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

                                    Form 10-Q


           [X]        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                      OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the quarterly period ended September 30, 1996

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

                      For the transition period from to


                         Commission file number: 0-1283

                          American Life Holdings, Inc.

         Delaware                                      No. 42-0951848
         --------                                      --------------
 State of Incorporation                        IRS Employer Identification No.

     11825 N. Pennsylvania Street
         Carmel, Indiana 46032                            (317) 817-6100
     ----------------------------                         --------------
 Address of principal executive offices                      Telephone



    Indicate  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 [ ]

      Shares of common stock outstanding as of November 1, 1996: 18,876,858




<PAGE>
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<CAPTION>



                                              PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                       AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                                                CONSOLIDATED BALANCE SHEET
                                                   (Dollars in millions)

                                                          ASSETS

                                                                                                          Prior basis
                                                                                                          ------------
                                                                                         September 30,    December 31,
                                                                                             1996             1995
                                                                                             ----             -----
                                                                                          (unaudited)       (audited)
<S>                                                                                       <C>                <C>
Investments:
   Actively managed fixed maturity securities at fair value (amortized cost:
     1996 - $4,897.8; 1995 - $4,667.3)..................................................   $4,940.3          $5,083.1
   Equity securities at fair value (cost: 1996 - $12.1; 1995 - $16.5)...................       12.8              18.8
   Credit-tenant loans..................................................................       25.3              13.6
   Mortgage loans.......................................................................       59.1              64.6
   Policy loans.........................................................................       63.7              62.9
   Short-term investments...............................................................       95.0             108.2
   Other invested assets................................................................       21.1              18.2
                                                                                           --------          --------

         Total investments..............................................................    5,217.3           5,369.4

Accrued investment income...............................................................       81.3              80.8
Cost of policies purchased..............................................................      382.7             250.1
Cost of policies produced...............................................................       54.6              77.6
Income tax assets.......................................................................       25.4               -
Property and equipment (net of accumulated depreciation: 1996 - $1.4; 1995 - $1.1)......        6.2               8.9
Securities segregated for the future redemption of redeemable
   preferred stock of a subsidiary......................................................       45.0              39.2
Goodwill (net of accumulated amortization: 1996 - $18.1; 1995 - $11.3)..................      399.3             348.9
Other assets............................................................................       31.3              33.1
                                                                                           --------          --------

         Total assets...................................................................   $6,243.1          $6,208.0
                                                                                           ========          ========














                                                 (continued on next page)




                     The accompanying notes are an integral
                       part of the consolidated financial
                                   statements.

                                                             2
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                      AMERICAN LIFE HOLDINGS, INC.  AND SUBSIDIARIES

                                           CONSOLIDATED BALANCE SHEET, continued
                                      (Dollars in millions, except per share amounts)

                                           LIABILITIES AND SHAREHOLDERS' EQUITY


                                                                                                           Prior basis
                                                                                                          ------------
                                                                                         September 30,    December 31,
                                                                                             1996             1995
                                                                                             ----             -----
                                                                                          (unaudited)       (audited)
<S>                                                                                       <C>               <C>
Liabilities:
   Insurance liabilities...............................................................   $5,278.7          $5,148.7
   Income tax liabilities..............................................................        -                38.1
   Investment borrowings...............................................................      123.1             130.7
   Contingent consideration payable upon determination of the Savings Bank Litigation..       30.1              30.1
   Other liabilities...................................................................       72.8              71.5
   Accounts payable to affiliates......................................................         .8               1.2
   Notes payable.......................................................................      171.3             282.5
                                                                                          --------          --------

         Total liabilities.............................................................    5,676.8           5,702.8

Minority interest, primarily redeemable preferred stock of a subsidiary................       99.6              99.6

Shareholders' equity:
   Series Preferred Stock .............................................................       72.9              66.6
   Common stock, $1 par value, and additional paid-in capital; 35,000,000
     shares authorized; shares issued and outstanding: 1996 - 18,876,858;
     1995 - 13,442,075.................................................................      344.8              75.9
   Unrealized appreciation of securities:
     Fixed maturity securities (net of applicable
       deferred income taxes: 1996 - $7.4; 1995 - $105.0)..............................       13.8             194.9
     Other investments (net of applicable deferred income taxes:
       1996 - $.3; 1995 - $.8).........................................................         .5               1.5
   Retained earnings...................................................................       34.7              66.7
                                                                                          --------          --------

         Total shareholders' equity....................................................      466.7             405.6
                                                                                          --------          --------

         Total liabilities and shareholders' equity....................................   $6,243.1          $6,208.0
                                                                                          ========          ========

















                     The accompanying notes are an integral
                       part of the consolidated financial
                                   statements.

