===============================================================================

                             UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                        WASHINGTON, D.C. 20549

                 --------------------------------------

                             FORM 10-K

         ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
                    SECURITIES EXCHANGE ACT OF 1934

             For the fiscal year ended December 31, 1998 or

              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
           OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

      For the transition period from _______________ to _______________

                    Commission file number: 33-64820

                            AMERICO LIFE, INC.
             (Exact Name of Registrant as Specified in its Charter)

        Missouri                                 No. 43-1627599
 (State of Incorporation)            (I.R.S. Employer Identification No.)

           1055 Broadway                                    64105
       Kansas City, Missouri                              (Zip Code)
   (Address of Principal Executive Offices)

         Registrant's telephone number including area code: (816) 391-2000

         Securities Registered Pursuant to Section 12(b) of the Act: None

         Securities Registered Pursuant to Section 12(g) of the Act: None

   Indicated by check mark whether the Registrant  (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the  Securities  Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing  requirements  for the past  90 days. Yes      No

   Indicate by check mark if disclosure of  delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.

   Shares of common stock outstanding as of March 25, 1999:  10,000, none
of which is held by non-affiliates.

                    Documents Incorporated by Reference: None

=== ===========================================================================


<PAGE>



                                TABLE OF CONTENTS
<TABLE>
  Item                                                                            Page
                                     PART I

  <S>                                                                              <C>
   1.     Business                                                                  2
   2.     Properties                                                               12
   3.     Legal Proceedings                                                        12
   4.     Submission of Matters to a Vote of Security Holders                      13

                                     PART II

   5.     Market for Registrant's Common Equity and Related Stockholder Matters    14
   6.     Selected Consolidated Financial Data                                     14
   7.     Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                    15
  7A.     Quantitative and Qualitative Disclosure about Market Risk                25
   8.     Financial Statements and Supplementary Data                              25
   9.     Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure                                                     25

                                    PART III

  10.     Directors and Executive Officers of the Registrant                       26
  11.     Executive Compensation                                                   27
  12.     Security Ownership of Certain Beneficial Owners and Management           28
  13.     Certain Relationships and Related Transactions                           28

                                     PART IV

  14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K          30
</TABLE>


<PAGE>


                                     PART I

ITEM 1.     BUSINESS

General

     Americo Life, Inc.  ("Americo" or the "Company") is a financial  services
holding company whose  subsidiaries are engaged in the life insurance and asset
accumulation business.  Americo is wholly-owned by Financial Holding Corporation
("FHC"), a privately-owned corporation.

     The Company's  wholly-owned insurance subsidiaries are: Great Southern Life
Insurance  Company ("Great  Southern"),  United Fidelity Life Insurance  Company
("United  Fidelity"),  The College Life Insurance  Company of America  ("College
Life"),  National  Farmers  Union  Life  Insurance  Company  ("National  Farmers
Union"),  The Ohio State Life  Insurance  Company  ("Ohio  State") and Financial
Assurance Life Insurance Company ("Financial Assurance" or "FAL").

     The Company  develops,  markets and  administers  life  insurance and asset
accumulation  products  which it distributes  principally  through two different
channels. One channel sells life insurance and annuity products through Personal
Producing General Agents ("PPGAs"), Independent Marketing Organizations ("IMOs")
and payroll  deduction  programs.  The  administration  of closed blocks of life
insurance and annuity  business with which no significant  marketing  operations
are associated is handled by the support staff which is responsible for the sale
of traditional business.  The second channel,  referred to as Americo Retirement
Services  ("ARS"),  sells  various  asset  accumulation   products,   consisting
primarily of tax-qualified annuities.

     In addition to the operations  described  above,  the Company  occasionally
makes financial investments in other businesses.  The Company has an investment,
in the form of a 50% interest, in Argus Health Systems, Inc. ("Argus"), which is
engaged in  prescription  drug claim  processing.  The Company also  wholly-owns
several real estate  partnerships  formerly-owned by GSSW, Limited  Partnerships
("GSSW").  The Company's  investments in Argus and the real estate  partnerships
collectively comprise the Company's non-life insurance operating segment.

     At  December  31,  1998,  the  Company has  approximately  $3.3  billion of
invested  assets under  management.  In addition to  expanding  the range of its
product  offerings,  the  Company's  operating  strategy  contemplates  pursuing
selected  acquisitions  of in-force  blocks of life  insurance  or of  insurance
companies.   The  Company  will  also  pursue   opportunities   to  enter  other
arrangements, including acquisitions, which can complement its current marketing
and distribution  channels and increase its asset and policy base. The following
section describes certain  transactions  which have contributed to the Company's
past growth.

Acquisitions and Reinsurance Transactions

     Along with the  development of new business,  acquisitions  and reinsurance
transactions have added  significantly to the Company's growth.  Since 1988, the
Company  has  acquired  seven  companies  or blocks of  insurance  policies  and
continues to investigate  acquisition  opportunities in the insurance  industry.
The  principal  additions  were  College Life in 1988,  Great  Southern in 1989,
Loyalty Life Insurance  Company  ("Loyalty  Life") and National Farmers Union in
1991,  The Victory Life  Insurance  Company in 1995 and Ohio State and Investors
Guaranty  Life  Insurance  Company  ("Investors  Guaranty")  in  1997,  and  two
significant reinsurance transactions in 1996 and 1995.

In October 1998, the Company  entered into a series of  transactions  to acquire
the 50% interest in College  Insurance Group,  Inc. ("CIG") not previously owned
by the Company. Through the formation of CIG in 1993, the Company entered into a
joint venture with an unrelated individual to promote the sale of life insurance
and annuity products in tax-qualified markets. By acquiring the other 50% of the
joint venture and the related marketing entities previously  wholly-owned by the
individual,  the  Company  believes  it can  expand  its  presence  in the asset
accumulation market, particularly the tax-qualified market.


<PAGE>


     In certain  transactions,  the Company has used an  unaffiliated  reinsurer
("the Reinsurer") to reinsure  substantial  blocks of insurance business that it
has acquired.  Such  transactions  result in the policy  liabilities and related
assets being  transferred  to the Reinsurer in exchange for a ceding  commission
and subsequently being reinsured to the Company on a modified coinsurance basis.
In these transactions,  the assets supporting the insurance liabilities are held
in trust for the benefit of the Company.

     In 1995 and 1996,  the Company  entered into separate  agreements  with The
Ohio Casualty Insurance Company ("Ohio Casualty"),  Fremont General  Corporation
and the Reinsurer under which the direct  liabilities of The Ohio Life Insurance
Company  ("Ohio  Life") and Fremont Life  Insurance  Company  ("Fremont  Life"),
respectively,   were  reinsured  on  a  coinsurance  basis.  Pursuant  to  these
agreements,  the Company  services life  insurance and annuity  policies of Ohio
Life and Fremont Life. At December 31, 1998,  these  agreements  covered  81,170
policies with associated liabilities totaling $584.2 million.

     On April 15, 1997,  the Company  acquired all of the  outstanding  stock of
Ohio State and Investors  Guaranty from Farmers Group, Inc. for a purchase price
of $345.4 million.  On April 16, 1997, Ohio State and Investors Guaranty entered
into  coinsurance  agreements to reinsure all of their insurance  liabilities to
the Reinsurer.  The Company also entered into agreements to service the policies
of Ohio  State  and  Investors  Guaranty.  At  December  31,  1998,  the  policy
liabilities  associated with the 234,217  policies  administered  totaled $667.6
million.

     The Company and the Reinsurer entered into modified coinsurance  agreements
to  reinsure  certain  risks on the Ohio  Life,  Fremont  Life,  Ohio  State and
Investors Guaranty insurance policies.  The risks associated with the Ohio State
and Investors  Guaranty  policies are reinsured on a 70% quota share basis.  The
modified coinsurance agreements provide that the assets related to the reinsured
policies  are to be  retained  by the  Reinsurer.  The  Company  began  directly
assuming certain of the policies of Fremont Life and Ohio Life in 1996 and 1997,
respectively,  and intends to begin  directly  assuming the  Investors  Guaranty
policies in 1999.

     In August  1997,  Great  Southern  sold the stock of Loyalty Life for $12.2
million  resulting  in a $4.8 million gain before  income  taxes.  Prior to this
sale, several of the Company's  insurance  subsidiaries  entered into agreements
with Loyalty Life for the assumption of Loyalty Life's insurance liabilities. As
of the  date of sale,  Loyalty  Life  has  assets  totaling  $32.4  million  and
liabilities totaling $20.0 million.

     In May 1998, Great Southern sold the stock of Investors  Guaranty for $14.8
million,  resulting in a $4.9 million gain before income taxes.  The reinsurance
agreements  with the  Reinsurer  are  unaffected  by the sale. As of the date of
sale,  Investors  Guaranty had assets  totaling  $10.3  million and  liabilities
totaling $0.4 million.

Life Insurance and Annuity Business

     The Company's  insurance business operations are divided into two segments:
life insurance operations and asset accumulation operations.  The Company's life
insurance  operations consist primarily of selling and servicing  universal life
insurance  products as well as traditional  term and whole life insurance.  This
segment consists  primarily of insurance business acquired by the Company and is
supplemented by new life insurance  business sold through individual and payroll
deduction markets.  The Company's asset accumulation  operations include annuity
products sold through the Company's ARS  operations.  Policy  liabilities  as of
December 31, 1998 for the Company's  segments are summarized below.  Information
concerning  reported  revenues and income before provision for income taxes from
the  Company's  operating  segments  is set  forth in Item 7 under  "Results  of
Operations-Segment   Results"  and  in  Note  12  of  the  Company's   Notes  to
Consolidated Financial Statements.


<PAGE>


<TABLE>

                                                             Asset Accumulation
                                                     Life Insurance         Operations
                                                       Operations                                   Total
                                                                          (in thousands)
<S>                                                   <C>                  <C>                  <C>
Policyholder account balances:
     Universal life                                    $   1,436,120        $      22,371        $   1,458,491
     Annuities                                               680,828              361,794            1,042,622
                                                       -------------        -------------        -------------
                                                       $   2,116,948        $     384,165        $   2,501,113
                                                       =============        =============        =============

Future policy benefits                                 $     833,917        $           -        $     833,917
                                                       =============        =============        =============
</TABLE>

     The following  table shows the Company's  collected  premiums  during 1998,
1997 and 1996 by product category.
<TABLE>

                                                                  Premiums Collected
                                                                 for periods indicated
                                    --------------------------------------------------------------------------------
                                          First Year                    Renewal                      Total
                                    ------------------------    ------------------------    ------------------------
Product Category                         $            %              $            %               $           %
----------------                         -            -              -            -               -           -
                                                                    (in thousands)
<S>                                    <C>          <C>           <C>           <C>           <C>            <C>

Year ended
December 31, 1998
Traditional                             14,326       12.3           84,929       25.5           99,255        22.1
Interest-sensitive                      42,607       36.6          195,214       58.7          237,821        53.0
                                    ----------    -------       ----------    -------       ----------     -------
   Total life                           56,933       48.9          280,143       84.2          337,076        75.1
Annuities                               59,470       51.1           52,352       15.8          111,822        24.9
                                    ----------    -------       ----------    -------       ----------     -------
   Direct and assumed premiums         116,403      100.0          332,495      100.0          448,898       100.0
                                    ==========    =======       ==========    =======                      =======
   Less ceded premiums                                                                        (126,538)
                                                                                             ---------
   Total                                                                                       322,360
                                                                                            ==========

Year ended
December 31, 1997
Traditional                             11,184        8.5           87,607       28.7           98,791        22.6
Interest-sensitive                      44,524       33.7          173,384       56.7          217,908        49.7
                                    ----------    -------       ----------    -------       ----------     -------
   Total life                           55,708       42.2          260,991       85.4          316,699        72.3
Annuities                               76,500       57.8           44,693       14.6          121,193        27.7
                                    ----------    -------       ----------    -------       ----------     -------
   Direct and assumed premiums         132,208      100.0          305,684      100.0          437,892       100.0
                                    ==========    =======       ==========    =======                      =======
   Less ceded premiums                                                                        (137,159)
                                                                                             ---------
   Total                                                                                       300,733
                                                                                            ==========

Year ended
December 31, 1996
Traditional                              4,048        4.5           61,475       23.4           65,523        18.6
Interest-sensitive                      34,888       38.6          132,266       50.4          167,154        47.4
                                    ----------    -------       ----------    -------       ----------     -------
   Total life                           38,936       43.1          193,741       73.8          232,677        66.0
Annuities                               51,419       56.9           68,734       26.2          120,153        34.0
                                    ----------    -------       ----------    -------       ----------     -------
   Direct and assumed premiums          90,355      100.0          262,475      100.0          352,830       100.0
                                    ==========    =======       ==========    =======                      =======
   Less ceded premiums                                                                         (91,711)
                                                                                            ----------
   Total                                                                                       261,119
                                                                                            ==========
</TABLE>

     Life Insurance Operations:  The Company's life insurance operations consist
of traditional and interest-sensitive  life insurance and annuities. At December
31, 1998, the life insurance in force on interest-sensitive  contracts was $28.1
billion,  the insurance in force on  traditional  life  insurance  contracts was
$14.0 billion and annuity liabilities  totaled $0.7 billion.  The Company's life
insurance  subsidiaries offer a portfolio of individual  interest sensitive life
insurance products,  including  interest-sensitive whole life and universal life
insurance and customary riders. The Company also offers equity-indexed products,
specifically  life  insurance,  single  premium  annuities and flexible  premium
annuities.  In addition,  the Company offers single premium and flexible premium
annuity  products.  The principal  differences among the types of these products
offered by the  Company  relate to policy  provisions  affecting  the amount and
timing of premium payments.

     The Company delivers its life insurance  products to individuals  using two
methods of  distribution,  PPGA ("Personal  Producing  General Agents") and IMOs
("Independent Marketing Organizations").

     The Company's PPGA marketing system utilizes  approximately 800 independent
agents who market the  Company's  products.  The  Company  employs  none of such
agents,  but each is a party to a general  agency  agreement  which  governs the
terms of his/her relationship with the Company.  PPGAs who represent the Company
are free to represent other insurers.  Of the $39 million total annualized first
year life insurance premiums generated by the Company during 1998, approximately
$16 million, or 41%, was derived from sales through the Company's PPGA system.

     Approximately $18 million,  or 46%, of the Company's  annualized first year
life  insurance  premiums in 1998 were derived from sales through IMOs comprised
of nonexclusive independent agents with an aggregate membership of approximately
2,000 at December 31, 1998.

     Since 1995,  the Company has  employed its Career  Partners(TM)  program to
increase the production from individual agents and reduce the Company's reliance
on large marketing organizations and/or brokers. The Career Partners(TM) program
attempts to build a long-term  relationship  between the Company and  individual
agents by providing benefits in addition to commissions to reward production and
longevity  in the  program.  As a  result  of  this  program,  the  Company  has
experienced   improved   retention,   consistency  of  production  and  stronger
relationships  with  participating  agents.  Growth of the  Career  Partners(TM)
program has been significant from September 1, 1995, when it was introduced,  to
December 31, 1998. Currently,  560 agents participate in the Career Partners(TM)
program.  Sales  by  Career  Partners(TM)  represented  72% of the new  business
produced in 1998.

     The Company also offers  products in the payroll  deduction  market.  These
products consist of voluntary payroll deduction,  interest  sensitive  universal
life insurance offered to employees of large and medium size companies. Sales in
the  payroll  deduction  market  accounted  for  $5.0  million,  or 13%,  of the
Company's  annualized first year life insurance premiums in 1998. This effort is
conducted  through agents focused on the payroll  deduction  market.  The agency
force,  which consists of  approximately 75 general agents,  primarily  contacts
companies that have a minimum of 100 eligible employees.

     Asset  Accumulation  Product  Operations:  The Company's asset accumulation
operations consist of selling and servicing life insurance and annuity products.
At December 31, 1998, the liabilities  related to  interest-sensitive  contracts
and annuity contracts totaled $22.4 million and $0.4 billion,  respectively. The
Company's  life  insurance  subsidiaries  offer a  portfolio  of life  insurance
products and single premium and flexible  premium  annuity  products,  including
equity-indexed   products.   The  significant  portion  of  these  products  are
tax-qualified.

     In 1998, the Company expanded its marketing of asset accumulation  products
by  purchasing  the interests  owned by its joint  venture  partner as described
above under "Acquisitions and Reinsurance Transactions". This transaction allows
the  Company  to expand its  marketing  capabilities  in the asset  accumulation
market with the primary focus on tax qualified annuity  products,  specifically,
products  qualified  under Section  403(b) of the Internal  Revenue Code.  These
products are marketed to public  school  teachers and  administrators  through a
specialized  field  force  of  managed  agents  and  independent  producers  who
specialize in  tax-qualified  sales.  The managed agent program has  experienced
significant  growth since its  introduction  in 1995.  In 1998,  sales from this
program  represented 53% of the life insurance and annuity  production from this
market.   Total  sales   generated  by  the  managed   program  and  independent
distribution  systems  specializing in the tax-qualified  markets,  expressed in
terms of first year collected premiums,  increased from $14.6 million in 1993 to
$43.7 million in 1998.

     The  Company's ARS  operations  also offer  products to the senior  annuity
markets. The senior market, generally considered to include individuals over age
55, is expected to experience double-digit annual growth resulting from a number
of factors, including consumer concerns over the adequacy of Social Security and
pension plans and the aging of the consumer population.  The Company competes in
this market by offering fixed annuity products with riders and benefits tailored
to the needs of seniors.  Sales  generated  through IMOs,  expressed in terms of
first year collected premiums, were $18.0 million in 1998.

Operations

     The Company has made  strategic  decisions  over the last several  years to
achieve its goal of operating  at the lowest  achievable  cost level  consistent
with  providing  good  service.  These  decisions  include  (i)  investments  in
technology,  (ii) centralization of certain functions and (iii) outsourcing data
processing.

     The Company has made  significant  investments  in  technology to lower its
operating  costs.  Its  use of  digital  imaging  technology  has  substantially
eliminated the typical paper  intensive life  insurance  processing  procedures,
resulting in lower operating  costs,  improved  customer service and an improved
working environment. As part of the imaging technology, the Company uses a third
party system called  Automated Work  Distributor to control workflow and perform
other  functions  designed to increase  efficiency.  As the  investment  in this
technology  is  relatively  fixed,  the Company  has been able to leverage  this
investment by increasing the number of policies administered.

     In order to more effectively manage its various insurance  operations,  the
Company has consolidated certain common functions into its Kansas City, Missouri
offices.  These centralized  functions include product  development,  marketing,
finance,  investment  management,  data  processing,  personnel  and  regulatory
compliance.   The  Company  believes  that  this  approach  allows  it  to  more
effectively  manage the  business  and, by  eliminating  duplicative  functions,
reduce operating costs and improve returns on acquired business.

     The  Company  has  outsourced  its data  processing  requirements  with the
exception of local area networks through  contracts  entered into by its parent,
FHC. The principal such contract is with Computer Sciences  Corporation ("CSC"),
which provides all of the Company's data processing  needs. By outsourcing these
functions,  the  Company  believes  that  it  has  reduced  operating  costs  by
eliminating  the fixed costs  associated  with a data  processing  function  and
improved  its ability to increase  its  policyholder  base  without  significant
investment.  In  addition,  the use of a vendor such as CSC provides the Company
access to current technology and a higher caliber of staff than it might be able
to employ on its own.

Investments

     A significant  factor  contributing to the Company's  profitability  is its
ability  to earn  investment  income  sufficient  to provide  for its  insurance
liabilities  and generate a profit.  The  Company's  insurance  liabilities  are
backed by a  portfolio  composed  principally  of fixed  rate  investments  that
generate  predictable  rates of  return.  The rates of  return on the  Company's
investments vary over time depending on the current  interest rate  environment,
the spread at which fixed rate  investments  are priced over the yield curve and
other factors.  FHC manages the Company's invested assets as described under the
heading  "Agreements with FHC" in Item 13 appearing elsewhere in this Form 10-K.
The  Company's  investment  philosophy  is  conservative  with  an  emphasis  on
balancing  credit and interest rate risk and is  influenced  by  regulatory  and
asset-liability matching requirements.

     The Company's insurance subsidiaries are governed by insurance statutes and
regulations  which restrict the type of  investments  they are permitted to make
and the  amount  of funds  that may be used for any one type of  investment.  In
compliance with these  regulations and consistent with the Company's  investment
philosophy,  the Company invests  principally in investment grade securities (as
rated by nationally recognized rating organizations). At December 31, 1998, 0.8%
of the Company's fixed rate investments were non-investment grade. There were no
securities which were in default as to principal or interest.

     A goal of the Company's investment strategy is to provide liquidity for its
insurance  liabilities.  Through  computer-based  models,  the Company  conducts
studies  of the  cash  flow  characteristics  of its  liabilities  using  common
interest  rate  scenarios.  The Company  uses this  information  to assist it in
managing  the  duration of its asset  portfolio  so that it closely  matches the
duration of its liabilities.

     The  Company's  general   investment   philosophy  is  to  hold  fixed-rate
securities for long-term  investment.  Thus, the Company does not have a trading
portfolio.  However,  its fixed-rate  portfolio is divided into those securities
being held to maturity and those  available for sale.  The primary  factor which
influences the Company's  decision to  characterize  its  investments as held to
maturity is the cash flow requirements of the Company's liabilities.  Securities
have been categorized as available for sale except for those securities that the
Company  has the intent  and the  ability  to hold  until  maturity.  Securities
designated  as available  for sale include those that may be sold in response to
changes  in  interest  rates,  changes  in  prepayment  risk,  liquidity  needs,
management of taxable income and similar economic factors.

     The carrying amounts of the Company's investments at December 31, 1998 were
as follows:

<TABLE>
                                                                                            Total
                                                               Held to      Available     Carrying
                    Investment Category                      Maturity (1)  for Sale (2)     Amount      Percentage
                    -------------------                      ------------     ---------     ------      ----------
                                                                                 (in thousands)
<S>                                                         <C>           <C>           <C>               <C>

Fixed maturities:
   U.S. Treasury and government securities                   $     3,402   $    42,920   $    46,322        1.9%
   Mortgage-backed securities:
   Collateralized mortgage obligations                           255,950        87,147       343,097       14.2
   Pass-through certificates:
     GNMA                                                         20,013        81,413       101,426        4.2
     FHLMC                                                         1,855           383         2,238        0.1
     FNMA                                                          1,052         6,890         7,942        0.3
   Other pass-through securities                                   6,043        23,300        29,343        1.2
   Other asset-backed securities                                  29,961        82,132       112,093        4.6
   Corporate bonds                                               558,318       601,006     1,159,324       48.0
                                                             -----------   -----------   -----------   --------

       Total fixed maturities                                $   876,594   $   925,191   $ 1,801,785       74.5%
                                                             ===========   ===========   -----------

Equity securities                                                                             89,022        3.7
Investment in equity subsidiaries                                                              9,669        0.4
Mortgage loans on real estate                                                                190,074        7.9
Investment real estate                                                                        28,606        1.2
Policy loans                                                                                 210,173        8.7
Cash and cash equivalents                                                                     68,219        2.8
Other invested assets                                                                         17,066        0.8
                                                                                         -----------   --------

       Total cash and invested assets                                                    $ 2,414,614      100.0%
                                                                                         ===========   ========
</TABLE>

------------------------------------------------------------

(1) Carrying  amount is  amortized  cost.  The market  value of held to maturity
    securities at December 31, 1998 was $914.7 million.
(2) Carrying  amount is market value.  The amortized  cost of available for sale
    securities at December 31, 1998 was $893.7 million.

     See  Note 4 of the  Notes to  Consolidated  Financial  Statements,  and the
discussion  under  the  heading  "Investment  Portfolio"  in  Item  7  appearing
elsewhere  in  this  Form  10-K  for  information   about  the  composition  and
performance of the Company's investment portfolio and the risks inherent in such
investments.


<PAGE>


     In addition to the  investments  owned by the Company  which are  described
above,  certain investments  supporting the Company's insurance  liabilities are
held by the  Reinsurer.  These  investments  are  managed by FHC.  The  carrying
amounts of these investments at December 31, 1998 were as follows:
<TABLE>

                                                                     Total Carrying
                                                                         Amount                  Percentage
<S>                                                                 <C>                              <C>

Fixed maturities:
     U.S. Treasury and government securities                         $       95,294                   9.2%
     Mortgage-backed securities                                             170,972                  16.6
     Other asset-backed securities                                          141,594                  13.7
     Corporate bonds                                                        591,842                  57.3
                                                                     --------------               -------

         Total fixed maturities                                      $      999,702                  96.8%
                                                                     --------------               -------

Cash                                                                         32,926                   3.2
                                                                     --------------               -------

         Total cash and invested assets                              $    1,032,628                 100.0%
                                                                     ==============               =======
</TABLE>

Non-Insurance Operations

     From time to time,  the Company makes  selective  investments in businesses
outside of the life insurance  industry.  The primary investments of this nature
owned at December 31, 1998 were the  investments  in Argus,  which was accounted
for using the equity method, and in wholly-owned real estate partnerships.

     Argus:  The  Company  and an  unrelated  third  party each own a 50% equity
interest  in  Argus.   Argus  is   principally   engaged  in  the   business  of
electronically processing prescription drug claims, including providing services
in connection  with the  point-of-sale  adjudication,  processing and payment of
these  claims.   Argus'   principal   customers   include   health   maintenance
organizations,  preferred provider organizations, health insurance companies and
managed health  companies.  For 1998, Argus generated  revenues of $35.7 million
and processed over 134 million claims compared with 145 million claims processed
in 1997,  a decrease of 8%. At December 31, 1998,  Argus had  approximately  256
full-time  employees and maintains  its corporate  headquarters  in Kansas City,
Missouri.  Currently,  there are less than 10 prescription drug claim processors
in the managed care business. Argus faces increasing competition from other drug
claim  processors  and  customers  choosing  to  perform  their  own drug  claim
processing.

     Real Estate Partnerships: In 1992, the Company and an unrelated third party
formed a limited  partnership,  GSSW, for the purpose of purchasing  real estate
and mortgage loans from the Resolution Trust Corporation.  In December 1996, the
Company  liquidated  its 50%  interest  in GSSW in  exchange  for  cash of $22.6
million and 100%  interests  in several real estate  partnerships  then owned by
GSSW. In 1998 and 1997, the Company disposed of several of the properties in the
retained partnerships for gains of $3.1 million and $5.1 million,  respectively.
The  proceeds  from these  sales  have been  reinvested  in similar  properties.
Currently the Company  manages ten  properties  including  office space,  retail
space and apartments.

Reinsurance

     In keeping with industry  practices,  the Company reinsures portions of its
life  insurance   exposure  with   unaffiliated   reinsurance   companies  under
traditional indemnity reinsurance agreements. Generally, the Company enters into
indemnity  reinsurance  arrangements  to  diversify  its risk  and to limit  its
maximum  loss on risks  that  exceed  the  Company's  policy  retention  limits,
currently ranging from $50,000 to $350,000 per life. Indemnity  reinsurance does
not  fully  discharge  the  Company's  obligation  to pay  policy  claims on the
reinsured  business.  The Company  remains  responsible for policy claims to the
extent the reinsurer fails to pay such claims. At December 31, 1998, the Company
had ceded to reinsurers  approximately  $5.9 billion (15%) of life  insurance in
force, of which 97% was reinsured with insurance companies rated "A (Excellent)"
or better by A.M. Best. Approximately $2.1 billion of the insurance in force was
ceded to a single  reinsurer,  which was rated "A+" by A.M.  Best.  The  Company
evaluates  the  financial  strength  of  its  reinsurers  upon  inception  of  a
reinsurance treaty and on an annual basis thereafter.

     The Company has entered into several  coinsurance and modified  coinsurance
agreements  with  a  single   unaffiliated   reinsurer  with  related  insurance
liabilities   totaling  $1.2  billion  at  December  31,  1998.  See  "Business:
Acquisitions and Reinsurance Transactions" described above.

