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                              AUTOMATIC COINSURANCE
                              REINSURANCE AGREEMENT


                    INVESTORS GUARANTY LIFE INSURANCE COMPANY
               A California corporation with executive offices in
                                 Columbus, Ohio



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                   AUTOMATIC COINSURANCE REINSURANCE AGREEMENT

                                    Schedule

1.  Reinsured:           Investors Guaranty Life Insurance Company

2.  Address:             A California corporation with executive offices in
                         Columbus, Ohio

3.  Effective date:      The date the stock of the Reinsured is purchased by the
                         Retrocessionaire.

4.  Policies:

            (a)  All individual insurance policies written by the Reinsured.

            (b)  All group insurance policies written by the Reinsured.

            (c)  All annuity plans (whether group or individual) written by the
                 Reinsured.

            (d)  All riders issued with or added later to the above described
                 contracts.

5.  Reinsurance:       100%

6.  Initial consideration (all values as of effective date of this agreement)
    computed as follows:

            (a)  The Reinsured's policy reserves from Annual Statement Exhibits
                 8, 9, and 10; plus

            (b)  the claim liabilities pertaining to the policies; plus

            (c)  the advance premiums applicable to the policies; minus

            (d)  the net due and deferred premiums applicable to the policies;
                 plus

            (e)  the miscellaneous reserves and liabilities applicable to the
                 policies; and less

           (f)   the policy loans; and less


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          (g)    the miscellaneous assets applicable to the policies.

7.  Ceding commission: $133,000,000, minus the ceding commission pertaining
    to the Ohio State Treaty.

8.  Expense commission: The amount indicated by Exhibit A, attached to and
    made a part of this agreement.

The agreement of which this  Schedule is a part is hereby  executed in duplicate
by the parties hereto.

INVESTORS GUARANTY LIFE                         EMPLOYERS REASSURANCE
INSURANCE COMPANY                                   CORPORATION

By:                                     By: /s/ James D. Maughn
   --------------------------------        ------------------------------------

Title:                                  Title: /s/ Ex. Vice Pres. and Actuary
      -----------------------------           ---------------------------------

Date:                                   Date: /s/ January 21, 1997
     ------------------------------          ----------------------------------

By:                                     By: /s/ Robert D. Parmley
   --------------------------------        ------------------------------------

Title:                                  Title: /s/ Ass't Gen Counsel
      -----------------------------           ---------------------------------

Date:                                   Date: /s/ January 21, 1997
     ------------------------------          ----------------------------------



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                   AUTOMATIC COINSURANCE REINSURANCE AGREEMENT

                        Employers Reassurance Corporation
                                       of
                              Overland Park, Kansas
                      (hereinafter called the Corporation)

agrees  with  the  Reinsured  named  in the  Schedule  made a  part  hereof,  in
consideration of the mutual covenants hereinafter contained, as follows:


                                 ARTICLE  I

APPLICATION OF AGREEMENT.  This  agreement  applies to loss which is retained by
the Reinsured  pertaining to the insurance policies and riders described in Item
4 of the Schedule becoming  effective before, on and after the effective date of
this agreement  (hereinafter called policies or policy) and which is paid by the
Reinsured on or after the effective date of this agreement.


                                 ARTICLE  II

ENTIRE  AGREEMENT.  This agreement shall constitute the entire agreement between
the parties with respect to the business being reinsured hereunder. There are no
other  understandings  between  the  parties  other  than as  expressed  in this
agreement.  Any change or  modification to this agreement shall be null and void
unless made by amendment to this agreement and signed by both parties.


                                ARTICLE  III

REINSURANCE.  The Corporation will indemnify the Reinsured against the
percentage specified in Schedule Item 5 of loss to which this agreement applies.


                                 ARTICLE  IV

RECAPTURE.  The Reinsured does not have any rights to recapture the policies.


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                                 ARTICLE  V

PRODUCER COMMISSION.  The Corporation is obligated to the Reinsured for the
commissions paid by the Reinsured to its producers of the policies.


                                 ARTICLE  VI

DEFINITIONS.  The word  "policies"  means the insurance  forms  described in the
Schedule and includes  conditional  receipts pertaining thereto and conversions,
reinstatements and exchanges thereof.

