FINANCIAL SECTION

                               To Our Stockholders

     Management prepared the following consolidated financial statements and all
other  financial  information  included in this Annual Report and is responsible
for its integrity,  consistency and objectivity.  In preparing these statements,
management  necessarily  made  certain  estimates  and  judgments  and  selected
accounting   principles  in  conformity  with  generally   accepted   accounting
principles in the United States appropriate in the circumstances.
     The  Company  maintains  a  system  of  internal  accounting  controls  and
procedures to provide  reasonable  assurance,  at an appropriate  cost, that its
assets are protected and that its financial transactions are properly authorized
and  recorded.  Qualified  personnel in the Company  maintain and monitor  these
internal controls on an ongoing basis.
     The Audit  Committee of the Board of Directors,  composed solely of outside
directors,  meets  annually  and, as required,  with the  independent  auditors,
management and the internal  auditors.  Each has free and separate access to the
committee.  The committee reviews audit procedures,  scope and findings, and the
adequacy of the Company's financial reporting.
     The independent  auditors,  KPMG LLP, are elected by the Board of Directors
to audit the financial statements and render an opinion thereon.



                                                 /s/ Richard L. Finn

                                                 Richard L. Finn
                                                 Senior Vice President, Finance


                                                  Contents:

                                   Management's Discussion ...................22
                                   Selected Financial Data ...................24
                                   Financial Statements ......................28
                                   Notes to These Statements .................32
                                   Reports of Independent Auditors ...........43
                                   Stockholder Information ...................44


                             MANAGEMENT'S DISCUSSION
          and analysis of financial condition and results of operations


     Operating Results

     Earnings  trended upward the past three years with  operating  earnings per
share  rising 50 percent  over the  period as all  segments  contributed  to the
improvement.  Including realized gains and losses over that time, net income per
share increased 12 percent. Return on equity averaged 8.79 percent for the three
years and the pretax operating margin averaged 13.3 percent.

     This  performance  is best  analyzed  by  reviewing  each of the  Company's
operating segments. However,  corporate-wide factors are discussed first, namely
investment performance and income taxes.

     Investment income was unchanged in 2000 after rising 3 percent in 1999. The
investment  portfolio's amortized cost was essentially level over the past three
years,  but the investment mix shifted from securities to mortgage loans,  which
comprised  9.6 percent of  investments  in 1997 versus 14.4  percent  this year.
However,  securities  still  comprise  three-fourths  of the  portfolio.  As the
Company's  product  mix shifts  increasingly  toward  variable  products,  whose
investable funds largely are segregated into separate  accounts,  the investment
portfolio is expected to decline over time, as will the income on the portfolio.
The portfolio's net earned yield rose to 7.56 percent in 2000, from 7.52 percent
in 1999 and 7.34 percent in 1998.  Investment  margins on the interest sensitive
products widened in 1999 but narrowed in both 1998 and 2000. Net realized losses
of $3.9 million were incurred  this year,  compared to net gains of $2.9 million
and $11.4  million  the  previous  two years.  Investment  purchases  focused on
mortgage loans this year, but the Company  experienced a net cash outflow in its
investments  overall.  The net yield on securities  and mortgage loan  purchases
equaled  7.95  percent,  compared  to 7.81  percent in 1999.  Investment  assets
declined 1 percent in 2000.  The  unrealized  loss on the  securities  portfolio
improved $14.7 million during the year as market yields declined.

     The  Company  has long  prided  itself  on the  quality  of its  investment
portfolio.  However, management has chosen to assume more risk in the securities
portfolio in an effort to attain  higher  total  returns  commensurate  with the
added  risk.  Therefore,  91 percent of its  securities  are  investment  grade,
compared to 96 percent in 1997. Securities  delinquencies and defaults represent
0.6 percent of the portfolio,  up from 0.3 percent last year.  These issues were
written down to their  estimated fair value,  resulting in 2000's realized loss.
The  mortgage  portfolio  consists of loans on  commercial  properties,  largely
industrial  warehouses.  The loans are  generally  dispersed  across the nation.
However, there are two exceptions,  none is located in the Northeast and a third
of the properties  are on the West Coast.  No loans were  foreclosed  this year,
none were  restructured and none are delinquent.  In response to the portfolio's
demonstrated  quality,  the  mortgage  loan  valuation  reserve was reduced $3.0
million  during  2000,  creating an  investment  gain.  Real estate  investments
comprise 2.9 percent of the entire  portfolio,  unchanged from 1997. The Company
holds two properties acquired through  foreclosure,  valued at $2.1 million, the
lower of cost or net fair value,  which are under contracts for sale. Other real
estate investments include industrial warehouses,  office buildings and shopping
center joint ventures. These properties' carrying values are significantly below
their fair values.  Sales of real estate  properties  generated  $4.3 million of
investment gains this year.

     The effective  income tax rate was  essentially  the same in 1998 and 2000,
28.6 percent and 28.4  percent,  respectively.  The rate rose to 29.7 percent in
1999 largely due to changes in affordable  housing tax credits.  The Company has
invested  $34.4  million in real estate  joint  ventures  which  generate  these
credits and provide much of the rate  reduction  from the 35.0  percent  Federal
income tax rate.

     The following addresses the financial  performance of each of the Company's
four reportable  operating  segments:  the Parent  Company,  divided between its
individual  and  group  insurance  operations,  and each of its  life  insurance
affiliates.  Refer  also to the  Segment  Information  Note to the  Consolidated
Financial Statements.


Kansas City Life Insurance Company - Individual Operations

     The segment consists of the Parent Company's individual business,  which is
changing  from  traditional  and interest  sensitive  products to  predominantly
variable  universal  life and annuity  products.  These are  marketed  through a
general agency distribution system. This segment also includes the non-insurance
affiliates,  principally  the  banking  and  brokerage  operations.  The segment
dominates  Company  performance,  accounting  for 41  percent  of its  insurance
revenues,  more than  three-fourths  of its sales and nearly  two-thirds  of its
operating income.

     Sales, in terms of new annualized  premiums,  rose 42 percent over the past
three years,  with much of this growth  occurring in 1998. The growth was driven
by variable universal life and annuity products, which increased from 47 percent
of sales in 1997 to 77 percent  this year,  as  variable  sales rose 134 percent
over the three years.  The variable line has generated $347.9 million in assets,
one-fourth higher than a year ago.  Reflecting  changing  consumer  preferences,
sales of interest sensitive products,  consisting of universal life and flexible
annuities,  declined 42 percent from 1997 to account for only a fifth of current
sales.  Marketing  efforts  in 2001 will  benefit  from the  enhancement  of the
variable product portfolio,  a new universal life policy offering  competitively
high  future cash  accumulations,  and the recent  introduction  of a CD annuity
offering guaranteed investment returns.

     Insurance revenues,  including renewal receipts,  rose 22 percent from 1997
through  2000  largely  due to the  acquisition  of a block of  traditional  and
universal  life insurance  business  during 1997.  Excluding  this  acquisition,
insurance revenues rose 2 percent a year on average.

     Policy  surrenders  remained within  historical  norms in the  traditional,
universal  life  and  variable  lines of  business.  However,  flexible  annuity
surrenders rose consistently over the three years as a percentage of accumulated
values available to be surrendered  reflecting  changing  consumer  preferences.
While this has little impact on current earnings, the surrenders truncate future
earnings flows.

     The segment's  operating  earnings grew at a 10 percent average annual rate
since 1997 largely due to expanding pretax profit margins. These margins widened
from 13.8 percent of operating revenues in 1997 to 16.9 percent this year due to
more favorable mortality  experience,  $4.0 million of unlocking benefit in each
of the past two years and improved operating efficiencies.  Deferred acquisition
cost assumptions were changed,  or unlocked,  to reflect the emergence of actual
profit margins which were better than those assumed.  These  assumptions will be
reviewed annually in the future and unlocked as necessary.  However,  the annual
benefit is expected to be below that of the past two years.  Operating  expenses
improved  relative to revenues  even as $2.4 million was invested in  developing
the banking and customer relationship management initiatives.


Kansas City Life Insurance Company - Group Operations

     The  group  segment  consists  of  life  and  disability  coverages  and  a
substantial block of group dental business.  These products are sold through the
Kansas City Life sales force and appointed group agents.  The group  marketplace
is sizable and expanding, but it is also highly competitive.  Thus the potential
for sales growth is  considerable,  but profitable  sales growth is challenging.
Group took  several  significant  steps the past two years to  bolster  earnings
performance.  First, the stop loss line was  discontinued in late 1999.  Second,
the long-term  disability  business was reinsured late that year as well. Kansas
City Life will continue to offer long-term  disability products but they will be
80 percent reinsured with claims paid by the reinsurer.  Finally, management was
strengthened in the ASO claims paying service with resulting  increased revenues
and widened profit margins.  The group segment  provides  one-fifth of corporate
insurance revenues,  9 percent of sales and 2 percent of the Company's operating
income.

     Sales declined 5 percent a year on average since 1997.  However,  excluding
the discontinued  stop loss line of business,  group sales rose 1 percent a year
on  average,   with  4  percent   growth  in  2000.  The  dental  line  provides
three-fourths  of group sales and rose an average of 2 percent annually over the
past three years.

     The efforts taken to address the stop loss and long-term  disability lines,
while  improving  group's bottom line,  dampened  insurance  revenue growth to 2
percent  annually  over the past  three  years.  Excluding  these  two  lines of
business,  revenues grew 4 percent  annually,  largely due to 8 percent  average
annual  growth  in  dental,  a line  providing  two-thirds  of  group  revenues.
Significantly,  2000's revenues were considerably  above trend.  Revenues rose 5
percent in total for the year, but increased 12 percent  excluding the stop loss
and long-term disability lines. Dental revenues rose 17 percent this year.

     Group recorded  operating  losses in 1998 and 1999 but earned $831,000 this
year as pretax  operating  margins tripled due to  considerably  improved claims
ratios partially resulting from the efforts discussed above.


