<PAGE>

[LETTERHEAD]




     I, EDWARD J. FREEL, SECRETARY OF STATE OF 
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF DESIGNATION OF ""ARM FINANCIAL GROUP,
INC.'', FILED IN THIS OFFICE ON THE SIXTEENTH DAY OF JULY, A.D.
1998, AT 9 0'CLOCK A.M.







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  STATE OF DELAWARE
  SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/16/1998
  981277351 - 2343817

             CERTIFICATE OF DESIGNATION OF PREFERENCES AND RIGHTS
                                    OF THE
          SERIES A FIXED/ADJUSTABLE RATE CUMULATIVE PREFERRED STOCK

                            ($200.00 Stated Value)
                                                 
                                     of

                           ARM FINANCIAL GROUP, INC.

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

                        Pursuant to Section 151 of the

              General Corporation Law of the State of Delaware

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


    The undersigned DOES HEREBY CERTIFY that the following resolution was 
duly adopted by the Board of Directors (the ""BOARD'') OF ARM Financial 
Group, Inc., a Delaware corporation (hereinafter called the ""CORPORATION''), 
by unanimous written consent in lieu of a meeting dated as of July 14, 1998, 
with certain of the designations, preferences and rights having been fixed by 
the Pricing Committee of the Board (the ""COMMITTEE''), at a meeting on July 
15, 1998, pursuant to authority delegated to it by the Board pursuant to 
authority delegated to it by the Board pursuant to the provisions of Section 
141(c)(1) of the General Corporation Law of the State of Delaware.

         RESOLVED that, pursuant to authority expressly granted to and vested 
     in the Committee by the Board and in the Board by provisions of the 
     Restated Certificate of Incorporation of the Corporation, as amended 
     (the ""CERTIFICATE OF INCORPORATION''), the issuance of a series of 
     Preferred Stock, par value $.01 per share (the ""PREFERRED STOCK''), 
     which shall consist of 375,000 of the 10,000,000 shares of Preferred 
     Stock which the Corporation now has authority to issue, is authorized, 
     and the Board and the Committee, pursuant to the authority expressly 
     granted to the Committee by the Board pursuant to the provisions of 
     Section 141(c)(1) of the General Corporation Law of the State of 
     Delaware and the Certificate of Incorporation, fix the powers, 
     designations, preferences and relative, participating, optional or other 
     special rights, and the qualifications, limitations or restrictions 
     thereof, of the shares of such series (in addition to the powers, 
     designations, preferences and relative participating, optional or other 
     special rights, and the qualifications, limitations or restrictions 
     thereof, set forth in the Certificate of Incorporation which may be 
     applicable to the Preferred Stock as follows:  
 
         1.   DESIGNATION AND AMOUNT; FRACTIONAL SHARES. The designation for 
     such series of the Preferred Stock authorized by this resolution shall 
     be the Series A Fixed/Adjustable Rate Cumulative Preferred Stock, par 
     value $.01-pershare, with a stated value of $200.00 per share (the 
     ""Series A Fixed/Adjustable Rate Preferred Stock''). The stated value per 
     share of Series A Fixed/Adjustable Rate Preferred Stock shall not for 
     any purpose be considered to be a determination by the board or the 
     Committee with respect to the capital and surplus of the Corporation. The 
     number of shares of Series A Fixed/Adjustable Rate Preferred Stock shall 
     be 375,000. The Series A Fixed/Adjustable Rate Preferred Stock is 
     issuable in whole shares only.

         2.   DIVIDENDS. (a) Holders of shares of Series A Fixed/Adjustable 
     Rate Preferred Stock will be entitled to receive cash dividends, when, 
     as if declared by the Board or the Committee out of assets of the 
     corporation legally available for payment. dividends on the Series A Fixed/
     Adjustable Rate Preferred Stock, calculated as a percentage of the stated 
     value, will be payable quarter on March 15, June 15, September 15 and 
     December 15 of each year (each a ""DIVIDEND PAYMENT DATE''), commencing 
     September 15, 1998. From the date of issuance of the Series A Fixed/
     Adjustable Rate Preferred Stock and continuing through June 15, 2003, the 
     rate of such dividend will be 5.575% per annum. After June 15, 2003, 
     dividends on the Series A Fixed/Adjustable Rate Preferred Stock will be 
     payable quarterly on each dividend payment date at the Applicable Rate 
     (as defined in paragraph 3) from time to time in effect. The Applicable 
     Rate per annum for any dividend period beginning on or after June 15, 2003
     will be equal to .625% plus the highest of the Treasury Bill Rate, the 
     Ten-Year Constant Maturity Rate and the Thirty-Year Constant Maturity 
     Rate (each defined in paragraph 3), as determined in advance of such 
     dividend period. The Applicable Rate per annum for any dividend period 
     beginning on or after June 15, 2003 will not be less than 6.05% not greater
     than 12.05% (without taking into account any adjustments set forth in 
     paragraph 2(b).

