                                                                                    |          (2,350)                           |                                                                                    |          (2,890)                           |
|                                |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                         |
| Income      tax benefit             |          (1,252)                           |                                                                                    |             (845)           |                                                                                    |             (867)           |
|                                |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                         |
| Net      loss                       |  $      (2,325)                                      |                                                                                    |  $      (1,505)                                      |                                                                                    |  $      (2,023)                                      |
|                                |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                                                    |                                                         |

|                  |                                                         |                                                                                                                | 2009                                                                                              |                                                                                              | %      Change                                                                           |                                                                                                                | 2008                                                                                              |                                                                                              | %      Change                                                                          |                                                                                    | 2007                                                         |
|-----------------------|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|--------------------------------------------------------------|
| New      premiums:    |                                                         |                                                                                                                |                                                                                              |                                                                                              |                                                                                    |                                                                                                                |                                                                                              |                                                                                              |                                                                                   |
|                  | Group      life insurance                                    |  $        1,599                                                        |                                                                                              |             (23)                      |                                                                                    |  $        2,084                                                        |                                                                                              |               37            |                                                                                   |  $        1,517                            |
|                  | Group      dental insurance                                  |            7,266                                             |                                                                                              |             (19)                      |                                                                                    |            8,968                                             |                                                                                              |               32            |                                                                                   |            6,785                 |
|                  | Group      disability insurance                              |            3,201                                             |                                                                                              |               93            |                                                                                    |            1,657                                             |                                                                                              |                 8 |                                                                                   |            1,530                 |
|                  | Group      stop loss insurance                               |                    - |                                                                                              |                 - |                                                                                    |                    - |                                                                                              |           (100)                                 |                                                                                   |            1,423                 |
|                  | Other      group insurance                                   |               181                             |                                                                                              |             (31)                      |                                                                                    |               264                             |                                                                                              |                 2 |                                                                                   |               258 |
|                  |                                                         | Total      new premiums                                                                                             |          12,247                                      |                                                                                              |               (6) |                                                                                                                |          12,973                                      |                                                                                              |               13 |                                                                                    |          11,513 |
| Renewal      premiums |          44,764 |                                                                                                                |                 4 |                                                                                              |          43,235                            |                                                                                                                |                 2 |                                                                                              |          42,549                           |
| Total      premiums   |  $      57,011            |                                                                                                                |                 1 |                                                                                              |  $      56,208                                       |                                                                                                                |                 4 |                                                                                              |  $      54,062                                      |
|                  |                                                         |                                                                                                                |                                                                                              |                                                                                              |                                                                                    |                                                                                                                |                                                                                              |                                                                                              |                                                                                   |                                                                                    |                                                         |

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|                                            |                                                                                        |                                              |                                                                                        | 2009                                                  |                                                                                        | 2008                                                                                              |                                                                             | 2007                                                                                              |
|-------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------------------|-------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
| Insurance      revenues:                        |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |
|                                            | Premiums                                                                                    |  $   65,342                   |                                                                                        |  $   65,001                       |                                                                                        |  $   66,537                                                                   |
|                                            | Reinsurance      ceded                                                                      |        (3,081) |                                                                                        |        (3,484)     |                                                                                        |        (4,058)                                                 |
|                                            |                                                                                        |                                              | Total      insurance revenues                                                               |       62,261            |                                                                                        |       61,517                                                        |                                                                             |       62,479                                                        |
| Investment      revenues:                       |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |
|                                            | Net      investment income                                                                  |       12,741        |                                                                                        |       12,651            |                                                                                        |       13,313                                                        |
|                                            | Realized      investment gains, excluding                                                   |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |
|                                            |                                                                                        | impairment      losses                            |            418                       |                                                  |            315                       |                                                                                              |              17 |
|                                            | Net      impairment losses recognized in earnings:                                          |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |
|                                            |                                                                                        | Total      other-than-temporary impairment losses |        (4,394)                                           |                                                  |        (2,599)                                           |                                                                                              |           (411)                |
|                                            |                                                                                        | Portion      of impairment losses recognized in   |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |
|                                            |                                                                                        |                                              | other      comprehensive income (loss)                                                      |         2,121 |                                                                                        |                 - |                                                                             |                 - |
|                                            | Net      impairment losses recognized in earnings                                           |        (2,273) |                                                                                        |        (2,599)     |                                                                                        |           (411)                                 |
|                                            |                                                                                        |                                              | Total      investment revenues                                                              |       10,886            |                                                                                        |       10,367                                                        |                                                                             |       12,919                                                        |
| Other      revenues                             |                1 |                                              |                3 |                                                  |                7 |
|                                            |                                                                                        |                                              | Total      revenues                                                                         |       73,148            |                                                                                        |       71,887                                                        |                                                                             |       75,405                                                        |
|                                            |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |
| Policyholder      benefits                      |       42,692                                                  |                                              |       44,518                                                  |                                                  |       43,197                                                  |
| Amortization      of deferred acquisition costs |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |
|                                            | and      value of business acquired                                                         |       13,693        |                                                                                        |       13,209            |                                                                                        |       12,765                                                        |
| Operating      expenses                         |       13,933                                                  |                                              |       13,375                                                  |                                                  |       14,266                                                  |
|                                            |                                                                                        |                                              | Total      benefits and expenses                                                            |       70,318            |                                                                                        |       71,102                                                        |                                                                             |       70,228                                                        |
|                                            |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |
| Income      before income tax expense           |         2,830                                       |                                              |            785                       |                                                  |         5,177                                       |
|                                            |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |
| Income      tax expense                         |            991                       |                                              |            405                       |                                                  |         2,295                                       |
|                                            |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |
| Net      income                                 |  $     1,839                                                  |                                              |  $        380                                  |                                                  |  $     2,882                                                  |
|                                            |                                                                                        |                                              |                                                                                        |                                                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |

|                  | 2009                                                         |   | %      Change                                                                                     |   | 2008                                                         |   | %      Change                                                                           |   | 2007                                                         |
|-----------------------|--------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|--------|-----------------------------------------------------------------------------------------|--------|--------------------------------------------------------------|
|                  |                                                         |   |                                                                                              |   |                                                         |   |                                                                                    |   |                                                         |
| New      premiums     |  $        8,759 |   |               20            |   |  $        7,294 |   |               11  |   |  $        6,583 |
| Renewal      premiums |          56,583 |   |               (2)           |   |          57,707 |   |               (4) |   |          59,954 |
| Total      premiums   |  $      65,342            |   |                 1 |   |  $      65,001            |   |               (2) |   |  $      66,537            |
|                  |                                                         |   |                                                                                              |   |                                                         |   |                                                                                    |   |                                                         |

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| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.1 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $1.0 million.  These issuers had also      experienced declines in value related to the mortgage credit crisis,      including significant and continuing reductions in capital and liquidity      positions.  These securities were sold during the fourth quarter      of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      by less than $0.1 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the security and created an      other-than-temporary impairment.  This security had been      previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through TARP      funds.  This company has experienced large losses in its real      estate loan portfolios and has had an increase in non-performing loans      over the past year.  This security was written down by a total      of $0.4 million before it was sold during the third quarter of      2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      by less than $0.1 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the securities and created an      other-than-temporary impairment.  This security had been      previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.4 million.  During the second quarter of 2009, the      Company accepted an |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|    | offer      from this company to exchange this security for a security with a      longer-dated maturity with an enhanced second lien priority in the capital      structure.  This security had been written down in a previous      period. |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      by a total of $0.1 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the securities and created an      other-than-temporary impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.3 million, primarily as a result of a      decline in price on a debt security from an issuer that completed a LBO      transaction during 2008.  This security had also been written      down during the second quarter of2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A      collateralized debt obligation (CDO) security was written down by $0.2      million, primarily due to a price decline that had persisted for a period      longer than the Company considered temporary and the deteriorating      performance of the collateral.  This security had also been      written down during the second quarter of2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, are financial      guarantee insurance companies that provide credit enhancement for bond      issuers as well as investment management services and were written down by      a total of $1.0 million.  These issuers had also experienced      declines in value related to the mortgage credit crisis and had recently      been downgraded to a negativeoutlook. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $0.5million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.2 million, primarily as a result of a      decline in price on a debt security from an issuer that recently completed      a LBO transaction.  This security had been written down      previously. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | A      CDO security was written down by $0.2 million, primarily due to a price      decline that had persisted for a period longer than the Company considered      temporary.  The security was below cost by 20% or more for at      least six consecutive months. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.1 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                              | 2009                                        |   | 2008                                        |   | 2007                                                        |
|---------------------------------------------------|---------------------------------------------|--------|---------------------------------------------|--------|-------------------------------------------------------------|
|                                              |                                        |   |                                        |   |                                                        |
| Total      revenue                                |  $  73,148                   |   |  $  71,887                   |   |  $  75,405                                   |
| Less:      Realized investment losses             |       (1,855) |   |       (2,284) |   |          (394) |
| Revenue      excluding realized investment losses |      75,003        |   |      74,171        |   |      75,799                        |
| Policyholder      benefits                        |  $  42,692                   |   |  $  44,518                   |   |  $  43,197                                   |
|                                              |                                        |   |                                        |   |                                                        |
| Policyholder      benefit ratio                   | 57%                                         |   | 60%                                         |   | 57%                                                         |

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|                                     |                                                                | 2009   |                                                                | 2008 |
|------------------------------------------|---------------------------------------------------------------------|--------|---------------------------------------------------------------------|------|
| Total      assets less separate accounts |  $    3,869,418                            |   |  $    3,708,526                            |
| Total      stockholders' equity          |           628,363 |   |           527,107 |
| Ratio      of stockholders' equity       |                                                                |   |                                                                |
|                                     | to      assets less separate accounts                               | 16%    |                                                                | 14%  |

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|                                 |                                                                                              |                                                                   |                                                                                        | Less      than                                                         |                                                                            |                                                 |                                                                            |                                                                            |                                                                                              | After                                                                                             |
|--------------------------------------|---------------------------------------------------------------------------------------------------|------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|------------------------------------------------------------------------|---------------------------------------------------------------------------------|------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                 |                                                                                              | Total                                                                  |                                                                                        | 1      year                                                            |                                                                            | 1-3      years                                       |                                                                            | 4-5      years                                                                  |                                                                                              | 5      years                                                                                      |
| Borrowings      (1)                  |  $              -      |                                                                   |  $             -      |                                                                   |  $          -            |                                                 |  $          -            |                                                                            |  $             -            |
| Operating      lease obligations (2) |              2.5                 |                                                                   |              0.8           |                                                                   |           1.3                 |                                                 |           0.3                 |                                                                            |             0.1                       |
| Purchase      obligations (3)        |              1.1                 |                                                                   |              1.1           |                                                                   |              - |                                                 |              - |                                                                            |                 - |
| Mortgage      loan commitments       |                                                                                              |                                                                   |                                                                                        |                                                                   |                                                                            |                                                 |                                                                            |                                                                            |                                                                                              |
|                                 | and      other investments (4)                                                                    |            31.2 |                                                                                        |            15.2 |                                                                            |         16.0 |                                                                            |              - |                                                                                              |                 - |
| Annuity      certain contracts (5)   |            59.4                            |                                                                   |            13.0                      |                                                                   |         20.9                            |                                                 |         13.7                            |                                                                            |           11.8                                  |
| Insurance      liabilities (6)       |       2,915.7                                                       |                                                                   |          268.5                                 |                                                                   |       522.5                                       |                                                 |       500.6                                       |                                                                            |      1,624.1                                                             |
| Tax      contingencies (7)           |                 - |                                                                   |                - |                                                                   |              - |                                                 |              - |                                                                            |                 - |
|                                 |                                                                                              |                                                                   |                                                                                        |                                                                   |                                                                            |                                                 |                                                                            |                                                                            |                                                                                              |                                                                                              |
| Total      contractual obligations   |  $   3,009.9                                                                  |                                                                   |  $      298.6                                            |                                                                   |  $   560.7                                                  |                                                 |  $   514.6                                                  |                                                                            |  $  1,636.0                                                                        |
|                                 |                                                                                              |                                                                   |                                                                                        |                                                                   |                                                                            |                                                 |                                                                            |                                                                            |                                                                                              |                                                                                              |

|                (1) | The      Company had no outstanding borrowings. Borrowings include short-term debt      as described in the previous section – Debt and Short-Term      Borrowing. |
|-----------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2)   | The      Company leases its mainframe computer and certain related support      equipment.  The Company is also a lessee of an office building      with a 20-year lease that began in 1989 with two five-year renewal      options.  In 1998, the Company assigned the interest in the      lease to a third-party for the remainder of the lease      period.  The Company’s lease on the office building expired at      December 31, 2009. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3)   | Purchase      obligations include contracts where the Company has a non-cancelable      commitment to purchase goods andservices. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------|

|               (4) | The      Company’s mortgage loan commitments provide funding to originate      commercial mortgage loans.  Mortgage loan commitments generally      do not extend beyond 90 days.  Other investments are primarily      commitments to fund affordable housing project obligations and to fund a      construction loan. |
|-----------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (5)   | Annuity      certain contracts are those insurance liabilities (included in future      policy benefits and policyholder account balances on the balance sheet)      which do not have life contingencies and have scheduled      payments.  Annuity certain contracts without life contingencies      consist of single premium immediate annuities, supplementary contracts and      structured settlements. |
|-----------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (6)   | Insurance      liabilities consist primarily of future policy benefits and policyholder      account balances for which the timing of cash flows is uncertain and which      have life contingencies.  The schedule of payments for these      liabilities can vary significantly because of the uncertainty of the      timing of cash flows, which depend upon insurable events or policyholder      surrenders. |
|-----------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (7)   | The      contractual obligations reported above exclude the Company’s liability of      $6.6 million for unrecognized tax benefits.  The Company cannot      make a reasonably reliable estimate of the amount and period of related      future payments for such liability. |
|-----------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|  |   | Item      6A:  QUANTITATIVE AND      QUALITATIVE DISCLOSURES ABOUT MARKETRISK |
|--|--------|-----------------------------------------------------------------------------------------|

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|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                | There- |                                                            | Total                                         | Fair   |
|------------------------------------------------------|-----------------------------------------------------------|--------|----------------------------------------------------------------|--------|----------------------------------------------------------------|--------|------------------------------------------|----------|------------------------------------------|----------|-----------------------------------------------------|--------|-----------------------------------------------------------------|-----------------------------------------------|--------|
|                                                 |                                                      | 2010   |                                                           | 2011   |                                                           | 2012   |                                     | 2013     |                                     | 2014     |                                                | after  |                                                            | Principal                                     | Value  |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| Corporate      bonds currently callable              |  $        19 |   |  $         2 |   |  $         2 |   |  -                                  |     |  -                                  |     |  $       47 |   |  $         70 |  $      71 |
|                                                 | Average      interest rate                                | 7.10%  |                                                           | 6.10%  |                                                           | 6.88%  |                                     | -      % |                                     | -      % |                                                | 6.02%  |                                                            | 6.34%                                         |   |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| Residential      mortgage-backed securities and CMOs | 52                                                        |   | 47                                                             |   | 42                                                             |   | 41                                       |     | 36                                       |     | 267                                                 |   | 485                                                             |        437 |
|                                                 | Average      interest rate                                | 4.12%  |                                                           | 5.67%  |                                                           | 5.63%  |                                     | 5.60%    |                                     | 5.58%    |                                                | 5.57%  |                                                            | 5.43%                                         |   |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| All      other securities                            | 129                                                       |   | 134                                                            |   | 142                                                            |   | 157                                      |     | 178                                      |     | 1,186                                               |   | 1,926                                                           |     1,995                 |
|                                                 | Average      interest rate                                | 6.30%  |                                                           | 7.38%  |                                                           | 6.20%  |                                     | 5.74%    |                                     | 5.67%    |                                                | 5.68%  |                                                            | 5.88%                                         |   |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| Investment      securities                           | 200                                                       |   | 183                                                            |   | 186                                                            |   | 198                                      |     | 214                                      |     | 1,500                                               |   | 2,481                                                           |     2,503                 |
|                                                 | Average      interest rate                                | 5.81%  |                                                           | 6.93%  |                                                           | 6.08%  |                                     | 5.71%    |                                     | 5.65%    |                                                | 5.67%  |                                                            | 5.81%                                         |   |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| Mortgages                                            | 34                                                        |   | 47                                                             |   | 34                                                             |   | 43                                       |     | 46                                       |     | 257                                                 |   | 461                                                             |        459 |
|                                                 | Average      interest rate                                | 7.16%  |                                                           | 6.29%  |                                                           | 6.23%  |                                     | 6.23%    |                                     | 6.46%    |                                                | 6.50%  |                                                            | 6.48%                                         |   |
|                                                 |                                                      |   |                                                           |   |                                                           |   |                                     |     |                                     |     |                                                |   |                                                            |                                          |   |
| Total                                                |  $      234            |   |  $     230                       |   |  $     220                       |   |  $     241 |     |  $     260 |     |  $  1,757                            |   |  $    2,942                            |  $      2,962                            |
|                                                 | Average      interest rate                                | 6.01%  |                                                           | 6.80%  |                                                           | 6.10%  |                                     | 5.80%    |                                     | 5.80%    |                                                | 5.79%  |                                                            | 5.91%                                         |   |

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Item7.

| KANSAS      CITY LIFE INSURANCE COMPANY                |                                                                                                                      |                                                               |                                                                                                                      |
|--------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED      BALANCE SHEETS                       |                                                                                                                      |                                                               |                                                                                                                      |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   | December      31 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   | 2009 |   | 2008 |
| ASSETS                                                 |                                                                                                                      |                                                               |                                                                                                                      |   |
| Investments:                                           |                                                                                                                      |                                                               |                                                                                                                      |
|                                                   | Fixed      maturity securities available for sale, at fair value                                                          |                                                               |                                                                                                                      |   |
|                                                   |                                                                                                                      |                                                               | (amortized      cost:  2009 - $2,470,516; 2008 - $2,543,674)                                                    |  $  2,469,272 |   |  $  2,350,834 |
|                                                   | Equity      securities available for sale, at fair value                                                                  |                                                               |                                                                                                                      |   |
|                                                   |                                                                                                                      |                                                               | (cost:      2009 - $35,405; 2008 - $35,850)                                                                               |           36,876 |   |           36,576 |
|                                                   | Mortgage      loans                                                                                                       |         457,582            |                                                                                                                      |         445,389 |
|                                                   | Real      estate                                                                                                          |         114,076            |                                                                                                                      |           99,576 |
|                                                   | Policy      loans                                                                                                         |           85,585 |                                                                                                                      |           88,304 |
|                                                   | Short-term      investments                                                                                               |         138,704            |                                                                                                                      |           35,138 |
|                                                   |                                                                                                                      | Total      investments                                             |      3,302,095                                                                                   |   |      3,055,817 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |
| Cash                                                   |                                                                                                                      |                                                               |                                                                                                                      |             4,981 |   |             9,720 |
| Accrued      investment income                         |           32,989                                                        |                                                               |           33,689                                                        |
| Deferred      acquisition costs                        |         209,495                                                                   |                                                               |         263,756                                                                   |
| Value      of business acquired                        |           66,114                                                        |                                                               |           82,855                                                        |
| Reinsurance      receivables                           |         179,365                                                                   |                                                               |         168,390                                                                   |
| Property      and equipment                            |           24,393                                                        |                                                               |           25,922                                                        |
| Income      taxes                                      |             8,784                                             |                                                               |           39,628                                                        |
| Other      assets                                      |           35,145                                                        |                                                               |           28,749                                                        |
| Separate      account assets                           |         312,824                                                                   |                                                               |         258,565                                                                   |
|                                                   |                                                                                                                      | Total      assets                                                  |  $  4,176,185                                                                                              |   |  $  3,967,091 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |
| LIABILITIES                                            |                                                                                                                      |                                                               |                                                                                                                      |
| Future      policy benefits                            |  $     866,889                                                                              |                                                               |  $     853,456                                                                              |
| Policyholder      account balances                     |      2,048,828                                                                                   |                                                               |      2,030,656                                                                                   |
| Policy      and contract claims                        |           33,484                                                        |                                                               |           34,913                                                        |
| Other      policyholder funds                          |         137,847                                                                   |                                                               |         125,826                                                                   |
| Notes      payable                                     |                     - |                                                               |             2,900                                             |
| Income      taxes                                      |           21,851                                                        |                                                               |                     - |
| Other      liabilities                                 |         126,099                                                                   |                                                               |         133,668                                                                   |
| Separate      account liabilities                      |         312,824                                                                   |                                                               |         258,565                                                                   |
|                                                   |                                                                                                                      | Total      liabilities                                             |      3,547,822                                                                                   |   |      3,439,984 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |
| STOCKHOLDERS'      EQUITY                              |                                                                                                                      |                                                               |                                                                                                                      |
| Common      stock, par value $1.25 per share           |                                                                                                                      |                                                               |                                                                                                                      |
|                                                   | Authorized      36,000,000 shares,                                                                                        |                                                               |                                                                                                                      |   |
|                                                   |                                                                                                                      | issued      18,496,680 shares                                      |           23,121                                                        |   |           23,121 |
| Additional      paid in capital                        |           41,068                                                        |                                                               |           36,281                                                        |
| Retained      earnings                                 |         757,225                                                                   |                                                               |         750,600                                                                   |
| Accumulated      other comprehensive loss              |         (36,477)                                                                  |                                                               |        (130,799)                                                                       |
| Treasury      stock, at cost (2009 - 6,931,589 shares; |                                                                                                                      |                                                               |                                                                                                                      |
|                                                   | 2008      - 7,061,476 shares)                                                                                             |       (156,574)                      |                                                                                                                      |        (152,096) |
|                                                   |                                                                                                                      | Total      stockholders' equity                                    |         628,363                                                                   |   |         527,107 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |
|                                                   |                                                                                                                      | Total      liabilities and stockholders' equity                    |  $  4,176,185                                                                                              |   |  $  3,967,091 |
|                                                   |                                                                                                                      |                                                               |                                                                                                                      |   |   |   |   |

----

Table of Contents 

|                                                   KANSAS CITY LIFE INSURANCE COMPANY |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------|---------------------------------------------------------------------------|--------------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF INCOME                                                                                                                                                                                                                                                                                |                                                                                |                                                                                |                                                                      |                                                                      |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      | Year      Ended December 31                                               |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      | 2009                                                                      |                                                                     | 2008 |   | 2007 |
| REVENUES                                                                                                                                                                                                                                                                                                         |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
| Insurance      revenues:                                                                                                                                                                                                                                                                                         |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|                                                                                                                                                                                                                                                                                                             | Premiums                                                                            |  $      190,799                                  |                                                                      |  $      180,782                        |                                                                     |  $      175,460 |
|                                                                                                                                                                                                                                                                                                             | Contract      charges                                                               |          105,716                       |                                                                      |          109,007             |                                                                     |          111,422 |
|                                                                                                                                                                                                                                                                                                             | Reinsurance      ceded                                                              |          (54,851)                      |                                                                      |          (53,616)            |                                                                     |          (54,988) |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                | Total      insurance revenues                                             |          241,664             |                                                                     |          236,173 |   |          231,894 |
| Investment      revenues:                                                                                                                                                                                                                                                                                        |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|                                                                                                                                                                                                                                                                                                             | Net      investment income                                                          |          177,428                       |                                                                      |          177,419             |                                                                     |          190,405 |
|                                                                                                                                                                                                                                                                                                             | Realized      investment gains, excluding                                           |                                                                                |                                                                      |                                                                      |                                                                     |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                | impairment      losses                                                              |            10,979  |                                                                      |            10,422 |   |              9,462 |
|                                                                                                                                                                                                                                                                                                             | Net      impairment losses recognized in earnings:                                  |                                                                                |                                                                      |                                                                      |                                                                     |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                | Total      other-than-temporary impairment losses                                   |          (37,125)            |                                                                      |          (62,693)           |   |            (4,036) |
|                                                                                                                                                                                                                                                                                                             |                                                                                | Portion      of impairment losses recognized in                                     |                                                                      |                                                                      |                                                                     |   |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                | other      comprehensive income (loss)                                    |            16,070  |                                                                     |                      - |   |                      - |
|                                                                                                                                                                                                                                                                                                             | Net      impairment losses recognized in earnings                                   |          (21,055)                      |                                                                      |          (62,693)            |                                                                     |            (4,036) |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                | Total      investment revenues                                            |          167,352             |                                                                     |          125,148 |   |          195,831 |
| Other      revenues                                                                                                                                                                                                                                                                                              |            10,579            |                                                                                |            13,005  |                                                                      |            11,499 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                | Total      revenues                                                       |          419,595             |                                                                     |          374,326 |   |          439,224 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| BENEFITS      AND EXPENSES                                                                                                                                                                                                                                                                                       |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
| Policyholder      benefits                                                                                                                                                                                                                                                                                       |          178,971                       |                                                                                |          178,749             |                                                                      |          166,458            |
| Interest      credited to policyholder account balances                                                                                                                                                                                                                                                          |            86,713            |                                                                                |            86,899  |                                                                      |            91,215 |
| Amortization      of deferred acquisition costs                                                                                                                                                                                                                                                                  |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|                                                                                                                                                                                                                                                                                                             | and      value of business acquired                                                 |            39,654            |                                                                      |            42,084  |                                                                     |            40,333 |
| Operating      expenses                                                                                                                                                                                                                                                                                          |            97,805            |                                                                                |            92,808  |                                                                      |            88,307 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                | Total      benefits and expenses                                          |          403,143             |                                                                     |          400,540 |   |          386,313 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| Income      (loss) before income tax expense (benefit)                                                                                                                                                                                                                                                           |            16,452            |                                                                                |          (26,214)            |                                                                      |            52,911 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| Income      tax expense (benefit)                                                                                                                                                                                                                                                                                |              5,720 |                                                                                |            (9,164) |                                                                      |            17,250 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| NET      INCOME (LOSS)                                                                                                                                                                                                                                                                                           |  $        10,732                       |                                                                                |  $      (17,050)                       |                                                                      |  $        35,661            |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| Comprehensive      income (loss), net of taxes:                                                                                                                                                                                                                                                                  |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|                                                                                                                                                                                                                                                                                                             | Change      in net unrealized gains and (losses) on                                 |                                                                                |                                                                      |                                                                      |                                                                     |   |
|                                                                                                                                                                                                                                                                                                             |                                                                                | securities      available for sale                                                  |  $        89,709             |                                                                      |  $      (89,921)                      |   |  $          6,396 |
|                                                                                                                                                                                                                                                                                                             | Change      in benefit plan obligations                                             |            11,212            |                                                                      |          (21,067)            |                                                                     |            (1,089) |
|                                                                                                                                                                                                                                                                                                             |                                                                                | Other      comprehensive income (loss)                                              |          100,921             |                                                                      |        (110,988)                      |   |              5,307 |
| COMPREHENSIVE      INCOME (LOSS)                                                                                                                                                                                                                                                                                 |  $      111,653                                  |                                                                                |  $    (128,038)                                  |                                                                      |  $        40,968            |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |
| Basic      and diluted earnings per share:                                                                                                                                                                                                                                                                       |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |
|                                                                                                                                                                                                                                                                                                             | Net      income (loss)                                                              |  $            0.93 |                                                                      |  $          (1.47) |                                                                     |  $            3.01 |
|                                                                                                                                                                                                                                                                                                             |                                                                                |                                                                                |                                                                      |                                                                      |                                                                     |   |   |   |

