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

                              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, 1997 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
                  Kansas City, Missouri   64105
        (Address of Principal Executive Offices)  (Zip Code)

     Registrant's telephone number including area code: (816) 391-2700

         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 X 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, 1998:  10,000, none of
   which is held by non-affiliates.

                      Documents Incorporated by Reference: None

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


<PAGE>





<TABLE>


                                TABLE OF CONTENTS
  <S>    <C>                                                                                              <C>
  Item                                                                                                     Page
                                   PART I
   1.     Business                                                                                           2
   2.     Properties                                                                                         12
   3.     Legal Proceedings                                                                                  12
   4.     Submission of Matters to a Vote of Security Holders                                                12

                                   PART II

   5.     Market for Registrant's Common Equity and Related Stockholder Matters                              13
   6.     Selected Consolidated Financial Data                                                               13
   7.     Management's Discussion and Analysis of Financial Condition and Results of Operations              14
  7A.     Quantitative and Qualitative Disclosure about Market Risk                                          22
   8.     Financial Statements and Supplementary Data                                                        22
   9.     Changes in and Disagreements with Accountants on Accounting and Financial Disclosure               22

                                    PART III

  10.     Directors and Executive Officers of the Registrant                                                 23
  11.     Executive Compensation                                                                             24
  12.     Security Ownership of Certain Beneficial Owners and Management                                     25
  13.     Certain Relationships and Related Transactions                                                     25

                                    PART IV

  14.     Exhibits, Financial Statement Schedules and Reports on Form 8-K                                    27
</TABLE>

                                            1

<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
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"),  located in Dallas, Texas, United Fidelity
Life Insurance Company ("United  Fidelity"),  The College Life Insurance Company
of America ("College Life"), The Victory Life Insurance Company ("Victory Life")
and National Farmers Union Life Insurance  Company  ("National  Farmers Union"),
all located in Kansas City, Missouri,  and The Ohio State Life Insurance Company
("Ohio  State")  and  Investors  Guaranty  Life  Insurance  Company  ("Investors
Guaranty"), located in Columbus, Ohio. Through a joint venture, the Company also
has a 50% interest in  Financial  Assurance  Life  Insurance  Company  (formerly
Financial  Assurance,  Incorporated)  ("FAL")  and Annuity  Service  Corporation
("ASC"), located in Kansas City, Missouri and Austin, Texas, respectively.

     The Company  develops,  markets and administers  life insurance and annuity
products in four target  markets:  (i)  individual  life  insurance sold through
Personal   Producing   General  Agents   ("PPGAs")  and  Independent   Marketing
Organizations  ("IMOs")  (ii)  payroll  deduction  life  insurance  sold through
specialized agents,  (iii) tax-qualified life and annuities sold through a joint
venture  and (iv) life and annuity  products  sold  through  IMOs to the "senior
market".  In  addition,   the  Company  administers  policies  acquired  through
acquisition with which there are no meaningful marketing operations associated.

     Prior to the Great  Southern  acquisition,  the Company  had no  meaningful
marketing  operations  and its  strategy  was to increase the number of policies
administered and assets managed  primarily  through  acquisition.  Following the
acquisition  of Great  Southern in 1989,  the Company  expanded  its strategy to
include the  development of and marketing of life and annuity  products into the
markets described above.

     In addition to the life insurance  operations  described above, the Company
occasionally makes financial and strategic 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").

Acquisitions and Reinsurance Transactions

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

     In 1993,  the Company  entered into a joint  venture  whose purpose was the
sale of tax-qualified  life and annuity products by the Company's life insurance
subsidiaries. At December 31, 1997, the Company had direct insurance liabilities
generated as a result of this joint venture of approximately $320.5 million.

     The Company has utilized a transaction  structure involving an unaffiliated
reinsurer ("the Reinsurer") in order to acquire insurance companies or blocks of
insurance  business.  The transaction steps result in the policy liabilities and
related  assets being  transferred  to the  Reinsurer  in exchange for a ceding
commission and subsequently  reinsured to the Company on a modified  coinsurance
basis. The assets supporting the insurance liabilities are held in trust for the
benefit of the Company.

     In 1995,  the  Company  entered  into  agreements  with  The Ohio  Casualty
Insurance  Company ("Ohio  Casualty")  and the Reinsurer  under which the direct
liabilities of The Ohio Life  Insurance  Company ("Ohio Life") were reinsured to
the  Reinsurer on a coinsurance  basis.  These  agreements  also provide for the
Company to service the approximately  75,000 life insurance and annuity policies
of Ohio Life. At December 31, 1997, the policy liabilities associated with these
policies totaled $278.1 million.

     In 1996, the Company entered into similar agreements with Fremont  General
Corporation and the Reinsurer covering  approximately 20,000 policies of Fremont
Life  Insurance  Company  ("Fremont  Life").  At December 31,  1997,  the policy
liabilities associated with these policies totaled $444.7 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 approximately 229,000 policies of Ohio State and Investors Guaranty.
At December 31, 1997, the policy liabilities associated with these policies
totaled $667.0 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 to the Company. 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  the policies of Fremont Life and Ohio Life in 1996 and 1997,
respectively,  and intends to begin  directly  assuming the  Investors  Guaranty
policies in 1998.

     Including  the above  transactions,  at December 31, 1997,  the Company has
approximately  $3.5 billion of invested assets under management.  In addition to
expanding  its  product  offerings,  the  Company's  future  operating  strategy
includes pursuing selected  acquisitions of in-force blocks of life insurance or
insurance companies. The Company will also focus on opportunities to enter other
arrangements, including acquisitions, which can complement the Company's current
marketing and distribution channels and increase its asset and policy base.

     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 insurance liabilities.

     In March 1998, the Company  entered an agreement with an unrelated party to
sell  Investors  Guaranty.  The  Company  will  continue  to  assume  the  risks
associated  with  Investors  Guaranty  policies on a 70% quota share basis.  The
Company intends to reinsure these risks on an assumption basis in the future.

Life Insurance Business

     The Company's  in-force life insurance business consists of traditional and
interest-sensitive  life  insurance  and  annuities.  At December 31, 1997,  the
insurance in force on  interest-sensitive  life  insurance  contracts  was $31.7
billion,  the insurance in force on  traditional  life  insurance  contracts was
$15.7 billion and annuity liabilities totaled $1.1 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's  life
insurance  subsidiaries  also offer single premium and flexible  premium annuity
products,   including  tax-qualified  annuities,  as  well  as  a  portfolio  of
traditional life insurance  products,  including  individual term and whole life
insurance.    Interest-sensitive   life   insurance   products   accounted   for
substantially  all new life policies written in 1997. 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.



<PAGE>


     The following  table shows  collected  premiums of the Company during 1997,
1996 and 1995 by product category.
<TABLE>
                                                                      Premiums Collected
                                                                    for periods indicated
                                           -------------------------------------------------------------------------
                                               First Year                  Renewal                    Total
                                           --------------------     ----------------------    ----------------------
<S>                                            <C>       <C>           <C>         <C>
Product Category                                $         %             $           %              $          %
----------------                                -         -             -           -              -          -
                                                                       (in thousands)

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
                                             =========    =====      =========    =======      (137,159)      =====
   Less ceded premiums                                                                         --------
   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
                                                                                               ========

Year ended
December 31, 1995
Traditional                                      3,206      3.9         58,895       29.8        62,101        22.2
Interest-sensitive                              28,731     34.8        118,515       60.0       147,246        52.6
                                               -------    -----      ---------     ------     ---------      ------
   Total life                                   31,937     38.7        177,410       89.8       209,347        74.8
Annuities                                       50,592     61.3         20,064       10.2        70,656        25.2
                                               -------    -----      ---------     ------     ---------      ------
    Direct and assumed premiums                 82,529    100.0        197,474      100.0       280,003       100.0
                                               =======    =====      =========     ======                    ======
   Less ceded premiums                                                                          (80,638)
                                                                                               --------
   Total                                                                                        199,365
                                                                                               ========

</TABLE>

Marketing and Distribution

     The Company's new business  efforts have been divided into four segments as
defined more fully below:  Individual  Markets,  Special Markets,  Tax-qualified
Markets and the Seniors Market.

     Individual  Markets.  The Company  delivers its products to the  individual
markets  using two  methods  of  distribution,  PPGA and  independent  marketing
organizations.  The Company's PPGA marketing system utilizes  approximately  600
independent  agents  who market the  Company's  products.  None of the agents is
employed by the Company, but each is a party to a general agency agreement which
governs  the  terms  of his or her  arrangement  with  the  Company.  PPGAs  who
represent the Company may also represent  other  insurers.  Of the $41.9 million
total  annualized  first-year life insurance  premiums  generated by the Company
during 1997, approximately $17.0 million (or 41%) was derived from sales through
the Company's PPGA system.

     Approximately $9.3 million, or 22%, of the Company's annualized  first-year
life  insurance  premiums in 1997 was  derived  from sales  through  eight large
marketing  organizations  comprised of non-exclusive  independent agents with an
aggregate membership of approximately 2,000 at December 31, 1997.



     Since 1995,  the Company has employed its Career  Partners  Program(TM)  to
increase the production from individual agents and reduce the Company's reliance
on large marketing  organizations and brokers.  The Career Partners  Program(TM)
attempts  to  build a longer  term  relationship  between  the  Company  and the
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.

     The  individual  markets  experienced  significant  growth in 1997 from two
sources.  The addition of Ohio State's individual  production  contributed $12.3
million, or 29%, of first year annualized life insurance  premiums.  Growth from
the same sources,  excluding Ohio State,  increased  $7.0 million,  or 33%, over
1996.  In total,  this segment  increased  new  premiums by $19.3 million,
nearly doubling 1996 production.

     Special Markets/Payroll  Deduction. The Company's special marketing efforts
consist of offering  voluntary payroll deduction,  interest-sensitive  universal
life  insurance to employees of large and  medium-sized  companies and accounted
for $6.0 million, or 14%, of the Company's annualized  first-year life insurance
premiums in 1997.  This effort is conducted  through  Great  Southern's  special
marketing  agency force. The agency force,  which consists of approximately  100
general agents, primarily contacts companies that have a minimum of 100 eligible
employees.   The  Company's   special   marketing  efforts  benefited  from  the
introduction of an expanded product  portfolio and increased special marketing
agency force. First year new production increased $4.0 million in 1997.

     Tax-Qualified  Life  Insurance  and Annuity  Markets.  Great  Southern  and
College Life expanded their  marketing  capabilities in the  tax-qualified  life
insurance and annuity markets,  specifically  products  qualified under Internal
Revenue Code Sections 401(k) and 403(b), through a joint venture founded in July
1993 ("Joint Venture"),  effected through College Insurance Group, Inc. ("CIG").
These products are marketed to public school teachers  through a specialty field
force of  managed  agents.  CIG is  owned  equally  by  United  Fidelity  and an
unrelated  individual.  CIG, in turn,  owns 100% of the stock of FAL and 100% of
the stock of ASC.  Pursuant to the Joint Venture,  both parties  generally share
the profits from 401(k) and 403(b)  business  written by marketing  companies on
behalf of Great  Southern and College Life.  Sales  generated  through the Joint
Venture, expressed in terms of collected premiums,  increased from $14.6 million
in 1993 to $107.9 million in 1997.

     Seniors  Market.   In  1996,   Great  Southern   expanded  its  marketing
capabilities into the seniors life insurance and annuity markets.  Following the
Fremont Life  transaction,  the Company was introduced to a select group of IMOs
that  specialize  in the  marketing of fixed  annuities to seniors.  The Company
introduced  products to this distribution  source in the fourth quarter of 1996.
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 growth in consumer concerns over 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 maturing  individuals.  Sales generated through the IMOs, expressed
in terms of collected  premiums,  were $17.5 million in 1997.

Competition and Ratings

     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.


<PAGE>


     The Company believes that the principal  competitive factors in the sale of
life insurance 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 "Aq
(Good)" from S&P. National Farmers Union is rated "B+ (Very Good)" by A.M. Best.
A.M.  Best's  ratings  for  insurance   companies   currently  range  from  "A++
(Superior)" to "F (In Liquidation)", and some insurance companies are not rated.
Publications of A.M. Best indicate that the "A" and "A-" ratings are assigned to
those companies that, in A.M. Best's opinion,  have achieved  excellent  overall
performance  when  compared to the standards  established  by A.M. Best and that
generally  have  demonstrated  a strong  ability  to meet their  obligations  to
policyholders  over a long  period  of time.  The "B+"  rating  is  assigned  to
companies  that,  in A.M.  Best's  opinion,  have  achieved  very  good  overall
performance  when  compared to the standards  established  by A.M. Best and that
generally have a strong ability to meet their obligations to policyholders,  but
whose  financial   strength  may  be  susceptible  to  unfavorable   changes  in
underwriting  or  economic  conditions.  The "A"  rating is  assigned  by S&P to
companies  which,  in S&P's  opinion,  offer good  financial  security,  but the
capacity to meet  policyholder  obligations  is somewhat  susceptible to adverse
economic and underwriting  conditions.  Ohio State's rating of Aq indicates that
the  rating is based  solely on  quantitative  analysis  of  publicly  available
financial data. 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.

Operations

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

     The Company has made  significant  investments in technology  over the past
several years in order 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 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  through  the  increase  in  the  policies  being
administered.

     In order to more effectively manage the various insurance operations of the
Company,  it has  consolidated  certain  common  functions into its Kansas City,
Missouri  location.  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.