                                                             3
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                       AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF OPERATIONS
                                      (Dollars in millions, except per share amounts)
                                                        (unaudited)

                                                                     Three months ended          Nine months ended
                                                                        September 30,               September 30,
                                                                   --------------------           ------------------
                                                                   1996            1995           1996          1995
                                                                   ----            ----           ----          ----
<S>                                                                <C>           <C>            <C>           <C>
Revenues:
   Insurance policy income..................................       $ 10.9         $ 13.8        $  33.0       $  43.6
   Net investment income....................................        102.7          105.4          306.4         312.9
   Net trading income.......................................          1.1             .3             .1           1.1
   Net realized gains.......................................          5.8           11.1            9.8          63.2
   Other income.............................................          1.2            1.5            3.9           4.9
                                                                   ------         ------         ------       -------

         Total revenues.....................................        121.7          132.1          353.2         425.7
                                                                   ------         ------         ------       -------

Benefits and expenses:
   Insurance policy benefits................................          6.1            7.0           18.1          22.0
   Change in future policy benefits.........................           .6            1.5            (.2)          2.5
   Interest expense on annuities and financial products.....         62.2           64.9          184.2         194.3
   Interest expense on notes payable........................          7.2            8.3           21.5          25.7
   Interest expense on investment borrowings................          1.1            2.3            2.9           6.7
   Amortization of cost of policies purchased
     and cost of policies produced:
       Related to operations................................         11.2            9.3           29.4          26.4
       Related to realized gains............................          2.2            4.4            4.8          33.6
   Amortization of goodwill.................................          2.3            2.3            6.8           6.8
   Restructuring expenses...................................          4.3            -              5.7            -
   Other operating costs and expenses.......................          5.8            7.7           18.8          23.8
                                                                   ------         ------         ------        ------

         Total benefits and expenses........................        103.0          107.7          292.0         341.8
                                                                   ------         ------         ------        ------

         Income before income taxes, minority interest
           and extraordinary charge.........................         18.7           24.4           61.2          83.9
Income tax expense..........................................          7.3            9.4           23.6          31.7
                                                                   ------         ------         ------        ------

         Income before minority interest and
           extraordinary charge.............................         11.4           15.0           37.6          52.2
Minority interest - primarily dividends on redeemable
   preferred stock of a subsidiary..........................          2.2            2.2            6.6           6.6
                                                                   ------         ------         ------        ------

         Income before extraordinary charge.................          9.2           12.8           31.0          45.6
Extraordinary charge on extinguishment of debt,
   net of income tax benefit................................           .8             -              .8            -
                                                                   ------         ------         ------        ------         

         Net income.........................................          8.4           12.8           30.2          45.6
Less preferred stock dividends..............................          2.1            1.9            6.3           5.6
                                                                   ------         ------         ------        ------

         Net income applicable to common stock..............       $  6.3         $ 10.9         $ 23.9        $ 40.0
                                                                   ======         ======         ======        ======






                          The accompanying notes are an
                        integral part of the consolidated
                              financial statements.

                                                                 4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                       AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                                      CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                                   (Dollars in millions)
                                                        (unaudited)

                                                                                             Nine months ended
                                                                                                September 30,
                                                                                           -------------------- 
                                                                                           1996            1995
                                                                                           ----            ----
                                                                                                       (prior basis)
<S>                                                                                      <C>              <C>
Series Preferred Stock:
   Balance, beginning of period.......................................................   $  66.6          $  58.9
     Accrued dividends on 1994 Series Preferred Stock.................................       6.3              5.6
                                                                                         -------          -------

   Balance, end of period.............................................................   $  72.9          $  64.5
                                                                                         =======          =======

Common stock and additional paid-in capital:
   Balance, beginning of period.......................................................   $  75.9          $  45.9
     Issuance of common stock.........................................................     125.0               -
     Adjustment of balance due to adoption of new basis...............................     143.9               -
                                                                                         -------          -------