----

Table of Contents 

|                                                                                   KANSAS      CITY LIFE INSURANCE COMPANY |                                                                    |   |                                                                                              |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|
| CONSOLIDATED STATEMENTS OF STOCKHOLDERS'      EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | Year      Ended December 31                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 2009                                                                    |   | 2008                                                                                              |   | 2007 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| COMMON STOCK, beginning      and end of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  $      23,121                       |   |  $      23,121                                                 |   |  $      23,121 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| ADDITIONAL      PAID IN CAPITAL                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                    |   |                                                                                              |   |   |
| Beginning      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |          36,281            |   |          30,244                                      |   |          25,852 |
| Excess      of proceeds over cost of treasury stock sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |            4,787 |   |            6,037                           |   |            4,392 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|     End      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |          41,068            |   |          36,281                                      |   |          30,244 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| RETAINED      EARNINGS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |                                                                    |   |                                                                                              |   |   |
| Beginning      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        750,600                       |   |        780,133                                                 |   |        780,892 |
| Cummulative      effect of change in accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                    |   |                                                                                              |   |   |
|     principle      (See Note 14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |            8,399 |   |                 - |   |                 - |
| Net      income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |          10,732            |   |        (17,050)                                                |   |          35,661 |
| Stockholder      dividends of $1.08 per share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                    |   |                                                                                              |   |   |
|     (2008      - $1.08; 2007 - $3.08)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |        (12,506)                      |   |        (12,483)                                                |   |        (36,420) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|     End      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        757,225                       |   |        750,600                                                 |   |        780,133 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| ACCUMULATED      OTHER COMPREHENSIVE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| LOSS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| Beginning      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |      (130,799)                                 |   |        (19,811)                                                |   |        (25,118) |
| Cummulative      effect of change in accounting                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |                                                                    |   |                                                                                              |   |   |
|     principle      (See Note 14)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |          (6,599)           |   |                 - |   |                 - |
| Other      comprehensive income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |        100,921                       |   |      (110,988)                                                           |   |            5,307 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|     End      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |        (36,477)                      |   |      (130,799)                                                           |   |        (19,811) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| TREASURY STOCK, at      cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |                                                                    |   |                                                                                              |   |   |
| Beginning      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |      (152,096)                                 |   |      (129,286)                                                           |   |      (120,443) |
| Cost      of 396,821 shares acquired                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|     (2008      - 557,424 shares; 2007 - 230,581 shares)                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |        (11,957)                      |   |        (25,972)                                                |   |        (10,799) |
| Cost      of 526,708 shares sold                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                    |   |                                                                                              |   |   |
|     (2008      - 222,687 shares; 2007 -140,121 shares)                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |            7,479 |   |            3,162                           |   |            1,956 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
|     End      of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |      (156,574)                                 |   |      (152,096)                                                           |   |      (129,286) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |
| TOTAL      STOCKHOLDERS' EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  $    628,363                                  |   |  $    527,107                                                            |   |  $    684,401 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |                                                                    |   |                                                                                              |   |   |

----

Table of Contents 

| KANSAS      CITY LIFE INSURANCE COMPANY                        |                                                                                                          |                                                                    |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH FLOWS                          |                                                                                                          |
|                                                           |                                                                                                          |                                                                    |   |   |   |   |   |   |   |
|                                                           |                                                                                                          |                                                                    |   |   | Year      Ended December 31 |
|                                                           |                                                                                                          |                                                                    |   |   | 2009 |   | 2008 |   | 2007 |
| OPERATING      ACTIVITIES                                      |                                                                                                          |                                                                    |   |   |   |
| Net      income (loss)                                         |  $      10,732                                                             |                                                                    |  $    (17,050) |   |  $      35,661 |
| Adjustments      to reconcile net income (loss) to             |                                                                                                          |                                                                    |   |   |   |
|                                                           | net      cash provided by operating activities:                                                               |                                                                    |   |   |   |   |
|                                                           |                                                                                                          | Amortization      of investment premium                                 |            3,838 |   |            5,114 |   |            6,279 |
|                                                           |                                                                                                          | Depreciation                                                            |            2,919 |   |            3,008 |   |            3,323 |
|                                                           |                                                                                                          | Acquisition      costs capitalized                                      |        (33,557) |   |        (27,804) |   |        (28,643) |
|                                                           |                                                                                                          | Amortization      of deferred acquisition costs                         |          35,575 |   |          34,990 |   |          31,073 |
|                                                           |                                                                                                          | Amortization      of value of business acquired                         |            4,664 |   |            7,094 |   |            9,260 |
|                                                           |                                                                                                          | Realized      investment (gains) losses                                 |          10,076 |   |          52,271 |   |          (4,060) |
|                                                           |                                                                                                          | Changes      in assets and liabilities:                                 |   |   |   |   |   |
|                                                           |                                                                                                          |                                                                    | Reinsurance      recoverable |        (10,975) |   |          (6,050) |   |          (4,109) |
|                                                           |                                                                                                          |                                                                    | Future      policy benefits |          13,433 |   |            1,633 |   | (2,258) |
|                                                           |                                                                                                          |                                                                    | Policyholder      account balances |        (22,122) |   |        (17,378) |   | (20,923) |
|                                                           |                                                                                                          |                                                                    | Income      taxes payable and deferred |            7,944 |   |        (31,509) |   |            1,577 |
|                                                           |                                                                                                          | Other,      net                                                         |            6,150 |   |            8,018 |   |            5,717 |
|                                                           |                                                                                                          | Net      cash provided                                                  |          28,677 |   |          12,337 |   |          32,897 |
|                                                           |                                                                                                          |                                                                    |   |   |   |   |   |   |   |
| INVESTING      ACTIVITIES                                      |                                                                                                          |                                                                    |   |   |   |
| Purchases      of investments:                                 |                                                                                                          |                                                                    |   |   |   |
|                                                           | Fixed      maturity securities                                                                                |      (322,508)                                 |   |      (251,136) |   |      (313,080) |
|                                                           | Equity      securities                                                                                        |          (4,025)           |   |          (8,300) |   |        (15,249) |
|                                                           | Mortgage      loans                                                                                           |        (59,650)                      |   |        (49,273) |   |        (54,816) |
|                                                           | Real      estate                                                                                              |        (21,338)                      |   |        (30,138) |   |          (4,507) |
|                                                           | Other      investment assets                                                                                  |      (103,566)                                 |   |                   - |   |                   - |
| Sales      of investments:                                     |                                                                                                          |                                                                    |   |   |   |
|                                                           | Fixed      maturity securities                                                                                |        134,810                       |   |          33,499 |   |        168,259 |
|                                                           | Equity      securities                                                                                        |            4,781 |   |            8,811 |   |            4,583 |
|                                                           | Real      estate                                                                                              |            4,063 |   |          30,613 |   |          22,457 |
|                                                           | Other      investment assets                                                                                  |            2,719 |   |            5,883 |   |            7,930 |
| Maturities      and principal paydowns of investments:         |                                                                                                          |                                                                    |   |   |
|                                                           | Fixed      maturity securities                                                                                |        247,925                       |   |        254,950 |   |        198,224 |
|                                                           | Equity      securities                                                                                        |            -     |   |                   - |   |            2,806 |
|                                                           | Mortgage      loans                                                                                           |          47,458            |   |          54,031 |   |          58,405 |
| Net      dispositions (acquisitions) of property and equipment |               (68)                      |                                                                    |                   3 |   |             (969) |
| Proceeds      from sale of non insurance affiliate             |                   - |                                                                    |                   - |   |          10,104 |
|                                                           |                                                                                                          | Net      cash provided (used)                                           |        (69,399) |   |          48,943 |   |          84,147 |
|                                                           |                                                                                                          |                                                                    |   |   |   |   |   |   |   |

----

Table of Contents 

| KANSAS      CITY LIFE INSURANCE COMPANY                |
|--------------------------------------------------------|
| CONSOLIDATED STATEMENTS OF CASH      FLOWS-(Continued) |
|                                                   |   |   |   |   |   |   |   |   |   |
|                                                   |   |   |   |   | Year      Ended December 31 |
|                                                   |   |   |   |   | 2009 |   | 2008 |   | 2007 |
|                                                   |   |   |   |   |   |   |   |   |   |
| FINANCING      ACTIVITIES                              |   |   |   |   |   |
| Proceeds      from borrowings                          |  $        1,500 |   |  $    100,962 |   |  $    122,830 |
| Repayment      of borrowings                           |          (4,400) |   |      (108,462) |   |      (127,130) |
| Deposits      on policyholder account balances         |        239,642 |   |        200,465 |   |        205,767 |
| Withdrawals      from policyholder account balances    |      (203,006) |   |      (240,508) |   |      (294,799) |
| Net      transfers from separate accounts              |            8,566 |   |            8,556 |   |          11,706 |
| Change      in other deposits                          |            5,878 |   |            4,525 |   |          13,703 |
| Cash      dividends to stockholders                    |        (12,506) |   |        (12,483) |   |        (36,420) |
| Net      disposition (acquisition) of treasury stock   |               309 |   |        (16,773) |   |          (4,451) |
|                                                   |   | Net      cash provided (used) |          35,983 |   |        (63,718) |   |      (108,794) |
|                                                   |   |   |   |   |   |   |   |   |   |
| Increase      (decrease) in cash                       |          (4,739) |   |          (2,438) |   |            8,250 |
| Cash      at beginning of year                         |            9,720 |   |          12,158 |   |            3,908 |
|                                                   |   |   |   |   |   |   |   |   |   |
|                                                   |   | Cash      at end of year |  $        4,981 |   |  $        9,720 |   |  $      12,158 |
|                                                   |   |   |   |   |   |   |   |   |   |

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1. NATURE OF OPERATIONS 

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| ·   | The      current fair value of the security as compared to amortized      cost; |
|--------------------|---------------------------------------------------------------------------------|

| ·   | The      credit rating of the security; |
|--------------------|-----------------------------------------|

| ·   | The      extent and the length of time the fair value has been below amortized      cost; |
|--------------------|-------------------------------------------------------------------------------------------|

| ·   | The      financial position of the issuer, including the current and future impact      of any specific events, material declines in the issuer’s revenues,      margins, cash positions, liquidity issues, asset quality, debt levels and      income results; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Significant      management or organizationalchanges; |
|--------------------|-------------------------------------------------------|

| ·   | Significant      uncertainty regarding the issuer’sindustry; |
|--------------------|--------------------------------------------------------------------|

| ·   | Violation      of financial covenants; |
|--------------------|----------------------------------------|

| ·   | Consideration      of information or evidence that supports timely  recovery; |
|--------------------|-------------------------------------------------------------------------------|

| ·   | The      Company’s intent and ability to hold an equity security until it recovers      in value; |
|--------------------|---------------------------------------------------------------------------------------------------------|

| ·   | Whether      the Company intends to sell a debt security and whether it is not more      likely than not that the Company will be required to sell a debt security      before recovery of the amortized cost basis;and |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Other      business factors related to the issuer’s  industry. |
|--------------------|----------------------------------------------------------------------|

| ·   | The      risk that the Company’s assessment of an issuer’s ability to meet all of      its contractual obligations will change based on changes in the credit      characteristics of that issuer; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the economic outlook will be worse than expected or have more of      an impact on the issuer thananticipated; |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the performance of the underlying collateral for securities      could deteriorate in the future and the Company’s credit enhancement      levels and recovery values do not provide sufficient protection to the      Company’s contractual principal andinterest; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that fraudulent, inaccurate or misleading information could be      provided to the Company’s credit, investment and accounting professionals      who determine the fair value estimates and accounting treatment for      securities; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that new information obtained by the Company or changes in other      facts and circumstances may lead the Company to change its intent to sell      the security before it recovers invalue; |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that facts and circumstances change such that it becomes more likely      than not that the Company will be required to sell the investment before      recovery of the amortized cost basis;and |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | The      risk that the methodology or assumptions used to develop estimates of the      portion of impairments due to credit prove, over time, to be inaccurate or      insufficient. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                                                                   | 2009                                                                          |   | 2008                                                                                                          |   | 2007                                                                                                          |
|------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------|
| Balance      at beginning of year                                      |  $    263,756                                        |   |  $    217,512                                                                        |   |  $    220,595                                                                        |
| Cumulative      effect of change in accounting principle (See Note 14) |             (450) |   |                   - |   |                   - |
| Capitalization      of commissions, sales and issue expenses           |          33,557                  |   |          27,804                                                  |   |          28,643                                                  |
| Gross      amortization                                                |        (46,677)                            |   |        (46,412)                                                            |   |        (43,341)                                                            |
| Accrual      of interest                                               |          11,552                  |   |          11,422                                                  |   |          12,268                                                  |
| Amortization      due to realized investment (gains) losses            |             (177) |   |            2,243                                       |   |                 33            |
| Change      in DAC due to unrealized investment (gains) losses         |        (52,066)                            |   |          51,187                                                  |   |             (686)                                 |
| Balance      at end of year                                            |  $    209,495                                        |   |  $    263,756                                                                        |   |  $    217,512                                                                        |
|                                                                   |                                                                          |   |                                                                                                          |   |                                                                                                          |

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|                                                                   | 2009                                                                              |   | 2008                                                                                                    |   | 2007                                                                                                    |
|------------------------------------------------------------------------|-----------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|
| Balance      at beginning of year                                      |  $     82,855                                       |   |  $     73,517                                                             |   |  $     82,769                                                             |
| Cumulative      effect of change in accounting principle (See Note 14) |            (135)           |   |                  - |   |                  - |
| Gross      amortization                                                |         (8,644)                           |   |       (11,704)                                                            |   |       (14,545)                                                            |
| Accrual      of interest                                               |           4,115                 |   |           4,610                                       |   |           5,285                                       |
| Amortization      due to realized investment (gains) losses            |              336 |   |           1,187                                       |   |              (76)                      |
| Change      in VOBA due to unrealized investment (gains) losses        |       (12,413)                                      |   |         15,245                                                  |   |                84            |
| Balance      at end of year                                            |  $     66,114                                       |   |  $     82,855                                                             |   |  $     73,517                                                             |
|                                                                   |                                                                              |   |                                                                                                    |   |                                                                                                    |

|                                             | 2009                                                    |   | 2008                                                   |   | 2007                                                    |
|--------------------------------------------------|---------------------------------------------------------|--------|--------------------------------------------------------|--------|---------------------------------------------------------|
| Balance      at beginning of year                |  $   258,565                        |   |  $   420,393                       |   |  $   400,749                        |
| Deposits      on variable policyholder contracts |         35,180  |   |         48,994 |   |         57,767  |
| Transfers      to general account                |         (7,271) |   |       (11,486)           |   |         (2,476) |
| Investment      performance                      |         70,096  |   |     (135,280)                      |   |         33,826  |
| Policyholder      benefits                       |       (31,347)            |   |       (49,863)           |   |       (54,663)            |
| Contract      charges                            |       (12,399)            |   |       (14,193)           |   |       (14,810)            |
| Balance      at end of year                      |  $   312,824                        |   |  $   258,565                       |   |  $   420,393                        |
|                                             |                                                    |   |                                                   |   |                                                    |

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|                                                            |                                                 | Separate                                                                            |                                             | Net                                                                         |
|-----------------------------------------------------------------|------------------------------------------------------|-------------------------------------------------------------------------------------|--------------------------------------------------|-----------------------------------------------------------------------------|
|                                                            |                                                 | Account                                                                             |                                             | Amount                                                                      |
|                                                            |                                                 | Balance                                                                             |                                             | at      Risk                                                                |
|                                                            |                                                 |                                                                                |                                             |                                                                        |
| Return      of net deposits                                     |  $      193,870   |                                                                                |  $      8,932 |
| Return      of the greater of the highest anniversary           |                                                 |                                                                                |                                             |
|                                                            | contract      value or net deposits                  |              4,580 |                                             |             485 |
| Return      of the greater of every fifth year highest          |                                                 |                                                                                |                                             |
|                                                            | anniversary      contract value or net deposits      |              6,078 |                                             |             593 |
| Return      of the greater of net deposits accumulated annually |                                                 |                                                                                |                                             |
|                                                            | at      5% or the highest anniversary contract value |            17,195            |                                             |          2,995                 |
| Total                                                           |  $      221,723   |                                                                                |  $    13,005            |
|                                                            |                                                 |                                                                                |                                             |                                                                        |

|                                          | 2009                                             |   | 2008                                             |   | 2007                                             |
|-----------------------------------------------|--------------------------------------------------|--------|--------------------------------------------------|--------|--------------------------------------------------|
| Variable      annuity incurred death benefits |  $      5,778 |   |  $      4,426 |   |  $      3,267 |
| Variable      annuity paid death benefits     |  $      5,899 |   |  $      4,528 |   |  $      2,775 |

|                      |                                                         | 2009                                   |                                                         | 2008                                   |                                                         | 2007                                   |
|---------------------------|--------------------------------------------------------------|----------------------------------------|--------------------------------------------------------------|----------------------------------------|--------------------------------------------------------------|----------------------------------------|
| Money      market         |  $        8,358 |                                   |  $      10,256            |                                   |  $        9,463 |
| Fixed      income         |          18,066 |                                   |          13,827 |                                   |          18,781 |
| Balanced                  |          51,935 |                                   |          45,089 |                                   |          85,424 |
| International      equity |          23,540 |                                   |          17,258 |                                   |          29,733 |
| Intermediate      equity  |          63,083 |                                   |          50,389 |                                   |          72,910 |
| Aggressive      equity    |          56,741 |                                   |          45,495 |                                   |          78,861 |
|                      | Total                                                        |  $    221,723 |                                                         |  $    182,314 |                                                         |  $    295,172 |
|                      |                                                         |                                   |                                                         |                                   |                                                         |                                   |

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|                                       |                                                               |                                                    | 2009                                                               |                                                    | 2008                                                    |
|--------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------|---------------------------------------------------------|
| Life      insurance                        |  $     617,247                       |                                                    |  $     620,136                       |
| Immediate      annuities and supplementary |                                                               |                                                    |                                                               |
|                                       | contracts      with life contingencies                             |         201,554 |                                                               |         192,212 |
|                                       |                                                               | Total                                                   |         818,801            |                                                    |         812,348 |
| Accident      and health insurance         |           48,088 |                                                    |           41,108 |
|                                       |                                                               |                                                    |                                                               |                                                    |                                                    |
|                                       |                                                               | Total      future policy benefits                       |  $     866,889                       |                                                    |  $     853,456            |
|                                       |                                                               |                                                    |                                                               |                                                    |                                                    |

|                          |                                                               | 2009                         |                                                               | 2008                         |
|-------------------------------|--------------------------------------------------------------------|------------------------------|--------------------------------------------------------------------|------------------------------|
| Universal      life insurance |  $     989,929                       |                         |  $  1,013,172                                       |
| Fixed      deferred annuities |         999,500            |                         |         956,216            |
| Other                         |           59,399 |                         |           61,268 |
|                          | Policyholder      account balances                                 |  $  2,048,828 |                                                               |  $  2,030,656 |
|                          |                                                               |                         |                                                               |                         |

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|                          |                                                                                    | December      31, 2009                                                                                                    |
|-------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
| Assets:                       | Level      1                                                                            |                                                                                                                      | Level      2 |   | Level      3 |   | Total |
|                          | Bonds:                                                                                  |                                                                                                                      |   |   |   |   |   |   |
|                          |     U.S.      Treasury securities and                               |                                                                                                                      |   |   |   |   |   |   |
|                          |         obligations      of U.S. Government     |  $         9,939                                                        |   |  $       97,723 |   |  $       14,275 |   |  $     121,937 |
|                          |     Federal      agencies 1                                         |                     - |   |           28,321 |   |                     - |   |           28,321 |
|                          |     Federal      agency issued                                      |                                                                                                                      |   |   |   |   |   |   |
|                          |        residential      mortgage-backed securities 1 |                     - |   |         172,515 |   |                     - |   |         172,515 |
|                          |             Subtotal        |             9,939                                             |   |         298,559 |   |           14,275 |   |         322,773 |
|                          | Corporate      obligations:                                                             |                                                                                                                      |   |   |   |   |   |   |
|                          |         Industrial                              |                     - |   |         412,292 |   |             3,654 |   |         415,946 |
|                          |         Energy                                  |                     - |   |         200,340 |   |                     - |   |         200,340 |
|                          |         Technology                              |                     - |   |           40,864 |   |                     - |   |           40,864 |
|                          |         Communications                          |                     - |   |           86,264 |   |                     - |   |           86,264 |
|                          |         Financial                               |                     - |   |         361,768 |   |             2,840 |   |         364,608 |
|                          |         Consumer                                |                     - |   |         284,910 |   |           22,596 |   |         307,506 |
|                          |     Public      utilities                                           |                     - |   |         287,687 |   |                     - |   |         287,687 |
|                          |             Subtotal        |                     - |   |      1,674,125 |   |           29,090 |   |      1,703,215 |
|                          |     Corporate      private-labeled residential                      |                                                                                                                      |   |   |   |   |   |   |
|                          |         mortgage-backed      securities         |                     - |   |         200,002 |   |                     - |   |         200,002 |
|                          |     Other                                                           |                     - |   |         220,572 |   |             9,109 |   |         229,681 |
|                          |     Redeemable      preferred stocks                                |           13,601                                                        |   |                     - |   |                     - |   |           13,601 |
|                          | Subtotal                                                                                |           23,540                                                        |   |      2,393,258 |   |           52,474 |   |      2,469,272 |
|                          |     Equity      securities                                          |             3,400                                             |   |           27,427 |   |             6,049 |   |           36,876 |
|                          | Total                                                                                   |  $       26,940                                                                   |   |  $  2,420,685 |   |  $       58,523 |   |  $  2,506,148 |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |
|                          |                                                                                    | 1%                                                                                                                        |   | 97% |   | 2% |   |   |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |
| Liabilities:                  |                                                                                    |                                                                                                                      |   |   |   |   |   |
| Other      policyholder funds |                                                                                    |                                                                                                                      |   |   |   |   |   |
|                          | Guaranteed      minimum withdrawal benefits                                             |  $               -                        |   |  $               - |   |  $       (1,642) |   |  $       (1,642) |
|                          | Total                                                                                   |  $               -                        |   |  $               - |   |  $       (1,642) |   |  $       (1,642) |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |

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|                          |                                                                                    | December      31, 2008                                                                                                    |
|-------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
| Assets:                       | Level      1                                                                            |                                                                                                                      | Level      2 |   | Level      3 |   | Total |
|                          | Bonds:                                                                                  |                                                                                                                      |   |   |   |   |   |   |
|                          |     U.S.      Treasury securities and                               |                                                                                                                      |   |   |   |   |   |   |
|                          |         obligations      of U.S. Government     |  $       10,943                                                                   |   |  $       70,068 |   |  $         6,045 |   |  $       87,056 |
|                          |     Federal      agencies 1                                         |                     - |   |           76,209 |   |                     - |   |           76,209 |
|                          |     Federal      agency issued                                      |                                                                                                                      |   |   |   |   |   |   |
|                          |        residential      mortgage-backed securities 1 |                     - |   |         200,127 |   |                358 |   |         200,485 |
|                          |             Subtotal        |           10,943                                                        |   |         346,404 |   |             6,403 |   |         363,750 |
|                          | Corporate      obligations:                                                             |                                                                                                                      |   |   |   |   |   |   |
|                          |         Industrial                              |                     - |   |         336,562 |   |           32,151 |   |         368,713 |
|                          |         Energy                                  |                     - |   |         189,740 |   |                     - |   |         189,740 |
|                          |         Technology                              |                     - |   |           35,317 |   |                     - |   |           35,317 |
|                          |         Communications                          |                     - |   |           64,514 |   |             1,543 |   |           66,057 |
|                          |         Financial                               |                     - |   |         337,441 |   |             8,123 |   |         345,564 |
|                          |         Consumer                                |                     - |   |         252,066 |   |           27,809 |   |         279,875 |
|                          |     Public      utilities                                           |                     - |   |         254,200 |   |             1,424 |   |         255,624 |
|                          |             Subtotal        |                     - |   |      1,469,840 |   |           71,050 |   |      1,540,890 |
|                          |     Corporate      private-labeled residential                      |                                                                                                                      |   |   |   |   |   |   |
|                          |         mortgage-backed      securities         |                     - |   |         219,700 |   |                     - |   |         219,700 |
|                          |     Other                                                           |                     - |   |         192,454 |   |           12,046 |   |         204,500 |
|                          |     Redeemable      preferred stocks                                |           12,042                                                        |   |             9,952 |   |                     - |   |           21,994 |
|                          | Subtotal                                                                                |           22,985                                                        |   |      2,238,350 |   |           89,499 |   |      2,350,834 |
|                          |     Equity      securities                                          |             5,395                                             |   |           26,040 |   |             5,141 |   |           36,576 |
|                          | Total                                                                                   |  $       28,380                                                                   |   |  $  2,264,390 |   |  $       94,640 |   |  $  2,387,410 |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |
|                          |                                                                                    | 1%                                                                                                                        |   | 95% |   | 4% |   |   |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |
| Liabilities:                  |                                                                                    |                                                                                                                      |   |   |   |   |   |
| Other      policyholder funds |                                                                                    |                                                                                                                      |   |   |   |   |   |
|                          | Guaranteed      minimum withdrawal benefits                                             |  $               -                        |   |  $               - |   |  $            755 |   |  $            755 |
|                          | Total                                                                                   |  $               -                        |   |  $               - |   |  $            755 |   |  $            755 |
|                          |                                                                                    |                                                                                                                      |   |   |   |   |   |   |

|                                       |                                                |                                                                                                                            | Level      1                                                                        |                                                                                                                            | Level      2                                                             |                                                                                                                            | Level      3                                                                        |                                                                                                                            | Total                                                                    |
|--------------------------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
| Fixed      maturities available for sale:  |                                                |                                                                                                                            |                                                                                |                                                                                                                            |                                                                     |                                                                                                                            |                                                                                |
|                                       | Priced      from external pricing services          |  $        23,540                                                                   |                                                                                |  $   2,277,303                                                                                              |                                                                     |  $                  -            |                                                                                |  $   2,300,843                                                                                              |
|                                       | Priced      from independent broker quotations      |                      - |                                                                                |          111,587                                                                   |                                                                     |                      - |                                                                                |          111,587                                                                   |
|                                       | Priced      from internal matrices and calculations |                      - |                                                                                |              4,368                                             |                                                                     |            52,474                                                        |                                                                                |            56,842                                                        |
|                                       |                                                | Subtotal                                                                                                                        |            23,540            |                                                                                                                            |       2,393,258                            |                                                                                                                            |            52,474            |                                                                                                                            |       2,469,272                            |
| Equity      securities available for sale: |                                                |                                                                                                                            |                                                                                |                                                                                                                            |                                                                     |                                                                                                                            |                                                                                |
|                                       | Priced      from external pricing services          |              3,400                                             |                                                                                |              2,407                                             |                                                                     |                      - |                                                                                |              5,807                                             |
|                                       | Priced      from independent broker quotations      |                      - |                                                                                |                      - |                                                                     |                      - |                                                                                |                      - |
|                                       | Priced      from internal matrices and calculations |                      - |                                                                                |            25,020                                                        |                                                                     |              6,049                                             |                                                                                |            31,069                                                        |
|                                       |                                                | Subtotal                                                                                                                        |              3,400 |                                                                                                                            |            27,427 |                                                                                                                            |              6,049 |                                                                                                                            |            36,876 |
|                                       | Total                                               |  $        26,940                                                                   |                                                                                |  $   2,420,685                                                                                              |                                                                     |  $        58,523                                                                   |                                                                                |  $   2,506,148                                                                                              |
|                                       | Percent      of total                               | 1%                                                                                                                              |                                                                                | 97%                                                                                                                             |                                                                     | 2%                                                                                                                              |                                                                                | 100%                                                                                                                            |
|                                       |                                                |                                                                                                                            |                                                                                |                                                                                                                            |                                                                     |                                                                                                                            |                                                                                |                                                                                                                            |                                                                     |