Sunset Life Insurance Company of America

     Sunset Life offers  interest  sensitive  and term  products to  individuals
through  personal  producing  general  agents.   Much  of  its  operations  were
integrated  into the corporate  headquarters  in 1999  resulting in  significant
efficiencies.  Its marketing operations remain separate to provide the requisite
focus on Sunset's  particular  markets and  products in order to maximize  their
potential and to fully service the needs of Sunset's  sales force.  This segment
generates 10 percent of consolidated  insurance revenues, 5 percent of sales and
one-fifth of operating income.

     Sales  declined the past two years,  resulting in sales this year which are
half those of 1997. This reflected  changing consumer  preferences,  disruptions
related to the  integration of the company's  operations and the transition to a
new  marketing  team. It is expected that sales will rebound in 2001 since these
disruptions are past and the new marketing  management will more fully implement
their strategies.

     Insurance revenues were stable over the past three years.  Pretax operating
margins,  however,  rose from 19.4 percent of operating revenues in 1997 to 24.0
percent in 2000. The benefits  provided both by unlocking  deferred  acquisition
cost  assumptions  this year and by  improved  operating  efficiency  due to the
integration  mentioned  above  were  only  partially  offset  by less  favorable
mortality  experience.  Due  to  widening  profit  margins,  operating  earnings
averaged 9 percent annual growth over the past three years.

<TABLE>
<CAPTION>
                             SELECTED FINANCIAL DATA
                       (Thousands, except per share data)

                                         2000             1999              1998             1997              1996
Revenues:
<S>                                <C>                   <C>               <C>              <C>               <C>
  Insurance                        $   253,619           255,595           259,559          244,695           219,593
Investment income, net                 207,135           207,682           202,402          197,345           191,494
  Other                                 16,024            13,956            14,671            9,998             9,768
    Operating revenues                 476,778           477,233           476,632          452,038           420,855
  Realized investment gains (losses)    (3,871)            2,860            11,426           14,505             3,013
                                   $   472,907           480,093           488,058          466,543           423,868

Operating income                   $    51,599            43,186            41,085           35,433            40,357
Realized investment gains (losses), net (2,516)            1,859             7,427            9,428             1,958
  Net income                       $    49,083            45,045            48,512           44,861            42,315

Per common share:
  Operating income                 $      4.29              3.51              3.32             2.86              3.26
  Realized investment gains (losses), net (.21)              .15               .60              .77               .16

Net income                         $      4.08              3.66              3.92             3.63              3.42

  Cash dividends                   $      1.00               .96               .90              .88               .84
  Stockholders' equity:
    As reported                    $     44.28             40.86             46.58            42.84             37.40
    Excluding unrealized
      gains and losses                   47.92             45.28             42.42            39.90             37.16

Assets                             $ 3,646,261         3,621,284         3,577,414        3,439,452         2,954,710
Net return on invested assets             7.56 %            7.52              7.34             7.56              7.88
Life insurance in force            $26,938,904        26,747,316        26,641,664       26,595,709        22,148,738

<FN>
The above is not covered by the report of independent auditors.
Per common share earnings information represents both basic and diluted earnings
per common share.
Per share data has been adjusted for a two-for-one stock split in June 1999.
</FN>
</TABLE>


Old American Insurance Company

     Old American offers traditional final expense coverage to the senior market
through a general agency sales force.  Positive steps have been taken to enhance
the  Company's  profitability  over the past several  years.  First,  the under-
performing home health business was sold in 1998. Second, underwriting standards
on new business were strengthened  that year as well.  Although time is required
for this to  noticeably  help  earnings,  its impact  began to emerge this year.
Additionally,  Old American's operations are integrated with those of the Parent
and  Sunset  Life in  order to  maximize  economies  of  scale.  Old  American's
marketing  effort has been kept distinct  from the other  companies in the group
for the same reasons as Sunset Life. This segment  provides  one-fourth of total
insurance revenues, 7 percent of sales and 15 percent of consolidated  operating
income.

     This year's sales were just  three-fourths of those in 1997.  However,  the
company  chose to  pursue  more  profitable  sales  growth by  instituting  more
stringent underwriting  standards.  While this dampened growth in the short run,
this places Old American in a stronger financial position, to the benefit of its
policyowners,  sales agents and stockholders.  Recruiting  efforts regarding new
agents will intensify during 2001 in order to achieve improved sales growth.

     Reflecting the sales trends  discussed  above,  insurance  revenues trended
downward,  declining  3  percent a year on  average.  However  pretax  operating
margins rose from 4.5 percent of operating revenues in 1997 to 12.4 percent this
year. This substantial improvement resulted from improved benefits ratios due to
the changes in underwriting  and the sale of the home health business  discussed
above. Additionally, operating expenses were well contained, declining 5 percent
over the three-year period. These achievements  resulted in 43 percent growth in
operating  earnings this year, and 41 percent  average annual growth in earnings
since 1997.


Market and Interest Rate Risk Analysis

     Kansas  City  Life  holds a  diversified  portfolio  of  investments  which
includes cash, bonds, preferred stocks,  mortgage-backed securities,  commercial
mortgages  and real  estate.  Each of these  investments  is  subject to varying
market risks which can affect  their  ability to earn a  competitive  return and
their fair value.  The  majority of these  assets are debt  instruments  and are
considered fixed income investments.  Thus the primary market risk affecting the
Company is interest rate risk.

     Generally, the coupon or dividend income represents the greatest portion of
the fixed income  investments'  overall total return. As interest rates fall, as
they have for most of the past decade, the coupon and dividend streams of older,
higher-paying   investments   become   relatively   more  valuable  than  newer,
lower-yielding  opportunities.   Therefore,  the  market  value  of  the  older,
high-paying investments increases.  The opposite effect occurs as interest rates
rise. The market value of such  investments  varies inversely to market interest
rates.

     The Federal  Reserve Open Market  Committee  began raising  interest  rates
during 1999 to reduce the risks of increasing  inflation,  thus pushing interest
rates higher and reducing the value of bonds.  At year end 1999, the securities'
book value  exceeded  their market value by $86.7  million,  a reversal from the
previous year. Rates reversed during 2000 and generally moved lower beginning in
May. By year end the  portfolio's  book value exceeded its market value by $71.0
million.

     Due to the  complex  nature of interest  rate  movements  and their  uneven
effects on the value of fixed income investments,  complex computer programs are
used to help  predict  changes  in the  value of its  portfolio.  Assuming  that
changes  occur  equally over the entire term  structure  of interest  rates (the
"yield curve"), it is estimated that a one percent (or 100 basis point) increase
in rates  translates to an $88.0 million  ($97.0  million - 1999) loss of market
value for the $2.2 billion securities portfolio.  Conversely,  a 100 basis point
rate decrease  translates to a $94.0 million  increase in market value. The gain
or loss  due to  changes  in  interest  rates  is  affected  by the  portfolio's
duration.  Duration  measures the time elapsing  before cash flows are received.
The longer the duration, the greater the variance in the portfolio's value for a
given change in interest rates.  Additionally,  the larger size of the potential
gain versus the potential loss indicates the portfolio has positive convexity, a
term describing the skew in the securities' value changes.

     Market  changes  rarely  follow a linear  pattern in one  direction for any
length of time.  Within  diversified  portfolios,  an investor  will likely find
embedded  options,  puts and calls,  that change the  structure of the cash flow
stream.  Mortgage-backed  securities are particularly sensitive to interest rate
changes.  As long-term  interest  rates fall,  homeowners  become more likely to
refinance  their  mortgage or move up to a larger home,  causing a prepayment of
the  outstanding  mortgage  principal  which must then be  reinvested at a lower
rate. Should interest rates rise suddenly, prepayments expected by investors may
cease,  extending the maturity of a mortgage pool by many years. This represents
a further interest rate risk to investors.

The  majority of the  corporate  investments  are debt  instruments  of domestic
corporations,  governmental agencies and government sponsored enterprises. These
obligations  expose  the  Company to  varying  degrees  of credit  risk with the
exception of certain  agency  obligations  carrying the full faith and credit of
the Federal government. Credit risk is the risk that the value of the investment
may decline due to  deterioration in the financial  strength of the issuer,  and
thus the timely payment of principal or interest  might not occur.  This risk is
mitigated  by  diversifying  the  investment  portfolio  across a broad range of
issuers,  and by limiting the amount invested in any particular entity. With the
exception of certain government sponsored  enterprises,  there is no exposure at
this year end to any single issuer in an amount  greater than one percent of its
assets on a book value basis

<TABLE>
<CAPTION>
                               EXPECTED CASH FLOWS
                                   (Millions)

                                                                                   There-  Total      Fair
                                       2001    2002     2003     2004     2005     after  Principal   Value

<S>                                 <C>       <C>      <C>      <C>       <C>     <C>      <C>         <C>
Corporate bonds currently callable  $   29       12       18       11        4       62      136         135
  Average interest rate               9.06%   10.20     8.71     7.96     8.86     6.10     7.57
Mortgage backed securities and CMO's   117       26       24       23       21       91      302         295
  Average interest rate               7.14%    7.58     7.45     7.36     7.26     7.37     7.29
All other securities                   135      107      182       98      162      917    1,601       1,596
  Average interest rate               6.92%    7.10     6.87     7.07     7.08     7.39     7.27

Total                                 $281      145      224      132      187    1,070    2,039       2,026

<FN>
The table shows expected cash flows from principal repayments of bonds
in the form of maturities, calls, sinking funds and prepayments.
</FN>
</TABLE>


     Kansas  City Life owns  $62.0  million of foreign  bonds.  Since  these are
denominated in U.S. dollars, there is no exposure to any direct foreign currency
risk.  However,  there is an indirect exposure to exchange markets to the extent
that the issuers of these  securities need to obtain dollars to fully fund their
obligations.  The Company has no material  foreign  exposure in its  mortgage or
real estate holdings.