<PAGE>


     The  Company  has  outsourced  its  data  processing  requirements  through
contracts  entered into by FHC. The  principal  contract  entered into by FHC is
with Computer Sciences  Corporation  ("CSC") which provides all of the Company's
data  processing  needs for its  operations  with the  exception  of local  area
networks.  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 on its part.  In addition,  the use of a vendor
such as CSC  provides  the  Company  access to current  technology  and a higher
caliber staff than it may be able to achieve 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.  The  Company  manages  its  invested  assets  internally.   Its
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 insurance  subsidiaries of Americo are restricted by insurance statutes
and regulations as to 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, 1997, 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-generated 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
choosing  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,  the fixed-rate  portfolio is divided into held to maturity
and available for sale portfolios. 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.  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  designated as
available for sale include securities 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.


<PAGE>


     The carrying amounts of the Company's investments at December 31, 1997 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                    $    2,427     $  64,986     $   67,413      3.1%
Mortgage-backed securities:
   Collateralized mortgage obligations                           276,505        96,767        373,272     17.3
   Pass-through certificates:
     GNMA                                                         18,063       109,165        127,228      5.9
     FHLMC                                                         2,434           554          2,988      0.1
     FNMA                                                          1,560         5,070          6,630      0.3
     Other pass-through securities                                 6,410        25,533         31,943      1.5
Other asset-backed securities                                     30,152        57,603         87,755      4.1
Corporate bonds                                                  514,272       401,406        915,678     42.3
                                                              ----------     ---------    -----------   ------

       Total fixed maturities                                  $ 851,823      $761,084     $1,612,907     74.6%
                                                               =========      ========     ==========

Equity securities                                                                              78,949      3.7
Investment in equity subsidiaries                                                              21,670      1.0
Mortgage loans on real estate                                                                 165,630      7.8
Investment real estate                                                                         27,630      1.3
Policy loans                                                                                  200,137      9.2
Cash and cash equivalents                                                                      36,859      1.6
Other invested assets                                                                          18,890      0.8
                                                                                           ----------    ------


       Total cash and invested assets                                                      $2,162,672    100.0%
                                                                                           ==========    =====


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



(1)     Carrying  amount is amortized  cost.  The market value of held to maturity  securities at December 31, 1997
       was $873.9 million.
(2)     Carrying  amount is market value.  The amortized cost of available for sale securities at December 31, 1997
       was $736.0 million.
</TABLE>

     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.

Non-Insurance Operations

     The Company selectively makes investments in businesses outside of the life
insurance industry.  The primary investments of this nature at December 31, 1997
were the investments in Argus,  which was accounted for using the equity method,
and in wholly-owned real estate partnerships.


<PAGE>


     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 1997, Argus generated  revenues of $39.7 million
and processed over 145 million claims  compared to 129 million claims  processed
in 1996, an increase of 12%. At December 31, 1997, Argus had  approximately  251
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.  In 1997,  a major client  decided to perform its claims  processing
internally, which will have an effect on Argus' 1998 revenues and earnings.

     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 July 1997,  the Company  disposed of several of these  properties for a
gain of $5.1  million.  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 assist in  diversifying  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,
1997,  the Company had ceded to reinsurers  approximately  $6.1 billion (17%) of
life insurance in force,  of which 80% was reinsured  with  insurance  companies
rated "A (Excellent)" or better by A.M. Best.  Approximately $1.4 billion of the
insurance in force was ceded to a single reinsurer,  which was rated "A" by A.M.
Best.  Additionally,  in connection  with the Joint  Venture,  the Company ceded
$141.6 million of insurance liabilities to FAL at December 31, 1997. 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  $1.4  billion at December  31,  1997.  See
"Business: Acquisitions and Reinsurance Transactions".

     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  $20.0 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 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 treaties totaled
$0.8  million and $0.9  million for the years ended  December 31, 1997 and 1996,
respectively.  See Note 6 of the Notes to the Consolidated  Financial Statements
of the Company included in Item 8 in this Form 10-K.



<PAGE>


Regulation

     Each of Great Southern, United Fidelity,  College Life and National Farmers
Union are domiciled in Texas. Victory Life is domiciled in Kansas. Ohio State is
domiciled in Ohio and Investors Guaranty is domiciled in California. 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,  Kansas, Ohio and California.  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,
subject  in either  case to  sufficient  earned  statutory  surplus  from  which
dividends  may be paid.  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.


<PAGE>


     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.  The  NAIC's RBC model act
provides  for four  levels of  potential  involvement  by state  regulators  for
inadequately  capitalized  insurance  companies as follows:  (1) Company  Action
Level,  (2)  Regulatory  Action  Level,  (3)  Authorized  Control  Level and (4)
Mandatory Control Level. 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,
1997.

     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.  Under the Texas  Regulations,  an insurer
has met RBC  requirements  if its admitted  assets exceed its  liabilities by at
least 6%. At December 31, 1997,  the  Company's  Texas  insurance  subsidiaries'
admitted assets exceeded their liabilities by more than the required 6% level.

     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,  1998,  Americo  and its  wholly-owned  subsidiaries  employed
approximately 623 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)
391-2700.

     The principal  operations of the insurance  subsidiaries are conducted from
Kansas City,  Missouri;  Dallas,  Texas;  and Columbus,  Ohio.  United Fidelity,
College Life, National Farmers Union and Victory Life operate from approximately
45,000 square feet of leased office space located at 1055 Broadway, Kansas City,
Missouri 64105. The property is leased from Broadway Square Partners, a Missouri
limited partnership of which a corporation  controlled by the Merriman family is
a 50% partner.  The lease expired on February 28, 1998 and current  negotiations
are in progress to renew this lease.

     Great Southern's  operations are conducted from approximately 57,000 square
feet of leased office space located at 500 N. Akard,  Dallas,  Texas 75221.  The
lease expires in June 2007.

     Ohio  State  and  Investors   Guaranty   operations   are  conducted   from
approximately  83,800 square feet of leased office space located at 2500 Farmers
Drive, Columbus, Ohio 43235. The lease expires in April 2000.

ITEM 3.    LEGAL PROCEEDINGS

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

     Great  Southern is a defendant  in four  purported  class  action  lawsuits
alleging  deceptive  sales  practices  in the  marketing  of its whole  life and
universal life insurance policies and seeking unspecified compensatory, punitive
and/or  treble  damages.  These  cases are:  Harriett D. Mann and Dan C. Wynn v.
Great  Southern  Life  Insurance  Company  (U.S.  District  Court for the Middle
District of Florida,  filed on  September  22,  1997);  Irwin  Ginsberg v. Great
Southern Life Insurance  Company (U.S.  District Court for the Southern District
of Florida,  filed on February 24, 1997);  James Morgan McGraw,  Frances Norman,
Robert Harry Bishop and Charlene McGraw v. Great Southern Life Insurance Company
and Ervin  Jackson  (U.S.  District  Court for the  Eastern  District  of Texas,
amended petition alleging class action filed July 1, 1997); and Yvonne H. Massey
v. Great Southern Life Insurance Company, Ralph Williams & Associates,  Inc. and
Ralph Williams (U.S. District Court for the Northern District of Alabama,  filed
September 19, 1997).  Great Southern has filed a motion before the U.S. Judicial
Panel on Multidistrict  Litigation requesting that these lawsuits be transferred
to a  single  district  and  consolidated  for  pretrial  proceedings.  A  fifth
purported class action lawsuit making similar  allegations,  Ernest Marqoquin v.
Great Southern Life Insurance Company and Dale Darnell,  was filed against Great
Southern on February 11, 1998 in Cameron County District Court,  Texas. On March
19, 1998,  Great Southern  removed this case to the United States District Court
for the Southern District of Texas.  Great Southern intends to seek to have this
case  added to the  consolidated  multidistrict  litigation  proceedings.  Great
Southern intends to defend all these cases 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,
1997 and at December 31, 1997,  1996,  1995, 1994 and 1993 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,
                                             ----------------------------------------------------------------------


                                               1997 (3)        1996        1995 (2)      1994(1)         1993
                                               --------        ----        --------      -------         ----
                                                         (in thousands, except per share information)
<S>                                          <C>           <C>           <C>           <C>            <C>
Statement of Income Data:
Premiums and policy revenues                  $   203,729   $   165,602   $   140,130   $   134,225    $   134,856
Net investment income                             219,267       186,725       152,047       130,149        132,327
Net realized investment gains (losses)              2,950         (120)         (282)       (3,529)          7,584
Gain on disposition of partnership interest            --        15,825            --            --            --
Other income                                       12,331         3,567         2,168           117          6,736
                                                    -----         -----           ---         -----        -------
    Total income                                  438,277       371,599       294,063       260,962        281,503
Policyholder benefits                             262,940       218,659       169,162       151,835        151,907
Commissions                                        11,230        13,473         9,662         8,711          9,355
Amortization expense                               43,694        29,714        26,666        23,534         22,972
Interest expense                                   12,089        12,263        10,593         9,254          7,540
Other operating expenses                           77,038        56,703        47,124        45,110         44,538
                                             ------------  ------------  ------------  ------------  -------------
Income before provision for income taxes           31,286        40,787        30,856        22,518         45,191
Provision for income taxes                          9,230        13,513        11,126         9,159         16,190
                                             ------------  ------------  ------------  ------------  -------------

Income before extraordinary loss                   22,056        27,274        19,730        13,359         29,001
Extraordinary loss                                     --            --            --            --           (798)
                                              -----------  ------------  ------------  ------------  -------------
Net income                                    $    22,056  $     27,274  $     19,730  $     13,359   $     28,203
                                              ===========  ============  ============  ============   ============
Net income applicable to common stock per common share:
Income before extraordinary loss              $  2,205.60   $  2,727.40   $  1,973.00   $  1,335.90    $  2,900.10
Extraordinary loss                                     --            --            --            --         (79.80)
                                              -----------   -----------   -----------   -----------   ------------
Net income                                    $  2,205.60   $  2,727.40   $  1,973.00   $  1,335.90    $  2,820.30
                                              ===========   ===========   ===========   ===========    ===========

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

Balance Sheet Data:
Total investments                              $2,125,813    $2,018,852    $2,014,634    $1,582,592     $1,710,165
Total assets                                    4,038,018     2,769,583     2,459,805     1,994,628      2,056,167
Total debt                                        132,884       133,312       133,451       100,702        100,736
Total liabilities                               3,791,156     2,562,561     2,269,042     1,844,632      1,897,332
Stockholder's equity                              246,862       207,022       190,763       149,996        158,835

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

(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.

</TABLE>

<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  insurance  in force has  increased  156% from
$18.5 billion in 1989 to $47.4 billion in 1997.  This growth has been the result
of a combination of acquisitions,  reinsurance assumed and new business written.
The growth in the Company's volume of life insurance  inforce for the last three
years is summarized in the following table. <TABLE>

                                                                       1997        1996        1995
                                                                       ----        ----        ----
                                                                                (in
                                                                                billions)

<S>                                                                    <C>         <C>        <C>
Beginning of year balance                                              $  27.6     $  26.9    $  23.0
Insurance business acquired or assumed                                    21.3         2.0        4.7
New business written                                                       2.6         2.1        2.0
Terminations                                                              (4.1)       (3.4)      (2.8)
                                                                     ---------   ---------  ---------
End of year balance                                                   $   47.4    $   27.6   $   26.9
                                                                      ========    ========   ========
</TABLE>

     The  Company's  generation  of new business  increased in each of the three
years  ended  December  31,  1997.   Annualized   annuity   premiums   increased
significantly  as a result of an increase in  tax-qualified  business written in
connection  with the Joint  Venture  arrangement  entered into by the Company in
1993. The following table  summarizes the Company's sales in terms of annualized
premiums: <TABLE>

                                                                       1997        1996        1995
                                                                       ----        ----        ----
                                                                               (in millions)

<S>                                                                 <C>           <C>         <C>
Life insurance premiums                                             $    40.2     $ 23.1      $ 20.1
Annuity premiums                                                         75.8       52.6        49.2
                                                                    ----------  ---------    --------
                                                                     $  116.0     $ 75.7      $ 69.3
                                                                     ========     ======      ======
</TABLE>
     The Company intends to continue its focus on the sale of interest-sensitive
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.


Year to Year Comparisons

     The Company entered into four  transactions  during the period 1995 through
1997 which  affect  the  comparability  of its  results  of  operations  between
periods.  In July 1995, the Company acquired all of the outstanding common stock
of Victory Life for $42.8 million. The Victory Life transaction (the "Victory
Life Acquisition") added approximately $270 million of insurance  liabilities
and $32.9  million of notes  payable to the Company's consolidated  balance
sheet.

     In October 1995, in connection with administrative  agreements entered into
with Ohio  Casualty and Ohio Life,  an  unaffiliated  company (the  "Reinsurer")
reinsured  100% of the insurance  business of Ohio 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 $278 million at December 31, 1997.

     In July  1996,  the  Company  entered  into  similar  agreements  with  the
Reinsurer and Fremont Life. The associated  policy  liabilities  involved in the
transaction were approximately $371 million at December 31, 1997.

     On April 15, 1997,  Great Southern  acquired all of the outstanding  common
stock of Ohio State 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  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.

     In each of the transactions with the Reinsurer, the invested assets related
to the reinsured  businesses are owned by the  Reinsurer.  At December 31, 1997,
the insurance liabilities associated with these reinsurance transactions totaled
$1.4 billion.  Results from these reinsurance  transactions and the Victory Life
Acquisition and 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 as the
Acquisitions, on the individual income statement components, excluding the costs
of financing, are set forth in the table below (in millions).
<TABLE>

                                                         1997 and 1996                 1996 and 1995
                                                    Acquisitions Effects on       Acquisitions Effects on
                                                     1997 and 1996 Results         1996 and 1995 Results
                                                              (1)                           (2)
                                                    -------------------------     -------------------------

                                                       1997         1996             1996         1995
                                                       ----         ----             ----         ----

<S>                                                  <C>           <C>             <C>          <C>
Premiums and policy revenues                         $  56.8       $  6.9          $  40.3      $  11.0
Net investment income                                   43.7         14.3             55.2         14.3
Other income                                             3.4          --               0.1          0.5
Policyholder benefits                                   66.8         17.5             67.6         18.3
Commissions                                              1.5          2.4              3.9          0.5
Amortization expense                                    18.4          --               3.6          1.3
Other operating expenses                                14.9          0.7              7.8          1.1

     (1)  Includes the results from the Ohio State  Acquisition  in 1997 and the Fremont  Life  agreements  in 1997
         and 1996.