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|                             |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          | 2009                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |                                                                                                                                                            |                                                                                                                                                                       |
|----------------------------------|-------------------------|-------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|----------------------------|-----------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-----------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|----------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          | Ending                                                         |                                                                                                                                                            |                                                                                                                                                                       |
|                             |                    |                                                                                                        | Beginning                                                                                                        |                                                                                  |                       |                                                                                                                              | Included      in                                                                                                                                   |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          | Balance                                                        |                                                                                                                                                            |                                                                                                                                                                       |
|                             |                    |                                                                                                        | Balance      as                                                                                                  |                                                                                  | Included                   |                                                                                                                              | Other                                                                                                                                              |                                                                          | Purchases                                                                         |                                                                                    | Net                                                                                                      |                                                                          | as      of                                                     |                                                                                                                                                            | Net      Unrealized                                                                                                                                                        |
|                             |                    |                                                                                                        | of      December 31,                                                                                             |                                                                                  | in                         |                                                                                                                              | Comprehensive                                                                                                                                      |                                                                          | and                                                                               |                                                                                    | Transfers                                                                                                |                                                                          | December      31,                                              |                                                                                                                                                            | Gains      (Losses) at                                                                                                                                                     |
|                             |                    |                                                                                                        | 2008                                                                                                             |                                                                                  | Earnings                   |                                                                                                                              | Income      (Loss)                                                                                                                                 |                                                                          | Dispositions                                                                      |                                                                                    | in      (out)                                                                                            |                                                                          | 2009                                                           |                                                                                                                                                            | December      31, 2009                                                                                                                                                     |
| Assets:                          |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |
| Fixed      maturities available  |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |
|                             | for      sale           |  $            89,499                       |                                                                                                             |  $  (1,172)                                                            |                       |  $               3,100                            |                                                                                                                                               |  $      (1,985)                            |                                                                              |  $    (36,968)                                                 |                                                                                                     |  $       52,474                       |                                                           |  $                    2,533                            |
| Equity      securities available |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |
|                             | for      sale           |                  5,141 |                                                                                                             |               - |                       |                      229 |                                                                                                                                               |             (129) |                                                                              |               808 |                                                                                                     |             6,049 |                                                           |                           228 |
| Total                            |                    |  $            94,640                       |                                                                                                             |  $  (1,172)                                                            |                       |  $               3,329                            |                                                                                                                                               |  $      (2,114)                            |                                                                              |  $    (36,160)                                                 |                                                                                                     |  $       58,523                       |                                                           |  $                    2,761                            |
|                             |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |                                                                                                                                                            |                                                                                                                                                                       |
| Liabilities:                     |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |
| Other      policyholder funds-   |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |
|                             | guaranteed      minimum |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |                                                                                                                                                            |
|                             |                    | withdrawal      benefits                                                                                    |  $                 755 |                                                                                  |  $  (2,452) |                                                                                                                              |  $                       - |                                                                          |  $            55 |                                                                                    |  $                - |                                                                          |  $        (1,642) |                                                                                                                                                            |  $                           - |
|                             |                    |                                                                                                        |                                                                                                             |                                                                                  |                       |                                                                                                                              |                                                                                                                                               |                                                                          |                                                                              |                                                                                    |                                                                                                     |                                                                          |                                                           |                                                                                                                                                            |                                                                                                                                                                       |

|                             |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          | 2008                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |                                                                                                                                                                                  |                                                                                                                                                                       |
|----------------------------------|-------------------------|-------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|--------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          | Ending                                                                             |                                                                                                                                                                                  |                                                                                                                                                                       |
|                             |                    |                                                                                                        | Beginning                                                                                                                   |                                                                                  |                                       |                                                                                                                                                          | Included      in                                                                                                                                   |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          | Balance                                                                            |                                                                                                                                                                                  |                                                                                                                                                                       |
|                             |                    |                                                                                                        | Balance      as                                                                                                             |                                                                                  | Included                                   |                                                                                                                                                          | Other                                                                                                                                              |                                                                          | Purchases                                                              |                                                                    | Net                                                                                                      |                                                                          | as      of                                                                         |                                                                                                                                                                                  | Net      Unrealized                                                                                                                                                        |
|                             |                    |                                                                                                        | of      December 31,                                                                                                        |                                                                                  | in                                         |                                                                                                                                                          | Comprehensive                                                                                                                                      |                                                                          | and                                                                    |                                                                    | Transfers                                                                                                |                                                                          | December      31,                                                                  |                                                                                                                                                                                  | Gains      (Losses) at                                                                                                                                                     |
|                             |                    |                                                                                                        | 2007                                                                                                                        |                                                                                  | Earnings                                   |                                                                                                                                                          | Income      (Loss)                                                                                                                                 |                                                                          | Dispositions                                                           |                                                                    | in      (out)                                                                                            |                                                                          | 2008                                                                               |                                                                                                                                                                                  | December      31, 2008                                                                                                                                                     |
| Assets:                          |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |
| Fixed      maturities available  |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |
|                             | for      sale           |  $          127,576                                  |                                                                                                                        |  $       392                                  |                                       |  $             (8,682)                                                                  |                                                                                                                                               |  $    (29,442)                                       |                                                                   |  $         (345)      |                                                                                                     |  $       89,499                       |                                                                               |  $                  (7,892)                                                            |
| Equity      securities available |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |
|                             | for      sale           |                  1,148 |                                                                                                                        |               - |                                       |                           - |                                                                                                                                               |             (304) |                                                                   |            4,297 |                                                                                                     |             5,141 |                                                                               |                               - |
| Total                            |                    |  $          128,724                                  |                                                                                                                        |  $       392                                  |                                       |  $             (8,682)                                                                  |                                                                                                                                               |  $    (29,746)                                       |                                                                   |  $        3,952            |                                                                                                     |  $       94,640                       |                                                                               |  $                  (7,892)                                                            |
|                             |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |                                                                                                                                                                                  |                                                                                                                                                                       |
| Liabilities:                     |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |
| Other      policyholder funds-   |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |
|                             | guaranteed      minimum |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |                                                                                                                                                                                  |
|                             |                    | withdrawal      benefits                                                                                    |  $                   58 |                                                                                  |  $     (122) |                                                                                                                                                          |  $                       - |                                                                          |  $          819 |                                                                    |  $                - |                                                                          |  $            755 |                                                                                                                                                                                  |  $                           - |
|                             |                    |                                                                                                        |                                                                                                                        |                                                                                  |                                       |                                                                                                                                                          |                                                                                                                                               |                                                                          |                                                                   |                                                                    |                                                                                                     |                                                                          |                                                                               |                                                                                                                                                                                  |                                                                                                                                                                       |

----

Table of Contents 

|                             |                                                                                                   |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            | Gross                                                                                                                                       |                                                                                                                       |                                                                                            |
|----------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                             |                                                                                                   |                                                                                                   |                                                                                                   | Amortized                                                                                   |                                                                                                            | Unrealized                                                                                                                                  |                                                                                                                       | Fair                                                                                            |
| Bonds:                           | Cost                                                                                                   |                                                                                                   | Gains                                                                                                  |                                                                                        | Losses                                                                                                          |                                                                                                                                        | Value                                                                                                                      |
|                             | U.S.      Treasury securities and                                                                      |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                                       |                                                                                            |
|                             |                                                                                                   | obligations      of U.S. Government                                                                    |  $           118,284                       |                                                                                        |  $       4,674                                                          |                                                                                                                                        |  $            1,021                                       |                                                                                            |  $     121,937 |
|                             | Federal      agencies 1                                                                                |                 27,640 |                                                                                                   |              681           |                                                                                                            |                        - |                                                                                                                       |           28,321                              |
|                             | Federal      agency issued                                                                             |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                                       |                                                                                            |
|                             |                                                                                                   | residential      mortgage-backed securities 1                                                          |               165,350            |                                                                                        |           7,220                                               |                                                                                                                                        |                     55 |                                                                                            |         172,515 |
|                             |                                                                                                   |                                                                                                   | Subtotal                                                                                               |               311,274 |                                                                                                            |         12,575                                                                                      |                                                                                                                       |                1,076 |   |         322,773 |
|                             | Corporate      obligations:                                                                            |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                                       |                                                                                            |
|                             |                                                                                                   | Industrial                                                                                             |               400,775            |                                                                                        |         17,773                                                          |                                                                                                                                        |                2,602                            |                                                                                            |         415,946 |
|                             |                                                                                                   | Energy                                                                                                 |               190,836            |                                                                                        |         10,703                                                          |                                                                                                                                        |                1,199                            |                                                                                            |         200,340 |
|                             |                                                                                                   | Technology                                                                                             |                 39,358 |                                                                                        |           1,919                                               |                                                                                                                                        |                   413            |                                                                                            |           40,864 |
|                             |                                                                                                   | Communications                                                                                         |                 84,146 |                                                                                        |           3,492                                               |                                                                                                                                        |                1,374                            |                                                                                            |           86,264 |
|                             |                                                                                                   | Financial                                                                                              |               371,179            |                                                                                        |           9,247                                               |                                                                                                                                        |              15,818                                       |                                                                                            |         364,608 |
|                             |                                                                                                   | Consumer                                                                                               |               294,732            |                                                                                        |         15,210                                                          |                                                                                                                                        |                2,436                            |                                                                                            |         307,506 |
|                             | Public      utilities                                                                                  |               273,796            |                                                                                                   |         16,012                                      |                                                                                                            |                2,121                                             |                                                                                                                       |         287,687                                         |
|                             | Total      corporate obligations                                                                       |            1,654,822                            |                                                                                                   |         74,356                                      |                                                                                                            |              25,963                                                        |                                                                                                                       |      1,703,215                                                         |
|                             | Corporate      private-labeled residential                                                             |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                                       |                                                                                            |
|                             |                                                                                                   | mortgage-backed      securities                                                                        |               242,545            |                                                                                        |              387                               |                                                                                                                                        |              42,930                                       |                                                                                            |         200,002 |
|                             | Other                                                                                                  |               247,009            |                                                                                                   |           4,349                           |                                                                                                            |              21,677                                                        |                                                                                                                       |         229,681                                         |
| Redeemable      preferred stocks |                 14,866 |                                                                                                   |                98           |                                                                                        |                1,363                 |                                                                                                                                        |           13,601                                                         |
| Fixed      maturity securities   |            2,470,516                            |                                                                                                   |         91,765                                                 |                                                                                        |              93,009                            |                                                                                                                                        |      2,469,272                                                                                    |
| Equity      securities           |                 35,405 |                                                                                                   |           1,657                                      |                                                                                        |                   186 |                                                                                                                                        |           36,876                                                         |
| Total                            |                                                                                                   |  $        2,505,921                                       |                                                                                                   |  $     93,422                                                 |                                                                                                            |  $          93,195                                                                   |                                                                                                                       |  $  2,506,148                                                                    |
|                             |                                                                                                   |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                                       |                                                                                            |   |   |

----

Table of Contents 

|                             |                                                                                                   |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            | Gross                                                                                                                                       |                                                                                                            |                                                                                            |
|----------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|                             |                                                                                                   |                                                                                                   |                                                                                                   | Amortized                                                                                   |                                                                                                            | Unrealized                                                                                                                                  |                                                                                                            | Fair                                                                                            |
| Bonds:                           | Cost                                                                                                   |                                                                                                   | Gains                                                                                                  |                                                                                        | Losses                                                                                                          |                                                                                                                                        | Value                                                                                                           |
|                             | U.S.      Treasury securities and                                                                      |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                            |                                                                                            |
|                             |                                                                                                   | obligations      of U.S. Government                                                                    |  $             83,937            |                                                                                        |  $       3,518                                                          |                                                                                                                                        |  $               399            |                                                                                            |  $       87,056 |
|                             | Federal      agencies 1                                                                                |                 72,135 |                                                                                                   |           4,074                           |                                                                                                            |                        - |                                                                                                            |           76,209                              |
|                             | Federal      agency issued                                                                             |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                            |                                                                                            |
|                             |                                                                                                   | residential      mortgage-backed securities 1                                                          |               197,713            |                                                                                        |           3,407                                               |                                                                                                                                        |                   635 |                                                                                            |         200,485 |
|                             |                                                                                                   |                                                                                                   | Subtotal                                                                                               |               353,785 |                                                                                                            |         10,999                                                                                      |                                                                                                            |                1,034 |   |         363,750 |
|                             | Corporate      obligations:                                                                            |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                            |                                                                                            |
|                             |                                                                                                   | Industrial                                                                                             |               389,580            |                                                                                        |           6,501                                               |                                                                                                                                        |              27,368                            |                                                                                            |         368,713 |
|                             |                                                                                                   | Energy                                                                                                 |               201,172            |                                                                                        |           4,261                                               |                                                                                                                                        |              15,693                            |                                                                                            |         189,740 |
|                             |                                                                                                   | Technology                                                                                             |                 37,264 |                                                                                        |           1,109                                               |                                                                                                                                        |                3,056                 |                                                                                            |           35,317 |
|                             |                                                                                                   | Communications                                                                                         |                 73,035 |                                                                                        |              699                               |                                                                                                                                        |                7,677                 |                                                                                            |           66,057 |
|                             |                                                                                                   | Financial                                                                                              |               387,927            |                                                                                        |           3,430                                               |                                                                                                                                        |              45,793                            |                                                                                            |         345,564 |
|                             |                                                                                                   | Consumer                                                                                               |               302,433            |                                                                                        |           4,900                                               |                                                                                                                                        |              27,458                            |                                                                                            |         279,875 |
|                             | Public      utilities                                                                                  |               260,529            |                                                                                                   |           6,013                           |                                                                                                            |              10,918                                                        |                                                                                                            |         255,624                                         |
|                             | Total      corporate obligations                                                                       |            1,651,940                            |                                                                                                   |         26,913                                      |                                                                                                            |            137,963                                                                   |                                                                                                            |      1,540,890                                                         |
|                             | Corporate      private-labeled residential                                                             |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                            |                                                                                            |
|                             |                                                                                                   | mortgage-backed      securities                                                                        |               272,405            |                                                                                        |                90                    |                                                                                                                                        |              52,795                            |                                                                                            |         219,700 |
|                             | Other                                                                                                  |               241,172            |                                                                                                   |              545           |                                                                                                            |              37,217                                                        |                                                                                                            |         204,500                                         |
| Redeemable      preferred stocks |                 24,372 |                                                                                                   |                52           |                                                                                        |                2,430                 |                                                                                                                                        |           21,994                                              |
| Fixed      maturity securities   |            2,543,674                            |                                                                                                   |         38,599                                                 |                                                                                        |            231,439                                       |                                                                                                                                        |      2,350,834                                                                         |
| Equity      securities           |                 35,850 |                                                                                                   |           1,143                                      |                                                                                        |                   417 |                                                                                                                                        |           36,576                                              |
| Total                            |                                                                                                   |  $        2,579,524                                       |                                                                                                   |  $     39,742                                                 |                                                                                                            |  $        231,856                                                                              |                                                                                                            |  $  2,387,410                                                                    |
|                             |                                                                                                   |                                                                                                   |                                                                                                   |                                                                                        |                                                                                                            |                                                                                                                                        |                                                                                                            |                                                                                            |   |   |

|         |                                      |                                                                                                                            | December      31, 2009                                                   |                                                                                                                            | December      31, 2008                                                   |
|--------------|-------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
|         |                                      |                                                                                                                            | Carrying                                                                 |                                                                                                                            |  Fair                                                               |   | Carrying |   |  Fair |
|         |                                      |                                                                                                                            | Value                                                                    |                                                                                                                            |  Value                                                              |   | Value |   |  Value |
| Investments: |                                      |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |   |   |
|         | Fixed      maturities available for sale  |  $   2,469,272                                                                                              |                                                                     |  $   2,469,272                                                                                              |                                                                     |  $   2,350,834 |   |  $   2,350,834 |
|         | Equity      securities available for sale |            36,876                                                        |                                                                     |            36,876                                                        |                                                                     |            36,576 |   |            36,576 |
|         | Mortgage      loans                       |          457,582                                                                   |                                                                     |          456,819                                                                   |                                                                     |          445,389 |   |          449,228 |
|         | Policy      loans                         |            85,585                                                        |                                                                     |            85,585                                                        |                                                                     |            88,304 |   |            88,304 |
|         | Cash      and short-term investments      |          143,685                                                                   |                                                                     |          143,685                                                                   |                                                                     |            44,858 |   |            44,858 |
|         |                                      |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |   |   |   |   |
| Liabilities: |                                      |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |   |   |
|         | Individual      and group annuities       |          999,500                                                                   |                                                                     |          977,573                                                                   |                                                                     |          956,216 |   |          938,023 |
|         | Notes      payable                        |                      - |                                                                     |                      - |                                                                     |              2,900 |   |              2,900 |
|         | Supplementary      contracts without      |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |   |   |   |
|         |                                      | life      contingencies                                                                                                         |            59,399 |                                                                                                                            |            57,023 |   |            61,268 |   |            54,327 |

----

Table of Contents 

|                          |                                   | 2009                                                                        |                                   | 2008                                                                        |                                   | 2007                                                                        |
|-------------------------------|----------------------------------------|-----------------------------------------------------------------------------|----------------------------------------|-----------------------------------------------------------------------------|----------------------------------------|-----------------------------------------------------------------------------|
| Net      investment income:   |                                   |                                                                        |                                   |                                                                        |                                   |
|                          | Fixed      maturity securities         |  $  143,514                                                  |                                   |  $  147,600                                                  |                                   |  $  150,594                                                  |
|                          | Equity      securities                 |          2,822                 |                                   |        (2,599)                           |                                   |          3,516                 |
|                          | Mortgage      loans                    |        29,361                            |                                   |        29,735                            |                                   |        31,292                            |
|                          | Real      estate                       |          5,673                 |                                   |          5,678                 |                                   |          5,909                 |
|                          | Policy      loans                      |          5,897                 |                                   |          6,210                 |                                   |          6,230                 |
|                          | Short-term      investments            |             272 |                                   |          1,043                 |                                   |          3,716                 |
|                          | Other                                  |             436 |                                   |             673 |                                   |             775 |
|                          |                                   |      187,975                                       |                                   |      188,340                                       |                                   |      202,032                                       |
| Less      investment expenses |      (10,547) |                                                                        |      (10,921) |                                                                        |      (11,627) |
|                          |                                   |  $  177,428                                                  |                                   |  $  177,419                                                  |                                   |  $  190,405                                                  |
|                          |                                   |                                                                        |                                   |                                                                        |                                   |                                                                        |

|                                     |                              | 2009                                                                        |   | 2008                                                        |   | 2007                                                                         |
|------------------------------------------|-----------------------------------|-----------------------------------------------------------------------------|--------|-------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| Realized      investment gains (losses): |                              |                                                                        |   |                                                        |   |
|                                     | Fixed      maturity securities    |  $    (9,685)                                      |   |  $  (50,682)                                 |   |  $    (3,294)                                       |
|                                     | Equity      securities            |             903 |   |      (10,173)                      |   |          1,645                  |
|                                     | Real      estate                  |        (1,453)                           |   |          5,154 |   |          7,118                  |
|                                     |                              |      (10,235)                                      |   |      (55,701)                      |   |          5,469                  |
|                                     | Amortization      of DAC and VOBA |             159 |   |          3,430 |   |             (43) |
|                                     |                              |  $  (10,076)                                                 |   |  $  (52,271)                                 |   |  $      5,426                             |
|                                     |                              |                                                                        |   |                                                        |   |                                                                         |

|                               |                                                                          |                               | 2009                                                                                                          |   | 2008                                                                                                                      |   | 2007                                                              |
|------------------------------------|-------------------------------------------------------------------------------|------------------------------------|---------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
|                               |                                                                          |                               |                                                                                                          |   |                                                                                                                      |   |                                                              |
| Net      unrealized gains (losses) |  $           227  |                               |  $    (192,114)                                                                      |   |  $    13,208                                                                                     |
|                               | Amounts      resulting from:                                                  |                               |                                                                                                          |   |                                                                                                                      |   |
|                               |                                                                          | DAC      and VOBA                  |            1,055                                       |   |            65,534                                                  |   |           (898) |
|                               |                                                                          | Policyholder      account balances |                   - |   |                     - |   |           (548) |
| Deferred      income taxes         |             (449) |                               |            44,303                                      |   |        (4,117)                                                                         |
|                               |                                                                          |                               |                                                                                                          |   |                                                                                                                      |   |                                                              |
|                               |                                                                          |                               |  $           833                                  |   |  $      (82,277)                                                                       |   |  $      7,645                  |
|                               |                                                                          |                               |                                                                                                          |   |                                                                                                                      |   |                                                              |

|                          |                                 |                           | 2009                                                                                    |   | 2008                                                                                      |   | 2007                                                              |
|-------------------------------|--------------------------------------|--------------------------------|-----------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------|
| Change      in net unrealized |                                 |                           |                                                                                    |   |                                                                                      |
|                          | gains      (losses) during the year: |                           |                                                                                    |   |                                                                                      |   |
|                          |                                 | Fixed      maturity securities |  $      82,208                                       |   |  $      (89,106)                                       |   |  $      6,958                  |
|                          |                                 | Equity      securities         |               902 |   |               (815) |   |           (562) |
|                          |                                 |                           |                                                                                    |   |                                                                                      |   |                                                              |
|                          |                                 |                           |  $      83,110                                       |   |  $      (89,921)                                       |   |  $      6,396                  |
|                          |                                 |                           |                                                                                    |   |                                                                                      |   |                                                              |

----

Table of Contents 

| Credit      losses on securities held at beginning of year in other       |                                                                                  |
|---------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                                      | comprehensive      income (loss)                                                      |  $           5,713 |
| Additions      for credit losses not previously recognized in other-than- |                                                                                  |
|                                                                      | temporary      impairment                                                             |               6,500 |
| Additions      for increases in the credit loss for which an other-than-  |                                                                                  |
|                                                                      | temporary      impairment previously recognized when there was no                     |   |
|                                                                      | intent      to sell the security before recovery of its amortized cost      basis     |                  844 |
| Reductions      for securities sold during the period (realized)          |              (4,469) |
| Reductions      for securities previously recognized in other             |                                                                                  |
|                                                                      | comprehensive      income (loss) because of intent to sell                            |   |
|                                                                      | the      security before recovery of its amortized cost basis                         |                       - |
| Reductions      for increases in cash flows expected to be collected      |                                                                                  |
|                                                                      | that      are recognized over the remaining life of the security                      |                 (409) |
| Credit      losses on securities held at the end of year in other         |                                                                                  |
|                                                                      | comprehensive      income (loss)                                                      |  $           8,179 |
|                                                                      |                                                                                  |   |

| ·   | Five      securities were residential mortgage-backed securities that were written      down by a total of $0.2 million.  The significant decline in the      subprime and non-conforming mortgage markets and the specific performance      of the underlying collateral caused the Company’s cash flow projections to      be less than the amortized cost of the securities and created an      other-than-temporary impairment.  Two of these securities had      been previously written down due to reduced projected cash flows from the      underlying securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $0.5 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period.  This security was sold      during the fourth quarter of 2009. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $0.6      million.  As the trucking industry is highly correlated with the      general economy, this company had experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary.  This security had been written down in a      previous period.  This security was sold during the fourth      quarter of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $5.2 million.  These issuers had also      experienced declines in value related to the mortgage credit      crisis, |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|    |  including      significant and continuing reductions in capital and liquidity      positions.  These securities were sold during the fourth quarter      of 2009. |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Four      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.3 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  Three of these securities had been previously      written down due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and is currently under reorganization was written down $0.2      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written down and      continues to be challenged in its market and industry.  This      security was exchanged for a replacement security during the third quarter      of 2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.3 million.  This company has been affected by the credit      crisis, causing reduced access to liquidity and higher borrowing      costs.  This security had been written down in a previous      period.  The Company determined that a credit-related impairment      had occurred, and this security was sold during the third quarter of      2009. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a financial institution that had been impacted by the      housing and mortgage credit crisis and had been supported through Troubled      Assets Relief Program (TARP) funds.  This company has      experienced large losses in its real estate loan portfolios and has had an      increase in non-performing loans over the past year.  This      security was written down by a total of $1.5 million before it was sold      during the third quarter of 2009. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities (from two issuers) were residential mortgage-backed securities      that were written down by a total of $0.1 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary      impairment.  These securities had been previously written down      due to reduced projected cash flows from the underlying      securitizations. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a collateralized debt obligation (CDO) that was written down      $0.2 million.  This security had been impacted by the rapid rise      in delinquencies and foreclosures in the subprime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling had caused extreme declines in market valuations, regardless of      individual security performance.  This security had been written      down in previous periods. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a print media company that filed for bankruptcy protection      in 2008 and was under reorganization was written down $1.0      million.  The print media industry is highly cyclical and has      experienced weakened consumer demand and competition from electronic      media.  This security had been previously written      down. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security from a global commercial finance company that provides financial      products and advisory services to a range of industry sectors was written      down $0.5 million.  This company had been affected by the credit      crisis, forcing reduced access to liquidity and higher borrowing      costs.  The Company determined that a credit-related impairment      had occurred. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that provides custom-tailored financing to      private and corporate owners of real estate nationwide and was written      down $2.2 million.  During the second quarter of 2009, the      Company accepted an offer from this company to exchange this security for      a security with a longer-dated maturity with an enhanced second lien      priority in the capital structure.  This security had been      written down in a previous period. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| The Company’s analysis of      securities for the quarter ended March 31, 2009 resulted in the      determination that six fixed-maturity issuers (seven securities) had      other-than-temporary impairments and were written down by a combined $6.1      million due to credit impairments.  The aggregate impairment for      these securities was $21.4 million, and $15.3 million of this amount was      determined to be non-credit and was recognized in other comprehensive      income (loss). |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a mortgage and financial guaranty insurer that was      written down $1.6 million.  Mortgage insurers have suffered from      the deterioration in the U.S. housing market and mortgage credit      market.  Rising mortgage delinquencies and defaults have      resulted in rating downgrades for these insurers.  Recent rating      downgrades, combined with the issuer’s need to raise additional capital to      meet future payments contributed to the other-than-temporary      impairment. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a trucking company that was written down $1.6      million.  As the trucking industry is highly correlated with the      general economy, this company had experienced a reduction in shipping      volume as a result of the recession.  This company renegotiated      its credit facilities in the first quarter of 2009, but new covenants      placed significant requirements on the issuer.  These      restrictions, combined with the need to retire longer-term debt, placed      additional stress on cash resources and led to indications of continued      weakening performance that the Company believed to be      other-than-temporary. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a company that develops, manufactures and markets      imaging products that was written down $1.2 million.   This      company’s past emphasis was in traditional film, which has been largely      surpassed by digital photography.  The decline in the economy      had negatively affected sales, as the consumer photography industry is a      discretionary item.  The company’s declining revenues and      liquidity position led to the other-than-temporary    impairment. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities (from one issuer) were residential mortgage-backed securities      that were written down by a total of $0.6 million.  The      significant decline in the subprime and non-conforming mortgage markets      and the specific performance of the underlying collateral caused the      Company’s cash flow projections to be less than the amortized cost of the      securities and created an other-than-temporary  impairment. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was a residential mortgage-backed security that was written down      $0.1 million.  The significant decline in the subprime and      non-conforming mortgage markets and the specific performance of the      underlying collateral caused the Company’s cash flow projections to be      less than the amortized cost of the security and created an      other-than-temporary impairment. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.0 million as the Company accepted a tender      offer on the Company’s holdings from an issuer during the second quarter      of 2009. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $0.4 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $3.1 million, primarily as a result of      declines in price and rating agency downgrades on debt issues from issuers      that completed leveraged buyout transactions during 2008.  One      of these securities was subsequently sold during the fourth quarter of      2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      securities were CDOs that were written down by a total of $5.3      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were written down by $1.9 million due to a decline in price      that had persisted for a period longer than the Company considered      temporary.  One of these securities was subsequently sold during      the fourth quarter of 2008. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | One      security was from an originator of residential prime, Alt-A and subprime      mortgages that was written down $4.2 million.  The significant      decline in the subprime and non-conforming mortgage markets resulted in a      reduction in value for thissecurity. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from an issuer that designs, manufactures and services cars      and trucks and provides vehicle-related financing, leasing and insurance      was written down $1.2 million, largely resulting from the decline in the      U.S. automotive industry. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security that is a financial services company involved in automotive and      real estate financing and mortgage lending was written down by $0.6      million and subsequently sold during the fourth quarter of      2008. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Four      securities (two issuers) were perpetual preferred securities that were      written down $3.3 million.  These securities had been negatively      impacted by the housing and mortgage credit crisis and have received TARP      (Troubled Assets Relief Program)funds. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      of the securities were preferred stocks of government-sponsored agencies      that were written down by a total of $6.5 million.  These      entities buy and hold mortgages and issue and sell guaranteed residential      mortgage-backed securities to facilitate housing      ownership.  They are now operated in conservatorship by the U.S.      government and their existing common and preferred stock securities are      severely diluted.  Dividend payments were suspended, driving the      fair value of these securitiesdown. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities from the same issuer were from an investment banking firm that      filed for bankruptcy during the third quarter of 2008 and were written      down by a total of $9.2 million.  This firm was part of the      financial industry that was hit hard by the mortgage credit      crisis.  After a severe decline in equity valuations, the      inability to obtain short-term funding and the failure to find an acquirer      forced this firm to file for Chapter 11  bankruptcy. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs that were written down by a total of $5.1      million.  These securities were impacted by the rapid rise in      delinquencies and foreclosures in the sub-prime and Alt-A mortgage      markets, along with a decline in the fair value of securities issued by      financial institutions.  Ongoing CDO liquidations and investor      selling have caused extreme declines in market valuations, regardless of      individual security performance. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities, one issuer a parent organization of the other, were from      financial guarantee insurance companies that provide credit enhancement      for bond issuers as well as investment management services and were      written down by a total of $4.9 million.  These issuers had also      experienced declines in value related to the mortgage credit crisis and      had been downgraded to a negativeoutlook. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a supplier of auto parts for light trucks and      sport-utility vehicles.  The deteriorating truck and      sport-utility vehicle markets of the auto industry, combined with the      sharp decline in value and recent ratings declines, resulted in a $2.1      million write-down. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down $1.1 million as continued price deterioration      occurred on this security that was previously written      down.  This issuer is primarily in the radio and advertising      business. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security provides custom-tailored financing to private and corporate      owners of real estate nationwide.  This security had a rating      decline to below investment grade status combined with continued price      deterioration and was written down $2.8million. |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was from a bank holding company that had recently filed for      bankruptcy.  This holding company was the parent of a large      nationwide bank that was recently taken over by the Office of Thrift      Supervision and the Federal Deposit Insurance Corporation (FDIC) was      appointed as its receiver.  As a result of the bankruptcy      filing, this security was written down $0.8  million. |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Three      of the securities were written down by a total of $3.3 million, primarily      as a result of declines in price and rating agency downgrades on debt      issues from issuers that had recently completed leveraged buyout (LBO)      transactions.  These LBO transactions greatly increased the debt      level of each issuer.  One of these securities    had |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|    | been      written down previously, and the other two securities were below cost by      20% or more for at least six consecutivemonths. |
|--------------|-----------------------------------------------------------------------------------------------------------------------------------------|