     Certain of the insurance  subsidiaries  of the Company have ceded blocks of
insurance  under  financial  reinsurance  treaties  which  have  the  effect  of
increasing the statutory surplus of the Company. As a result of such reinsurance
transactions,  the Company has increased its statutory  surplus after the effect
of income taxes by  approximately  $14.8 million;  however,  the effect of these
reinsurance  treaties  is not  included in  stockholder's  equity of the Company
presented in accordance with generally accepted accounting  principles ("GAAP").
Financial  reinsurance increases the ceding insurer's statutory surplus with the
expectation that such increased surplus will be returned to the reinsurer out of
future  earnings,  if any,  and  guarantees  the  reinsured  against  any future
statutory losses, if any, on the policies reinsured. The ability of an insurance
subsidiary  to pay  dividends  to  Americo  may  be  adversely  affected  by the
reduction in statutory  earnings caused by reductions in the outstanding  levels
of  financial  reinsurance.  The risk fees paid to the  reinsurers  under  these
financial  reinsurance  treaties  totaled  $0.5 million and $0.8 million for the
years ended December 31, 1998 and 1997, respectively. See Note 6 of the Notes to
the  Consolidated  Financial  Statements  of  the  Company  included  in  Item 8
appearing elsewhere in this Form 10-K.

Competition and Ratings

     The  financial  services  industry in which the Company  operates is highly
competitive.  The Company competes with a large number of other insurers as well
as  non-insurance  financial  services  companies,  such  as  banks,  investment
advisors, mutual fund companies and other financial institutions,  some of which
have greater financial  resources,  offer alternative products and, with respect
to other insurers,  have higher ratings than the Company.  National banks,  with
their  preexisting  customer  bases for financial  services  products,  may pose
increasing  competition in the future to insurers who sell annuities,  including
the  Company,  as a  result  of  the  U.S.  Supreme  Court's  1994  decision  in
NationsBank of North Carolina v. Variable Annuity Life Insurance Company,  which
permits national banks to sell annuity  products of life insurance  companies in
certain circumstances.

     The Company believes that the principal  competitive factors in the sale of
life insurance and asset  accumulation  products are product  features,  product
flexibility,  product pricing and crediting rates,  commission  structure,  high
credit standing and perceived stability of insurer,  and service provided to the
policyholder.  The  Company  believes  that its  ability to  compete  with other
insurance  companies is dependent  upon its ability to attract and retain agents
to market its insurance products and its ability to develop competitive products
that are also profitable.  The Company  believes that it has good  relationships
with its  agents and  marketing  groups,  has an  adequate  variety of  policies
approved for issuance,  and is generally  competitive  within the industry.  The
Company also competes with other entities in acquiring life insurance  companies
and blocks of insurance  business.  The  acquisition  of insurance  companies or
blocks of business is extremely  competitive.  Many of the companies  with which
the Company  competes have a stronger  capital position as well as better access
to the capital markets.

     A primary  factor in a  company's  ability  to compete in the sales of life
insurance  business  and the  acquisition  of life  insurance  companies  is the
ratings it receives from various rating agencies.  Two of the Company's  primary
marketing   subsidiaries,   Great  Southern  and  College  Life,  are  rated  "A
(Excellent)"  by A.M. Best and have a claims paying ability rating of "A (Good)"
from   Standard   and   Poor's   Corporation   ("S&P").   Ohio  State  is  rated
"A-(Excellent)"  by A.M. Best and has a claims paying  ability  rating of "BBBpi
(Good)" from S&P. National Farmers Union is rated "B+ (Very Good)" by A.M. Best.
While  ratings  do not  constitute  recommendations  to buy or sell a  company's
insurance  products,  and are subject to change or withdrawal at any time,  they
are considered an important measurement in some markets.

Regulation

     All of the Company's life insurance  company  subsidiaries are domiciled in
Texas.  One or more of the  life  insurance  subsidiaries  is  licensed  to sell
insurance in the District of Columbia and all states, except New York.

     General Regulation.  The Company is subject to comprehensive  regulation in
the various  states in which it is authorized to conduct  business.  The laws of
these states establish  supervisory agencies with broad regulatory authority to,
among  other  matters,  grant and  revoke  licenses  for  transacting  business,
regulate trade practices, establish reserve requirements,  regulate the form and
content of policies, and prescribe the type and amount of investments permitted.
These supervisory agencies periodically examine the business and accounts of the
Company's  insurance  subsidiaries  and  require  them to file  detailed  annual
statements prepared in accordance with statutory accounting practices.

     Increased scrutiny has been placed upon the insurance regulatory framework,
and a number  of state  legislatures  have  considered  or  enacted  legislative
proposals that alter,  and in many cases  increase,  state authority to regulate
insurance companies and their holding company systems. In addition,  legislation
has been  introduced  periodically in Congress which could result in the federal
government  assuming some role in the regulation of the insurance  industry.  In
recent  years,  the NAIC has  taken  initiatives  to  reduce  insurance  company
insolvencies and market conduct violations. These initiatives include investment
reserve  requirements,  risk-based capital standards,  codification of insurance
accounting principles, new investment standards and restrictions on an insurance
company's  ability  to pay  dividends  to its  stockholders.  The  NAIC has also
approved and  recommended  to states for adoption  model laws related to product
design  and  illustrations.  The  Company  has  evaluated  its  current  product
portfolio  in response to these  initiatives.  It is not possible to predict the
future impact of changing state and federal  regulation on the operations of the
Company and its insurance subsidiaries.


     Under  applicable  state  insurance  laws,  all of the Company's  insurance
subsidiaries  are  required  to  maintain  minimum  levels of capital  stock and
statutory  surplus.  The capital and surplus of each of the Company's  insurance
subsidiaries  exceeds  the  minimum  requirements.  In  addition,  each  of  the
Company's insurance subsidiaries is subject to the supervision of the regulators
of each state in which it is licensed.  Such regulators  have the  discretionary
authority, in connection with the continual licensing of any such subsidiary, to
limit or  prohibit  new  issuances  of business to  policyholders  within  their
jurisdiction  when, in their  judgement,  such  regulators  determine  that such
subsidiary is not maintaining adequate statutory surplus or capital. The Company
does not believe the current or anticipated  levels of statutory  surplus of its
insurance  subsidiaries  present a material risk that any such  regulator  would
limit the amount of new insurance business that an insurance  subsidiary intends
to issue.

     Holding Company Regulations. Substantially all states also regulate members
of insurance  holding  company  systems.  FHC is registered as a holding company
system  pursuant to such  legislation in Texas.  The insurance  holding  company
statutes regulate certain  transactions among affiliates,  including the payment
of  dividends  by an  insurance  company to its parent.  Generally,  without the
consent of the domiciliary state's insurance commissioner,  an insurance company
may  not pay  dividends  to its  parent  in  excess  of the  greater  of (i) the
insurer's  prior year  statutory  net gain from  operations,  or (ii) 10% of its
prior year ending statutory capital and surplus. Dividends may be paid only from
statutory  earned  surplus as determined  by the Texas  Department of Insurance.
Generally,   state  laws  require  an  insurance  company  to  file  a  dividend
notification prior to payment of ordinary dividends.

     Under Texas regulations, interest and principal on any newly-issued surplus
debentures  may be paid only with  prior  approval  of the Texas  Department  of
Insurance.   Surplus  debentures  issued  by  United  Fidelity  contain  payment
schedules  which  have been  approved  by the  Texas  Department  of  Insurance.
Therefore,  United Fidelity does not require  approval from the Texas Department
of Insurance  for each payment of principal  and interest  unless such  payments
differ from the approved schedule.

     Risk-Based  Capital  Requirements.  The NAIC's  risk-based  capital ("RBC")
rules are used to  evaluate  the  adequacy of  statutory  capital and surplus in
relation to a company's  investment and insurance risks. The RBC formula is used
by the states as an early warning tool to identify  under-capitalized  companies
for the  purpose of  initiating  regulatory  action.  Generally,  action will be
triggered when the ratio of a company's total adjusted  capital  (defined as the
total of its statutory capital,  surplus and asset valuation reserve ("AVR")) to
its Authorized  Control Level RBC (the "RBC Ratio") falls below 200%. Based upon
the Company's  calculations,  all of its insurance  subsidiaries  had RBC ratios
exceeding 200% at December 31, 1998.


<PAGE>


     Texas  has its own RBC  requirements,  the  stated  purpose  of which is to
require a  minimum  level of  capital  and  surplus  to  absorb  the  financial,
underwriting and investment risks assumed by an insurer. The Commissioner of the
Texas  Department of Insurance has the power to take corrective  actions similar
to those in the NAIC's  model act if a company  does not  maintain  the required
minimum level of capital and surplus.  At December 31, 1998, the Company's Texas
insurance subsidiaries' exceeded these requirements.

     There can be no assurance that  insurance-related laws and regulations will
not become more  restrictive  in the future and thereby have a material  adverse
effect on the  operations  of the  Company or on the  ability  of the  Company's
subsidiaries to make payments on the surplus  debentures or to pay dividends and
thus on the Company's ability to service its debt.

Employees

     At  March 1,  1999,  Americo  and its  wholly-owned  subsidiaries  employed
approximately 766 persons.


<PAGE>


ITEM 2.    PROPERTIES

     The  principal  executive  offices  of the  Company  are  located  at  1055
Broadway,  Kansas City,  Missouri  64105 and the Company's  telephone  number is
(816) 391-2000.

     The principal  operations of the insurance  subsidiaries are conducted from
Kansas City,  Missouri and Dallas, and Austin, Texas.  The Company's  locations
include  leased office space  located at 1055  Broadway,  Kansas City,  Missouri
64105 and 333 West 11th Street,  Kansas City,  Missouri 64105.  These properties
are leased from Broadway  Square  Partners,  a Missouri  limited  partnership of
which a  corporation  controlled  by the Merriman  family is a 50% partner.  The
leases expire on August 31, 2010 and August 31, 2013, respectively.

     The Company occupies leased office space located at 500 N. Akard,  Dallas,
Texas 75221.  The lease expires in June 2007.

     The Company also  occupies  leased  office space located at 3755 Capitol of
Texas Highway South,  Austin, Texas 78704. The two leases related to this office
space expire in May 2001 and 2003.

ITEM 3.    LEGAL PROCEEDINGS

     From  time to time  the  Company  is party to  litigation  and  arbitration
proceedings in the ordinary course of its business, none of which is expected to
have a material adverse effect on the Company.

     Great  Southern  and the Company are  defendants  in four  purported  class
action lawsuits that were consolidated in May 1998 for multidistrict  litigation
pretrial  proceedings in the U.S.  District  Court for the Northern  District of
Texas (In re Great Southern Life Insurance  Company Sales Practice  Litigation).
These  lawsuits  allege  deceptive  sales  practices  in the  marketing of Great
Southern's whole life and universal life insurance policies and seek unspecified
compensatory,  punitive and/or treble damages. Additionally, on August 13, 1998,
a fifth purported  class action lawsuit also alleging  deceptive sales practices
was filed  against  Great  Southern in state court in Dallas,  Texas  (Ebling v.
Great Southern Life Insurance Co., 68th District Court,  Dallas County,  Texas).
Another previously  reported  purported class action making similar  allegations
(Marroquin v. Great  Southern Life  Insurance  Co.,  filed February 11, 1998, in
Cameron County District Court,  Texas) was settled on an individual basis for an
amount that was not material to the Company.

     On July 16,  1998,  Great  Southern,  Fremont  Life  Insurance  Company and
Fremont General Corporation (collectively "Fremont") were named as defendants in
a purported  class action lawsuit  arising out of the sale of, and imposition of
surrender  charges under,  deferred annuity  contracts  (Gularte v. Fremont Life
Ins. Co., et al., Los Angeles Superior Court, Los Angeles, California).  Fremont
subsequently assumed the defense of Great Southern, the effect of which has been
to limit the case to a claim  for  declaratory  relief  as to the  amount of the
surrender charge.

     Great  Southern  and the  Company,  together  with one of Great  Southern's
general  agents,  Great  American  Life  Underwriters   ("GALU"),   Entrepreneur
Corporation,  Mercantile Life Insurance Company,  American Planning  Corporation
and various  individuals,  including  certain officers of Great Southern and the
Company,  are named defendants in an action that was certified as a class action
on April 28, 1998  (Thibodeau et al. v. Great  American Life  Underwriters,  et.
al., District Court, Dallas County, Texas).  Plaintiffs, who were life insurance
agents for GALU, allege that they were defrauded by defendants into surrendering
renewal  commissions  in return for the promise of stock  ownership in a company
(Entrepreneur  Corporation)  to be made  public  at some  point  in the  future.
Plaintiffs claim actual and exemplary damages in an unspecified amount.
Defendants have appealed the ruling certifying a class.


<PAGE>



     On October 20, 1998, a purported  class  action  lawsuit was filed  against
Great Southern, Credit Card Services, Inc., First Madison Bank and certain other
defendants  (McCulley v. Great  Southern Life Insurance  Company,  et. al., U.S.
District  Court  for  the  Northern   District  of  Texas),   alleging   various
misrepresentations  in connection  with the marketing of credit cards secured by
universal  life  insurance  policies  issued by Great  Southern.  The suit seeks
actual, exemplary and treble damages in an unspecified amount.

     The Company intends to defend all of the above pending actions  vigorously.
There can be no assurance that the foregoing or any future  litigation  relating
to pricing and sales  practices  will not have a material  adverse effect on the
Company.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     None.


<PAGE>


                                     PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
           MATTERS

     All of the outstanding  shares of capital stock of the Company are owned by
FHC.  There is no established  public  trading market for the Company's  capital
stock.

ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

     The historical financial  information for the five years ended December 31,
1998 and at December 31, 1998,  1997,  1996, 1995 and 1994 has been derived from
the audited  Consolidated  Financial  Statements  of the  Company.  The selected
consolidated  financial  data set forth below is  qualified  in its  entirety by
reference to and should be read in conjunction with "Management's Discussion and
Analysis of Financial  Condition and Results of  Operations,"  and the Company's
Consolidated  Financial  Statements and the Notes thereto included  elsewhere in
this Form 10-K. <TABLE>

                                                                    Year Ended December 31,
                                             ----------------------------------------------------------------------


                                               1998 (4)      1997 (3)        1996        1995 (2)       1994(1)
                                               --------      --------        ----        --------       -------
<S>                                          <C>           <C>           <C>           <C>           <C>

Statement of Income Data:
Premiums and policy revenues                  $  218,582    $  203,729    $  165,602    $  140,130    $  134,225
Net investment income                            226,534       219,267       186,725       152,047       130,149
Net realized investment gains (losses)             8,284         2,950          (120)         (282)       (3,529)
Gain on disposition of partnership interest           --            --        15,825            --            --
Other income                                      12,163        12,331         3,567         2,168           117
                                             -----------    ----------    ----------    ----------    ----------
    Total income                                 465,563       438,277       371,599       294,063       260,962
Policyholder benefits                            251,506       262,940       218,659       169,162       151,835
Commissions                                       13,390        11,230        13,473         9,662         8,711
Amortization expense                              87,189        43,694        29,714        26,666        23,534
Interest expense                                  12,057        12,089        12,263        10,593         9,254
Other operating expenses                          89,394        77,038        56,703        47,124        45,110
                                             -----------    ----------    ----------    ----------    ----------
Income before provision for income taxes          12,027        31,286        40,787        30,856        22,518
Provision for income taxes                         3,235         9,230        13,513        11,126         9,159
                                             -----------    ----------    ----------    ----------    ----------
Net Income                                    $    8,792    $   22,056    $   27,274    $   19,730    $   13,359
                                             ===========   ===========   ===========   ===========   ===========
Net income applicable to common stock per common share:
Net income                                    $   879.20    $ 2,205.60    $ 2,727.40    $ 1,973.00    $ 1,335.90
                                              ==========    ==========    ==========    ==========    ==========

Average common shares outstanding                     10            10            10            10            10
                                                      ==            ==            ==            ==            ==

Balance Sheet Data:
Total investments                             $2,346,395   $ 2,125,813   $ 2,018,852   $ 2,014,634   $ 1,582,592
Total assets                                   4,105,814     4,061,236     2,769,583     2,459,805     1,994,628
Total debt                                       132,533       132,884       133,312       133,451       100,702
Total liabilities                              3,848,634     3,814,374     2,562,561     2,269,042     1,844,632
Stockholder's equity                             257,180       246,862       207,022       190,763       149,996
</TABLE>

---------------------------

(1)    On February 28,  1994,  the Company  sold its  investment  in 100% of the
       common  stock  of PFS  Holding  Company  ("PFSH")  and  its  wholly-owned
       subsidiary, Premium Financing Specialists, Inc., to FHC.

(2)     On July 10, 1995,  the Company  acquired all of the  outstanding  common
        stock of Victory Life.

(3)     On April 15, 1997, the Company  acquired all of the  outstanding  common
        stock of Ohio State and Investors Guaranty.

(4)     On October 1, 1998,  the Company  acquired the 50% of College  Insurance
        Group, Inc. not previously owned by the Company.


<PAGE>


ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

                              RESULTS OF OPERATIONS

     The following  discussion analyzes  significant items affecting the results
of operations and the financial condition of the Company. In connection with the
"safe harbor"  provisions  of the Private  Securities  Litigation  Reform Act of
1995, the Company cautions readers regarding certain forward-looking  statements
contained in this report and in any other  statements  made by, or on behalf of,
the Company,  whether or not in future  filings with the Securities and Exchange
Commission (the "SEC").  Forward-looking  statements are statements not based on
historical  information  and  which  relate to  future  operations,  strategies,
financial results, or other developments. Statements using verbs such as "plan",
"anticipate",   "believe"  or  words  of  similar   import   generally   involve
forward-looking  statements.  Without  limiting the  foregoing,  forward-looking
statements  include  statements which represent the Company's beliefs concerning
future  levels of sales and  surrenders of the  Company's  products,  investment
spreads  and  yields,  or  the  earnings  and  profitability  of  the  Company's
activities.

     Forward-looking   statements  are   necessarily   based  on  estimates  and
assumptions that are inherently  subject to significant  business,  economic and
competitive  uncertainties  and  contingencies,  many of which  are  beyond  the
Company's control and many of which are subject to change.  These  uncertainties
and  contingencies  could cause actual results to differ  materially  from those
expressed  in any  forward-looking  statements  made by,  or on behalf  of,  the
Company.  Whether or not actual results differ  materially from  forward-looking
statements may depend on numerous  foreseeable and  unforeseeable  developments.
Some may be national in scope, such as general economic  conditions,  changes in
tax law and  changes in  interest  rates.  Some may be related to the  insurance
industry generally,  such as pricing  competition,  regulatory  developments and
industry consolidation.  Others may relate to the Company specifically,  such as
credit,  volatility  and other risks  associated  with the Company's  investment
portfolio. Investors are also directed to consider other risks and uncertainties
discussed in documents filed by the Company with the SEC. The Company  disclaims
any obligation to update forward-looking information.  This discussion should be
read in conjunction with the accompanying  consolidated financial statements and
the notes thereto.

General

     The volume of the Company's life insurance in force has increased 134% from
$18.5 billion in 1989 to $43.3 billion in 1998.  This growth has been the result
of a combination of acquisitions,  reinsurance assumed and new business written.
Changes in the  Company's  volume of life  insurance  inforce for the last three
years is summarized in the following table. <TABLE>

                                                               1998             1997              1996
                                                               ----             ----              ----
                                                                            (in billions)
<S>                                                         <C>               <C>              <C>

Beginning of year balance                                    $  47.2           $  27.6          $  26.9
Insurance business acquired or assumed                           1.6              18.9              2.0
New business written                                             3.4               2.6              2.1
Terminations and other                                          (5.3)             (1.9)            (3.4)
                                                             -------           -------          -------
End of year balance                                          $  46.9           $  47.2          $  27.6
                                                             =======           =======          =======
</TABLE>

     The following  table  summarizes the Company's sales in terms of annualized
premiums over the three year period ended December 31, 1998:
<TABLE>

                                                               1998             1997              1996
                                                               ----             ----              ----
                                                                            (in millions)
<S>                                                         <C>               <C>              <C>

Life insurance premiums                                      $  39.3           $  40.2          $  23.1
Annuity premiums                                                56.2              75.8             52.6
                                                             -------           -------          -------
                                                             $  95.5           $ 116.0          $  75.7
                                                             =======           =======          =======
</TABLE>

     The Company intends to continue its focus on the sale of life insurance and
annuity products through its marketing and  distribution  systems.  In addition,
the Company may also pursue  selected  acquisitions  of blocks of life insurance
policies and life insurance companies.



<PAGE>


Segment Results

     Revenues and income  before  provision  for income taxes for the  Company's
operating  segments,  as defined  by  Financial  Accounting  Standard  No.  131,
"Financial  Reporting for Segments of a Business  Enterprise",  is summarized as
follows:
<TABLE>

                                   Life                        Asset Accumulation                      Non-Life
                                Insurance                           Products                          Insurance
                                Operations                         Operations                        Investments
                      -------------------------------    -------------------------------    -------------------------------
<S>                    <C>        <C>       <C>            <C>         <C>      <C>          <C>        <C>        <C>

                        1998       1997      1996           1998        1997     1996         1998       1997       1996
                        ----       ----      ----           ----        ----     ----         ----       ----       ----

Revenues               $417.5     $414.6    $347.3          $24.1       $7.7     $6.8         $8.0       $11.6      $1.1
Income (loss)
  before income taxes    54.4       53.7      45.2            6.2       (3.0)    (1.1)         6.8       10.6       1.1
</TABLE>

     Life  insurance  operations.  Income  before  income taxes  increased  only
slightly from 1998 and 1997.  Income before income taxes  increased $8.5 million
from 1996 to 1997 due to certain  acquisitions  completed  in 1997 as more fully
described  in the  "Consolidated  Year to  Year  Comparisons"  section  included
elsewhere in this  Management's  Discussion and Analysis of Financial  Condition
and Results of Operations.

     Asset  accumulation   products  operations.   Income  before  income  taxes
increased $9.2 million from 1997 to 1998.  The primary  reasons for the increase
were (i)  adjustments  to  deferred  policy  acquisition  costs  resulting  from
revisions  made to the  Company's  estimate  of future  gross  profits  from its
interest  sensitive and annuity  products,  and (ii) the addition in 1998 of the
results of operations from business which was previously  ceded to an affiliated
insurance  company and  recaptured  in 1998 in  conjunction  with the  Company's
consolidation of its asset accumulation operations.

     Non-life insurance  investments.  Income before income taxes decreased $3.8
million  from 1997 to 1998.  The  primary  reasons for the  decrease  were (i) a
decrease  in income from Argus and (ii) a decrease  in net  realized  investment
gains on the sale of investment  properties  in 1998 compared with 1997.  Income
before income taxes increased between 1996 and 1997. The primary reasons for the
increase  were (i) an  increase in income from Argus and (ii) an increase in net
realized investment gains on the sale of investment  properties in 1997 compared
with 1996.

     Significant   reconciling  items of the segment revenues and income before
income taxes shown above to amounts reported in the Company's consolidated
financial statements appearing elsewhere in this Form 10-K include net
investment  income and operating  expenses not  allocated to segments,  net
realized  investment gains (losses) not allocated to segments,  interest expense
and  certain  non-recurring   transactions  such  as  gains  from  the  sale  of
subsidiaries. These reconciling items had the effect of decreasing income before
income taxes, by $25.4 million from 1997 to 1998.  The primary reasons for the 
decrease were (i) net realized investment losses in 1998 and (ii) an increase in
operating expenses not allocated to segments in 1998.  These reconciling items
had the effect of decreasing income before income taxes by $25.8 million from
1996 to 1997.  The primary reasons for the decrease were (i) a gain on 
dispostion of a partnership interest in 1996 and (ii) an increase in operating
expenses not allocated to segments in 1997.

Consolidated Year to Year Comparisons

     The Company  entered into two  transactions  during the period 1996 through
1998 which  affect  the  comparability  of its  results  of  operations  between
periods.

     In July 1996, in connection  with  administrative  agreements  entered into
with Fremont Life, an unaffiliated  company (the "Reinsurer")  reinsured 100% of
the  insurance  business of Fremont Life on a coinsurance  basis.  The Reinsurer
then  reinsured  certain risks on these same  liabilities to Great Southern on a
modified coinsurance basis. The associated policy liabilities were approximately
$335.4 million at December 31, 1998.

     On April 15, 1997,  Great Southern  acquired all of the outstanding  common
stock of Ohio State Life and Investors Guaranty ("Ohio State  Acquisition") from
Farmers Group, Inc. On the acquisition  date, Ohio State and Investors  Guaranty
had combined assets of $1,039 million and combined  liabilities of $694 million.
The acquisition  was accounted for as a purchase.  On April 16, 1997, Ohio State
and Investors Guaranty entered into separate coinsurance  agreements to reinsure
100% of their  insurance  liabilities  to the Reinsurer in exchange for a ceding
commission of $145.7  million.  Concurrently,  the Reinsurer and Great  Southern
entered into a modified  coinsurance  agreement  under which the Reinsurer ceded
certain risks on a 70% quota share basis on the same  insurance  liabilities  to
Great  Southern.  The results of operations of these acquired  policies from the
date of acquisition, less the net 30% coinsurance, are included in the Company's
results of operations.  The Reinsurer will receive 100% of the statutory profits
from the reinsured policies until the Reinsurer has recovered the initial ceding
commission.


<PAGE>


     In each of the above  transactions with the Reinsurer,  the invested assets
related to the reinsured businesses are owned by the Reinsurer.  At December 31,
1998, the insurance liabilities  associated with these reinsurance  transactions
totaled $1.0 billion.  Results from this  reinsurance  transaction  and the Ohio
State  Acquisition are included in the Company's  results of operations from the
respective dates of the transactions.

     The effects of the above transactions,  collectively  referred to herein as
the Acquisitions,  on the individual income statement components,  excluding the
costs of financing, are set forth in the table below (in millions).
<TABLE>

                                                         1998 and 1997                 1997 and 1996
                                                    Acquisitions Effects on       Acquisitions Effects on
                                                     1998 and 1997 Results         1997 and 1996 Results
                                                              (1)                           (2)
                                                    -------------------------     -------------------------


                                                       1998         1997             1997         1996
                                                       ----         ----             ----         ----
<S>                                                 <C>          <C>              <C>           <C>
Premiums and policy revenues                         $  53.6      $  42.0          $  56.8       $  6.9
Net investment income                                   27.2         18.9             43.7         14.3
Net realized investment gains                            6.7          -                -            -
Other income                                             3.8          3.4              3.4          -
Policyholder benefits                                   49.4         37.5             66.8         17.5
Commissions                                              2.5          1.3              1.5          2.4
Amortization expense                                    25.1         11.1             18.4          -
</TABLE>

     (1) Includes the results from the Ohio State Acquisition in 1997.
     (2) Includes the results from the Ohio State  Acquisition  in 1997 and
         the  agreements  with the Reinsurer in 1997 and 1996.

     Year Ended December 31, 1998 Compared with Year Ended December 31, 1997

     Income before  provision for income taxes  decreased $19.3 million to $12.0
million  in 1998.  The  primary  reasons  for the  decrease  were  (i)  realized
investment  losses,  (ii) an  increase  in  amortization  expense  and  (iii) an
increase  in other  operating  expenses,  partially  offset by (iv) lower  death
benefits. The Company recorded $2.8 million of expense for the relocation of its
Columbus,  Ohio operations  during 1998. These items and significant  changes in
individual income statement components are discussed in more detail below.

     Premiums and policy  revenues.  Premiums and policy revenues totaled $218.6
million in 1998 compared to $203.7 million in 1997.  Excluding the Acquisitions,
premiums  and  policy  revenues  increased  $3.3  million  from  1997  to  1998.
Traditional life insurance premiums decreased $5.1 million because lapses of the
Company's  traditional  policies  exceeded the premium volume from  newly-issued
traditional policies. This decrease was offset by an increase in policy revenues
of $4.0 million  resulting from policy  charges on increased  interest-sensitive
life and  annuity  policy fund values and  increased  surrender  charges of $2.7
million from a closed block of annuity business.

     Net investment income. Net investment income totaled $226.5 million in 1998
compared to $219.3  million in 1997.  Excluding the effect of the  Acquisitions,
net  investment  income  decreased  $1.1 million,  which includes a $1.6 million
decrease in income from equity subsidiaries.

     Net realized  investment gains. Net realized  investment gains totaled $8.3
million in 1998 compared with $3.0 million in 1997.  Excluding the effect of the
Acquisitions, net realized investment gains decreased $1.4 million. In 1998, the
Company reported $8.3 million of realized gains including $16.7 million of gains
from the sale of fixed maturity investments held by the Reinsurer.  As described
below, the sale of fixed maturity  investments held by the Reinsurer resulted in
increased amortization of cost of business acquired assets.  Excluding the $16.7
million of gains described above, the Company realized losses of $8.4 million in
1998  compared  to  gains  of $3.0  million  in  1997.  There  were no  sales of
investments  held by the  Reinsurer in 1997 and no impact on  amortization  from
other gains realized in 1997. The difference between realized losses in 1998 and
realized  gains in 1997 resulted in an $11.4 million  reduction in income before
provision for income taxes in 1998 compared with 1997.