              Dividends on shares of the Series A Fixed/Adjustable Rate 
     Preferred Stock will be cumulative from the date of initial issuance of 
     such shares of Series A Fixed/Adjustable Rate Preferred Stock. Dividends 
     will be payable, in arrears, to holders of record as they appear on the 
     stock books of the Corporation on such record dates, not more than 60 days 
     nor less than 10 days preceding the payment dates thereof, as shall be 
     fixed by the Board or the Committee. The amount of dividends payable for 
     the initial dividend period or any period shorter than a full dividend 
     period shall be calculated on the basis of a 360-day year of twelve 30-day
     months. No dividends may be declared or paid or set apart for payment on 
     any Parity Preferred Stock (as defined in paragraph 10(b)) with regard to 
     the payment of dividends unless there shall also be or have been declared 
     and paid or set apart for payment on the Series A Fixed/Adjustable Rate 
     Preferred

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                                      3



     Stock, like dividend for all dividend payment periods of the Series A
     Fixed/Adjustable Rate Preferred Stock ending on or before the dividend
     payment date of such Parity Preferred Stock ratably in proportion to the
     respective amounts of dividends (x) accumulated and unpaid or payable on
     such Parity Preferred Stock, on the one hand, and (y) accumulated and
     unpaid through the dividend payment period or periods of the Series A
     Fixed/Adjustable Rate Preferred Stock next preceding such dividend payment
     date, on the other hand.

               Except as set forth in the preceding sentence, unless full 
     cumulative dividends on the Series A Fixed/Adjustable Rate Preferred Stock
     have been paid, no dividends (other than in common Stock of the
     Corporation) may be paid or declared and set aside for payment or other
     distribution made upon the Common Stock or any other stock of the
     Corporation ranking junior to or on a parity with the Series A
     Fixed/Adjustable Rate Preferred Stock as to dividends, nor may any Common
     Stock or any other stock of the Corporation ranking junior to or on a party
     with the Series A Fixed/Adjustable rate Preferred Stock as to dividends be
     redeemed, purchased or otherwise acquired for any consideration (or any
     payment be made to or available for a sinking fund for the redemption of
     any shares of such stock; PROVIDED, HOWEVER, that any moneys theretofore
     deposited in any sinking fund with respect any preferred stock of the
     Corporation in compliance with the provision of such sinking fund may
     thereafter be applied to the purchase or redemption of such preferred stock
     in accordance with the terms of such sinking fund, regardless of whether at
     the time of such application full cumulative dividends upon shares of the
     Series A Fixed /Adjustable Rate Preferred Stock outstanding to the last
     dividend payment date shall have been paid or declared and set apart for
     payment) by the Corporation PROVIDED that any such junior or parity
     Preferred Stock or Common Stock may be converted into or exchanged for
     stock of the Corporation ranking junior to the Series A Fixed/Adjustable
     Rate Preferred Stock as to dividends.

          (b) If at any times prior to January 15, 2000, one or more amendments
     to the Internal Revenue Code of 1986, as amended (the CODE"), are enacted
     which reduce the percentage of the dividends received deduction (currently
     70%) as specified in Section 243(a)(1) of the Code or any successor
     provision (the "DIVIDENDS RECEIVED PERCENTAGE"), the amount of each
     dividend (if declared) on each share of the Series A Fixed/Adjustable Rate
     Preferred Stock for dividend payments made on or after the effective date
     of such change in the Code will be adjusted by multiplying the amount of
     the dividend payable determined as described above (before adjustment) by a
     factor, which will be the number determined in accordance with the
     following formula (the "DRD FORMULA"), and rounding the result to the
     nearest cent (with one-half cent rounded up):


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                                      4



                                  1-[35(1-70)]
                                  _____________
                                  1-[35(1-DRP)]

          For the purpose of the DRD Formula, "DRP" means the Dividends Received
     Percentage (expressed as a decimal) applicable to the dividend in question;
     PROVIDED, HOWEVER, that if the Dividends Received Percentage applicable to
     the dividend in question shall be less than 50%, the  DRP shall equal
     50. No amendment to the Code, other than a change in the percentage of the
     dividends received deduction set forth in Section 243(a)(1) of the Code, or
     any successor provision thereto, will give rise to an adjustment.
     Notwithstanding the foregoing provisions, in the event that, with respect
     to any such amendment, the Corporation receives either an unqualified
     opinion of nationally recognized independent tax counsel selected by the
     Corporation or a private letter ruling or similar form of authorization
     from the Internal Revenue Service ("IRS") to the effect that such an
     amendment does not apply to dividends payable on the Series A
     Fixed/Adjustable Rate Preferred Stock, then any such amendment will not
     results in the adjustment provided for pursuant to the DRD Formula. The
     opinion reference in the previous sentence will be based upon the
     legislation amending or establishing the DRP or upon a published
     pronouncement of the IRS addressing such legislation