| ·   | Two      securities were CDOs and were written down by $2.8 million, primarily due      to price declines that had persisted for periods longer than the Company      considered temporary.  Both securities were below cost by 20% or      more for at least six consecutivemonths. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $3.3 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary, rating agency downgrades and a debt restructuring      during the quarter. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was written down by $0.8 million due to a combination of a      decline in price that had persisted for a period longer than the Company      considered temporary and a further deterioration in fair value during the      second quarter of 2008. |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security was below cost by 20% or more for more than six consecutive      months and was the subject of a recent leveraged buyout that was finalized      during the fourth quarter of 2007, which greatly increased the debt level      of the company.  Accordingly, the Company wrote down this      security $3.3 million at year-end2007. |
|--------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | One      security filed for Chapter 11 protection and indicated that it would not      be able to fully meet all of the obligations of its      borrowings.  The Company recognized an other-than-temporary      impairment on this security at year-end 2006 of $1.1      million.  As a result of this new action, the Company recognized      an additional $0.7 million impairment in 2007.  At December 31,      2006, this security was below cost by 20% or more for more than twelve      consecutive months.  It was in a highly competitive and cyclical      industry that was experiencing weakened demand and      overcapacity.  Capital expenditures for equipment upgrades were      exceeding cash generation. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|                             |                                                                                              |                                          |                                                                                              | Less than 12 months                                                   |                                                                                        | 12 months or longer                                                   |                                                                  | Total                                                 |
|----------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|---------------------------------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|-------------------------------------------------------|
|                             |                                                                                              |                                          |                                                                                              | Fair                                                                  |                                                                                        | Unrealized                                                            |                                                                  | Fair                                                  |   | Unrealized |   | Fair |   | Unrealized |
| Bonds:                           |                                                                                              | Value                                         |                                                                                              | Losses                                                                |                                                                                        | Value                                                                 |                                                                  | Losses                                                |   | Value |   | Losses |
|                             | U.S.      Treasury securities and                                                                 |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | obligations      of U.S. Government           |  $   30,616                                                                   |                                                                  |  $        913                                  |                                                                  |  $     3,040                            |                                                  |  $        108 |   |  $         33,656 |   |  $     1,021 |
|                             | Federal      agency issued                                                                        |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | residential      mortgage-backed securities 1 |         1,363                                             |                                                                  |                4 |                                                                  |         6,191                 |                                                  |              51 |   |               7,554 |   |              55 |
|                             |                                                                                              |                                          | Subtotal                                                                                          |       31,979                            |                                                                                        |            917 |                                                                  |         9,231 |   |            159 |   |             41,210 |   |         1,076 |
|                             | Corporate      obligations:                                                                       |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | Industrial                                    |       55,724                                                        |                                                                  |            562                       |                                                                  |       24,393                            |                                                  |         2,040 |   |             80,117 |   |         2,602 |
|                             |                                                                                              | Energy                                        |       12,392                                                        |                                                                  |            167                       |                                                                  |       11,822                            |                                                  |         1,032 |   |             24,214 |   |         1,199 |
|                             |                                                                                              | Technology                                    |         4,012                                             |                                                                  |              76            |                                                                  |         7,369                 |                                                  |            337 |   |             11,381 |   |            413 |
|                             |                                                                                              | Communications                                |         2,353                                             |                                                                  |              44            |                                                                  |       20,797                            |                                                  |         1,330 |   |             23,150 |   |         1,374 |
|                             |                                                                                              | Financial                                     |       35,437                                                        |                                                                  |            568                       |                                                                  |     126,213                                       |                                                  |       15,250 |   |           161,650 |   |       15,818 |
|                             |                                                                                              | Consumer                                      |       21,753                                                        |                                                                  |            898                       |                                                                  |       34,167                            |                                                  |         1,538 |   |             55,920 |   |         2,436 |
|                             |                                                                                              | Public      utilities                         |       34,108                                                        |                                                                  |            731                       |                                                                  |       19,916                            |                                                  |         1,390 |   |             54,024 |   |         2,121 |
|                             | Total      corporate obligations                                                                  |     165,779               |                                                                                              |         3,046                 |                                                                                        |     244,677                                       |                                                                  |       22,917            |   |           410,456 |   |       25,963 |
|                             | Corporate      private-labeled residential                                                        |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |
|                             |                                                                                              | mortgage-backed      securities               |       18,319                                                        |                                                                  |         2,266                                       |                                                                  |     158,813                                       |                                                  |       40,664 |   |           177,132 |   |       42,930 |
|                             | Other                                                                                             |       25,747    |                                                                                              |            940 |                                                                                        |     149,415                                       |                                                                  |       20,737            |   |           175,162 |   |       21,677 |
| Redeemable      preferred stocks |            831                             |                                          |                2       |                                                                  |         7,672                                       |                                                                  |         1,361                 |                                                  |               8,503 |   |         1,363 |
| Fixed      maturity securities   |     242,655                                                                   |                                          |         7,171                                             |                                                                  |     569,808                                                             |                                                                  |       85,838                            |                                                  |           812,463 |   |       93,009 |
| Equity      securities           |                 - |                                          |                 - |                                                                  |         1,986                                       |                                                                  |            186 |                                                  |               1,986 |   |            186 |
|                             |                                                                                              |                                          | Total                                                                                             |  $      242,655                                                  |                                                                                        |  $     7,171                            |                                                                  |  $      571,794                                  |   |  $   86,024 |   |  $       814,449 |   |  $   93,195 |
|                             |                                                                                              |                                          |                                                                                              |                                                                  |                                                                                        |                                                                  |                                                                  |                                                  |   |   |   |   |   |   |

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|                             |                                                                                              |                                          |                                                                                              | Less than 12 months                        |                                                                  | 12 months or longer                                                   |                                                                  | Total                                      |
|----------------------------------|---------------------------------------------------------------------------------------------------|-----------------------------------------------|---------------------------------------------------------------------------------------------------|--------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|-----------------------------------------------------------------------|--------------------------------------------|
|                             |                                                                                              |                                          |                                                                                              | Fair                                       |                                                                  | Unrealized                                                            |                                                                  | Fair                                       |   | Unrealized |   | Fair |   | Unrealized |
| Bonds:                           |                                                                                              | Value                                         |                                                                                              | Losses                                     |                                                                  | Value                                                                 |                                                                  | Losses                                     |   | Value |   | Losses |
|                             | U.S.      Treasury securities and                                                                 |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | obligations      of U.S. Government           |  $     1,591                                                        |                                       |  $        260            |                                                                  |  $     5,213                            |                                       |  $        139 |   |  $           6,804 |   |  $        399 |
|                             | Federal      agency issued                                                                        |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | residential      mortgage-backed securities 1 |       28,933                                                        |                                       |            419 |                                                                  |       25,404                            |                                       |            216 |   |             54,337 |   |            635 |
|                             |                                                                                              |                                          | Subtotal                                                                                          |       30,524 |                                                                  |            679 |                                                                  |       30,617 |   |            355 |   |             61,141 |   |         1,034 |
|                             | Corporate      obligations:                                                                       |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | Industrial                                    |     152,873                                                                   |                                       |       11,301                            |                                                                  |       72,964                            |                                       |       16,067 |   |           225,837 |   |       27,368 |
|                             |                                                                                              | Energy                                        |     104,230                                                                   |                                       |       12,571                            |                                                                  |       17,098                            |                                       |         3,122 |   |           121,328 |   |       15,693 |
|                             |                                                                                              | Technology                                    |         5,828                                             |                                       |         1,352                 |                                                                  |         6,975                 |                                       |         1,704 |   |             12,803 |   |         3,056 |
|                             |                                                                                              | Communications                                |       27,885                                                        |                                       |         3,584                 |                                                                  |       17,674                            |                                       |         4,093 |   |             45,559 |   |         7,677 |
|                             |                                                                                              | Financial                                     |     171,513                                                                   |                                       |       18,408                            |                                                                  |       94,853                            |                                       |       27,385 |   |           266,366 |   |       45,793 |
|                             |                                                                                              | Consumer                                      |     124,295                                                                   |                                       |       14,605                            |                                                                  |       62,311                            |                                       |       12,853 |   |           186,606 |   |       27,458 |
|                             |                                                                                              | Public      utilities                         |     124,053                                                                   |                                       |         8,339                 |                                                                  |       15,021                            |                                       |         2,579 |   |           139,074 |   |       10,918 |
|                             | Total      corporate obligations                                                                  |     710,677               |                                                                                              |       70,160 |                                                                  |     286,896                                       |                                                                  |       67,803 |   |           997,573 |   |     137,963 |
|                             | Corporate      private-labeled residential                                                        |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |
|                             |                                                                                              | mortgage-backed      securities               |     114,480                                                                   |                                       |       15,261                            |                                                                  |       90,001                            |                                       |       37,534 |   |           204,481 |   |       52,795 |
|                             | Other                                                                                             |     125,491               |                                                                                              |       16,342 |                                                                  |       58,344                            |                                                                  |       20,875 |   |           183,835 |   |       37,217 |
| Redeemable      preferred stocks |         9,786                                             |                                          |         1,237                                             |                                       |         3,938                 |                                                                  |         1,193                 |                                       |             13,724 |   |         2,430 |
| Fixed      maturity securities   |     990,958                                                                   |                                          |     103,679                                                                   |                                       |     469,796                                       |                                                                  |     127,760                                       |                                       |        1,460,754 |   |     231,439 |
| Equity      securities           |                 - |                                          |                 - |                                       |         1,755                 |                                                                  |            417 |                                       |               1,755 |   |            417 |
|                             |                                                                                              |                                          | Total                                                                                             |  $      990,958                       |                                                                  |  $      103,679                                                  |                                                                  |  $      471,551                       |   |  $      128,177 |   |  $    1,462,509 |   |  $      231,856 |
|                             |                                                                                              |                                          |                                                                                              |                                       |                                                                  |                                                                  |                                                                  |                                       |   |   |   |   |   |   |

| ·   | 84      security issues representing 36% of the issues with unrealized losses,      including 93% being rated as investment grade, were below cost for less      than one year; |
|--------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 96      security issues representing 41% of the issues with unrealized losses,      including 80% being rated as investment grade, were below cost for one      year or more and less than three years;and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 52      security issues representing 23% of the issues with unrealized losses,      including 81% being rated as investment grade, were below cost for three      years or more. |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| ·   | 293      security issues representing 61% of the issues with unrealized losses,      including 94% being rated as investment grade, were below cost for less      than one year; |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 65      security issues representing 13% of the issues with unrealized losses,      including 88% being rated as investment grade, were below cost for one      year or more and less than three years;and |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| ·   | 125      security issues representing 26% of the issues with unrealized losses,      including 92% being rated as investment grade, were below cost for three      years or more. |
|--------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                                       |                                                                                             |                                                |                                                                                                                                        | December      31, 2009                                                                           |
|------------------------------------------------------------|--------------------------------------------------------------------------------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   | Gross |
|                                                       |                                                                                             |                                                |                                                                                                                                        | Amortized                                                                                        |   | Fair |   | Unrealized |
| Securities      owned without realized impairment:         | Cost                                                                                             |                                                | Value                                                                                                                                       |                                                                                             | Losses |
| Unrealized      losses of 10% or less                      |  $          633,514                       |                                                |  $          608,280                                                                  |                                                                                             |  $         25,234 |
| Unrealized      losses of 20% or less and greater than 10% | 109,379                                                                                          |                                                | 94,348                                                                                                                                      |                                                                                             | 15,031 |
|                                                       | Subtotal                                                                                         | 742,893                                             |                                                                                                                                        | 702,628                                                                                          |   | 40,265 |
| Unrealized      losses greater than 20%:                   |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
|                                                       | Investment      grade                                                                            |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           | 13,125                                                                                                                                      |                                                                                             | 9,821 |   | 3,304 |
|                                                       |                                                                                             | Six      months or more and less than twelve months | 25,413                                                                                                                                      |                                                                                             | 19,627 |   | 5,786 |
|                                                       |                                                                                             | Twelve      months or greater                       |                34,906                                            |                                                                                             |                22,225 |   | 12,681 |
|                                                       |                                                                                             |                                                | Total      investment grade                                                                                                                 | 73,444                                                                                           |   | 51,673 |   | 21,771 |
|                                                       | Below      investment grade                                                                      |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Six      months or more and less than twelve months | 4,654                                                                                                                                       |                                                                                             | 2,954 |   | 1,700 |
|                                                       |                                                                                             | Twelve      months or greater                       |                15,139                                            |                                                                                             |                11,139 |   | 4,000 |
|                                                       |                                                                                             |                                                | Total      below investment grade                                                                                                           | 19,793                                                                                           |   | 14,093 |   | 5,700 |
|                                                       | Unrealized      losses greater than 20%                                                          | 93,237                                              |                                                                                                                                        | 65,766                                                                                           |   | 27,471 |
| Subtotal                                                   |  $          836,130                       |                                                |  $          768,394                                                                  |                                                                                             |  $         67,736 |
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   |   |
| Securities      owned with realized impairment:            |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
| Unrealized      losses of 10% or less                      |  $              4,850 |                                                |  $              4,634                                            |                                                                                             |  $              216 |
| Unrealized      losses of 20% or less and greater than 10% | 10,594                                                                                           |                                                | 8,720                                                                                                                                       |                                                                                             | 1,874 |
|                                                       | Subtotal                                                                                         | 15,444                                              |                                                                                                                                        | 13,354                                                                                           |   | 2,090 |
| Unrealized      losses greater than 20%:                   |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |
|                                                       | Investment      grade                                                                            |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Six      months or more and less than twelve months |                        - |                                                                                             |                       - |   |                     - |
|                                                       |                                                                                             | Twelve      months or greater                       |                17,937                                            |                                                                                             |                12,298 |   |               5,639 |
|                                                       |                                                                                             |                                                | Total      investment grade                                                                                                                 |                17,937 |   |                12,298 |   |               5,639 |
|                                                       | Below      investment grade                                                                      |                                                |                                                                                                                                        |                                                                                             |   |   |
|                                                       |                                                                                             | Less      than six months                           | 514                                                                                                                                         |                                                                                             | 362 |   | 152 |
|                                                       |                                                                                             | Six      months or more and less than twelve months |                  5,859                                 |                                                                                             |                  3,944 |   |               1,915 |
|                                                       |                                                                                             | Twelve      months or greater                       |                31,760                                            |                                                                                             |                16,097 |   |             15,663 |
|                                                       |                                                                                             |                                                | Total      below investment grade                                                                                                           | 38,133                                                                                           |   | 20,403 |   | 17,730 |
|                                                       | Unrealized      losses greater than 20%                                                          | 56,070                                              |                                                                                                                                        | 32,701                                                                                           |   | 23,369 |
| Subtotal                                                   |  $            71,514            |                                                |  $            46,055                                                       |                                                                                             |  $         25,459 |
| Total      unrealized losses                               |  $          907,644                       |                                                |  $          814,449                                                                  |                                                                                             |  $         93,195 |
|                                                       |                                                                                             |                                                |                                                                                                                                        |                                                                                             |   |   |   |   |

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|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    | December      31, 2008                                                                                                      |
|------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   | Gross |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    | Amortized                                                                                                                   |   | Fair |   | Unrealized |
| Securities      owned without realized impairment:         | Cost                                                                                                                                         |                                                                                                        | Value                                                                                                                                                   |                                                                                                                        | Losses |
| Unrealized      losses of 10% or less                      |  $          891,477                                                                   |                                                                                                        |  $          847,458                                                                              |                                                                                                                        |  $         44,019 |
| Unrealized      losses of 20% or less and greater than 10% |              397,403                                                        |                                                                                                        |              339,664                                                                   |                                                                                                                        |             57,739 |
|                                                       | Subtotal                                                                                                                                     |           1,288,880                                       |                                                                                                                                                    |           1,187,122                                                       |   |           101,758 |
| Unrealized      losses greater than 20%:                   |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
|                                                       | Investment      grade                                                                                                                        |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |              296,683                                                                   |                                                                                                                        |              207,314 |   |             89,369 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                46,194                                                        |                                                                                                                        |                28,918 |   |             17,276 |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      investment grade                                                                                                                             |              342,877                                       |   |              236,232 |   |           106,645 |
|                                                       | Below      investment grade                                                                                                                  |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                45,346                                                        |                                                                                                                        |                27,269 |   |             18,077 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                  4,547                                             |                                                                                                                        |                  2,098 |   |               2,449 |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      below investment grade                                                                                                                       |                49,893                            |   |                29,367 |   |             20,526 |
|                                                       | Unrealized      losses greater than 20%                                                                                                      |              392,770                       |                                                                                                                                                    |              265,599                                       |   |           127,171 |
| Subtotal                                                   |  $       1,681,650                                                                                   |                                                                                                        |  $       1,452,721                                                                                              |                                                                                                                        |  $       228,929 |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   |   |
| Securities      owned with realized impairment:            |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
| Unrealized      losses of 10% or less                      |  $                      - |                                                                                                        |  $                     -                  |                                                                                                                        |  $                   - |
| Unrealized      losses of 20% or less and greater than 10% |                  5,676                                  |                                                                                                        |                  4,725                                             |                                                                                                                        |                  951 |
|                                                       | Subtotal                                                                                                                                     |                  5,676 |                                                                                                                                                    |                  4,725                 |   |                  951 |
| Unrealized      losses greater than 20%:                   |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |
|                                                       | Investment      grade                                                                                                                        |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                  6,476                                             |                                                                                                                        |                  4,635 |   |               1,841 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      investment grade                                                                                                                             |                  6,476                 |   |                  4,635 |   |               1,841 |
|                                                       | Below      investment grade                                                                                                                  |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |
|                                                       |                                                                                                                                         | Less      than six months                                                                                   |                     563                             |                                                                                                                        |                     428 |   |                  135 |
|                                                       |                                                                                                                                         | Six      months or more and less than twelve months                                                         |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         | Twelve      months or greater                                                                               |                          - |                                                                                                                        |                         - |   |                       - |
|                                                       |                                                                                                                                         |                                                                                                        | Total      below investment grade                                                                                                                       |                     563 |   |                     428 |   |                  135 |
|                                                       | Unrealized      losses greater than 20%                                                                                                      |                  7,039 |                                                                                                                                                    |                  5,063                 |   |               1,976 |
| Subtotal                                                   |  $            12,715                                                        |                                                                                                        |  $              9,788                                                        |                                                                                                                        |  $           2,927 |
| Total      unrealized losses                               |  $       1,694,365                                                                                   |                                                                                                        |  $       1,462,509                                                                                              |                                                                                                                        |  $       231,856 |
|                                                       |                                                                                                                                         |                                                                                                        |                                                                                                                                                    |                                                                                                                        |   |   |   |   |

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Table of Contents 

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Table of Contents 

|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | Fair      Value                                                                                          |                                                                                          |                                                                                                                                              |                                                                                                        | Fair      Value                                                                                                                             |                                                                                                                       |                                                                                            |
|--------|--------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | of      Securities                                                                                       |                                                                                          |                                                                                                                                              |                                                                                                        | of      Securities                                                                                                                          |                                                                                                                       |                                                                                            |
|   |                                       |                                                                                                   |                                                                                                   | Total                                                                                       |   |                                                                                            |                                                                                 | with      Gross                                                                                          |                                                                                          | Gross                                                                                                                                             |                                                                                                        | with      Gross                                                                                                                             |                                                                                                                       | Gross                                                                                           |
|   |                                       |                                                                                                   |                                                                                                   | Fair                                                                                        |   | %                                                                                               |                                                                                 | Unrealized                                                                                               |                                                                                          | Unrealized                                                                                                                                        |                                                                                                        | Unrealized                                                                                                                                  |                                                                                                                       | Unrealized                                                                                      |
|   |                                       |                                                                                                   |                                                                                                   | Value                                                                                       |   | of      Total                                                                                   |                                                                                 | Gains                                                                                                    |                                                                                          | Gains                                                                                                                                             |                                                                                                        | Losses                                                                                                                                      |                                                                                                                       | Losses                                                                                          |
|   | U.S.      Treasury securities and          |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | obligations      of U.S. Government                                                                    |  $           121,937                       |                                                                                        | 5%     |                                                                                            |  $          88,281            |                                                                                                     |  $         4,674                            |                                                                                                                                              |  $            33,656                       |                                                                                                                                        |  $            1,021                                       |
|   | Federal      agencies 1                    |                 28,321 |                                                                                                   | 1%                                                                                          |   |              28,321            |                                                                                 |                681            |                                                                                          |                         - |                                                                                                        |                        - |
|   | Federal      agency issued                 |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | residential      mortgage-backed securities 1                                                          |               172,515            |                                                                                        | 7%     |                                                                                            |            164,961            |                                                                                                     |             7,220                 |                                                                                                                                              |                  7,554 |                                                                                                                                        |                     55 |
|   |                                       |                                                                                                   | Subtotal                                                                                               |               322,773 |   | 13%                                                                                             |                                                                                 |            281,563                                |                                                                                          |           12,575                                                                                |                                                                                                        |                41,210                                            |                                                                                                                       |                1,076 |
|   | Corporate      obligations:                |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | Industrial                                                                                             |               415,946            |                                                                                        | 17%    |                                                                                            |            335,829            |                                                                                                     |           17,773                            |                                                                                                                                              |                80,117            |                                                                                                                                        |                2,602                            |
|   |                                       | Energy                                                                                                 |               200,340            |                                                                                        | 8%     |                                                                                            |            176,126            |                                                                                                     |           10,703                            |                                                                                                                                              |                24,214            |                                                                                                                                        |                1,199                            |
|   |                                       | Technology                                                                                             |                 40,864 |                                                                                        | 2%     |                                                                                            |              29,483 |                                                                                                     |             1,919                 |                                                                                                                                              |                11,381            |                                                                                                                                        |                   413            |
|   |                                       | Communications                                                                                         |                 86,264 |                                                                                        | 4%     |                                                                                            |              63,114 |                                                                                                     |             3,492                 |                                                                                                                                              |                23,150            |                                                                                                                                        |                1,374                            |
|   |                                       | Financial                                                                                              |               364,608            |                                                                                        | 15%    |                                                                                            |            202,958            |                                                                                                     |             9,247                 |                                                                                                                                              |              161,650                       |                                                                                                                                        |              15,818                                       |
|   |                                       | Consumer                                                                                               |               307,506            |                                                                                        | 12%    |                                                                                            |            251,586            |                                                                                                     |           15,210                            |                                                                                                                                              |                55,920            |                                                                                                                                        |                2,436                            |
|   |                                       | Public      utilities                                                                                  |               287,687            |                                                                                        | 12%    |                                                                                            |            233,663            |                                                                                                     |           16,012                            |                                                                                                                                              |                54,024            |                                                                                                                                        |                2,121                            |
|   |                                       |                                                                                                   | Subtotal                                                                                               |            1,703,215                 |   | 70%                                                                                             |                                                                                 |         1,292,759                                                |                                                                                          |           74,356                                                                                |                                                                                                        |              410,456                                                       |                                                                                                                       |              25,963            |
|   | Corporate      private-labeled residential |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |
|   |                                       | mortgage-backed      securities                                                                        |               200,002            |                                                                                        | 8%     |                                                                                            |              22,870 |                                                                                                     |                387 |                                                                                                                                              |              177,132                       |                                                                                                                                        |              42,930                                       |
|   | Other                                      |               229,681            |                                                                                                   | 9%                                                                                          |   |              54,519            |                                                                                 |             4,349                            |                                                                                          |              175,162                                                             |                                                                                                        |              21,677                                                        |
|   | Redeemable      preferred stocks           |                 13,601 |                                                                                                   |            -                         |   |                5,098 |                                                                                 |                  98 |                                                                                          |                  8,503                                       |                                                                                                        |                1,363                                             |
| Total  |                                       |  $        2,469,272                                       |                                                                                                   | 100%                                                                                        |   |  $     1,656,809                                                  |                                                                                 |  $       91,765                                                  |                                                                                          |  $          812,463                                                                        |                                                                                                        |  $          93,009                                                                   |
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                          |                                                                                                                                              |                                                                                                        |                                                                                                                                        |                                                                                                                       |                                                                                            |