The word  "loss"  shall  mean  only such  amounts  as are  actually  paid by the
Reinsured for benefits afforded under the policies,  in settlement of claims for
benefits under the policies,  or in satisfaction of judgments for benefits under
the policies;  provided  that, in the event of the  insolvency of the Reinsured,
"loss" shall mean the amount of policy benefits which the Reinsured has incurred
or is  liable  for,  and  payment  by  the  Corporation  shall  be  made  to the
liquidator, receiver or other statutory successor of the Reinsured in accordance
with the provisions of the Insolvency Clause attached to and made a part of this
agreement.  The word "loss" shall  include life  insurance  proceeds  payable by
reason of death  which  remain  unpaid  because of the nature of the  settlement
option  selected.  The word "loss"  includes  cash values paid by the  Reinsured
because of policy surrenders. The word "loss" shall not include:

 (1)  claim expenses;

 (2)  salaries paid to employees of the Reinsured;

 (3)  any amount paid by the Reinsured for punitive,  exemplary or  compensatory
      damages arising out of the conduct of the Reinsured in the  investigation,
      trial or  settlement of any claim or failure to pay or delay in payment of
      any benefits under any policy;  provided that, this subparagraph (3) shall
      not apply if the  Corporation  has, in advance of any such  conduct by the
      Reinsured,  counseled with the Reinsured and concurred in the  Reinsured's
      course of conduct;

 (4)  any statutory penalty imposed upon the Reinsured on account of any unfair
      trade practice or any unfair claim practice;

 (5)  amounts collected under other reinsurance.




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The term "claim  expenses"  shall mean statutory  interest  payable on insurance
proceeds,  court costs,  interest upon judgments,  and allocated  investigation,
adjustment and legal expenses,  but the term "claim  expenses" shall not include
salaries paid to employees of the Reinsured.

Claims shall be deemed to be "incurred" on the date when:

   (a)   the death occurs as respects life coverage;

   (b)   the disability commences, as respects waiver of premium coverage;

   (c)   the accident takes place, as respects accidental death coverage.

The word  "exchange"  means that an insurance  contract  reinsured  hereunder is
traded for another plan of equal or smaller face amount, without requirement for
full evidence of insurability.

The term "other reinsurance" means those contracts entered into by the Reinsured
with  insurance  or  reinsurance  companies  other  than the  Corporation  which
reinsure the policies.

"Miscellaneous reserves and liabilities" means the sum of the following:

    (a)  due or accrued agent commissions;

    (b)  premiums due or accrued on other reinsurance;

    (d)  premium suspense.

"Miscellaneous assets" means the amounts recoverable under other reinsurance.

The term  "Ohio  State  Treaty"  means  the  Automatic  Coinsurance  Reinsurance
Agreement,  which has the same  effective  date as this  agreement,  between the
Corporation and The Ohio State Life Insurance Company.

The term "Escrow  Account" means the funds  pertaining to this agreement and the
Ohio State  Treaty  received  and held by COMMERCE  BANK,  N.A. of Kansas  City,
Missouri   ("Commerce   Bank")   pursuant   to  its   Escrow   Agreement   (Ohio
State/Investors    Guaranty    Business)   with   the    Corporation   and   the
Retrocessionaire).

The word  "Retrocessionaire"  means Great Southern Life Insurance Company, which
is the Corporation's reinsurer for the policies.




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                                ARTICLE  VII

INITIAL  CONSIDERATION.  On the effective date of this agreement,  the Reinsured
shall deposit to Commerce Bank assets equal to the  Reinsured's  estimate of the
initial  consideration  indicated  in Item 6 of the  Schedule,  minus the ceding
commission indicated in Item 7 of the Schedule.  Thirty days after the effective
date of this agreement, the Reinsured shall pay to the Corporation the amount by
which  the  estimate  is  less  than  actual,  with  interest  thereon,  or  the
Corporation  shall pay to the Reinsured the amount by which the estimate is more
than actual, with interest thereon.


