<PAGE>

                         RELEASE AND AMENDMENT AGREEMENT dated as of December
                    15, 1997 (this "Amendment Agreement"), to (a) the Credit
                    Agreement dated as of June 24, 1997 (the "Credit
                    Agreement"), among ARM Financial Group, Inc., a Delaware
                    corporation (the "Borrower"), the financial institutions
                    from time to time party thereto (the "Lenders") and The
                    Chase Manhattan Bank, a New York banking corporation, as
                    administrative agent (in such capacity, the "Administrative
                    Agent") for the Lenders, (b) the Pledge Agreement dated as
                    of June 24, 1997, among the Borrower, Integrity Holdings,
                    Inc., a Delaware corporation ("Holdings") and The Chase
                    Manhattan Bank, a New York banking corporation, as
                    representative (the "Representative") for the Secured
                    Parties (as defined in the Pledge Agreement (the "Pledge
                    Agreement") and (c) the Assignment Agreement dated as of
                    June 24, 1997, among the Borrower, Holdings and the
                    Representative (the "Assignment Agreement").

         A. The Borrower has requested that the Lenders amend certain
provisions of the Credit Agreement, the Pledge Agreement and the Assignment
Agreement to (i) release any and all liens and security interests in favor of
the Representative for the benefit of the Lenders, (ii) amend certain of the
negative convenants continued in the Credit Agreement and (iii) make certain
other changes to the Credit Agreement in order to effectuate the foregoing.

         B. The Lenders are willing to enter into this Amendment Agreement on
the terms and subject to the conditions set forth herein.

         C. Capitalized terms used but not defined herein shall have the
meanings assigned to them in the Credit Agreement.

         Accordingly, in consideration of the mutual agreements herein
contained and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, the parties hereto agree as follows:

         SECTION 1. COLLATERAL RELEASE. The Representative hereby agrees, and
the Lenders hereby consent, that as of the date first above written (i) any and
all liens, charges, encumbrances and security interests in favor of the
Representative for the benefit of the Lenders created pursuant to the Assignment
Agreement and the Pledge Agreement shall automatically be released and
terminated without any further action on the part of the Representative or any
Lender and (ii) the Representative, at the request of the Borrower or Holdings,
as applicable, shall execute any documents and instruments (including UCC
termination statements), deliver any certificates or documents representing the
Collateral and will take any other reasonable action necessary to effect the
release and termination of such liens and security interests.

         SECTION 2. AMENDMENTS. (a) Section 1.01 of the Credit Agreement is
hereby amended by (i) deleting the definition of "Adjusted Statutory Surplus"
in its entirety, (ii) amending the definition of "Non-Investment Grade
Investments" by (A) deleting the word "equity" appearing as the first word in
clause (b) thereto and substituting therefor the words "common stock", (B)
deleting the word "and" appearing at the end of clause (b) thereto and
substituting therefor a comma, (C) deleting the period appearing at the end
of clause (c) thereof and substituting therefor the word "and" and (D)
adding to the end of such section a new clause (d) which shall read in its
entirety: "(d) investments in preferred stocks that are not rated P1, P2,
PSF1 or PSF2 by the NAIC", (iii) deleting the definition of "Loan Documents"
in its entirety and substituting therefor the following definition:

    "LOAN DOCUMENTS" shall mean this Agreement and the Guarantee Agreement.
<PAGE>

                                                                               2


             (iv) adding the following definition:

         "CAPITAL" shall mean, with respect to any Insurance Subsidiary at
         any time, the sum of the amounts set forth on lines 29 and 30 of the
         Liabilities, Surplus, and Other Funds Statement in the Annual
         Statement or the Quarterly Statement of such Insurance Subsidiary most
         recently delivered to the Administrative Agent and the Lenders
         pursuant to Section 5.04 or, if such statement shall be modified, the
         equivalent item on any successor form.

             and (v) amending the definition of "Invested Assets" by deleting
the figures "10A" and "16" contained in the second line thereof and
substituting therefor the figures "11" and "17", respectively.

             (b) Section 3.24 of the Credit Agreement is hereby deleted in its
entirety.

              (c) Section 5.04(a)(ii)(B) of the Credit Agreement is hereby
amended by deleting the numbers "6.12" and "6.17" appearing in the second line
thereof and substituting respectively therefor the numbers "6.11" and "6.16".