|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | Fair      Value                                                                                          |                                                                                                     |                                                                                                                                              |                                                                                             | Fair      Value                                                                                                                             |                                                                                                            |                                                                                            |
|--------|--------------------------------------------|--------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 | of      Securities                                                                                       |                                                                                                     |                                                                                                                                              |                                                                                             | of      Securities                                                                                                                          |                                                                                                            |                                                                                            |
|   |                                       |                                                                                                   |                                                                                                   | Total                                                                                       |   |                                                                                            |                                                                                 | with      Gross                                                                                          |                                                                                                     | Gross                                                                                                                                             |                                                                                             | with      Gross                                                                                                                             |                                                                                                            | Gross                                                                                           |
|   |                                       |                                                                                                   |                                                                                                   | Fair                                                                                        |   | %                                                                                               |                                                                                 | Unrealized                                                                                               |                                                                                                     | Unrealized                                                                                                                                        |                                                                                             | Unrealized                                                                                                                                  |                                                                                                            | Unrealized                                                                                      |
|   |                                       |                                                                                                   |                                                                                                   | Value                                                                                       |   | of      Total                                                                                   |                                                                                 | Gains                                                                                                    |                                                                                                     | Gains                                                                                                                                             |                                                                                             | Losses                                                                                                                                      |                                                                                                            | Losses                                                                                          |
|   | U.S.      Treasury securities and          |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | obligations      of U.S. Government                                                                    |  $             87,056            |                                                                                        | 4%     |                                                                                            |  $          80,252            |                                                                                                     |  $         3,518                                       |                                                                                                                                              |  $              6,804 |                                                                                                                                        |  $               399            |
|   | Federal      agencies 1                    |                 76,209 |                                                                                                   | 3%                                                                                          |   |              76,209            |                                                                                 |             4,074                            |                                                                                                     |                         - |                                                                                             |                        - |
|   | Federal      agency issued                 |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | residential      mortgage-backed securities 1                                                          |               200,485            |                                                                                        | 8%     |                                                                                            |            146,148            |                                                                                                     |             3,407                            |                                                                                                                                              |                54,337 |                                                                                                                                        |                   635 |
|   |                                       |                                                                                                   | Subtotal                                                                                               |               363,750 |   | 15%                                                                                             |                                                                                 |            302,609                                |                                                                                                     |           10,999                                                                                |                                                                                             |                61,141                                            |                                                                                                            |                1,034 |
|   | Corporate      obligations:                |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | Industrial                                                                                             |               368,713            |                                                                                        | 16%    |                                                                                            |            142,876            |                                                                                                     |             6,501                            |                                                                                                                                              |              225,837            |                                                                                                                                        |              27,368                            |
|   |                                       | Energy                                                                                                 |               189,740            |                                                                                        | 8%     |                                                                                            |              68,412 |                                                                                                     |             4,261                            |                                                                                                                                              |              121,328            |                                                                                                                                        |              15,693                            |
|   |                                       | Technology                                                                                             |                 35,317 |                                                                                        | 2%     |                                                                                            |              22,514 |                                                                                                     |             1,109                            |                                                                                                                                              |                12,803 |                                                                                                                                        |                3,056                 |
|   |                                       | Communications                                                                                         |                 66,057 |                                                                                        | 3%     |                                                                                            |              20,498 |                                                                                                     |                699            |                                                                                                                                              |                45,559 |                                                                                                                                        |                7,677                 |
|   |                                       | Financial                                                                                              |               345,564            |                                                                                        | 15%    |                                                                                            |              79,198 |                                                                                                     |             3,430                            |                                                                                                                                              |              266,366            |                                                                                                                                        |              45,793                            |
|   |                                       | Consumer                                                                                               |               279,875            |                                                                                        | 12%    |                                                                                            |              93,269 |                                                                                                     |             4,900                            |                                                                                                                                              |              186,606            |                                                                                                                                        |              27,458                            |
|   |                                       | Public      utilities                                                                                  |               255,624            |                                                                                        | 11%    |                                                                                            |            116,550            |                                                                                                     |             6,013                            |                                                                                                                                              |              139,074            |                                                                                                                                        |              10,918                            |
|   |                                       |                                                                                                   | Subtotal                                                                                               |            1,540,890                 |   | 67%                                                                                             |                                                                                 |            543,317                                |                                                                                                     |           26,913                                                                                |                                                                                             |              997,573                                                       |                                                                                                            |            137,963                       |
|   | Corporate      private-labeled residential |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |
|   |                                       | mortgage-backed      securities                                                                        |               219,700            |                                                                                        | 9%     |                                                                                            |              15,219 |                                                                                                     |                  90 |                                                                                                                                              |              204,481            |                                                                                                                                        |              52,795                            |
|   | Other                                      |               204,500            |                                                                                                   | 9%                                                                                          |   |              20,665            |                                                                                 |                545            |                                                                                                     |              183,835                                                             |                                                                                             |              37,217                                                        |
|   | Redeemable      preferred stocks           |                 21,994 |                                                                                                   |            -                         |   |                8,270 |                                                                                 |                  52 |                                                                                                     |                13,724                                                  |                                                                                             |                2,430                                             |
| Total  |                                       |  $        2,350,834                                       |                                                                                                   | 100%                                                                                        |   |  $        890,080                                  |                                                                                 |  $       38,599                                                  |                                                                                                     |  $       1,460,754                                                                                        |                                                                                             |  $        231,439                                                                              |
|   |                                       |                                                                                                   |                                                                                                   |                                                                                        |   |                                                                                            |                                                                                 |                                                                                                     |                                                                                                     |                                                                                                                                              |                                                                                             |                                                                                                                                        |                                                                                                            |                                                                                            |

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Table of Contents 

|                       | 2009                                                                                              |   | 2008                                                                                              |   | 2007                                                                  |
|----------------------------|---------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------|
|                       |                                                                                              |   |                                                                                              |   |                                                                  |
| Proceeds                   |  $      114,886                                                                              |   |  $   15,407                                                                   |   |  $      181,208                                                  |
| Gross      realized gains  |         9,494                                             |   |                 - |   |            431 |
| Gross      realized losses |                 - |   |         1,115                                             |   |            633 |

|                                        | Amortized                                                          |   | Fair                                                               |
|---------------------------------------------|--------------------------------------------------------------------|--------|--------------------------------------------------------------------|
|                                        | Cost                                                               |   | Value                                                              |
|                                        |                                                               |   |                                                               |
| Due      in one year or less                |  $       88,137            |   |  $       89,563            |
| Due      after one year through five years  |         524,283            |   |         544,819            |
| Due      after five years through ten years |         816,117            |   |         842,457            |
| Due      after ten years                    |         521,780            |   |         505,466            |
| Residential      mortgage-backed securities |         505,333            |   |         473,366            |
| Redeemable      preferred stocks            |           14,866 |   |           13,601 |
|                                        |                                                               |   |                                                               |
|                                        |  $  2,470,516                                       |   |  $  2,469,272                                       |
|                                        |                                                               |   |                                                               |

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Table of Contents 

|                    |                    | 2009                                                                                                                            | 2008                                                                                                    |
|-------------------------|-------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|
|                    |                    | Carrying                                                                                                                        | Carrying                                                                                                |
|                    |                    | Amount                                                                                                                          | Amount                                                                                                  |
| Geographic      region: |                    |                                                                                                                            |
|                    | East      north central |  $        19,783                                                                   |  $    18,236                                                                   |
|                    | Mountain                |            51,965                                                        |        63,257                                                        |
|                    | Pacific                 |          101,648                                                                   |      101,276                                                                   |
|                    | West      south central |          106,625                                                                   |      100,491                                                                   |
|                    | West      north central |          113,997                                                                   |      112,775                                                                   |
|                    | Other                   |            66,974                                                        |        52,764                                                        |
|                    | Valuation      reserve  |            (3,410)                                                       |         (3,410)                                                 |
|                    |                    |  $      457,582                                                                              |  $  445,389                                                                              |
| Property      type:     |                    |                                                                                                                            |
|                    | Industrial              |  $      248,397                                                                              |  $  249,792                                                                              |
|                    | Retail                  |                      - |                  - |
|                    | Office                  |          208,290                                                                   |      197,214                                                                   |
|                    | Other                   |              4,305                                             |          1,793                                             |
|                    | Valuation      reserve  |            (3,410)                                                       |         (3,410)                                                 |
|                    |                    |  $      457,582                                                                              |  $  445,389                                                                              |
|                    |                    |                                                                                                                            |                                                                                                    |

|                             |                                             | 2009                                   |                                             | 2008                                   |
|----------------------------------|--------------------------------------------------|----------------------------------------|--------------------------------------------------|----------------------------------------|
| Land                             |  $    17,370            |                                   |  $    18,382            |
| Buildings                        |        63,704 |                                   |        54,804 |
|                             | Less      accumulated depreciation               |      (21,809) |                                             |      (21,537) |
| Real      estate, commercial     |        59,265 |                                   |        51,649 |
| Real      estate, joint ventures |        54,811 |                                   |        47,927 |
|                             |                                             |  $  114,076             |                                             |  $    99,576  |
|                             |                                             |                                   |                                             |                                   |

----

Table of Contents 

|                                      |                                      | 2009                                            |                                      | 2008                                                      |                                                  | 2007                                                                  |
|-------------------------------------------|-------------------------------------------|-------------------------------------------------|-------------------------------------------|-----------------------------------------------------------|-------------------------------------------------------|-----------------------------------------------------------------------|
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Gross      liability at beginning of year |  $   7,006            |                                            |  $   7,089            |                                                      |  $     7,391            |
| Less      reinsurance recoverable         |     (3,495)           |                                            |     (3,826)           |                                                      |        (3,829)     |
| Net      liability at beginning of year   |       3,511 |                                            |       3,263 |                                                      |         3,562 |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Incurred      benefits related to:        |                                      |                                            |                                      |                                                      |                                                  |
|                                      | Current      year                         |     27,602                  |                                      |     26,411                            |                                                  |       23,852                            |
|                                      | Prior      years 1                        |        (448) |                                      |          271 |                                                  |            180 |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Total      incurred benefits              |     27,154            |                                            |     26,682            |                                                      |       24,032            |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Paid      benefits related to:            |                                      |                                            |                                      |                                                      |                                                  |
|                                      | Current      year                         |     23,764                  |                                      |     23,178                            |                                                  |       20,824                            |
|                                      | Prior      years                          |       3,008       |                                      |       3,256                 |                                                  |         3,507                 |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Total      paid benefits                  |     26,772            |                                            |     26,434            |                                                      |       24,331            |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Net      liability at end of year         |       3,893 |                                            |       3,511 |                                                      |         3,263 |
| Reinsurance      recoverable              |       4,774 |                                            |       3,495 |                                                      |         3,826 |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |
| Gross      liability at end of year       |  $   8,667            |                                            |  $   7,006            |                                                      |  $     7,089            |
|                                      |                                      |                                            |                                      |                                                      |                                                  |                                                                  |

|                                                                 |                                                                            | 2009                                                           |   | 2008                           |
|----------------------------------------------------------------------|---------------------------------------------------------------------------------|----------------------------------------------------------------|--------|--------------------------------|
| Federal      Home Loan Bank (FHLB) loans with various maturities and |                                                                            |                                                           |   |
|                                                                 | a      weighted average interest rate, no borrowings at December 31,      2009, |                                                           |   |                           |
|                                                                 | (0.95%      at December 31, 2008), secured by mortgage-backed    securities     |                                                           |   |                           |
|                                                                 | totaling      $64.0 million ($102.2 million at December 31, 2008)               |  $         - |   |  $   2,900 |
|                                                                 |                                                                            |  $         - |   |  $   2,900 |
|                                                                 |                                                                            |                                                           |   |                           |

----

Table of Contents 

|                          | 2009                                       |   | 2008                                   |   | 2007                                       |
|-------------------------------|--------------------------------------------|--------|----------------------------------------|--------|--------------------------------------------|
|                          |                                       |   |                                   |   |                                       |
| Net      gain from operations |  $   24,979            |   |  $   27,301        |   |  $   50,141            |
|                          |                                       |   |                                   |   |                                       |
| Net      income (loss)        |       19,455 |   |      (20,114) |   |       47,718 |
|                          |                                       |   |                                   |   |                                       |
| Unassigned      surplus       |     415,575            |   |     398,941        |   |     433,253            |
|                          |                                       |   |                                   |   |                                       |
| Capital      and surplus      |     336,615            |   |     306,247        |   |     357,332            |

|                                       | 2009                                                                                                          |    | 2008                                                                                                                |    | 2007                                                                                                                |    |
|--------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------------|---------|
|                                       |                                                                                                          |    |                                                                                                                |    |                                                                                                                |    |
| Current      income tax expense (benefit)  |  $           476                                  |    |  $       (1,386)                                                            |    |  $      20,875                                                                   |    |
| Deferred      income tax expense (benefit) |            5,244                                       |    |           (7,778)                                                 |    |          (3,625)                                                       |    |
| Total      income tax expense (benefit)    |  $        5,720                                                  |    |  $       (9,164)                                                            |    |  $      17,250                                                                   |    |
|                                       |                                                                                                          |    |                                                                                                                |    |                                                                                                                |    |
|                                       |                                                                                                          |    |                                                                                                                |    |                                                                                                                |    |
|                                       | 2009                                                                                                          |    | 2008                                                                                                                |    | 2007                                                                                                                |    |
|                                       |                                                                                                          |    |                                                                                                                |    |                                                                                                                |    |
| Federal      income tax rate               |                 35            |  % |                 35                  |  % |                 35                  |  % |
| Tax      credits net of equity adjustment  |                   6 |    |                    - |    |                 (4)                 |    |
| Permanent      differences                 |                  (3)     |    |                   1       |    |                    - |    |
| Prior      year taxes                      |                  (3)     |    |                  (1)           |    |                   2       |    |
| Effective      income tax rate             |                 35            |  % |                 35                  |  % |                 33                  |  % |
|                                       |                                                                                                          |    |                                                                                                                |    |                                                                                                                |    |

----

Table of Contents 

|                                   |                                             |                                                                                              | 2009                                                                                              |                                                                                              | 2008                                                                                              |
|----------------------------------------|--------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
| Deferred      tax assets:              |                                             |                                                                                              |                                                                                              |
|                                   | Future      policy benefits                      |  $    41,248                                                             |                                                                                              |  $    39,198                                                             |
|                                   | Basis      differences between tax and           |                                                                                              |                                                                                              |                                                                                              |
|                                   |                                             | GAAP      accounting for investments                                                              |                 - |                                                                                              |          5,041                                       |
|                                   | Unrealized      investment losses                |                 - |                                                                                              |        67,240                                                  |
|                                   | Employee      retirement benefits                |        26,154                                                  |                                                                                              |        30,878                                                  |
|                                   | Tax      carryovers                              |             938                       |                                                                                              |               66            |
| Gross      and net deferred tax assets |        68,340 |                                                                                              |      142,423                                                             |
|                                   |                                             |                                                                                              |                                                                                              |                                                                                              |                                                                                              |
| Deferred      tax liabilities:         |                                             |                                                                                              |                                                                                              |
|                                   | Basis      differences between tax and           |                                                                                              |                                                                                              |                                                                                              |
|                                   |                                             | GAAP      accounting for investments                                                              |          7,782                                       |                                                                                              |                 - |
|                                   | Unrealized      investment gains                 |               79            |                                                                                              |                 - |
|                                   | Capitalization      of deferred acquisition      |                                                                                              |                                                                                              |                                                                                              |
|                                   |                                             | costs,      net of amortization                                                                   |        37,902                                                  |                                                                                              |        56,902                                                  |
|                                   | Value      of business acquired                  |        23,140                                                  |                                                                                              |        28,999                                                  |
|                                   | Property      and equipment, net                 |          7,290                                       |                                                                                              |          8,072                                       |
|                                   | Other                                            |        13,998                                                  |                                                                                              |          9,747                                       |
| Gross      deferred tax liabilities    |        90,191 |                                                                                              |      103,720                                                             |
|                                   | Net      deferred tax (asset)/liability          |        21,851                                                  |                                                                                              |      (38,703)                                                            |
|                                   | Current      tax (receivable)/liability          |        (8,784)                                                 |                                                                                              |           (925)                                 |
| Income      taxes (receivable)/payable |  $    13,067            |                                                                                              |  $  (39,628)                                                                       |
|                                   |                                             |                                                                                              |                                                                                              |                                                                                              |                                                                                              |

|                                                                    | 2009                                                                                   |   | 2008                                                                        |
|-------------------------------------------------------------------------|----------------------------------------------------------------------------------------|--------|-----------------------------------------------------------------------------|
|                                                                    |                                                                                   |   |                                                                        |
|  Beginning      of year                                            |  $      6,268                                       |   |  $      5,432                            |
|                                                                    |                                                                                   |   |                                                                        |
|  Additions      based on tax positions related to the current year |             720            |   |             553 |
|  Additions      for tax positions of prior years                   |               56 |   |             567 |
|  Reductions      for tax positions of prior years                  |           (294)                      |   |            (165)     |
|  Reductions      for statute of limitations lapse                  |           (114)                      |   |            (119)     |
|                                                                    |                                                                                   |   |                                                                        |
|  End      of year                                                  |  $      6,636                                       |   |  $      6,268                            |
|                                                                    |                                                                                   |   |                                                                        |

----

Table of Contents 

|                                    |                                                         |                                              |                                                         | 2009                                                                    |                                               | 2008                                               |                                                                    | 2007                                                                          |
|-----------------------------------------|--------------------------------------------------------------|---------------------------------------------------|--------------------------------------------------------------|-------------------------------------------------------------------------|----------------------------------------------------|----------------------------------------------------|-------------------------------------------------------------------------|-------------------------------------------------------------------------------|
| Income      tax expense (benefit)       |  $        5,720 |                                              |  $      (9,164)           |                                                                    |  $      17,250  |
| Stockholders'      equity:              |                                                         |                                              |                                                         |                                                                    |                                               |
|                                    | Related      to:                                             |                                              |                                                         |                                                                    |                                               |                                               |
|                                    |                                                         | Unrealized      gains (losses), net               |          49,274 |                                                                    |        (48,419) |                                               |            3,444 |
|                                    |                                                         | Change      in benefit                            |                                                         |                                                                    |                                               |                                               |                                                                    |
|                                    |                                                         |                                              | plan      obligations                                        |            6,037 |                                               |        (11,343) |                                                                    |             (587) |
| Total      income tax expense (benefit) |                                                         |                                              |                                                         |                                                                    |                                               |
|                                    | included      in financial statements                        |  $      61,031 |                                                         |  $    (68,926)                                 |                                               |  $      20,107  |
|                                    |                                                         |                                              |                                                         |                                                                    |                                               |                                               |                                                                    |                                                                          |

|                   |   | Plan      Assets |   | Target |
|------------------------|--------|------------------|--------|--------|
|                   |   | 2009             |   | 2008   |   | Allocation |
|                   |   |             |   |   |   |   |   |   |
| Debt      securities   |   | 39%              |   | 33%    |   | 26% | - | 32% |
| Equity      securities |   | 60%              |   | 61%    |   | 56% | - | 76% |
| Cash      equivalents  |   | 1%               |   | 6%     |   | 0% | - | 2% |

----

Table of Contents 

----

Table of Contents 

|                                               |                                                |                                                                                                          | Pension      Benefits                       |                                                                                   | Other      Benefits                   |
|----------------------------------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------|----------------------------------------------------------------------------------------|---------------------------------------|
|                                               |                                                |                                                                                                          | 2009                                        |                                                                                   | 2008                                  |   | 2009 |   | 2008 |
|                                               |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |   |
| Change      in projected benefit obligation:       |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |
|                                               | Benefit      obligation at beginning of year        |  $   137,492                                                                              |                                        |  $  142,375                                                             |                                  |  $    29,738 |   |  $    27,724 |
|                                               | Service      cost                                   |           2,059                                             |                                        |          2,405                            |                                  |             730 |   |             821 |
|                                               | Interest      cost                                  |           7,922                                             |                                        |          7,662                            |                                  |          1,590 |   |          1,599 |
|                                               | Plan      amendments                                |                   - |                                        |               15 |                                  |                  - |   |          1,588 |
|                                               | Actuarial      (gain) loss                          |           2,044                                             |                                        |        (5,145)                                      |                                  |        (3,309) |   |        (1,183) |
|                                               | Benefits      paid                                  |        (12,831)                                                            |                                        |        (9,820)                                      |                                  |           (736) |   |           (811) |
|                                               |                                                | Benefit      obligation at end of year                                                                        |  $   136,686            |                                                                                   |  $  137,492            |   |  $    28,013 |   |  $    29,738 |
|                                               |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |   |
| Change      in plan assets:                        |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |
|                                               | Fair      value of plan assets at beginning of year |  $     94,832                                                                   |                                        |  $  127,395                                                             |                                  |  $         836 |   |  $         921 |
|                                               | Return      on plan assets                          |         19,865                                                        |                                        |      (28,824)                                                 |                                  |               38 |   |               47 |
|                                               | Company      contributions                          |           6,080                                             |                                        |          6,081                            |                                  |                  - |   |                  - |
|                                               | Benefits      paid                                  |        (12,831)                                                            |                                        |        (9,820)                                      |                                  |           (256) |   |           (132) |
|                                               |                                                | Fair      value of plan assets at end of year                                                                 |  $   107,946            |                                                                                   |  $    94,832 |   |  $         618 |   |  $         836 |
|                                               |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |   |
| Current      and noncurrent liabilities recognized |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |
|                                               |  in      the Consolidated Balance Sheets:      |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |
|                                               | Current      liabilities                            |  $            75                             |                                        |  $            -       |                                  |  $      1,197 |   |  $      1,030 |
|                                               | Noncurrent      liabilities                         |         28,665                                                        |                                        |        42,660                                       |                                  |        26,198 |   |        27,872 |
|                                               |                                                | Funded      status at end of year                                                                             |  $     28,740 |                                                                                   |  $    42,660 |   |  $    27,395 |   |  $    28,902 |
|                                               |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |   |
| Amounts      recognized in accumulated other       |                                                |                                                                                                          |                                        |                                                                                   |                                  |   |   |
|                                               | comprehensive      loss:                            |                                                                                                          |                                        |                                                                                   |                                  |   |   |   |
|                                               | Net      loss                                       |  $     57,614                                                                   |                                        |  $    72,640                                                  |                                  |  $      1,390 |   |  $      4,708 |
|                                               | Prior      service cost                             | (602)                                                                                                         |                                        | (1,308)                                                                                |                                  | (1,001) |   | (1,390) |
|                                               |                                                | Total      accumulated other comprehensive loss                                                               |  $     57,012 |                                                                                   |  $    71,332 |   |  $         389 |   |  $      3,318 |
|                                               |                                                |                                                                                 |                                        |                                                                                   |                                  |   |   |   |   |

| Other      changes in plan assets and benefit obligations                                                  | Pension                                                                               |   | Other                                                                            |
|------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------|
|     recognized      in other comprehensive income (loss):                              | 2009                                                                                  |   | 2008                                                                             |   | 2009 |   | 2008 |
|         Unrecognized      actuarial loss                           |  $  (10,432)                                                           |   |  $   33,665                                                  |   |  $   (3,307) |   |  $   (1,179) |
|         Unrecognized      prior service cost                       |               - |   |              15 |   |               - |   |         1,588 |
|         Amortization      of net gain                              |        (4,594)                                     |   |        (2,375)                                |   |            (11) |   |          (172) |
|         Amortization      of prior service cost                    |             706           |   |            646            |   |            389 |   |            222 |
|         Total      recognized in other comprehensive income (loss) |  $  (14,320)                                                           |   |  $   31,951                                                  |   |  $   (2,929) |   |  $        459 |
|                                                                                                       |                                                                                  |   |                                                                             |   |   |   |   |

----

Table of Contents 

|                                    |                                |                                   | Pension      Benefits |                                       | Other      Benefits |
|-----------------------------------------|-------------------------------------|----------------------------------------|-----------------------|--------------------------------------------|---------------------|
|                                    |                                |                                   | 2009                  |                                       | 2008                |   | 2009 |   | 2008 |
| Plans      with underfunded accumulated |                                |                                   |                  |                                       |                |   |   |
|                                    |                                | benefit      obligation:               |                  |                                       |                |   |   |   |   |
|                                    | Projected      benefit obligation   |  $      136,686                   |                  |  $      137,492                       |                |  n/a |   |  n/a |
|                                    | Accumulated      benefit obligation |     132,070        |                  |     131,595            |                |  n/a |   |  n/a |
|                                    | Fair      value of plan assets      |     107,946        |                  |       94,832 |                |  n/a |   |  n/a |
|                                    |                                |                                   |                  |                                       |                |   |   |   |   |
| Weighted      average assumptions used  |                                |                                   |                  |                                       |                |   |   |
|                                    |                                | to      determine benefit obligations  |                  |                                       |                |   |   |   |   |
|                                    |                                | at      December 31:                   |                  |                                       |                |   |   |   |   |
|                                    | Discount      rate                  | 6.00%                                  |                  | 6.00%                                      |                | 6.01% |   | 5.75% |
|                                    | Expected      return on plan assets | 8.00%                                  |                  | 8.00%                                      |                | 5.50% |   | 5.50% |
|                                    | Rate      of compensation increase  | 3.38%                                  |                  | 3.75%                                      |                |            - |   |            - |
|                                    |                                |                                   |                  |                                       |                |   |   |   |   |
| Weighted      average assumptions used  |                                |                                   |                  |                                       |                |   |   |
|                                    |                                | to      determine net periodic benefit |                  |                                       |                |   |   |   |   |
|                                    |                                | cost      for years ended December 31: |                  |                                       |                |   |   |   |   |
|                                    | Discount      rate                  | 6.00%                                  |                  | 5.50%                                      |                | 5.75% |   | 5.75% |
|                                    | Expected      return on plan assets | 8.00%                                  |                  | 8.00%                                      |                | 5.50% |   | 5.50% |
|                                    | Rate      of compensation increase  | 3.38%                                  |                  | 3.75%                                      |                |            - |   |            - |

|                                                                                          | Pension      Plan                                                                                                                                  |   | Other      Benefits                                                                                                                          |
|-----------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| Assets,      at fair value:                                                                   | 2009                                                                                                                                               |   | 2008                                                                                                                                         |   | 2009 |   | 2008 |
|    Cash      and cash equivqalents                                             |  $                     89            |   |  $                  120                       |   |              618 |   |              836 |
|    Common      stocks                                                          |                    4,614                            |   |                   3,469                            |   |                   - |   |                   - |
|    Investment      funds                                                       |                                                                                                                                               |   |                                                                                                                                         |   |   |   |   |
|         Stock      and bond funds                     |                  65,355                                       |   |                 50,096                                       |   |                   - |   |                   - |
|         Money      market funds                       |                         76 |   |                   5,005                            |   |                   - |   |                   - |
|         Hedge      funds                              |                  16,346                                       |   |                 14,507                                       |   |                   - |   |                   - |
|    Debt      securities                                                        |                                                                                                                                               |   |                                                                                                                                         |   |   |   |   |
|         United      States Government fixed           |                                                                                                                                               |   |                                                                                                                                         |   |   |   |   |
| maturity      securities                                                                      |                       765            |   |                   3,864                            |   |                   - |   |                   - |
|         Industrial      fixed maturity securities     |                  18,488                                       |   |                 16,016                                       |   |                   - |   |                   - |
|         Public      utility fixed maturity securities |                    1,856                            |   |                   1,282                            |   |                   - |   |                   - |
|    Mineral      rights                                                         |                         71 |   |                      168            |   |                   - |   |                   - |
|    Real      estate                                                            |                         19 |   |                        19 |   |                   - |   |                   - |
|    Other                                                                       |                       267            |   |                      286            |   |                   - |   |                   - |
|         Fair      value of assets at end of year      |  $            107,946                                                             |   |  $             94,832                                                  |   |  $          618 |   |  $          836 |
|                                                                                          |                                                                                                                                               |   |                                                                                                                                         |   |   |   |   |