                                ARTICLE  VIII

REINSURANCE  PREMIUM.  The Reinsured  shall pay to the Corporation a reinsurance
premium equal to the insurance  premium  collected by the Reinsured on and after
the effective  date of this  agreement  pertaining  to the  policies,  minus the
reinsurance  premium paid to other  carriers,  and minus the expense  commission
indicated in Item 8 of the Schedule.


                                 ARTICLE  IX

POLICY LOANS. The Corporation shall be obligated to the Reinsured for the policy
loan increases,  minus the amount of uncapitalized policy loan interest (the net
result  of which is  hereinafter  referred  to as  policy  loan  increase).  The
Reinsured  shall be obligated to the  Corporation for the policy loan decreases,
plus the amount of  uncapitalized  policy loan interest (the net result of which
is hereinafter referred to as policy loan decrease).


                                 ARTICLE  X

INVESTMENTS.  The Escrow Account assets shall be invested in accordance with the
investment  guidelines  contained  in Exhibit B,  attached to and made a part of
this agreement.


                                 ARTICLE  XI

INTEREST.  Interest  rates  credited by the  Reinsured on the policies  shall be
determined in accordance with the procedures contained in Exhibit C, attached to
and made a part of this agreement.



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                                ARTICLE  XII

REPORTING,  ACCOUNTING  AND  SETTLEMENTS.  Within 25 days  after the end of each
calendar  quarter,  the  Reinsured  or its  administrator  shall  furnish to the
Corporation a report (in a form  satisfactory  to the  Corporation)  showing the
following information:

      (a)   Amounts owed Corporation:

            (1)  Reinsurance premium applicable to insurance premium collected
                 during quarter;

            (2)  Policy loan decrease during quarter;

            (3)  Increase during quarter in miscellaneous reserves and
                 liabilities;

            (4)  Decrease during quarter in miscellaneous assets;

     (b)    Amounts owed Reinsured:

            (1)  loss paid under the policies during the quarter;

            (2)  expense commission;

            (3)  policy loan increase during quarter;

            (4)  producer commission for the quarter;

            (5)  Decrease during quarter in miscellaneous reserves and
                 liabilities;

            (6)  Increase during quarter in miscellaneous assets;

     (c)    Balance due Corporation or Reinsured.

Any balance due the Corporation  shall be deposited to the Escrow Account within
30 days after the end of the  calendar  quarter  involved.  Any  balance due the
Reinsured  shall be paid by the  Corporation  to an  account  designated  by the
Reinsured within 30 days after the end of the calendar quarter involved.

The  Reinsured  and the  Corporation  each agree to pay interest to the other on
amounts  not  paid  within  the  time  periods  required  within  this  article,
calculated using the one month LIBOR rate.

The  Reinsured's  report for the third  calendar  quarter of each  calendar year
shall include:

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            (1)   a summary listing showing all policies in force;

            (2)   the detailed information required with respect to the policies
by the Exhibit of Life Insurance in the Corporation's Annual Statement;

            (3)   the aggregate reserve information required with respect to the
policies  by the  Corporation's  actuarial  opinion and by the other exhibits
of the Corporation's Annual Statement.


                                ARTICLE  XIII

CLAIMS.  The Reinsured  agrees that it will cause to be  investigated  and paid,
settled or defended all claims  arising under the  policies.  Except as respects
damages to which this agreement may apply by virtue of  subparagraph  (3) of the
definition  of  loss,   the  claim   decisions  of  the  Reinsured  (or  of  its
administrator) shall be binding upon the Corporation.

The Corporation shall have the right, at its own expense, to participate jointly
with the Reinsured (or its  administrator)in  the  investigation,  adjustment or
defense of any claim.

The  Corporation  has no  obligation  to indemnify  the  Reinsured for any claim
expenses paid by the Reinsured with respect to the policies.


                                ARTICLE  XIV

ADMINISTRATION OF INSURANCE.  The Corporation shall have no authority or
responsibility to administer the insurance provided by the policies.


                                 ARTICLE  XV

INSPECTION OF RECORDS.  The Corporation may inspect the records of the Reinsured
pertaining to the policies at any time during the normal business hours of the
Reinsured.

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                                ARTICLE  XVI

OFFSET.  The Reinsured or the Corporation may offset any balance due from one
party to the other under this agreement.