     Kansas  City Life  manages  its  investments  under the  constraints  of an
asset-liability  management (ALM) program.  Obligations to policyowners,  mainly
represented  by the  anticipated  cash flows paid under  insurance  and  annuity
contracts,  dictate the nature and construction of the investment portfolio. The
ALM program is an effort to balance the  investment  opportunities  available in
the market place with the need to meet future cash obligations  while optimizing
policyowner returns.

     As interest  rates  rise,  policyowners  become  more  likely to  surrender
policies or to borrow  against the cash value,  often to meet sudden needs or to
invest  in  higher  yielding  opportunities.  This  disintermediation  may force
partial  liquidation  of the  portfolio  at a time when the fair market value of
fixed income  investments is falling.  If interest rates fall, new cash receipts
may have to be  invested at interest  rate levels  below the minimum  guaranteed
rates payable to  policyowners,  eroding profit margins.  Due to the strength of
its normal cash flow,  the Company can usually adapt to small sudden  changes in
interest  rates,  or even larger  changes  occurring  over long periods of time.
Extreme sudden market volatility,  however, poses the greatest risk. A number of
steps are taken to quantify and mitigate this risk under ALM.

     For liquidity purposes,  a number of short-term credit lines are maintained
with the  capacity  to borrow  additional  capital.  Agreements  also exist with
corresponding   investment  banks  to  borrow  funds  under  reverse  repurchase
agreements.  Kansas  City Life has  additional  borrowing  capacity  through its
membership  in the Federal  Home Loan Bank.  The  Company  has $41.5  million in
outstanding loans under this agreement which have been used to fund a short-term
floating  rate  portfolio  of  mortgage-backed   securities  and  collateralized
mortgage obligations (CMO's).

     The  aforementioned  risks  may be  hedged,  from  time to  time,  with the
purchase or sale of certain derivatives  contracts,  mainly in the form of caps,
floors, swaps or swaptions. These contracts work mainly as volatility insurance,
to provide value in periods of extreme interest rate movement.  Thus their value
is largely a function of the  likelihood  of a rapid,  dramatic  market  change.
Kansas City Life conducts  numerous  probability-based  computer  simulations to
test the effects on profitability  of these market shifts,  and to determine the
value of derivatives  hedging.  Derivatives have not been used thus far due to a
number  of  factors,  including  pricing,  liquidity  and the net  value  to the
Company's  business  position.  The  corporate  policy  is to not  engage in the
trading of such instruments for speculative  purposes,  and derivatives  markets
will only be used to hedge a specific,  identifiable  risk for a specific period
of time under specific conditions.


Changes in Accounting Standards

     Financial  Accounting  Standard  (FAS) No.  133,"Accounting  for Derivative
Instruments  and for Hedging  Activities,"  as amended by FAS No. 137,  provides
comprehensive,  consistent  standards for the  recognition  and  measurement  of
derivative and hedging  activities.  The Standard,  which the Company will adopt
January 1, 2001, is not anticipated to have a significant  impact on Kansas City
Life's reported results.

     The  National  Association  of  Insurance  Commissioners  (NAIC) has issued
comprehensive  new guidelines to statutory  accounting  principles and practices
for the life insurance  industry  which will take effect January 1, 2001.  These
revised guidelines are generally referred to as "codification." While this guide
does not impact  stockholder  reporting,  which is based on  generally  accepted
accounting  principles (GAAP), it does govern accounting practice and procedures
required for  reporting to state  regulators.  The Company  will  implement  the
guidelines  as required  with little  impact to statutory  surplus at any of our
insurance companies.


     Liquidity and Capital Resources

     Kansas  City Life  generated  $22.3  million in funds  from its  operations
annually,  on average,  over the past three years after addressing  receipts and
withdrawals  of  policyowner  contract  deposits.  Including  funds  provided by
investment sales,  maturities and paydowns,  the Company generated an average of
$689.2 million a year in new investments. Thus, liquidity is generally of little
concern,  although  funds  were  borrowed  over the three  years in  support  of
investment   strategies.   Additionally,   as  discussed  earlier,   assets  and
liabilities'  maturities  and  yields  are  matched  and cash  flow  testing  is
performed to ensure funds will be available as needed to meet future policyowner
obligations.

     The above comments  exclude net proceeds from the variable line of business
since these largely are partitioned  into separate  accounts rather than held in
the Company's  general  investments.  These  separate  accounts  totaled  $325.1
million this year end.

     Kansas City Life's statutory equity comfortably exceeds the minimum capital
deemed  necessary to support its book of  business,  as  determined  by the risk
based capital calculations and guidelines established by the NAIC.

     Current  legislative  activities  are not  expected  to have a  significant
impact on the ongoing operations of the business.

     Book value,  excluding the volatile effects of unrealized  investment gains
and losses, equaled $47.92 per share this year end and averaged 6 percent annual
growth over the last three years. In January 2001, the Board of Directors raised
the  stockholder  dividend to an  indicated  annual rate of $1.08 a share,  an 8
percent increase.  The Board also extended the stock repurchase  program through
2001 to include  the  potential  purchase  of up to an  additional  one  million
shares,  which would represent 8 percent of the shares outstanding.  The Company
purchased  126,000 of its shares on the open market for $4.0 million  under this
program during 2000.


                          CONSOLIDATED INCOME STATEMENT
          (Thousands, except per share data and parenthetical comments)

                                             2000         1999          1998
REVENUES
Insurance revenues:
  Premiums:
    Life insurance                      $    99,195      104,086       108,510
    Accident and health                      44,641       42,636        42,441
  Contract charges                          109,783      108,873       108,608
Investment revenues:
  Investment income, net                    207,135      207,682       202,402
  Realized investment gains (losses), net    (3,871)       2,860        11,426
Other                                        16,024       13,956        14,671

      TOTAL REVENUES                        472,907      480,093       488,058

BENEFITS AND EXPENSES
Policy benefits:
  Death benefits                            113,403      110,672       107,355
  Surrenders of life insurance               15,767       14,592        19,368
  Other benefits                             73,854       70,702        72,190
  Increase in benefit and contract reserves  73,816       85,206        84,427
Amortization of deferred acquisition costs   26,828       31,261        36,201
Insurance operating expenses                100,735      103,597       100,568

         TOTAL BENEFITS AND EXPENSES        404,403      416,030       420,109

Income before Federal income taxes           68,504       64,063        67,949

Federal income taxes:
  Current                                    15,633       21,172        20,471
  Deferred                                    3,788       (2,154)       (1,034)
                                             19,421       19,018        19,437

NET INCOME                              $    49,083       45,045        48,512


Basic and diluted earnings per share:
  Operating Income                            $4.29         3.51          3.32
  Realized investment gains (losses), net      (.21)         .15           .60

  Net income                                  $4.08         3.66          3.92


See accompanying Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>

                           CONSOLIDATED BALANCE SHEET

                                                                                   2000            1999
<S>                                                                          <C>                 <C>
ASSETS
Investments:
  Fixed maturities:
    Available for sale, at fair value (amortized cost $1,998,319,000;
     $2,079,458,000 - 1999)                                                  $   1,934,157       1,999,215
    Held to maturity, at amortized cost (fair value $80,463,000;
     $107,570,000 - 1999)                                                           80,572         107,606
  Equity securities available for sale, at fair value
    (cost $100,866,000; $122,371,000 - 1999)                                        94,269         115,968
  Mortgage loans on real estate, net                                               396,731         340,704
  Real estate, net                                                                  44,443          42,011
  Real estate joint ventures                                                        34,185          37,336
  Policy loans                                                                     116,024         118,521
  Short-term investments                                                            54,171          19,380
     TOTAL INVESTMENTS                                                           2,754,552       2,780,741
Cash                                                                                13,391          22,355
Accrued investment income                                                           41,028          43,907
Receivables, net                                                                     3,688           7,552
Property and equipment, net                                                         20,701          22,010
Deferred acquisition costs                                                         244,960         236,370
Value of purchased insurance in force                                               87,833          95,636
Reinsurance recoverables                                                           135,378         131,995
Deferred income taxes                                                                8,870          14,716
Other assets                                                                        10,712           6,103
Separate account assets                                                            325,148         259,899
                                                                             $   3,646,261       3,621,284
LIABILITIES AND STOCKHOLDERS' EQUITY
Future policy benefits:
  Life insurance                                                             $     775,381         782,341
  Accident and health                                                               45,905          47,215
Accumulated contract values                                                      1,619,887       1,688,706
Policy and contract claims                                                          34,083          34,721
Other policyholders' funds:
  Dividend and coupon accumulations                                                 61,354          61,740
  Other                                                                             88,195          90,885
Notes payable                                                                       41,520          69,500
Current income taxes payable                                                         6,383           7,870
Other liabilities                                                                  116,151          84,602
Separate account liabilities                                                       325,148         259,899
     TOTAL LIABILITIES                                                           3,114,007       3,127,479
Stockholders' equity:
  Common stock, par value $1.25 per share
    Authorized 36,000,000 shares, issued 18,496,680 shares                          23,121          23,121
  Paid in capital                                                                   20,109          18,498
  Retained earnings                                                                651,324         614,278
  Accumulated other comprehensive loss                                             (55,280)        (59,095)
  Less treasury stock, at cost (6,475,203 shares; 6,411,738 shares - 1999)        (107,020)       (102,997)
     TOTAL STOCKHOLDERS' EQUITY                                                    532,254         493,805
                                                                             $   3,646,261       3,621,284


<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>

                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

                                                                         2000             1999             1998


<S>                                                               <C>                    <C>               <C>
COMMON STOCK, beginning and end of year                           $      23,121          23,121            23,121

PAID IN CAPITAL:
  Beginning of year                                                      18,498          17,633            16,256
  Excess of proceeds over cost of treasury stock sold                     1,611             865             1,377