----

Table of Contents 

| Assets,      at fair value as of December 31, 2009                                                      | Pension      Plan                                                                     |
|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                                                                    | Level      1                                                                          |   | Level      2 |   | Level      3 |   | Total |
|    Common      stocks                                                                    |  $    4,614                                                  |   |  $              - |   |  $           - |   |  $       4,614 |
|    Investment      funds                                                                 |                                                                                  |   |   |   |   |   |   |
|         Stock      and bond funds                               |               - |   |         65,355 |   |               - |   |         65,355 |
|         Money      market funds                                 |             76            |   |                  - |   |               - |   |                76 |
|         Hedge      funds                                        |               - |   |         16,346 |   |               - |   |         16,346 |
|    Debt      securities                                                                  |                                                                                  |   |   |   |   |   |   |
|         United      States Government fixed maturity securities |               - |   |              765 |   |               - |   |              765 |
|         Industrial      fixed maturity securities               |               - |   |         18,378 |   |           110 |   |         18,488 |
|         Public      utility fixed maturity securities           |               - |   |           1,856 |   |               - |   |           1,856 |
|    Other      assets                                                                     |           356                       |   |                  - |   |             90 |   |              446 |
|         Total                                                   |  $    5,046                                                  |   |  $   102,700 |   |  $       200 |   |  $   107,946 |
|                                                                                                    |                                                                                  |   |   |   |   |   |   |
|                                                                                                    | Other      Benefits                                                                   |
|                                                                                                    | Level      1                                                                          |   | Level      2 |   | Level      3 |   | Total |
|    Cash      and cash equivqalents                                                       |           618                       |   |                  - |   |               - |   |              618 |
|         Total                                                   |  $       618                                  |   |  $              - |   |  $           - |   |  $          618 |
|                                                                                                    |                                                                                  |   |   |   |   |   |   |

| Assets,      at fair value as of December 31, 2008                                                      | Pension      Plan                                                                     |
|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                                                                    | Level      1                                                                          |   | Level      2 |   | Level      3 |   | Total |
|    Common      stocks                                                                    |  $    3,469                                                  |   |  $              - |   |  $         - |   |  $       3,469 |
|    Investment      funds                                                                 |                                                                                  |   |   |   |   |   |   |
|         Stock      and bond funds                               |               - |   |         50,096 |   |               - |   |         50,096 |
|         Money      market funds                                 |        5,005                                       |   |                  - |   |               - |   |           5,005 |
|         Hedge      funds                                        |               - |   |         14,507 |   |               - |   |         14,507 |
|    Debt      securities                                                                  |                                                                                  |   |   |   |   |   |   |
|         United      States Government fixed maturity securities |               - |   |           3,864 |   |               - |   |           3,864 |
|         Industrial      fixed maturity securities               |               - |   |         14,990 |   |        1,026 |   |         16,016 |
|         Public      utility fixed maturity securities           |               - |   |           1,282 |   |               - |   |           1,282 |
|    Other      assets                                                                     |           406                       |   |                  - |   |           187 |   |              593 |
|         Total                                                   |  $    8,880                                                  |   |  $     84,739 |   |  $    1,213 |   |  $     94,832 |
|                                                                                                    |                                                                                  |   |   |   |   |   |   |
|                                                                                                    | Other      Benefits                                                                   |
|                                                                                                    | Level      1                                                                          |   | Level      2 |   | Level      3 |   | Total |
|    Cash      and cash equivqalents                                                       |           836                       |   |                  - |   |               - |   |              836 |
|         Total                                                   |  $       836                                  |   |  $              - |   |  $           - |   |  $          836 |
|                                                                                               |                                                                                  |   |   |   |   |   |   |

----

Table of Contents 

|                                                                        | Pension      Plan                                                                           |   | Other      Benefits                                                                         |
|-----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------|
| Plan      assets:                                                           | 2009                                                                                        |   | 2008                                                                                        |   | 2009 |   | 2008 |
|        Balance,      beginning of period |  $    1,213                                                        |   |  $       268                                        |   |  $            - |   |  $            - |
|    Gains      or losses (realized and unrealized)            |            (92)                      |   |          (253)                                 |   |                - |   |                - |
|    Transfers      in - level 3                               |                - |   |        1,198                                             |   |                - |   |                - |
|    Transfers      out - level 3                              |          (921)                                 |   |                - |   |                - |   |                - |
|        Balance,      end of period       |  $       200                                        |   |  $    1,213                                                        |   |  $            - |   |  $            - |
|                                                                        |                                                                                        |   |                                                                                        |   |   |   |   |

|                                                       |                                                  |                                                  | Pension      Benefits                                             |                                                  | Other      Benefits                                               |
|------------------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------------------|-------------------------------------------------------|-------------------------------------------------------------------|
|                                                       |                                                  |                                                  | 2009                                                              |                                                  | 2008                                                              |   | 2007 |   | 2009 |   | 2008 |   | 2007 |
| Service      cost                                          |  $     2,059            |                                                  |  $     2,405                        |                                                  |  $     2,310                        |   |  $      731 |   |  $      821 |   |  $      789 |
| Interest      cost                                         |         7,922 |                                                  |         7,662             |                                                  |         7,448             |   |       1,590 |   |       1,599 |   |       1,423 |
| Expected      return on plan assets                        |        (7,389)     |                                                  |        (9,986)                 |                                                  |        (9,456)                 |   |          (41) |   |          (51) |   |          (53) |
| Amortization      of:                                      |                                                  |                                                  |                                                              |                                                  |                                                              |   |   |   |   |   |   |
|                                                       |                                                  | Unrecognized      actuarial loss                      |         4,594             |                                                  |         2,375             |   |         2,303 |   |            11 |   |          172 |   |          176 |
|                                                       |                                                  | Unrecognized      prior service cost                  |           (706) |                                                  |           (646) |   |           (647) |   |        (389) |   |        (222) |   |        (378) |
|                                                       | Net      periodic benefit cost                        |         6,480 |                                                              |         1,810 |                                                              |         1,958 |   |       1,902 |   |       2,319 |   |       1,957 |
| Total      recognized in other comprehensive income (loss) |      (14,320)                |                                                  |       31,951                        |                                                  |           (528) |   |     (2,929) |   |          459 |   |       2,204 |
| Total      recognized in net periodic benefit cost and     |                                                  |                                                  |                                                              |                                                  |                                                              |   |   |   |   |   |   |
|                                                       |                                                  | other      comprehensive income (loss)                |  $    (7,840)                            |                                                  |  $   33,761                                   |   |  $     1,430 |   |  $      (1,027) |   |  $   2,778 |   |  $   4,161 |
|                                                       |                                                  |                                                  |                                                              |                                                  |                                                              |   |   |   |   |   |   |   |   |

|                                      | One      Percentage Point                                  |
|-------------------------------------------|------------------------------------------------------------|
|                                      | Change      in the Growth Rate                             |
|                                      | Increase                                                   |   | Decrease |
|                                      |                                                       |   |   |
| Service      and interest cost components |  $        465 |   |  $         (383) |
| Postretirement      benefit obligation    |         4,670      |   |          (3,828) |

|  Defined     |   |                      |   |               |
|-------------------|--------|---------------------------|--------|--------------------|
|  Measurement |   |  Number              |   |  Grant        |
|  Period      |   |  of      Units       |   |  Price        |
|  2007-2009   |   |    179,488 |   |  $      52.10 |
|  2008-2010   |   |    178,133 |   |  $      44.33 |
|  2009-2011   |   |    170,419 |   |  $      44.93 |
|  2010-2012   |   |    223,969 |   |  $      30.04 |

----

Table of Contents 

----

Table of Contents 

|                                                    |                                                                                                                             |                                                                                       | Individual                                                                                                                      | Group                                                                                                                           |                                                                                                                            | Old                                                                            |                                                                                                   | Intercompany                                                                                                                    |
|---------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
|                                                    |                                                                                                                             |                                                                                       | Insurance                                                                                                                       | Insurance                                                                                                                       | American                                                                                                                        | Eliminations      1                                                            |                                                                                                                            | Total                                                                                                                           |
| 2009:                                                   |                                                                                                                             |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |
| Insurance      revenues (customer revenues)             |  $         132,087                                                             |                                                                                       |  $         47,862                                                             |                                                                                                                            |  $         62,261                                                             |                                                                           |  $            (546)                                            |                                                                                                                            |  $        241,664 |
| Net      investment income                              |             164,133                                                  |                                                                                       |                  554                       |                                                                                                                            |             12,741                                                  |                                                                           |                      - |                                                                                                                            |            177,428 |
| Realized      investment losses                         |               (8,221)                                      |                                                                                       |                      - |                                                                                                                            |             (1,855)                                                 |                                                                           |                      - |                                                                                                                            |             (10,076) |
| Other      revenues                                     |               10,323                                       |                                                                                       |                  255                       |                                                                                                                            |                      1 |                                                                           |                      - |                                                                                                                            |              10,579 |
|                                                    |                                                                                                                             | Total      revenues                                                                        |             298,322                                                 |                                                                                                                            |             48,671                                                  |                                                                           |             73,148                                                  |                                                                                                                            |                (546) |   |            419,595 |
|                                                    |                                                                                                                             |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Policyholder      benefits                              |             102,480                                                  |                                                                                       |             33,799                                                  |                                                                                                                            |             42,692                                                  |                                                                           |                      - |                                                                                                                            |            178,971 |
| Interest      credited to policyholder account balances |               86,713                                       |                                                                                       |                      - |                                                                                                                            |                      - |                                                                           |                      - |                                                                                                                            |              86,713 |
| Amortization      of deferred acquisition costs         |                                                                                                                             |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |
|                                                    | and      value of business acquired                                                                                              |               25,961 |                                                                                                                            |                      - |                                                                                                                            |             13,693 |                                                                                                                            |                      - |   |              39,654 |
| Operating      expenses                                 |               65,969                                       |                                                                                       |             18,449                                                  |                                                                                                                            |             13,933                                                  |                                                                           |                (546)                                 |                                                                                                                            |              97,805 |
|                                                    |                                                                                                                             | Total      benefits and expenses                                                           |             281,123                                                 |                                                                                                                            |             52,248                                                  |                                                                           |             70,318                                                  |                                                                                                                            |                (546) |   |            403,143 |
|                                                    |                                                                                                                             |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Income      (loss) before income tax expense (benefit)  |               17,199                                       |                                                                                       |             (3,577)                                                 |                                                                                                                            |               2,830                                       |                                                                           |                      - |                                                                                                                            |              16,452 |
| Income      tax expense (benefit)                       |                 5,981                            |                                                                                       |             (1,252)                                                 |                                                                                                                            |                  991                       |                                                                           |                      - |                                                                                                                            |                5,720 |
| Segment      net income (loss)                          |  $           11,218                                                  |                                                                                       |  $         (2,325)                                                            |                                                                                                                            |  $           1,839                                                  |                                                                           |  $                -                        |                                                                                                                            |  $          10,732 |
|                                                    |                                                                                                                             |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Segment      assets                                     |  $      3,808,909                                                                             |                                                                                       |  $           9,949                                                  |                                                                                                                            |  $       357,327                                                                        |                                                                           |  $                  -            |                                                                                                                            |  $     4,176,185 |
| Interest      expense                                   |  $                    - |                                                                                       |  $                  -            |                                                                                                                            |  $                  4            |                                                                           |  $                  -            |                                                                                                                            |  $                   4 |

| 2008:                                                   |                                                                                                       |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |                                                                                            |
|---------------------------------------------------------|------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|
| Insurance      revenues (customer revenues)             |  $         126,480                                       |                                                                                       |  $         48,763                                                             |                                                                                                                            |  $         61,517                                                             |                                                                           |  $            (587)                                            |                                                                                                                            |  $        236,173                                  |
| Net      investment income                              |             164,243                            |                                                                                       |                  525                       |                                                                                                                            |             12,651                                                  |                                                                           |                      - |                                                                                                                            |            177,419                       |
| Realized      investment losses                         |             (49,987)                           |                                                                                       |                      - |                                                                                                                            |             (2,284)                                                 |                                                                           |                      - |                                                                                                                            |             (52,271)                |
| Other      revenues                                     |               12,734                 |                                                                                       |                  268                       |                                                                                                                            |                      3 |                                                                           |                      - |                                                                                                                            |              13,005            |
|                                                    |                                                                                                       | Total      revenues                                                                        |             253,470                                                 |                                                                                                                            |             49,556                                                  |                                                                           |             71,887                                                  |                                                                                                                            |                (587) |   |            374,326 |
|                                                    |                                                                                                       |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |                                                                                            |   |   |
| Policyholder      benefits                              |             101,275                            |                                                                                       |             32,956                                                  |                                                                                                                            |             44,518                                                  |                                                                           |                      - |                                                                                                                            |            178,749                       |
| Interest      credited to policyholder account balances |               86,899                 |                                                                                       |                      - |                                                                                                                            |                      - |                                                                           |                      - |                                                                                                                            |              86,899            |
| Amortization      of deferred acquisition costs         |                                                                                                       |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |
|                                                    | and      value of business acquired                                                                        |               28,875 |                                                                                                                            |                      - |                                                                                                                            |             13,209 |                                                                                                                            |                      - |                                                                                            |              42,084 |
| Operating      expenses                                 |               61,070                 |                                                                                       |             18,950                                                  |                                                                                                                            |             13,375                                                  |                                                                           |                (587)                                 |                                                                                                                            |              92,808            |
|                                                    |                                                                                                       | Total      benefits and expenses                                                           |             278,119                                                 |                                                                                                                            |             51,906                                                  |                                                                           |             71,102                                                  |                                                                                                                            |                (587) |   |            400,540 |
|                                                    |                                                                                                       |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |                                                                                            |   |   |
| Income      (loss) before income tax expense (benefit)  |             (24,649)                           |                                                                                       |             (2,350)                                                 |                                                                                                                            |                  785                       |                                                                           |                      - |                                                                                                                            |             (26,214)                |
| Income      tax expense (benefit)                       |               (8,724)                |                                                                                       |                (845)                                 |                                                                                                                            |                  405                       |                                                                           |                      - |                                                                                                                            |               (9,164)     |
| Segment      net income (loss)                          |  $         (15,925)                                      |                                                                                       |  $         (1,505)                                                            |                                                                                                                            |  $              380                                  |                                                                           |  $                -                        |                                                                                                                            |  $         (17,050)                           |
|                                                    |                                                                                                       |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |                                                                                            |   |   |
| Segment      assets                                     |  $      3,618,510                                                       |                                                                                       |  $           8,780                                                  |                                                                                                                            |  $       339,801                                                                        |                                                                           |  $                  -            |                                                                                                                            |  $     3,967,091                                                  |
| Interest      expense                                   |  $                928 |                                                                                       |  $                  -            |                                                                                                                            |  $              118                                  |                                                                           |  $                  -            |                                                                                                                            |  $            1,046            |

----

Table of Contents 

|                                                    |                                                                                                  |                                                                                       | Individual                                                                                                                      | Group                                                                                                                           |                                                                                                                            | Old                                                                            |                                                                                                                            | Intercompany                                                                                                                    |
|---------------------------------------------------------|-------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|
| 2007:                                                   | Insurance                                                                                             | Insurance                                                                                  | American                                                                                                                        | Eliminations      1                                                                                                             |                                                                                                                            | Total                                                                          |
| Insurance      revenues (customer revenues)             |  $         124,190                                  |                                                                                       |  $         45,776                                                             |                                                                                                                            |  $         62,479                                                             |                                                                           |  $            (551)                                            |                                                                                                                            |  $        231,894 |
| Net      investment income                              |             176,666                       |                                                                                       |                  426                       |                                                                                                                            |             13,313                                                  |                                                                           |                      - |                                                                                                                            |            190,405 |
| Realized      investment gains (losses)                 |                 5,820 |                                                                                       |                      - |                                                                                                                            |                (394)                                 |                                                                           |                      - |                                                                                                                            |                5,426 |
| Other      revenues                                     |               11,214            |                                                                                       |                  278                       |                                                                                                                            |                      7 |                                                                           |                    -             |                                                                                                                            |              11,499 |
|                                                    |                                                                                                  | Total      revenues                                                                        |             317,890                                                 |                                                                                                                            |             46,480                                                  |                                                                           |             75,405                                                  |                                                                                                                            |                (551) |   |            439,224 |
|                                                    |                                                                                                  |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Policyholder      benefits                              |               93,200            |                                                                                       |             30,061                                                  |                                                                                                                            |             43,197                                                  |                                                                           |                      - |                                                                                                                            |            166,458 |
| Interest      credited to policyholder account balances |               91,215            |                                                                                       |                      - |                                                                                                                            |                      - |                                                                           |                      - |                                                                                                                            |              91,215 |
| Amortization      of deferred acquisition costs         |                                                                                                  |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |
|                                                    | and      value of business acquired                                                                   |               27,568 |                                                                                                                            |                      - |                                                                                                                            |             12,765 |                                                                                                                            |                      - |   |              40,333 |
| Operating      expenses                                 |               55,283            |                                                                                       |             19,309                                                  |                                                                                                                            |             14,266                                                  |                                                                           |                (551)                                 |                                                                                                                            |              88,307 |
|                                                    |                                                                                                  | Total      benefits and expenses                                                           |             267,266                                                 |                                                                                                                            |             49,370                                                  |                                                                           |             70,228                                                  |                                                                                                                            |                (551) |   |            386,313 |
|                                                    |                                                                                                  |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Income      (loss) before income tax expense (benefit)  |               50,624            |                                                                                       |             (2,890)                                                 |                                                                                                                            |               5,177                                       |                                                                           |                      - |                                                                                                                            |              52,911 |
| Income      tax expense (benefit)                       |               15,822            |                                                                                       |                (867)                                 |                                                                                                                            |               2,295                                       |                                                                           |                      - |                                                                                                                            |              17,250 |
| Segment      net income (loss)                          |  $           34,802                       |                                                                                       |  $         (2,023)                                                            |                                                                                                                            |  $           2,882                                                  |                                                                           |  $                -                        |                                                                                                                            |  $          35,661 |
|                                                    |                                                                                                  |                                                                                       |                                                                                                                            |                                                                                                                            |                                                                                                                            |                                                                           |                                                                                                                            |                                                                                                                            |   |   |   |
| Segment      assets                                     |  $      3,977,585                                                  |                                                                                       |  $           8,410                                                  |                                                                                                                            |  $       366,113                                                                        |                                                                           |  $                  -            |                                                                                                                            |  $     4,352,108 |
| Interest      expense                                   |  $             1,364            |                                                                                       |  $                  -            |                                                                                                                            |  $              264                                  |                                                                           |  $                  -            |                                                                                                                            |  $            1,628 |

|                                                |   | 2009                                                                                             |   | 2008                                                                                                   |   | 2007                                                                                             |
|-----------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------|
| Customer      revenues by line of business:         |   |                                                                                             |   |                                                                                                   |   |                                                                                             |
| Traditional      individual insurance products, net |   |  $            88,086            |   |  $             78,403            |   |  $            74,696            |
| Interest      sensitive products                    |   |                89,439 |   |                 89,828 |   |                93,993 |
| Variable      life insurance and annuities          |   |                16,277 |   |                 19,179 |   |                17,429 |
| Group      life and disability products, net        |   |                47,862 |   |                 48,763 |   |                45,776 |
| Insurance      revenues                             |   |  $          241,664                       |   |  $           236,173                       |   |  $          231,894                       |
|                                                |   |                                                                                             |   |                                                                                                   |   |                                                                                             |

|                          | 2009                                                                         |   | 2008                                                                         |
|-------------------------------|------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|
| Land                          |  $           766 |   |  $           766 |
| Home      office complex      |          20,365                 |   |          20,257                 |
| Furniture      and equipment  |          44,803                 |   |          44,440                 |
|                          |          65,934                 |   |          65,463                 |
|                          |                                                                         |   |                                                                         |
| Accumulated      depreciation |        (41,541)                           |   |        (39,541)                           |
|                          |                                                                         |   |                                                                         |
|                          |  $      24,393                            |   |  $      25,922                            |
|                          |                                                                         |   |                                                                         |

----

Table of Contents 

|                                         |    |                                                                                                          | 2009                                              |                                                                                                          | 2008                                              |                                                                                                          | 2007                                              |
|----------------------------------------------|---------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------|
|                                         |    |                                                                                                          |                                              |                                                                                                          |                                              |                                                                                                          |                                              |
| Life      insurance in force (in millions) : |    |                                                                                                          |                                              |                                                                                                          |                                              |
|                                         | Direct  |  $      29,201                                                             |                                              |  $      28,691                                                             |                                              |  $      29,406                                                             |
|                                         | Ceded   |        (14,190)                                                            |                                              |        (14,492)                                                            |                                              |        (14,315)                                                            |
|                                         | Assumed |            1,482                                       |                                              |            1,609                                       |                                              |            1,729                                       |
|                                         |    | Net                                                                                                           |  $      16,493 |                                                                                                          |  $      15,808 |                                                                                                          |  $      16,820 |
|                                         |    |                                                                                                          |                                              |                                                                                                          |                                              |                                                                                                          |                                              |
| Premiums:                                    |    |                                                                                                          |                                              |                                                                                                          |                                              |
| Life      insurance:                         |    |                                                                                                          |                                              |                                                                                                          |                                              |
|                                         | Direct  |  $    139,422                                                                        |                                              |  $    130,008                                                                        |                                              |  $    125,602                                                                        |
|                                         | Ceded   |        (45,506)                                                            |                                              |        (46,205)                                                            |                                              |        (46,287)                                                            |
|                                         | Assumed |            3,379                                       |                                              |            3,773                                       |                                              |            3,681                                       |
|                                         |    | Net                                                                                                           |  $      97,295 |                                                                                                          |  $      87,576 |                                                                                                          |  $      82,996 |
|                                         |    |                                                                                                          |                                              |                                                                                                          |                                              |                                                                                                          |                                              |
|  Accident      and health:              |    |                                                                                                          |                                              |                                                                                                          |                                              |
|                                         | Direct  |  $      47,998                                                             |                                              |  $      47,001                                                             |                                              |  $      46,177                                                             |
|                                         | Ceded   |          (9,345)                                                 |                                              |          (7,411)                                                 |                                              |          (8,701)                                                 |
|                                         | Assumed |                   - |                                              |                   - |                                              |                   - |
|                                         |    | Net                                                                                                           |  $      38,653 |                                                                                                          |  $      39,590 |                                                                                                          |  $      37,476 |
|                                         |    |                                                                                                          |                                              |                                                                                                          |                                              |                                                                                                          |                                              |

----

Table of Contents 

|                                                 |   |   |                                                                                                           |   |                                                                                                    |   | Life                                                                                |   |            |
|------------------------------------------------------|--------|--------|----------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------|--------|-----------------|
|                                                 |   |   | Ceded      Life                                                                                                |   | Percent      of                                                                                         |   | Reinsurance                                                                         |   | Percent      of |
|                                                 | Rating |   | In-Force                                                                                                       |   | In-Force                                                                                                |   | Recoverable                                                                         |   | Recoverable     |
|                                                 |   |   | (In-Millions)                                                                                                  |   |                                                                                                    |   | (in-Thousands)                                                                      |   |
| TransAmerica      Life Insurance Company (Aegon USA) | A-     |   |  $          4,856                                       |   | 34%                                                                                                     |   |  $        30,407                       |   | 23%             |
| RGA      Reinsurance Company                         | AA-    |   |              2,807                            |   | 20%                                                                                                     |   |            16,222            |   | 12%             |
| Security      Life of Denver                         | A+     |   |              2,799                            |   | 20%                                                                                                     |   |            32,868            |   | 25%             |
| Swiss      Re Life & Health America              | A+     |   |              1,043                            |   | 7%                                                                                                      |   |              6,990 |   | 5%              |
| Lincoln      National Life Insurance Company         | AA-    |   |                 651            |   | 5%                                                                                                      |   |              7,042 |   | 5%              |
| Hannover      Life Reassurance of America            | AA-    |   |                 598            |   | 4%                                                                                                      |   |              3,942 |   | 3%              |
| Employers      Reassurance Corporation               | AA+    |   |                   41 |   |                  - |   |            22,520            |   | 17%             |
| Other      (16 companies)                            |   |   |              1,321                            |   | 9%                                                                                                      |   |            10,454            |   | 8%              |
| Total                                                |   |   |  $        14,116                                                  |   | 100%                                                                                                    |   |  $      130,445                                  |   | 100%            |
|                                                 |   |   |                                                                                                           |   |                                                                                                    |   |                                                                                |   |            |

|                                                           |                                                                                                                            |                                                 | Unrealized                                                                                                                      |           | Pension                                                                                                                         |   |                                                                     |
|----------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|----------------|---------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------|
|                                                           |                                                                                                                            |                                                 | Gain      (Loss)                                                                                                                | and      Other |                                                                                                                            |   |
|                                                           |                                                                                                                            |                                                 | on      Securities                                                                                                              | Benefits       |                                                                                                                            | Total  |
| 2009:                                                          |                                                                                                                            |                                                 |                                                                                                                            |           |                                                                                                                            |
| Total      unrealized gains arising during the year            |  $      197,065                                                                              |                                                 |  $                  -            |           |  $      197,065                                                                              |
| Less:                                                          |                                                                                                                            |                                                 |                                                                                                                            |           |                                                                                                                            |
|                                                           | Realized      investment gains (losses),excluding                                                                               |                                                 |                                                                                                                            |           |                                                                                                                            |
|                                                           |                                                                                                                            | impairment      losses                               |            10,159                                                        |           |                      - |   |            10,159 |
|                                                           | Other-than-temporary      impairment losses                                                                                     |                                                 |                                                                                                                            |           |                                                                                                                            |   |
|                                                           |                                                                                                                            | recognized      in earnings                          |          (35,011)                                                                  |           |                      - |   |          (35,011)           |
|                                                           | Other-than-temporary      impairment losses                                                                                     |                                                 |                                                                                                                            |           |                                                                                                                            |   |
|                                                           |                                                                                                                            | recognized      in other comprehensive income (loss) |            16,070                                                        |           |                      - |   |            16,070 |
| Net      unrealized gains (losses) excluding impairment losses |          205,847                                                                   |                                                 |                      - |           |          205,847                                                                   |
| Change      in benefit plan obligations                        |                      - |                                                 |            17,249                                                        |           |            17,249                                                        |
| Effect      on DAC and VOBA                                    |          (67,833)                                                                  |                                                 |                      - |           |          (67,833)                                                                  |
| Policyholder      account balances                             |                      - |                                                 |                      - |           |                      - |
| Deferred      income taxes                                     |          (48,305)                                                                  |                                                 |            (6,037)                                                       |           |          (54,342)                                                                  |
| Other      comprehensive income                                |  $        89,709                                                                   |                                                 |  $        11,212                                                                   |           |          100,921                                                                   |
|                                                           |                                                                                                                            | Net  income                                |                                                                                                                            |           |                                                                                                                            |   |            10,732 |
|                                                           |                                                                                                                            | Comprehensive      income                            |                                                                                                                            |           |                                                                                                                            |   |  $      111,653                       |
|                                                           |                                                                                                                            |                                                 |                                                                                                                            |           |                                                                                                                            |   |                                                                     |