          If any such amendment to the Code is enacted after the dividend
     payable on a Dividend Payment Date has been declared, the amount of the
     dividend payable on such Dividend Payment Date will not be increased;
     instead, additional dividends (the "POST DECLARATION DATE DIVIDENDS") equal
     to the excess, if any, of (x) the product of the dividend paid by the
     Corporation on such Dividend Payment Date and the DRD Formula (where the
     DRP used in the DRD Formula would be equal to the greater of the Dividend
     Received Percentage and .50) applicable to the dividend in question over
     (y) the dividend paid by the Corporation on such Dividend Payment Date,
     will be payable (if declared) to holders of Series A Fixed/Adjustable Rate
     Preferred stock on the record date applicable to the next succeeding
     Dividend Payment Date or, if the Series A Fixed/Adjustable Rate Preferred
     Stock is called for redemption prior to such record date, to holders of
     Series A Fixed/Adjustable Rate Preferred Stock on the redemption date, as
     the case may be, in addition to any other amounts payable on such date.
     Notwithstanding the foregoing provisions, if with respect to any such
     amendment, the Corporation receives either an unqualified opinion of
     nationally recognized independent tax counsel selected by the Corporation
     or a private letter ruling or similar form of authorization from the IRS to
     the effect that such amendment does not apply to a dividend so payable on
     the Series A Fixed/Adjustable Rate Preferred Stock, then such amendment
     will not result in the



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                                       5


     payment of Post Declaration Date Dividends. The opinion referenced in
     the previous sentence will be based upon the legislation amending or
     establishing the DRP or upon a published pronouncement of the IRS 
     addressing such legislation.

          If any such amendment to the Code is enacted and the reduction in the
     Dividends Received Percentage retroactively applies to a Dividend Payment
     Date as to which the Corporation previously paid dividends on the Series A
     Fixed/Adjustable Rate Preferred Stock (each, an "AFFECTED DIVIDEND PAYMENT
     DATE"), the Corporation will pay (if declared) additional dividends (the
     "RETROACTIVE DIVIDENDS") to holders of Series A Fixed/Adjustable Rate
     Preferred Stock on the record date applicable to the next succeeding
     Dividend Payment Date (or, if such amendment is enacted after the dividend
     payable on such Dividend Payment Date has been declared, to holders of
     Series A Fixed/Adjustable Rate Preferred Stock on the record date following
     the date of enactment) or, if the Series A Fixed/Adjustable Rate Preferred
     Stock is called for redemption prior to such record date, to holders of
     Series A Fixed/Adjustable Rate Preferred Stock on the redemption date, as
     the case may be, in an amount equal to the excess of (x) the product of the
     sum of the dividends paid by the Corporation on each Affected Dividend
     Payment Date and the DRD Formula (where the DRP used in the DRD Formula
     would be equal to the greater of the Dividends Received Percentage and .50)
     applied to each Affected Dividend Payment Date over (y) the sum of the
     dividends paid by the Corporation on each Affected Dividend Payment Date.
     The Corporation will only make one payment of Retroactive Dividends for any
     such amendment. Notwithstanding the foregoing provisions, if, with respect
     to any such amendment, the Corporation receives either an unqualified
     opinion of nationally recognized independent tax counsel selected by the
     Corporation or a private letter ruling or similar form of authorization
     from the IRS to the effect that such amendment does not apply to a dividend
     payable on an Affected Dividend Payment Date for the Series A
     Fixed/Adjustable Rate Preferred Stock, then such amendment will not result
     in the payment of Retroactive Dividends with respect to such Affected
     Dividend Payment Date. The opinion referenced in the previous sentence will
     be based upon the legislation amending or establishing the DRP or upon a
     published pronouncement of the IRS addressing such legislation.

          Notwithstanding the foregoing, no adjustment in the dividends payable
     by the Corporation will be made, and no Post Declaration Date Dividends or
     Retroactive Dividends will be payable by the Corporation, in respect of the
     enactment of any amendment to the Code at any time on or after January 15,
     2000 that reduces the Dividends Received Percentage.

          In the event that the amount of dividends payable per share of the
     Series A Fixed/Adjustable Rate Preferred Stock is adjusted pursuant to the
     DRD Formula

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                                       6


     and/or Post declaration Date dividends or Retroactive Dividends are to be
     paid, the corporation will give notice of each such adjustment and if
     applicable, any Post Declaration Date Dividends and Retroactive Dividends
     to the holders of records as they appear on the stock books of the
     Corporation on such record date, not more than 60 days nor less than 10
     days preceding the payment date thereof as shall be fixed by the Board or
     the Committee.

          Unless the context otherwise requires references herein to dividends
     include dividends as adjusted by the DRD Formula, Post Declaration Date
     Dividends and Retroactive Dividends. The Corporation's calculation of the
     dividends payable, as so adjusted and as certified accurate as to 
     calculation and reasonable as to method by the independent certified public
     accountants then regularly engaged by the Corporation, will be final and 
     not subject to review absent manifest error.

          If the Dividends Received Percentage is reduced 50% or less prior to
     January 15,200, the Corporation may at its option, redeem the Series A
     Fixed/Adjustable Rated Preferred Stock as a whole but not in part as
     described in paragraph 7 hereof.