  End of year                                                            20,109          18,498            17,633

RETAINED EARNINGS:
  Beginning of year                                                     614,278         581,074           543,715
  Net income                                                             49,083          45,045            48,512
  Other comprehensive income (loss):
    Unrealized gains (losses) on securities                               9,581        (104,921)           15,094
    Decrease (increase) in unfunded pension liability                    (5,766)            360            (6,076)
  Comprehensive income (loss)                                            52,898         (59,516)           57,530
  Transfer other comprehensive (income) loss to
    accumulated other comprehensive income                               (3,815)        104,561            (9,018)
  Stockholder dividends of $1.00 per share
     ($.96 - 1999 and $.90 - 1998)                                      (12,037)        (11,841)          (11,153)

  End of year                                                           651,324         614,278           581,074


ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS):
  Beginning of year                                                      (59,095)        45,466            36,448
  Other comprehensive income (loss)                                        3,815       (104,561)            9,018

  End of year                                                            (55,280)       (59,095)           45,466


TREASURY STOCK, at cost:
  Beginning of year                                                     (102,997)       (89,361)          (88,946)
  Cost of 174,550 shares acquired
    (349,087 shares - 1999 and 24,640 shares - 1998)                      (5,600)       (14,094)           (1,063)
  Cost of 111,085 shares sold
    (32,243 shares - 1999 and 47,296 shares - 1998)                        1,577            458               648

  End of year                                                           (107,020)      (102,997)          (89,361)


TOTAL STOCKHOLDERS' EQUITY                                         $     532,254        493,805           577,933


<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

<TABLE>
<CAPTION>

                                                 CONSOLIDATED STATEMENT OF CASH FLOWS



                                                                         2000             1999             1998

OPERATING ACTIVITIES
<S>                                                               <C>                    <C>               <C>
Net income                                                        $      49,083          45,045            48,512
Adjustments to reconcile net income to
  net cash from operating activities:
    Amortization of investment premium, net                               4,867           2,061             2,398
    Depreciation                                                          6,093           5,265             5,153
    Policy acquisition costs capitalized                                (35,775)        (39,553)          (46,011)
    Amortization of deferred acquisition costs                           26,828          31,261            36,201
    Realized investment (gains) losses                                    3,871          (2,860)          (11,426)
    Changes in assets and liabilities:
     Future policy benefits                                              (8,270)         12,375            25,855
     Accumulated contract values                                         (8,246)        (10,182)          (12,264)
     Other policy liabilities                                            (3,076)         14,867             6,842
     Income taxes payable and deferred                                    8,147         (14,748)          (11,399)
    Other, net                                                           22,819          18,449              (718)

    NET CASH PROVIDED                                                    66,341          61,980            43,143

INVESTING ACTIVITIES
Purchases of investments:
  Fixed maturities available for sale                                  (415,189)       (654,943)         (644,087)
  Fixed maturities held to maturity                                      (3,304)         (3,354)                -
  Equity securities available for sale                                  (22,134)        (43,130)          (28,047)
Sales of fixed maturities available for sale                            369,027         406,785           372,930
Maturities and principal paydowns
  of security investments:
    Fixed maturities available for sale                                 115,557         173,990           216,247
    Fixed maturities held to maturity                                    24,539          10,913            30,453
    Equity securities available for sale                                 44,158          22,644            28,043
Purchases of other investments                                         (138,947)        (36,300)          (78,298)
Sales, maturities and principal
  paydowns of other investments                                          53,990          59,655            60,500
Dispositions of insurance blocks - net cash paid                              -          (5,162)          (13,250)

    NET CASH PROVIDED (USED)                                             27,697         (68,902)          (55,509)

FINANCING ACTIVITIES
Proceeds from borrowings                                                 58,445          95,850             1,100
Repayment of borrowings                                                 (86,425)        (26,350)           (1,100)
Policyowner contract deposits                                           137,901         148,993           175,421
Withdrawals of policyowner contract deposits                           (198,474)       (181,367)         (187,028)
Cash dividends to stockholders                                          (12,037)        (11,841)          (11,153)
Disposition (acquisition) of treasury stock, net                         (2,412)        (12,771)              962

    NET CASH PROVIDED (USED)                                           (103,002)         12,514           (21,798)

Increase (decrease) in cash                                              (8,964)          5,592           (34,164)
Cash at beginning of year                                                22,355          16,763            50,927

    CASH AT END OF YEAR                                           $      13,391          22,355            16,763



<FN>
See accompanying Notes to Consolidated Financial Statements.
</FN>
</TABLE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  (Amounts in tables are generally stated in thousands, except per share data)


SIGNIFICANT ACCOUNTING POLICIES

Organization
Kansas City Life Insurance Company is a Missouri  domiciled stock life insurance
company which, with its affiliates, is licensed to sell insurance products in 49
states and the District of Columbia.  The Company offers a diversified portfolio
of  individual  insurance,  annuity  and group  products  distributed  primarily
through numerous general  agencies.  In recent years, the Company's new business
activities have been concentrated in interest sensitive and variable products.

Basis of Presentation
The  accompanying  consolidated  financial  statements have been prepared on the
basis of accounting  principles  generally  accepted in the United States (GAAP)
and  include  the  accounts  of  Kansas  City  Life  Insurance  Company  and its
subsidiaries, principally Sunset Life Insurance Company of America (Sunset Life)
and Old American  Insurance  Company (Old  American).  Significant  intercompany
transactions  have been eliminated in consolidation.  Certain  reclassifications
have  been  made to prior  year  results  to  conform  with the  current  year's
presentation. GAAP requires management to make certain estimates and assumptions
which affect  amounts  reported in the  financial  statements  and  accompanying
notes. Actual results could differ from these estimates.

Recognition of Revenues
Traditional  life insurance  products  include whole life  insurance,  term life
insurance and certain  annuities.  Premiums for these products are recognized as
revenues  when due.  Accident and health  insurance  premiums are  recognized as
revenues  over the  terms  of the  policies.  Revenues  for  universal  life and
flexible  annuity products are amounts assessed against contract values for cost
of insurance,  policy administration and surrenders,  as well as amortization of
deferred front-end contract charges.

Future Policy Benefits
For traditional  life insurance  products,  reserves have been computed by a net
level premium  method based upon  estimates at the time of issue for  investment
yields,  mortality and  withdrawals.  These  estimates  include  provisions  for
experience less favorable than actually  expected.  Investment yield assumptions
for new issues  are graded  down and range  from 7.25  percent  to5.25  percent.
Mortality  assumptions  are based on standard  mortality  tables.  The 1975-1980
Select and Ultimate Basic Table is used for business issued since 1977.

Reserves  and claim  liabilities  for  accident  and  health  insurance  include
estimated  unpaid claims and claims  incurred but not reported.  For traditional
life and  accident  and health  insurance,  benefits  and claims are  charged to
expense in the period incurred.

Liabilities  for  universal  life  and  flexible  annuity   products   represent
accumulated contract values,  without reduction for potential surrender charges,
and deferred front-end contract charges which are amortized over the term of the
policies.  Benefits and claims are charged to expense in the period incurred net
of related accumulated contract values.  Interest on accumulated contract values
is credited to contracts as earned. Crediting rates for universal life insurance
and flexible  annuity  products  ranged from 4.00 percent to 6.75 percent  (3.85
percent to 6.50 percent - 1999 and 3.85 percent to 7.25 percent - 1998).

Withdrawal assumptions for all products are based on corporate experience.

Policy Acquisition Costs
The costs of acquiring new business,  principally  commissions,  certain  policy
issue and  underwriting  expenses  and certain  variable  agency  expenses,  are
deferred.  For  traditional  life  products,   deferred  acquisition  costs  are
amortized in proportion to premium  revenues over the  premium-paying  period of
related  policies,  using  assumptions  consistent  with those used in computing
benefit reserves. Acquisition costs for interest sensitive and variable products
are  amortized  over a period not  exceeding 30 years in proportion to estimated
gross profits arising from interest spreads and charges for mortality,  expenses
and surrenders  that are expected to be realized over the term of the contracts.
The amortization is adjusted retrospectively when estimates of current or future
gross profits to be realized from a block of business are revised. This asset is
also adjusted for the impact on estimated gross profits of net unrealized  gains
and losses on securities.

Value of Purchased Insurance in Force
The value of purchased insurance in force arising from the acquisition of a life
insurance  subsidiary and a block of life insurance  business is being amortized
in  proportion  to projected  future  premium  revenues or gross  profits.  Such
amortization is included in insurance operating  expenses.  If these projections
should  change,  the  amortization  is  adjusted  prospectively.  This asset was
increased  $8,523,000  ($9,313,000 - 1999 and  $9,609,000 - 1998) for accrual of
interest and reduced $16,326,000 ($18,008,000 - 1999 and $17,194,000 - 1998) for
amortization.  The  increase  for  accrual of  interest  for the life  insurance
subsidiary was calculated  using a 13.0 percent interest rate for the life block
and a 7.0 percent  rate for the  accident  and health block and, on the acquired
block,  a 7.0 percent  interest rate on the  traditional  life portion and a 5.4
percent rate on the interest  sensitive  portion.  Total accumulated  accrual of
interest and amortization equal $62,942,000 and $97,941,000,  respectively.  The
value of  purchased  insurance  inforce is adjusted  for the impact on estimated
gross  profits  of net  unrealized  gains and losses on  securities.  Based upon
current conditions and assumptions as to future events, the Company expects that
the amortization will be between 6 and 8 percent of the asset's current carrying
amount in each of the next five years.