   Balance, end of period.............................................................   $ 344.8          $  45.9
                                                                                         =======          =======

Unrealized appreciation (depreciation) of securities:
   Fixed maturity securities:
     Balance, beginning of period.....................................................   $ 194.9          $ (28.5)
       Change in unrealized appreciation (depreciation)...............................    (159.0)           191.8
       Adjustment of balance due to adoption of new basis.............................     (22.1)              -
                                                                                         -------          -------

     Balance, end of period...........................................................   $  13.8          $ 163.3
                                                                                         =======          =======

   Other investments:
     Balance, beginning of period.....................................................   $   1.5          $   (.5)
       Change in unrealized appreciation (depreciation)...............................       (.1)             1.9
       Adjustment of balance due to adoption of new basis.............................       (.9)              -
                                                                                         -------          -------

     Balance, end of period...........................................................   $    .5          $   1.4
                                                                                         =======          =======

Retained earnings:
   Balance, beginning of period.......................................................   $  66.7          $   3.3
     Net income.......................................................................      30.2             45.6
     Preferred stock dividends (payable in additional shares).........................      (6.3)            (5.6)
     Adjustment of balance due to adoption of new basis...............................     (55.9)              -
                                                                                         -------          -------

   Balance, end of period.............................................................   $  34.7          $  43.3
                                                                                         =======          =======

     Total shareholders' equity.......................................................   $ 466.7          $ 318.4
                                                                                         =======          =======










                     The accompanying notes are an integral
                       part of the consolidated financial
                                   statements.

                                                             5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>



                                      AMERICAN LIFE HOLDINGS, INC.  AND SUBSIDIARIES

                                           CONSOLIDATED STATEMENT OF CASH FLOWS
                                                   (Dollars in millions)
                                                        (unaudited)
                                                                                           Nine months ended
                                                                                             September 30,
                                                                                        ----------------------   
                                                                                        1996              1995
                                                                                        ----              ----
<S>                                                                                    <C>              <C>
Cash flows from operating activities:
   Net income....................................................................... $   30.2           $  45.6
   Adjustments to reconcile net income to net cash provided by operating activities:
     Amortization and depreciation..................................................     41.5              67.6
     Income taxes...................................................................     18.0              32.8
     Insurance liabilities..........................................................     26.1              25.8
     Interest credited to insurance liabilities.....................................    184.2             194.3
     Fees charged to insurance liabilities..........................................    (24.5)            (21.9)
     Accrual and amortization of investment income..................................    (16.8)            (52.0)
     Deferral of cost of policies produced..........................................    (61.7)            (58.0)
     Other liabilities..............................................................     (1.6)            (11.7)
     Extraordinary charge on extinguishment of debt.................................      1.3                -
     Realized (gains) and trading (income) losses on investments....................     (9.9)            (64.3)
     Other..........................................................................     (1.9)             (3.7)
                                                                                     --------          --------

         Net cash provided by operating activities..................................    184.9             154.5
                                                                                     --------          --------

Cash flows from investing activities:
   Purchases of investments......................................................... (1,323.4)         (1,987.9)
   Sales of investments.............................................................  1,067.0           1,691.5
   Maturities and redemptions.......................................................    123.7              46.5
                                                                                     --------          --------
         Net cash used by investing activities......................................   (132.7)           (249.9)
                                                                                     --------          --------

Cash flows from financing activities:
   Proceeds from sale of stock to Conseco, Inc......................................    125.0                -
   Payments on notes payable........................................................   (125.0)            (15.0)
   Investment borrowings, net.......................................................     (7.6)             60.8
   Cash released from segregated account for redemption of Convertible Debentures...      -                 9.2
   Conversion and redemption of Convertible Debentures..............................     (2.1)             (9.2)
   Deposits to insurance liabilities................................................    529.4             625.2
   Withdrawals from insurance liabilities...........................................   (585.1)           (580.5)
                                                                                     --------          --------

         Net cash provided (used) by financing activities...........................    (65.4)             90.5
                                                                                     --------          --------

         Net decrease in short-term investments.....................................    (13.2)             (4.9)

Short-term investments, beginning of period.........................................    108.2              53.6
                                                                                     --------          --------

Short-term investments, end of period............................................... $   95.0          $   48.7
                                                                                     ========          ========









                     The accompanying notes are an integral
                       part of the consolidated financial
                                   statements.