     3. APPLICABLE RATE Except as provided above in paragraph 2, the "APPLICABLE
     RATE" per annum for any dividend period beginning on or after June15,2003
     will be equal to .625% plus the Effective Rate (as defined herein), but not
     less than 6.05% nor greater that 12.05% (without taking into account any
     adjustment as described in paragraph 2(b)). The "EFFECTIVE RATE" for any
     dividend period beginning on or after Jun 15, 2003 will be equal to the
     highest of the Treasury Bill Rate, the Ten-Year Constant Maturity Rate and
     the Thirty-Year Constant Maturity Rate (each as defined herein) for such
     dividend period. If the Corporation determines in good faith that for any
     reason; (i) any one of the Treasury Bill Rate, the Ten-Year Constant
     Maturity Rate or the Thirty-Year Constant Maturity Rate cannot be
     determined for any dividend period beginning on or after June 15, 2003,
     then the Effective Rate for such dividend period will be equal to the
     higher of whichever two of such rates can be so determined; (ii) only Year
     Constant Maturity Rate can be determined for any dividend period beginning
     on or after June 15, 2003, then the Effective Rate for such dividend
     period will be equal to whichever such rates can so be determined; or
     (iii) none of the Treasury Bill Rate, the Ten-Year Constant Maturity Rate
     or the Thirty-Year Constant Maturity Rate can be determined for any
     dividend period beginning on or after June 15, 2003, then the Effective
     Rate for the preceding dividend period will be continued for such dividend
     period.

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                                       7

          The "TREASURY BILL RATE" for each dividend period will be the
     arithmetic average of the tow most recent weekly per annum market discount
     rate (or the one weekly per annum market discount rate if only one such 
     rate is published during the relevant Calendar Period (as defined herein)
     for three- month U.S. Treasury bills, as published weekly by the Federal
     Reserve Board (as defined herein) during the Calendar Period immediately
     preceding the tenth calendar day preceding the dividend period for which
     the dividend rate on the Series A Fixed/Adjustable Rate Preferred Stock is
     being determined.

          The "TEN-YEAR CONSTANT MATURITY RATE" for each dividend period will be
     the arithmetic average of the two most recent weekly per annum Ten-Year
     Average Yields (as defined herein)(or the one weekly per annum Ten-Year
     Average Yield, if only one such yield is published during the relevant
     Calendar Period), as published weekly by the Federal Reserve Board during
     the Calendar Period immediately preceding the tenth calendar day preceding
     the dividend period for which the dividend rate on the Series A
     Fixed/Adjustable Rate Preferred Stock is being determined.

          The "THIRTY-YEAR CONSTANT MATURITY RATE" for each dividend period will
     be the arithmetic average of the two most recent weekly per annum
     Thirty-Year Average Yields (as defined herein) (or the one weekly per annum
     Thirty-Year Average Yield, if only one such yield is published during the
     relevant Calendar Period), as published weekly by the Federal Reserve Board
     during the Calendar Period immediately preceding the tenth calendar day
     preceding the dividend period for which the dividend rate on the Series A
     Fixed/Adjustable Rate Preferred Stock is being determined.

          If the Federal Reserve Board does not publish a weekly annum market
     discount rate, Ten-Year Average Yield or Thirty-Year Yield during any
     applicable Calendar Period, then the Treasury Bill Rate, Ten-Year Constant
     Maturity Rate or Thirty-Year Constant Maturity Rate, as the case may be,
     for such dividend period will be the arithmetic average of the two most
     recent weekly per annum market discount rates for three-month U.S. Treasury
     bill, Ten-Year Average Yields or Thirty-Year Average Yields, as the case
     may be (or the one weekly per annum rate, if only one such rate is
     published during the relevant Calendar Period), as published weekly during
     such Calendar Period by any Federal Reserve Bank or by any U.S. Government
     department or agency selected by the Corporation. If any such rate is not
     published by the Federal Reserve Board or by any Federal Reserve Bank or by
     any U.S. Government department or agency during such Calendar Period then
     the Treasury Bill Rate, Ten-Year Constant Maturity Rate or Thirty-Year
     Constant Maturity Rate or Thirty-Year Constant Maturity Rate for such
     dividend period will be the arithmetic of the tow most recent weekly per
     annum (i) in the case of the Treasury Bill Rate, market discount rate (or
     the one weekly
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                                       8