     (2)  Includes the results from the Fremont Life  agreements in 1996 and the Victory Life  Acquisition  and the
         Ohio Life agreements in 1996 and 1995.
</TABLE>

     The other  operating  expenses in the above table  include  only the direct
expenses related to providing  administration for the policies and assets of the
Acquisitions.  The  operating  expenses  shown do not include any  allocation of
indirect or overhead expenses.


<PAGE>


     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.

     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 $2.9 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.

     Interest expense.  Interest expense decreased $0.2 million to $12.1 million
in 1997 from $12.3 million in 1996. Average outstanding  indebtedness was $133.1
million with an average cost of 9.06% in 1997 compared with average  outstanding
indebtedness of $133.5 million with an average cost of 9.19% in 1996.

     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.

     Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

     Income before  provision for income taxes  increased  $9.9 million to $40.8
million in 1996 from $30.9  million in 1995.  The  primary  reasons  for the net
increase were (i) income  resulting from the Acquisitions and (ii) gain from the
disposition  of the  Company's  interest  in GSSW,  partially  offset by (iii) a
decrease in net investment income, (iv) an increase in death benefits and (v) an
increase in other operating  expenses.  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 $165.6
million in 1996 compared to $140.1 million in 1995. Excluding the effects of the
Acquisitions, premiums and policy revenue decreased by $3.8 million from 1995 to
1996.  Premiums and policy  revenues from  historical  business  decreased  $2.8
million and $1.0 million,  respectively,  between 1996 and 1995. 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 this  amount of  in-force  business  decreases.  A portion of the
decreasing  policy revenues  between 1996 and 1995 resulted from $0.4 million of
non-recurring  surrender  charges realized in 1995 related to certain group life
annuities.

     Collected  premiums on interest sensitive and annuity products increased by
$69.4  million from 1995 to 1996.  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 $34.7 million to
$186.7  million in 1996 from $152.0  million in 1995.  Excluding the  investment
income  resulting  from  the  Acquisitions,  investment  income  decreased  $6.2
million,  primarily  attributable to (i) a decrease in income from the Company's
equity subsidiaries and (ii) changes in expected  prepayments on mortgage-backed
securities.

     The Company's share of earnings from its equity subsidiaries decreased from
$9.4 million in 1995 to $5.5 million in 1996 as a result of a reduction in gains
on the  sale of real  estate  by GSSW in 1996  compared  to 1995  and  increased
expenses at the Company's other equity subsidiaries. Gains from the sale of real
estate by GSSW added $1.2 million to investment  income in 1996 compared to $3.3
million in 1995. Income from the Company's investment in Argus decreased in 1996
due to increased systems development costs incurred by Argus.

     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 1996,  interest
rates  increased,  reducing  the expected  prepayment  rate.  In 1995,  expected
prepayments of the portfolio were accelerated as interest rates had declined. As
a result of the changes in expected  prepayments,  amortization  of premiums and
accretion  of discounts  were  accelerated  in 1995,  causing an increase in net
investment  income of $1.3 million in 1995. The decrease in investment income in
1996 resulting from the reduced expected prepayment rate was offset by discounts
recognized upon the early repayment of certain of the Company's mortgage loans.



     Gain on disposition of partnership  interest. 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  limited  partnerships then owned by
GSSW resulting in a gain of $15.8 million.

     Other income.  Other income in 1996 and 1995 included $2.5 million and $1.2
million,  respectively, of gains from the sales of blocks of accident and health
business owned by the Company.

     Policyholder  benefits.  Policyholder benefits were $49.5 million higher in
1996 than in 1995 as a result of the Acquisitions. Excluding the effects of such
Acquisitions,  policyholder  benefits  increased $0.2 million from 1995 to 1996.
The Company  experienced an unusually  high level of death  benefits  during the
first half of 1996,  including a small  number of policies  with very large face
amounts which had offsetting benefit reserve releases. These releases,  together
with lower  benefit  reserve  increases in 1996  resulting  from the  decreasing
traditional  premiums,  partially  offset the increasing  policyholder  benefits
resulting from the increased death benefits.

     Amortization  expense.  Amortization expense increased $3.0 million in 1996
to  $29.7  million,  including  an  increase  of  $2.3  million  related  to the
Acquisitions.  Included in  amortization  expense is an  adjustment  to decrease
deferred policy  acquisition  costs and the cost of business  acquired assets of
$3.2 million in 1996 and $4.0  million in 1995.  These  adjustments  result from
revisions made to the Company's estimate of future gross profits of 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.

     Interest expense.  Interest expense increased $1.7 million to $12.3 million
in 1996 from $10.6 million in 1995.  Average  outstanding  indebtness was $133.5
million  with an average cost of 9.19% in 1996  compared to average  outstanding
indebtness  of $116.5  million  with an average  cost of 9.10% in 1995.  Average
outstanding  indebtedness  was higher in 1996 than 1995 due to the  issuance  of
$32.9 million of notes in connection  with the Victory Life  Acquisition in July
1995.

     Other  operating  expenses.  Other  operating  expenses  increased to $56.7
million in 1996 from $47.1  million in 1995.  The  increase  in other  operating
expenses primarily  resulted from increased  expenses  associated with servicing
the  policies  related  to  the  Acquisitions.  Other  operating  expenses  also
increased in 1996 as a result of increased  product  development  and  marketing
expenses,  partly in  connection  with  marketing  alliances  with Ohio Life and
Fremont Life.

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 FHC under Advisory
and Data Processing  Agreements with FHC and its own operating  expenses.  These
cash  requirements  are met by payments  of  principal  and  interest on surplus
debentures 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, 1997,  Americo had $12.5 million of cash and cash  equivalents  and
marketable  equity  securities  available  for debt service and other  corporate
requirements.

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

     In connection  with the  acquisition of Victory Life 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  which  began in 1995.  The notes are carried at their
discounted value, which assumes an average effective rate of 11.6%.

     Americo's credit  agreement,  which was last amended in February 1997, 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, 1997, United Fidelity had four surplus  debentures  payable
to Americo with an aggregate  outstanding unpaid balance of $137.3 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, each scheduled payment will not
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,  1997 was $97.7  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 direct and assumed 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 statutes in each of the states 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, 1997,  National  Farmers
Union had adjusted surplus of $39.1 million.

     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 has  structured  its  interest-sensitive  life  insurance  and
annuity products to include  substantial  surrender  charges so as to reduce the
probability  of  unexpected  increases in policy or contract  surrenders,  which
would create a need for increased liquidity. At December 31, 1997, approximately
72% of the reserves for  interest-sensitive  life  insurance  products  were for
policies  with  surrender  charges or  otherwise  not  subject to  discretionary
withdrawal by the policyholder.

     The Company believes that its investment portfolio will allow it to satisfy
all existing contractual obligations to policyholders. At December 31, 1997, the
Company's investment portfolio included cash and short-term investments totaling
$36.9 million,  marketable equity  securities  totaling $78.9 million as well as
$359.7  million in U.S.  Treasury  and  government  securities,  mortgage-backed
securities and  asset-backed  securities  and $401.4 million of corporate  bonds
classified  as  available  for sale that  management  believes  could be readily
converted to cash.

     Financial  condition.  Stockholder's  equity increased to $246.9 million at
December 31, 1997 from $207.0 million at December 31, 1996. The increase was the
result  of net  income  of  $22.1  million  and an  increase  in net  unrealized
investment  gains of $19.8  million,  less a $2.0  million  dividend to FHC. Net
unrealized  investment  gains in 1997 were  recorded  due to an  increase in the
market value of both the Company's  available for sale fixed maturity securities
and its marketable equity securities.  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.


<PAGE>


     The changes  occurring in the  Company's  consolidated  balance  sheet from
December 31, 1996 to December 31, 1997 primarily  reflect the normal  operations
of the Company's life insurance subsidiaries,  the acquisition of Ohio State and
Investors  Guaranty,  and the  related  reinsurance  transactions  discussed  in
Results  of  Operations.  See  Note 3 to the  Company's  Consolidated  Financial
Statements  included elsewhere in this Form 10-K for further discussion of these
transactions.

     Statutory  capital and surplus of the Company's  insurance  subsidiaries at
December 31, 1997  includes  $20.0  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  statutory  minimum surplus  requirements  and require  National
Farmers  Union to place  securities  in an  escrow  account  ($80.3  million  at
December 31, 1997) to secure National  Farmers Union's  obligations to the third
party reinsurer.

     Investment   Portfolio.   The  Company  has  what  it  considers  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.

     In November 1995, the Financial  Accounting Standards Board ("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 to available for sale. 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.

     The NAIC assigns securities quality ratings called "NAIC designations" that
are used by insurers when preparing  their annual  statements.  The NAIC assigns
designations to  publicly-traded  as well as  privately-placed  securities.  The
designations  assigned  by the NAIC range from class 1 to class 6, with a rating
in class 1 being of the  highest  quality.  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, 1997:
<TABLE>

                                                  Equivalent                  Available      Total
            S&P                    Moody's           NAIC        Held to        for         Carrying
         Rating (1)               Rating (1)        Rating(1)  Maturity(2)      Sale (3)     Amount     Percentage
--       -----------         --   ----------      ---------    -----------    ----------    --------    ----------
                                                                                  (in thousands)
<S>                                 <C>               <C>       <C>           <C>           <C>            <C>
Investment grade:
AAA                                  Aaa               1         $ 346,546     $ 354,862    $   701,408     43.5%
AA                              Aa1,Aa2, Aa3           1            76,946        65,115        142,061      8.8
A                                A1, A2, A3            1           318,255       192,239        510,494     31.7
BBB                           Baa1, Baa2, Baa3         2           107,227       139,011        246,238     15.2
                                                                 ---------     ---------      ---------  -------
Subtotal                                                           848,974       751,227      1,600,201     99.2

Non-investment grade:
BB or below                     Ba1 or below         3, 4            2,849         9,857         12,706      0.8
                                                               ------------  -----------     ----------  -------

Total fixed maturity
  investments                                                    $ 851,823     $ 761,084     $1,612,907    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, 1997 was $873.9 million.

(3)  Carrying  amounts  market value.  The amortized  cost of available for sale
     securities at December 31, 1997 was $736.0 million.


<PAGE>


     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, 1997,
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 MBSs is that a changing  interest  rate
environment might cause prepayment of the underlying  mortgages at speeds slower
or faster 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 the overall
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, 1997, approximately $165.6 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 33  states.  Approximately  41%  of  the  portfolio  was
multi-family apartments,  20% was office buildings, 24% was retail space and 15%
was other types of properties.  At December 31, 1997,  approximately  21% of the
mortgage loan portfolio was secured by properties in Texas,  and 22% in Missouri
and 12% in Kansas.  No more than 10% of the  remaining  portfolio was secured by
properties in any one state.

     At December 31, 1997,  8.15% of the mortgage  loan  portfolio  consisted of
loans with balloon  payments that mature before January 1, 1999. At December 31,
1997,  mortgage  loans  delinquent  by more  than 90 days,  as  determined  on a
contract   delinquency  basis,   totaled   approximately  $0.5  million,   which
constituted  0.3% of mortgage  loans and was 0.02% of cash and invested  assets.
Loans  foreclosed  upon and  transferred  to real estate owned in the  Company's
consolidated  balance  sheet  totaled  $1.6  million,  or less  than 1% of total
mortgage  loans at December  31,  1997.  The  favorable  default  experience  is
principally  attributed to the Company  having been selective 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  1.3% of the  carrying  value  of the
Company's cash and invested assets at December 31, 1997.

     Non-Insurance  Subsidiaries.  During 1996, Americo received a dividend from
Argus consisting of $8.0 million of cash and a $1.5 million note receivable from
Broadway Square Partners, a related party. Americo used $4.5 million of the cash
received to purchase a 50% interest in Hereford LLP,  which owns and manages the
building  leased by Argus.  Hereford  LLP was  formed  in 1996 to  purchase  the
building which was previously owned by Argus.

     Subsequent  Event.  The Company has entered an agreement  with an unrelated
party to sell Investors Guaranty.  The Company will continue to assume the risks
associated  with  Investors  Guaranty  policies on a 70% quota share basis.  The
Company intends to reinsure these risks on an assumption basis in the future.

Effects of Accounting Pronouncements

     In February  1997,  the FASB issued SFAS No. 128  "Earnings  per Share" and
SFAS No. 129, "Disclosure of Information about Capital Structure".  SFAS No. 128
specifies the computation, presentation and disclosure requirements for earnings
per share. SFAS No. 129 does not establish new disclosure  requirements,  rather
it  codifies  certain  disclosure  requirements  contained  in other  statements
previously  issued.  These  statements  are effective  for  financial  statement
periods  ending  after  December  15,  1997.  Adoption  of these new  accounting
standards did not have an impact on the consolidated financial statements of the
Company.

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
Income" and SFAS No. 131,  "Disclosures  about  Segments  of an  Enterprise  and
Related  Information".  SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in financial statements. SFAS
No. 131  establishes  new guidelines for public  business  enterprises to report
financial and  descriptive  information  about their operating  segments.  These
statements  are  effective  for  financial  statement  periods  beginning  after
December 15, 1997.

     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.  Management  has not  determined  the
effects,  if any, of adopting this SOP on the Company's  consolidated  financial
statements.