                                ARTICLE  XVII

INSOLVENCY CLAUSE.  The attached Insolvency Clause is hereby made a part of this
agreement.


                               ARTICLE  XVIII

ASSIGNMENTS AND CHANGES OF INTEREST.  No assignment or change of the Reinsured's
interest  hereunder,  whether  voluntary or involuntary and whether by merger or
reinsurance of its entire business with another  company or otherwise,  shall be
binding upon the Corporation, provided that, this article does not apply to:

         (a)   The  Corporation's  assignment of its interests and  liabilities
as the reinsurer to the  Retrocessionaire,  but only with respect to those
policies on which the Retrocessionaire is not named as the direct insurer;

         (b)   The  Reinsured's  assignment of its rights and duties as the
ceding company to the  Retrocessionaire,  but only with  respect to those
policies  on which the Retrocessionaire is named as the direct insurer.


                                ARTICLE  XIX

ENFORCEABILITY.  This agreement has been duly executed by each of the parties
hereto and constitutes a binding and enforceable agreement of each such party.


                                 ARTICLE  XX

TERMINATION.  This  agreement  shall remain in force until  terminated by mutual
consent  or by either  party  giving  to the  other  party not less than 90 days
advance notice,  by registered  mail or express  delivery  service,  stating the
termination date.

This agreement  does not apply with respect to policies  issued by the Reinsured
to become effective on or after the termination date of this agreement.


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The reinsurance  afforded by this agreement  applicable to each policy issued by
the Reinsured to become  effective prior to or during the term of this agreement
shall continue to apply thereto until the policy naturally expires.

IN WITNESS  WHEREOF,  the  parties  hereto have  signed  this  agreement  on the
Schedule Page.


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                                INSOLVENCY CLAUSE

         The portion of any risk or obligation  assumed by the  reinsurer,  when
such portion is ascertained, shall be payable on demand of the ceding insurer at
the same time an the ceding  insurer shall pay its not retained  portion of such
risk or obligation,  with reasonable  provision for verification before payment,
and the  reinsurance  shall be  payable  by the  reinsurer,  on the basis of the
liability  of the ceding  insurer  under the  contract  or  contracts  reinsured
without diminution because of the insolvency of the ceding insurer. In the event
of insolvency  and the  appointment  of a  conservator,  liquidator or statutory
successor  of the  ceding  company,  such  portion  shall  be  payable  to  such
conservator,  liquidator or statutory  successor  immediately upon demand,  with
reasonable  provision for  verification,  on the basis of claims allowed against
the  insolvent  company  by  any  court  of  competent  jurisdiction  or by  any
conservator,  liquidator, or statutory successor of the company having authority
to allow such claims,  without  diminution because of such insolvency or because
such conservator,  liquidator or statutory  successor has failed to pay all or a
portion of any  claims.  Payments by the  reinsurer  as above set forth shall be
made  directly  to the  ceding  insurer  or to its  conservator,  liquidator  or
statutory  successor,  except where the  contract of  insurance  or  reinsurance
specifically  provides  another  payee of such  reinsurance  in the event of the
insolvency of the coding insurer.

         The conservator,  liquidator or statutory successor of a ceding insurer
shall give written  notice of the pendency of a claim against the ceding insurer
indicating  the policy or bond  reinsured,  within a reasonable  time after such
claim is filed and the  reinsurer  may  interpose,  at its own  expense,  in the
proceeding where such claim is to be adjudicated,  any defense or defenses which
it may deem  available to the coding company or its  conservator,  liquidator or
statutory successor. The expense thus incurred by the reinsurer shall be payable
subject to court  approval out of the estate of the insolvent  ceding insurer as
part  of  the  expense  of  conservation  or  liquidation  to  the  extent  of a
proportionate  share of the  benefit  which may accrue to the ceding  insurer in
conservation or liquidation, solely as a result of the defense undertaken by the
reinsurer.

         The original insured or policyholder  shall not have any rights against
the  reinsurer  which  are  not  specifically  set  forth  in  the  contract  of
reinsurance,  or in a specific  agreement between the reinsurer and the original
insured or policyholder.