     per annum market discount rate, if only such rate is published during the
     relevant Calendar Period) for all of the U.S. Treasury bills then having
     remaining maturities of not less than 80 nor more than 100 days, and (ii)
     in the case of the Ten-Year Constant Maturity Rate, average yields to
     maturity (or the one weekly per annum average yield to maturity, if only 
     one such yield is published during the relevant Calendar Period) for all
     of the actively traded marketable U.S. Treasury fixed interest rate 
     securities (other than Special Securities (as defined herein) then 
     having remaining maturities of not less than eight nor more than 
     twelve years, and (iii), in the case of the Thirty-Year Constant 
     Maturity Rate, average yield to maturity (or the one weekly per annum 
     average yield to maturity, if only one such yield is published during the 
     relevant Calendar Period) for all of the actively traded marketable U.S.
     Treasury fixed interest rate securities (other than Special Securities) 
     then having remaining maturities of not less than twenty-eight nor more 
     than thirty years, in each case as published during such Calendar Period 
     by the Federal Reserve or, if the Federal Reserve Board does not publish 
     such rates, by any Federal Reserve Bank or by any U.S. Government 
     department or agency selected by the Corporation. If the Corporation 
     determines in god faith that for any reason (i) no such U.S. Treasury bill
     rates are published as provided above during such Calendar Period or (ii)
     the Corporation cannot determine the Treasury Bill Rate for any dividend 
     period; then the Treasury Bill Rate for such dividend period will be the 
     arithmetic average of the per annum market discount rates based upon the 
     closing bids during such Calendar Period for each of the issues of 
     marketable non-interest-bearing U.S. Treasury securities with a remaining 
     maturity of not less than 80 nor more than 100 days from the date of each
     such quotation, as chosen and quoted daily for each business day in New 
     York City (or less frequently if daily quotations are not generally 
     available) to the Corporation by at least three recognized dealers in U.S.
     Government securities selected by the Corporation. If the Corporation 
     determines in good faith that for any reason the Corporation cannot 
     determine the Ten-Year Constant Maturity Rate or Thirty-Year Constant 
     Maturity Rate for any dividend period as provided above, then the 
     applicable rate for such dividend period will be the arithmetic average of
     the per annum average yields to maturity based upon the closing bids during
     such Calendar Period for each of the issues of actively traded marketable 
     U.S. Treasury fixed interest rate securities (other than Special 
     Securities) with a final maturity date (i) in the case of the Ten-Year 
     Constant Maturity Rate, not lessthan eight nor more than twelve years 
     from the date of each such quotation, and (ii) in the case of the 
     Thirty-Year Constant Maturity Rate, not less than twenty-eight nor 
     more than thirty years from the date of date of each such quotation,
     in each case as chosen and quoted daily for each business day in New
     York City (or less frequently if daily quotations are not generally 
     available) to the Corporation by at least three recognized dealers 
     in the United States.


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                                       9


          The Treasury Bill Rate, the Ten-Year Constant Maturity Rate and the
     Thirty-Year Constant Maturity Rate will each be rounded to the nearest five
     hundredth of percent, with .025% being rounded upward.

          The Applicable Rate with respect to each dividend period beginning on
     or after June 15, 2003 will be calculated as promptly as practicable by the
     Corporation according to the appropriate method described above. The
     Corporation will cause notice of each Applicable Rate to be given to the
     holders of Series A Fixed/Adjustable Rate Preferred Stock when payment is
     made of the dividend for the immediately preceding dividend period.

          As used in this paragraph 3, the term "CALENDAR PERIOD" means a period
     of fourteen calendar days; the term "FEDERAL RESERVE BOARD" means the Board
     of Governors of the Federal Reserve System; the term "SPECIAL SECURITIES"
     means securities which can, at the option of the holder, be surrendered at
     face value in payment of any Federal estate tax or which provided tax
     benefits to the holder and are priced to reflect such tax benefits or which
     provide tax benefits to the holder and are priced to reflect such tax
     benefits or which were originally issued at a deep or substantial discount;
     the term "TERM-YEAR AVERAGE YIELD" means the average yield to maturity for
     actively traded marketable U.S. Treasury fixed interest rate securities
     (adjusted to constant maturities of ten year); and the term "THIRTY-YEAR
     AVERAGE YIELD" means the average yield to maturity for activity traded
     marketable U.S. Treasury fixed interest rate securities (adjusted to
     constant maturities of thirty years).

          4. "LIQUIDATION PREFERENCE". The shares of Series A Fixed/Adjustable
     Rate Preferred Stock shall rank, as to liquidation, dissolution or winding
     up of the Corporation, prior to the shares of Common Stock and any other
     class of stock of the Corporation ranking junior to the Series A
     Fixed/Adjustable Rate Preferred Stock as to rights upon liquidation,
     dissolution or winding up of the Corporation, so that in the event of any
     liquidation, dissolution or winding up of the Corporation, whether
     voluntary or involuntary, the holder of the Series A Fixed/Adjustable Rate
     Preferred Stock shall be entitled to receive out of the assets of the
     Corporation available for distribution to its stockholders, whether from
     capital, surplus or earnings, before any distribution is made to holders of
     shares of Common Stock or any other such junior stock, an amount equal to
     $200.00 per share (the "LIQUIDATION PREFERENCE" of a share of Series A
     Fixed/Adjustable Rate Preferred Stock) plus an amount equal to all
     dividends (whether or not earned or declared) accrued and accumulated and
     unpaid on the shares of Series A Fixed/Adjustable Rate Preferred Stock to
     the date of final distribution. The holders of the Series A 
     Fixed/Adjustable Rate Preferred Stock will not be entitled to receive 
     the Liquidation Preference until the liquidation preference of any 
     other class of stock of the Corporation ranking senior to the Series A 
     Fixed/Adjustable Rate Preferred Stock as to rights upon liquidation, 
     dissolution or winding up shall