Year 2000

     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 is  dependent  on  computer  systems  and  applications  to conduct  its
business. The Company's significant processing applications are maintained by an
outsider  vendor.   Management  and  vendor  representatives  have  developed  a
conversion plan to prepare the Company's  systems for year 2000 compliance.  The
cost of testing and  conversion  of system  applications  is not  expected to be
material to the Company,  because much of the conversion programming will be the
responsibility  of  the  outside  vendor.   Management   believes  that  planned
modifications  to  existing  systems  and  conversions  to new  systems  will be
complete  before year 2000 and that year 2000 issues will not pose a significant
problem to the Company. The Company is initiating formal communications with its
outside  business  partners to  determine  the extent to which they will be year
2000  compliant.  Where  practicable,  the  Company  will  assess and attempt to
mitigate its risks with respect to such third  parties.  The Company is not able
to estimate the effect, if any, on its results of operations from the failure of
such parties to be year 2000 compliant.

Effects of Inflation and Interest Rate Changes

     Management does not believe that inflation has had a significant  effect on
its consolidated results of operations.

     Management  is aware  that  prevailing  market  interest  rates  may  shift
significantly  and has  strategies  in place to  manage  either an  increase  or
decrease  in  prevailing  rates.  In a rising  interest  rate  environment,  the
Company's  average cost of funds would  increase  over time as it prices its new
and renewing  interest-sensitive  and investment  products to maintain generally
competitive  market  rates.   Management  would  seek  to  place  new  funds  in
investments  which were matched in duration to, and higher  yielding  than,  its
liabilities.  Management  believes that liquidity to fund  withdrawals  would be
available  through  incoming cash flow,  the sale of short-term or floating rate
instruments  or  reverse  repurchase  agreements  on the  Company's  substantial
mortgage-backed  securities  portfolio,  thereby avoiding the sale of 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  interest-sensitive
and investment products. 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.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     Not applicable.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Company's audited consolidated financial statements for the three years
ended  December  31,  1997 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:
<TABLE>

                  Name                     Age                               Position

<S>                                         <C>
Michael A. Merriman                         40    Chairman of the Board

Gary L. Muller                              51    President, Chief Executive Officer and Director

Timothy S. Sotos                            49    Director

Mark K. Fallon                              43    Senior Vice President and Assistant Secretary-Investments

David F. Hill                               43    Senior Vice President and Chief Marketing Officer

Gary E. Jenkins                             40    Senior Vice President, Chief Financial Officer and Treasurer

Donna H. Kinnaird                           46    Senior Vice President, Chief Operating Officer-Kansas City

Robert B. Thomas, Jr                        51    Senior Vice President, Chief Operating Officer-Dallas
</TABLE>

     Americo's current Board of Directors consists of three directorships.  Each
director of Americo,  except  Timothy S. Sotos,  was elected to such position in
1992 in  connection  with the Company's  incorporation.  Michael A. Merriman and
Gary L. Muller are also directors of FHC. 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. He was the Director of Investments of American General
Corporation from July 1987 to April 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. He served as President and Chief Executive Officer of Pierce
National Life from July 1992 to September 1993.

     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).  He served as Chief  Financial
Officer of Academy Life  Insurance  Company for six years before it was acquired
by Providian Corporation in January 1993.

     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.

     Robert B. Thomas,  Jr.  became  Senior Vice  President and Chief  Operating
Officer - Dallas of Americo,  and certain of its  insurance  subsidiaries on
June 30, 1997.  He served as Chairman,  President  and Chief  Executive Officer
of United Fidelity Companies from February 1993 to February 1997.

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, 1997.
<TABLE>

                                           Summary Compensation Table
                      Name and
                Principal Occupation                                  Annual Compensation           All Other
                                                         Year        Salary          Bonus      Compensation (1)

<S>                                                      <C>        <C>              <C>           <C>
Gary L. Muller                                           1997       $ 462,000        $ 350,000     $    3,220
President, Chief Executive Officer and                   1996       $ 462,000        $ 350,000     $    3,203
  Director                                               1995       $ 462,000        $ 350,000     $    3,140

Michael A. Merriman                                      1997       $ 363,000               --     $    3,220
Chairman of the Board                                    1996       $ 363,000               --     $    3,203
                                                         1995       $ 363,000               --     $    3,186

Donna H. Kinnaird                                        1997       $ 200,000        $ 175,000     $    3,168
Senior Vice President and                                1996       $ 190,000        $ 175,000     $    3,203
  Chief Operating Officer-Kansas City                    1995       $ 190,000        $ 150,000     $    3,186

Gary E. Jenkins                                          1997       $ 200,000        $ 175,000     $    3,165
Senior Vice President,                                   1996       $ 175,000        $ 175,000     $    3,203
  Chief Financial Officer and Treasurer                  1995       $ 175,000        $ 150,000     $      186

David F. Hill                                            1997       $ 200,000        $ 175,000     $  103,308
Senior Vice President and                                1996       $ 100,000        $  75,000     $   31,000
  Chief Marketing Officer                                1995              --               --             --

------------------------------------------------------
</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, 1998
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       Actual Percent
   Title of Class                 Names of Beneficial Owners                     Ownership           of Class
                                                                           ------------------     ---------------

<S>                  <C>                                                       <C>      <C>           <C>
Common Stock          Michael 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)     During  1995,  FHC paid Mr.  Muller  $234,944  for 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, 1997 was $7.2 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  $15.61  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,  1997 under the Data  Processing  Agreement  was $11.8
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  leased  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 $0.7 million of expense under this agreement for the year
ended December 31, 1997.

     FHC Lease.  The  Company's  subsidiary,  United  Fidelity,  leases to FHC a
building in Kansas City which is 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 ASC each entered into separate
services  agreements  with FAL,  pursuant to which FHC and ASC  provide  certain
administrative  functions to FAL with respect to certain tax-qualified insurance
and annuity products ("403(b) Business").  For these services,  FAL pays 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. Generally, these percentage
fees will increase by 4% annually.  These service agreements each had an initial
term of three years  commencing  July 30, 1993,  and renew  annually  thereafter
unless terminated by the parties.  FAL paid $1,484,129 and $2,113,612 to FHC and
ASC,  respectively,  under these service agreements during 1997. Each of FHC and
ASC have agreed to indemnify  FAL against all  liabilities  resulting  from such
servicer's gross negligence,  fraudulent conduct or bad faith in the performance
of its duties under the respective services agreement.

     FHC and  certain of its life insurance and 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.

     One of the  Company's  insurance  subsidiaries  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 1997 was  approximately  $899,000.  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  $312,000 in
1997 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  testing  services
performed for the Company's subsidiaries and were competitive with rates 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)                            Stock Purchase  Agreement  dated March 3, 1995
                                  by and among Victory  Financial  Group,  Inc.,
                                  its  wholly-owned   subsidiary,   Kansas  Life
                                  Insurance    Company   and   the    Registrant
                                  (incorporated by reference from Exhibit 2.1 to
                                  Registrant's Form 10-Q (File No. 33-64820) for
                                  the quarter ended March 31, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.1(b)                            Letter  Agreement  dated July 10, 1995 among  Registrant  and  Victory  Financial
                                  Group,  Inc.  respecting  certain  provisions  of the  Stock  Purchase  Agreement
                                  (incorporated  by reference from Exhibit 2.1(b) to  Registrant's  Form 8-K report
                                  (File No. 33-64820) dated as of July 10, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.1(c)                            Pledge and Escrow  Agreement  dated July 10, 1995 among the  Registrant,  Victory
                                  Financial Group, Inc. and NationsBank of Texas,  N.A.  (incorporated by reference
                                  from Exhibit 2.1(c) to Registrant's  Form 8-K report (File No. 33-64820) dated as
                                  of July 10, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.1(d)                            Indemnity Agreement  Respecting Mortgages (and other matters) dated July 10, 1995
                                  between Victory Financial Group,  Inc. and Registrant  (incorporated by reference
                                  from Exhibit 2.1(d) to Registrant's  Form 8-K report (File No. 33-64820) dated as
                                  of July 10, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.1(e)                            Letter  Agreement  dated  as of July  7,  1995
                                  among Registrant, The Victory Life Insurance
                                  Company and Victory Financial Group, Inc.
                                  regarding   estimated   federal   income   tax
                                  deposits   (incorporated   by  reference  from
                                  Exhibit 2.1(e) to Registrant's Form 8-K report
                                  (File  No.  33-64820)  dated  as of  July  10,
                                  1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.2                               Reinsurance, Transfer and Assumption Agreement
                                  dated as of July 5, 1995, between Kansas Life
                                  Insurance Company and National Farmers Union
                                  Life  Insurance   Company   (incorporated   by
                                  reference from Exhibit 2.2 to Registrant's
                                  Form 8-K report (File No. 33-64820) dated as
                                  of July 10, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------


<PAGE>



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

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ----------------
---------------- ----------------

2.3(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).
---------------- ----------------
---------------- ----------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

2.3(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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).
---------------- ---------------- ----------------------------------------------------------------------------------


<PAGE>



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

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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

4.3(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  Form 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) due 2010. (Two
                                  identical notes (No. VNO-1 and No. VNO-2) were
                                  originally issued on July 10, 1995. Pursuant
                                  to instruction 2 to Item 601 of Regulation
                                  S-K, only VNO-1 was filed.) (Incorporated by
                                  reference from Exhibit 4.1(d) to Registrant's
                                  Form 8-K report (File No. 33-64820) dated as
                                  of July 10, 1995).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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.
---------------- ---------------- ----------------------------------------------------------------------------------


<PAGE>



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

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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

*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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

*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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

*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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.10                             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.
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.13(a)                          Stock  Purchase  Agreement  dated February 26,
                                  1993,  among  Financial  Holding  Corporation,
                                  United   Fidelity  Life   Insurance   Company,
                                  Financial Assurance Incorporated and Robert L.
                                  Myer  (incorporated  by reference from Exhibit
                                  10.17  to  Registrant's  Form  S-4  (File  No.
                                  33-64820) filed June 22, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.13(b)                          First Amendment to Stock Purchase  Agreement dated June 24, 1993, among Financial
                                  Holding Corporation,  United Fidelity Life Insurance Company, Financial Assurance
                                  Incorporated and Robert L. Myer  (incorporated by reference from Exhibit 10.17(b)
                                  to Amendment No. 1. to  Registrant's  Form S-4 (File No.  33-64820)  filed August
                                  30, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.14(a)                          Stock  Purchase  Agreement  dated  February 26,  1993,  among  Financial  Holding
                                  Corporation,  Robert L. Myer and Annuity Service Corp. (incorporated by reference
                                  from Exhibit 10.18 to  Registrant's  Form S-4 (File No.  33-64820) filed June 22,
                                  1993).
---------------- ---------------- ----------------------------------------------------------------------------------


<PAGE>



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

10.14(b)                          First Amendment to Stock Purchase  Agreement  dated June 24, 1993,  among Annuity
                                  Service Corp.,  Financial  Holding  Corporation,  United  Fidelity Life Insurance
                                  Company and Robert L. Myer  (incorporated  by reference from Exhibit  10.18(b) to
                                  Amendment No. 1. to  Registrant's  Form S-4 (File No.  33-64820) filed August 30,
                                  1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.15                             Subscription   Agreement  dated  February  26,
                                  1993, among Financial Holding Corporation,
                                  Robert L. Myer, Annuity Service Corp. and
                                  United   Fidelity   Life   Insurance   Company
                                  (incorporated by reference from Exhibit 10.19
                                  to Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.16                             Shareholders'  Agreement  dated July 30, 1993,
                                  among College Insurance Group, Inc., Robert L.
                                  Myer, United Fidelity Life Insurance Company
                                  and     Financial     Holding      Corporation
                                  (incorporated by reference from Exhibit 10.20
                                  to Registrant's Form S-4 (File No. 33-64820)
                                  filed June 22, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.17(a)                          Services   Agreement   dated  July  30,  1993,
                                  between  Financial  Assurance  Life  Insurance
                                  Company    (formerly    Financial    Assurance
                                  Incorporated)     and    Financial     Holding
                                  Corporation  (incorporated  by reference  from
                                  Exhibit 10.21 to  Registrant's  Form S-4 (File
                                  No. 33-64820) filed June 22, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.17(b)                          Services  Agreement  dated  July  30,  1993,  between  Financial  Assurance  Life
                                  Insurance  Company  (formerly  Financial  Assurance   Incorporated)  and  Annuity
                                  Service Corp.  (incorporated  by reference from Exhibit 10.21(b) to Amendment No.
                                  1. to Registrant's Form S-4 (File No. 33-64820) filed August 30, 1993).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.18                             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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.19                             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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
----------------- --------------- ----------------------------------------------------------------------------------

*10.20(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.
----------------- --------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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>


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

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
----------------- --------------- ----------------------------------------------------------------------------------

*10.20(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.
----------------- --------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.20(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).
---------------- ---------------- ----------------------------------------------------------------------------------
----------------- --------------- ----------------------------------------------------------------------------------

*10.20(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.
----------------- --------------- ----------------------------------------------------------------------------------
----------------- --------------- ----------------------------------------------------------------------------------

*10.20(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.
----------------- --------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------
10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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>


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

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------


<PAGE>



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

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.21(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.22(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.22(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).
---------------- ---------------- ----------------------------------------------------------------------------------
---------------- ---------------- ----------------------------------------------------------------------------------

10.22(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, 1997.



<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 31st day of March, 1998.