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                                    EXHIBIT A
                               Expense Commission


INVESTORS GUARANTY LIFE

Expense Commission:

                                                               Percent of
                                Per Policy                      Premium

Deferred Annuities          $8.75 per quarter                     --
Life Insurance              $8.75 per quarter                    2.5%
Deposit Funds               --                                    --




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                                                                       EXHIBIT B

INVESTMENT OBJECTIVES

The primary objectives are:

1)       Preservation of principal (capital).

2)       Maximize the potential value of the portfolio with a focus on
         maintaining and increasing future investment income streams.

INVESTMENT CONSTRAINTS

1)       Conservative and stable investment philosophy with primary emphasis on
         balancing credit and interest rate risk.

2)       Focus an well-structured  securities  (non-callable  corporates,  CMO's
         with stable average lives, current or discount coupon pass-throughs) to
         reduce  reinvestment risk and improve price performance.  Investment in
         high risk or volatile derivative securities (e.g. inverse floaters) are
         not considered part of the overall investment strategy.

3)       Investments  are made with the  intent of being  held  long  term.  The
         portfolio   will  not  be   actively/aggressively   managed   based  on
         anticipated  interest rate and/or spread changes.  Any restructuring of
         the  portfolio  will be  performed  in  conjunction  with  the  overall
         asset/liability management process.

4)       The portfolio  will be structured  with the goal of matching the assets
         with the expected  liability  cash flows.  The  structure of the assets
         will be  regularly  monitored  considering  interest  rate and expected
         prepayment rate changes. Asset/liability studies are completed at least
         annually, or more frequently if warranted. The results of these studies
         play  an  integral  role  in  the  durational   aspects  of  securities
         purchased.

5)       Maintain a high quality/liquid investment portfolio to satisfy both
         existing and prospective cash flow needs.


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INVESTMENT GUIDELINES AND LIMITATIONS

The  following  guidelines  will be  utilized in  developing  and  managing  the
portfolio:

1)       Maturity Structure:


The targeted average life for the        The maturity distribution of the
portfolio is a range of 6-13 years.      portfolio will be a function of
                                         expected liability cash flows, and
                                         the term structure of interest
                                         rates.

2)       Sector Allocation:                                        Target
                                            Expected             Percentage
         Sector                               Range              Allocation

         U.S. Governments                      0-25%                  - %
         Corporate Bonds                      45-85                  55
         Asset-Backed Securities (ABS):        5-20                  20
         Mortgage-Backed Securities (MBS):    15-45                  25
                                                                     --
         Total MBS                                                  100%
                                                                     ===

3)       Ratings Guidelines:

         a)       Corporate Bonds:
                                                                 Expected
                                  Expected                      Percentage
            Rating Category        Range                      of Corporates

             AAA & AA                5-15%                          10%
             A                      40-75                           65
             BBB                    15-25                           25
                                                                    --
                                                                   100 %

For any  corporate  bonds rated both  Baa-3/BBB by Moody's and Standard & Poor's
respectively, Employer's Re will be notified prior to their purchase. Subsequent
to the transaction, written approval will be obtained from Employer's Re for all
Baa-3/BBB- bonds acquired.


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     b)       Mortgage-Backed Securities:

              MBS holdings will generally involve government agency,  government
              sponsored  agency (FNMA and FHLMC),  or AAA rated  collateral.  No
              more than 20% of the total  portfolio will be backed by non-agency
              collateral.

     c)       Below Investment Grade Securities (BIG):

              BIG  bonds  are  not  considered  part of the  overall  investment
              strategy.  However,  any bond  purchased  as an  investment  grade
              security which is subsequently  downgraded to a BIG rating will be
              reevaluated  at that time.  If the risk of  default is  considered
              low,  the bond may be  retained.  Any BIG bonds  retained  will be
              regularly monitored and reevaluated. The total amount of BIG bonds
              to be retained cannot exceed 5% of total investments.

     d)       Asset-Backed Securities:

              ABS investments  should generally be rated AA or AAA by one of the
              major  rating  agencies.  No more than 20% of ABS  holdings can be
              rated below AA.

                                        Expected               Target
                                          Range              Allocation

             AAA                        80-100%                  100%
             AA                          0-20                     __

4)       Holding limitations:

         a)   Industry Concentration:

              Corporate bond holdings are limited to no more than 20% in any one
              industry.