<PAGE>


                                            10


     have been paid (or a sum set aside therefor sufficient to provide for 
     payment) in full. After payment of the full amount of the Liquidation 
     Preference and such dividends, the holders of shares of Series A 
     Fixed/Adjustable Rate Preferred Stock will not be entitled to any further
     participation in any distribution of assets by the Corporation. If, upon
     any liquidation, dissolution or winding up of the Corporation, the assets
     of the Corporation, or proceeds thereof, distributable among the holders of
     shares of Parity Preferred Stock shall be sufficient to pay in full the 
     preferential amount aforesaid, then such assets, or the proceeds thereof, 
     shall be distributable among such holders ratably in accordance with the 
     respective amount which would be payable on such shares if all amounts 
     payable thereon were paid in full. For the purposes hereof, neither a 
     consolidation or merger of the Corporation with or into any other 
     corporation, nor a merger of any other corporation with or into the 
     Corporation, nor sale or transfer of all or any part of the Corporation's
     assets for cash or securities shall be considered a liquidation, 
     dissolution or winding up of the Corporation.


         5.   CONVERSION. The Series A Fixed/Adjustable Rate Preferred Stock 
     is not convertible into shares of any other class or series of stock of 
     the Corporation.


         6.   VOTING RIGHTS. The holders of shares of Series A 
     Fixed/Adjustable Rate Preferred Stock shall have no voting rights 
     whatsoever, except for any voting rights to which they may be entitled 
     under the laws of the State of Delaware, and except as follows:


              (a)   Whenever, at any time or times, dividends payable on the 
          shares of Series A Fixed/Adjustable Rate Preferred Stock or on any 
          Parity Preferred Stock shall be in arrears for an aggregate number 
          of days equal to six calendar quarters or more, whether or not 
          consecutive, the holders of the outstanding shares of Series A 
          Fixed/Adjustable Rate Preferred Stock shall have the right, with 
          holders of shares of any one or more other class or series of stock 
          upon which like voting rights have been conferred and are 
          exercisable (voting together as a class) to elect two of the 
          authorized number of members of the Board at the Corporation's next 
          annual meeting of stockholders and at each subsequent annual meeting 
          of stockholders until such arrearages have been paid or set apart 
          for payment, at which time such right shall terminate except as 
          herein or by law expressly provided subject to revesting in the 
          event of each and every subsequent default of the character above 
          mentioned. Upon any termination of the right of the holders of 
          shares of Series A Fixed/Adjustable Rate Preferred Stock as a class 
          to vote for directors as herein provided, the term of office of all 
          directors then in office elected by the holders of shares of Series 
          A Fixed/Adjustable Rate Preferred Stock shall terminate immediately.

<PAGE>
                                     11

     Any director who shall have been so elected pursuant to this paragraph 
     may be removed at any time, either with or without cause. Any vacancy 
     thereby created may be filled only by the affirmative vote of the 
     holders of shares of Series A Fixed/Adjustable Rate Preferred Stock voting
     separately as a class (together with the holders of shares of any other 
     class or series of stock upon which like voting rights have been 
     conferred and are exercisable). If the office of any director elected by 
     the holders of shares of Series A Fixed/Adjustable Rate Preferred Stock 
     voting as a class becomes vacant for any reason other than removal from 
     office as aforesaid, the remaining director elected pursuant to this 
     paragraph may choose a successor who shall hold office for the unexpired 
     term in respect of which such vacancy occurred.  At elections for such 
     directors, each holder of shares of Series A Fixed/Adjustable Rate 
     Preferred Stock shall be entitled to one vote for each share held (the 
     holders of shares of any other class or series of preferred stock having 
     like voting rights being entitled to such number of votes, if any, for 
     each share of such stock held as may be granted to them).


         (b)   So long as any shares of Series A Fixed/Adjustable Rate 
     Preferred Stock remain outstanding, the consent of the holders of at least
     two-thirds of the shares of Series A Fixed/Adjustable Rate Preferred 
     Stock outstanding at the time and all other classes or series of stock 
     upon which like voting rights have been conferred and are exercisable 
     (voting together as a class) given in person or by proxy, either in 
     writing or any any meeting called for the purpose, shall be necessary to 
     permit, effect or validate any one or more of the following.