              (d) Section 5.10 of the Credit Agreement is hereby amended and
restated to read in its entirety:

         SECTION 5.10. INTENTIONALLY OMITTED.

             (e) Section 5.11 of the Credit Agreement is hereby amended and
restated to read in its entirety:

         SECTION 5.11. FURTHER ASSURANCES. Execute any and all further
         documents, agreements and instruments, and take all further actions in
         order to effectuate the transactions contemplated by the Loan
         Documents.

             (f) Section 6.05(c) of the Credit Agreement is hereby amended by
(i) deleting "(i)" appearing in the fifth line of the first sentence thereof,
(ii) deleting the word "and" appearing in the sixth line of the first sentence
thereof and (iii) deleting clause (ii) in its entirety.

             (g) Section 6.12 of the Credit Agreement is hereby amended by
deleting the number "2.00" appearing in the second line thereof and
substituting therefor the number "3.00".

             (h) Section 6.13 of the Credit Agreement is hereby amended by (i)
deleting the words "Adjusted Statutory Surplus" appearing in the caption and in
the first line thereof and substituting therefor in both such places the words
"Total Adjusted Capital" and (ii) deleting the amount "$135,000,000" appearing
in the third line thereof and substituting therefor the amount "$175,000,000".

             (i) Section 6.16 of the Credit Agreement is hereby amended by
adding, following the words "10% of the" appearing in the third line thereof,
the following: "Capital and".

            (j) Article VII, Paragraph (n) of the Credit Agreement is hereby
amended by (i) deleting, following the word "terms" appearing in the second
line thereof, the following:

         , or the security interest purported to be created by any Security
         Document shall cease to be a valid and perfected first priority
         security interest in the relevant collateral for any reason other than
         the failure of Chase, on behalf of the Lenders, to take any action
         that is within its control and not otherwise prohibited by applicable
         law, applicable regulation or the order of any court
<PAGE>

                                                                               3


         SECTION 3. REPRESENTATIONS AND WARRANTIES. To induce the other parties
hereto to enter into this Amendment Agreement, the Borrower represents and
warrants to each of the Lenders and the Administrative Agent that (a) before and
after giving effect to this Amendment Agreement, the representations and
warranties set forth in Article III of the Credit Agreement are true and correct
in all material respects on and as of the date hereof with the same effect as
though made on and as of the date hereof, except to the extent such
representations and warranties expressly relate to an earlier date, and (b)
before and after giving effect to this Amendment Agreement, no Default or Event
of Default has occurred and is continuing.

         SECTION 4. CONDITIONS TO EFFECTIVENESS. This Amendment Agreement shall
become effective as of the date first above written on the date that the
Administrative Agent shall have received counterparts of this Amendment
Agreement that, when taken together, bear the signatures of the Borrower,
Holdings and each of the Lenders.

         SECTION 5. EFFECT OF AMENDMENT AGREEMENT. Except as expressly set
forth herein, this Amendment Agreement shall not by implication or otherwise
limit, impair, constitute a waiver of, or otherwise affect the rights and
remedies of the Lenders, the Administrative Agent or the Borrower under the
Credit Agreement, and shall not alter, modify, amend or in any way affect any
of the terms, conditions, obligations, covenants or agreements contained in
the Credit Agreement, all of which are ratified and affirmed in all respects
and shall continue in full force and effect. Nothing herein shall be deemed
to entitle the Borrower to a consent to, or a waiver, amendment, modification
or other change of, any of the terms, conditions, obligations, covenants or
agreements contained in the Credit Agreement in similar or different
circumstances. This Amendment Agreement shall apply and be effective only
with respect to the provisions of the Credit Agreement specifically referred
to herein. Any default under this Amendment Agreement shall constitute an
Event of Default under the Credit Agreement.

         SECTION 6. COUNTERPARTS. This Amendment Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument. Delivery of any executed counterpart of a signature page of
this Amendment Agreement by facsimile transmission shall be as effective as
delivery of a manually executed counterpart hereof.

         SECTION 7. APPLICABLE LAW. THIS AMENDMENT AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

         SECTION 8. HEADINGS. The headings of this Amendment Agreement are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.