     Included  in 1998  realized  losses  of $8.4  million  is $6.0  million  of
realized  losses on short  positions held on common stocks owned by the Company.
There was a like amount of increase in market value on the related long position
of the common  stocks  which is included in  unrealized  gains in  stockholder's
equity.

     Other income.  Other income totaled $12.2 million in 1998 compared to $12.3
million in 1997. Other income includes an administrative service fee paid to the
Company  associated  with the reinsurance of 30% of the Ohio State and Investors
Guaranty   policies,   which   amounts  are  included  in  the  effects  of  the
Acquisitions.  Excluding these amounts, other income decreased $0.5 million from
1997 to 1998.  The  Company  recorded  a gain of $4.9  million  from the sale of
Investors  Guaranty  in May  1998  and a gain of $4.8  million  from the sale of
Loyalty Life Insurance Company ("Loyalty") in 1997.

     Policyholder benefits. Policyholder benefits totaled $251.5 million in 1998
compared with $262.9 million in 1997.  Excluding the effect of the Acquisitions,
policyholder  benefits  decreased $23.3 million from 1997 to 1998. This decrease
resulted  primarily from (i) an $8.9 million decrease in death benefits,  (ii) a
$4.3 million  decrease in interest  credited on universal  life and annuity fund
balances,  and (iii) a $5.5 million  increase in the amount of benefit  reserves
released  from  1997 to 1998  associated  with the  lower  traditional  premiums
referred to above.  The  decrease in interest  credited is  comprised of an $8.8
million decrease resulting from reduced fund values in a closed block of annuity
business,  offset by a $5.9 million increase related to increased fund values of
the Company's asset accumulation  products.  The balance of the decrease results
from a reduction, made in response to market conditions, in the rate of interest
credited on interest-sensitive products.

     Amortization  expense.  Amortization  expense totaled $87.2 million in 1998
compared  with $43.7  million in 1997.  Amortization  expense in 1998  increased
$16.7  million  as a result of  realized  investment  gains on the sale of fixed
maturity  investments,  including $6.7 million related to the Acquisitions.  The
sale of these fixed maturity investments at a gain will reduce future investment
income,  requiring the recognition of additional  amortization  expense in 1998.
Excluding the  Acquisitions,  amortization  expense increased $29.5 million from
1997 to  1998.  This  increase  resulted  from (i)  $10.0  million  of  realized
investment gains as discussed above, (ii) increased surrenders in a closed block
of  annuity  business  and  (iii)  increased  amortization  of  deferred  policy
acquisition  costs  on  Great  Southern's  universal  life  insurance  business.
Included in  amortization  expense are  adjustments to decrease  deferred policy
acquisition  costs and the cost of business  acquired  assets of $0.9 million in
1998 and $2.5 million in 1997. These  adjustments  result from revisions made to
the Company's estimate of future gross profits from its interest-sensitive  life
and annuity policies. Under GAAP, deferred policy acquisition costs and the cost
of business  acquired assets on  interest-sensitive  life products are amortized
based on the estimated future gross profits of the related policies.

     Other operating expenses. Other operating expenses totaled $89.4 million in
1998  compared  with $77.0  million in 1997.  The  increase  in other  operating
expenses resulted from (i) the inclusion of twelve months of operating  expenses
related to Ohio State and  Investors  Guaranty in 1998 compared with nine months
of operating  expenses  for these  entities in 1997  following  their April 1997
acquisition  by the  Company,  (ii) $2.8  million  of  expenses  related  to the
relocation of the Company's Columbus, Ohio operations to other Company locations
during 1998, (iii) the operating expenses of marketing  operations  purchased by
the  Company in October  1998 and (iv)  increased expenses associated with the 
continued development and expansion of the Company's product offerings and
marketing capabilities.  Increased expenses in these areas included both
product development expenses and expenses incurred on the Company's
administrative systems.

     Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

     Income before  provision for income taxes  decreased  $9.5 million to $31.3
million in 1997 from $40.8  million in 1996.  The  primary  reasons  for the net
decrease were (i) the gain from the  disposition  of the  Company's  interest in
GSSW in 1996,  (ii) an increase in death benefits and (iii) an increase in other
operating  expenses,  partially  offset by (iv) a gain from the  disposition  of
Loyalty Life in 1997 and (v) income resulting from the  Acquisitions.  The items
and significant changes in individual income statement  components are discussed
in more detail below.

     Premiums and policy  revenues.  Premiums and policy revenues totaled $203.7
million in 1997 compared to $165.6 million in 1996.  Excluding the Acquisitions,
premiums and policy  revenues  decreased  $11.8  million from 1996 to 1997.  The
decrease is primarily due to the Company  currently writing small amounts of new
traditional life insurance products and,  therefore,  traditional life insurance
premiums are decreasing as the amount of in-force business decreases.  Also, the
1996 results  included  $2.5 million of  traditional  premiums on  supplementary
contracts and $3.4 million of accident and health  premiums  which did not recur
in 1997.


<PAGE>


     Collected premiums on interest sensitive and annuity products including the
Acquisitions  increased  by $51.8  million  from $287.3  million  1996 to $339.1
million in 1997.  This  increase  in  collected  premiums  is not  reflected  in
premiums and policy revenues because generally  accepted  accounting  principles
require that premiums collected on these types of products be treated as deposit
liabilities rather than revenues.

     Net investment  income.  Net investment  income  increased $32.6 million to
$219.3 million in 1997 from $186.7 million in 1996. Excluding the net investment
income from invested  assets  associated with the  Acquisitions,  net investment
income increased $3.1 million, primarily attributable to (i) changes in expected
prepayments on mortgage-backed  securities and (ii) an increase in income of the
Company's equity subsidiaries.

     Management   continually   evaluates  the  expected   prepayments   of  the
mortgage-backed   securities  portfolio  to  more  accurately  reflect  expected
paydowns on the securities as market  interest rates change.  In 1997,  interest
rates decreased, accelerating expected prepayment rates. In 1996, interest rates
increased,  reducing the expected prepayment rate. As a result of the changes in
expected  prepayments,  amortization of premiums and accretion of discounts were
accelerated  in 1997,  causing  an  increase  in net  investment  income of $1.4
million in 1997. The decrease in net  investment  income in 1996 of $1.8 million
resulting  from the reduced  expected  prepayment  rate was partially  offset by
discounts of $0.5 million  recognized upon the early repayment of certain of the
Company's mortgage loans.

     The Company's share of earnings from its equity subsidiaries decreased from
$5.5  million in 1996 to $3.6 million in 1997.  Equity  earnings in GSSW of $4.5
million in 1996 did not recur in 1997 as the Company disposed of GSSW in 1996 in
exchange for 100% interests in several real estate limited partnerships formerly
owned by GSSW. These limited  partnerships  added $1.9 million to net investment
income in 1997. This decrease in earnings from GSSW was offset by an increase in
the income from the Company's other equity subsidiaries.

     Net realized investment gains. The Company recorded net realized investment
gains of $3.0 million in 1997.  During 1997, the Company  recorded gains of $5.1
million  from the sale of three real estate  investment  properties,  which were
offset by various other investment losses.

     Other Income. Other income increased $8.7 million from $3.6 million in 1996
to $12.3 in 1997.  Excluding  other income  related to the  Acquisitions,  other
income  increased $5.4 million from 1996 to 1997. The Company realized a gain of
$4.8  million  in  1997  from  the  sale  of  Loyalty  Life  Insurance   Company
("Loyalty"),  a former  wholly-owned  subsidiary  of the Company.  Prior to this
sale, several of the Company's  insurance  subsidiaries  entered into agreements
with Loyalty for the assumption of Loyalty's insurance liabilities. Other income
in 1997  includes  a  servicing  fee  paid to the  Company  associated  with the
reinsurance of 30% of the Ohio State and Investors Guaranty policies.

     Policyholder  benefits.  Policyholder benefits increased $44.2 million from
$218.7 million in 1996 to $262.9  million in 1997.  Excluding the effects of the
Acquisitions,  policyholder  benefits  decreased $5.1 million from 1996 to 1997.
The decrease in  policyholder  benefits  primarily  resulted  from lower benefit
reserve  increases in 1997 resulting from the decreasing  traditional  premiums,
partially offset by a $5.1 million increase in death benefits.

     Amortization  expense.  Amortization  expense  increased $14.0 million from
$29.7  million in 1996 to $43.7  million in 1997.  Excluding  the effects of the
Acquisitions,  amortization  expense  decreased  $4.4 million from 1996 to 1997.
Included in  amortization  expense are  adjustments to decrease  deferred policy
acquisition  costs and the cost of business  acquired  assets of $2.5 million in
1997 and $3.2 million in 1996. These  adjustments  result from revisions made to
the Company's  estimate of future gross profits from its interest sensitive life
and annuity policies.  Under GAAP,  deferred policy  acquisitions  costs and the
cost of  business  acquired  assets  on  interest-sensitive  life  products  are
amortized based on the estimated future gross profits of the related policies.

     Other operating expenses.  Other operating expenses increased $20.3 million
to $77.0  million in 1997 from $56.7  million in 1996.  Excluding the effects of
the Acquisitions,  other operating  expenses increased $6.1 million from 1996 to
1997.  The primary  reasons for the increase in operating  expenses from 1996 to
1997 are expenses  associated  with a marketing  office opening in California in
September 1996, increased  depreciation expense in 1997 resulting from purchases
of computer  equipment in 1996 and 1997,  and increased  legal and  professional
fees in 1997. Financial Condition and Liquidity

     Liquidity.  The  liquidity  needs of Americo,  whose  principal  assets are
investments  in its  insurance  subsidiaries,  are  dependent  upon  receipt  of
sufficient funds from its subsidiaries. The cash requirements of Americo consist
of debt service requirements on notes payable, amounts due to FHC under advisory
and data  processing  agreements  and its own  operating  expenses.  These  cash
requirements are met by payments of principal and interest on surplus debentures
that Americo holds which are issued by United Fidelity and dividends from United
Fidelity.  Americo also receives  payments  under  investment  advisory and data
processing  agreements with the insurance  subsidiaries  which permit Americo to
recover a portion of the amounts paid by it under similar  agreements  with FHC.
On a stand-alone  basis, at December 31, 1998, Americo had $33.2 million of cash
and cash equivalents and marketable equity securities available for debt service
and other corporate requirements.

     Americo has outstanding $100.0 million aggregate principal amount of senior
subordinated notes that it issued in 1993. These senior  subordinated notes bear
interest at 9.25% and mature in May 2005.  They are  redeemable at the option of
Americo beginning in 1998. The redemption prices are in excess of par in 1999.

     In connection with the acquisition of The Victory Life Insurance Company in
July  1995,  Americo  issued  notes  payable  to the  seller  with face  amounts
aggregating  $17 million and  borrowed  $21 million  under a $70 million  credit
agreement  with a syndicate  of banks.  Of the $17 million  face amount of notes
payable  issued to the seller,  $5 million  mature in 2015 and the remaining $12
million mature in 24 equal  semi-annual  installments the first of which was due
in 1995.  The notes are  carried at their  discounted  value,  which  assumes an
average effective rate of 11.6%.

     Americo's  bank  credit  agreement,  which was last  amended in 1998,  is a
revolving  credit  facility  until  December  1999,  at which time  amounts then
outstanding  convert  into a term  loan  repayable  in  six,  equal  semi-annual
installments  commencing  July 1,  2000.  Amounts  outstanding  under the credit
facility bear interest at either a bank prime rate or 7/8% over LIBOR.

     At December  31, 1998,  United  Fidelity  had  outstanding  to Americo four
surplus debentures with an aggregate unpaid balance of $122.8 million. The terms
of the surplus  debentures  have been  established to provide for the payment of
principal and interest to Americo in amounts  sufficient to make payments on the
Company's  external debt obligations in accordance with their payment schedules.
The surplus  debentures  and their payment  schedules  have been approved by the
Texas Department of Insurance;  therefore, no scheduled payment will require the
approval of the Texas Department of Insurance.

     The surplus debentures  contain  restrictions which prevent United Fidelity
from making  principal  and interest  payments if such  payments  reduce  United
Fidelity's  statutory  capital  and  surplus  below an amount  specified  in the
surplus debenture  agreements.  The most restrictive minimum surplus requirement
contained in the surplus debentures is $37.5 million;  United Fidelity's capital
and  surplus at  December  31,  1998 was $96.9  million.  Any future  payment of
principal or interest on such surplus  debentures will be limited by the ability
of the  subsidiaries  of United Fidelity to pay dividends to United Fidelity and
may be further  limited by United  Fidelity's RBC  requirements.  See "Business:
Regulation".  The Company  does not believe that United  Fidelity  will have any
difficulty  in meeting its  obligations  under these  surplus  debentures in the
foreseeable future.

     In order to meet its  obligations  under  the  surplus  debentures,  United
Fidelity uses funds generated by its insurance operations and dividends from its
insurance  subsidiaries.  The  ability  of  the  insurance  subsidiaries  to pay
dividends is subject to regulatory  restrictions.  The insurance holding company
statues of Texas in which the  Company's  insurance  subsidiaries  are domiciled
regulate payment of dividends by an insurance company to its parent.  Generally,
without the consent of the state's insurance commissioner,  an insurance company
may  not pay  dividends  to its  parent  in  excess  of the  greater  of (i) the
insurer's  prior year  statutory  net gain from  operations,  or (ii) 10% of its
prior year  ending  statutory  capital  and  surplus,  subject in either case to
sufficient  earned  statutory  surplus  from which such  dividends  may be paid.
Additionally,  an  insurance  company  is  required  to  notify  the  respective
insurance department prior to the payment of ordinary dividends.

     The ability of life  insurance  subsidiaries  to pay dividends  also may be
affected by reinsurance  treaties.  Under reinsurance treaties with an unrelated
reinsurer,  National  Farmers Union is restricted  from  declaring  dividends if
adjusted surplus is less than $27.5 million.  Adjusted surplus is defined in the
treaties as statutory  capital and surplus,  plus AVR,  less the admitted  asset
value of all  affiliated  investments.  At December 31, 1998,  National  Farmers
Union had adjusted surplus of $52.2 million.


<PAGE>


     The principal sources of liquidity for the Company's insurance subsidiaries
are premium  receipts,  net  investment  income  received and net proceeds  from
investments that have been sold or matured or from mortgage loans that have been
repaid.  Cash flows from premiums  received and investment  income are generally
sufficient to meet the subsidiaries'  obligations,  which consist of the payment
of claims and benefits on insurance  policies,  purchases of investments and the
payment  of  operating  expenses.  Although  there is no  intent to  dispose  of
investments at this time, the Company's investments are substantially in readily
marketable securities.

     The Company believes that its investment portfolio will allow it to satisfy
all existing contractual obligations to policyholders. At December 31, 1998, the
Company's investment portfolio included cash and short-term investments totaling
$68.2 million,  marketable equity  securities  totaling $89.0 million as well as
$324.2  million in U.S.  Treasury  and  government  securities,  mortgage-backed
securities and  asset-backed  securities  and $601.0 million of corporate  bonds
classified  as available for sale,  all of which  management  believes  could be
readily converted to cash.

     Financial  condition.  Stockholder's  equity increased to $257.2 million at
December 31, 1998 from $246.9 million at December 31, 1997. The increase was the
result  of net  income  of  $8.8  million  and  an  increase  in net  unrealized
investment  gains of $3.5  million,  less a $2.0  million  dividend to FHC.  Net
unrealized  investment  gains in 1998 were  recorded  due to an  increase in the
market value of the Company's  marketable equity securities offset by a decrease
in its  available  for  sale  fixed  maturities.  See  Note  4 to the  Company's
Consolidated  Financial  Statements  included  elsewhere  in this  Form 10-K for
further discussion of the components of the change in net unrealized  investment
gains.

     The changes  occurring in the  Company's  consolidated  balance  sheet from
December 31, 1998 to December 31, 1997 primarily  reflect the normal  operations
of the Company's life insurance subsidiaries.

     Statutory  capital and surplus of the Company's  insurance  subsidiaries at
December 31, 1998  includes  $14.8  million  relating to  financial  reinsurance
agreements  which is not  included  in  stockholder's  equity  on a GAAP  basis.
Financial  reinsurance  treaties  between  National  Farmers Union and unrelated
parties contain minimum  statutory  surplus  requirements  and require  National
Farmers  Union to place  securities  in an  escrow  account  ($75.2  million  at
December 31, 1998) to secure National  Farmers Union's  obligations to the third
party reinsurer.

     Investment Portfolio. The Company has what it believes to be a conservative
investment  philosophy.  The Company's investment portfolio is designed to match
investment  maturities  as  closely  as  possible  to the  projected  cash  flow
requirements of the Company's outstanding  liabilities.  The Company's policy is
to have a  substantial  portion  of its  investment  portfolio  in fixed  income
securities with call protection.

     The  following  table sets forth the  composition  of the  Company's  fixed
maturity  securities  according to NAIC designations and S&P and Moody's ratings
at December 31, 1998:


<PAGE>
<TABLE>



                                                  Equivalent                                  Total
            S&P                    Moody's           NAIC        Held to      Available      Carrying
         Rating (1)               Rating (1)        Rating       Maturity        for           Amount    Percentage
--       -----------         --   -----------     ---------    -----------                 --  ------    ----------
                                                      (1)          (2)          Sale (3)
                                                      ---          ---       -- --------
<S>                             <C>                   <C>     <C>           <C>           <C>                <C>
                                                                                   (in thousands)
Investment grade:
AAA                                  Aaa               1       $   328,689   $   329,527   $   658,216        36.5%
AA                              Aa1,Aa2, Aa3           1            93,297        95,094       188,391        10.5
A                                A1, A2, A3            1           331,993       307,662       639,655        35.5
BBB                           Baa1, Baa2, Baa3         2           122,493       178,089       300,582        16.7
                                                               -----------   -----------   -----------   ---------
Subtotal                                                           876,472       910,372    1,786,844         99.2

Non-investment grade:
BB or below                     Ba1 or below         3, 4              122        14,819        14,941         0.8
                                                               -----------   -----------   -----------   ---------

Total fixed maturity
  investments                                                  $   876,594   $   925,191   $1,801,785        100.0%
                                                               ===========   ===========   ==========    =========
</TABLE>


(1)  The ratings  set forth  above are based on the ratings  assigned by S&P and
     Moody's  Investors  Service,  Inc.  ("Moody's").   If  S&P's  ratings  were
     unavailable, ratings assigned by Moody's were used. If ratings assigned S&P
     and Moody's were not equivalent,  securities were categorized in this table
     based upon the rating  assigned  by S&P.  Bonds not rated by S&P or Moody's
     are  classified  for the  purpose  of the  table  according  to the  rating
     assigned  to them by the NAIC as  follows:  NAIC class 1 is included in the
     "A" rating; class 2 in "BBB" and class 3, "BB or below".

(2)  Carrying  amount is  amortized  cost.  The market value of held to maturity
     securities as December 31, 1998 was $914.7 million.

(3)  Carrying  amount is market value.  The amortized cost of available for sale
     securities at December 31, 1998 was $893.7 million.

     The Company  continually  reviews its non-investment  grade debt securities
(NAIC  designations  3 through 6) for  evidence  of  declines in value which are
other than temporary.  The Company does not anticipate any material  increase in
its investments in non-investment  grade debt securities.  At December 31, 1998,
the Company's investment portfolio contained no securities which were in default
as to principal or interest.

     The Company maintains a mortgage-backed securities ("MBS") portfolio, which
consists of "pass-through"  obligations and collateralized  mortgage obligations
("CMOs"). Approximately 90% of the MBS portfolio consists of securities or pools
of  securities  guaranteed  by the U.S.  government,  including  those issued by
Government  National Mortgage  Association,  or those issued by Federal National
Mortgage Association and Federal Home Loan Mortgage Corporation.

     The  primary  risk  associated  with MBS is that a changing  interest  rate
environment  might  cause  prepayment  of the  underlying  mortgages  at  speeds
different than anticipated at the time of their purchase.  The degree to which a
security is at risk to either  increases or reductions in yield is influenced by
the  difference   between  its  carrying  value  and  par  value,  the  relative
sensitivity  of the  underlying  mortgages to prepayment in a changing  interest
rate  environment  and  the  repayment   priority  of  the  securities  in  each
securitization structure.

     The  Company  manages  the  yield  and  cash  flow  variability  of its MBS
portfolio  by  (i)  purchasing   securities  backed  by  collateral  with  lower
prepayment  sensitivity  (such as mortgages  priced at a discount to par value),
(ii)  avoiding  securities  whose  values are heavily  influenced  by changes in
prepayments  (such as  interest-only  and  principal-only  securities) and (iii)
concentrating  on  securities  with  prepayment  protected  structures  (such as
planned  amortization  class CMO's).  See Note 4 to the  Company's  Consolidated
Financial  Statements  included elsewhere in this Form 10-K for a summary of the
Company's investments in CMO's.

     At December 31, 1998, approximately $190.1 million in carrying value of the
Company's   investment   portfolio  consisted  of  mortgage  loans,  which  were
collateralized primarily by multi-family apartments, office buildings and retail
properties  located  in 30  states.  Approximately  34%  of  the  portfolio  was
multi-family apartments,  18% was office buildings, 27% was retail space and 21%
was other types of properties.  At December 31, 1998,  approximately  16% of the
mortgage loan portfolio was secured by properties in Texas, 15% in Missouri, 11%
in Connecticut  and 10% in Kansas.  No more than 10% of the remaining  portfolio
was secured by properties in any one state.
     At December 31, 1998,  1.11% of the mortgage  loan  portfolio  consisted of
loans with balloon  payments that mature before January 1, 2000. At December 31,
1998,  mortgage  loans  delinquent  by more  than 90 days,  as  determined  on a
contract   delinquency  basis,   totaled   approximately  $0.9  million,   which
constituted  0.5% of mortgage  loans and was 0.04% of cash and invested  assets.
There were no loans  foreclosed upon and transferred to real estate owned in the
Company's  consolidated  balance at December 31,  1998.  The  favorable  default
experience  is  principally  attributed  to  the  Company's  selectivity  in the
purchase of mortgages in  connection  with  acquisitions  of its life  insurance
subsidiaries.  In light of the current  market  interest rate  environment,  the
Company may experience prepayments on its mortgage loan portfolio, thus reducing
its  yield on such  portfolio.  The  Company  plans  to  continue  applying  its
historical underwriting standards to future investments in mortgage loans.

     Real  estate  investments  were  only  1.2% of the  carrying  value  of the
Company's cash and invested assets at December 31, 1998.

     Non-Insurance  Subsidiaries.  During 1998,  Americo received dividends from
Argus  consisting  of $9.5  million  of cash and  received a $0.4  million  cash
distribution from Hereford, LLP.

Asset-Liability Management

     Management is aware that prevailing  interest rates may shift significantly
and has strategies in place to manage either an increase or decrease in interest
rates. In a rising interest rate environment,  the Company's cost of funds would
increase  over time as it prices  its new and  existing  interest-sensitive  and
investment products to maintain generally  competitive market rates.  Management
would seek to invest new and renewal premiums in investments which are generally
matched in duration to, and higher  yielding than, its  liabilities.  Management
believes  that  liquidity  to fund  withdrawals  would be  available  through  a
combination  of incoming  cash flow,  the sale of  short-term  or floating  rate
instruments,  and maturing  short-duration  assets thereby  avoiding the sale of
significant  amounts of longer duration fixed-rate assets in an unfavorable bond
market.  In a declining  rate  environment,  the  Company's  cost of funds would
decrease over time,  reflecting lower interest crediting rates on its fixed-rate
liabilities. Should increased liquidity be required for withdrawals,  management
believes that a  significant  portion of its  investments  could be sold without
adverse  consequences  in  light of the  general  strengthening  which  would be
expected in the bond market.

     Asset-liability  management  is utilized by the Company to reduce the risks
to the Company for interest rate fluctuations and disintermediation. The Company
believes  that its  fixed-rate  liabilities  should  be  backed  by a  portfolio
principally  composed of fixed-rate  investments that generate predictable rates
of return in a variety of interest rate environments.  The Company does not have
a specific  target rate of return.  Instead,  its rates of return vary over time
depending  on the  current  interest  rate  environment,  the slope of the yield
curve,  the spread at which  fixed-rate  investments  are priced  over the yield
curve,  and general economic  conditions.  The Company's  portfolio  strategy is
constructed with a view to achieving adequate  risk-adjusted  returns consistent
with  its  investment  objectives  of  effective   asset-liability   management,
liquidity and safety.  The Company has structured  its  investment  portfolio to
reduce  changes in the value of the assets under various rate  environments.  In
that regard,  the percentage of the Company's  fixed-rate  investment  portfolio
which  is  non-callable  has  increased  from  44% in  1995 to 62% in  1998.  In
addition, the portfolio's concentration in mortgage-backed  securities,  which
are subject to cash flow variability in changing interest rate environments, has
decreased from 38% in 1995 to 24% in 1998. See  "Investment  Portfolio"  section
included  elsewhere  in  Management's   Discussion  and  Analysis  of  Financial
Condition and Results of Operations  for additional  information  related to the
Company's investments.

     In order to reduce the  probability  of  unexpected  increases in policy or
contract  surrenders,  which would create a need for  increased  liquidity,  the
Company  has  structured  its  interest-sensitive  life  insurance  and  annuity
products  to include  substantial  surrender  charges.  At  December  31,  1998,
approximately 81% and 83% of the reserves for interest-sensitive  life insurance
and annuity products,  respectively, were for policies with surrender charges or
otherwise not subject to discretionary  withdrawal by the policyholder.  Also at
December  31,  1998,  the  aggregate  cash  surrender  values  of the  Company's
interest-sensitive  life insurance and annuity products were  approximately  87%
and 93%, respectively, of the aggregate policyholder fund value.


<PAGE>


     As part of its  asset-liability  management,  the Company conducts detailed
computer  simulations  that model its fixed-rate  assets and  liabilities  under
commonly used  stress-test  interest rate  scenarios.  With the results of these
computer simulations, the Company can measure the potential gain or loss in fair
value  of its  interest-rate  sensitive  instruments  and  seek to  protect  its
economic  value and achieve a  predictable  spread  between what it earns on its
invested assets and what it pays on its  liabilities.  At December 31, 1998, the
Company's  assets had an effective  duration of 5.1 and its  liabilities  had an
effective  duration of 6.8. If interest rates were to decrease 10% from December
31, 1998 levels,  the increase in the value of the Company's  liabilities  would
exceed the increase in the value of the Company's  assets by  approximately $23
million. Because the Company actively manages its assets and liabilities and has
developed  strategies  to reduce its  exposure to loss as interest  rate changes
occur, it expects that actual losses would be less than the estimated  potential
loss.

Effects of Accounting Pronouncements

     In June 1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of  Accounting  Standard  No. 130,  "Reporting  Comprehensive  Income"
("SFAS 130").  SFAS 130  establishes  standards  for  reporting  and  displaying
comprehensive  income  and  its  components  in a full  set  of  general-purpose
financial statements. Comprehensive income includes all changes in stockholder's
equity during a period except those  resulting  from  investments  by owners and
distributions  to owners.  The  adoption  of SFAS 130  resulted  in revised  and
additional  disclosures but had no effect on the financial position,  results of
operations, or liquidity of the Company.

     Also in June 1997, FASB issued Statement of Financial  Accounting  Standard
No. 131,  "Disclosures about Segments of an Enterprise and Related  Information"
("SFAS 131"). This statement  specifies revised  guidelines for determination of
an entity's operating  segments and the type and level of financial  information
to be  disclosed.  The  adoption  of this  statement  resulted  in  revised  and
additional  disclosures but had no effect on the financial position,  results of
operations, or liquidity of the Company.

     In December 1997, the American  Institute of Certified  Public  Accountants
("AICPA") approved Statement of Position ("SOP") 97-3,  "Accounting by Insurance
and Other  Enterprises  for  Insurance-Related  Assessments."  SOP 97-3 provides
guidance  for  determining  when an entity  should  recognize  a  liability  for
guaranty-fund  and other  insurance-related  assessments and a related asset for
assessments which may be recovered  through future premium tax offsets.  The SOP
is effective for financial  statements for fiscal years beginning after December
15, 1998 with early adoption  encouraged.  Adoption of this accounting  standard
will not have a significant impact on the consolidated  financial  statements of
the Company.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities".  SFAS No. 133 provides guidance related to
the accounting for derivative instruments and hedging activities focusing on the
recognition  and  measurement  of  derivative  instruments.  This  statement  is
effective for all fiscal  quarters of all fiscal years  beginning after June 15,
1999. Adoption of this accounting standard will not have a significant impact on
the consolidated financial statements of the Company.