              (i)    the issuance or increase of the authorized amount of any 
          class or series of shares ranking prior (as that term is defined in 
          paragraph 10(a) hereof) to the shares of the Series A 
          Fixed?Adjustable Rate Preferred Stock or


              (ii)   the amendment, alteration repeal, whether by merger, 
          consolidation or otherwise, of any of the provisions of the 
          Certificate of Incorporation (including this resolution or any 
          provisions hereof) that would materially and adversely affect any 
          power, preference, or special right of the shares of Series A 
          Fixed?Adjustable Rate Preferred Stock or of the holders thereof;


     PROVIDED, HOWEVER, that any increase in the amount of authorized Common 
     Stock or authorized Preferred Stock or any increase or decrease in the 
     number of shares of any series of Preferred Stock or the creation and 
     issuance of other series of Common Stock or Preferred Stock in each case

<PAGE>
                                     12

          ranking on a  parity with or junior to the shares of Series A 
          Fixed?Adjustable Rate Preferred Stock with respect to the payment 
          of dividends and the distribution of  assets upon liquidation, 
          dissolution or winding up, shall not be deemed to materially and 
          adversely affect such powers, preferences or special rights.


              (c)   The foregoing voting provisions shall not apply if, at or 
          prior to the time when the act with respect to which such vote 
          would otherwise be required shall be effected, all outstanding 
          shares of Series A Fixed?Adjustable Rate Preferred Stock shall have 
          been redeemed or called for redemption and sufficient funds shall 
          have been deposited in trust to effect such redemption.


         7.   REDEMPTION. The shares of the Series A Fixed/Adjustable Rate 
     Preferred Stock may be redeemed at the option of the Corporation, as a 
     whole, or from time to time in part, at any time, upon not less than 
     thirty nor more than sixty days' prior notice mailed to the holders of 
     the shares to be redeemed at their addresses as shown on the stock books 
     of the Corporation; PROVIDED, HOWEVER, that shares of the Series A 
     Fixed/Adjustable Rate Preferred Stock shall not be redeemable prior to 
     June 15, 2003, except as stated below. Subject to the foregoing, on or 
     after such date, shares of the Series A Fixed/Adjustable Rate Prefrerred 
     Stock are redeemable at $200.00 per share plus accrued and unpaid dividends
     (whether or not declared and including any increase in dividends payable 
     due to changes in the Dividends Received Percentage) from the immediately
     preceding Dividend Payment Date to the date fixed for redemption (but 
     without any accumulation for unpaid dividends for prior dividend periods on
     the Series A Fixed/Adjustable Rate Preferred Stock).


         If full cumulative dividends on the Series A Fixed/Adjustable Rate 
     Preferred Stock have not been paid, the Series A Fixed/Adjustable Rate 
     Preferred Stock may not be redeemed in part and the Corporation may not 
     purchase or acquire any shares of the Series A Fixed/Adjustable Rate 
     Preferred Stock otherwise than pursuant to a purchase or exchange offer 
     made on the same terms to all holders of the Series A Fixed/Adjustable 
     Rate Preferred Stock. If fewer than all outstanding shares of Series A 
     Fixed/Adjustable Rate Preferred Stock are to be redeemed, the 
     Corporation will select those to be redeemed by lot or a substantially 
     equivalent method.


         If a notice of redemption has been given pursuant to this paragraph 7 
     and if, on or before the date fixed for redemption, the funds necessary 
     for such redemption shall have been set aside by the Corporation, 
     separate and apart from its other funds in trust for the pro rate 
     benefit of the holders of the shares of Series A Fixed/Adjustable Rate 
     Preferred Stock so called for redemption, then, 

<PAGE>
                                     13

     notwithstanding that any certificates for such shares have not been 
     surrendered for cancellation, on the redemption date dividends shall 
     cease to accrue on the shares to be redeemed, and at the close of 
     business on the redemption date the holders of such shares shall cease 
     to be stockholders with respect to such shares and shall have no interest 
     in or claims against the Corporation by virtue thereof and shall have no 
     voting or other rights with respect to such shares, except the right to 
     receive the moneys payable upon surrender (and endorsement, if required 
     by the Corporation) of their certificates, and the shares evidenced 
     thereby shall no longer be outstanding. Subject to applicable escheat 
     laws, any moneys so set aside by the Corporation an unclaimed a the end 
     of two years form the redemption date shall revert to the general funds 
     of the Corporation for the payment of the amounts payable upon such 
     redemption. Any interest accrued on funds so deposited shall be paid to 
     the Corporation from time to time.


         Notwithstanding the foregoing provisions, if at any time prior to 
     January 15, 2000, one or more amendments to the Code are enacted that 
     reduce the Dividends Received Percentage to 50% or less, and as a 
     result, the amount of dividends of the Series A Fixed/Adjustable Rate 
     Preferred Stock payable on any Dividend Payment Date may be adjusted 
     upwards as described above in paragraph 2, the Corporation, at its 
     option, may redeem all, but not less than all, of the outstanding share 
     of the Series A Fixed/Adjustable Rate Preferred Stock, provided that, 
     within sixty days of the date on which an amendment to the Code is 
     enacted that reduces the Dividends Received Percentage to 50% or less, 
     the Corporation sends notice to holders of the Series A Fixed/Adjustable 
     Rate Preferred Stock of such redemption. Any redemption of the Series A 
     Fixed/Adjustable Rate Preferred Stock will be at a redemption price of 
     $204.00 per share (equivalent to $31.00 per depositary share), plus 
     accrued and unpaid dividends (whether or not declared and including any 
     increase in dividends payable due to changes in the Dividends Received 
     Percentage) from the immediately preceding Dividends Payment Date or the 
     date of original issuance of the Series A Fixed/Adjustable Rate 
     Preferred Stock, as the case may be, to the date fixed for redemption 
     (but without any accumulation for unpaid dividends for prior dividend 
     periods on the Series A Fixed/Adjustable Rate Preferred Stock).