                               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 31, 1998
-----------------------------------------------------    Directors
                Michael A. Merriman


                 /s/ Gary L. Muller                      President, Chief Executive             March 31, 1998
-----------------------------------------------------    Officer and Director
                Gary L. Muller


                /s/ Gary E. Jenkins                      Senior Vice President, Chief           March 31, 1998
-----------------------------------------------------    Financial Officer and Treasurer
                   Gary E.Jenkins                       (Principal Financial Officer and
                                                         Principal Accounting Officer)


</TABLE>





<PAGE>




                       AMERICO LIFE, INC. AND SUBSIDIARIES

                          INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S>                                                                                                          <C>

                                                                                                             Page
Audited Financial Statements for the Three Years Ended December 31, 1997:


  Report of Independent Accountants                                                                           F-2

  Consolidated Balance Sheet at December 31, 1997 and 1996                                                    F-3

  Consolidated Statement of Income for the Years Ended December 31, 1997, 1996 and 1995                       F-4

  Consolidated Statement of Stockholder's Equity for the Years Ended December 31, 1997, 1996 and 1995         F-5

  Consolidated Statement of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995                   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, 1997 and 1996, and the results
of their  operations  and their  cash  flows for each of the three  years in the
period ended December 31, 1997, 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
an 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.




PRICE WATERHOUSE LLP
Kansas City, Missouri
March 27, 1998



<PAGE>


                       Americo Life, Inc. and Subsidiaries

                           Consolidated Balance Sheet
                             (Dollars in thousands)
                           December 31, 1997 and 1996
<TABLE>

                                                                                             1997          1996
                                                                                             ----          ----
                                        Assets
<S>                                                                                      <C>            <C>
Investments:
   Fixed Maturities:
     Held to maturity, at amortized cost (market: $873,935 and $847,832)                  $  851,823     $  857,451
     Available for sale, at market (amortized cost: $735,955 and $671,792)                   761,084        670,274
   Equity securities, at market (cost: $50,837 and $33,341)                                   78,949         48,262
   Investment in equity subsidiaries                                                          21,670         18,078
   Mortgage loans on real estate, net                                                        165,630        184,326
   Investment real estate, net                                                                27,630         22,417
   Policy loans                                                                              200,137        204,607
   Other invested assets                                                                      18,890         13,437
                                                                                         -----------    -----------

     Total investments                                                                     2,125,813      2,018,852

Cash and cash equivalents                                                                     36,859         96,069
Accrued investment income                                                                     27,620         25,287
Amounts receivable from reinsurers                                                         1,429,679        314,023
Other receivables                                                                             23,875         13,969
Deferred policy acquisition costs                                                             64,622         72,438
Cost of business acquired                                                                    300,180        200,710
Other assets                                                                                  29,370        28,235
                                                                                         ------------  ------------
     Total assets                                                                         $4,038,018     $2,769,583
                                                                                          ==========     ==========

                         Liabilities and Stockholder's Equity
Policyholder account balances                                                             $2,486,436     $1,466,959
Reserves for future policy benefits                                                          881,583        681,545
Unearned policy revenues                                                                      12,845         32,128
Policy and contract claims                                                                    36,570         30,959
Other policyholder funds                                                                      75,960         81,442
Notes payable                                                                                132,884        133,312
Amounts payable to reinsurers                                                                 12,200          6,221
Federal income taxes payable                                                                     164            --
Deferred income taxes                                                                         58,126         43,195
Due to broker                                                                                 31,836         50,013
Amounts due to affiliates                                                                      3,137          2,168
Other liabilities                                                                             59,415         34,619
                                                                                         -----------    -----------

     Total liabilities                                                                     3,791,156      2,562,561

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
   Net unrealized investment gains                                                            56,973         37,189
   Retained earnings                                                                         186,134        166,078
                                                                                         -----------    -----------

     Total stockholder's equity                                                              246,862        207,022
                                                                                         -----------    -----------

Commitments and contingencies

     Total liabilities and stockholder's equity                                           $4,038,018     $2,769,583
                                                                                          ==========     ==========
</TABLE>

                See accompanying notes to consolidated financial statements

<PAGE>


                       Americo Life, Inc. and Subsidiaries

                                      Consolidated Statement of Income
                             (Dollars in thousands, except per share amounts)
                         For the Years Ended December 31, 1997, 1996 and 1995

<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                           <C>          <C>            <C>
Income
   Premiums and policy revenues                                               $203,729      $165,602       $140,130
   Net investment income                                                       219,267       186,725        152,047
   Net realized investment gains (losses)                                        2,950          (120)          (282)
   Gain on disposition of partnership interest                                      --        15,825             --
   Other income                                                                 12,331         3,567          2,168
                                                                           -----------   ------------  ------------
     Total income                                                              438,277       371,599        294,063
                                                                            ----------    ----------     ----------

Benefits and expenses
   Policyholder benefits:
     Death benefits                                                            116,196        91,996         73,346
     Interest credited on universal life and annuity products                  109,392        84,495         59,794
     Other policyholder benefits                                                55,790        57,088         41,828
     Change in reserves for future policy benefits                             (18,438)      (14,920)        (5,806)
   Commissions                                                                  11,230        13,473          9,662
   Amortization expense                                                         43,694        29,714         26,666
   Interest expense                                                             12,089        12,263         10,593
   Other operating expenses                                                     77,038        56,703         47,124
                                                                           -----------   -----------    -----------
     Total benefits and expenses                                               406,991       330,812        263,207
                                                                            ----------    ----------     ----------

     Income before provision for income taxes                                   31,286        40,787         30,856

Provision for income taxes                                                        9,230       13,513         11,126
                                                                           ------------   ----------    -----------
     Net income                                                             $   22,056    $   27,274     $   19,730
                                                                            ==========    ==========     ==========

Net income per common share                                                  $2,205.60     $2,727.40      $1,973.00
                                                                             =========     =========      =========
</TABLE>

                 See accompanying notes to consolidated financial statements
<PAGE>


                                 Americo Life, Inc. and Subsidiaries

                             Consolidated Statement of Stockholder's Equity
                                            (Dollars in thousands)
                         For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>


                                                                               1997          1996          1995
                                                                               ----          ----          ----

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

Net unrealized investment gains
   Balance at beginning of year                                                 37,189        46,204        23,167
   Change during year                                                           19,784        (9,015)       23,037
                                                                           -----------   ------------  -----------
   Balance at end of year                                                       56,973         37,189       46,204
                                                                           -----------   ------------  -----------

Retained earnings
   Balance at beginning of year                                                166,078      140,804        123,074
   Net income                                                                   22,056       27,274         19,730
   Dividends                                                                    (2,000)      (2,000)        (2,000)
                                                                           -----------   -----------   -----------
   Balance at end of year                                                      186,134      166,078        140,804
                                                                            ----------    ---------     ----------
     Total stockholder's equity                                              $ 246,862    $ 207,022      $ 190,763
                                                                             =========    =========      =========
</TABLE>

                   See accompanying notes to consolidated financial statements
<PAGE>

                          Americo Life, Inc. and Subsidiaries

                          Consolidated Statement of Cash Flows
                                 (Dollars in thousands)
                   For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----
<S>                                                                       <C>            <C>          <C>
Cash flows from operating activities
Net income                                                                 $   22,056     $   27,274   $     19,730
                                                                           ----------     ----------   ------------
Adjustments to reconcile net income to net cash used by operating activities:
   Depreciation and amortization                                               47,305         30,103        28,850
   Deferred policy acquisition costs                                          (34,220)       (19,337)      (18,565)
   Undistributed earnings of equity subsidiaries                               (3,622)        (5,458)      (10,103)
   Distributed earnings of equity subsidiaries                                     --         14,000            --
   Amortization of unrealized investment gains                                 (6,973)        (6,059)       (6,774)
   (Increase) decrease in assets net of effects from business acquisitions:
     Accrued investment income                                                   (797)        (1,398)         (180)
     Other invested assets                                                         --         (1,596)           78
     Amounts receivable from reinsurers                                      (162,334)       (54,942)      (28,852)
     Amount received from reinsurance transaction                                  --            --         20,854
     Other receivables                                                         (9,824)        (2,527)       (1,417)
     Other assets, net of amortization                                         10,462         (2,274)       (2,274)
   Increase (decrease) in liabilities net of effects from business acquisitions:
     Reserves for future policy benefits and unearned policy revenues             371         (7,489)      (11,524)
     Policyholder account balances                                             72,899         10,573       (11,106)
     Policy and contract claims                                                (2,258)         7,654        (5,460)
     Other policyholder funds                                                  (5,482)       (11,265)       (1,091)
     Amounts payable to reinsurers                                             (2,053)        (6,734)        2,039
     Federal income taxes payable                                                 164            --         (4,330)
     Provision for deferred income taxes                                        4,281          5,576        (3,546)
     Other liabilities                                                          7,207         (5,775)          314
     Amounts due to/due from affiliates                                        (4,100)        10,739        (8,928)
   Net realized (gains) losses on investments                                  (2,950)           120           282
   Gain on disposition of partnership interest                                     --        (15,825)           --
   Gain on sale of subsidiary                                                  (4,848)           --             --
   Amortization on bonds and mortgage loans                                     1,722          2,244           649
   Other changes                                                                (4,568)       (4,470)       (2,065)
                                                                           -----------   -----------   -----------
   Total adjustments                                                          (99,618)       (64,140)      (63,149)
                                                                           ----------     ----------    ----------
       Net cash used by operating activities                                  (77,562)       (36,866)      (43,419)
                                                                           ----------     ----------    ----------


                                                                                                        (Continued)
</TABLE>

                  See accompanying notes to consolidated financial statements
<PAGE>


                           Americo Life, Inc. and Subsidiaries

                    Consolidated Statement of Cash Flows (Continued)
                                    (Dollars in thousands)
                    For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----
<S>                                                                        <C>            <C>          <C>
Cash flows from investing activities
   Purchases of fixed maturity investments                                  $ (421,408)    $ (304,743)  $ (463,723)
   Purchases of equity securities                                              (67,815)       (24,072)          --
   Purchases of other investments                                              (21,944)            (6)     (38,760)
   Mortgage loans originated                                                   (24,777)        (1,323)     (25,730)
   Maturities or redemptions of fixed maturity investments                      89,206         45,791      135,402
   Sales of fixed maturity investments:
     Held to maturity                                                               --             --        5,915
     Available for sale                                                        380,251        190,368      233,425
   Sales of equity securities                                                  173,455             --           --
   Sales of other investments                                                   13,257         19,738       17,826
   Sale of subsidiary, net of cash sold                                         10,911            --            --
   Redemption of partnership interest                                               --         22,440           --
   Payment for subsidiary acquired, net of cash acquired                      (248,581)            --      (22,966)
   Repayments from mortgage loans                                               45,287         40,401       24,203
   Change in due to broker                                                     (18,662)         5,014       44,998
   Acquisition of equity subsidiary                                                 --         (4,550)          --
   Change in policy loans                                                        4,470          6,459          680
                                                                           ------------  ------------   ----------
       Net cash used by investing activities                                   (86,350)        (4,483)     (88,730)
                                                                           -----------    -----------   ----------

Cash flows from financing activities
   Notes payable issued                                                             --             --       21,000
   Repayments of notes payable                                                    (542)          (545)        (285)
   Debt issue cost paid                                                             --             --         (737)
   Receipts credited to policyholder account balances                          192,648        176,845      164,386
   Return of policyholder account balances                                     (85,404)       (95,878)    (101,985)
   Dividends paid                                                               (2,000)        (2,000)      (2,000)
                                                                            ----------     ----------  -----------

     Net cash provided by financing activities                                 104,702         78,422       80,379
                                                                            ----------     ----------   ----------
Net increase (decrease) in cash and cash equivalents                           (59,210)        37,073      (51,770)
Cash and cash equivalents at beginning of year                                  96,069         58,996      110,766
                                                                           -----------     ----------   ----------
Cash and cash equivalents at end of year                                    $   36,859      $  96,069   $   58,996
                                                                            ==========      =========   ==========

Supplemental disclosures of cash flow information Cash paid during year for:
Interest                                                                    $   12,095     $   12,280   $   10,432
Income taxes                                                                     4,789          5,226       14,037

Supplemental schedule of non-cash investing and financing activities
 Acquisition of subsidiaries:
     Fair value of assets acquired, net of cash acquired                    $  948,724   $        --   $  285,870
     Liabilities                                                              (700,143)           --     (251,002)
     Notes payable issued to seller                                                 --            --      (11,902)
                                                                           ------------- ------------  -----------

     Payment for subsidiaries acquired, net of cash acquired                $  248,581   $        --   $    22,966
                                                                            ==========   ===========   ===========
</TABLE>
               See accompanying notes to consolidated financial statements
<PAGE>


                           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 Victory Life Insurance Company ("Victory"),  The
College Life Insurance  Company of America  ("College  Life"),  National Farmers
Union Life Insurance Company ("National Farmers"), The Ohio State Life Insurance
Company ("Ohio State") and Investors Guaranty Life Insurance Company ("Investors
Guaranty"), collectively referred to as the Insurance Companies. In August 1997,
the Company sold Loyalty Life Insurance Company ("Loyalty Life") to an unrelated
party.  United  Fidelity owns 50% of College  Insurance  Group,  Inc., a holding
company  which owns 100% of both  Financial  Assurance  Life  Insurance  Company
("Financial  Assurance"),  a stock life insurance  company,  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  except  Victory,  Ohio State and Investors
Guaranty are domiciled in Texas.  Victory, Ohio State and Investors Guaranty are
domiciled  in  Kansas,  Ohio and  California,  respectively.  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,  Ohio and California 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.

     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.




<PAGE>

                        Americo Life, Inc. and Subsidiaries
            Notes to Consolidated Financial Statements (Continued)


     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.

     Futures  contracts  are  accounted  for as hedges.  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.  Gains or losses on terminated
hedges  are  recorded  as an  adjustment  to the basis of the asset  hedged  and
amortized into income over the remaining life of the asset hedged.