----

Table of Contents 

|                                                       |                                                                                                                            |   | Unrealized                                                                                                                      |           | Pension                                                                                             |                                                           |   |
|------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|----------------|-----------------------------------------------------------------------------------------------------|----------------------------------------------------------------|--------|
|                                                       |                                                                                                                            |   | Gain      (Loss)                                                                                                                | and      Other |                                                                                                |                                                           |
|                                                       |                                                                                                                            |   | on      Securities                                                                                                              | Benefits       |                                                                                                | Total                                                          |
| 2008:                                                      |                                                                                                                            |   |                                                                                                                            |           |                                                                                                |
| Total      unrealized losses arising during the year       |  $    (266,176)                                                                                        |   |  $                  -            |           |  $    (266,176)                                                            |
| Less:  Realized      losses included in net loss |          (60,856)                                                                  |   |                      - |           |          (60,856)                                      |
| Net      unrealized loss                                   |        (205,320)                                                                             |   |                      - |           |        (205,320)                                                 |
| Change      in benefit plan obligations                    |                      - |   |          (32,410)                                                                  |           |          (32,410)                                      |
| Effect      on DAC                                         |            51,187                                                        |   |                      - |           |            51,187                            |
| Effect      on VOBA                                        |            15,245                                                        |   |                      - |           |            15,245                            |
| Policyholder      account balances                         |                 548                             |   |                      - |           |                 548 |
| Deferred      income taxes                                 |            48,419                                                        |   |            11,343                                                        |           |            59,762                            |
| Other      comprehensive loss                              |  $      (89,921)                                                                             |   |  $      (21,067)                                                                             |           |        (110,988)                                                 |
|                                                       | Net      loss                                                                                                                   |   |                                                                                                                            |           |                                                                                                |          (17,050) |
|                                                       | Comprehensive      loss                                                                                                         |   |                                                                                                                            |           |                                                                                                |  $    (128,038)                       |
|                                                       |                                                                                                                            |   |                                                                                                                            |           |                                                                                                |                                                           |   |

|                                                         |                                                                                                                            |   | Unrealized                                                                                                                      |           | Pension                                                                                                        |                                                                     |   |
|--------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------|----------------|----------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|--------|
|                                                         |                                                                                                                            |   | Gain      (Loss)                                                                                                                | and      Other |                                                                                                           |                                                                     |
|                                                         |                                                                                                                            |   | on      Securities                                                                                                              | Benefits       |                                                                                                           | Total                                                                    |
| 2007:                                                        |                                                                                                                            |   |                                                                                                                            |           |                                                                                                           |
| Total      unrealized gains arising during the year          |  $          8,907                                                        |   |  $                  -            |           |  $          8,907                                       |
| Less:  Realized      losses included in net income |            (1,650)                                                       |   |                      - |           |            (1,650)                                      |
| Net      unrealized gain                                     |            10,557                                                        |   |                      - |           |            10,557                                       |
| Additional      minimum pension liability                    |                      - |   |            (1,676)                                                       |           |            (1,676)                                      |
| Effect      on DAC                                           |               (687)                                       |   |                      - |           |               (687)                      |
| Effect      on VOBA                                          |                   85                  |   |                      - |           |                   85 |
| Policyholder      account balances                           |               (115)                                       |   |                      - |           |               (115)                      |
| Deferred      income taxes                                   |            (3,444)                                                       |   |                 587                             |           |            (2,857)                                      |
| Other      comprehensive income (loss)                       |  $          6,396                                                        |   |  $        (1,089)                                                                  |           |              5,307                            |
|                                                         | Net      income                                                                                                                 |   |                                                                                                                            |           |                                                                                                           |            35,661 |
|                                                         | Comprehensive      income                                                                                                       |   |                                                                                                                            |           |                                                                                                           |  $        40,968            |
|                                                         |                                                                                                                            |   |                                                                                                                            |           |                                                                                                           |                                                                     |   |

|                   |                                                                     | Unrealized                                                                                                                      |                                                                     | Unrealized                                                                |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |                                                                |
|------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------|-----------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------|-------------------------------------------------------------|----------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------|-------------------------------------------------------------|-----------------------------------------------|---------------------------------------------------------------------|
|                   |                                                                     | Gain      (Loss) on                                                                                                             | Gain      (Loss) on                                                      | Minimum                                                                   |                                                | DAC/                                                                                                                            |                                                   | Policyholder                                                |                                                                                               |                                                                                                          |                                  |
|                   |                                                                     | Non-Impaired                                                                                                                    | Impaired                                                                 |                                                                      | Pension                                             |                                                                                                                            | VOBA                                                   |                                                        | Account                                                                                            |                                                                                                          |                                  |                                                        |                                          |
|                   |                                                                     | Securities                                                                                                                      |                                                                     | Securities                                                                |                                                | Liability                                                                                                                       |                                                   | Impact                                                      |                                                                                               | Balances                                                                                                      |                                  | Tax      Effect                                             |                                          | Total                                                               |
| 2009:                  |                                                                     |                                                                                                                            |                                                                     |                                                                      |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |
| Beginning      of year |  $    (189,916)                                 |                                                                                                                            |  $        (2,197)           |                                                                      |  $      (74,650) |                                                                                                                            |  $    65,534                  |                                                        |  $               - |                                                                                                          |  $    70,430 |                                                        |  $   (130,799)            |
|                   | Cumulative      effect of change in                                      |                                                                                                                            |                                                                     |                                                                      |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |                                                                |
|                   |     accounting      principle                        |                      - |                                                                     |          (13,507)            |                                                |                      - |                                                   |          3,355 |                                                                                               |                   - |                                  |          3,553 |                                          |           (6,599) |
|                   | Other      comprehensive income (loss)                                   |          212,711                                                                   |                                                                     |            (6,862) |                                                |            17,248                                                        |                                                   |      (67,834)                      |                                                                                               |                   - |                                  |      (54,342)                      |                                          |        100,921                   |
| End      of year       |  $        22,795            |                                                                                                                            |  $      (22,566)                      |                                                                      |  $      (57,402) |                                                                                                                            |  $      1,055       |                                                        |  $               - |                                                                                                          |  $    19,641 |                                                        |  $     (36,477) |
|                   |                                                                     |                                                                                                                            |                                                                     |                                                                      |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |                                                                |
| 2008:                  |                                                                     |                                                                                                                            |                                                                     |                                                                      |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |
| Beginning      of year |  $          6,068 |                                                                                                                            |  $          7,139 |                                                                      |  $      (42,240) |                                                                                                                            |  $       (898) |                                                        |  $         (548)                                 |                                                                                                          |  $    10,668 |                                                        |  $     (19,811) |
|                   | Other      comprehensive loss                                            |        (195,984)                                                                             |                                                                     |            (9,336) |                                                |          (32,410)                                                                  |                                                   |        66,432            |                                                                                               |               548                       |                                  |        59,762            |                                          |       (110,988)                       |
| End      of year       |  $    (189,916)                                 |                                                                                                                            |  $        (2,197)           |                                                                      |  $      (74,650) |                                                                                                                            |  $    65,534                  |                                                        |  $             -             |                                                                                                          |  $    70,430 |                                                        |  $   (130,799)            |
|                   |                                                                     |                                                                                                                            |                                                                     |                                                                      |                                                |                                                                                                                            |                                                   |                                                        |                                                                                               |                                                                                                          |                                  |                                                        |                                          |                                                                |

----

Table of Contents 

----

Table of Contents 

|                   |                                                        | First                                                                  |                                                        | Second                                                                 |                                                        | Third                                                                  |                                                        | Fourth                                                                 |
|------------------------|-------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------|------------------------------------------------------------------------|-------------------------------------------------------------|------------------------------------------------------------------------|
| 2009:                  |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |
| Total      revenues    |  $  101,635                                  |                                                                   |  $  101,750                                  |                                                                   |  $  112,052                                  |                                                                   |  $  104,158                                  |
|                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |
| Net      income (loss) |        (4,548)           |                                                                   |          8,044 |                                                                   |          5,181 |                                                                   |          2,055 |
|                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |
| Per      common share, |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |
|                   | basic      and diluted                                      |          (0.40)           |                                                        |            0.70 |                                                        |            0.45 |                                                        |            0.18 |
|                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |
| 2008:                  |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |
| Total      revenues    |  $  108,319                                  |                                                                   |  $    98,289                       |                                                                   |  $    78,092                       |                                                                   |  $    89,626                       |
|                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |
| Net      income (loss) |          3,602 |                                                                   |          1,677 |                                                                   |      (15,178)                      |                                                                   |        (7,151)           |
|                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |
| Per      common share, |                                                        |                                                                   |                                                        |                                                                   |                                                        |                                                                   |                                                        |
|                   | basic      and diluted                                      |            0.31 |                                                        |            0.14 |                                                        |          (1.30)           |                                                        |          (0.62)           |

----

Table of Contents 

----

Table of Contents 

|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             | Schedule I                                                                            |
|----------------------------------------------------------|----------------------------------|--------------------------------------------------------------------------|-------------------------------------------------------------------------------------|--------------------------------------------------------------------------|-------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |                                                                                  |
| KANSAS      CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |                             |                                                                     |                                                                                |                                                                     |
| SUMMARY      OF INVESTMENTS - OTHER THAN                 |                             |                                                                     |                                                                                |                                                                     |
| INVESTMENTS      IN RELATED PARTIES                      |                             |                                                                     |                                                                                |                                                                     |
| DECEMBER      31, 2009                                   |                             |                                                                     |                                                                                |                                                                     |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |                                                                                  |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             | Amount      at                                                                        |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             | Which      Shown                                                                      |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             | in      Consolidated                                                                  |
| Type      of Investment                                  |                             | Cost                                                                     |                                                                                | Fair      Value                                                          |                                                                    | Balance      Sheet                                                                               |
| Fixed      maturity securities, available for sale:      |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |
|                                                     | Bonds:                           |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |
|                                                     |                             | United      States government and government                             |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |
|                                                     |                             |                                                                     | agencies      and authorities                                                       |                                                                     |  $        48,486           |                                                                                             |  $      49,409                                                           |                                                                                             |  $            49,409 |
|                                                     |                             | Residential      mortgage-backed securities                              |                                                                                |          505,333            |                                                                    |        473,366                                                |                                                                                                        |              473,366            |
|                                                     |                             | Public      utilities                                                    |                                                                                |          273,796            |                                                                    |        287,687                                                |                                                                                                        |              287,687            |
|                                                     |                             | Corporate                                                                |                                                                                |       1,381,026                            |                                                                    |     1,415,528                                                                |                                                                                                        |           1,415,528                            |
|                                                     |                             | All      other bonds                                                     |                                                                                |          247,009            |                                                                    |        229,681                                                |                                                                                                        |              229,681            |
|                                                     | Redeemable      preferred stocks |                                                                     |            14,866            |                                                                     |          13,601            |                                                                                             |                13,601            |
|                                                     |                             | Total                                                                    |                                                                                |       2,470,516                            |                                                                    |  $      2,469,272                                                                           |                                                                                                        |           2,469,272                            |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |                                                                                  |
| Equity      securities, available for sale:              |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |
|                                                     | Common      stocks               |                                                                     |            30,451            |                                                                     |          31,295            |                                                                                             |                31,295            |
|                                                     | Perpetual      preferred stocks  |                                                                     |              4,954 |                                                                     |            5,581 |                                                                                             |                  5,581 |
|                                                     |                             | Total                                                                    |                                                                                |            35,405 |                                                                    |  $      36,876                                                |                                                                                                        |                36,876 |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |                                                                                  |
| Mortgage      loans                                      |                             |          457,582            |                                                                                |                                                                     |                                                                    |              457,582            |
| Real      estate                                         |                             |          114,076            |                                                                                |                                                                     |                                                                    |              114,076            |
| Policy      loans                                        |                             |            85,585 |                                                                                |                                                                     |                                                                    |                85,585 |
| Short-term      investments                              |                             |          138,704            |                                                                                |                                                                     |                                                                    |              138,704            |
|                                                     |                             | Total      investments                                                   |                                                                                |  $   3,301,868                                       |                                                                    |                                                                                             |                                                                                                        |  $       3,302,095                                       |
|                                                     |                             |                                                                     |                                                                                |                                                                     |                                                                    |                                                                                             |                                                                                                        |                                                                                             |                                                                                  |

----

Table of Contents 

|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               | Schedule II                                             |
|--------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------------------------------------------------------------------|---------------------------------------------------------|
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
| KANSAS      CITY LIFE INSURANCE COMPANY                |                                                                          |                                                                          |                                                                                                                      |
| CONDENSED      FINANCIAL INFORMATION OF REGISTRANT     |
| BALANCE      SHEETS                                    |                                                                          |                                                                          |                                                                                                                      |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
|                                                   |                                                                          |                                                                          |                                                                                                                      | December      31                                                              |
|                                                   |                                                                          |                                                                          |                                                                                                                      | 2009                                                                          |                                                               | 2008                                                    |
| ASSETS                                                 |                                                                          |                                                                          |                                                                                                                      |
| Investments:                                           |                                                                          |                                                                          |                                                                                                                      |
|                                                   | Fixed      maturity securities available for sale, at fair value              |  $  1,965,759                                                  |                                                                                                                      |  $  1,861,373                                                  |
|                                                   | Equity      securities available for sale, at fair value                      |                                                                          |                                                                                                                      |                                                                          |
|                                                   |                                                                          | Investment      in unconsolidated subsidiaries                                |         163,629                                                                   |                                                                          |         157,831            |
|                                                   |                                                                          | Other                                                                         |           30,481                                                        |                                                                          |           37,542 |
|                                                   | Mortgage      loans                                                           |         400,320                       |                                                                                                                      |         381,969                       |
|                                                   | Real      estate                                                              |         110,044                       |                                                                                                                      |           95,008            |
|                                                   | Policy      loans                                                             |           66,017            |                                                                                                                      |           68,070            |
|                                                   | Short-term      investments                                                   |         117,968                       |                                                                                                                      |           24,860            |
|                                                   |                                                                          |                                                                          | Total      investments                                                                                                    |      2,854,218                                       |                                                               |      2,626,653                 |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
| Cash                                                   |                                                                          |             3,025 |                                                                                                                      |             3,838 |
| Accrued      investment income                         |           26,297            |                                                                          |           26,674                                                        |
| Deferred      acquisition costs                        |         105,957                       |                                                                          |         150,652                                                                   |
| Value      of business acquired                        |           61,037            |                                                                          |           75,187                                                        |
| Reinsurance      receivables                           |         104,813                       |                                                                          |           99,170                                                        |
| Property      and equipment                            |           24,383            |                                                                          |           25,671                                                        |
| Income      taxes                                      |             7,196 |                                                                          |           48,925                                                        |
| Other      assets                                      |           26,845            |                                                                          |           19,053                                                        |
| Separate      account assets                           |         312,824                       |                                                                          |         258,565                                                                   |
|                                                   |                                                                          |                                                                          | Total      assets                                                                                                         |  $  3,526,595                                                  |                                                               |  $  3,334,388                            |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
| LIABILITIES                                            |                                                                          |                                                                          |                                                                                                                      |
| Future      policy benefits                            |  $     576,395                                  |                                                                          |  $     570,748                                                                              |
| Policyholder      account balances                     |      1,751,663                                       |                                                                          |      1,725,779                                                                                   |
| Policy      and contract claims                        |           23,584            |                                                                          |           24,147                                                        |
| Other      policyholder funds                          |         118,344                       |                                                                          |         108,515                                                                   |
| Income      taxes                                      |             2,685 |                                                                          |                     - |
| Other      liabilities                                 |         112,737                       |                                                                          |         119,527                                                                   |
| Separate      account liabilities                      |         312,824                       |                                                                          |         258,565                                                                   |
|                                                   |                                                                          |                                                                          | Total      liabilities                                                                                                    |      2,898,232                                       |                                                               |      2,807,281                 |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
| STOCKHOLDERS'      EQUITY                              |                                                                          |                                                                          |                                                                                                                      |
| Common      stock, par value $1.25 per share           |                                                                          |                                                                          |                                                                                                                      |
|                                                   | Authorized      36,000,000 shares,                                            |                                                                          |                                                                                                                      |                                                                          |
|                                                   |                                                                          | issued      18,496,680 shares                                                 |           23,121                                                        |                                                                          |           23,121 |
| Additional      paid in capital                        |           41,068            |                                                                          |           36,281                                                        |
| Retained      earnings                                 |         757,225                       |                                                                          |         750,600                                                                   |
| Accumulated      other comprehensive loss              |         (36,477)                      |                                                                          |        (130,799)                                                                       |
| Treasury      stock, at cost (2009 - 6,931,589 shares; |                                                                          |                                                                          |                                                                                                                      |
|                                                   | 2008      - 7,061,476 shares)                                                 |       (156,574)                                 |                                                                                                                      |        (152,096)                           |
|                                                   |                                                                          |                                                                          | Total      stockholders' equity                                                                                           |         628,363                       |                                                               |         527,107 |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |
|                                                   |                                                                          |                                                                          | Total      liabilities and stockholders' equity                                                                           |  $  3,526,595                                                  |                                                               |  $  3,334,388                            |
|                                                   |                                                                          |                                                                          |                                                                                                                      |                                                                          |                                                               |                                                    |

----

Table of Contents 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    | Schedule II                                                                                                         |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------|-------------------------------------------------------------------------------|--------------------------------------------------------------------|-------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    | (continued)                                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
|                                                                                          KANSAS CITY LIFE INSURANCE COMPANY |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
| CONDENSED      FINANCIAL INFORMATION OF REGISTRANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                          |                                                                          |
|                                                                                          STATEMENTS OF INCOME               |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          | Year      Ended December 31                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          | 2009                                                               |                                                                          | 2008                                                                                                                      |                                                                    | 2007                                                                                                                |
| REVENUES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
| Insurance      revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Premiums                                                                      |  $     121,604                                  |                                                                          |  $     111,451                       |                                                                          |  $    104,381                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Contract      charges                                                         |           88,812            |                                                                          |           90,944 |                                                                          |          91,154                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Reinsurance      ceded                                                        |         (38,752)                      |                                                                          |         (36,663)           |                                                                          |        (37,114)                                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          | Total      insurance revenues                                                 |         171,664                       |                                                               |         165,732                       |                                                                                                                      |        158,421                       |
| Investment      revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Net      investment income                                                    |         142,570                       |                                                                          |         142,020            |                                                                          |        151,587                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Realized      investment gains, excluding                                     |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          | impairment      losses                                                        |             9,540 |                                                               |             9,794 |                                                                                                                      |            9,278 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Net      impairment losses recognized in earnings:                            |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          | Total      other-than-temporary impairment losses                             |         (28,802)                      |                                                               |         (57,071)                      |                                                                                                                      |          (3,625)           |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          | Portion      of impairment losses recognized in                               |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          | other      comprehensive income (loss)                                        |           12,337 |                                                                          |                     - |                                                                    |                    - |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Net      impairment losses recognized in earnings                             |         (16,465)                      |                                                                          |         (57,071)           |                                                                          |          (3,625)                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          | Total      investment revenues                                                |         135,645            |                                                                          |           94,743                                                        |                                                                    |        157,240                                                                   |
| Other      revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |             4,732 |                                                                          |             5,495 |                                                               |            5,631       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          | Total      revenues                                                           |         312,041            |                                                                          |         265,970                                                                   |                                                                    |        321,292                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| BENEFITS      AND EXPENSES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
| Policyholder      benefits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |         131,460                       |                                                                          |         129,514                       |                                                               |        119,848                             |
| Interest      credited to policyholder account balances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |           74,136            |                                                                          |           73,742            |                                                               |          76,941                  |
| Amortization      of deferred acquisition costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | and      value of business acquired                                           |           21,650            |                                                                          |           24,635 |                                                                          |          21,545                                                              |
| Operating      expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |           76,467            |                                                                          |           71,429            |                                                               |          66,824                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          | Total      benefits and expenses                                              |         303,713            |                                                                          |         299,320                                                                   |                                                                    |        285,158                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| Income      (loss) before income tax expense (benefit) and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | equity      in undistributed net income of subsidiaries                       |             8,328 |                                                                          |         (33,350)           |                                                                          |          36,134                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| Income      tax expense (benefit)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |             3,603 |                                                                          |         (10,662)                      |                                                               |          11,571                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| Income      (loss) before equity in undistributed net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | income      of subsidiaries                                                   |             4,725 |                                                                          |         (22,688)           |                                                                          |          24,563                                                              |
| Equity      in undistributed net income of subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |             6,007 |                                                                          |             5,638 |                                                               |          11,098                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| NET      INCOME (LOSS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  $       10,732                       |                                                                          |  $     (17,050)                                 |                                                               |  $      35,661                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| Comprehensive      income (loss), net of taxes:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Change      in net unrealized gains and (losses) on                           |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          | securities      available for sale                                            |  $       71,240                       |                                                               |  $     (69,328)                                 |                                                                                                                      |  $        4,347            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Change      in benefit plan obligations                                       |           11,212            |                                                                          |         (21,067)           |                                                                          |          (1,089)                                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | Other      comprehensive income (loss) of subsidiaries                        |           18,469            |                                                                          |         (20,593)           |                                                                          |            2,049                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          | Other      comprehensive income (loss)                                        |         100,921            |                                                                          |       (110,988)                                                                             |                                                                    |            5,307                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |
| COMPREHENSIVE      INCOME (LOSS)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  $     111,653                                  |                                                                          |  $   (128,038)                                            |                                                               |  $      40,968                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                          |                                                                          |                                                                          |                                                               |                                                                          |                                                                                                                      |                                                                    |                                                                                                                |

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Table of Contents 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              | Schedule      II                                                                  |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|-----------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              | (continued)                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              |                                                                              |
|                                                                                         KANSAS CITY LIFE INSURANCE COMPANY |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |
| CONDENSED      FINANCIAL STATEMENT OF REGISTRANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                                                                                 STATEMENTS OF CASH FLOWS                                                           |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              |                                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                | Year      Ended December 31                                                                                         |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                | 2009                                                                                                                |                                                                                    | 2008                                                                                                          |                                                              | 2007                                                                              |
| OPERATING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |
| Net      income (loss)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  $       10,732                                                                   |                                                                                                                      |  $     (17,050)                                                                       |                                                                                                                |  $     35,661                                             |
| Equity      in undistributed net income of subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |            (6,007)                                                 |                                                                                                                      |           (5,638)                                                 |                                                                                                                |        (11,098)                                      |
| Adjustments      to reconcile net income (loss) to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | net      cash provided by operating activities:                                                                           |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Amortization      of investment premium                                                                                   | 3,348                                                                                                               |                                                                                                                |            4,026                 |                                                                                                          |           5,070 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Depreciation                                                                                                              | 2,919                                                                                                               |                                                                                                                |            3,008                 |                                                                                                          |           3,288 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Acquisition      costs capitalized                                                                                        | (18,267)                                                                                                            |                                                                                                                |         (16,021)                                |                                                                                                          |        (17,027)                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Amortization      of deferred acquisition costs                                                                           | 20,124                                                                                                              |                                                                                                                |          20,064                            |                                                                                                          |         14,829            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Amortization      of value of business acquired                                                                           | 2,073                                                                                                               |                                                                                                                |            4,570                 |                                                                                                          |           6,717 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Realized      investment (gains) losses                                                                                   | 6,925                                                                                                               |                                                                                                                |          47,277                            |                                                                                                          |          (4,287)     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Changes      in assets and liabilities:                                                                                   |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      | Future      policy benefits                                                                                         | 5,646                                                                                                               |                                                                                    |            5,548                                       |                                                              |          (1,603)                     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      | Policyholder      account balances                                                                                  | (16,266)                                                                                                            |                                                                                    |         (10,721)                                                      |                                                              |        (14,870)                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      | Income      taxes payable and deferred                                                                              | 8,698                                                                                                               |                                                                                    |         (29,309)                                                      |                                                              |              631 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Other,      net                                                                                                           | (1,534)                                                                                                             |                                                                                                                |               340 |                                                                                                          |          (5,012)     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Net      cash provided                                                                                                    |           18,391                                                  |                                                                                                                |            6,094                 |                                                                                                          |         12,299            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              |                                                                              |
| INVESTING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |
| Purchases      of investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Fixed      maturity securities                                                                                            | (256,429)                                                                                                                 |                                                                                                                |       (202,499)                                                                       |                                                                                    |      (264,728)                                                                       |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Equity      securities                                                                                                    | (3,214)                                                                                                                   |                                                                                                                |           (6,097)                                                 |                                                                                    |        (13,807)                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Mortgage      loans                                                                                                       | (55,920)                                                                                                                  |                                                                                                                |         (47,121)                                                            |                                                                                    |        (50,229)                                                            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Real      estate                                                                                                          | (21,338)                                                                                                                  |                                                                                                                |         (30,138)                                                            |                                                                                    |          (4,507)                                                 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Other      investment assets                                                                                              | (93,108)                                                                                                                  |                                                                                                                |           (6,086)                                                 |                                                                                    |                   - |
| Sale      of investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Fixed      maturity securities                                                                                            | 108,721                                                                                                                   |                                                                                                                |          26,245                                                        |                                                                                    |       134,649                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Equity      securities                                                                                                    | 4,652                                                                                                                     |                                                                                                                |            7,102                                             |                                                                                    |           3,369                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Real      estate                                                                                                          | 3,752                                                                                                                     |                                                                                                                |          30,496                                                        |                                                                                    |         22,445                                                        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Other      investment assets                                                                                              | 8,553                                                                                                                     |                                                                                                                |            4,144                                             |                                                                                    |         25,084                                                        |
| Maturities      and principal paydowns of investments:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Fixed      maturity securities                                                                                            | 196,859                                                                                                                   |                                                                                                                |        208,824                                                                   |                                                                                    |       153,063                                                                   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Equity      securities                                                                                                    |                     - |                                                                                                                |                    - |                                                                                    |           2,806                                             |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | Mortgage      loans                                                                                                       | 37,569                                                                                                                    |                                                                                                                |          44,974                                                        |                                                                                    |         49,673                                                        |
| Net      acquisitions of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |               (309)                                 |                                                                                                                      |              (242)                                 |                                                                                                                |          (1,184)                           |
| Proceeds      from sale of non insurance affiliate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |                     - |                                                                                                                      |                    - |                                                                                                                |         10,104                                  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      | Net      cash provided (used)                                                                                             |          (70,212)                                                      |                                                                                                                |          29,602                            |                                                                                                          |         66,738            |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                                                                                                                      |                                                                                                                      |                                                                                                                |                                                                                                                |                                                                                    |                                                                                                          |                                                              |                                                                              |