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         b)   Company Concentration:

              The  maximum   amount  to  be  invested  in  any  one  company  or
              organization is as follows:
                                               Maximum Amount
                                                  Invested
                        Rating Category         (In Million)

                              AAA                    $15
                              AA                      15
                               A                      12
                              BBB                      8

         c)       Individual MBS concentration:

                  The maximum amount to be invested in any one agency collateral
                  security is $25 million. For a non-agency collateral security,
                  the maximum amount is $10 million (rated AAA).

         d)       Individual ABS Concentration:

                  The maximum  amount to be invested in any one ABS  security is
                  as follows:

                                                 Maximum Amount
                                                    Invested
                        Rating Category           (In Million)

                              AAA                      $10
                              AA                        5

5)        Any security which is outside the scope of these guidelines can be
          invested in, if mutually agreed upon by both organizations.




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                                                                       EXHIBIT C

                         Interest Rate Crediting Process

1.       Objective.  The objective of this process is to assure that credited
         rates are established so as to meet required spread targets.

2.       Expected  Gross  Interest  Rate. The expected gross interest rate for a
         block of  business is  determined  by  blending  current  yields on the
         investment  portfolio  of  assets  underlying  the  block  of  business
         together with expected new money for minimal new and reinvestment  cash
         flow.  The  blending  will be based on cash flow for the  period  under
         review and will take into consideration  funds due for reinvestment and
         interest income.

         Current yields should include the effect of realized  statutory capital
         gains and losses. New money assumptions shall consider these investment
         guidelines in respect of quality, duration and type of assets.

         An example is shown in the following Table 1:

            Table 1
            Expected Gross Interest Rate

                                            Volume           Rate
            Investment Portfolio            800              8.5%
            Reinvestment Portfolio          100              8.0%
            New Money                       100              8.0%

            Average                         1,000            8.4%

3.       Expected Net Interest Rate.  The expected net interest rate for a block
         of business is determined by subtracting from the gross rate charges
         for investment expenses and risks.

         Charges for investment  expenses cover the cost of investment  expenses
         (including  transaction costs) per the Services Agreement  described in
         Numbered Paragraph 3 of this agreement.

         Charges for risk should take into  consideration the default and option
         risks (as agreed upon) relating to the portfolio assets  underlying the
         block of business.

         An example is shown in the following Table 2:


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                  Table 2
                  Expected Net Interest Rate


                  Expected Gross Rate               8.4%
                  Less: Investment Expenses         0.25%
                  And less: Investment Risks        0.2%

                  Expected Net Rate                 7.95%

4.       Target Credited Rate.  To determine the target credited rate, the
         required spread must be subtracted from the expected net investment
         rate.  The required spread varies by plan and by duration within plan.

         The target credited rate may be modified for marketing reasons provided
         that  adjustments  are  offsetting in the aggregate.  Antiselection  in
         favor of artificially high rates will be considered in this process.

         An example is shown in the following Table 3:

            Table 3
            Target Credited Rate

                                            Life                      Annuity
            Expected Net Rate               7.95%                     7.95%
            Less: Required Spread           1.5%                      1.75%

            Calculated Credited Rate        6.45%                      6.20%
            Marketing Adjustments           0.4%                      -0.10%
            (Assuming 80% annuities)

            Target Credited Rate            6.85%                     6.10%

5.  Working  Range.  If  currently  credited  interest  rates are outside of the
    defined working range of plus or minus 25 basis points of target rates, then
    no  action is  required  (but  action  may be  taken)  until the  cumulative
    shortfall exceeds $750,000.

6.  Actions.  If currently credited interest rates are outside the defined
    working range of target rates, then action is required.  Three courses of
    action are possible:

    a.  Adjust credited rates;

    b.  Adjust reinsurance and retrocession allowances;


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    c.  Do nothing, which is not acceptable after cumulative shortfall exceeds
        $750,000.

Considerations in this decision are:


   1.  The objective stated above;

   2.  Competition and marketing issues;

   3.  Previous deficiencies and sufficiencies in credited rates (relative to
       target rates);

   4.  Expected trends in future credited rates;

   5.  The magnitude of the contemplated adjustments.



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