Year 2000 Readiness

     Many existing  computer programs were designed and developed without regard
to  the  upcoming  change  in  the  century.  If not  corrected,  many  computer
applications could fail or create erroneous results by or at the Year 2000.

     The Company has developed a  comprehensive  Year 2000 plan that  management
believes will identify potential processing issues and allow the Company to take
any necessary  corrective actions before problems arise. A committee,  comprised
of a cross section of key employees from all business areas,  has been formed to
execute, test and implement the remediation plan. The Company's remediation plan
is comprised of six phases. These phases are (i) a complete inventory of systems
which the Company utilizes, (ii) an initial assessment of Year 2000 preparedness
for  each  identified  system,  (iii)  the  development  of a plan to  remediate
appropriate  systems,  (iv) the  remediation  of  systems,  (v) the  testing  of
systems,  and (vi) the  implementation  into production of systems.  Because the
Company's  administration  systems are  outsourced to a third party vendor,  the
Company is  coordinating  the Year 2000 plan with its outsource  provider.  This
provider has contractual  responsibility  for the Year 2000  remediations of the
Company's administration systems.

     The  Company had met its  milestone  of having all  administration  systems
prepared for Year 2000  processing by December 31, 1998.  These systems are used
by the Company to process its insurance business, including premium receipts and
claim payments.  Currently,  all administrative  systems have been renovated and
the  Company,  working  with its  outsource  provider,  has tested all Year 2000
remediations  and has placed  these  tested  systems  into  production  use. All
internal and corporate  systems,  such as file servers and desktop systems,  are
scheduled  to be Year 2000 ready by June 30,  1999.  Approximately  95% of these
systems have been  assessed for Year 2000  readiness  and  substantially  all of
these are believed to be Year 2000 ready. The Company's  imbedded systems,  such
as phone  switches,  will be upgraded,  as necessary,  during 1999. The affected
systems have been  identified.  If the Company fails to successfully  complete a
significant  portion  of the Year  2000 plan such  failure  may have a  material
adverse  impact on the  Company's  financial  condition.  Currently,  management
considers  the  possibility  of such a failure to be unlikely;  however,  in the
event management's  assessment changes in the future, an appropriate contingency
plan will be developed.

     A major part of the  Company's  Year 2000 plan  relates  to other  business
entities  on which the  Company  is  reliant  to  conduct  its  operations.  The
aforementioned  Year  2000  committee  has  identified  key  business  partners,
customers,  vendors and  suppliers to  participate  in a survey  program.  These
business  entities are comprised of entities which impact many companies  across
the  country  in  varied  industries,  as well as  entities  with  more  limited
customers. Entities serving customers nationwide include the federal government,
the  banking  system,  the  postal  service,  national  brokerage  firms,  stock
exchanges, and national overnight delivery providers. Local entities include the
Company's  reinsurers,  banks,  computer  hardware vendors,  payroll  processor,
public  utilities and phone  companies.  After  identifying  the  entities,  the
Company  sent  surveys  to each  requesting  information  related  to Year  2000
readiness.  Management  has  developed a database to track survey  responses and
will send any necessary  second requests by April 15, 1999. If further  requests
do not result in a response,  a determination  will be made at that time whether
further  contact  should  be made.  The  responses  to these  surveys  are being
evaluated  by  Company  management  to  determine  whether  potential  Year 2000
problems  exist.  If the Company  believes a problem may exist,  an  appropriate
contingency  plan will be developed  to minimize any effect on the Company.  The
Company  is  specifically  reliant  upon  the  federal  government  for  various
functions including mail delivery of customer  correspondence,  national banking
activities and electronic list bill premium processing for government employees.
The federal  government's  policy is to not respond to Year 2000 surveys, so the
Company,  like most  organizations,  has assumed the  operations  of the federal
government will not be significantly affected by Year 2000 problems. If problems
do arise, the operations of the Company may be materially adversely impacted.

     The Company  incurred expense through December 1998 related to this project
is $160,000. It is expected additional expenses will total $250,000 during 1999.
As these  expenses are not  significant  to the  Company's  overall  information
technology  budget,  this  remediation  plan will be funded  from the  Company's
normal  operating  cash  flows.  The  remediation  costs are  nominal due to the
Company's  service  agreement  with its third party  provider.  At this point in
time,  other  information  systems  projects  have not suffered due to Year 2000
compliance  efforts  so as  not to  have  an  adverse  effect  on the  Company's
operations.

     The estimates and conclusions herein contain forward-looking statements and
are based on management's  best estimates of future events.  Risks to completing
the plan include the availability of trained personnel,  management's ability to
discover and correct the potential Year 2000 sensitive problems which could have
a serious  impact on  specific  facilities,  and the  ability of  suppliers  and
customers to bring their systems into Year 2000 compliance.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     The  quantitative  and  qualitative   disclosures  about  market  risk  are
contained in the "Asset-Liability Management" section of Management's Discussion
and Analysis of Financial Condition and Results of Operations included elsewhere
in this Form 10-K.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's audited consolidated financial statements for the three years
ended  December  31,  1998 and the  related  report of  independent  accountants
thereon are set forth at pages F-2 to F-28 hereof and are incorporated herein by
reference.  Reference is made to the Index to Financial  Statements  on page F-1
herein.

ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

     None.


<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The Company's Directors and Executive Officers are as follows:

    Name               Age  Position

Michael A. Merriman    41   Chairman of the Board and Director

Gary L. Muller         52   President, Chief Executive Officer and Director

Timothy S. Sotos       50    Director

Mark K. Fallon         44    Senior Vice President and
                             Assistant Secretary-Investments

David F. Hill          44    Senior Vice President and Chief Marketing Officer

Gary E. Jenkins        41    Senior Vice President, Chief Financial Officer
                             and Treasurer

Donna H. Kinnaird      47    Senior Vice President,
                             Chief Operating Officer-Kansas City

     Americo's  current  Board of  Directors  consists of three  directors.  The
executive officers of Americo are elected by the Board of Directors from time to
time as it deems  necessary  or  advisable,  and are  subject  to removal by the
Board.

     All executive  decisions,  including decisions concerning executive officer
compensation,  are made by the  Board  of  Directors.  No  member  of the  Board
receives any compensation,  other than  reimbursement  for travel expenses,  for
services as such.

Certain Information About Officers

     Michael A. Merriman was elected Chairman of the Board,  effective  November
1, 1995,  of Americo,  FHC and  several of its  subsidiaries,  including  all of
Americo's insurance subsidiaries.  Previously, Mr. Merriman served as a director
and officer of all these same entities.

     Gary L. Muller is  President  and Chief  Executive  Officer and a director
of Americo.  Mr.  Muller is also a director and officer of FHC and of several
of its subsidiaries, including all of Americo's insurance subsidiaries.

     Timothy S. Sotos was  elected as a director of Americo on November 1, 1995.
He also serves as a director  of all of the  insurance  subsidiaries.  He is the
Chairman  of the  Board and  Executive  Vice  President  of  Clinical  Reference
Laboratory,  which is 80% owned by the Merriman family. He is the brother-in-law
of Michael A. Merriman.

     Mark K.  Fallon  became  Senior  Vice  President  and  Assistant  Secretary
Investments  of Americo  and all of the life  subsidiaries  on November 1, 1995.
Previously,  he  served  as  Vice  President  of  Americo  and  all of the  life
subsidiaries since 1993.

     David F. Hill became Senior Vice President and Chief  Marketing  Officer of
Americo and all of the life insurance  subsidiaries on July 1, 1996. Previously,
he was Senior Vice President of ReliaStar  Financial  Corporation from September
1993 to March 1996.

     Gary E. Jenkins has served as Senior Vice  President and Chief  Financial
Officer of Americo since July 1994. He became Treasurer of Americo and the
insurance  subsidiaries  on November 1, 1995.  From June 1993 to July 1994,
Mr. Jenkins provided  financial  consulting  services to Aachen Holdings Inc.
(former  shareholder of Academy Life Insurance Company).

     Donna H.  Kinnaird is Senior Vice  President  and Chief  Operating  Officer
Kansas  City of Americo  and has been Senior  Vice  President  of its  insurance
subsidiaries  since  August  1989.  In 1994,  she assumed the  position of Chief
Operating Officer of the Kansas City-based  insurance  companies.  She served as
Chief Financial Officer from 1989 to 1994.



<PAGE>


ITEM 11. EXECUTIVE COMPENSATION

     The  following  table  sets  forth all  compensation  paid to (i) the Chief
Executive Officer of the Company and (ii) the other four most highly compensated
Executive Officers of the Company for the three years ended December 31, 1998.
                           Summary Compensation Table
<TABLE>

Name and
Principal Occupation                                  Annual Compensation           All Other
                                                         Year        Salary          Bonus      Compensation (1)
<S>                                                     <C>       <C>             <C>            <C>

Gary L. Muller                                           1998      $  462,000      $   350,000    $    4,887
President, Chief Executive Officer and                   1997         462,000          350,000         3,220
  Director                                               1996         462,000          350,000         3,203

Michael A. Merriman                                      1998         363,000               --         4,887
Chairman of the Board                                    1997         363,000               --         3,220
                                                         1996         363,000               --         3,203

Donna H. Kinnaird                                        1998         200,000          175,000         4,923
Senior Vice President and                                1997         200,000          175,000         3,168
  Chief Operating Officer-Kansas City                    1996         190,000          175,000         3,203

Gary E. Jenkins                                          1998         200,000          175,000         4,925
Senior Vice President and,                               1997         200,000          175,000         3,165
  Chief Financial Officer and Treasurer                  1996         175,000          175,000         3,203

David F. Hill                                            1998         200,000          175,000         4,927
Senior Vice President and                                1997         200,000          175,000       103,308
  Chief Marketing Officer                                1996         100,000           75,000        31,000
</TABLE>

------------------------------------------------------

(1)  Includes  amounts  contributed by the Company for the benefit of the person
     identified  under the Company's  Saving Plan (as  hereinafter  defined) and
     Supplemental   Accidental  Death  and  Dismemberment   coverage.   Includes
     relocation and tax reimbursement in 1996 and 1997 for David F. Hill.

     Supplemental  Accidental Death and Dismemberment  coverage in the amount of
$500,000 is  provided  for all senior  officers of Americo and its  subsidiaries
that hold the following named positions: Vice President,  Senior Vice President,
Executive Vice President, President, Chief Executive Officer and Chairman of the
Board.  Currently,  this policy covers approximately 35 employees of Americo and
its subsidiaries.

     Executive  officers hold no  outstanding  options to purchase the Company's
stock.




<PAGE>



ITEM 12.      SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The Company has 10,000 shares of Common Stock outstanding at March 25, 1999
all of which were beneficially  owned by FHC, whose principal  executive offices
are located at 300 West 11th Street, Kansas City, Missouri 64105 and whose phone
number is (816) 391-2000. The Company has no other outstanding shares of capital
stock.

     The  following  table  sets  forth  certain  information  with  respect  to
beneficial  ownership by Directors and Executive  Officers of Americo,  named in
Item 11 "Summary Compensation Table" above, of FHC's Common Stock.
<TABLE>

                                                                           Amount and Nature
                                                                             of Beneficial
                                                                               Ownership          Actual Percent
   Title of Class                 Names of Beneficial Owners                                         of Class
                                                                           ------------------     ---------------
<S>                  <C>                                                       <C>                   <C>

Common Stock          Michael A. Merriman                                       112,000 (1)           29.8%
                      Gary L. Muller                                             52,500 (2)           14.0%
                      Timothy S. Sotos                                           49,800 (3)           13.3%
                      All directors and executive officers as a group           214,300               57.1%
</TABLE>

-----------------------------

(1)    Includes  (i)  40,000  shares  held in  irrevocable  trust of  Elaine  A.
       Merriman for the benefit of Michael A.  Merriman  and  Marybeth  Merriman
       Sotos (the wife of Timothy S. Sotos),  of which trust Michael A. Merriman
       is the sole Trustee with sole voting and investment  power and (ii) 9,000
       shares held as  Custodian  for Jack D.  Merriman,  II, over which  shares
       Michael A. Merriman has sole voting and investment power.

(2)     FHC has an option to acquire 17,301 of these shares at a per share price
        of $188.

(3)    Includes  (i) 40,500  shares  owned by Marybeth  Merriman  Sotos and (ii)
       9,300 shares held as Custodian for Maryelaine Sotos, Timothy J. Sotos and
       James P. Sotos,  over which  shares  Timothy S. Sotos has sole voting and
       investment power.

ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Agreements with FHC

     Americo or one of its subsidiaries  have the following  agreements with FHC
or its  affiliates,  none of which may be  deemed  the  result  of arm's  length
negotiations between independent parties.

     Advisory Agreement.  The Company appointed FHC to act as investment advisor
on  a  non-exclusive  basis  to  the  Company  and  its  wholly-owned  insurance
subsidiaries  pursuant  to an  advisory  agreement  between  the Company and FHC
("Advisory Agreement"). Under the Advisory Agreement, FHC supervises and directs
the  composition of the  investment  portfolios of the Company and its insurance
subsidiaries in accordance with their  respective  objectives and policies.  For
its services  under the Advisory  Agreement,  FHC is paid in advance a quarterly
fee based on the aggregate  statutory book value of the investable assets of the
Company and its  subsidiaries as of the end of the prior fiscal  quarter.  Under
this formula the fee paid for the year ended December 31, 1998 was $8.1 million.
FHC also is entitled to receive reimbursement for certain commissions, brokerage
and other expenses incurred by it in the performance of its duties.  The Company
recovers  amounts paid to FHC under the Advisory  Agreement  from the  insurance
subsidiaries, subject to regulatory limitations. The Advisory Agreement provides
that FHC shall not be liable for any  losses  except  for those  resulting  from
willful misfeasance,  bad faith or gross negligence,  or from reckless disregard
by FHC of its duties.


<PAGE>


     Data Processing Agreement. Pursuant to a data processing services agreement
("Data  Processing  Agreement")  between FHC and the  Company,  FHC provides the
Company and its insurance subsidiaries with record-keeping  services for certain
life insurance and annuity products.  In providing these services,  FHC utilizes
contract personnel and computerized data processing  systems.  For its services,
FHC is paid a fee of  $15.87  for each  policy  serviced  per year,  subject  to
renegotiation  and annual  adjustments  based on changes in the  consumer  price
index.  This amount  generally  represents FHC's cost of providing such services
plus  amortization of FHC's  development  costs.  The aggregate fee paid for the
year ended  December  31,  1998 under the Data  Processing  Agreement  was $14.5
million. FHC also is entitled to reimbursement for its reasonable  out-of-pocket
expenses  incurred in performing the Data Processing  Agreement.  The Company is
also  a  party  to a  separate  data  processing  services  agreement  with  its
wholly-owned  insurance  subsidiaries wherein the subsidiaries agree to use such
services and to pay for them  pursuant to a separate  data  processing  services
agreement  (the  "Subsidiary  Data  Processing   Agreement").   Under  the  Data
Processing  Agreement,  Americo  agrees to  indemnify  FHC  against  liabilities
arising out of, among other matters, actions taken by FHC under the agreement in
good   faith   and  due   diligence.   Americo's   subsidiaries   made   similar
indemnification  agreements  with Americo under the Subsidiary  Data  Processing
Agreement.

     Reimbursement of Expense  Agreement.  The Company and its subsidiaries have
entered into a cost sharing  agreement with FHC  respecting  air  transportation
expenses arising from the use of an airplane owned by FHC. Under this agreement,
each  party  pays  the  cost of any air  transportation  expenses  which  can be
identified  as incurred  for its sole  benefit and  expenses  which cannot be so
identified  are allocated  based on  utilization.  Americo and its  subsidiaries
incurred approximately $0.3 million of expense under this agreement for the year
ended December 31, 1998.

     FHC Lease. The Company's  subsidiary,  United Fidelity,  owns a building in
Kansas  City  which is leased  to and  occupied  by FHC.  Under the terms of the
lease,  FHC pays  $8,500  per month in rent and has an option  to  purchase  the
building for $1.2 million, an amount equal to its statutory book value and which
approximates  its current fair market  value.  The exercise  price of the option
will be revised  annually  to the  greater  of fair  market  value or  statutory
carrying  value.  Management  believes  that the  rentals  under  the  lease are
comparable to market rental values for comparable space and footage in the local
market.

Other Transactions

     In connection  with the Joint  Venture,  referred to under  "Marketing  and
Distribution"  contained in Item 1 herein,  FHC and Annuity Service  Corporation
("ASC")  each  entered  into  separate  services  agreements  with  FAL in 1993,
pursuant to which FHC and ASC provided certain  administrative  functions to FAL
with respect to certain  tax-qualified  insurance and annuity products  ("403(b)
Business"). For these services, FAL paid a fixed fee (on a per policy basis) for
all 403(b) Business existing at December 31, 1992 and a percentage fee (based on
first year premiums) for all 403(b)  Business  written or reinsured by FAL after
December  31,  1992.  FAL paid $1.4  million  and $2.0  million  to FHC and ASC,
respectively,  under  these  service  agreements  during  1998.  These  services
agreements  were  terminated  October 1,  1998,  concurrent  with the  Company's
purchase of the 50% of CIG not previously owned by the Company.

     FHC and  certain of its  non-life  insurance  subsidiaries,  including  the
Company,  are parties to a tax sharing agreement under which (i) tax savings and
tax  detriments  inure to the benefit or detriment,  respectively,  of the party
contributing the expense or other item that reduces or increases,  respectively,
the  consolidated  group's  taxes from what they would have been had each member
filed  separately,  and (ii) losses arising from filing the consolidated  return
and rights to average  income by  carryforwards  and  carrybacks  are  equitably
divided  among the parties in the same manner that they  benefited  from savings
caused by filing a consolidated return.

     United  Fidelity  leases office space (and related  parking  facilities) in
buildings owned by Broadway Square Partners,  a general partnership in which one
of the partners is SCOL, Inc. ("SCOL"), a Missouri corporation, owned by members
of the Merriman family. The aggregate amount paid (including rentals and expense
reimbursement)  under  the  lease  to  Broadway  Square  Partners  in  1998  was
approximately  $1,051,000.  The  terms  of the  lease  are as  favorable  to the
Company's  subsidiary  as  those  offered  other  unaffiliated  tenants  of  the
building.

     Subsidiaries of the Company paid an aggregate of approximately  $343,000 in
1998 to Clinical Reference  Laboratory,  Inc., a Kansas  corporation  ("Clinical
Laboratory"),  which is 80% owned by the Merriman family and of which Timothy S.
Sotos is  Chairman  of the Board.  The  amounts  paid were for  medical  testing
services  performed  for  the  Company's  subsidiaries.   The  rates  paid  were
competitive  with those  charged by Clinical  Laboratory  to similarly  situated
unaffiliated insurance companies for similar services.


<PAGE>


                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) Financial Statements and Financial Statement Schedules:

     Reference  is made to the  indexes  set  forth on pages F-1 and S-1 of this
report.

     Financial  statements  of the Company's  50% owned  subsidiaries  have been
omitted because the Company's  proportionate share of the income from continuing
operations  before  income  taxes  of  such  subsidiaries  is less  than  20% of
consolidated  income from  continuing  operations  before income taxes,  and the
Company's  investment in and advances to such  subsidiaries  is less than 20% of
consolidated total assets of the Company.

     (b) Exhibits:
<TABLE>

---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
<S>                              <C>

2.1(a)(1)                         Stock  Purchase  Agreement  dated January 21,
                                  1997 between  Great  Southern Life Insurance
                                  Company  and Farmers  Group,  Inc.
                                  (incorporated  by  reference  from Exhibit
                                  2.3(a) to Registrant's Form 10-K (File No.
                                  33-64820)for the year ended December 31,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

2.1(a)(2)                         Amendment No. 1 dated April 15, 1997 to Stock
                                  Purchase  Agreement by and between Farmers
                                  Group, Inc. and Great Southern Life Insurance
                                  Company  (incorporated by reference from
                                  Exhibit 2.1(b) to Registrant's Form 10-Q
                                  (File No.  33-64820) for the quarter ended
                                  March 31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
2.1(b)                            Automatic  Coinsurance  Reassurance Agreement
                                  entered into between The Ohio State Life
                                  Insurance  Company and Employers  Reassurance
                                  Corporation  (incorporated by reference from
                                  Exhibit 2.3(b) to Registrant's Form 10-K
                                  (File No.  33-64820) for the year ended
                                  December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

2.1(c)                            Automatic  Coinsurance  Reassurance  Agreement
                                  entered into between  Investors  Guaranty Life
                                  Insurance  Company and  Employers  Reassurance
                                  Corporation  (incorporated  by reference  from
                                  Exhibit 2.3(c) to Registrant's Form 10-K (File
                                  No.  33-64820) for the year ended December 31,
                                  1996).
---------------- ----------------
---------------- ----------------

2.1(d)                            Modified  Coinsurance  Retrocession  Agreement
                                  (Ohio  State  Life   Business)   entered  into
                                  between Great Southern Life Insurance  Company
                                  and    Employers    Reassurance    Corporation
                                  (incorporated by reference from Exhibit 2.3(d)
                                  to Registrant's  Form 10-K (File No. 33-64820)
                                  for the year ended December 31, 1996).
---------------- ----------------
---------------- ----------------

2.1(e)                            Modified  Coinsurance  Retrocession  Agreement
                                  (Investors   Guaranty  Life  Business)  to  be
                                  entered  into  between  Great   Southern  Life
                                  Insurance  Company and  Employers  Reassurance
                                  Corporation  (incorporated  by reference  from
                                  Exhibit 2.3(e) to Registrant's Form 10-K (File
                                  No.  33-64820) for the year ended December 31,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

2.1(f)                            Escrow  Agreement  (Ohio State  Life/Investors
                                  Guaranty Life  Business)  entered into between
                                  Great  Southern  Life  Insurance  Company  and
                                  Employers       Reinsurance        Corporation
                                  (incorporated by reference from Exhibit 2.3(f)
                                  to Registrant's  Form 10-K (File No. 33-64820)
                                  for the year ended December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
2.1(g)                            Investment  Management  Agreement (Ohio State
                                  Life Business) entered into between Americo
                                  Life, Inc. and Employers Reassurance
                                  Corporation  (incorporated  by reference from
                                  Exhibit 2.3(g) to Registrant's Form 10-K
                                  (File No.  33-64820) for the year ended
                                  December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

2.1(h)                            Investment  Management  Agreement (Investors
                                  Guaranty Life Business) entered into between
                                  Americo Life, Inc. and Employers Reassurance
                                  Corporation  (incorporated by reference from
                                  Exhibit 2.3(h) to  Registrant's Form 10-K
                                  (File No.  33-64820)for the year ended
                                  December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

2.2                               Stock  Purchase  Agreement  dated February 27,
                                  1998 between  Great  Southern  Life  Insurance
                                  Company and John Hancock Mutual Life Insurance
                                  Company  related  to  the  sale  of  Investors
                                  Guaranty Life Insurance Company  (incorporated
                                  by reference from Exhibit 2.4 to  Registrant's
                                  Form 10-Q [File No.  33-64820] for the quarter
                                  ended March 31, 1998).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------

2.3                               Purchase   Agreement  dated  October  1,  1998
                                  between the Registrant,  Robert L. Myer, Great
                                  Southern  Group,   Inc.,   Marketing  Services
                                  Group,  Inc., NAP Partners,  Inc., and Pension
                                  Consultants     &     Administrators,     Inc.
                                  (incorporated  by reference from Exhibit 25 to
                                  Registrant's Form 10-Q [File No.  33-64820]for
                                  the quarter ended September 30, 1998).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

3.1                               Restated Articles of Incorporation, as
                                  amended, of the Registrant  (incorporated by
                                  reference from Exhibit 3.1 to Registrant's
                                  Form S-4 (File No. 33-64820) filed June 22,
                                  1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

3.2                               Bylaws,   as   amended,   of  the   Registrant
                                  (incorporated by reference from Exhibit 3.2 to
                                  Registrant's  Form  S-4  (File  No.  33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
4.1(a)                            Conformed  copy of Indenture, dated as of May
                                  25, 1993,  between  Registrant and Commerce
                                  Bank of Kansas City,  N.A., as trustee
                                 (incorporated  by reference from Exhibit 4.1
                                  to Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ---------------------------------------------

4.1(b)                            Form of 9 1/4%  Senior  Subordinated  Note
                                  Due 2005 (included in the Indenture filed as
                                  Exhibit 4.1(a) hereto) (incorporated by
                                  reference from Exhibit 4.2 to Registrant's
                                  Form S-4 (File No.33-64820)filed June 22,
                                  1993).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------

4.2(a)                            Credit  Agreement  dated  as of July  6,  1995
                                  between  Registrant  and The  Chase  Manhattan
                                  Bank as administrative  agent (incorporated by
                                  reference from Exhibit 4.1(a) to  Registrant's
                                  Form 8-K (File No. 33-64820) dated as of July
                                  10, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.2(b)                            Security  Agreement dated as of July 5, 1995
                                  between Registrant and The Chase Manhattan
                                  Bank as administrative agent (incorporated by
                                  reference from Exhibit 4.1(b) to Registrant's
                                  Form 8-K report (File No. 33-64820) dated as
                                  of July 10, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.2(c)(1)                         Amended and  restated  credit  agreement
                                  dated as of December  27, 1996  between
                                  Registrant and The Chase Manhattan Bank as
                                  administrative  agent (incorporated by
                                  reference from Exhibit 4.2(c) to Registrant's
                                  Form 10-K (File No.  33-64820) for
                                  the year ended December 31, 1996).
---------------- ---------------- ---------------------------------------------

<PAGE>



---------------- ---------------- ---------------------------------------------
4.2(c)(2)                         Amendment  No. 1 to the amended  and  restated
                                  credit  agreement  dated  as of  February  27,
                                  1997,  between  the  Registrant  and The Chase
                                  Manhattan   Bank   as   administrative   agent
                                  (incorporated by reference from Exhibit 4.2(d)
                                  to Registrant's  Form 10-K (File No. 33-64820)
                                  for the year ended December 31, 1996).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------

4.2(c)(3)                         Amendment No. 2 dated April 6, 1998 to the
                                  amended and restated credit  agreement dated
                                  as of February 27, 1997, between the
                                  Registrant  and The Chase  Manhattan Bank as
                                  administrative agent (incorporated by
                                  reference from Exhibit 4.2(c)(3) to
                                  Registrant's  Form 10-Q [File No. 33-64820]
                                  for the quarter ended March 31, 1998).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
4.2(c)(4)                         Amendment  No.  3  dated  April  30,  1998 to
                                  the  amended  and  restated  credit agreement
                                  dated as of February 27, 1997,  between the
                                  Registrant  and The Chase Manhattan  Bank  as
                                  administrative agent (incorporated by
                                  reference   from  Exhibit 4.2(c)(4) to
                                  Registrant's Form 10-Q [File No.33-64820]
                                  for the  quarter  ended  March  31, 1998).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
4.3(a)                            Form of  Registrant's  $5,000,000  5 1/2%
                                  Senior  Subordinated  Set-off  Note due 2015
                                  (Incorporated by reference from Exhibit 4.1
                                  (c) to Registrant's  From 8-K report [file
                                  No. 33-64820] dated as of July 10, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.3(b)*                           Form of Registrant's $6,000,000, 6 1/2% Senior
                                  Subordinated Note (No. VNO-1-R) due 2010. (Two
                                  identical notes (No.  VNO-1-R and No. VNO-2-R)
                                  were issued in 1998 as replacements  for notes
                                  originally  issued on July 10, 1995.  Pursuant
                                  to  instruction  2 to Item  601 of  Regulation
                                  S-K, only VNO-1-R is filed.
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
4.4                               Amended and  Restated  Surplus  Debenture  No.
                                  004, dated  December 31, 1993, as amended,  in
                                  the  amount  of  $57,760,000  made  by  United
                                  Fidelity Life Insurance Company  (successor by
                                  merger to FHC Life  Insurance  Company) to the
                                  Registrant  (incorporated  by  reference  from
                                  Exhibit  4.3 to  Registrant's  Form 10-Q (File
                                  No. 33-64820) for the quarter ended March 31,
                                  1994).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.5                               Amended and  Restated  Surplus  Debenture  No.
                                  005, dated December 31, 1993, in the amount of
                                  $26,000,000   made  by  United  Fidelity  Life
                                  Insurance Company  (successor by merger to FHC
                                  Life  Insurance  Company)  to  the  Registrant
                                  (incorporated by reference from Exhibit 4.4 to
                                  Registrant's Form 10-Q (File No. 33-64820) for
                                  the quarter ended March 31, 1994).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.6                               Amended and  Restated  Surplus  Debenture No.
                                  006,  dated  December 1, 1995, as amended, in
                                  the amount of  $16,125,753  made by United
                                  Fidelity Life Insurance Company to Registrant
                                  (incorporated by reference from Exhibit 4.6
                                  to Registrant's Form 10-K (File No. 33-64820)
                                  for the year ended December 31, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.7                               Surplus  Debenture No.007 dated July 10, 1995,
                                  in the  amount of  $38,000,000  made by United
                                  Fidelity   Life   Insurance   Company  to  the
                                  Registrant  (incorporated  by  reference  from
                                  Exhibit  4.3 to  Registrant's  Form 8-K report
                                  (File No. 33-64820)dated as of July 10, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