     In January 1997, the Company implemented  Statement of Financial Accounting
Standards  ("SFAS") No. 125 "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities". SFAS No. 125 establishes new criteria
for determining  whether a transfer of financial  assets in exchange for cash or
other  consideration  should  be  accounted  for  as a  sale  or  as  pledge  of
collateral.  The  implementation  of portions of this  statement with respect to
accounting   for  pledged   collateral,   repurchase   agreements   and  similar
transactions  was  deferred  for one  year by SFAS  No.  127,  "Deferral  of the
Effective  Date of Certain  Provisions of the FASB  Statement No. 125" issued in
December 1996.  Implementation of these new accounting  standards did not have a
material impact on the consolidated financial statements of the Company.

     In February  1997,  the Financial  Accounting  Standards  Board  ("FASB")
issued SFAS No. 128,  "Earnings per Share"  and SFAS No.  129,  "Disclosure  of
Information  about  Capital  Structure".  SFAS No. 128  specifies  the
computation,  presentation  and  disclosure  requirements  for earnings per
share.  SFAS No. 129 does not establish new disclosure  requirements,  rather it
codifies  certain  disclosure  requirements  contained in other statements
previously  issued.  Adoption  of these  new  accounting  standards  did not
have an  impact  on the  consolidated financial statements of the Company.

     In June  1997,  the FASB  issued  SFAS No.  130,  "Reporting  Comprehensive
Income" and SFAS No. 131,  "Disclosures  about  Segments  of an  Enterprise  and
Related  Information".  SFAS No. 130 establishes standards for the reporting and
display of comprehensive income and its components in financial statements. SFAS
No. 131  establishes  new guidelines for public  business  enterprises to report
financial and  descriptive  information  about their operating  segments.  These
statements  are  effective  for  financial  statement  periods  beginning  after
December 15, 1997.

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.


<PAGE>



     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 ($4,131),  $1,446 and $(1,524) for the years ended  December
31, 1997, 1996 and 1995, 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 $1,617, $(4,673) and $(2,515) for the years
ended December 31, 1997, 1996 and 1995, 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  unrealized  gain
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
7.0% at December 31, 1997.

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 7.5% 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  1.7%, 2.9%
and 4.5% of the ordinary life insurance in force at December 31, 1997,  1996 and
1995,  respectively.  Premium  income  related to  participating  life insurance
policies  represents 3.3%, 4.4% and 6.5% of premiums and policy revenues for the
years 1997,  1996 and 1995,  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.


<PAGE>



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 $10,036, and $7,213 at December 31, 1997 and 1996, 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 $3,436,  $3,051 and $1,957 for the years ended  December 31, 1997,  1996 and
1995, 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 1997, 1996
or 1995.

Reclassifications

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

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  policyholder  account balances reduced for an estimate of
discounted future profits.



<PAGE>



     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>

                                                               1997                               1996
                                                  -------------------------------    -------------------------------

                                                     Carrying          Fair             Carrying          Fair
                                                      Amount          Value              Amount          Value
<S>                                                <C>              <C>               <C>             <C>
Financial assets:
   Fixed maturities held to maturity                $  851,823       $  873,935        $  857,451      $  847,832
   Fixed maturities available for sale                 761,084          761,084           670,274         670,274
   Equity securities                                    78,949           78,949            48,262          48,262
   Mortgage loans                                      165,630          166,634           184,326         183,328
   Policy loans                                        200,137          200,137           204,607         204,607
   Other invested assets                                10,000           10,032            10,000           9,681
   Cash and cash equivalents                            36,859           36,859            96,069          96,069
Financial liabilities:
   Annuities                                         1,072,062        1,039,463           527,324         508,882
   Notes payable                                       132,884          137,794           133,312         132,812
</TABLE>

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.


<PAGE>



     Ohio State and Investors Guaranty transferred bonds and policy loans to the
Reinsurer  equal  to  the  statutory   reserves   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 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.

     In July 1995,  the Company  acquired  all the  outstanding  common stock of
Victory,  pursuant  to the Stock  Purchase  Agreement  dated as of March 3, 1995
("the  Agreement")  by  and  among  Victory  Financial  Group,  Inc.,  a  Nevada
corporation  (the  "Seller"),  its  wholly-owned  subsidiary,  The  Kansas  Life
Insurance  Company  ("Kansas  Life") and the  Company.  When the  Agreement  was
executed, Kansas Life was the immediate parent of Victory.

     In  connection  with the  acquisition  of  Victory,  the  Company,  through
National Farmers, entered into a Reinsurance,  Transfer and Assumption Agreement
(the  "Reinsurance  Agreement")  under which National Farmers  reinsured all the
insurance business of Kansas Life on a 100% coinsurance basis.  National Farmers
received  securities,  cash  and  other  assets  totaling  $23,295  equal to the
insurance liabilities assumed.  National Farmers has subsequently  completed the
assumption of this business.

     The Company  accounted  for the  acquisition  of Victory and the  insurance
business of Kansas Life using the purchase  method of accounting.  The operating
results of Victory and the insurance business acquired from Kansas Life from the
date of acquisition are included in the Company's statement of income.

     The total amount paid by the Company for (1) the  outstanding  common stock
of  Victory,  (2)  related  consulting  and  noncompetition  agreements  and (3)
transaction expenses, was $42,752. The acquisition was funded by $17,000 of 6.5%
subordinated notes issued by the Company to the Seller, $21,000 borrowed under a
$70,000 revolving credit facility dated as of July 6, 1995 ("Credit Agreement"),
and $4,800 of internal funds.

     The effect of the acquisition of Victory and the  Reinsurance  Agreement on
the Company's balance sheet at the date of acquisition was as follows:
<TABLE>

      <S>                                                                              <C>
      Assets acquired:
         Investments:
           Fixed maturity securities                                                    $   221,873
           Cash                                                                              16,340
           Other                                                                             39,455
                                                                                       ------------
                                                                                            277,668
         Cost of business acquired                                                           20,931
         Other assets                                                                         6,054
                                                                                       ------------
                                                                                        $   304,653
      Liabilities assumed:
         Reserves for future policy benefits                                            $   178,862
         Policyholder account balances                                                       46,586
         Other liabilities                                                                   46,303
         Notes payable                                                                       32,902
                                                                                      -------------
                                                                                        $   304,653
</TABLE>



<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 Victory and the  Reinsurance  Agreement
occurred  on January  1, 1995 and the  acquisition  of Ohio State and  Investors
Guaranty occurred on January 1, 1996. <TABLE>

                                                                 1997          1996          1995
                                                                 ----          ----          ----

     <S>                                                      <C>           <C>           <C>
      Total revenue                                            $  458,203    $  452,071    $  308,734
      Net income                                                   21,701        26,083        19,804
      Net income per common share                                2,170.10      2,608.30      1,980.40
</TABLE>

     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.


<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, 1997
                                                             ----------------------------------------------------------

                                                                              Gross             Gross       Estimated
                                                              Amortized     Unrealized       Unrealized    Market Value
                                                                 Cost         Gains            Losses
<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
                                                               ==========   ===========      ===========     ==========


                                                                                 December 31, 1996
                                                             -----------------------------------------------------------

                                                                              Gross             Gross       Estimated
                                                              Amortized     Unrealized       Unrealized    Market Value
                                                                 Cost         Gains            Losses
Held to maturity:
   U.S. Treasury and government securities                   $      4,594  $        160      $      (110)  $      4,644
   Public utility securities                                       61,929         2,465           (1,470)        62,924
   Corporate securities                                           448,837         7,638          (12,510)       443,965
   Asset-backed securities                                         27,852            28             (629)        27,251
   Mortgage-backed pass-through securities                         36,060           735             (385)        36,410
   Collateralized mortgage obligations                            278,179         1,212           (6,753)       272,638
                                                             ------------  ------------     ------------   ------------
                                                                  857,451        12,238          (21,857)       847,832
                                                             ------------  ------------     ------------   ------------
Available for sale:
   U.S. Treasury and government securities                         98,100           204           (1,293)        97,011
   Public utility securities                                       27,678           274              (18)        27,934
   Corporate securities                                           262,924         2,935           (3,725)       262,134
   Asset-backed securities                                         52,089           897             (122)        52,864
   Mortgage-backed pass-through securities                        156,304           383             (644)       156,043
   Collateralized mortgage obligations                             74,697           844           (1,253)        74,288
                                                             ------------   -----------      -----------   ------------
                                                                  671,792         5,537           (7,055)       670,274
                                                             ------------   -----------      -----------   ------------
     Subtotal, all fixed maturities                             1,529,243        17,775          (28,912)     1,518,106
                                                             -------------  ------------     ------------  ------------
Equity securities                                                  33,341        15,484             (563)        48,262
                                                             ------------   -----------      ------------  ------------
     Total fixed maturities and equity securities              $1,562,584   $    33,259       $  (29,475)    $1,566,368
                                                             ============   ===========      ============  ============

</TABLE>

<PAGE>



     The  amortized  cost and market  values of  mortgage-backed  securities  by
category at December 31, 1997 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                            $    28,467   $    29,401        $  137,328    $  140,322

Collateralized mortgage obligations:
   Sequential class                                            80,849        81,006            45,343        46,573
   Planned amortization class                                  44,240        45,048            15,505        15,558
   Very accurately defined maturity                            98,750       100,617             6,150         6,048
   Accrual class                                               42,836        43,197            23,539        23,504
   Other                                                        9,830         9,420             4,290         5,084
                                                           ----------    ----------         ---------    ----------
                                                              276,505       279,288            94,827        96,767
                                                           ----------    ----------         ---------    ----------
     Total securities                                      $  304,972    $  308,689         $ 232,155    $  237,089
                                                           ==========    ==========         =========    ==========
</TABLE>

     The amortized cost and estimated market value of fixed maturities which are
held to maturity and  available  for sale at December 31, 1997,  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                                    $      1,865   $     1,890      $        198    $      200
Due after one year through five years                            59,150        59,129            76,560        78,234
Due after five years through ten years                          202,675       206,588           100,273       103,081
Due after ten years                                             253,009       267,438           270,455       284,877
Mortgage-backed securities                                      335,124       338,890           288,469       294,692
                                                             ----------    ----------         ---------    ----------
                                                             $  851,823    $  873,935         $ 735,955    $  761,084
                                                             ==========    ==========         =========    ==========
</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  $44,550  and  $53,426 at  December  31,  1997 and 1996,  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.

     At December 31, 1997, the Company held below  investment  grade (S&P rating
below BBB-)  corporate  debt  securities  with an  aggregate  carrying  value of
$23,195 and market  value of $23,349.  At December  31,  1996,  the Company held
below  investment  grade corporate debt  securities  with an aggregate  carrying
value of $10,125 and market value of $10,168.  These  holdings  amounted to 0.6%
and  0.4%  of the  Company's  total  assets  at  December  31,  1997  and  1996,
respectively.

     Fixed  maturities  with an amortized book value of $38,205 and $72,062 were
on deposit with insurance  regulatory agencies of certain states at December 31,
1997 and 1996, 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.



<PAGE>



Mortgage loans on real estate

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

                                                                                         1997           1996
                                                                                         ----           ----

      <S>                                                                             <C>            <C>
      Mortgage loan principal                                                          $ 167,188      $ 187,477
      Net unamortized purchase discount                                                   (1,258)        (2,851)
      Allowance for losses                                                                  (300)          (300)
                                                                                       ---------      ---------
         Net mortgage loans                                                            $ 165,630      $ 184,326
                                                                                       =========      =========
</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, 1997,  mortgage  loans on real estate were  concentrated  in the
following property types and states: <TABLE>

                                                                                                        % of
                                                                                         1997        Portfolio

      <S>                                                                            <C>                <C>
      Property type:
         Commercial
           Multi-family apartments                                                   $    67,785         40.9%
           Office buildings                                                               32,388         19.6
           Retail space                                                                   39,856         24.1
           Industrial/Warehouses                                                          22,955         13.9
         Residential                                                                       2,646          1.5
                                                                                      ----------     --------
           Total                                                                      $  165,630        100.0%
                                                                                      ==========     ========
</TABLE>

     At December 31, 1997, the following  states had a concentration of mortgage
loans  aggregating  more  than  10% of the  Company's  mortgage  loans:  Texas -
$35,121; Missouri - $35,660; and Kansas - $19,820.

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 development joint venture (acquired in 1995) and
GSSW (disposed of in 1996). <TABLE>

                                                                           1997          1996           1995
                                                                           ----          ----           ----

     <S>                                                              <C>            <C>            <C>
      Current assets                                                   $   16,630     $   12,952     $   22,371
      Noncurrent assets                                                    96,494         67,358         90,359
      Current liabilities                                                   4,883          2,829          3,517
      Noncurrent liabilities                                               86,571         59,403         60,157
      Net revenues                                                         28,910         32,401         37,737
      Expenses applicable to net revenues                                  23,521         26,307         25,682
      Income from continuing operations                                     5,083          6,505         11,978
      Net income                                                            3,244          5,458          9,457
</TABLE>

     In 1996, GSSW distributed $6,000 cash 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, 1997 and 1996.

     In December 1996, the Company  received a dividend from Argus consisting of
$8,000 cash and a $1,500 note receivable from a related party.  The Company used
$4,500 of the cash  received to purchase a 50% interest in Hereford  LLP,  which
owns and manages the building leased by Argus.