----

Table of Contents 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   | Schedule II |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------|-------------------------------------------------------------------------|-----------------------------|-------------------------------------------------------------------|--------|--------------------------------------------------------|-------------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   | (continued) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |
|                                                                                                     KANSAS CITY LIFE INSURANCE COMPANY |                                                                                                                      |                          |                                                                    |                        |
| CONDENSED      FINANCIAL STATEMENT OF REGISTRANT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|                                                    STATEMENTS OF CASH FLOWS (Continued)                                                                                                                                                                                                                                                                                                     |                                                                                                                      |                          |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    | Year      Ended December 31 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    | 2009                        |                                                              | 2008   |                                                   | 2007        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |
| FINANCING      ACTIVITIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |                                                                                                                      |                          |                                                                    |                        |                                                              |
| Proceeds      from borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  $                 -            |                          |  $      77,500                       |                        |  $     87,105                       |
| Repayment      of borrowings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |                     - |                          |         (84,700)                |                        |        (91,405)                |
| Deposits      on policyholder account balances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |         216,567                                                                   |                          |        179,988                       |                        |       183,642                       |
| Withdrawals      from policyholder account balances                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |        (178,645)                                                                       |                          |       (208,454)                           |                        |      (249,543)                           |
| Net      transfers from separate accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |             8,566                                             |                          |            8,556 |                        |         11,706            |
| Change      in other deposits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |             4,572                                             |                          |            1,269 |                        |           9,257 |
| Cash      dividends to stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |          (12,506)                                                            |                          |         (12,483)                |                        |        (36,420)                |
| Dividends      from subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |           12,145                                                        |                          |          15,165            |                        |         15,910            |
| Net      disposition (acquisition) of treasury stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                309                             |                          |         (16,773)                |                        |          (4,451)     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      | Net      cash provided (used) |           51,008      |                        |         (39,932)          |   |        (74,199)     |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |
| Increase      (decrease) in cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |               (813)                                 |                          |           (4,234)     |                        |           4,838 |
| Cash      at beginning of year                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |             3,838                                             |                          |            8,072 |                        |           3,234 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      | Cash      at end of year      |  $         3,025      |                        |  $        3,838      |   |  $       8,072 |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                                                                                                      |                          |                                                                    |                        |                                                              |   |                                                   |        |

----

Table of Contents 

|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              | Schedule III                                                         |
|----------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------|------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |
| KANSAS      CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |
| SUPPLEMENTARY      INSURANCE INFORMATION                 |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     | Future      policy                                                                              |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                   benefits, policy- |                                                                                    |                                                                         |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     | holder      account                                                                             |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |
|                                                     |   |                                                                                                                                                                            | Deferred                                                                                                 |                                                                                                                     | balances,      and                                                                              |                                                                                    |                                                                         |                                                                                                                                              | Other                                                                |
|                                                     |   |                                                                                                                                                                            | acquisition                                                                                              |                                                                                                                     | policy      and                                                                                 |                                                                                    | Unearned                                                                     |                                                                                                                                              | policyholder                                                         |
| Segment                                                  |   | costs                                                                                                                                                                           |                                                                                                     | contract      claims                                                                                                     |                                                                                            | premiums                                                                                |                                                                         | funds                                                                                                                                             |
| December      31, 2009:                                  |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |
| Individual                                               |   |  $               130,641                                                                        |                                                                                                     |  $           2,669,521                                       |                                                                                            |  $           392            |                                                                         |  $         132,599                                                                              |
| Group                                                    |   |                              - |                                                                                                     |                    31,027 |                                                                                            |               650 |                                                                         |                         - |
| Old      American                                        |   |                     78,854                                                  |                                                                                                     |                  248,653            |                                                                                            |               184 |                                                                         |                 4,022                                             |
|                                                     | Total  |                                                                                                                                                                            |  $               209,495 |                                                                                                                     |  $           2,949,201              |                                                                                    |  $        1,226                 |                                                                                                                                              |  $         136,621 |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |
| December      31, 2008:                                  |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |
| Individual                                               |   |  $               188,817                                                                        |                                                                                                     |  $           2,648,287                                       |                                                                                            |  $           376            |                                                                         |  $         120,730                                                                              |
| Group                                                    |   |                              - |                                                                                                     |                    30,139 |                                                                                            |               423 |                                                                         |                         - |
| Old      American                                        |   |                     74,939                                                  |                                                                                                     |                  240,599            |                                                                                            |               198 |                                                                         |                 4,099                                             |
|                                                     | Total  |                                                                                                                                                                            |  $               263,756 |                                                                                                                     |  $           2,919,025              |                                                                                    |  $           997 |                                                                                                                                              |  $         124,829 |
|                                                     |   |                                                                                                                                                                            |                                                                                                     |                                                                                                                     |                                                                                            |                                                                                    |                                                                         |                                                                                                                                              |                                                                 |

----

Table of Contents 

|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                | Schedule III                                                                                      |
|----------------------------------------------------------|--------|-------------------------------------------------------------------------------------------|----------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                | (continued)                                                                                       |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |
| KANSAS      CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |
| SUPPLEMENTARY INSURANCE INFORMATION                      |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |  Policyholder                                                                                       |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |  benefits      and                                                                                  |                                                                                                                                                                                        | Amortization      of                                                                                                      |                                                                                                                                |                                                                                              |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |  interest                                                                                           |                                                                                                                                                                                        | deferred      policy                                                                                                      |                                                                                                                                |                                                                                              |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            | credited      to                                                                                         |                                                                                                                                                                                        | acquisitions      costs                                                                                                   |                                                                                                                                |                                                                                              |
|                                                     |   |                                                                                      | Premium                                      |                                                                                                                                                    | Net      investment                                                        |                                                                                                                                                                            | policyholder                                                                                             |                                                                                                                                                                                        | and      value of                                                                                                         |                                                                                                                                | Operating                                                                                         |
| Segment                                                  |   | revenue2                                                                                  |                                         | income3                                                                                                                                                 |                                                                       | account      balances                                                                                                                                                           |                                                                                                     | business      acquired                                                                                                                                                                      |                                                                                                                      | expenses4                                                                                                                           |
| Year      Ended December 31, 2009:                       |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |
| Individual                                               |   |  $       26,371                                   |                                         |  $          164,133                                                                              |                                                                       |  $               189,193                                                                        |                                                                                                     |  $                  25,961                                                                   |                                                                                                                      |  $              65,969                                   |
| Group                                                    |   |           47,862                        |                                         |                     554                             |                                                                       |                     33,799                                                  |                                                                                                     |                                - |                                                                                                                      |                  18,449                        |
| Old      American                                        |   |           62,261                        |                                         |                12,741                                                        |                                                                       |                     42,692                                                  |                                                                                                     |                      13,693                                                        |                                                                                                                      |                  13,933                        |
| Intercompany      eliminations1                          |   |               (546) |                                         |                          - |                                                                       |                              - |                                                                                                     |                                - |                                                                                                                      |                      (546) |
|                                                     | Total  |                                                                                      |  $     135,948 |                                                                                                                                                    |  $          177,428 |                                                                                                                                                                            |  $               265,684 |                                                                                                                                                                                        |  $                  39,654 |                                                                                                                                |  $              97,805 |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |
| Year      Ended December 31, 2008:                       |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |
| Individual                                               |   |  $       17,473                                   |                                         |  $          164,243                                                                              |                                                                       |  $               188,174                                                                        |                                                                                                     |  $                  28,875                                                                   |                                                                                                                      |  $              61,070                                   |
| Group                                                    |   |           48,763                        |                                         |                     525                             |                                                                       |                     32,956                                                  |                                                                                                     |                                - |                                                                                                                      |                  18,950                        |
| Old      American                                        |   |           61,517                        |                                         |                12,651                                                        |                                                                       |                     44,518                                                  |                                                                                                     |                      13,209                                                        |                                                                                                                      |                  13,375                        |
| Intercompany      eliminations1                          |   |               (587) |                                         |                          - |                                                                       |                              - |                                                                                                     |                                - |                                                                                                                      |                      (587) |
|                                                     | Total  |                                                                                      |  $     127,166 |                                                                                                                                                    |  $          177,419 |                                                                                                                                                                            |  $               265,648 |                                                                                                                                                                                        |  $                  42,084 |                                                                                                                                |  $              92,808 |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |
| Year      Ended December 31, 2007:                       |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |
| Individual                                               |   |  $       12,768                                   |                                         |  $          176,666                                                                              |                                                                       |  $               184,415                                                                        |                                                                                                     |  $                  27,568                                                                   |                                                                                                                      |  $              55,283                                   |
| Group                                                    |   |           45,776                        |                                         |                     426                             |                                                                       |                     30,061                                                  |                                                                                                     |                                - |                                                                                                                      |                  19,309                        |
| Old      American                                        |   |           62,479                        |                                         |                13,313                                                        |                                                                       |                     43,197                                                  |                                                                                                     |                      12,765                                                        |                                                                                                                      |                  14,266                        |
| Intercompany      eliminations1                          |   |               (551) |                                         |                          - |                                                                       |                              - |                                                                                                     |                                - |                                                                                                                      |                      (551) |
|                                                     | Total  |                                                                                      |  $     120,472 |                                                                                                                                                    |  $          190,405 |                                                                                                                                                                            |  $               257,673 |                                                                                                                                                                                        |  $                  40,333 |                                                                                                                                |  $              88,307 |
|                                                     |   |                                                                                      |                                         |                                                                                                                                                    |                                                                       |                                                                                                                                                                            |                                                                                                     |                                                                                                                                                                                        |                                                                                                                      |                                                                                                                                |                                                                                              |

----

Table of Contents 

|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      | Schedule IV                                                                                                               |
|----------------------------------------------------------|---------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
| KANSAS      CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |
| REINSURANCE INFORMATION                                  |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |
| Years      Ended December 31                             |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
|                                                     |                            |                                                                                        |                                                                                              | Life      Insurance Premiums                                                                |                                                                                              | Accident      and Health Premiums                                                           |
|                                                     |                            |                                                                                        |                                                                                              | 2009                                                                                        |                                                                                              | 2008                                                                                        |                                                                                              | 2007                                                                                  |                                                                                              | 2009                                                                                              |                                                                                              | 2008                                                                                                          |                                                                                                                      | 2007                                                                                                                      |
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
| Direct:                                                  |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |
|                                                     | Individual                      |                                                                                        |  $   64,999                                                                   |                                                                                        |  $   55,667                                                                   |                                                                                        |  $   50,785                                                                   |                                                                                  |  $        614                                        |                                                                                              |  $        720                                        |                                                                                                          |  $            946                                        |
|                                                     | Group                           |                                                                                        |       10,964                                                        |                                                                                        |       11,445                                                        |                                                                                        |       10,656                                                        |                                                                                  |       46,047                                                        |                                                                                              |       44,763                                                        |                                                                                                          |           43,406                                                        |
|                                                     | Old      American               |                                                                                        |       63,787                                                        |                                                                                        |       63,239                                                        |                                                                                        |       64,470                                                        |                                                                                  |         1,555                                             |                                                                                              |         1,762                                             |                                                                                                          |             2,067                                             |
|                                                     | Intercompany      Eliminations1 |                                                                                        |           (328)                                 |                                                                                        |           (343)                                 |                                                                                        |           (309)                                 |                                                                                  |           (218)                                 |                                                                                              |           (244)                                 |                                                                                                          |              (242)                                       |
|                                                     |                            | Total                                                                                       |                                                                                              |     139,422                                                             |                                                                                              |     130,008                                                             |                                                                                              |     125,602                                                       |                                                                                              |       47,998                                                        |                                                                                              |       47,001                                                                    |                                                                                                                      |           46,177                                                        |
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
| Ceded:                                                   |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |
|                                                     | Individual                      |                                                                                        |      (41,870)                                                            |                                                                                        |      (41,934)                                                            |                                                                                        |      (41,750)                                                            |                                                                                  |           (751)                                 |                                                                                              |           (753)                                 |                                                                                                          |              (894)                                       |
|                                                     | Group                           |                                                                                        |        (1,579)                                                 |                                                                                        |        (1,905)                                                 |                                                                                        |        (1,825)                                                 |                                                                                  |        (7,570)                                                 |                                                                                              |        (5,540)                                                 |                                                                                                          |           (6,461)                                                       |
|                                                     | Old      American               |                                                                                        |        (2,057)                                                 |                                                                                        |        (2,366)                                                 |                                                                                        |        (2,712)                                                 |                                                                                  |        (1,024)                                                 |                                                                                              |        (1,118)                                                 |                                                                                                          |           (1,346)                                                       |
|                                                     |                            | Total                                                                                       |                                                                                              |      (45,506)                                                      |                                                                                              |      (46,205)                                                      |                                                                                              |      (46,287)                                                |                                                                                              |        (9,345)                                                 |                                                                                              |        (7,411)                                                             |                                                                                                                      |           (8,701)                                                       |
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
| Assumed:                                                 |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |
|                                                     | Individual                      |                                                                                        |         3,379                                             |                                                                                        |         3,773                                             |                                                                                        |         3,681                                             |                                                                                  |                 - |                                                                                              |                 - |                                                                                                          |                     - |
|                                                     | Group                           |                                                                                        |                 - |                                                                                        |                 - |                                                                                        |                 - |                                                                                  |                 - |                                                                                              |                 - |                                                                                                          |                     - |
|                                                     | Old      American               |                                                                                        |                 - |                                                                                        |                 - |                                                                                        |                 - |                                                                                  |                 - |                                                                                              |                 - |                                                                                                          |                     - |
|                                                     |                            | Total                                                                                       |                                                                                              |         3,379                                       |                                                                                              |         3,773                                       |                                                                                              |         3,681                                 |                                                                                              |                 - |                                                                                              |                 -             |                                                                                                                      |                     - |
|                                                     |                            | Net                                                                                         |                                                                                              |  $   97,295                                                             |                                                                                              |  $   87,576                                                             |                                                                                              |  $   82,996                                                       |                                                                                              |  $   38,653                                                                   |                                                                                              |  $   39,590                                                                               |                                                                                                                      |  $       37,476                                                                   |
|                                                     |                            |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                        |                                                                                              |                                                                                  |                                                                                              |                                                                                              |                                                                                              |                                                                                                          |                                                                                                                      |                                                                                                                      |
| %      of Assumed to Net                                 |                            |                3 |                                                                                              |                4 |                                                                                              |                4 |                                                                                              |               - |                                                                                              |               -             |                                                                                              |                   - |

----

Table of Contents 

|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  | Schedule IV |
|----------------------------------------------------------|--------------------------|---------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|-------------------------------------------------------|-------------|
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  | (continued) |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
| KANSAS      CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |                     |                                                                                        |                                                                                              |
| REINSURANCE INFORMATION                                  |                     |                                                                                        |                                                                                              |
| Years      Ended December 31                             |                     |                                                                                        |                                                                                              |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
|                                                     |                     |                                                                                        |                                                                                              | Life      Insurance In Force                                                     |                                                                                              |
|                                                     |                     |                                                                                        |                                                                                              | 2009                                                                             |                                                                                              | 2008                                                                             |                                                                                              | 2007                                                  |        |
|                                                     |                     |                                                                                        |                                                                                              | (in      millions)                                                               |                                                                                              |
|                                                     | Direct:                  |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |
|                                                     |                     | Individual                                                                                  |  $   23,992                                                                   |                                                                             |  $   24,524                                                                   |                                                                             |  $   25,018                                                                   |                                                  |
|                                                     |                     | Group                                                                                       |         4,317                                             |                                                                             |         3,299                                             |                                                                             |         3,509                                             |                                                  |
|                                                     |                     | Old      American                                                                           |            892                             |                                                                             |            868                             |                                                                             |            879                             |                                                  |
|                                                     |                     |                                                                                        | Total                                                                                             |       29,201                                       |                                                                                              |       28,691                                       |                                                                                              |       29,406            |        |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
|                                                     | Ceded:                   |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |
|                                                     |                     | Individual                                                                                  |      (13,714)                                                            |                                                                             |      (14,012)                                                            |                                                                             |      (13,877)                                                            |                                                  |
|                                                     |                     | Group                                                                                       |           (435)                                 |                                                                             |           (434)                                 |                                                                             |           (386)                                 |                                                  |
|                                                     |                     | Old      American                                                                           |             (41)                      |                                                                             |             (46)                      |                                                                             |             (52)                      |                                                  |
|                                                     |                     |                                                                                        | Total                                                                                             |      (14,190)                                           |                                                                                              |      (14,492)                                           |                                                                                              |      (14,315)                |        |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
|                                                     | Assumed:                 |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |
|                                                     |                     | Individual                                                                                  |         1,482                                             |                                                                             |         1,609                                             |                                                                             |         1,729                                             |                                                  |
|                                                     |                     | Group                                                                                       |                 - |                                                                             |                 - |                                                                             |                 - |                                                  |
|                                                     |                     | Old      American                                                                           |                 - |                                                                             |                 - |                                                                             |                 - |                                                  |
|                                                     |                     |                                                                                        | Total                                                                                             |         1,482                            |                                                                                              |         1,609                            |                                                                                              |         1,729 |        |
|                                                     | Net                      |                                                                                        |  $   16,493                                                                   |                                                                             |  $   15,808                                                                   |                                                                             |  $   16,820                                                                   |                                                  |
|                                                     |                     |                                                                                        |                                                                                              |                                                                             |                                                                                              |                                                                             |                                                                                              |                                                  |        |
|                                                     | %      of Assumed to Net |                9 |                                                                                              |              10 |                                                                                              |              10 |                                                                                              |

----

Table of Contents 

|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            | Schedule    V                                                            |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------|
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   |                                                               KANSAS CITY LIFE INSURANCE COMPANY AND SUBSIDIARIES |                   |
|   | VALUATION      AND QUALIFYING ACCOUNTS                                                                                                                                                                                                                                                                                                                                                                    |                   |                                                                                                                            |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            | Years      Ended December 31                                             |                                                                                                                            |                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            | 2009                                                                     |                                                                                                                            | 2008                                                                     |                                                                                                                            | 2007                                                                     |
|   | Mortgage      loan reserve:                                                                                                                                                                                                                                                                                                                                                                               |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Beginning      of year |  $          3,410                                                        |                                                                     |  $          3,410                                                        |                                                                     |  $          3,600                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Additions              |                      - |                                                                     |                      - |                                                                     |                      - |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Deductions             |                      - |                                                                     |                      - |                                                                     |               (190)                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   | End      of year                                                                                                                |  $          3,410 |                                                                                                                            |  $          3,410 |                                                                                                                            |  $          3,410 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   | Allowance      for uncollectible accounts:                                                                                                                                                                                                                                                                                                                                                                |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Beginning      of year |  $          2,853                                                        |                                                                     |  $          2,853                                                        |                                                                     |  $          2,966                                                        |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Additions              |                      - |                                                                     |                   13                  |                                                                     |                     7       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      | Deductions             |            (1,547)                                                       |                                                                     |                 (13)                            |                                                                     |               (120)                                       |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   | End      of year                                                                                                                |  $          1,306 |                                                                                                                            |  $          2,853 |                                                                                                                            |  $          2,853 |
|   |                                                                                                                                                                                                                                                                                                                                                                                                      |                   |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |                                                                                                                            |                                                                     |

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REPORT OF INDEPENDENT 

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Table of Contents 

|   | Item      8.  CHANGES IN AND      DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL      DISCLOSURE |
|--------|------------------------------------------------------------------------------------------------------------------------|

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|                              | KANSAS      CITY LIFE INSURANCE COMPANY                                                                           |                                                                                                              |                                                                                                              |
|-----------------------------------|-------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------------|
|                              | CONDENSED      CONSOLIDATED INCOME STATEMENT                                                                      |                                                                                                              |                                                                                                              |
|                              | (amounts      in thousands, except share data)                                                                    |                                                                                                              |                                                                                                              |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
|                              |                                                                                                              | Quarter      ended                                                                                                |                                                                                                              | Year      ended |
|                              |                                                                                                              | December      31                                                                                                  |                                                                                                              | December      31 |
|                              |                                                                                                              | 2009                                                                                                              |                                                                                                              | 2008 |   | 2009 |   | 2008 |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
| Revenues                          |  $           104,158                                  |                                                                                                              |  $             89,626                       |   |  $           419,595 |   |  $           374,326 |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
| Net      income (loss)            |  $               2,055            |                                                                                                              |  $             (7,151)                      |   |  $             10,732 |   |  $           (17,050) |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
| Net      income (loss) per share, |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |
|                              | basic      and diluted                                                                                            |  $                 0.18 |                                                                                                              |  $               (0.62) |   |  $                 0.93 |   |  $               (1.47) |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
| Dividends      paid               |  $                 0.27 |                                                                                                              |  $                 0.27 |   |  $                 1.08 |   |  $                 1.08 |
|                              |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |   |
| Average      number of            |                                                                                                              |                                                                                                              |                                                                                                              |   |   |   |   |
|                              | shares      outstanding                                                                                           |          11,611,468                                                  |                                                                                                              |          11,450,812 |   |          11,550,016 |   |          11,568,635 |

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Table of Contents 

Item9. 

|   | PART IV |
|--------|---------|

|   | Item      14.  EXHIBITS, FINANCIAL      STATEMENT SCHEDULES |
|--------|-----------------------------------------------------------------------|

|                                                                                                                                                 | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                 | Number |
| (a)(1)  Financial      Statements (See Item 7:  Financial Statements and      Supplementary Data)….……..… | 72     |
|                                                                                                                                                 |   |
| (a)(2)  Supplementary Data and      Financial Statement Schedules                                                                          |   |

|                                                                                                                                                                         | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                         | Number |
| I   - Summary      of Investments - Other than Investments in Related Parties, December 31,      2009………………..        | 126    |
| II - Condensed      Financial Information of Registrant, Years ended December 31, 2009, 2008      and 2007……….                                   | 127    |
| III - Supplementary      Insurance Information, Years ended December 31, 2009, 2008 and 2007      ………………...                    | 131    |
| IV - Reinsurance      Information, Years ended December 31, 2009, 2008 and 2007      …………………………....... | 133    |
| V - Valuation      and Qualifying Accounts, Years ended December 31, 2009, 2008 and 2007      …………………...                 | 135    |

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| Exhibit    |                                                                                                                                                                                                                                                                                                                                                                                          |
|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Number:    | Basic Documents:                                                                                                                                                                                                                                                                                                                                                                              |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
|  3(a) | Articles      of Incorporation (as Restated in 1986 and Amended in      1999).  [Filed as                                                                                                                                                                                                                                                                                           |
|       | Exhibit      3(a) to the Company’s 10-Q Report for the quarter ended September 30,      1999                                                                                                                                                                                                                                                                                            |
|       | and      incorporated herein by reference]                                                                                                                                                                                                                                                                                                                                                    |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
|  3(b) | Bylaws      as Amended and Restated October 29, 2007.  [Filed as Exhibits      3.1 and 3.2 to the Company's 8-K Report for October 30, 2007 and      incorporated herein by reference]                                                                                                                                                                                              |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
|  4(a) | Specimen      copy of Stock Certificate. [Filed as Exhibit 4(a) to the Company’s 10-Q      Report                                                                                                                                                                                                                                                                                       |
|       | for      the quarter ended September 30, 1999 and incorporated herein by      reference]                                                                                                                                                                                                                                                                                                      |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10(a)      | First      Amendment to 2009 Restatement, Kansas City Life Deferred Compensation      Plan                                                                                                                                                                                                                                                                                                    |
|       | Twelfth      Amendment, Kansas City Life Deferred Compensation Plan.                                                                                                                                                                                                                                                                                                                          |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10(b)      | Thirty-Second      Amendment, Kansas City Life Insurance Company Savings and Profit Sharing      Plan                                                                                                                                                                                                                                                                                         |
|       | Thirty-First      Amendment, Kansas City Life Insurance Company Savings and Profit Sharing      Plan                                                                                                                                                                                                                                                                                          |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10(c)      | Fourteenth      Amendment, Kansas City Life Employee Stock Plan.  [Filed as      Exhibit 10(c) to the Company’s 10-K Report for 2005 and incorporated      herein by reference, and the Amended and Restated Kansas City Life      Insurance Company Stock Plan filed as Exhibit 10(c) to the Company’s 10-K      Report for 2001 and incorporated herein by reference] |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 10(d)      | Third      Amendment, Kansas City Life Excess Benefit Plan.   [Filed      as Exhibit 10(d) to the Company’s 10-K Report for 2008 and incorporated      herein by reference]                                                                                                                                                                                              |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 14         | Kansas      City Life Insurance Company Code of Ethics for Officers, Directors and      Employees.                                                                                                                                                                                                                                                                                            |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 21         | Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                 |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 23         | Consent      of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                                                |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 31(a)      | Section      302 Certification.                                                                                                                                                                                                                                                                                                                                                               |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 31(b)      | Section      302 Certification.                                                                                                                                                                                                                                                                                                                                                               |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 32(a)      | Section      1350 Certification.                                                                                                                                                                                                                                                                                                                                                              |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |
| 99(e)      | Prospectus      for Kansas City Life Insurance Company Savings and Investment      Plan.                                                                                                                                                                                                                                                                                                      |
|       |                                                                                                                                                                                                                                                                                                                                                                                          |

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Table of Contents 

SIGNATURES

| By: /s/ R.      Philip      Bixby                | By:      /s/ Tracy W. Knapp                   |
|----------------------------------------------------------------------------------------------------|-----------------------------------------------|
| R.      Philip Bixby                                                                               | Tracy      W. Knapp                           |
| Director;      President, Chief                                                                    | Director;      Senior Vice President, Finance |
| Executive      Officer and Chairman                                                                | (Principal      Financial Officer)            |
| of      the Board                                                                                  | Date:  February      26, 2010       |
| (Principal      Executive Officer)                                                                 |                                          |
| Date:  February      26, 2010                                                            | By:      /s/ William A.    Schalekamp         |
|                                                                                               | William      A. Schalekamp                    |
| By: /s/      Walter E.      Bixby                | Director;      Senior Vice President,         |
| Walter      E. Bixby                                                                               | General      Counsel and Secretary            |
| Director  and      Vice Chairman                                                         | Date:  February      26, 2010       |
| of      the Board                                                                                  |                                          |
| Date:  February      26, 2010                                                            | By:      /s/ Cecil R.Miller                   |
|                                                                                               | Cecil      R. Miller                          |
| By: /s/ John      C.      Cozad             | Director                                      |
| John      C. Cozad                                                                                 | Date:  February      26, 2010       |
| Director                                                                                           |                                          |
| Date:  February      26, 2010                                                            |                                          |
|                                                                                               |                                          |
| By: /s/ Kevin      G.      Barth            |                                          |
| Kevin      G. Barth                                                                                |                                          |
| Director                                                                                           |                                          |
| Date:  February      26, 2010                                                            |                                          |
|                                                                                               |                                          |
| By:      /s/ Mark A. Milton                                                                        |                                          |
| Mark      A. Milton                                                                                |                                          |
| Director;      Senior Vice President, Actuary                                                      |                                          |
| Date:  February      26, 2010                                                            |                                          |
|                                                                                               |                                          |

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