4.8                               In accordance with Item  601(b)(4)(iii)(A)  of
                                  Regulation S-K, certain instruments respecting
                                  long  term  debt  of the  Registrant  and  its
                                  subsidiaries  have  been  omitted  but will be
                                  furnished to the Commission upon request.
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.1                              Senior Officer Accidental Death and
                                  Dismemberment Policy (incorporated by
                                  reference from Exhibit 10.1 to  Registrant's
                                  Form S-4 (File No.  33-64820) filed
                                  June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.2(a)                           Tax  Sharing  Agreement  dated as of December
                                  1,  1994,  among the  Registrant, Financial
                                  Holding  Corporation,  Cidat Aviation
                                  Incorporated,  Assured  Leasing Corporation,
                                  Landmark Mortgage Company, First Consulting &
                                  Administration,  Inc., Hanover Financial
                                  Corporation,  United  Fidelity Life Insurance
                                  Company, PFS Holding Company, Premium Finance
                                  Specialists,   Inc.,   Premium   Financing
                                  Specialists of California and PFS  Financing
                                  Corporation   (incorporated  by reference
                                  from Exhibit 10.2 to  Registrant's  Form 10-K
                                  (File No.  33-64820) for the year ended
                                  December 31, 1994).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ---------------------------------------------

10.2(b)                           Amendment,  effective as of January 1, 1996,
                                  to Tax Sharing Agreement, adding the Victory
                                  Life Insurance Company as a party
                                  (incorporated  by  reference  from Exhibit
                                  10.2(b) to Registrant's  Form 10-K [File No.
                                  33-64820]  for the  year  ended  December  31,
                                  1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.3(a)                           Reimbursement   of  Expense   Agreement  dated
                                  January   1,  1993,   among  the   Registrant,
                                  Financial Holding Corporation, United Fidelity
                                  Life  Insurance  Company,   The  College  Life
                                  Insurance  Company of  America,  Loyalty  Life
                                  Insurance Company, National Farmers Union Life
                                  Insurance   Company,   Great   Southern   Life
                                  Insurance  Company,  PFS  Holding  Company and
                                  Premium    Financing     Specialists,     Inc.
                                  (incorporated  by reference  from Exhibit 10.5
                                  to Registrant's  Form S-4 (File No.  33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ----------------------------------------------
10.3(b)                           Amendment dated August 29, 1997, to
                                  Reimbursement of Expense Agreement removing
                                  Loyalty  Life  Insurance  Company  as a party
                                  (incorporated  by  reference  from Exhibit
                                  10.3(b) to Registrant's  Form 10-K [File No.
                                  33-64820]  for the  year  ended  December  31,
                                  1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.3(c)                           Amendment dated October 1, 1997, to
                                  Reimbursement  of Expense  Agreement  adding
                                  Americo  Services,  Inc. and The Ohio State
                                  Life Insurance Company as parties and
                                  removing Argus Health Systems,  Inc. as a
                                  party  (incorporated  by reference from
                                  Exhibit 10.3(c) to Registrant's  Form 10-K
                                  [File No. 33-64820] for the year ended
                                  December 31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.4(a)                           Cost Sharing  Agreement dated as of January 1,
                                  1993,  among the  Registrant,  United Fidelity
                                  Life  Insurance  Company,   The  College  Life
                                  Insurance   Company   of   America,    Premium
                                  Financing   Specialists,   Inc.,  PFS  Holding
                                  Company,    Financial    Assurance   Marketing
                                  Corporation,  Great  Southern  Life  Insurance
                                  Company,  Loyalty Life  Insurance  Company and
                                  National Farmers Union Life Insurance  Company
                                  (incorporated  by reference  from Exhibit 10.8
                                  to Registrant's  Form S-4 (File No.  33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.4(b)                           Amendment  dated August 29, 1997,  to Cost
                                  Sharing  Agreement,  removing  Loyalty Life
                                  Insurance Company as a party (incorporated
                                  by  reference  from Exhibit 10.4(b) to
                                  Registrant's Form 10-K [File No.33-64820] for
                                  the  year  ended  December  31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.4(c)                           Amendment  dated  October  1,  1997,  to  Cost
                                  Sharing  Agreement  adding  Americo  Services,
                                  Inc. and The Ohio State Life Insurance Company
                                  as parties and  removing  PFS Holding  Company
                                  and  Premium  Financing  Specialists,  Inc. as
                                  parties   (incorporated   by  reference   from
                                  Exhibit  10.4(c)  to  Registrant's  Form  10-K
                                  [File  No.   33-64820]   for  the  year  ended
                                  December 31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.5                              Data  Processing Services Agreement dated as
                                  of January 1, 1993,  between  the Registrant
                                  and Financial  Holding  Corporation
                                  (incorporated  by reference from Exhibit 10.9
                                  to Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.6(a)                           Subsidiary Data Processing  Services Agreement
                                  dated  as  of  January  1,  1993,   among  the
                                  Registrant, FHC Life Insurance Company, United
                                  Fidelity   Life   Insurance   Company,   Great
                                  Southern Life Insurance  Company,  The College
                                  Life  Insurance  Company of  America,  Loyalty
                                  Life  Insurance  Company and National  Farmers
                                  Union Life Insurance Company  (incorporated by
                                  reference  from Exhibit 10.10 to  Registrant's
                                  Form S-4 (File No.  33-64820)  filed  June 22,
                                  1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.6(b)                           Amendment dated August 29, 1997, to Subsidiary
                                  Data Processing  Services  Agreement  removing
                                  Loyalty  Life  as  a  party  (incorporated  by
                                  reference from Exhibit 10.6(b) to Registrant's
                                  Form  10-K  [File No.  33-64820]  for the year
                                  ended December 31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.6(c)                           Amendment dated October 1, 1997, to Subsidiary
                                  Data  Processing   Services  Agreement  adding
                                  Americo Services, Inc. and The Ohio State Life
                                  Insurance Company as parties  (incorporated by
                                  reference from Exhibit 10.6(c) to Registrant's
                                  Form  10-K  [File No.  33-64820]  for the year
                                  ended December 31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.7(a)                           Advisory  Agreement  dated  as of  January  1,
                                  1993,  between the  Registrant  and  Financial
                                  Holding Corporation (incorporated by reference
                                  from Exhibit  10.11 to  Registrant's  Form S-4
                                  (File No. 33-64820) filed June 22, 1993).
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
10.7(b)                           First  Amendment to Advisory  Agreement dated
                                  September   17,   1993  by  and   between  the
                                  Registrant and Financial  Holding  Corporation
                                  (incorporated   by   reference   from  Exhibit
                                  10.8(b)  to  Registrant's  Form 10-Q (File No.
                                  33-64820) for the quarter ended
                                  March 31, 1994).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.8                              Office  Building Lease dated as of January 1,
                                  1993,  between  Financial  Holding Corporation
                                  and United Fidelity Life Insurance Company
                                  (incorporated  by reference from Exhibit 10.12
                                  to Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.9                              Lease   Agreement  dated  February  24,  1988,
                                  between  Broadway  Square  partners and United
                                  Fidelity Life Insurance Company  (incorporated
                                  by   reference    from   Exhibit    10.13   to
                                  Registrant's  Form  S-4  (File  No.  33-64820)
                                  filed June 22, 1993).

---------------- ---------------- ----------------------------------------------
---------------- ---------------- ---------------------------------------------
10.9(a)*                          First  Amendment to Lease  Agreement  dated
                                  October 10, 1998,  between  Broadway Square
                                  Partners and United Fidelity Life Insurance
                                  Company.
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.10                             Lease dated November 1, 1990, between United
                                  Fidelity Life Insurance Company and First
                                  Consulting & Administration, Inc., a
                                  subsidiary  of Financial  Holding Corporation
                                  (included as Exhibit A to Exhibit 10.11)
                                  (incorporated by reference from Exhibit 10.14
                                  to  Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.11                             Assignment  of Lease  dated as of April 1,
                                  1993 between United Fidelity  Life Insurance
                                  Company  and  Finance  Holding   Corporation
                                  respecting  the  First Consulting &
                                  Administration  Lease described in Exhibit
                                  10.10 (incorporated by reference from Exhibit
                                  10.15 to Registrant's Form S-4 (File No.
                                  33-64820) filed June 22, 1993).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.12                             Office  Lease  Agreement  dated  February 19,
                                  1997,  between  Metropolitan  Life Insurance
                                  Company and Great Southern Life Insurance
                                  (incorporated  by reference from Exhibit
                                  10.12 to  Registrant's  Form 10-K [File No.
                                  33-64820]for the year ended December
                                  31, 1997).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.13                             Stock Transfer  Restriction  and Option
                                  Agreement dated June 30, 1989 among DST
                                  Systems,  Inc.,  Argus Health  Systems,
                                  Inc. and Financial  Holding  Corporation
                                  (incorporated by reference from Exhibit 10.22
                                  to Registrant's  Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------

10.14                             Supplemental  Tax  Sharing   Agreements  dated
                                  December  31,  1993  among  Financial  Holding
                                  Corporation,   the   Registrant   and   United
                                  Fidelity Life Insurance Company  (incorporated
                                  by   reference    from   Exhibit    10.20   to
                                  Registrant's Form 10-Q (File No. 33-64820) for
                                  the Quarter Ended March 31, 1994).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------
10.15(a)(1)                       Master  Agreement  dated as of July 31,  1995,
                                  among The Ohio  Life  Insurance  Company,  The
                                  Ohio   Casualty   Insurance    Company,    the
                                  Registrant  and Great  Southern Life Insurance
                                  Company   (incorporated   by  reference   from
                                  Exhibit 10.21 to Registrant's  Form 10-Q (File
                                  No. 33-64820) for the quarter ended June 30,
                                  1995).
---------------- ---------------- ----------------------------------------------

10.15(a)(2)                       First Amendment to Master Agreement between
                                  The Ohio Life Insurance Company,  The Ohio
                                  Casualty  Insurance  Company and Great
                                  Southern Life Insurance Company dated as of
                                  October 2, 1995 (incorporated  by  reference
                                  from  Exhibit  10.21(b)  to Registrant's
                                  Form 10-Q (File No. 33-64820) for the quarter
                                  ended  September 30, 1995).
---------------- ---------------- ---------------------------------------------
----------------- --------------- ---------------------------------------------

10.15(a)(3)                       Second  Amendment to Master Agreement between
                                  The Ohio Life Insurance  Company, The Ohio
                                  Casualty  Insurance  Company and Great
                                  Southern Life  Insurance Company dated as of
                                  November  17,  1997   (incorporated   by
                                  reference  from  Exhibit 10.20(a)(3)  to
                                  Registrant's  Form 10-K [File No.  33-64820]
                                  for the year ended December 31, 1997).
----------------- --------------- ---------------------------------------------
---------------- ---------------- ----------------------------------------------
10.15(b)                          Assignment and Assumption  Agreement  between
                                  The Ohio Life Insurance Company and Great
                                  Southern Life Insurance  Company dated as of
                                  October 2, 1995  (incorporated by reference
                                  from Exhibit 10.21(c) to Registrant's  Form
                                  10-Q (File No. 33-64820) for the quarter
                                  ended September 30, 1995).
---------------- ---------------- ---------------------------------------------
<PAGE>


---------------- ---------------- ---------------------------------------------
10.15(c)                          Escrow Agreement between Commerce Bank, N.A.
                                  of Kansas City, Missouri, Employers
                                  Reassurance  Corporation  of  Overland  Park,
                                  Kansas  and  Great  Southern  Life Insurance
                                  Company dated as of October 2, 1995
                                  (incorporated  by reference  from Exhibit
                                  10.21(e) to Registrant's  Form 10-Q (File No.
                                  33-64820) for the quarter ended  September 30,
                                  1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.15(d)                          Escrow Agreement between Commerce Bank, N.A.
                                  of Kansas City, Missouri,  Employers
                                  Reassurance  Corporation of Overland Park,
                                  Kansas and The Ohio Casualty Insurance
                                  Company   dated   as  of   October   2,   1995
                                  (incorporated by reference from Exhibit
                                  10.21(f) to Registrant's Form 10-Q (File No.
                                  33-64820) for the quarter ended  September 30,
                                  1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.15(e)                          Investment  Management Agreement between the
                                  Registrant and Employers Reassurance
                                  Corporation  of Overland Park,  Kansas dated
                                  as of October 2, 1995  (incorporated by
                                  reference from Exhibit 10.21(g) to
                                  Registrant's  Form 10-Q (File No. 33-64820)
                                  for the quarter ended September 30, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.15(f)                          Assumption  Reinsurance  Agreement  between
                                  The Ohio Life  Insurance  Company and Great
                                  Southern Life Insurance  Company dated as of
                                  October 2, 1995  (incorporated by reference
                                  from Exhibit 10.21(i) to Registrant's  Form
                                  10-Q (File No. 33-64820)for the quarter ended
                                  September 30, 1995).
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ----------------------------------------------
10.15(g)(1)                       Reinsurance  Agreement  between Employers
                                  Reassurance  Company of Overland Park,
                                  Kansas and The Ohio Life Insurance  Company,
                                  effective January 1, 1995 (transfer date
                                  October 2, 1995) and  amendments  thereto
                                  (incorporated  by reference from Exhibit
                                  10.21(k) to Registrant's  Form 10-Q (File No.
                                  33-64820) for the quarter ended  September 30,
                                  1995).
---------------- ---------------- ----------------------------------------------
----------------- --------------- ----------------------------------------------

10.15(g)(2)                       Amendment No. 4 to the Reinsurance Agreement
                                  between  Employers  Reassurance Company of
                                  Overland  Park,   Kansas  and  The  Ohio  Life
                                  Insurance  Company  effective  April  1,  1996
                                  (incorporated   by   reference   from  Exhibit
                                  10.20(g)(2)  to  Registrant's  Form 10-K [File
                                  No. 33-64820] for the year ended December 31,
                                  1997).
----------------- --------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------

10.15(h)                          Retrocession   Agreement  between  Great
                                  Southern  Life  Insurance  Company  and
                                  Employers  Reassurance  Company of Overland
                                  Park,  Kansas,  effective  January 1, 1995
                                  and amendments  thereto  (incorporated by
                                  reference from Exhibit 10.21(l) to
                                  Registrant's  Form 10-Q (File No.  33-64820)
                                  for the quarter ended  September 30, 1995).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.15(i)(1)                       Services  Agreement  between the Registrant,
                                  The Ohio Life  Insurance  Company and The Ohio
                                  Casualty Insurance Company dated as of October
                                  2,  1995   (incorporated   by  reference  from
                                  Exhibit  10.21(m)  to  Registrant's  Form 10-Q
                                  (File No. 33-64820)for the quarter ended
                                  September 30, 1995).
---------------- ---------------- ---------------------------------------------
----------------- --------------- ---------------------------------------------

10.15(i)(2)                       First Amendment to Services  Agreement between
                                  the   Registrant,   The  Ohio  Life  Insurance
                                  Company  and  The  Ohio   Casualty   Insurance
                                  Company   dated   as   of   March   27,   1997
                                  (incorporated   by   reference   from  Exhibit
                                  10.20(i)(2)  to  Registrant's  Form 10-K [File
                                  No. 33-64820] for the year ended December 31,
                                  1997).
----------------- --------------- ----------------------------------------------

----------------- --------------- ---------------------------------------------
10.15(i)(3)                       Amendment  to Services  Agreement  between the
                                  Registrant,  The Ohio Life  Insurance  Company
                                  and The Ohio Casualty  Insurance Company dated
                                  as  of  November  17,  1997  (incorporated  by
                                  reference   from   Exhibit    10.20(i)(3)   to
                                  Registrant's Form 10-K [File No. 33-64820] for
                                  the year ended December 31, 1997).
----------------- --------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(a)                          Master Agreement dated February 26, 1996 among
                                  Fremont  Life   Insurance   Company,   Fremont
                                  General   Corp.,   the  Registrant  and  Great
                                  Southern Life Insurance Company  (incorporated
                                  by reference  from Exhibit 10 to  Registrant's
                                  Form 10-Q (File No.  33-64820) for the quarter
                                  ended March 31, 1996).
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
10.16(b)                          First  Amendment to Master  Agreement dated as
                                  of July 1, 1996,  among Fremont Life Insurance
                                  Company, Fremont General Corp., Registrant and
                                  Great   Southern   Life   Insurance    Company
                                  (incorporated   by   reference   from  Exhibit
                                  10.1(b)  to  Registrant's  Form 10-Q (File No.
                                  33-64820)  for  the  quarter  ended  June  30,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(c)                          Letter  Agreement  dated  as of July 1,  1996,
                                  among  Fremont  General  Corp.,  Fremont  Life
                                  Insurance   Company,   Registrant   and  Great
                                  Southern Life Insurance Company  (incorporated
                                  by   reference   from   Exhibit   10.1(c)   to
                                  Registrant's Form 10-Q (File No. 33-64820) for
                                  the quarter ended June 30, 1996).
---------------- ---------------- ---------------------------------------------


<PAGE>


---------------- ---------------- ---------------------------------------------

10.16(d)                          Services  Agreement  dated as of July 1, 1996,
                                  between  Registrant and Fremont Life Insurance
                                  Company   (incorporated   by  reference   from
                                  Exhibit  10.1(d)  to  Registrant's  Form  10-Q
                                  (File No. 33-64820) for the quarter ended June
                                  30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.16(e)                          Assumption    Reinsurance    and   Coinsurance
                                  Agreement (Universal Life) dated as of July 1,
                                  1996,  between Fremont Life Insurance  Company
                                  and  Great  Southern  Life  Insurance  Company
                                  (incorporated   by   reference   from  Exhibit
                                  10.1(e)  to  Registrant's  Form 10-Q (File No.
                                  33-64820)  for  the  quarter  ended  June  30,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(f)                          Assumption    Reinsurance    and   Coinsurance
                                  Agreement  (Annuities)  dated  as of  July  1,
                                  1996,  between Fremont Life Insurance  Company
                                  and  Great  Southern  Life  Insurance  Company
                                  (incorporated   by   reference   from  Exhibit
                                  10.1(f)  to  Registrant's  Form 10-Q (File No.
                                  33-64820)  for  the  quarter  ended  June  30,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(g)                          Assignment and Assumption  Agreement dated as
                                  of  July  1,  1996,   between   Fremont   Life
                                  Insurance  Company  and  Great  Southern  Life
                                  Insurance  Company  (incorporated by reference
                                  from Exhibit 10.1(g) to Registrant's Form 10-Q
                                  (File No.  33-64820)for the quarter ended June
                                  30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(h)                          Automatic     Coinsurance    Universal    Life
                                  Reinsurance Agreement dated as of December 31,
                                  1995,  between Fremont Life Insurance  Company
                                  and    Employers    Reassurance    Corporation
                                  (incorporated   by   reference   from  Exhibit
                                  10.1(h)  to  Registrant's  Form 10-Q (File No.
                                  33-64820)  for  the  quarter  ended  June  30,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------
10.16(i)                          Amendment  No. 1 to the Automatic Coinsurance
                                  Universal  Life  Reinsurance Agreement dated
                                  as  of  December  31,  1995,   between
                                  Employers   Reassurance Corporation and
                                  Fremont Life Insurance  Company (incorporated
                                  by reference from Exhibit 10.1(i) to
                                  Registrant's  Form 10-Q (File No.  33-64820)
                                  for the quarter ended June 30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(j)                          Automatic   Coinsurance   Annuity  Reinsurance
                                  Agreement dated as of January 1, 1996, between
                                  Employers Reassurance  Corporation and Fremont
                                  Life  Insurance   Company   (incorporated   by
                                  reference from Exhibit 10.1(j) to Registrant's
                                  Form 10-Q (File No. 33-64820) for the quarter
                                  ended June 30, 1996).
---------------- ---------------- ---------------------------------------------

---------------- ---------------- ---------------------------------------------
10.16(k)                          Amendment No. 1 to the  Automatic  Coinsurance
                                  Annuity  Reinsurance  Agreement  dated  as  of
                                  January 1, 1996, between Employers Reassurance
                                  Corporation and Fremont Life Insurance Company
                                  (incorporated   by   reference   from  Exhibit
                                  10.1(k)  to  Registrant's  Form 10-Q (File No.
                                  33-64820)  for  the  quarter  ended  June  30,
                                  1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(l)                          Escrow  Agreement  dated  as of July 1, 1996,
                                  among  Commerce  Bank,  Employers Reassurance
                                  Corporation and Great Southern Life Insurance
                                  Company (incorporated by reference from
                                  Exhibit 10.1(l) to Registrant's  Form 10-Q
                                  (File No.  33-64820)for the quarter ended
                                  June 30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(m)                          Modified   Coinsurance  Annuity   Retrocession
                                  Agreement dated as of January 1, 1996, between
                                  Employers  Reassurance  Corporation  and Great
                                  Southern Life Insurance Company  (incorporated
                                  by   reference   from   Exhibit   10.1(m)   to
                                  Registrant's Form 10-Q (File No. 33-64820) for
                                  the quarter ended June 30, 1996).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(n)                          Modified Coinsurance  Universal Life and
                                  Annuity Retrocession  Agreement dated as
                                  of  December  31,  1995,  between  Employers
                                  Reassurance  Corporation  and Great Southern
                                  Life Insurance  Company  (incorporated by
                                  reference from Exhibit 10.1(n) to
                                  Registrant's  Form 10-Q (File No.  33-64820)
                                  for the quarter  ended June 30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.16(o)                          Amendment No. 1 to the Investment  Management
                                  Agreement  dated  as  of  December  31,  1995,
                                  between  Registrant and Employers  Reassurance
                                  Corporation  (incorporated  by reference  from
                                  Exhibit  10.1(o)  to  Registrant's  Form  10-Q
                                  (File No. 33-64820) for the quarter ended
                                  June 30, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.17(a)                          Agreement to Redeem  Partnership  Interest
                                  among Great  Southern Life  Insurance
                                  Company, GSSW Limited Partnership,  BGFRTS,
                                  L.C., and Southwestern Life Insurance Company
                                  dated December 30, 1996  (incorporated by
                                  reference from Exhibit 10.22(a) to
                                  Registrant's  Form 10-K (File No.  33-64820)
                                  for the year ended  December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.17(b)                          Agreement   Regarding   Purchase,   Sale,  and
                                  Assignment of Membership  Interest among Great
                                  Southern Life Insurance Company,  Southwestern
                                  Financial    Services     Corporation,     and
                                  Southwestern   Life  Insurance  Company  dated
                                  December 30, 1996  (incorporated  by reference
                                  from  Exhibit  10.22(b) to  Registrant's  Form
                                  10-K (File No. 33-64820) for the year ended
                                  December 31, 1996).
---------------- ---------------- ---------------------------------------------
---------------- ---------------- ---------------------------------------------

10.17(c)                          Agreement   Regarding  Purchase  and  Sale  of
                                  General  Partner   Interests  between  Americo
                                  Services,  Inc.  and  GSSW  --  REO  Ownership
                                  Corporation    dated    December    30,   1996
                                  (incorporated   by   reference   from  Exhibit
                                  10.22(c) to  Registrant's  Form 10-K (File No.
                                  33-64820)  for the  year  ended  December  31,
                                  1996).
---------------- ---------------- ----------------------------------------------
---------------- ---------------- ----------------------------------------------
*21.                              Subsidiaries of the Registrant
---------------- ---------------- ----------------------------------------------
---------------- ---------------- -----------------------------------------------

*27.                              Financial Data Schedule
---------------- ---------------- ----------------------------------------------
----------------------------
</TABLE>

         (c) Reports on Form 8-K.

              There were no reports on Form 8-K filed for the three months ended
December 31, 1998.



<PAGE>





                                   SIGNATURES

     Pursuant  to the  requirements  of Section  13 or 15 (d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned,  thereunto duly authorized, in the City of Kansas
City and the State of Missouri, on the 30st day of March, 1999.


                AMERICO LIFE, INC.

                By:                     /s/ Gary L. Muller
                   -----------------------------------------------------

                   Name:  Gary L. Muller
                   Title:  President and Chief Executive Officer



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed by the following  persons on behalf of the registrant and
in the capacities and on the dates indicated: <TABLE>


                                                               Title                          Date
<S>                                             <C>                                    <C>


      /s/ Michael A. Merriman                    Chairman of the Board of               March 30, 1999
---------------------------------------------    Directors
          Michael A. Merriman


         /s/ Gary L. Muller                      President, Chief Executive             March 30, 1999
----------------------------------------------   Officer and Director
             Gary L. Muller


         /s/ Gary E. Jenkins                      Senior Vice President, Chief           March 30, 1999
----------------------------------------------    Financial Officer and Treasurer
             Gary E. Jenkins                      (Principal Financial Officer and
                                                  Principal Accounting Officer)
</TABLE>







<PAGE>



                                       F-2
                       AMERICO LIFE, INC. AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S>                                                                                                         <C>
                                                                                                             Page
Audited Financial Statements for the Three Years Ended December 31, 1998:

  Report of Independent Accountants                                                                           F-2

  Consolidated Balance Sheet at December 31, 1998 and 1997                                                    F-3

  Consolidated Statement of Income for the Years Ended December 31, 1998, 1997 and 1996                       F-4

  Consolidated Statement of Stockholder's Equity for the Years Ended December 31, 1998, 1997 and 1996         F-5

  Consolidated Statement of Cash Flows for the Years Ended December 31, 1998, 1997 and 1996                   F-6

  Notes to Consolidated Financial Statements                                                                  F-8
</TABLE>




<PAGE>



                        Report of Independent Accountants


To the Board of Directors and
Stockholder of Americo Life, Inc.

     In our opinion, the accompanying consolidated balance sheet and the related
consolidated  statements of income,  of  stockholder's  equity and of cash flows
present fairly,  in all materials  respects,  the financial  position of Americo
Life,  Inc. and its  subsidiaries at December 31, 1998 and 1997, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.  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 of these statements in
accordance with generally accepted auditing standards which 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,  assessing the accounting  principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion  expressed
above.