Separate Accounts
These  accounts  arise from the sale of  variable  life  insurance  and  annuity
products.  Their assets are legally segregated and are not subject to the claims
which may  arise  from any other  business  of the  Company.  These  assets  are
reported at fair value since the underlying  investment risks are assumed by the
policyholders.  Therefore the related  liabilities are recorded at amounts equal
to the  underlying  assets.  Investment  income and gains or losses arising from
separate accounts accrue directly to the policyholders and are,  therefore,  not
included  in  investment  earnings  in  the  accompanying   consolidated  income
statement. Revenues to the Company from separate accounts consist principally of
contract  maintenance  charges,  administrative  fees  and  mortality  and  risk
charges.

Participating Policies
Participating  business at year end  approximates 11 percent of the consolidated
life  insurance  in force.  The  amount of  dividends  to be paid is  determined
annually by the Board of Directors. Provision has been made in the liability for
future policy benefits to allocate amounts to participating policyholders on the
basis of dividend  scales  contemplated  at the time the  policies  were issued.
Additional provisions have been made for policyholder dividends in excess of the
original scale which have been declared by the Board of Directors.

Investments
Securities  held to  maturity  and  short-term  investments  are  stated at cost
adjusted  for  amortization  of  premium  and  accrual of  discount.  Securities
available  for sale are  stated at fair  value.  Unrealized  gains and losses on
securities  available for sale are reduced by deferred  income taxes and related
adjustments to deferred  acquisition costs and the value of purchased  insurance
in force, and are included in accumulated other comprehensive income.

Mortgage  loans are stated at cost  adjusted  for  amortization  of premium  and
accrual of discount less an allowance for possible  losses. A loan is considered
impaired if it is probable that  contractual  amounts due will not be collected.
An allowance  for  possible  impairment  losses is based upon the loan's  market
price, or the fair value of the underlying collateral on a net realizable basis.
Loans in  foreclosure  and  loans  considered  to be  impaired  are  placed on a
non-accrual  status.  Other real estate  investments  are carried at depreciated
cost.  Real estate joint  ventures are valued at cost adjusted for the Company's
equity in  earnings  since  acquisition.  Policy  loans are carried at cost less
payments  received.  Premiums and  discounts on fixed  maturity  securities  are
amortized over the life of the related  security as an adjustment to yield using
the  effective  interest  method.  Realized  gains and  losses on  disposals  of
investments,  determined by the specific  identification method, are included in
investment revenues.

Federal Income Taxes
Income taxes have been provided using the liability  method.  Under that method,
deferred tax assets and  liabilities  are  determined  based on the  differences
between their financial reporting and their tax bases and are measured using the
enacted tax rates.

Income Per Share
Due to the Company's capital  structure and lack of other  potentially  dilutive
securities, there is no difference between basic and diluted earnings per common
share for any of the years or periods  reported.  The weighted average number of
shares  outstanding  during the year was 12,033,725 shares  (12,316,220 shares -
1999 and 12,394,104  shares - 1998). The actual number of shares  outstanding at
year end was 12,021,477 (12,084,942 - 1999).

Statutory Information and
  Stockholder Dividends Restriction
The Company's earnings, unassigned surplus (retained earnings) and stockholders'
equity, on the statutory basis used to report to regulatory authorities, follow.

                                2000      1999     1998

Net gain from operations   $   45,730    41,902   35,185
Net income                     42,265    42,012   36,152
Unassigned surplus
    at December 31            311,804   281,254  257,853
Stockholders' equity
    at December 31            248,014   219,875  209,246

Stockholder dividends may not exceed statutory unassigned surplus. Additionally,
under  Missouri  law, the Company  must have the prior  approval of the Missouri
Director  of  Insurance  in order to pay a  dividend  exceeding  the  greater of
statutory  net gain from  operations  for the  preceding  year or 10  percent of
statutory  stockholders'  equity at the end of the preceding  year.  The maximum
payable in 2001 without  prior  approval is  $45,730,000.  The Company  believes
these  statutory  limitations  impose no practical  restrictions on its dividend
payment plans.

As of  January 1,  2001,  the  Company  will  adopt new  statutory  codification
guidelines as promulgated by the National Association of Insurance Commissioners
(NAIC).  The net  effect  to both net  income  and  surplus  is  expected  to be
immaterial.

The  Company  is  required  to  deposit a defined  amount of assets  with  state
regulatory  authorities.   Such  assets  had  an  aggregate  carrying  value  of
$18,000,000 ($21,000,000 - 1999 and $18,000,000 - 1998).

Comprehensive Income (Loss)
Comprehensive  income is comprised of net income and other comprehensive  income
which includes  unrealized gains or losses on securities  available for sale and
unfunded pension liabilities as shown below.

                             Unrealized    Unfunded
                             Gain (Loss)   Pension
                            on Securities  Liability   Total
2000:
Unrealized holding gains
  arising during the year    $    9,422                9,422
Less:  Realized losses included
            in net income        (6,467)              (6,467)
Net unrealized gains             15,889               15,889
Increase in unfunded
  pension liability                   -     (8,871)   (8,871)
Effect on deferred
  acquisition costs              (1,145)              (1,145)
Deferred income taxes            (5,163)     3,105    (2,058)
Other comprehensive
  income (loss)              $    9,581     (5,766)    3,815


1999:
Unrealized holding losses
  arising during the year    $ (172,801)           (172,801)
Less:  Realized losses included
            in net income        (2,527)             (2,527)
Net unrealized losses          (170,274)           (170,274)
Decrease in unfunded
  pension liability                   -       554       554
Effect on deferred
  acquisition costs               8,858               8,858
Deferred income taxes            56,495      (194)   56,301
Other comprehensive
  income (loss)              $ (104,921)      360  (104,561)


                             Unrealized    Unfunded
                             Gain (Loss)    Pension
                            on Securities  Liability   Total

1998:
Unrealized holding gains
  arising during the year   $    33,261               33,261
Less:  Realized gains included
            in net income         9,360                9,360
Net unrealized gains             23,901               23,901
Increase in unfunded
  pension liability                   -    (9,348)    (9,348)
Effect on deferred
  acquisition costs                (680)                (680)
Deferred income taxes            (8,127)    3,272     (4,855)
Other comprehensive
  income (loss)              $   15,094    (6,076)     9,018


The  accumulated  balances  related  to  each  component  of  accumulated  other
comprehensive income follow.

                                           Change in
                             Unrealized    Unfunded
                             Gain (Loss)    Pension
                            on Securities  Liability  Total

December 31, 1998           $   51,542     (6,076)    45,466
Other comprehensive
   income (loss) for 1999     (104,921)       360   (104,561)

December 31, 1999              (53,379)    (5,716)   (59,095)
Other comprehensive
   income (loss) for 2000        9,581     (5,766)     3,815

December 31, 2000           $  (43,798)   (11,482)   (55,280)


REINSURANCE

                                  2000      1999      1998
Life insurance in force (in millions):
    Direct                    $   24,120   23,616    23,261
    Ceded                         (6,514)  (5,483)   (4,488)
    Assumed                        2,818    3,131     3,380

        Net                   $   20,424   21,264    22,153

Premiums:
Life insurance:
    Direct                    $  120,908  127,805   128,584
    Ceded                        (27,818) (29,255)  (26,748)
    Assumed                        6,105    5,536     6,674

        Net                   $   99,195  104,086   108,510

 Accident and health:
    Direct                    $   54,769   56,723    54,022
    Ceded                        (10,128) (14,087)  (11,581)

        Net                   $   44,641   42,636    42,441


Contract charges arise generally from directly issued business. However contract
charges  also arise from a block of business  assumed  during 1997 as  described
below.  Ceded  benefit  recoveries  were  $49,883,000  ($49,687,000  - 1999  and
$57,048,000 - 1998).

Old American has two coinsurance  agreements.  One agreement  reinsures  certain
whole life  policies  issued by Old  American  prior to December 1, 1986.  These
policies had a face value of  $103,901,000  as of this year end. The reserve for
future policy benefits ceded under this agreement was $44,331,000 ($46,741,000 -
1999).  The second agreement ceded $10.4 million of home health care reserves in
October 1998.

In 1997,  Kansas City Life  acquired a block of  traditional  life and universal
life-type  products.  As of this year end,  the block had $2.8  billion  of life
insurance in force ($3.1 billion - 1999).  The block  generated  life  insurance
premiums of $5,544,000 ($5,788,000 - 1999). Additionally,  in November 1999, the
Company ceded its group long-term disability reserves, totaling $5.2 million.

The maximum  retention on any one life is $350,000  for ordinary  life plans and
$100,000  for group  coverage.  A  contingent  liability  exists with respect to
reinsurance,  which may become a liability of the Company in the unlikely  event
that  the  reinsurers  should  be  unable  to  meet  obligations  assumed  under
reinsurance contracts.

PROPERTY AND EQUIPMENT

                                           2000        1999

Land                                $       766         766
Home office complex                      21,444      21,404
Furniture and equipment                  34,741      32,258

                                         56,951      54,428
Less accumulated depreciation           (36,250)    (32,418)

                                    $    20,701      22,010

Property  and   equipment  are  stated  at  cost  and   depreciated   using  the
straight-line  method.  The home office is  depreciated  over 25 to 50 years and
furniture and equipment over 3 to 10 years, their estimated useful lives.

NOTES PAYABLE

                                          2000      1999
Federal Home Loan Bank loan with
  various maturities and a weighted
  average variable interest rate,
  currently 6.63 percent, secured
  by specified securities              $  41,520    55,000

Commerce Bank unsecured revolving
  credit loan agreement providing a
  $20,000,000 line of credit with a
  variable interest rate, currently
  6.95 percent                                 -     2,500

UMB Bank unsecured revolving credit
  loan agreements providing a
  $40,000,000 line of credit with a
  variable interest rate, currently
  6.95 percent                                 -    12,000

                                       $  41,520    69,500

As a  member  of the  Federal  Home  Loan  Bank  with a  capital  investment  of
$14,937,000,  the  Company  has the  ability  to borrow  up to twenty  times its
capital  investment,  or $298,734,000,  when  collateralized  from the bank. The
Company earned a 7.00 percent average rate on the capital investment in the bank
for 2000. All borrowing is used to enhance investment strategies.  Interest paid
on all borrowings equaled $2,146,000 ($1,135,000 - 1999 and $717,000 - 1998).