         SECTION 9. EXPENSES. The Company agrees to reimburse the
Administrative Agent for its reasonable out-of-pocket expenses in connection
with this Amendment Agreement, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Administrative Agent.
<PAGE>

                                                                               4


IN WITNESS WHEREOF, the parties hereto have caused this Amendment Agreement
to be duly executed by their duly authorized officers, all as of the date and
year first above written.

                                                ARM FINANCIAL GROUP, INC.,

                                                by /s/ Peter S. Resnik
                                                -------------------------------
                                                Name: Peter S. Resnik
                                                Title: Treasurer

                                                by /s/ Edward L. Zemm
                                                -------------------------------
                                                Name: Edward L. Zemm
                                                Title: Chief Financial Officer


                                                INTEGRITY HOLDINGS, INC.,

                                                by /s/ Peter S. Resnik
                                                -------------------------------
                                                Name: Peter S. Resnik
                                                Title: Treasurer


                                                THE CHASE MANHATTAN BANK,
                                                individually, as Administrative
                                                Agent and as representative for
                                                the Secured Parties,

                                                by /s/ Peter Platten
                                                -------------------------------
                                                Name: Peter Platten
                                                Title: Vice President


                                                BANK OF TOKYO-MITSUBISHI TRUST
                                                COMPANY,

                                                by /s/ Douglas J. Beir
                                                -------------------------------
                                                Name: Douglas J. Beir
                                                Title: Vice President
<PAGE>

                                                                               5


                                                DEUTSCHE BANK AG, NEW YORK
                                                AND/OR CAYMAN ISLANDS BRANCHES,

                                                by /s/ Louis Caltavuturo
                                                -------------------------------
                                                Name: Louis Caltavuturo
                                                Title: Vice President

                                                by /s/ Alan Krosk
                                                -------------------------------
                                                Name: Alan Krosk
                                                Title:


                                                DRESDNER BANK AG, NEW YORK
                                                BRANCH AND GRAND CAYMAN BRANCH,

                                                by /s/ Robert P. Donohue
                                                -------------------------------
                                                Name: Robert P. Donohue
                                                Title: Vice President

                                                by /s/ Lloyd C. Stevens
                                                -------------------------------
                                                Name: Lloyd C. Stevens
                                                Title: Vice President


                                                THE FIRST NATIONAL BANK OF
                                                CHICAGO,

                                                by /s/ Fred T. Crawford
                                                -----------------------------
                                                Name: Fred T. Crawford
                                                Title: First Vice President


                                                FIRST UNION NATIONAL BANK OF
                                                NORTH CAROLINA,

                                                by /s/ Gail M. Golightly
                                                -------------------------------
                                                Name: Gail M. Golightly
                                                Title: Senior Vice President
<PAGE>

                                                                               6


                                                PNC BANK, KENTUCKY, INC.,

                                                by /s/ Brennan T. Danile
                                                -------------------------------
                                                Name: Brennan T. Danile
                                                Title: Corporate Banking Officer


                                                SUNTRUST BANK, CENTRAL FLORIDA,
                                                NATIONAL ASSOCIATION,

                                                by /s/ Janet P. Sommons
                                                -------------------------------
                                                Name: Janet P. Sommons
                                                Title: Vice President
<PAGE>


STATE OF GEORGIA

COUNTY OF FULTON


ON THE 12TH DAY OF DECEMBER, 1997 PERSONALLY APPEARED Janet P. Sommons, AS THE
Vice President OF SUNTRUST BANKS, INC., APPEARING AS AGENT OF SUNTRUST BANK,
CENTRAL FLORIDA, NATIONAL ASSOCIATION, AND BEFORE ME EXECUTED THE RELEASE AND
AMENDMENT AGREEMENT, BETWEEN ARM FINANCIAL GROUP INC, (AS BORROWER) AND
SUNTRUST BANK, CENTRAL FLORIDA, NATIONAL ASSOCIATION.


IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HAND AND OFFICIAL SEAL, IN THE
STATE AND COUNTY AFORESAID.

STATE OF Georgia

COUNTY OF Fulton


Sworn to and subscribed to before me this 12th day of December, 1997,
by Janet P. Sommons, who is PERSONALLY KNOWN to me or who
provided                       , as identification.



                                        /s/ Christine B. Alford
                                        -----------------------
                                        Notary Public
                                        My Commission Expires:

                                        Notary Public, DeKalb county, Georgia
                                        My Commission Expires June 29th, 2001