PRICEWATERHOUSECOOPERS LLP
Kansas City, Missouri
March 29, 1999


<PAGE>


           See accompanying notes to consolidated financial statements

                                       F-7
                       Americo Life, Inc. and Subsidiaries

                           Consolidated Balance Sheet
                             (Dollars in thousands)
                           December 31, 1998 and 1997
<TABLE>

                                                                                           1998              1997
                                                                                           ----              ----
                                      Assets
<S>                                                                                 <C>               <C>
Investments:
   Fixed Maturities:
     Held to maturity, at amortized cost (market: $914,672 and $873,935)             $     876,594     $     851,823
     Available for sale, at market (amortized cost: $893,664 and $735,955)                 925,191           761,084
   Equity securities, at market (cost: $42,201 and $50,837)                                 89,022            78,949
   Investment in equity subsidiaries                                                         9,669            21,670
   Mortgage loans on real estate, net                                                      190,074           165,630
   Investment real estate, net                                                              28,606            27,630
   Policy loans                                                                            210,173           200,137
   Other invested assets                                                                    17,066            18,890
                                                                                     -------------     -------------

     Total investments                                                                   2,346,395         2,125,813

Cash and cash equivalents                                                                   68,219            36,859
Accrued investment income                                                                   31,862            27,620
Amounts receivable from reinsurers                                                       1,207,197         1,429,679
Other receivables                                                                           36,529            23,875
Deferred policy acquisition costs                                                          131,574            87,840
Cost of business acquired                                                                  247,125           300,180
Other assets                                                                                36,913            29,370
                                                                                     -------------     -------------
     Total assets                                                                    $   4,105,814     $   4,061,236
                                                                                     =============     =============

                       Liabilities and Stockholder's Equity
Policyholder account balances                                                        $   2,501,113     $   2,486,436
Reserves for future policy benefits                                                        833,917           881,583
Unearned policy revenues                                                                    36,332            36,063
Policy and contract claims                                                                  45,467            36,570
Other policyholder funds                                                                   106,241            75,960
Notes payable                                                                              132,533           132,884
Amounts payable to reinsurers                                                               28,199            12,200
Federal income taxes payable                                                                    --               164
Deferred income taxes                                                                       63,600            58,126
Due to broker                                                                               36,275            31,836
Amounts due to affiliates                                                                    3,085             3,137
Other liabilities                                                                           61,872            59,415
                                                                                     -------------     -------------

     Total liabilities                                                                   3,848,634         3,814,374

Stockholder's equity:
   Common stock ($1 par value,  30,000 shares  authorized,  10,000 shares issued
and ..
outstanding)                                                                                    10                10
   Additional paid-in capital                                                                3,745             3,745
   Accumulated other comprehensive income                                                   60,499            56,973
   Retained earnings                                                                       192,926           186,134
                                                                                     -------------     -------------

     Total stockholder's equity                                                            257,180           246,862
                                                                                     -------------     -------------

Commitments and contingencies

     Total liabilities and stockholder's equity                                      $   4,105,814     $   4,061,236
                                                                                     =============     =============
</TABLE>

                       Americo Life, Inc. and Subsidiaries

                        Consolidated Statement of Income
                (Dollars in thousands, except per share amounts)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>


                                                                    1998          1997          1996
                                                                    ----          ----          ----

<S>                                                             <C>          <C>           <C>
Income
   Premiums and policy revenues                                  $  218,582   $   203,729   $   165,602
   Net investment income                                            226,534       219,267       186,725
   Net realized investment gains (losses)                             8,284         2,950          (120)
   Gain on disposition of partnership interest                           --            --        15,825
   Other income                                                      12,163        12,331         3,567
                                                                -----------   -----------   -----------
     Total income                                                   465,563       438,277       371,599
                                                                -----------   -----------   -----------

Benefits and expenses
   Policyholder benefits:
     Death benefits                                                 113,552       116,196        91,996
     Interest credited on universal life and annuity products       108,664       109,392        84,495
     Other policyholder benefits                                     53,135        55,790        57,088
     Change in reserves for future policy benefits                  (23,845)      (18,438)      (14,920)
   Commissions                                                       13,390        11,230        13,473
   Amortization expense                                              87,189        43,694        29,714
   Interest expense                                                  12,057        12,089        12,263
   Other operating expenses                                          89,394        77,038        56,703
                                                                -----------   -----------   -----------
     Total benefits and expenses                                    453,536       406,991       330,812
                                                                -----------   -----------   -----------

     Income before provision for income taxes                        12,027        31,286        40,787

Provision for income taxes                                            3,235         9,230        13,513
                                                                -----------   -----------   -----------
     Net income                                                  $    8,792   $    22,056   $    27,274
                                                                ===========   ===========   ===========

Net income per common share                                      $   879.20    $ 2,205.60    $ 2,727.40
                                                                ===========   ===========   ===========
</TABLE>



<PAGE>


                       Americo Life, Inc. and Subsidiaries

                 Consolidated Statement of Stockholder's Equity
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>


                                                     1998                    1997                     1996
                                                     ----                    ----                     ----

<S>                                             <C>          <C>        <C>          <C>         <C>         <C>
Common stock
   Balance at beginning and end of year          $      10               $      10                $      10
                                                 ---------               ---------                ---------

Additional paid-in capital
   Balance at beginning and end of year              3,745                   3,745                    3,745
                                                 ---------               ---------                ---------

Accumulated other comprehensive income
   Balance at beginning of year                     56,973                  37,189                   46,204
   Change during year                                3,526    $  3,526      19,784     $19,784       (9,015)  $  (9,015)
                                                 ---------               ---------                ---------
   Balance at end of year                           60,499                  56,973                   37,189
                                                 ---------               ---------                ---------

Retained earnings
   Balance at beginning of year                    186,134                 166,078                  140,804
   Net income                                        8,792       8,792      22,056      22,056       27,274      27,274
                                                             ---------               ---------                ---------
   Comprehensive income                                      $  12,318               $  41,840                $  18,259
                                                             =========               =========                =========
   Dividends                                        (2,000)                 (2,000)                  (2,000)
                                                 ---------               ---------                ---------
   Balance at end of year                          192,926                 186,134                  166,078
                                                 ---------               ---------                ---------

     Total stockholder's equity                  $ 257,180               $ 246,862                $ 207,022
                                                 =========               =========                =========
</TABLE>




<PAGE>


                       Americo Life, Inc. and Subsidiaries

                      Consolidated Statement of Cash Flows
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----
<S>                                                                       <C>           <C>           <C>
Cash flows from operating activities
Net income                                                                 $     8,792   $   22,056    $ 27,274
                                                                           -----------   ----------    --------
Adjustments to  reconcile  net income to net cash  provided  (used) by operating
  activities:
   Depreciation and amortization                                                86,679       47,305         30,103
   Deferred policy acquisition costs                                           (61,179)     (34,220)       (19,337)
   Undistributed earnings of equity subsidiaries                                (2,581)      (3,622)        (5,458)
   Distributed earnings of equity subsidiaries                                   9,943           --         14,000
   Amortization of unrealized investment gains                                 (14,407)      (6,973)        (6,059)
   (Increase) decrease in assets net of effects from business acquisitions:
     Accrued investment income                                                  (3,277)        (797)        (1,398)
     Other invested assets                                                         --            --         (1,596)
     Amounts receivable from reinsurers                                         64,438    (162,334)        (54,942)
     Other receivables                                                         (14,483)      (9,824)        (2,527)
     Other assets, net of amortization                                           6,586       10,462         (2,274)
   Increase (decrease) in liabilities net of effects from business acquisitions:
     Reserves for future policy benefits and unearned policy revenues         (49,315)          371         (7,489)
     Policyholder account balances                                               5,747       72,899         10,573
     Policy and contract claims                                                  8,857       (2,258)         7,654
     Other policyholder funds                                                   30,279       (5,482)       (11,265)
     Amounts payable to reinsurers                                              15,999       (2,053)        (6,734)
     Federal income taxes payable                                                 (164)         164             --
     Provision for deferred income taxes                                        3,757         4,277          5,576
     Other liabilities                                                           1,104        7,207         (5,775)
     Amounts due to/due from affiliates                                         (3,362)      (4,100)        10,739
   Net realized (gains) losses on investments                                   (8,284)      (2,950)           120
   Gain on disposition of partnership interest                                     --            --        (15,825)
   Gain on sale of subsidiary                                                   (4,855)      (4,848)            --
   Amortization on bonds and mortgage loans                                      3,425        1,722          2,244
   Other changes                                                                (4,902)      (4,564)        (4,470)
                                                                           ------------  ----------    -----------
   Total adjustments                                                            70,005      (99,618)       (64,140)
                                                                           -----------   ----------    -----------
       Net cash provided (used) by operating activities                         78,797      (77,562)       (36,866)
                                                                           -----------   ----------    -----------


                                                                                                        (Continued)
</TABLE>



<PAGE>


                       Americo Life, Inc. and Subsidiaries

                Consolidated Statement of Cash Flows (Continued)
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----
<S>                                                                       <C>           <C>           <C>

   Purchases of fixed maturity investments                                 $  (338,645)  $  (421,408)  $ (304,743)
   Purchases of equity securities                                             (107,983)      (67,815)      (24,072)
   Purchases of other investments                                               (7,972)      (21,944)           (6)
   Mortgage loans originated                                                   (51,461)      (24,777)       (1,323)
   Maturities or redemptions of fixed maturity investments                      32,110        89,206        45,791
   Sales of fixed maturity investments                                         257,910       380,251       190,368
   Sales of equity securities                                                  108,383       173,455            --
   Sales of other investments                                                   11,494        13,257        19,738
   Sale of subsidiary, net of cash sold                                         13,779        10,911            --
   Redemption of partnership interest                                               --            --        22,440
   Payment for subsidiaries acquired, net of cash acquired                     (15,377)     (248,581)           --
   Repayments from mortgage loans                                               27,818        45,287        40,401
   Change in due to broker                                                       3,151       (18,662)        5,014
   Acquisition of equity subsidiary                                                 --            --        (4,550)
   Change in policy loans                                                        4,723         4,470         6,459
                                                                           -----------   -----------   -----------
     Net cash used by investing activities                                     (62,070)      (86,350)       (4,483)
                                                                           ------------  -----------   -----------

Cash flows from financing activities
   Repayments of notes payable                                                    (283)         (542)         (545)
   Receipts credited to policyholder account balances                          284,251       192,648       176,845
   Return of policyholder account balances                                    (267,335)      (85,404)      (95,878)
   Dividends paid                                                               (2,000)       (2,000)       (2,000)
                                                                           ------------  -----------   -----------
     Net cash provided by financing activities                                  14,633       104,702        78,422
                                                                           -----------   -----------   -----------
Net increase (decrease) in cash and cash equivalents                            31,360       (59,210)       37,073
Cash and cash equivalents at beginning of year                                  36,859        96,069        58,996
                                                                           -----------   -----------   -----------
Cash and cash equivalents at end of year                                   $    68,219   $    36,859   $    96,069
                                                                           ===========   ===========      ========

Supplemental disclosures of cash flow information Cash paid during year for:
Interest                                                                   $    12,084   $    12,095   $    12,280
Income taxes                                                                      (359)        4,789         5,226

Supplemental schedule of non-cash investing and financing activities Acquisition
   of subsidiaries:
     Fair value of assets acquired, net of cash acquired                   $     19,733      948,724   $         --
     Liabilities                                                                 (4,356)    (700,143)            --
                                                                           ------------  ------------  ------------
     Payment for subsidiaries acquired, net of cash acquired               $     15,377  $   248,581   $         --
                                                                               ========  ===========           ====
</TABLE>





<PAGE>



                                      F-29

                       Americo Life, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements
                (Dollars in thousands, except per share amounts)

1.    Organization and Summary of Significant Accounting Policies

     Americo Life,  Inc. ("the  Company") is a holding company for the following
stock life insurance  companies,  all of which are 100% owned:  United  Fidelity
Life  Insurance  Company  ("United  Fidelity"),  Great  Southern Life  Insurance
Company  ("Great  Southern"),  The  College  Life  Insurance  Company of America
("College  Life"),  National  Farmers Union Life  Insurance  Company  ("National
Farmers") and The Ohio State Life Insurance Company ("Ohio State"), collectively
referred to as the Insurance Companies.  In May 1998, the Company sold Investors
Guaranty Life Insurance  Company  ("Investors  Guaranty") to an unrelated  party
and, in August 1997, the Company sold Loyalty Life Insurance  Company  ("Loyalty
Life") to an unrelated party. College Life owns 100% of College Insurance Group,
Inc.  ("CIG"),  a holding  company which owns 100% of Financial  Assurance  Life
Insurance Company ("Financial  Assurance"),  a stock life insurance company, NAP
Partners, Inc., Pension Consultants and Administrators, Inc. and Annuity Service
Corp.  The  Company  also has a 50%  interest  in  Argus  Health  Systems,  Inc.
("Argus"),  which  processes  prescription  drug claims.  In December  1996, the
Company  acquired a 50%  interest  in Hereford  LLP,  which owns and manages the
building leased by Argus. Also, in December 1996, Great Southern disposed of its
interest in GSSW Limited  Partnership  ("GSSW"),  a real estate holding company.
The  Company is a  wholly-owned  subsidiary  of  Financial  Holding  Corporation
("FHC").

     All of the Insurance  Companies are domiciled in Texas.  One or more of the
Insurance  Companies  is  licensed in the  District  of Columbia  and all states
except New York. The above companies comprise an Insurance Company Holding Group
as  defined  by the  laws of the  State  of  Texas  and  are  bound  by  certain
regulations thereof in the conduct of their business.

Principles of consolidation and basis of presentation

     The consolidated  financial  statements include the accounts of the Company
and its direct and indirect wholly-owned  subsidiaries.  The Insurance Companies
maintain their accounts in conformity  with accounting  practices  prescribed or
permitted  by  state  insurance  regulatory  authorities.  In  the  accompanying
financial statements, such accounts have been adjusted to conform with generally
accepted accounting principles (GAAP). All significant intercompany accounts and
transactions have been eliminated in consolidation.

     The  preparation  of  financial  statements  requires  management  to  make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Investments

     Fixed  maturity  investments  classified  as  held  to  maturity  are  debt
securities for which the Company has the positive  intent and ability to hold to
maturity and are stated at amortized cost with premiums  amortized to call dates
and discounts  amortized to maturity  dates.  Marketable  equity  securities and
fixed  maturities  available  for sale are  reported  at  market  value  and the
resulting  unrealized  gains or losses,  net of  applicable  income  taxes,  are
credited or charged to stockholder's equity. If a decline in the market value of
an individual  investment is considered to be other than temporary,  the loss is
recorded as a realized  investment  loss. Gains or losses on sales of securities
are computed using the specific identification method.


<PAGE>


                       Americo Life, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (Continued)

     When the  Company  recognizes  changes  in  conditions  that  cause a fixed
maturity  investment to be  transferred to a different  category  (e.g.  held to
maturity or available for sale), the security is transferred at market value. If
the security is  transferred  from  available for sale to held to maturity,  the
related  unrealized  gain or loss is  amortized  to  investment  income over the
remaining  life of the  security.  If the security is  transferred  from held to
maturity  to  available  for sale,  the  unrealized  gain or loss is included in
stockholder's equity.

     For  mortgage-backed   securities,   the  Company  anticipates  prepayments
utilizing published data when applying the interest method. Periodic adjustments
to securities'  carrying values as a result of changes in actual and anticipated
prepayments are credited or charged to net investment income.

     Equity  securities,  consisting  of  marketable  common  and  nonredeemable
preferred  stocks,  are carried at market value. The Company's 50% or less owned
subsidiaries  are  accounted  for  using  the  equity  method,  under  which the
Company's  proportionate  share of earnings  is  recorded as a component  of net
investment income.

     Mortgage  loans on real  estate are stated at  aggregate  unpaid  principal
balances,  net of unamortized purchase premiums or discounts and less allowances
for estimated losses.  Unamortized  purchase premiums or discounts are amortized
using the effective yield method over the life of the related loan.

     Policy loans are stated at aggregate unpaid principal balances.

     Investment real estate is stated at cost, less allowances for  depreciation
and, as appropriate, provisions for possible losses.

     The Company utilizes futures contracts to manage risks related to its fixed
maturities and equity  securities  portfolio.  For those contracts which qualify
for hedge  accounting,  gains or losses on open  contracts  are  recorded  as an
adjustment to the basis of the assets hedged and are included in net  unrealized
investment  gains.  Deferred  gains or  losses  on  terminated  hedges  on fixed
maturities  are  amortized  into  income over the  remaining  life of the asset.
Deferred gains or losses on terminated  hedges on equity securities remain until
the equity  security is sold. For those contracts which do not qualify for hedge
accounting, gains or losses are recorded as realized investment gains or losses.

     In June 1997, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standard No. 130,  "Reporting  Comprehensive
Income"  ("SFAS  130").  SFAS  130  establishes   standards  for  reporting  and
displaying   comprehensive   income  and  its   components  in  a  full  set  of
general-purpose financial statements.  Comprehensive income includes all changes
in stockholder's  equity during a period except those resulting from investments
by owners and  distributions  to owners.  The  adoption of SFAS 130  resulted in
revised and additional  disclosures but had no effect on the financial position,
results of operations, or liquidity of the Company.

     Also in June  1997,  the FASB  issued  Statement  of  Financial  Accounting
Standard  No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  ("SFAS 131").  This  statement  specifies  revised  guidelines for
determination  of an  entity's  operating  segments  and the type  and  level of
financial  information to be disclosed.  The adoption of this statement resulted
in  revised  and  additional  disclosures  but had no  effect  on the  financial
position, results of operations, or liquidity of the Company.

     In December 1997, the American  Institute of Certified  Public  Accountants
("AICPA") approved Statement of Position ("SOP") 97-3,  "Accounting by Insurance
and Other  Enterprises  for  Insurance-Related  Assessments."  SOP 97-3 provides
guidance  for  determining  when an entity  should  recognize  a  liability  for
guaranty-fund  and other  insurance-related  assessments and a related asset for
assessments which may be recovered  through future premium tax offsets.  The SOP
is effective for financial  statements for fiscal years beginning after December
15, 1998 with early adoption  encouraged.  Adoption of this accounting  standard
will not have a significant impact on the consolidated  financial  statements of
the Company.


<PAGE>



     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments and Hedging  Activities".  SFAS No. 133 provides guidance related to
the accounting for derivative instruments and hedging activities focusing on the
recognition  and  measurement  of  derivative  instruments.  This  statement  is
effective for all fiscal  quarters of all fiscal years  beginning after June 15,
1999. Adoption of this accounting standard will not have a significant impact on
the consolidated financial statements of the Company.

Cash equivalents

     The Company  considers  all highly  liquid  financial  instruments  with an
original maturity of three months or less to be cash equivalents.

Deferred policy acquisition costs and cost of business acquired

     The costs of new business produced, principally commissions, certain policy
issue and  underwriting  expenses  and certain  variable  agency  expenses,  are
deferred.  The cost of business acquired represents the amount of purchase price
assigned  to the value of the  policies  at  acquisition.  The cost of  business
acquired asset is no greater than the  actuarially  determined  present value of
future profits of the policies purchased.  For traditional life products,  these
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.   For  universal  life,   interest-sensitive   and
investment products, these costs are amortized in relation to the present value,
using the current  credited  interest  rate,  of expected  gross  profits of the
policies over the anticipated coverage period.

     Retrospective  adjustment  of  these  amounts  are made  annually  upon the
revision of estimates of current or future gross profits on universal  life-type
and annuity products to be realized from a group of policies.  Recoverability of
deferred policy acquisition costs and the cost of business acquired is evaluated
annually by comparing the current  estimate of future profits to the unamortized
asset  balances.  The revision of estimates  of future gross  profits  increased
(decreased) income related to deferred policy acquisition costs before provision
for income taxes by $6,203, $(4,131) and $1,446 for the years ended December 31,
1998,  1997 and 1996,  respectively.  The  revision of estimates of future gross
profits  increased  (decreased)  income related to the cost of business acquired
before provision for income taxes by $(7,105), $1,617 and $(4,673) for the years
ended December 31, 1998, 1997 and 1996, respectively.

     Anticipated  investment returns,  including realized gains and losses, from
the  investment  of  policyholder  balances are  considered in  determining  the
amortization of deferred policy acquisition costs, the cost of business acquired
and unearned policy  revenues.  When fixed maturities are stated at market value
an  adjustment is made to the deferred  policy  acquisition  costs,  the cost of
business   acquired  and  unearned  policy  revenues  equal  to  the  change  in
amortization  that would have been recorded if those fixed  maturities  had been
sold at their fair value and the proceeds  reinvested  at current  yields.  This
adjustment  is  recorded  net of income tax  directly to the  accumulated  other
comprehensive income component of stockholder's equity.

Universal life-type and annuity products

     Policyholder  account balances of universal  life-type,  interest-sensitive
and 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. Revenue for universal life-type and
other  interest-sensitive  products are  principally  comprised of insurance and
policy  administration  fees and surrender  charges,  as well as amortization of
deferred front-end contract charges.  Benefits and claims are charged to expense
in the period  incurred,  net of related  accumulated  contract values released.
Interest on  accumulated  contract  values is credited to  contracts  as earned.
Crediting rates for universal life-type and annuity products ranged from 3.0% to
6.0% at December 31, 1998.





Traditional life insurance products

     Traditional  life insurance  products include whole life insurance and term
life  insurance.  Reserves for future policy  benefits are estimated using a net
level premium  method based upon  historical  experience  of investment  yields,
mortality and withdrawals  including  provisions for possible adverse deviation.
Investment yield  assumptions are based on historical rates ranging from 7.0% to
9.0%. Mortality assumptions are based on the 1975-1980 Select and Ultimate Basic
Table with certain modifications including underwriting classifications and year
of issue.  Withdrawal  assumptions  for all products are estimated  based on the
Insurance Companies'  experience.  Additions to these reserves are required when
their  balances,  in  addition  to future  net cash flows  including  investment
income,  are  insufficient to cover future  benefits and expenses.  Premiums for
these  products are recognized as revenue when due.  Traditional  life insurance
benefits and claims are charged to expense in the period incurred.

Reinsurance

     Premiums and expenses  include amounts  related to reinsurance  assumed and
are stated net of amounts ceded. Reinsurance receivables and prepaid reinsurance
premiums are reported as assets and are recognized in a manner  consistent  with
the liabilities related to the underlying reinsured contracts.

Participating policies

     Participating life insurance policies  represent  approximately  1.3%, 1.7%
and 2.9% of the ordinary life insurance in force at December 31, 1998,  1997 and
1996,  respectively.  Premium  income  related to  participating  life insurance
policies  represents 3.3%, 3.3% and 4.4% of premiums and policy revenues for the
years 1998,  1997 and 1996,  respectively.  The  dividends  paid and accrued are
calculated in accordance with the terms of the individual  policy provisions and
the  dividend  schedule  as  reviewed  and  approved  annually  by the  Board of
Directors.

Property and equipment

     Company-occupied  property,  data  processing  equipment  and furniture and
office equipment,  included in other assets, are stated at cost less accumulated
depreciation of $12,434 and $10,036 at December 31, 1998 and 1997, respectively.
Depreciation  is  computed  on a  straight-line  basis for  financial  reporting
purposes using estimated useful lives of three to 30 years. Depreciation expense
was $5,492,  $3,436 and $3,051 for the years ended  December 31, 1998,  1997 and
1996, respectively.

Income taxes

     Provision for income taxes  includes  deferred taxes arising from temporary
differences  between  the  tax and  financial  reporting  basis  of  assets  and
liabilities.  This liability method of accounting for income taxes also requires
the Company to reflect the effect of a tax rate change on  accumulated  deferred
income taxes in income for the period in which the change is enacted.

Net income per common share

     Net income per common  share is  calculated  by  dividing  the  appropriate
income item by the average number of shares of common stock  outstanding  during
the period. There were no common share equivalents outstanding during 1998, 1997
or 1996.

Reclassifications

     Previously  reported  amounts for prior years have in some  instances  been
reclassified to conform to the current year presentation.


<PAGE>



2.    Fair values of financial instruments

     The  following   estimated  fair  value  disclosures  are  limited  to  the
reasonable  estimates  of  the  fair  value  of  only  the  Company's  financial
instruments. The Company does not anticipate that any significant assets will be
disposed  of or that  any  significant  liabilities  would be  settled  at these
estimated fair values.

     Investment  securities:   The  estimated  fair  values  of  fixed  maturity
securities are based on quoted market prices where available. For fixed maturity
securities not actively traded,  fair values are estimated using values obtained
from  independent  pricing  services.  In the case of private  placements,  fair
values  are  determined  using  market  values  of  comparable  securities.  The
estimated fair values of equity securities are based on quoted market prices.

     Mortgage  loans:  The fair values of  mortgage  loans are  estimated  using
discounted cash flow analyses and interest rates being offered for similar loans
to borrowers with similar credit ratings.

     Policy  loans:  Policy loans are  generally  issued with coupon rates below
market rates and are considered early payment of the life benefit.  As such, the
carrying amount of these financial instruments is a reasonable estimate of their
fair value.

     Other  invested  assets:  The fair  value of the note  receivable  from PFS
Holding  Company  ("PFSH"),  a  wholly-owned  subsidiary of FHC, is estimated by
discounting future cash flows at current market rates.

     Cash  and  cash  equivalents:  The  carrying  value  of  these  instruments
approximates fair value.

     Annuities:  The fair values of the Company's  annuities are estimated
using the current cash surrender  value for the Company's annuity contracts.

     Notes payable:  The fair value of the Company's senior  subordinated  notes
equals the quoted market price at the reporting  date. The carrying value of the
Company's  senior bank debt  approximates  fair value since the current interest
rate reprices every thirty to ninety days. The fair value of the Company's other
notes payable was  calculated  using a discounted  interest rate which  reflects
prevailing market rates.

     The  estimated  fair  values  of the  Company's  financial  instruments  at
December 31, are as follows:
<TABLE>

                                                               1998                               1997
                                                  -------------------------------    -------------------------------

                                                     Carrying          Fair             Carrying          Fair
                                                      Amount          Value              Amount          Value
<S>                                                <C>             <C>                <C>             <C>
   Fixed maturities held to maturity                $   876,594     $   914,672        $   851,823     $   873,935
   Fixed maturities available for sale                  925,191         925,191            761,084         761,084
   Equity securities                                     89,022          89,022             78,949          78,949
   Mortgage loans                                       190,074         203,135            165,630         166,634
   Policy loans                                         210,173         210,173            200,137         200,137
   Other invested assets                                 10,000          10,515             10,000          10,032
   Cash and cash equivalents                             68,219          68,219             36,859          36,859
Financial liabilities:
   Annuities                                          1,042,622         963,911          1,072,062       1,039,463
   Notes payable                                        132,533         134,283            132,884         137,794
</TABLE>



<PAGE>



3.    Changes in Subsidiaries

     On April 15, 1997, the Company acquired all of the outstanding common stock
of Ohio State and Investors  Guaranty  from Farmers  Group,  Inc.  pursuant to a
stock  purchase  agreement  dated  January  21,  1997.  The  purchase  price was
$345,387. The acquisition of Ohio State and Investors Guaranty was accounted for
using the purchase method of accounting. The operating results of Ohio State and
Investors  Guaranty after the date of acquisition  are included in the Company's
statement of income.

     The assets acquired and  liabilities  assumed related to the acquisition of
Ohio State and Investors Guaranty were as follows:
<TABLE>

<S>                                                                                     <C>
Assets acquired:
         Fixed maturities                                                                $     623,790
         Equity securities                                                                     123,418
         Cash and cash equivalents                                                              90,219
         Cost of business acquired                                                             141,919
         Other assets                                                                           59,597
                                                                                         -------------
                                                                                         $   1,038,943
Liabilities assumed:
         Policyholder account balances                                                   $     521,355
         Reserves for future policy benefits                                                   153,482
         Other liabilities                                                                      18,719
                                                                                         -------------
                                                                                         $     693,556
</TABLE>

     On April 16, 1997, Ohio State and Investors  Guaranty entered into separate
coinsurance  agreements to reinsure 100% of their  insurance  liabilities  to an
unaffiliated  insurance  company  (the  "Reinsurer")  in  exchange  for a ceding
commission  of  approximately  $146,000.  On the same day, the Reinsurer and the
Company entered into a modified coinsurance  agreement under which the Reinsurer
ceded certain risks on a 70% quota share basis on the same insurance liabilities
to the Company.  The reinsurance  agreements have the net effect of transferring
30% of the  profits on the Ohio State and  Investors  Guaranty  policies  to the
Reinsurer.  Under the coinsurance  treaty,  the assets  supporting the insurance
liabilities  are retained by the Reinsurer in an escrow  account for the benefit
and protection of the Company.  The Reinsurer will receive 100% of the statutory
profits from the  reinsured  policies  until the  Reinsurer  has  recovered  the
initial ceding commission.

     Ohio State and Investors Guaranty transferred bonds and policy loans to the
Reinsurer equal to the statutory reserve liabilities less the ceding commission.
The policy liabilities remain the direct liabilities of Ohio State and Investors
Guaranty and therefore remain on the Company's  consolidated  balance sheet. The
assets  retained by the  Reinsurer  are included on the  Company's  consolidated
balance sheet as a receivable from the Reinsurer.  The cost of business acquired
asset  related to the acquired  business has been reduced to reflect the net 30%
coinsurance.

     The acquisition of Ohio State and Investors Guaranty was funded by internal
funds and the proceeds of a $240,000 repurchase  agreement.  Upon receipt of the
$146,000 ceding commission from the Reinsurer, Ohio State and Investors Guaranty
paid dividends  totaling $200,000 to the Company.  The repurchase  agreement was
closed out in 1997.