         8.   AUTHORIZATION AND ISSUANCE OF OTHER SECURITIES.  No consent of 
     the holders of the Series A Fixed/Adjustable Rate Preferred Stock shall 
     be required for (a) the creation of any kind of the Corporation (b) the
        

<PAGE>
                                     14

     creation, or increase or decrease in the amount, of any class or 
     series of stock of the Corporation not ranking prior as to dividients or 
     upon liquidation, dissolution or winding up to the Series A 
     Fixed/Adjustable Rate Preferred Stock or (c) any increase or decrease in 
     the amount of authorized Common Stock or any increase, decrease of 
     change in the par value thereoif or in any other terms thereof.

         9.   AMENDMENT OF RESOLUTION. The Board and the Committee each 
     reserves the right by subsequent amendment of this resolution from time 
     to time to increase or decrease the number of shares that constitute the 
     Series A Fixed/Adjustable Rate Preferred Stock (but not below the number 
     of shares thereof then outstanding) and in other respects to amend this 
     resolution within the limitations provided by law, this resolution 
     within the limitations provided by law, this resolution and the 
     Certificate of Incorporation.

        10.   RANK. For the purposes of this resolution, any stock of any 
     class or classes of the Corporation shall be deemed to rank:

              (a)   prior to shares of the Series A Fixed/Adjustable Rate 
          Preferred Stock, either as to divides or upon liquidation, 
          dissolutionor winding up, or both, if the holders of stock of such 
          class or classes shall be entitled by the terms thereof to the 
          receipt of dividends or of amounts distributable upon liquidation, 
          dissolution or winding up, as the case may be, in preference or 
          priority to the holders  of shares of the Series A Fixed/Adjustable 
          Rate Preferred Stock,

              (b)   on a parity with shares of the Series A Fixed/Adjustable 
          Rate Preferred Stock, either as to dividends or upon liquidation, 
          dissolution or winding up, or both, whether or not the dividend rates,
          dividend payment dates, or redemptionor liquidation prices per share 
          thereof be different from those of the Series A Fixed/Adjustable Rate 
          Preferred Stock, if the holders of stock of such class or classes 
          shall be entitled by the terms thereof to the receipt of dividends or
          of amounts distributed upon liquidation, dissolution, or winding up,
          as the case may be, in proportion to their respective dividend rates 
          or liquidation prices, without preference or priority of one over the 
          other as between the holders of such stock and the holders of shares 
          of Series A Fixed/Adjustable Rate Preferred Stock (the term ""PARTY
          PREFERRED STOCK'' being used to refer to any stock ona parity with 
          the shares of Series A Fixed/Adjustable Rate Preferred Stock, either
          asto dividends or upon liquidation, dissolution or winding up or 
          both as the context may require), and


              (c)   junior to shares of the Series A Fixed/Adjustable Rate 
          Preferred Stock, either as to dividends or upon liquidation, 
          dissolution or winding up or both. If such class shall be Common 
          Stock or if the holders of the Series A Fixed/Adjustable Rate 
          Preferred Stock shall be entitled to the receipt of dividends 
          r of amounts distributable upon liquidation, dissolution or 
          winding up, as the case may be, in preference or priority to 
          the holders of stock of such class or classes. 

<PAGE>
                                     15

         The Series A Fixed/Adjustable Rate Preferred Stock shall be entitled 
     to the receipt of dividends or of amounts distributable upon liquidation, 
     dissolution or winding up, to the Common Stock and on a parity with the 
     Corporation 9-1/2% Cumulative Perpetual Preferrer Stock, with a 
     liquidation value of $200.00 per share.

<PAGE>
                                     16

         IN WITNESS WHEREOF, ARM Financial Group, Inc. has caused this 
Certificate to be made under the seal of the Corporation and signed by Martin 
H. Ruby, its Chairman of the Board of Directors and Chief Executive officer 
(Principal Executive Officer), and attested by Robert H. Scott, its Executive 
Vice President, General Counsel and Secretary, this 16th day of July, 1998.

                                   ARM FINANCIAL GROUP, INC.

                                   By: /s/ Martin H. Ruby
                                       -----------------------
                                   Name:  Martin H. Ruby
                                   Title: Chairman of the Board of Directors
                                          and Chief Executive Officer
                                          (Principal Executive Officer)

[SEAl]


Attest:


/s/ P A Scott
-------------------------