<PAGE>



Net investment income

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

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                         <C>            <C>           <C>
Fixed maturities                                                            $  117,197     $ 104,442     $   98,034
Equity securities                                                                1,437         1,101            524
Equity in earnings of equity subsidiaries                                        3,622         5,458         10,103
Mortgage loans on real estate                                                   16,712        21,344         20,169
Policy loans                                                                    12,420        13,719         12,247
Reinsurance funds held by reinsurer                                             65,747        37,425          6,007
Cash, short-term investments and other                                           8,770         7,452          8,988
                                                                             ---------     ---------      ---------
         Total investment income                                               225,905       190,941        156,072
Less investment expenses                                                        (6,638)       (4,216)        (4,025)
                                                                             ---------     ---------      ---------
         Net investment income                                               $ 219,267     $ 186,725      $ 152,047
                                                                             =========     =========      =========
</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>

                                                                               1997          1996          1995
                                                                               ----          ----          ----
<S>                                                                        <C>        <C>            <C>
   Held to maturity:
     Realized gains                                                        $       --   $         93   $        --
     Realized losses                                                               --          (124)          (668)
   Available for sale:
     Realized gains                                                             4,688         2,162            274
     Realized losses                                                           (4,097)       (3,524)          (407)
Equity securities:
   Realized gains                                                               4,582         2,340            372
   Realized losses                                                             (5,349)       (1,851)          (264)
Other investments:
   Realized gains                                                               5,339           788            502
   Realized losses                                                             (2,213)           (4)           (91)
                                                                           ----------    -----------   -----------
Total net realized investment gains (losses)                               $    2,950    $     (120)    $     (282)
                                                                           ==========    ==========     ==========
</TABLE>

     During  1995,  the  Company  sold  held  to  maturity  investments  with an
amortized cost of $6,583. The Company sold these investments based upon evidence
of the  deterioration  of the issuers'  creditworthiness.  The Company  realized
losses of $668 on these sales.

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

                                                                                 1997          1996
                                                                                 ----          ----
<S>                                                                         <C>           <C>
Investments carried at amortized cost:
   Fixed maturities available for sale                                       $    25,129   $    (1,518)
   Fixed  maturities  reclassified  from  available  for  sale  to  held to       44,550        53,426
maturity
Investments carried at estimated fair value:
   Equity securities                                                              28,112        14,922
Effect on other balance sheet accounts                                           (11,321)      (11,123)
Deferred income taxes                                                            (29,497)      (18,518)
                                                                             -----------   -----------
     Net unrealized investment gains                                         $    56,973   $    37,189
                                                                             ===========   ===========
</TABLE>

     The carrying value of investments that were non-income producing during the
three year period  ended  December  31, 1997 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 years  ended  December  31, are as
follows:
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>           <C>
Deferred policy acquisition costs:
  Balance, beginning of year                                                $  72,438     $  56,568     $  48,905
  Capitalization of expenses                                                   34,220        19,337        18,565
  Interest accretion                                                            5,802         4,075         3,779
  Amortization                                                                (27,207)       (7,401)      (12,080)
  Amounts related to fair value adjustment of fixed maturity securities       (20,631)         (141)       (2,601)
                                                                           ----------    -----------    ---------
  Balance, end of year                                                      $  64,622     $  72,438      $ 56,568
                                                                            =========     =========      ========

Cost of business acquired:
  Balance, beginning of year                                                 $200,710      $163,660      $132,623
  Additions                                                                   124,052        60,181        52,156
  Interest accretion                                                           18,157        12,210         9,862
  Amortization                                                                (47,741)      (34,908)      (26,394)
  Amounts related to fair value adjustment of fixed maturity securities         4,165         1,658        (4,587)
  Impact of realization of acquired tax benefits                                   837       (2,091)           --
                                                                           -----------   ----------      --------
  Balance, end of year                                                       $300,180      $200,710      $163,660
                                                                             ========      ========      ========
</TABLE>


     The estimated  amortization and interest  accretion of the cost of business
acquired for the five years ending December 31, 2002 are as follows:
<TABLE>

                                                                                Interest           Estimated
                                                          Amortization          Accretion        Net Decrease

        <S>                                               <C>                <C>                 <C>
         1998                                              $  54,932          $  17,981           $  36,951
         1999                                                 50,534             15,665              34,869
         2000                                                 44,890             13,358              31,532
         2001                                                 39,675             11,158              28,517
         2002                                                 34,783              9,587              25,196
</TABLE>


6.    Insurance Liabilities and Reinsurance

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

                                                                                             1997          1996
                                                                                             ----          ----
<S>                                                                                     <C>           <C>
   Universal life                                                                        $ 1,414,374   $    939,635
   Annuities                                                                               1,072,062        527,324
                                                                                         -----------   ------------
                                                                                         $ 2,486,436   $  1,466,959
                                                                                         ===========   ============


Future policy benefits:
   Traditional life                                                                      $   866,585   $    659,718
   Accident and health                                                                         2,605          3,090
   Supplementary contracts                                                                    12,393         18,737
                                                                                         -----------   ------------
                                                                                         $   881,583   $    681,545
                                                                                         ===========   ============
</TABLE>
     Approximately  72%  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  reinsured and a 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>

                                                                                         1997           1996
                                                                                         ----           ----

<S>                                                                                   <C>               <C>
Amounts receivable from reinsurers                                                    $1,175,922        $184,234
Cost of business acquired                                                                193,708          88,748
Insurance liabilities                                                                  1,364,453         245,361
</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 agreement, Great Southern is required to
reimburse the Reinsurer for the amount of the unrecovered ceding commission.

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

                                                                                          1997            1996
                                                                                          ----            ----

<S>                                                                                    <C>            <C>
Amounts recoverable for ceded future policy benefits                                   $ 1,532,449    $   350,062
Unrecovered ceding commission                                                             (144,478)       (61,127)
Amounts recoverable on ceded policy and contract claims                                     15,362         10,223
Amounts recoverable on paid losses                                                           5,971          3,247
Other                                                                                       20,375         11,618
                                                                                     -------------   ------------
                                                                                       $ 1,429,679    $   314,023
                                                                                       ===========    ===========
</TABLE>



<PAGE>



     Amounts  receivable  from  reinsurers  include $14,713 and $13,269 from one
unrelated  insurance company at December 31, 1997 and 1996,  respectively.  Also
included in amounts  receivable  from  reinsurers  is $149,141 and $100,122 from
Financial Assurance at December 31, 1997 and 1996, respectively.

     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,  1997,  no
allowance has been established as all amounts are deemed collectible.

     Premiums  ceded under  reinsurance  agreements  were  $48,279,  $35,050 and
$41,224 for the years ended  December  31,  1997,  1996 and 1995,  respectively.
Reinsurance  recoveries  netted  against  other  policyholder  benefits  totaled
$55,825,  $50,678 and $32,139 for the years ended  December 31,  1997,  1996 and
1995, 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. The
risk fees paid to the  reinsurers  under these treaties  totaled $766,  $884 and
$1,194 for the years ended December 31, 1997, 1996 and 1995, respectively. These
fees are  charged  against  premiums  and policy  revenues  in the  consolidated
statement  of  income.  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  ($80,260  at
December  31,  1997) to  secure  obligations  to the  reinsurer.  The  Insurance
Companies are in compliance with all requirements at December 31, 1997.

7.    Notes Payable

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

                                                                                             1997          1996
                                                                                             ----          ----

<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 7/8% at December 31, 1997), 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                                      8,297         8,584
Unsecured discounted $5,000 note, bearing interest at an effective interest rate of
12.0% due 2015                                                                                 3,015         2,981
Other                                                                                            572           747
                                                                                          ----------     ---------
                                                                                          $  132,884     $ 133,312
                                                                                          ==========     =========
</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:
<TABLE>

                  <S>                                                             <C>
                  1998                                                            104.6250%
                  1999                                                            102.3125%
                  2000 and thereafter                                             100.0000%
</TABLE>


     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 February 1997. 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 Landmark Mortgage Company, 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 issued to the Seller 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, 1997
was $4,396. The $5,000 note is subject to contractual set-off rights and is held
under a pledge  and escrow  agreement  to secure  the  Seller's  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, 1997.

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

           <S>                                                               <C>
           1998                                                               $         628
           1999                                                                         618
           2000                                                                       4,157
           2001                                                                       7,702
           2002                                                                       7,748
           Later years                                                              112,031
                                                                               ------------
                                                                                $   132,884
</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, 1997 was:
<TABLE>

                                                                                  Reported Statutory
Company                                                                          Capital and Surplus

<S>                                                                             <C>
United Fidelity                                                                 $        98,057
Great Southern                                                                          128,720
College Life                                                                             38,728
National Farmers                                                                         33,938
Victory                                                                                   5,958
Ohio State                                                                              117,951
Investors Guaranty                                                                       31,949
</TABLE>



<PAGE>



     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, 1997 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,
                                                                                             1997          1996
                                                                                             ----          ----
<S>                                                                                      <C>           <C>
Capital stock and surplus, on basis of statutory accounting practices, as filed with
insurance regulatory authorities                                                          $  124,600    $  115,246
Cost of business acquired                                                                    129,831       109,093
Deferred policy acquisition costs                                                             64,622        72,438
Invested assets adjustments                                                                   67,630        44,699
Reserves for future policy benefits                                                           52,728        62,506
Asset valuation reserve and interest maintenance reserve                                      31,766        24,833
Surplus debentures                                                                          (137,130)     (137,714)
Reserve credits on financial reinsurance treaties                                            (30,735)      (42,899)
Deferred income taxes                                                                        (58,127)      (43,195)
Other
                                                                                               1,677         2,015
                                                                                          ----------    ----------
Stockholder's equity, on basis of GAAP                                                    $  246,862    $  207,022
                                                                                          ==========    ==========
</TABLE>



<PAGE>



Net Income
<TABLE>

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

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                        <C>          <C>            <C>
Net income, on basis of statutory accounting practices, as filed with
insurance regulatory authorities                                            $  163,927   $    47,124    $   23,140
Amortization of cost of business acquired                                      (29,584)      (22,698)      (16,532)
Net change in deferred policy acquisition costs                                 10,464        13,191        10,264
Change in realized gains (losses)                                                3,020           895        (7,627)
Adjustment of policy and claim liabilities                                      18,347         6,242         6,889
Adjustment of reserves and premiums on financial reinsurance                   (12,164)       (9,188)        4,098
Deferred income tax provision                                                   (1,909)       (5,576)        3,546
Interest expense on notes payable                                               (9,368)      (12,263)      (10,593)
Adjustment of fixed maturity securities amortization                             2,347         2,064         4,176
Effects of reinsurance transaction                                            (124,585)        6,048            --
Amortization of debt acquisition costs                                             (73)         (336)         (301)
Other                                                                            1,634         1,771         2,670
                                                                           -----------   -----------    ----------
Net income, on basis of GAAP                                               $    22,056   $    27,274    $   19,730
                                                                           ===========   ===========    ==========
</TABLE>

9.    Income Taxes

     Americo  Life,  Inc.  and  certain  of  the  Insurance   Companies  file  a
consolidated  federal  life and  non-life  income tax return  with FHC and FHC's
non-life  subsidiaries.  The  remaining  Insurance  Companies  file  separate or
consolidated life insurance  company federal income tax returns,  as applicable.
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. <TABLE>

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

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                         <C>           <C>           <C>
Current tax provision                                                       $    4,953    $    7,937    $   14,672
Deferred tax provision                                                           4,277         5,576        (3,546)
                                                                            ----------    ----------    ----------
   Provision for income taxes                                               $    9,230     $  13,513    $   11,126
                                                                            ==========     =========    ==========
</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>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                         <C>          <C>            <C>
Computed tax at statutory rate                                              $  10,950    $   14,275     $   10,800
Increase (decrease) in tax resulting from:
   Increase in valuation allowance                                                 --            --            572
   Availability of dividends received deduction to offset taxable
temporary differences                                                          (1,376)         (503)          (934)
   Other                                                                         (344)         (259)           688
                                                                            ---------      --------      ---------
     Provision for income taxes                                             $   9,230      $ 13,513      $  11,126
                                                                            =========      ========      =========
</TABLE>



<PAGE>



     The provision for deferred income taxes for the years ended December 31, is
comprised of the following:
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>            <C>
Investments                                                                $    3,978    $    2,310     $   (7,759)
Reserves                                                                      (14,023)          727            642
Reinsurance                                                                      (328)         (583)         1,767
Cost of business acquired                                                       7,322        (2,991)         1,467
Deferred policy acquisition costs                                               6,642         3,537            333
Net operating losses                                                              481         2,333            444
Other                                                                             205           243           (440)
                                                                             --------      --------     ----------
     Provision for deferred income taxes                                     $  4,277      $  5,576     $   (3,546)
                                                                             ========      ========     ==========
</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>

                                                                                             1997          1996
                                                                                             ----          ----
<S>                                                                                       <C>          <C>
Deferred tax liability:
    Cost of business acquired                                                             $   47,184    $   39,862
    Investments                                                                                7,910         3,932
    Deferred policy acquisition costs                                                         12,779         6,137
    Reinsurance                                                                                2,645         3,228
    Net unrealized investment gains                                                           30,156        19,497
    Other                                                                                        201           321
                                                                                           ---------    ----------
         Total deferred tax liability                                                        100,875        72,977
                                                                                           ---------    ----------
Deferred tax asset:
    Policy reserves                                                                           44,847        30,891
    Utilization of net operating losses                                                          455           902
    Other deductible temporary differences                                                        --           542
                                                                                           ---------     ---------
Deferred income tax assets before valuation allowances                                        45,302        32,335
    Less: valuation allowance                                                                 (2,553)       (2,553)
                                                                                           ---------     ---------
         Total deferred tax asset                                                             42,749        29,782
                                                                                           ---------     ---------
Net deferred tax liability                                                                 $  58,126     $  43,195
                                                                                           =========     =========
</TABLE>

     A valuation  allowance is provided at December 31, 1997 and 1996 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, 1997, 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 1997.

     At December 31, 1997,  the Insurance  Companies  with balances in their PSA
had aggregate  balances in their  Shareholder  Surplus Accounts of approximately
$94,264 from which distributions could be made without incurring any federal tax
liability with respect to the PSA accounts.

     The  Company  has a  non-life  regular  net  operating  loss  carryover  of
approximately  $1,300 which will expire in2008 if unutilized  and no alternative
minimum tax net operating loss carryover.