FAIR VALUE OF
     FINANCIAL INSTRUMENTS


The  carrying  amounts  for cash,  short-term  investments  and policy  loans as
reported in the accompanying  balance sheet approximate  their fair values.  The
fair values for securities are based on quoted market prices,  where  available.
For those securities not actively traded, fair values are estimated using values
obtained  from  independent   pricing  services  or,  in  the  case  of  private
placements,  are  estimated by  discounting  expected  future cash flows using a
current market rate applicable to the yield,  credit quality and maturity of the
investments.  Fair values for mortgage loans are based upon discounted cash flow
analyses using an interest rate  assumption 2 percent above the comparable  U.S.
Treasury rate.

Fair  values  for the  Company's  liabilities  under  investment-type  insurance
contracts,  included with accumulated contract values for flexible annuities and
with  other  policyholder   funds  for  supplementary   contracts  without  life
contingencies, are estimated to be their cash surrender values.

Fair  values  for  the  Company's  insurance  contracts  other  than  investment
contracts  are not  required  to be  disclosed.  However,  the  fair  values  of
liabilities  under all insurance  contracts are taken into  consideration in the
Company's overall  management of interest rate risk, which minimizes exposure to
changing  interest  rates  through the matching of  investment  maturities  with
amounts due under insurance contracts.

The carrying amounts and fair values of the financial instruments follow.

                            2000                   1999
                     Carrying     Fair      Carrying    Fair
                     Amount       Value      Amount     Value
Investments:
  Securities available
    for sale       $2,028,426  2,028,426  2,115,183  2,115,183
  Securities held
    to maturity        80,572     80,463    107,606    107,570
  Mortgage loans      396,731    409,000    340,704    328,973
Liabilities:
  Individual and
    group annuities  $668,233    652,898    743,438    724,908
  Supplementary
    contracts without
    life contingencies 20,761     20,761     21,216     21,216

The  following   Investments  Note  provides   further  details   regarding  the
investments above.

INVESTMENTS

Investment Revenues
Major categories of investment revenues are summarized as follows.

                                2000       1999        1998
Investment income:
    Fixed maturities      $   156,117    157,766     154,213
    Equity securities           9,678      9,378       6,583
     Mortgage loans            29,478     27,608      26,024
    Real estate                10,563      9,907       9,587
    Policy loans                7,852      7,959       8,098
    Short-term                  3,025      3,639       4,832
    Other                       3,914      3,709       3,948
                              220,627    219,966     213,285
Less investment expenses      (13,492)   (12,284)    (10,883)

                          $   207,135    207,682     202,402

Realized gains (losses):
    Fixed maturities      $   (12,614)    (2,714)      8,052
    Equity securities             517        126       1,360
    Mortgage loans              2,970      1,500           -
    Real estate                 4,316      3,684       2,014
    Other                         940        264           -

                          $    (3,871)     2,860      11,426

Unrealized Gains and Losses
Unrealized gains (losses) on the Company's securities
follow.
                               2000        1999         1998

Available for sale:
  End of year             $   (70,758)   (86,647)     83,627
  Effect on deferred
    acquisition costs           3,381      4,526      (4,332)
  Deferred income taxes        23,579     28,742     (27,753)

                          $   (43,798)   (53,379)     51,542

  Increase (decrease) in
    net unrealized gains
    during the year:
      Fixed maturities    $     9,697    (99,595)     18,701
      Equity securities          (116)    (5,326)     (3,607)

                          $     9,581   (104,921)     15,094

Held to maturity:
  End of year             $      (109)       (36)      8,011

  Increase (decrease) in
    net unrealized gains
    during the year       $       (73)    (8,047)      2,177

Securities
The amortized  cost and fair value of investments in securities at this year end
follow.

                                      Gross
                       Amortized   Unrealized        Fair
                         Cost     Gains   Losses     Value
Available for sale:
Bonds:
  U.S. government  $    45,050    1,539      221     46,368
  Public utility       290,415    2,143   10,726    281,832
  Corporate          1,233,304   11,359   72,392  1,172,271
  Mortgage-backed      381,224    5,138    2,051    384,311
  Other                 47,581    1,109       60     48,630
Redeemable
   preferred stocks        745        8        8        745

Fixed maturities     1,998,319   21,296   85,458  1,934,157
Equity securities      100,866    2,141    8,738     94,269

                     2,099,185   23,437   94,196  2,028,426

Bonds held to maturity:
Public utility          12,474      817       18     13,273
Corporate               62,947    1,123    2,308     61,762
Other                    5,151      277        -      5,428

                        80,572    2,217    2,326     80,463

                   $ 2,179,757   25,654   96,522  2,108,889


The amortized  cost and fair value of investments in securities at last year end
follow.


                                      Gross
                      Amortized     Unrealized       Fair
                         Cost     Gains   Losses     Value
Available for sale:
Bonds:
  U.S. government  $    47,264      170      607     46,827
  Public utility       270,618    1,938   11,098    261,458
  Corporate          1,405,241    7,119   78,468  1,333,892
  Mortgage-backed      299,933    5,522    3,480    301,975
  Other                 55,537      217    1,556     54,198
Redeemable
   preferred stocks        865       12       12        865

Fixed maturities     2,079,458   14,978   95,221  1,999,215
Equity securities      122,371    1,916    8,319    115,968

                     2,201,829   16,894  103,540  2,115,183

Bonds held to maturity:
Public utility          18,101      743       45     18,799
Corporate               83,429    1,282    2,127     82,584
Other                    6,076      117        6      6,187

                       107,606    2,142    2,178    107,570

                   $ 2,309,435   19,036  105,718  2,222,753


The Company does not hold any non-income producing fixed maturity securities.

The  distribution of the fixed maturity  securities'  contractual  maturities at
this year end  follows.  However,  expected  maturities  may  differ  from these
contractual  maturities  since  borrowers  may have the  right to call or prepay
obligations.

                                      Amortized      Fair
                                        Cost         Value
Available for sale:
Due in one year or less            $     32,978      30,380
Due after one year through five years   479,318     472,312
Due after five years through ten years  349,413     335,202
Due after ten years                     755,386     711,952
Mortgage-backed bonds                   381,224     384,311

                                   $  1,998,319   1,934,157


Held to maturity:
Due in one year or less            $     20,809      20,877
Due after one year through five years    35,990      37,512
Due after five years through ten years   22,275      20,802
Due after ten years                       1,498       1,272

                                   $     80,572      80,463

Sales  of  investments  in  securities  available  for  sale,  excluding  normal
maturities and calls, follow.

                                 2000      1999       1998

Proceeds                      $ 392,548   428,425   422,241
Gross realized gains              7,292     9,455    12,512
Gross realized losses            13,541    10,371     5,234

The Company does not hold securities of any corporation and its affiliates which
exceeded 10 percent of stockholders' equity.

No derivative financial instruments are employed.

Mortgage Loans
The Company holds no non-income  producing  mortgage loans  ($1,528,000 - 1999).
Mortgage loans are carried net of a valuation reserve of $4,030,000  ($7,000,000
- 1999).

The mortgage  portfolio is  diversified  geographically  and by property type as
follows.

                               2000                       1999
                        Carrying     Fair        Carrying     Fair
                         Amount      Value        Amount      Value
Geographic region:
  East north central $   28,139      28,612       29,470      28,250
  Mountain               79,430      81,995       69,522      67,325
  Pacific               137,559     141,781      123,581     119,375
  West south central     58,847      61,521       30,708      30,071
  West north central     71,921      73,799       71,030      68,703
  Other                  24,865      25,322       23,393      22,249
  Valuation reserve      (4,030)     (4,030)      (7,000)     (7,000)
                     $  396,731     409,000      340,704     328,973


                                2000                      1999
                        Carrying     Fair        Carrying     Fair
                         Amount      Value        Amount      Value
Property type:
 Industrial          $  258,195     265,770      229,103     221,036
 Retail                  18,699      19,436       19,510      19,515
 Office                 107,534     111,024       81,540      78,310
 Other                   16,333      16,800       17,551      17,112
 Valuation reserve       (4,030)     (4,030)      (7,000)     (7,000)
                     $  396,731     409,000      340,704     328,973

The Company has commitments which expire in 2001 to originate  mortgage loans of
$15,122,000.

No  mortgage  loans  were   foreclosed  upon  and  transferred  to  real  estate
investments during the year (none - 1999 and $1,181,000 - 1998).

No mortgage  loans were  acquired in the sale of real estate  assets  during the
year (none - 1999 and $2,025,000 - 1998).

Real Estate
Detail concerning the Company's real estate investments follows.

                                         2000         1999
Penntower office building, at cost:
    Land                              $    1,106      1,106
    Building                              18,649     18,582
    Less accumulated depreciation        (11,477)   (10,881)
Foreclosed real estate, at lower of
    cost or net realizable value           2,090      4,655
Other investment properties, at cost:
    Land                                  11,050      6,110
    Buildings                             37,958     36,710
    Less accumulated depreciation        (14,933)   (14,271)

                                      $   44,443     42,011

Investment real estate,  other than foreclosed  properties,  is depreciated on a
straight-line basis.  Penntower office building is depreciated over 60 years and
all other properties from 10 to 35 years.  Foreclosed real estate is carried net
of a  valuation  allowance  of  $625,000  ($1,519,000  - 1999)  to  reflect  net
realizable value.

The  Company  held  non-income   producing  real  estate   equaling   $5,236,000
($3,483,000 - 1999).