<PAGE>



     Summarized  unaudited pro forma consolidated  financial  information of the
Company is set forth in the  following  table.  This  financial  information  is
presented assuming the acquisition of Ohio State and Investors Guaranty occurred
on January 1, 1996. <TABLE>

                                                                 1997          1996
                                                                 ----          ----

      <S>                                                     <C>           <C>
      Total revenue                                            $  458,203    $  452,071
      Net income                                                   21,701        26,083
      Net income per common share                                2,170.10      2,608.30
</TABLE>

     On May 8, 1998, Great Southern sold all of the outstanding  common stock of
Investors Guaranty, a wholly-owned subsidiary,  for $14,793, resulting in a gain
included in other income of $4,855.  All of the insurance  business of Investors
Guaranty is reinsured to an unaffiliated  insurance  company under a coinsurance
agreement  and  subsequently  reinsured  to  Great  Southern  under  a  modified
coinsurance  agreement on a 70% quota share basis. These reinsurance  agreements
are  unaffected  by the sale.  As of the date of sale,  Investors  Guaranty  had
assets totaling $10.3 million and liabilities totaling $0.4 million.

     In October 1998, the Company entered into a series of transactions with the
individual  owning the 50% of CIG not owned by the  Company.  The purpose of the
transactions was to consolidate all of the activities in the asset  accumulation
markets  conducted by CIG and other entities  owned 100% by the individual  with
those of the Company.  Specifically,  the Company  acquired the other 50% of CIG
for  $6,236  and  acquired  the stock or assets of  various  marketing  entities
wholly-owned by the individual for $9,518 plus contingent consideration of up to
an additional $5.0 million based on achieving  certain sales production  levels.
In addition,  the Company recaptured all of the insurance  liabilities that were
previously  ceded to an entity owned by the individual.  The Company paid $3,945
in 1998 and will pay  $2,624  and  $2,580  in 1999 and  2000,  respectively,  to
recapture these liabilities.

     In  1997,  Great  Southern  sold  the  stock of  Loyalty  Life for  $12,280
resulting  in a  $4,848  gain.  Prior to this  sale,  several  of the  Company's
insurance  subsidiaries  entered  into  agreements  with  Loyalty  Life  for the
assumption  of  Loyalty  Life  insurance  liabilities.  As of the  date of sale,
Loyalty Life has assets  totaling $32.4 million and  liabilities  totaling $20.0
million.


<PAGE>



4.   Investments

Fixed Maturities

     The amortized cost of investments in fixed  maturities,  the cost of equity
securities  and the estimated  market values of such  investments by category of
securities, are as follows: <TABLE>

                                                                              December 31, 1998
                                                      ------------------------------------------------------------------

                                                                          Gross              Gross         Estimated
                                                        Amortized      Unrealized          Unrealized        Market
                                                           Cost           Gains              Losses          Value
<S>                                                   <C>             <C>                <C>             <C>
Held to maturity:
   U.S. Treasury and government securities             $      3,402    $        191       $          -    $      3,593
   Public utility securities                                 47,290           2,871                 (1)         50,160
   Corporate securities                                     511,028          28,672             (1,316)        538,384
   Asset-backed securities                                   29,961             991                (24)         30,928
   Mortgage-backed pass-through securities                   28,963           1,185                 (8)         30,140
   Collateralized mortgage obligations                      255,950           6,146               (629)        261,467
                                                       ------------    ------------       ------------    ------------
                                                            876,594          40,056             (1,978)        914,672
                                                       ------------    ------------       ------------    ------------
Available for sale:
   U.S. Treasury and government securities                   40,858           2,063                 (1)         42,920
   Public utility securities                                 33,338           1,695                  -          35,033
   Corporate securities                                     546,654          25,081             (5,762)        565,973
   Asset-backed securities                                   78,778           3,469               (115)         82,132
   Mortgage-backed pass-through securities                  109,375           2,673                (62)        111,986
   Collateralized mortgage obligations                       84,661           2,713               (227)         87,147
                                                       ------------    ------------      --------------   ------------
                                                            893,664          37,694             (6,167)        925,191
                                                       ------------    ------------      --------------   ------------
     Subtotal, all fixed maturities                       1,770,258          77,750             (8,145)      1,839,863
                                                       ------------    ------------       ------------    ------------
Equity securities                                            42,201          47,043               (222)         89,022
                                                       ------------    ------------       ------------    ------------
     Total fixed maturities and equity  securities     $  1,812,459    $    124,793       $     (8,367)   $  1,928,885
                                                       ============    ============       ============    ============
</TABLE>
<TABLE>


                                                                              December 31, 1997
                                                      ------------------------------------------------------------------

                                                                          Gross              Gross         Estimated
                                                        Amortized      Unrealized          Unrealized        Market
                                                           Cost           Gains              Losses          Value
<S>                                                  <C>             <C>                <C>             <C>
Held to maturity:
   U.S. Treasury and government securities            $     2,427     $        82        $       (20)    $     2,489
   Public utility securities                               46,984           1,609               (154)         48,439
   Corporate securities                                   467,288          18,420             (1,591)        484,117
   Asset-backed securities                                 30,152             180               (131)         30,201
   Mortgage-backed pass-through securities                 28,467             967                (33)         29,401
   Collateralized mortgage obligations                    276,505           4,188             (1,405)        279,288
                                                      -----------     -----------        -----------     -----------
                                                          851,823          25,446             (3,334)        873,935
                                                      -----------     -----------        -----------     -----------
Available for sale:
   U.S. Treasury and government securities                 62,094           2,913                (21)         64,986
   Public utility securities                               29,732           1,073                (28)         30,777
   Corporate securities                                   355,660          16,408             (1,439)        370,629
   Asset-backed securities                                 56,314           1,289                 --          57,603
   Mortgage-backed pass-through securities                137,328           3,108               (114)        140,322
   Collateralized mortgage obligations                     94,827           2,419               (479)         96,767
                                                      -----------     -----------        -----------     -----------
                                                          735,955          27,210             (2,081)        761,084
                                                      -----------     -----------        -----------     -----------
     Subtotal, all fixed maturities                     1,587,778          52,656             (5,415)      1,635,019
                                                      -----------     -----------        -----------     -----------
Equity securities                                          50,837          28,753               (641)         78,949
                                                      -----------     -----------        -----------     -----------
     Total fixed maturities and equity securities     $ 1,638,615     $    81,409        $    (6,056)    $1,713,968
                                                      ===========     ===========        ===========     ==========
</TABLE>

     The amortized cost and estimated market value of mortgage-backed securities
by category at December 31, 1998 are as follows:
<TABLE>

                                                              Held to Maturity               Available for Sale
                                                         ---------------------------     ---------------------------

                                                                        Estimated                       Estimated
                                                          Amortized    Market Value       Amortized    Market Value
                                                             Cost                            Cost

<S>                                                       <C>           <C>               <C>           <C>
Pass-through agency securities                            $   28,963    $   30,140        $  109,375    $  111,986

Collateralized mortgage obligations:
   Sequential class                                          101,417       102,514            64,911        66,216
   Planned amortization class                                 45,552        46,993             6,043         6,122
   Very accurately defined maturity                          102,074       105,396             7,361         7,457
   Accrual class                                                  --            --             2,727         2,809
   Other                                                       6,907         6,564             3,619         4,543
                                                          ----------    ----------        ----------    ----------
                                                             255,950       261,467            84,661        87,147
                                                          ----------    ----------        ----------    ----------
     Total securities                                     $  284,913    $  291,607        $  194,036    $  199,133
                                                          ==========    ==========        ==========    ==========
</TABLE>


     The amortized cost and estimated market value of fixed maturities which are
held to maturity and  available  for sale at December 31, 1998,  by  contractual
maturity,  are shown below.  Expected  maturities  will differ from  contractual
maturities  because  borrowers may have the right to call or prepay  obligations
with or without penalties. <TABLE>

                                                              Fixed Maturities                Fixed Maturities
                                                              Held to Maturity               Available for Sale
                                                         ---------------------------     ---------------------------

                                                                        Estimated                       Estimated
                                                          Amortized    Market Value       Amortized    Market Value
                                                             Cost                            Cost

<S>                                                       <C>           <C>               <C>           <C>
Due in one year or less                                   $    3,471    $    3,466        $    6,918    $    7,005
Due after one year through five years                         91,959        93,706           104,952       106,331
Due after five years through ten years                       236,028       244,779           171,122       176,153
Due after ten years                                          230,262       250,187           337,858       354,436
Mortgage-backed securities                                   314,874       322,534           272,814       281,266
                                                          ----------    ----------        ----------    ----------
                                                          $  876,594    $  914,672        $  893,664    $  925,191
                                                          ==========    ==========        ==========    ==========
</TABLE>

     At December 31, 1998, the Company held below  investment  grade (S&P rating
below BBB-)  corporate  debt  securities  with an  aggregate  carrying  value of
$14,941 and market  value of $14,950.  At December  31,  1997,  the Company held
below  investment  grade corporate debt  securities  with an aggregate  carrying
value of $23,195 and market value of $23,349.  These  holdings  amounted to 0.5%
and  0.6%  of the  Company's  total  assets  at  December  31,  1998  and  1997,
respectively.


<PAGE>



     Fixed  maturities  with an amortized book value of $29,223 and $38,205 were
on deposit with insurance  regulatory agencies of certain states at December 31,
1998 and 1997, respectively.

     The Company  owns a $10,000,  9.25% senior  subordinated  note ("the note")
issued by PFSH which  matures in September  2004.  The note is included in other
invested assets on the Company's consolidated balance sheet.

Mortgage loans on real estate

     At December 31, mortgage loans on real estate consisted of:
<TABLE>
                                                                                         1998           1997
                                                                                         ----           ----

      <S>                                                                           <C>            <C>
      Mortgage loan principal                                                        $   190,838    $   167,188
      Net unamortized purchase discount                                                     (464)        (1,258)
      Allowance for losses                                                                  (300)          (300)
                                                                                     -----------    -----------
         Net mortgage loans                                                          $   190,074    $   165,630
                                                                                     ===========    ===========
</TABLE>

     The Company's  mortgage  loans on real estate are  diversified  by property
type,  location and loan size and are collateralized by the related  properties.
At December 31, 1998,  mortgage  loans on real estate were  concentrated  in the
following property types: <TABLE>
                                                                                                        % of
                                                                                         1998        Portfolio

     <S>                                                                             <C>                <C>
      Property type:
         Commercial
           Multi-family apartments                                                    $   65,332         34.4%
           Retail space                                                                   51,270         27.0
           Industrial/Warehouses                                                          37,725         19.8
           Office buildings                                                               33,727         17.7
         Residential                                                                       2,020          1.1
                                                                                      ----------      -------
           Total                                                                      $  190,074        100.0%
                                                                                      ==========        =====
</TABLE>

     At December 31, 1998, the following  states had a concentration of mortgage
loans  aggregating  more  than  10% of the  Company's  mortgage  loans:  Texas -
$31,344; Missouri - $28,487; Connecticut - $21,731 and Kansas - $19,825.

Investment in equity subsidiaries

     The following table presents summarized financial information on a combined
proportionate  basis  of the  Company's  equity  affiliates.  Amounts  presented
included the accounts of the Company's equity subsidiaries, CIG, Argus, Hereford
LLP (acquired in 1996),  a hotel joint  venture and GSSW  (disposed of in 1996).
The  Company  acquired  the  remaining  50% of CIG in  1998.  Subsequent  to the
acquisition  date,  the  operations  of CIG are  consolidated  in the  Company's
financial statements. <TABLE>

                                                                           1998          1997           1996
                                                                           ----          ----           ----

     <S>                                                              <C>           <C>            <C>
      Current assets                                                   $     5,471   $    16,630    $    12,952
      Noncurrent assets                                                     17,547        96,494         67,358
      Current liabilities                                                    3,353         4,883          2,829
      Noncurrent liabilities                                                 9,996        86,571         59,403
      Net revenues                                                          32,124        28,910         32,401
      Expenses applicable to net revenues                                   26,560        23,521         26,307
      Income from continuing operations                                      3,740         5,083          6,505
      Net income                                                             2,581         3,244          5,458
</TABLE>



     In 1996, GSSW distributed cash of $6,000 to the Company.  In December 1996,
the Company  liquidated its interest in GSSW in exchange for cash of $22,629 and
100% interests in several real estate limited partnerships which were then owned
by GSSW resulting in a gain of $15,825.  The limited  partnerships,  with assets
consisting primarily of investment real estate, are included in the consolidated
financial statements of the Company at December 31, 1998 and 1997.

     In 1998,  the Company  received  cash  dividends  from Argus  consisting of
$9,500 and a cash distribution from Hereford LLP of $443.

Net investment income

     Net investment  income for the years ended December 31, is comprised of the
following:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                         <C>          <C>           <C>
Fixed maturities                                                            $  124,157   $   117,197   $   104,442
Equity securities                                                                1,484         1,437         1,101
Equity in earnings of equity subsidiaries                                        2,581         3,622         5,458
Mortgage loans on real estate                                                   16,518        16,712        21,344
Policy loans                                                                    12,671        12,420        13,719
Reinsurance funds held by reinsurer                                             66,895        65,747        37,425
Cash, short-term investments and other                                           8,005         8,770         7,452
                                                                           -----------   -----------   -----------
         Total investment income                                               232,311       225,905       190,941
Less investment expenses                                                        (5,777)       (6,638)       (4,216)
                                                                           -----------   -----------   -----------
         Net investment income                                             $   226,534   $   219,267   $   186,725
                                                                           ===========   ===========   ===========
</TABLE>

Realized gains and losses

     Realized  gains  and  losses  from  the  sales  and  other  redemptions  of
investments for the years ended December 31, are as follows:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----
<S>                                                                       <C>           <C>           <C>
Fixed maturity securities:
   Held to maturity:
     Realized gains                                                        $        --   $        --   $        93
     Realized losses                                                                --            --          (124)
   Available for sale:
     Realized gains                                                             23,193         4,688         2,162
     Realized losses                                                            (1,212)       (4,097)       (3,524)
Equity securities:
   Realized gains                                                                6,018         4,582         2,340
   Realized losses                                                             (21,642)       (5,349)       (1,851)
Other investments:
   Realized gains                                                                4,929         5,339           788
   Realized losses                                                              (3,002)       (2,213)           (4)
                                                                           -----------   -----------   -----------
Total net realized investment gains (losses)                               $     8,284   $     2,950   $      (120)
                                                                           ===========   ===========   ===========
</TABLE>



<PAGE>



     Following  are the  components  of net  unrealized  investment  gains as of
December 31:
<TABLE>

                                                                                             1998          1997
                                                                                             ----          ----
<S>                                                                                       <C>         <C>
Investments carried at amortized cost:
   Fixed maturities available for sale                                                     $  29,200   $    25,129
   Fixed maturities reclassified from available for sale to held to maturity                  36,509        44,550
Investments carried at estimated fair value:
   Equity securities                                                                          47,172        28,112
Effect on other balance sheet accounts                                                       (21,019)      (11,321)
Deferred income taxes                                                                        (31,363)      (29,497)
                                                                                         -----------   -----------
     Net unrealized investment gains                                                     $    60,499   $    56,973
                                                                                         ===========   ===========
</TABLE>

     In November 1995, the FASB issued "A Guide to  Implementation  of Statement
115 on Accounting for Certain  Investments in Debt and Equity  Securities" ("the
Guide") which, among other things, provided entities with a one time opportunity
to transfer some or all securities from held to maturity.  In December 1995, the
Company  transferred  fixed maturity  securities with an amortized book value of
$195,207  and a market  value of $198,329  out of the held to maturity  category
into the  available for sale  category.  Additionally,  the Company  transferred
fixed maturity  securities with an amortized book value of $169,439 and a market
value  of  $178,883  out of the  available  for sale  category  into the held to
maturity  category.  In 1993, the Company also  transferred  securities from the
available for sale category to the held to maturity category. The net unrealized
gains of  $36,509  and  $44,550 at  December  31,  1998 and 1997,  respectively,
relating  to  these  investments  transferred  to held  to  maturity  are  being
amortized  into income  using the  effective  yield method over the lives of the
related securities.

The components of other comprehensive income are as follows:
<TABLE>

                                                                    Amounts            Income       Amounts Net of
                                                                   Before Tax          Taxes              Tax

1998

<S>                                                               <C>               <C>               <C>
Unrealized holding gains arising during period                    $    15,689       $    (5,470)      $    10,219
Reclassification adjustments for losses realized
  in net income                                                       (10,297)            3,604            (6,693)
                                                                  -----------       -----------       -----------
Other comprehensive income                                        $     5,392       $    (1,866)      $     3,526
                                                                  ===========       ===========       ===========

1997

Unrealized holding losses arising during period                   $    30,939       $   (11,041)      $    19,898
Reclassification adjustments for losses realized
  in net income                                                          (176)               62              (114)
                                                                  -----------       -----------       -----------
Other comprehensive income                                        $    30,763       $   (10,979)      $    19,784
                                                                  ===========       ===========       ===========

1996

Unrealized holding losses arising during period                   $   (12,996)      $     4,549       $    (8,447)
Reclassification adjustments for losses realized
  in net income                                                          (873)              305              (568)
                                                                  -----------       -----------       -----------
Other comprehensive income                                        $   (13,869)      $     4,854       $    (9,015)
                                                                  ===========       ===========       ===========
</TABLE>



     The carrying value of investments that were non-income producing during the
three year period  ended  December  31, 1998 was not  material to the  Company's
consolidated financial position.


<PAGE>



5.    Deferred Policy Acquisition Costs and Cost of Business Acquired

     The balances of and changes in deferred  policy  acquisition  costs and the
cost of business  acquired as of and for the three years ended  December 31, are
as follows:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                       <C>           <C>           <C>
Deferred policy acquisition costs:
  Balance, beginning of year                                               $    87,840   $    72,438   $    56,568
  Capitalization of expenses                                                    44,548        34,220        19,337
  Other additions                                                               30,645             -             -
  Interest accretion                                                             7,286         5,802         4,075
  Amortization                                                                 (19,868)      (27,207)       (7,401)
  Amounts related to fair value adjustment of fixed maturity securities        (18,877)        2,587          (141)
                                                                           -----------   -----------   -----------
  Balance, end of year                                                     $   131,574   $    87,840   $    72,438
                                                                           ===========   ===========   ===========

Cost of business acquired:
  Balance, beginning of year                                               $   300,180   $   200,710   $   163,660
  Additions                                                                      9,497       124,052        60,181
  Interest accretion                                                            15,453        18,157        12,210
  Amortization                                                                 (78,175)      (47,741)      (34,908)
  Amounts related to fair value adjustment of fixed maturity securities           (481)        4,165         1,658
  Impact of realization of acquired tax benefits                                   651           837        (2,091)
                                                                           -----------   -----------   -----------
  Balance, end of year                                                     $   247,125   $   300,180   $   200,710
                                                                           ===========   ===========   ===========
</TABLE>


     The estimated  amortization and interest  accretion of the cost of business
acquired for the five years ending December 31, 2003 are as follows:
<TABLE>

                                                                                Interest           Estimated
                                                          Amortization          Accretion        Net Decrease

        <S>                                               <C>                <C>                 <C>
         1999                                              $  44,817          $  13,027           $  31,790
         2000                                                 39,400             11,393              28,006
         2001                                                 34,502             10,013              24,489
         2002                                                 29,047              8,827              20,219
         2003                                                 25,137              7,820              17,317
</TABLE>


6.    Insurance Liabilities and Reinsurance

     Insurance liabilities at December 31, consist of the following:
<TABLE>

                                                                                          1998            1997
                                                                                          ----            ----
<S>                                                                                 <C>             <C>
Policyholder account balances:
   Universal life                                                                    $  1,458,491    $  1,414,374
   Annuities                                                                            1,042,622       1,072,062
                                                                                     ------------    ------------
                                                                                     $  2,501,113    $  2,486,436
                                                                                     ============    ============


Future policy benefits:
   Traditional life                                                                  $    818,312    $    866,585
   Accident and health                                                                      2,458           2,605
   Supplementary contracts                                                                 13,147          12,393
                                                                                     ------------    ------------
                                                                                     $    833,917    $    881,583
                                                                                     ============    ============
</TABLE>

     At December 31, 1998,  approximately 83% of the annuity account balances of
the Insurance Companies are subject to surrender charges upon early withdrawal.

     The  Insurance  Companies  cede and assume  reinsurance  with  unaffiliated
companies.  The  maximum  portion  of  the  risk  retained  on the  life  of any
individual is $350.

     As more  fully  described  in Note 3, the  Company  entered  into  separate
coinsurance agreements during 1997 to reinsure 100% of the insurance liabilities
of Ohio State and  Investors  Guaranty to the  Reinsurer.  On the same day,  the
Reinsurer  and Great  Southern  entered into a modified  coinsurance  agreement.
These  agreements  effectively  transfer  30% of the  profits  of Ohio State and
Investors Guaranty policies to the Reinsurer.

     In October  1995,  the Company  entered  into  several  agreements  with an
unaffiliated  insurance  company and the Reinsurer.  One of the agreements calls
for the direct insurer to reinsure  substantially all of its insurance  policies
and  contracts  to the  Reinsurer on a  coinsurance  basis.  The direct  insurer
transferred  approximately  $348,000 of assets to the  Reinsurer  and received a
ceding commission of $37,328.  On July 2, 1996, the Company entered into similar
agreements  with another  unaffiliated  insurance  company.  The direct  insurer
transferred  approximately  $405,000 of assets to the  Reinsurer  and received a
ceding commission of $34,745.  The Reinsurer  entered into modified  coinsurance
agreements  to reinsure  certain risks on the same  insurance  policies to Great
Southern.  The  modified  coinsurance  agreements  provide  that the  assets and
insurance  liabilities  related to the reinsured  policies are to be retained by
the  Reinsurer.  The  assets  retained  by the  Reinsurer  are held in an escrow
account for the benefit of Great Southern.

     Great  Southern also entered into  reinsurance  agreements  with the direct
insurers  which  provide  for Great  Southern  to  reinsure  the life  insurance
policies and  contracts  of the direct  insurers on either a  coinsurance  or an
assumption  basis  subject  to the  existing  coinsurance  agreements  with  the
Reinsurers.  The completion of the assumption of the policies will be subject to
necessary insurance department and policyholder approvals.

     These various  agreements are collectively  referred to as the "Reinsurance
Agreements".  The Company accounted for the Reinsurance  Agreements by recording
the direct  and  assumed  insurance  liabilities  and  amounts  receivable  from
Reinsurer  equal  to the  assets  held by the  Reinsurer.  Premiums  and  policy
revenues  and  policyholder  benefits  assumed  under the  modified  coinsurance
agreements are included in the Company's  statement of income.  Interest  income
earned on the assets held by the Reinsurer is recorded as investment income.

     At  December  31,  the  amounts  receivable  from  reinsurers,  the cost of
business  acquired  and the  insurance  liabilities  related to the  Reinsurance
Agreements included on the Company's consolidated balance sheet are as follows:
<TABLE>

                                                                                        1998              1997
                                                                                        ----              ----

<S>                                                                                 <C>             <C>
Amounts receivable from reinsurers                                                  $  1,101,255    $   1,175,922
Cost of business acquired                                                                151,234          193,708
Insurance liabilities                                                                  1,249,689        1,364,453
</TABLE>

     The  Reinsurer  will  receive  all  statutory  profits  from the  reinsured
policies until the Reinsurer has recovered the initial ceding  commission.  Upon
termination of the modified coinsurance  agreements,  Great Southern is required
to reimburse the Reinsurer for the amount of the unrecovered ceding commission.


<PAGE>



     Amounts  receivable from  reinsurers  consists of the following at December
31:
<TABLE>

                                                                                        1998              1997
                                                                                        ----              ----

<S>                                                                                    <C>          <C>
Amounts recoverable for ceded future policy benefits                               $   1,274,931    $   1,576,502
Unrecovered ceding commission                                                           (148,435)        (188,531)
Amounts recoverable on ceded policy and contract claims                                   17,996           15,362
Amounts recoverable on paid losses                                                         3,901            5,971
Other                                                                                     58,804           20,375
                                                                                   -------------    -------------
                                                                                   $   1,207,197    $   1,429,679
                                                                                   =============    =============
</TABLE>

     Amounts receivable from reinsurers include $13,721 and $14,713 from another
unrelated  insurance company at December 31, 1998 and 1997,  respectively.  Also
included  in amounts  receivable  from  reinsurers  is $149,141  from  Financial
Assurance at December 31, 1997.

     Reinsurance  contracts  do not relieve the Company from its  obligation  to
policyholders.  Failure of reinsurers to honor their obligations would result in
losses to the Company.  The Company  evaluates  the  financial  condition of its
reinsurers and monitors concentrations of credit risk arising from activities or
economic   characteristics  of  the  reinsurers  to  minimize  its  exposure  to
significant  losses from  reinsurer  insolvencies.  At  December  31,  1998,  no
allowance has been established as all amounts are deemed collectible.

     Premiums  ceded under  reinsurance  agreements  were  $50,283,  $48,279 and
$35,050 for the years ended  December  31,  1998,  1997 and 1996,  respectively.
Reinsurance  recoveries  netted  against  other  policyholder  benefits  totaled
$52,738,  $55,825 and $50,678 for the years ended  December 31,  1998,  1997 and
1996, respectively.  The Insurance Companies are liable for reinsurance ceded to
other  companies in the event the  reinsurers are unable to pay their portion of
the policy benefits.

     Certain of the  Insurance  Companies  have ceded blocks of insurance  under
financial  reinsurance  treaties  to provide  funds for  acquisitions  and other
purposes.  These reinsurance transactions represent financial arrangements under
generally accepted accounting principles, and accordingly,  are not reflected in
the accompanying  financial  statements except for the associated risk fees. For
statutory accounting purposes,  these financial reinsurance transactions provide
a reserve credit which increases statutory surplus.

     Certain  financial  reinsurance  treaties  entered  into  by the  Insurance
Companies  contain  minimum  statutory  surplus  requirements  and  require  the
Insurance  Companies  to place  securities  in an  escrow  account  ($75,184  at
December  31,  1998) to  secure  obligations  to the  reinsurer.  The  Insurance
Companies are in compliance with all requirements at December 31, 1998.



<PAGE>



7.    Notes Payable

     Notes payable at December 31, are comprised of the following:
<TABLE>

                                                                                             1998          1997
                                                                                             ----          ----

<S>                                                                                     <C>           <C>
Senior subordinated notes bearing interest at 9.25%, due 2005                            $   100,000   $   100,000
Borrowing under $70,000 amended and restated credit agreement, bearing interest at
7/8% over LIBOR rate (6 3/8% at December 31, 1998), due in six equal semi-annual
installments of $3,500 beginning in 2000                                                      21,000        21,000
Unsecured discounted $12,000 notes, bearing interest at an effective interest rate of
11.5%, payable in semi-annual equal installments due 2010                                      7,976         8,297
Unsecured discounted $5,000 note, bearing interest at an effective interest rate of
12.0% due 2015                                                                                 3,053         3,015
Other                                                                                            504           572
                                                                                         -----------   -----------
                                                                                         $   132,533   $   132,884
                                                                                         ===========   ===========
</TABLE>

     On or after June 1, 1998,  the senior  subordinated  notes (the  Notes) are
redeemable at the option of the Company,  in whole or in part, at the redemption
prices (expressed as percentages of principal amount) set forth below:

             1999                                                 102.3125%
             2000 and thereafter                                  100.0000%


     In 1995,  the Company  entered into a $70,000  Credit  Agreement  which was
provided  by a  syndicate  of  lenders  with  The  Chase  Manhattan  Bank as the
administrative  agent. The Credit Agreement was amended and restated in December
1996 and subsequently amended in 1997 and 1998. The Credit Agreement operates as
a revolving  credit  facility  until December 31, 1999. The amount of loans then
outstanding will convert into a term loan and amortized in six equal semi-annual
installments  commencing  July 1,  2000.  Amounts  outstanding  under the Credit
Agreement  accrue  interest  at a  variable  rate  or the  prime  rate.  Amounts
outstanding  under the  Credit  Agreement  rank  senior to the  Company's  other
currently  outstanding  debt and are secured by a pledge of the common  stock of
the Company's  subsidiaries,  United  Fidelity and by the surplus  debentures of
United  Fidelity.  The Company  pays 0.2% per year on the unused  portion of the
Credit Agreement.

     The  unsecured  discounted  notes bear  interest at 6.5% per annum  payable
semi-annually and rank pari passu with the Notes. The Company recorded the notes
at their fair value at the date of issuance  using  effective  interest rates of
11.5% and 12.0%. The unamortized  discount at December 31, 1998 was $4,102.  The
$5,000 note is subject to contractual  set-off rights and is held under a pledge
and escrow  agreement to secure the certain  indemnification  obligations to the
Company.