<PAGE>



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
$3,216, $1,931 and $1,881 in 1997, 1996 and 1995, 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,  1997 are as
follows: <TABLE>

                  <S>                                            <C>
                   1998                                           $    2,556
                   1999                                                2,348
                   2000                                                1,159
                   2001                                                  818
                   2002 and thereafter                                 3,884
                                                                ------------
                                                                  $   10,765
</TABLE>

     Great  Southern is a defendant  in four  purported  class  action  lawsuits
alleging  deceptive  sales  practices  in the  marketing  of its whole  life and
universal life insurance policies and seeking unspecified compensatory, punitive
and/or  treble  damages.  These  cases are:  Harriett D. Mann and Dan C. Wynn v.
Great  Southern  Life  Insurance  Company  (U.S.  District  Court for the Middle
District of Florida,  filed on  September  22,  1997);  Irwin  Ginsberg v. Great
Southern Life Insurance  Company (U.S.  District Court for the Southern District
of Florida,  filed on February 24, 1997);  James Morgan McGraw,  Frances Norman,
Robert Harry Bishop and Charlene McGraw v. Great Southern Life Insurance Company
and Ervin  Jackson  (U.S.  District  Court for the  Eastern  District  of Texas,
amended petition alleging class action filed July 1, 1997); and Yvonne H. Massey
v. Great Southern Life Insurance Company, Ralph Williams & Associates,  Inc. and
Ralph Williams (U.S. District Court for the Northern District of Alabama,  filed
September 19, 1997).  Great Southern has filed a motion before the U.S. Judicial
Panel on Multidistrict  Litigation requesting that these lawsuits be transferred
to a  single  district  and  consolidated  for  pretrial  proceedings.  A  fifth
purported class action lawsuit making similar  allegations,  Ernest Marqoquin v.
Great Southern Life Insurance Company and Dale Darnell,  was filed against Great
Southern on February 11, 1998 in Cameron County District Court,  Texas. On March
19, 1998,  Great Southern  removed this case to the United States District Court
for the Southern District of Texas.  Great Southern intends to seek to have this
case  added to the  consolidated  multidistrict  litigation  proceedings.  Great
Southern  intends  to  defend  all these  cases  vigorously.  The  amount of any
liability  that  may  arise  as a  result  of these  cases,  if any,  cannot  be
reasonably estimated at this time and no provision for loss has been made in the
accompanying financial statements.

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

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, 1997 and 1996.


12.   Segment Information

     Consolidated  business  segment  information  as of and for the years ended
December 31, is summarized as follows:
<TABLE>

                                                                    1997              1996             1995
                                                                    ----              ----             ----
<S>                                                           <C>              <C>               <C>
Revenues:
   Individual life and other insurance                         $      422,037   $      365,071    $      283,168
   Corporate and other non-insurance                                   16,240            6,528            10,895
                                                               --------------    -------------    --------------
     Total                                                     $      438,277   $      371,599    $      294,063
                                                               ==============   ==============    ==============

Income before provision for income taxes:
   Individual life and other insurance                         $       23,465  $        25,398    $       23,439
   Corporate and other non-insurance                                    7,821           15,389             7,417
                                                               --------------   --------------   ---------------

     Total                                                     $       31,286  $        40,787    $       30,856
                                                               ==============   ==============    ==============

Assets:
   Individual life and other insurance                          $   3,968,866    $   2,712,489      $  2,394,397
   Corporate and other non-insurance                                   69,152           57,094            65,408
                                                               ---------------  ---------------   --------------
     Total                                                      $   4,038,018    $   2,769,583      $  2,459,805
                                                                =============    =============    ==============
</TABLE>

     Individual  life and other  insurance  revenues  include  premiums  paid by
policyholders on traditional  insurance contracts,  product charges on universal
life and investment-type  contracts, other income, allocations of net investment
income and net realized investment gains and losses.

     Corporate and other non-insurance  revenues represent  investment income on
equity  affiliates  and  unallocated   assets,   and  unallocated  net  realized
investment gains and losses.

     Individual  life and other  insurance  income  before  provision for income
taxes represents total revenue,  policy and claim benefits,  operating  expenses
and net realized investment gains and losses.  Corporate and other non-insurance
income before provision for income taxes represents corporate revenues, expenses
not directly allocable to product segments, debt service costs,  unallocated net
realized  investment gains and losses and amortization  expense relating to debt
acquisition costs and goodwill. Corporate and non-insurance amortization expense
was $941,  $336 and $301 for the years ended  December 31, 1997,  1996 and 1995,
respectively.

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 leased by FHC.

     The Company leases to FHC a building which is occupied by FHC. In addition,
the  Company  utilizes  a  laboratory  which  is   partially-owned   by  several
stockholders of FHC for testing purposes.

     Amounts  due from (to)  affiliates  at December  31, 1997 and 1996  include
$(2,036) and $(293) due from (to) FHC arising from  intercompany  tax allocation
and other amounts from CIG and FHC arising from the normal course of business.


<PAGE>



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

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                         <C>           <C>           <C>
Data processing agreement between the Company and FHC                       $   11,802    $    9,778    $    8,073
Advisory agreement between the Company and FHC                                   7,180         6,143         4,750
Air transportation cost sharing agreement                                          667           765           551
Rental expense                                                                     906           913           899
Laboratory services                                                                312           178           163
</TABLE>

     College Life and Great Southern are involved in coinsurance agreements with
Financial Assurance.  Under the terms of the agreements,  College Life and Great
Southern agree to reinsure certain business,  as defined in a separate marketing
agreement,  to Financial  Assurance on a 50%  coinsurance  basis.  Additionally,
College Life and Great  Southern  agree to reimburse  Financial  Assurance for a
portion of the policy issue and maintenance  expenses  relating to servicing the
policies.

14.   Subsequent Event

     The  Company  has agreed to sell 100% of the  outstanding  common  stock of
Investors  Guaranty to an unrelated  party.  The Company will continue to assume
the risks  associated  with  Investors  Guaranty  policies  on a 70% quota share
basis. The Company intends to reinsure these risks on an assumption basis in the
future.



<PAGE>





                       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  27,  1998,  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.




PRICE WATERHOUSE LLP
Kansas City, Missouri
March 27, 1998


<PAGE>



                                                                    Schedule II
                       Americo Life, Inc. and Subsidiaries

                  Condensed Financial Information of Registrant
                                  Balance Sheet
                             (Dollars in thousands)
                           December 31, 1997 and 1996
<TABLE>


                                                                                             1997          1996
                                                                                             ----          ----
                                     Assets
<S>                                                                                      <C>           <C>
Equity securities, at market (cost: $6,855 and $5,228)                                    $   12,368   $     7,565
Investment in subsidiaries                                                                   227,784       184,584
Cash and cash equivalents                                                                         96         5,259
Surplus debentures receivable                                                                137,305       137,845
Property and equipment, net                                                                    2,127         2,126
Other assets                                                                                  10,506        11,119
                                                                                           ---------     ---------
   Total assets                                                                            $ 390,186     $ 348,498
                                                                                           =========     =========

                         Liabilities and Stockholder's Equity
Notes payable                                                                              $ 132,312     $ 132,564
Accrued interest payable                                                                         908           915
Amounts due to affiliates                                                                        332         1,515
Deferred income taxes                                                                          5,288         2,612
Other liabilities                                                                              4,484         3,870
                                                                                          ----------     ---------
   Total liabilities                                                                         143,324       141,476
                                                                                          ----------     ---------

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
Net unrealized investment gains                                                               56,973        37,189
Retained earnings                                                                            186,134       166,078
                                                                                          ----------    ----------
   Total stockholder's equity                                                                246,862       207,022
                                                                                          ----------    ----------
   Total liabilities and stockholder's equity                                              $ 390,186     $ 348,498
                                                                                           =========     =========
</TABLE>

                  See notes to condensed financial information
<PAGE>

                                                                     Schedule II
                                 Americo Life, Inc. and Subsidiaries

                          Condensed Financial Information of Registrant
                                      Statement of Income
                                    (Dollars in thousands)
                  For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----
<S>                                                                        <C>           <C>           <C>
Income
   Management and data processing fees from subsidiaries                    $   13,602    $  12,055     $  10,708
   Interest income on surplus debentures receivable                             12,757       12,842        11,053
   Net investment income                                                           428          415           819
   Net realized investment gains (losses)                                         (430)         107            --
   Other income                                                                  4,936        6,673         1,557
                                                                           ------------  -----------   ----------
     Total income                                                               31,293       32,092        24,137
                                                                           -----------   ----------    ----------

Expenses
   Management and advisory fees to parent                                       18,982       15,921        12,823
   Interest expense                                                             12,089       12,263        10,593
   Other operating expenses                                                      2,092        2,958         1,454
   Amortization expense                                                            941          664           301
                                                                             ---------    ---------    ----------
     Total expenses                                                             34,104       31,806        25,171
                                                                             ---------    ---------    ----------
     Income (loss) before provision for (benefit from) income taxes and
 equity in income of subsidiaries                                               (2,811)         286        (1,034)
Provision for (benefit from) income taxes                                          614        1,418          (581)
                                                                             ---------    ---------    ----------
     Loss before equity in income of subsidiaries                               (3,425)      (1,132)         (453)
Equity in income of subsidiaries                                                25,481       28,406        20,183
                                                                             ---------    ---------    ----------
     Net income                                                              $  22,056    $  27,274    $   19,730
                                                                             =========    =========    ==========
</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, 1997, 1996 and 1995
<TABLE>

                                                                               1997          1996          1995
                                                                               ----          ----          ----

<S>                                                                        <C>           <C>            <C>
Cash flows from operating activities
  Net income                                                                $  22,056     $  27,274      $  19,730
  Adjustments to reconcile net income to net cash provided (used) by
operating activities:
    Undistributed equity in earnings of subsidiaries                          (25,481)      (28,406)       (20,183)
    Dividends received from subsidiaries                                           --         8,000             --
    Depreciation and amortization                                               1,572           943            462
    (Increase) decrease in other assets, net of amortization expense              328          (545)        (4,820)
    Decrease in other liabilities                                                 (96)       (1,220)        (1,332)
    Provision for deferred income taxes                                         1,564           408            428
    Increase (decrease) in amounts due to/from affiliates                      (1,183)        4,541         (2,684)
    Other changes                                                                 613          (535)           306
                                                                            ---------     ---------      ---------
    Total adjustments                                                         (22,683)      (16,814)       (27,823)
                                                                            ---------     ---------      ---------
    Net cash provided (used) by operating activities                             (627)       10,460         (8,093)
                                                                            ---------     ---------     ----------

Cash flows from investing activities
  Payment for subsidiary acquired                                                  --            --        (23,252)
  Receipt from UFL for subsidiary acquired                                         --            --          5,500
  Amounts collected on surplus debentures receivable                              524           750             --
  Capital contribution to subsidiary acquired                                      --          (261)            --
  Payment for equity subsidiary acquired                                           --        (4,550)            --
  Purchases of equity securities                                               (5,393)         (663)        (6,289)
  Proceeds from sales of equity securities                                      3,507         3,368             --
  Mortgage loans originated                                                        --           (71)           (74)
  Purchases of property and equipment, net                                       (633)       (1,814)            --
                                                                           -----------   ----------      ---------
    Net cash used by investing activities                                      (1,995)       (3,241)       (24,115)
                                                                           ----------    -----------     ---------

Cash flows from financing activities
  Notes payable issued                                                             --            --         21,000
  Repayments of notes payable                                                    (541)         (506)          (244)
  Debt issue costs                                                                 --            --           (737)
  Dividends paid                                                               (2,000)       (2,000)        (2,000)
                                                                           -----------   ----------     ----------
  Net cash provided (used) by financing activities                             (2,541)       (2,506)        18,019
                                                                           -----------   ----------     ----------

Net increase (decrease) in cash and cash equivalents                           (5,163)        4,713        (14,189)
Cash and cash equivalents at beginning of year                                  5,259           546         14,735
                                                                           -----------   ------------   ----------
Cash and cash equivalents at end of year                                   $       96    $    5,259    $       546
                                                                           ============  ==========    ===========

Supplemental disclosure of cash flow information
  Cash paid during year for interest                                       $   12,095    $   12,280    $    10,432
</TABLE>
                  See notes to condensed financial information

<PAGE>
                                                                    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, 1997, 1996 and 1995

     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  Company  sold  its  interest  in a  subsidiary  acquired  in 1995 to a
wholly-owned  subsidiary,  in exchange for a surplus  debenture  for $38,000 and
cash of $5,500.

     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, 1997, 1996 and 1995
<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>
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%
                                 ============      ============     ============      ============       =====

1995
Insurance in force               $ 22,836,922      $  4,564,600     $  4,107,256      $ 22,379,578       18.4%
                                 ============      ============     ============      ============       =====

Premiums                         $    176,351      $     41,224     $      5,003      $    140,130        3.6%
                                 ============      ============     ============      ============       =====
</TABLE>



<PAGE>
                                                                     Schedule V

                      Americo Life, Inc. and Subsidiaries

                        Valuation and Qualifying Accounts
                             (Dollars in thousands)
              For the Years Ended December 31, 1997, 1996 and 1995
<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>
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
                                               ===========    ==========   ==========    ==========   ===========


1995
Reserve for impairment of mortgage loans
on real estate                                 $       908    $       --   $       --    $      608    $       300
Write-down for impairment of real estate               351            --           --           231            120
Allowance for receivables from agents                2,467           195           --           212          2,450
                                               -----------   ------------  -----------   -----------    ----------
     Total                                     $     3,726   $       195   $       --    $    1,051     $    2,870
                                               ===========   ============  ===========   ==========     ==========
</TABLE>
                         ----------------------------------------------

(1) Amounts transferred from other allowance accounts.