PENSIONS AND OTHER
POSTRETIREMENT BENEFITS

The  Company  has  pension  and  other  postretirement  benefit  plans  covering
substantially  all its  employees.  The  defined  benefits  pension  plan covers
employees  who were age 55 or over with at least 15 years of vested  service  at
December  31, 1997.  This plan's  benefits are based on years of service and the
employee's compensation during the last five years of employment. Employees have
a cash  balance  account  consisting  of  credits to the  account  based upon an
employee's years of service and compensation and interest  credits.  The closure
of Sunset Life's office in 1999 and significant  retirements at Kansas City Life
resulted in the  recognition of settlement and  curtailment  costs of $3,562,000
that year. The postretirement medical plans for the employees, full-time agents,
and their dependents are contributory with contributions  adjusted annually. The
Company pays these medical costs as due and the plan  incorporates  cost-sharing
features.  The postretirement life insurance plan is noncontributory  with level
annual payments over the participants' expected service periods. The plan covers
only those  employees with at least one year of service as of December 31, 1997.
The benefits in this plan are frozen using the  employees'  years of service and
compensation as of December 31, 1997. The tables at the right outline the plans'
funded status and their impact on the financial statements.

Noncontributory  defined  contribution  retirement  plans for general agents and
eligible  sales agents  provide  supplemental  payments based upon earned agency
first year individual life and annuity commissions. Contributions to these plans
were $143,000 ($143,000 - 1999 and $134,000 - 1998). A noncontributory  deferred
compensation  plan for eligible agents based upon earned first year  commissions
is also offered.  Contributions to this plan were $583,000  ($609,000 - 1999 and
$724,000 - 1998).

Savings plans for eligible employees and agents match employee  contributions up
to 6 percent of salary and agent  contributions  up to 2.5 percent of prior year
paid commissions. Contributions expensed to the plan were $1,425,000 ($1,468,000
- 1999 and $1,485,000 - 1998).  Effective in 1998, the Company may contribute an
additional  profit  sharing  amount up to 4 percent  of  salary  depending  upon
corporate profits.  The Company made a profit sharing  contribution of 4 percent
for 2000 equaling $1,098,000 (none - 1999 and 1998).

A noncontributory  trusteed  employee stock ownership plan covers  substantially
all salaried employees. No contributions have been made to this plan since 1992.

<TABLE>
<CAPTION>
                                                     Pension Benefits                Other Benefits
                                                    2000           1999            2000          1999

<S>                                             <C>               <C>           <C>            <C>
Accumulated benefit obligation                  $   98,273         88,405             -            -

Change in plan assets:
Fair value of plan assets at beginning of year  $   85,240        102,869         1,403        1,614
Return on plan assets                                4,033            934            74           82
Company contributions                                4,000          2,400             -            -
Benefits paid                                       (5,832)       (20,963)          (41)        (293)

  Fair value of plan assets at end of year$         87,441         85,240         1,436        1,403

Change in projected benefit obligation:
Benefit obligation at beginning of year         $   98,351        110,547        16,942       18,808
Service cost                                         1,913          2,760           530          626
Interest cost                                        7,365          7,673         1,144        1,200
Curtailment                                              -            469             -       (1,043)
Settlement                                               -          5,375             -            -
Net (gain) loss from past experience                   395         (3,921)       (1,641)      (2,008)
Benefits paid                                       (5,935)       (24,552)         (649)        (641)

  Benefit obligation at end of year             $  102,089         98,351        16,326       16,942

Plan underfunding                               $  (14,648)       (13,111)      (14,890)     (15,539)
Unrecognized net (gain) loss                        28,291         26,404        (1,020)         557
Unrecognized prior service cost                     (6,500)        (7,147)            -            -
Unrecognized net transition asset                     (311)          (517)            -            -

  Prepaid (accrued) benefit cost                $    6,832          5,629       (15,910)     (14,982)

Amounts recognized in the
  consolidated balance sheet:
Accrued benefit liability                       $  (10,833)         (3,165)     (15,910)     (14,982)
Accumulated other comprehensive income              17,665           8,794            -            -

  Net amount recognized                         $    6,832           5,629      (15,910)     (14,982)

Weighted average assumptions:
Discount rate                                         7.50%           7.75         7.50         7.75
Expected return on plan assets                        8.75            8.75         5.50         5.50
Rate of compensation increase                         4.50            4.50            -            -

<FN>
The assumed  growth rate of health  care costs has a  significant  effect on the
amounts reported as the table below demonstrates.
</FN>
</TABLE>

                                               One Percentage Point
                                             Change in the Growth Rate
                                             Increase        Decrease

Service and interest cost components       $      318           (263)
Postretirement benefit obligation               2,972         (2,317)

The components of the net periodic benefits cost follow.

<TABLE>
<CAPTION>
                                            Pension Benefits                   Other Benefits
                                        2000      1999       1998         2000      1999       1998

<S>                                  <C>          <C>        <C>           <C>       <C>       <C>
Service cost                         $  1,912     2,760      2,746           530       626       615
Interest cost                           7,365     7,673      7,650         1,144     1,200     1,194
Expected return on plan assets         (7,211)   (9,067)    (8,539)          (78)      (88)      (90)
Amortization of:
  Unrecognized net (gain) loss          1,687     1,014      1,152           (20)       52        76
  Unrecognized prior service cost        (647)     (647)      (769)            -         -         -
  Unrecognized net transition asset      (206)     (206)      (206)            -         -         -

Net periodic benefits cost           $  2,900     1,527      2,034         1,576     1,790     1,795


<FN>
For measurement purposes, a 10 percent annual increase in the per capita cost of
covered  health care benefits was assumed  todecrease  gradually to 6 percent in
2004 and thereafter.
</FN>
</TABLE>

<TABLE>
<CAPTION>

SEGMENT INFORMATION

                                               Kansas City Life          Sunset         Old
                                            Individual     Group           Life       American      Total
2000:
<S>                                       <C>               <C>           <C>          <C>         <C>
Revenues from external customers          $   110,339       56,267        28,272       74,765      269,643
Investment revenues                           155,420         ,767        34,456       16,492      207,135
Segment operating income                       32,601          831        10,438        7,729       51,599
Other significant noncash items:
  Increase (decrease) in policy reserves       49,560         (389)       17,721        6,924       73,816
  Amortization of deferred
    acquisition costs                          11,437            -         5,138       10,253       26,828
  Amortization of the value of
    purchased insurance in force                4,305            -             -        3,498        7,803
Interest expense                                2,177            -             1            5        2,183
Income tax expense                             12,172          356         3,751        3,142       19,421

Segment assets                              2,696,884       10,948       531,393      407,036    3,646,261
Expenditures for other long-lived assets        2,640           40             -           15        2,695


1999:
Revenues from external customers          $   113,399       53,311        26,750       76,091      269,551
Investment revenues                           158,017        1,083        33,617       14,965      207,682
Segment operating income (loss)                30,622         (898)        8,049        5,413       43,186
Other significant noncash items:
  Increase in policy reserves                  60,072          681        16,411        8,042       85,206
  Amortization of deferred
    acquisition costs                          12,443            -         7,765       11,053       31,261
  Amortization of the value of
    purchased insurance in force                5,128            -             -        3,567        8,695
Interest expense                                1,148            -             -            -        1,148
Income tax expense (benefit)                   12,931         (385)        3,898        2,574       19,018

Segment assets                              2,679,521       16,107       528,708      396,948    3,621,284
Expenditures for other long-lived assets        3,742          214             3          298        4,257


1998:
Revenues from external customers          $   112,898       52,537        28,794       80,001      274,230
Investment revenues                           155,428        1,146        31,878       13,950      202,402
Segment operating income (loss)                27,918         (985)        8,954        5,198       41,085
Other significant noncash items:
  Increase in policy reserves                  57,581          535        16,269       10,042       84,427
  Amortization of deferred
    acquisition costs                          16,861            -         8,323       11,017       36,201
  Amortization of the value of
    purchased insurance in force                4,660            -             -        2,925        7,585
Interest expense                                  717            -             -            -          717
Income tax expense (benefit)                   12,997         (422)        4,314        2,548       19,437

Segment assets                              2,627,568       16,215       538,254      395,377     3577,414
Expenditures for other long-lived assets        2,658          259            97           69        3,083
</TABLE>

Enterprise-Wide Disclosures
                                                     2000       1999       1998
Revenues from external customers by line of business:
  Variable life insurance and annuities          $  16,181     11,153      6,928
  Interest sensitive products                       93,602     97,720    101,680
  Traditional individual insurance products         92,078     97,616    103,171
  Group life and disability products                51,758     49,106     47,780
  Group ASO services                                 4,509      4,205      4,716
  Other                                             11,515      9,751      9,955
      Total                                      $ 269,643    269,551    274,230


Company  operations have been classified and summarized into the four reportable
segments above.  The segments,  while generally  classified along Company lines,
are based upon distribution  method,  product  portfolio and target market.  The
Parent Company was divided into two segments.  The Kansas City Life - Individual
segment  consists of sales of variable life and  annuities,  interest  sensitive
products and  traditional  life  insurance  products by a career  general agency
sales  force.  The Kansas City Life - Group  segment  consists of sales of group
life,  disability and dental products and administrative  services only (ASO) by
the Company's career general agency sales force and appointed group agents.  The
Sunset Life  segment  consists of sales of interest  sensitive  and  traditional
products by personal  producing general agents. The Old American segment markets
whole life final  expense  products to seniors  through a general  agency  sales
force.

Separate  investment  portfolios  are  maintained  for  each  of the  companies.
However,  investments  are  allocated to the group  segment  based upon its cash
flows.  Its investment  revenue is modeled using the year of investment  method.
Home office  functions are fully  integrated for the three companies in order to
maximize economies of scale. Therefore,  operating expenses are allocated to the
segments  based upon internal cost studies  which are  consistent  with industry
cost methodologies.

The totals at left agree to the selected  financial data which reconciles to the
consolidated  financial statements.  Intersegment revenues are not material. The
Company operates solely in the United States and no individual customer accounts
for 10 percent or more of the Company's revenue.