     The Notes and the Credit Agreement contain certain covenants including, but
not limited to, limitations on indebtedness,  liens securing indebtedness,  sale
or issuance of capital stock of the Company's subsidiaries, restricted payments,
issuance of other subordinated indebtedness, financial reinsurance, investments,
dividends and other  distributions by the Company's  subsidiaries,  dividends by
the Company,  transactions with affiliates,  the sale of assets and repayment of
subordinated indebtedness by the Company. The Company was in compliance with all
debt covenants at December 31, 1998.


<PAGE>



     The aggregate principal payments due during each of the next five years are
as follows:
<TABLE>

           <S>                                                                  <C>
           1999                                                                  $      616
           2000                                                                       4,155
           2001                                                                       7,700
           2002                                                                       7,746
           2003                                                                       4,295
           Later years                                                              108,021
                                                                                 ----------
                                                                                 $  132,533
</TABLE>

8.    Stockholder's Equity and Statutory Surplus

     The Insurance  Companies are required by the applicable  state's department
of insurance to maintain  minimum levels of statutory  capital and surplus.  The
reported statutory capital and surplus of each company at December 31, 1998 was:
<TABLE>

                                                                              Reported Statutory
Company                                                                          Capital and Surplus

<S>                                                                                 <C>
United Fidelity                                                                     $    96,949
Great Southern                                                                          140,777
College Life                                                                             41,462
National Farmers                                                                         48,477
Ohio State                                                                              121,044
Financial Assurance                                                                       5,375
</TABLE>

     Dividend  distributions  of the  Insurance  Companies  to their  respective
stockholder  exceeding the greater of statutory net gain from operations  during
the  preceding  year or 10% of capital and  surplus at the end of the  preceding
year are subject to the prior  approval of the  applicable  state  department of
insurance.  Dividends  from  the  Insurance  Companies  may be  paid  only  from
statutory  earned surplus as determined in accordance with accounting  practices
prescribed  or  permitted  by  the   applicable   state   insurance   regulatory
authorities.  In addition,  the National Association of Insurance  Commissioners
(NAIC)  and Texas  each  have  minimum  risk-based  capital  requirements  which
effectively  restrict the payment of dividends by the  Insurance  Companies.  At
December 31, 1998 the Insurance  Companies had statutory  capital and surplus in
excess  of the  levels  required  by  the  NAIC  and  Texas  risk-based  capital
guidelines.

     The  American  Institute  of  Certified  Public  Accountants  Statement  of
Position (SOP) 94-5  "Disclosure of Certain Matters in the Financial  Statements
of Insurance  Enterprises"  requires insurance enterprises to disclose permitted
statutory  accounting  practices  which  have a material  effect on capital  and
surplus or RBC. Permitted  practices encompass those practices not prescribed by
state  laws,   regulations  and   administrative   rules  or  by  existing  NAIC
authoritative  literature.  The Company does not have any  statutory  accounting
practices which are required to be disclosed under SOP 94-5.

     Accounting  practices used to prepare  statutory  financial  statements for
regulatory  filings of stock life  insurance  companies  differ  from GAAP.  The
following  tables  reconcile  capital  stock and  surplus  and net income of the
Insurance   Companies   determined  in  accordance  with  accounting   practices
prescribed or permitted by the state  insurance  departments  with  consolidated
stockholder's equity and net income of the Company on a GAAP basis.  Included in
the amounts stated in accordance with statutory  accounting practice are amounts
recorded in accordance with GAAP for non-insurance subsidiaries.







Stockholder's Equity
<TABLE>
                                                                                                December 31,
                                                                                         ---------------------------

                                                                                             1998          1997
                                                                                             ----          ----
<S>                                                                                     <C>           <C>
Capital stock and surplus, on basis of statutory accounting practices, as filed with
insurance regulatory authorities                                                         $   129,204   $   124,600
Cost of business acquired                                                                     76,776       129,831
Deferred policy acquisition costs                                                            131,574        87,840
Invested assets adjustments                                                                   65,175        67,630
Reserves for future policy benefits                                                           34,126        29,510
Asset valuation reserve and interest maintenance reserve                                      31,359        31,766
Surplus debentures                                                                          (123,343)     (137,130)
Reserve credits on financial reinsurance treaties                                            (22,788)      (30,735)
Deferred income taxes                                                                        (63,600)      (58,127)
Other                                                                                         (1,303)        1,677
                                                                                         -----------   -----------
Stockholder's equity, on basis of GAAP                                                   $   257,180   $   246,862
                                                                                         ===========   ===========
</TABLE>



Net Income
<TABLE>
                                                                                   Year Ended December 31,
                                                                           -----------------------------------------

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                       <C>           <C>           <C>
Net income, on basis of statutory accounting practices, as filed with
insurance regulatory authorities                                           $   (13,422)  $   163,927   $    47,124
Amortization of cost of business acquired                                      (61,844)      (29,584)      (22,698)
Net change in deferred policy acquisition costs                                 36,900        10,464        13,191
Change in realized gains (losses)                                               42,074         3,020           895
Adjustment of policy and claim liabilities                                        (569)       18,347         6,242
Adjustment of reserves and premiums on financial reinsurance                   (12,096)      (12,164)       (9,188)
Deferred income tax provision                                                   (2,634)       (1,909)       (5,576)
Interest expense on notes payable                                               (9,368)       (9,368)      (12,263)
Adjustment of fixed maturity securities amortization                             3,476         2,347         2,064
Effects of reinsurance transaction                                              30,205      (124,585)        6,048
Amortization of debt acquisition costs                                             (91)          (73)         (336)
Other                                                                           (3,839)        1,634         1,771
                                                                           -----------   -----------   -----------
Net income, on basis of GAAP                                               $     8,792   $    22,056   $    27,274
                                                                           ===========   ===========   ===========
</TABLE>

9.    Income Taxes

     Americo  Life,  Inc.  will file a  consolidated  federal  life and non-life
income tax return with FHC and FHC's eligible life and non-life subsidiaries for
1998.  As  Financial  Assurance  is  ineligible  to  join in the  filing  of the
consolidated  1998  return,  it  will  file  separately.  The  Company  and  its
subsidiaries  are charged or  credited an amount of federal  income tax equal to
the tax that would have been due for each entity on a separate  return  basis in
accordance  with a written tax  allocation  agreement.  Net operating  losses of
members in each consolidated return are utilized on a first-in, first-out basis.

The provision for U.S. federal income taxes for the years ended December 31,
is comprised of the following:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>           <C>
Current tax provision                                                      $      (522)  $     4,953   $     7,937
Deferred tax provision                                                           3,757         4,277         5,576
                                                                           -----------   -----------   -----------
   Provision for income taxes                                              $     3,235   $     9,230   $    13,513
                                                                           ===========   ===========   ===========
</TABLE>

     The  provision  for income  taxes  differed  from the  amounts  computed by
applying the applicable U.S.  statutory federal income tax rate of 35% to pretax
income from continuing operations as a result of the following differences:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>           <C>
Computed tax at statutory rate                                             $     4,209   $    10,950   $    14,275
Decrease in tax resulting from:
   Availability of dividends received deduction to offset taxable
temporary differences                                                             (785)       (1,376)         (503)
   Other                                                                          (189)         (344)         (259)
                                                                           -----------   -----------   -----------
     Provision for income taxes                                            $     3,235   $     9,230   $    13,513
                                                                           ===========   ===========   ===========
</TABLE>

     The Company's net deferred federal tax liabilities are comprised of the tax
cost or benefit associated with the following items based on the 35% tax rate in
effect:
<TABLE>

                                                                                             1998          1997
                                                                                             ----          ----
<S>                                                                                     <C>           <C>
Deferred tax liability:
    Cost of business acquired                                                            $    51,543   $    47,184
    Investments                                                                                5,499         7,910
    Deferred policy acquisition costs                                                         12,316        12,779
    Reinsurance                                                                                2,645         2,645
    Net unrealized investment gains                                                           32,777        30,156
    Other                                                                                        793           201
                                                                                         -----------   -----------
         Total deferred tax liability                                                        105,573       100,875
                                                                                         -----------   -----------
Deferred tax asset:
    Policy reserves                                                                           43,533        44,847
    Utilization of net operating losses                                                        1,422           455
                                                                                         -----------   -----------
Deferred income tax assets before valuation allowances                                        44,955        45,302
    Less: valuation allowance                                                                 (2,982)       (2,553)
                                                                                         -----------   -----------
         Total deferred tax asset                                                             41,973        42,749
                                                                                         -----------   -----------
Net deferred tax liability                                                               $    63,600   $    58,126
                                                                                         ===========   ===========
</TABLE>

     A valuation  allowance is provided at December 31, 1998 and 1997 related to
the tax benefit of loss carryovers and deductible differences because it is more
likely than not that such benefits will not be realized.

     Under the  provision  of the pre-1984  life  insurance  company  income tax
regulations, a portion of "gain from operations" of a life insurance company was
not subject to current  taxation but was  accumulated,  for tax  purposes,  in a
special tax memorandum account  designated as  "Policyholders'  Surplus Account"
(PSA).  Federal  income  taxes will become  payable on this  account at the then
current tax rate when and to the extent the account exceeds a specific  maximum,
or when and if  distributions  to  stockholders,  other than stock dividends and
other limited exceptions, are made in excess of the accumulated previously-taxed
income. At December 31, 1998, the Insurance  Companies had aggregate balances in
their PSA of approximately $11,549. Federal income tax of $4,043 would be due if
the entire  balance is  distributed  at the  current  income tax rate of 35%. No
provision has been recorded relating to any potential distributions from the PSA
subsequent to 1998.

     At December 31, 1998,  the Insurance  Companies  with balances in their PSA
had aggregate  balances in their  Shareholder  Surplus Accounts of approximately
$94,432 from which distributions could be made without incurring any federal tax
liability with respect to the PSA accounts.




<PAGE>



     Certain   subsidiaries   have  net  operating  loss   carryovers   totaling
approximately  $4,221  which  will  begin  to  expire  in  2009  if  unutilized.
Utilization of these loses is limited to income  generated on a separate  return
basis.

10.   Commitments and Contingencies

     The Company leases certain data processing equipment and office space, some
of which are from related parties,  under operating  leases.  Rental expense was
$3,678, $3,216 and $1,931 in 1998, 1997 and 1996, respectively,  and is included
in other operating  expenses.  Approximate  future minimum lease commitments for
leases  whose  terms  are  greater  than one year at  December  31,  1998 are as
follows: <TABLE>

                  <S>                          <C>
                   1999                         $    4,573
                   2000                              3,610
                   2001                              3,206
                   2002                              2,956
                   2003 and thereafter              14,751
                                                ----------
                                                $   29,096
</TABLE>

     Great  Southern  and the Company are  defendants  in four  purported  class
action lawsuits that were consolidated in May 1998 for multidistrict  litigation
pretrial  proceedings in the U.S.  District  Court for the Northern  District of
Texas (In re Great Southern Life Insurance  Company Sales Practice  Litigation).
These  lawsuits  allege  deceptive  sales  practices  in the  marketing of Great
Southern's whole life and universal life insurance policies and seek unspecified
compensatory,  punitive and/or treble damages. Additionally, on August 13, 1998,
a fifth purported  class action lawsuit also alleging  deceptive sales practices
was filed  against  Great  Southern in state court in Dallas,  Texas  (Ebling v.
Great Southern Life Insurance Co., 68th District Court,  Dallas County,  Texas).
Another previously  reported  purported class action making similar  allegations
(Marroquin v. Great  Southern Life  Insurance  Co.,  filed February 11, 1998, in
Cameron County District Court,  Texas) was settled on an individual basis for an
amount that was not material to the Company.

     Great  Southern  and the  Company,  together  with one of Great  Southern's
general  agents,  Great  American  Life  Underwriters   ("GALU"),   Entrepreneur
Corporation,  Mercantile Life Insurance Company,  American Planning  Corporation
and various  individuals,  including  certain officers of Great Southern and the
Company,  are named defendants in an action that was certified as a class action
on April 28, 1998  (Thibodeau et al. v. Great  American Life  Underwriters,  et.
al., District Court, Dallas County, Texas).  Plaintiffs, who were life insurance
agents for GALU, allege that they were defrauded by defendants into surrendering
renewal  commissions  in return for the promise of stock  ownership in a company
(Entrepreneur  Corporation)  to be made  public  at some  point  in the  future.
Plaintiffs claim actual and exemplary damages in an unspecified amount.
Defendants have appealed the ruling certifying a class.

     On October 20, 1998, a purported  class  action  lawsuit was filed  against
Great Southern, Credit Card Services, Inc., First Madison Bank and certain other
defendants  (McCulley v. Great  Southern Life Insurance  Company,  et. al., U.S.
District  Court  for  the  Northern   District  of  Texas),   alleging   various
misrepresentations  in connection  with the marketing of credit cards secured by
universal  life  insurance  policies  issued by Great  Southern.  The suit seeks
actual, exemplary and treble damages in an unspecified amount.

     The  Company  is also  named as  defendant  in a number  of other  lawsuits
arising  from the normal  course of  business, however, management does not
expect that these will result in a material loss to the Company.


<PAGE>



11.   Employee Benefit Plans

     Great Southern is a sponsor of several contributory  postretirement benefit
plans  which  provide  life  and  medical  insurance  to  participating  retired
employees  and agents.  Pursuant to the  purchase  agreement,  Great  Southern's
former parent assumed  responsibility for employees and agents who retired on or
after  August 1, 1984.  Future costs of benefits  for  employees  and agents who
retired  prior to August 1,  1984,  are the  responsibility  of the  Company.  A
liability  for these  postretirement  benefits  of $2,680 is  included  in other
liabilities at both December 31, 1998 and 1997.

12.   Segment Information

     The Company has determined that its reportable  segments are those that are
based on the Company's method of internal  reporting,  which  disaggregates  its
business by product type. The Company's  reportable segments are: life insurance
operations,  asset  accumulation  products  operations  and  non-life  insurance
operations.  The life insurance segment includes traditional term and whole life
insurance as well as  universal-life  insurance  products.  The segment consists
primarily  of  insurance  business  acquired by the  Company.  The  accumulation
products   segment   includes   annuity  products  sold  through  the  Company's
Austin-based  operations.  The non-life insurance segment includes the Company's
50% investment in Argus and its investments in limited partnerships, with assets
consisting  primarily of  investment  real  estate.  The  Company's  business is
conducted primarily in the United States.

     The  financial  results of the  Company's  segments are presented on a GAAP
basis.  Net investment  income and operating  expenses are allocated to its life
insurance and  accumulation  products  segments based on the Company's  internal
projections. The Company evaluates the performance of its segments and allocates
resources  to them  based on income  before  provision  for  income  taxes.  All
intersegment revenues have been eliminated.

     The table below presents information about the reported revenues and income
before provision for income taxes.  Asset  information by reportable  segment is
not reported, since the Company does not produce such information internally.


<PAGE>
<TABLE>



                                                Accumulation        Non-Life
                              Life Insurance      Products         Insurance        Reconciling      Consolidated
                                Operations       Operations        Operations          Items            Totals

<S>                          <C>               <C>              <C>               <C>               <C>
Revenues
     1998                     $     417,586     $      24,112    $       8,053     $      15,812     $     465,563
     1997                           414,673             7,742           11,642             4,220           438,277
     1996                           347,313             6,821            1,054            16,411           371,599

Amortization expense
     1998                            73,874            (1,582)              --            14,897            87,189
     1997                            40,238             2,292               --             1,164            43,694
     1996                            28,977                73               --               664            29,714

Income (loss) before
  provision for income
  taxes
     1998                            54,421             6,237            6,837           (55,468)           12,027
     1997                            53,716            (3,025)          10,694           (30,099)           31,286
     1996                            45,175            (1,129)           1,054            (4,313)           40,787
</TABLE>

     Significant   reconciling  items  to  amounts  reported  in  the  Company's
consolidated  financial statements include net investment and operating expenses
not allocated to segments,  net realized investment gains (losses) not allocated
to segments,  interest expense and certain  non-recurring  transactions  such as
gains from the sale of subsidiaries.

13.   Related Parties

     The Company and FHC are involved in advisory and data  processing  services
agreements.  Under the  advisory  agreement,  FHC  supervises  and  directs  the
composition of the investment  portfolios of the Company and its subsidiaries in
accordance with their  respective  objectives and policies.  For these services,
FHC is compensated based on the aggregate statutory book value of the investable
assets of the Insurance  Companies.  Under the data  processing  agreement,  FHC
provides  the Company and its  subsidiaries  with  record-keeping  services  for
certain life insurance and annuity products. For its services, FHC is paid a fee
per policy  serviced.  The Company and its  subsidiaries  are also involved in a
cost-sharing  agreement with FHC respecting air transportation  expenses arising
from the use of an airplane owned by FHC.

     United  Fidelity  leases office space from a partnership in which a related
party has a 50% interest. The Company leases to FHC a building which is occupied
by FHC. In addition, the Company utilizes a laboratory for underwriting purposes
which is partially-owned by several stockholders of FHC.

     Amounts  due from (to)  affiliates  at December  31, 1998 and 1997  include
$3,707 and $(2,036) due from (to) FHC arising from intercompany tax allocation.

     The following table summarizes the related party transactions for the three
years ended December 31:
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>           <C>
Data processing agreement between the Company and FHC                      $  14,536     $  11,802     $   9,778
Advisory agreement between the Company and FHC                                 8,066         7,180         6,143
Air transportation cost sharing agreement                                        321           667           765
Rental expense                                                                 1,051           906           913
Laboratory services                                                              343           312           178
</TABLE>



<PAGE>



                                       S-8

                       AMERICO LIFE, INC. AND SUBSIDIARIES

                     INDEX TO FINANCIAL STATEMENT SCHEDULES


<TABLE>

                                                                                                             Page
<S>                                                                                                          <C>
Report of Independent Accountants on Financial Statement Schedules                                            S-2
Schedule II       Condensed Financial Information of Registrant                                               S-3
Schedule IV       Reinsurance                                                                                 S-7
Schedule V        Valuation and Qualifying Accounts                                                           S-8
</TABLE>


         All other financial  statement schedules for which provision is made in
the applicable  accounting  regulation of the Securities and Exchange Commission
are not  required  under  the  related  instructions  or are  inapplicable,  and
therefore have been omitted.




<PAGE>



                      Report of Independent Accountants on
                          Financial Statement Schedules

To the Board of Directors and
Stockholder of Americo Life, Inc.


     Our audits of the  consolidated  financial  statements  referred  to in our
report  dated  March  29,  1999,  appearing  on page F-2 of this  Form 10-K also
included an audit of the Financial  Statement  Schedules listed in Item 14(a) of
this Form 10-K. In our opinion,  these  Financial  Statement  Schedules  present
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.




PRICEWATERHOUSECOOPERS LLP
Kansas City, Missouri
March 29, 1999


<PAGE>


                               Schedule II
                       Americo Life, Inc. and Subsidiaries

                  Condensed Financial Information of Registrant
                                  Balance Sheet
                             (Dollars in thousands)
                           December 31, 1998 and 1997

<TABLE>

                                                                                             1998          1997
                                                                                             ----          ----
                                        Assets
<S>                                                                                     <C>           <C>
Equity securities, at market (cost: $11,566 and $6,855)                                  $    24,763   $    12,368
Investment in subsidiaries                                                                   229,596       227,784
Cash and cash equivalents                                                                      8,432            96
Surplus debentures receivable                                                                123,498       137,305
Amounts due from affiliates                                                                    1,651            --
Property and equipment, net                                                                    1,764         2,127
Federal income taxes receivable                                                                1,597            --
Other assets                                                                                  10,686        10,506
                                                                                         -----------   -----------
   Total assets                                                                          $   401,987   $   390,186
                                                                                         ===========   ===========

                         Liabilities and Stockholder's Equity
Notes payable                                                                             $  132,029   $   132,312
Accrued interest payable                                                                         881           908
Amounts due to affiliates                                                                         --           332
Deferred income taxes                                                                          8,113         5,288
Other liabilities                                                                              3,784         4,484
                                                                                         -----------   -----------
   Total liabilities                                                                         144,807       143,324
                                                                                         -----------   -----------

Stockholder's equity:
Common stock ($1 par value, 30,000 shares authorized, 10,000 issued and
outstanding)                                                                                      10            10
Additional paid-in capital                                                                     3,745         3,745
Accumulated other comprehensive income                                                        60,499        56,973
Retained earnings                                                                            192,926       186,134
                                                                                         -----------   -----------
   Total stockholder's equity                                                                257,180       246,862
                                                                                         -----------   -----------
   Total liabilities and stockholder's equity                                                401,987   $   390,186
                                                                                         ===========   ===========
</TABLE>

                 See notes to condensed financial information


                                 Schedule II
                       Americo Life, Inc. and Subsidiaries

                  Condensed Financial Information of Registrant
                               Statement of Income
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----
<S>                                                                        <C>          <C>           <C>
Income
   Management and data processing fees from subsidiaries                    $   16,570   $    13,602   $    12,055
   Interest income on surplus debentures receivable                             12,237        12,757        12,842
   Net investment income                                                           686           428           415
   Net realized investment gains (losses)                                         (264)         (430)          107
   Other income                                                                  2,149         4,936         6,673
                                                                           -----------   -----------   -----------
     Total income                                                               31,378        31,293        32,092
                                                                           -----------   -----------   -----------

Expenses
   Management and advisory fees to parent                                       22,602        18,982        15,921
   Interest expense                                                             12,057        12,089        12,263
   Other operating expenses                                                      1,761         2,092         2,958
   Amortization expense                                                            850           941           664
                                                                           -----------   -----------   -----------
     Total expenses                                                             37,270        34,104        31,806
                                                                           -----------   -----------   -----------
     Income (loss) before provision for (benefit from) income taxes and
 equity in income of subsidiaries                                               (5,892)       (2,811)          286
Provision for (benefit from) income taxes                                       (1,461)          614         1,418
                                                                           -----------   -----------   -----------
     Loss before equity in income of subsidiaries                               (4,431)       (3,425)       (1,132)
Equity in income of subsidiaries                                                13,223        25,481        28,406
                                                                           -----------   -----------   -----------
     Net income                                                            $     8,792   $    22,056   $    27,274
                                                                           ===========   ===========   ===========
</TABLE>

                 See notes to condensed financial information


<PAGE>


                              Schedule II
                       Americo Life, Inc. and Subsidiaries

                  Condensed Financial Information of Registrant
                             Statement of Cash Flows
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                               1998          1997          1996
                                                                               ----          ----          ----

<S>                                                                        <C>          <C>           <C>
Cash flows from operating activities
  Net income                                                                $   8,792    $   22,056    $   27,274
  Adjustments to reconcile net income to net cash provided (used) by
operating activities:
    Undistributed equity in earnings of subsidiaries                          (13,223)      (25,481)      (28,406)
    Dividends received from subsidiaries                                        9,943            --         8,000
    Depreciation and amortization                                               1,575         1,572           943
    (Increase) decrease in other assets, net of amortization expense             (215)          328          (545)
    Decrease in other liabilities                                              (2,033)          (96)       (1,220)
    Provision for current income taxes                                         (1,597)           --            --
    Provision for deferred income taxes                                           136         1,564           408
    Increase (decrease) in amounts due to/from affiliates                      (1,983)       (1,183)        4,541
    Other changes                                                                 537           613          (535)
                                                                           ----------    ----------    ----------
    Total adjustments                                                          (6,860)      (22,683)      (16,814)
                                                                           ----------    ----------    ----------
    Net cash provided (used) by operating activities                            1,932          (627)       10,460
                                                                           ----------    ----------    ----------

Cash flows from investing activities
  Amounts collected on surplus debentures receivable                           13,828           524           750
  Capital contribution to subsidiary acquired                                      --            --          (261)
  Payment for equity subsidiary acquired                                           --            --        (4,550)
  Purchases of equity securities                                              (10,218)       (5,393)         (663)
  Proceeds from sales of equity securities                                      5,733         3,507         3,368
  Mortgage loans originated                                                        --            --           (71)
  Purchases of property and equipment, net                                       (362)         (633)       (1,814)
                                                                           ----------    ----------    ----------
    Net cash provided (used) by investing activities                            8,981        (1,995)       (3,241)
                                                                           ----------    ----------    ----------

Cash flows from financing activities
  Repayments of notes payable                                                    (577)         (541)         (506)
  Dividends paid                                                               (2,000)       (2,000)       (2,000)
                                                                           ----------    ----------    ----------
  Net cash used by financing activities                                        (2,577)       (2,541)       (2,506)
                                                                           ----------    ----------    ----------

Net increase (decrease) in cash and cash equivalents                            8,336        (5,163)        4,713
Cash and cash equivalents at beginning of year                                     96         5,259           546
                                                                           ----------    ----------    ----------
Cash and cash equivalents at end of year                                    $   8,432    $       96    $    5,259
                                                                           ==========    ==========    ==========

Supplemental disclosure of cash flow information
  Cash paid during year for interest                                       $   12,057    $   12,095    $   12,280

</TABLE>


                  See notes to condensed financial information


                                  Schedule II
                       Americo Life, Inc. and Subsidiaries

                  Condensed Financial Information of Registrant
                    Notes to Condensed Financial Information
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996

     In 1998, the Company received cash dividends totaling $9,500 from Argus and
a cash dividend totaling $443 from Hereford LLP. In 1996, the Company received a
dividend  totaling $15,673  representing a 50% interest in Argus.  Subsequently,
the  Company  received a dividend  from Argus  consisting  of $8,000  cash and a
$1,500 note receivable from a related party.

     The  accompanying   condensed  financial  information  should  be  read  in
conjunction  with the  Consolidated  Financial  Statements and the  accompanying
notes thereto in this Form 10-K.



<PAGE>

                                   Schedule IV
                       Americo Life, Inc. and Subsidiaries

                                   Reinsurance
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                                                      Percentage
                                                                      Assumed                         of Amount
         Year Ended                 Gross        Ceded to Other      From Other           Net          Assumed
        December 31,                Amount          Companies        Companies          Amount         to Net

<S>                           <C>               <C>              <C>               <C>                    <C>

1998
Insurance in force             $   45,695,670    $   12,612,790   $    1,179,946    $   34,262,826         3.4%
                               ==============    ==============   ==============    ==============         ====

Premiums                       $      252,133    $       50,283   $       16,732    $      218,582         7.6%
                               ==============    ==============   ==============    ==============         ====

1997
Insurance in force             $   44,310,608    $   13,844,254   $    5,283,041    $   35,749,395        14.7%
                               ==============    ==============   ==============    ==============        =====

Premiums                       $      244,647    $       48,279   $        7,361    $      203,729         3.6%
                               ==============    ==============   ==============    ==============         ====

1996
Insurance in force             $   23,125,887    $    5,189,238   $    4,804,462    $   22,741,111        21.1%
                               ==============    ==============   ==============    ==============        =====

Premiums                       $      174,910    $       35,050   $       25,742    $      165,602        15.5%
                               ==============    ==============   ==============    ==============        =====
</TABLE>



<PAGE>


                            Schedule V

                       Americo Life, Inc. and Subsidiaries

                        Valuation and Qualifying Accounts
                             (Dollars in thousands)
              For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>

                                                                     Additions
                                                             ---------------------------
                                                Balance at    Charged to    Charged to                  Balance at
         Year Ended                             Beginning      Cost and       Other                       End of
         December 31,                           of Period      Expenses     Accounts      Deductions      Period
                                                                               (1)
<S>                                          <C>            <C>           <C>           <C>           <C>

1998
Reserve for impairment of mortgage loans
on real estate                                 $       300   $        --   $        --   $        --   $       300
Write-down for impairment of real estate               107            --            --            --           107
Allowance for receivables from agents                3,468           112            --            --         3,580
                                               -----------   -----------   -----------   -----------   -----------
   Total                                        $    3,875    $      112   $        --   $        --   $     3,987
                                               ===========   ===========   ===========   ===========   ===========

1997
Reserve for impairment of mortgage loans
on real estate                                 $       300   $        --   $        --   $        --   $       300
Write-down for impairment of real estate               107            --            --            --           107
Allowance for receivables from agents                2,123         1,345            --            --         3,468
                                               -----------   -----------   -----------   -----------   -----------
   Total                                       $     2,530   $     1,345   $        --   $        --   $     3,875
                                               ===========   ===========   ===========   ===========   ===========

1996
Reserve for impairment of mortgage loans
on real estate                                 $       300   $        --   $        --   $        --   $       300
Write-down for impairment of real estate               120            --            --            13           107
Allowance for receivables from agents                2,450           250            --           577         2,123
                                               -----------   -----------   -----------   -----------   -----------
   Total                                       $     2,870   $       250   $        --   $       590   $     2,530
                                               ===========   ===========   ===========   ===========   ===========
</TABLE>

(1) Amounts transferred from other allowance accounts.