FEDERAL INCOME TAXES

A  reconciliation  of the  Federal  income  tax  rate  and the  actual  tax rate
experienced is shown below.

                                    2000       1999      1998

Federal income tax rate              35  %      35       35
Special tax credits                  (6)        (5)      (6)
Other permanent differences          (1)         -        -

Actual income tax rate               28 %       30       29


The tax effects of temporary  differences that give rise to significant portions
of the deferred tax assets and liabilities are presented below.

                                         2000       1999
Deferred tax assets:
  Basis differences between tax and
    GAAP accounting for investments  $   18,493    26,774
  Future policy benefits                 50,404    49,133
  Employee retirement benefits           14,579    11,990
  Other                                   7,670     9,413

Gross deferred tax assets                91,146    97,310

  Deferred tax liabilities:
  Capitalization of policy acquisition
    costs, net of amortization           47,235    44,809
  Property and equipment, net             3,708     3,841
  Value of insurance in force            30,449    33,102
  Other                                     884       842

Gross deferred tax liabilities           82,276    82,594

  Net deferred tax asset             $    8,870    14,716

A "valuation  allowance" must be established for any portion of the deferred tax
asset which is believed not to be realizable.  In  management's  opinion,  it is
more  likely  than not that the  Company  will  realize  the  benefit of the net
deferred tax asset and, therefore, no valuation allowance has been established.

Federal income taxes paid for the year were $17,364,000  ($17,884,000 - 1999 and
$20,164,000 - 1998).

Policyholders' surplus, which is frozen under the Deficit Reduction Act of 1984,
is $40,500,000 for Kansas City Life,  $2,800,000 for Sunset Life and $13,700,000
for Old American.  The Companies do not plan to distribute their  policyholders'
surplus.  Consequently,  the possibility of such surplus becoming subject to tax
is remote, and no provision has been made in the financial  statements for taxes
thereon.  Should the balance in policyholders'  surplus become taxable,  the tax
computed at current rates would approximate $20,000,000.

Income taxed on a current basis is  accumulated in  "shareholders'  surplus" and
can be distributed  to  stockholders  without tax to the Company.  Shareholders'
surplus equals  $399,775,000  for Kansas City Life,  $89,935,000 for Sunset Life
and $66,657,000 for Old American.


QUARTERLY CONSOLIDATED
   FINANCIAL DATA (unaudited)

                         First   Second     Third    Fourth
2000:
Total revenues      $   120,513   117,874 118,332   116,188

Operating income    $    12,802    13,764  14,485    10,548
Realized gains
  (losses), net             316       (42)     91    (2,881)

Net income          $    13,118    13,722  14,576     7,667

Per common share:
  Operating income  $      1.06      1.15    1.20       .88
  Realized gains
    (losses), net           .03      (.01)    .01      (.24)

   Net income       $      1.09      1.14    1.21       .64

1999:
Total revenues      $   120,040   117,038 123,667   119,348

Operating income    $    12,241     7,256  12,225    11,464
Realized gains, net         201       239   1,197       222

   Net income       $    12,442     7,495  13,422    11,686

Per common share:
  Operating income  $       .99       .58     .99       .95
  Realized gains, net       .01       .03     .10       .01

 Net income           $    1.00       .61    1.09       .96


CONTINGENT LIABILITIES

The  life  insurance  industry,   including  the  Company  and  certain  of  its
subsidiaries,  has been  subject to  increased  litigation  pursued on behalf of
purported  classes of insurance  purchasers  questioning the conduct of insurers
and their  agents'  marketing  practices.  The Company  believes that the action
described at right is part of this trend.

In a complaint  filed in March 1998,  Sunset Life and one of its agents was sued
for unspecified  compensatory  and punitive  damages  alleging  various forms of
deceit,  breach of fiduciary duty, and negligence in connection with the sale of
a universal  life  insurance  policy as a  replacement  for an existing  policy.
Subsequently, the complaint was amended to seek class action status and to add a
claim under  California's  Business and Professions Code S17200 which authorizes
individual  plaintiffs  to sue  on  behalf  of the  public  to  remedy  specific
delineated  alleged  unfair  business  practices,  and to seek  declaratory  and
injunctive  relief.  Sunset Life obtained a dismissal of the breach of fiduciary
duty claim and the class  action  allegations,  but the trial  court  refused to
dismiss the S17200  allegations.  All parties  appealed and the court of appeals
refused to overrule the trial  court's  failure to dismiss the S17200 claims and
remanded the case for further  discovery  and proof  regarding  the class action
allegations in the complaint. In the course of discovery,  the court has ordered
the  disclosure of the names of all  individuals  who purchased  universal  life
insurance policies from Sunset Life in replacement transactions from 1984 to the
present and of all individuals who purchased Sunset Life universal life policies
during that period and whose policies became under-funded. These individuals are
currently being  contacted,  pursuant to court order, to determine  whether they
are willing to discuss  this action  with  either the counsel for  plaintiff  or
Sunset Life.  It is expected that this contact will create  further  litigation.
Plaintiff has filed a motion for certification as a class action and the hearing
is presently scheduled in May 2001. Management denies the allegations, including
the  existence  of a  legitimate  class and the  existence  of a uniform  unfair
business  practice  capable of resolution  under section S17200,  and intends to
defend this matter vigorously. However, no assurances can be given regarding the
outcome of this lawsuit and accordingly management cannot estimate its effect on
the consolidated financial statements.

In addition  to the above,  the  Company  and  certain of its  subsidiaries  are
defendants  in, or subject to, other  claims or legal  actions that arose in the
ordinary course of business.  Some of these lawsuits arose in jurisdictions that
permit punitive damages disproportionate to the actual damages alleged. Although
no assurances can be given and no determinations  can be made at this time as to
the  outcome  of any of these  lawsuits  or  proceedings,  the  Company  and its
subsidiaries  believe that there are  meritorious  defenses for these claims and
are defending them vigorously.  In management's  opinion the amounts  ultimately
paid in these  suits,  if any,  would have no material  effect on the  Company's
consolidated results of operations and financial position.


                         REPORTS OF INDEPENDENT AUDITORS

                   To the Board of Directors and Stockholders
                      of Kansas City Life Insurance Company

     We have audited the accompanying  consolidated balance sheet of Kansas City
Life Insurance  Company and subsidiaries  (the Company) as of December 31, 2000,
and the related  consolidated  statements of income,  stockholders'  equity, and
cash flows for the year ended December 31, 2000. These financial  statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.
     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the consolidated  financial  position of Kansas City
Life  Insurance   Company  and  subsidiaries  at  December  31,  2000,  and  the
consolidated results of their operations and their cash flows for the year ended
December 31, 2000, in conformity with accounting  principles  generally accepted
in the United States.



/s/ KPMG LLP

Kansas City, Missouri
January 17, 2001


                   To the Board of Directors and Stockholders
                      of Kansas City Life Insurance Company

     We have audited the accompanying consolidated balance sheets of Kansas City
Life Insurance  Company and subsidiaries  (the Company) as of December 31, 1999,
and the related  consolidated  statements of income,  stockholders'  equity, and
cash flows for each of the two years in the period then ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.
     We conducted our audits in accordance  with  auditing  standards  generally
accepted in the United States.  Those standards require that we plan and perform
the audit to obtain reasonable  assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  An
audit also includes  assessing the accounting  principles  used and  significant
estimates  made by  management,  as well as  evaluating  the  overall  financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for our opinion.
     In our opinion,  the financial statements referred to above present fairly,
in all material  respects,  the consolidated  financial  position of Kansas City
Life  Insurance   Company  and  subsidiaries  at  December  31,  1999,  and  the
consolidated  results of their  operations  and their cash flows for each of the
two years in the period then ended,  in conformity  with  accounting  principles
generally accepted in the United States.



/s/ Ernst & Young LLP

Kansas City, Missouri
January 24, 2000

                             STOCKHOLDER INFORMATION

CORPORATE HEADQUARTERS
     Kansas City Life Insurance Company
     3520 Broadway
     Post Office Box 219139
     Kansas City, Missouri 64121-9139
     Telephone:  (816) 753-7000
     Fax: (816) 753-4902
     Internet: http://www.kclife.com
     E-mail: kclife@kclife.com


NOTICE OF ANNUAL MEETING

     The annual meeting of stockholders will be held at
     9  a.m.  Thursday,   April  19,  2001,  at  Kansas  City  Life's  corporate
     headquarters.


TRANSFER AGENT
     Cheryl Keefer, Assistant Secretary
     Kansas City Life Insurance Company
     Post Office Box 219139
     Kansas City, Missouri 64121-9139


10-K REQUEST
     Stockholders  may request a free copy of Kansas  City Life's Form 10-K,  as
     filed with the Securities and Exchange Commission, by writing to Secretary,
     Kansas City Life Insurance Company.


SECURITY HOLDERS
     As of February 5, 2001,  Kansas City Life had  approximately  698  security
     holders, including individual participants in security position listings.


STOCK AND DIVIDEND INFORMATION
         Stock Quotation Symbol
         Over-the-Counter-KCLI


                                    Bid           Dividend
                             High        Low         Paid
                                                 (per share)
     2000:
     First quarter         $  35.63     22.13        $ .25
     Second quarter           31.00     23.63          .25
     Third quarter            35.38     26.13          .25
     Fourth quarter           35.31     29.00          .25
     $1.00

     1999:
     First quarter          $ 43.82     39.25        $ .24
     Second quarter           42.75     43.00          .24
     Third quarter            52.25     34.50          .24
     Fourth quarter           40.00     32.75          .24
     $<.96

                    The above has been restated to reflect a
                      two-for-one stock split in June 1999.


     A quarterly dividend of $.27 per share was paid February 20, 2001.

     Over-the-counter  market  quotations  are  compiled  according  to  Company
     records and may reflect  inter-dealer prices,  without markup,  markdown or
     commission and may not necessarily represent actual transactions.