                                                             6
</TABLE>

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



     In 1996,  American Life Holdings,  Inc. ("we" or the "Company") changed its
name from American Life Group, Inc. (formerly The Statesman Group, Inc. prior to
its name change in 1995). The following notes should be read in conjunction with
the notes to the  consolidated  financial  statements  included in the Company's
1995 Form 10-K.

     SIGNIFICANT ACCOUNTING POLICIES

     The unaudited  consolidated  financial statements as of and for the periods
ended September 30, 1996 and 1995,  reflect all adjustments  (consisting only of
normal  recurring  items)  necessary to present  fairly the Company's  financial
position and results of  operations.  To conform with the current  presentation,
certain  amounts  previously  reported  have  been  reclassified.  In  preparing
financial   statements  in  conformity   with  generally   accepted   accounting
principles, we are required to make estimates and assumptions that significantly
affect various reported amounts.  For example, we use significant  estimates and
assumptions in calculating the cost of policies  produced,  the cost of policies
purchased,  goodwill, insurance liabilities,  liabilities related to litigation,
guaranty  fund  assessment  accruals and deferred  income  taxes.  If our future
experience   differs  from  these  estimates  and  assumptions,   our  financial
statements would be affected.

     On September  29, 1994,  Conseco  Capital  Partners II, L.P.  ("Partnership
II"),  a  Delaware   limited   partnership,   completed  the  acquisition   (the
"Acquisition") of the Company.  The sole general partner of Partnership II was a
wholly  owned  subsidiary  of  Conseco,  Inc.  ("Conseco").  As a result  of the
acquisition and related financing transactions,  Partnership II owned 80 percent
of  the  Company's  outstanding  common  stock.  Conseco,   through  its  direct
investment  and  interests  in  certain  of its  subsidiaries,  had a 38 percent
ownership  interest in the Company  prior to the  transactions  described in the
following paragraph.

     Effective September 30, 1996, Conseco and its subsidiaries purchased all of
the outstanding common stock of the Company not already owned by Conseco and its
subsidiaries for approximately $165 million in cash (the "Conseco Transaction").
Subsequent to the Conseco Transaction,  Conseco and its subsidiaries own all the
outstanding  shares  of the  Company's  common  stock.  At the same  time as the
Conseco  Transaction,  Conseco  purchased  5,434,783  newly issued shares of the
Company's  common stock for $125.0  million.  The Company used the proceeds from
the stock sale to repay all amounts borrowed under the senior credit facility.

     As a result of the Conseco Transaction, a new basis of accounting under the
"push down" method was adopted effective  September 30, 1996. Under this method,
the assets and  liabilities  of the Company were  revalued to reflect  Conseco's
cost basis,  which is based on the fair values of such assets and liabilities on
the dates Conseco's ownership interests were acquired.  The new accounting basis
was reflected in the  consolidated  balance sheet and statement of shareholders'
equity at  September  30,  1996,  and will be  reflected  in the  statements  of
operations  and cash flows in periods  subsequent  to September  30, 1996.  As a
result,  the assets and liabilities of the Company included in the September 30,
1996,  consolidated  balance sheet reflect the following  combination of values:
(i)  the  portion  of the  Company's  net  assets  acquired  by  Conseco  in the
Acquisition  of the Company made by Partnership II is valued as of September 29,
1994;  and (ii) the portion of the Company's net assets  acquired in the Conseco
Transaction is valued as of September 30, 1996.


                                        7

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)




     The effect of the adoption of the new basis of  accounting on the Company's
balance sheet accounts is as follows (dollars in millions):
<TABLE>
<CAPTION>

                                                                                             Debit
                                                                                           (Credit)
                                                                                           --------
         <S>                                                                              <C>
         Cost of policies purchased...................................................     $  110.0
         Cost of policies produced....................................................        (88.0)
         Goodwill.....................................................................         57.2
         Mortgage loans...............................................................          1.6
         Income tax assets............................................................         (4.2)
         Securities segregated for the future redemption of redeemable
           preferred stock of a subsidiary............................................          3.5
         Other liabilities............................................................         (1.3)
         Notes payable................................................................        (13.8)
         Common stock and additional paid-in capital..................................       (143.9)
         Net unrealized appreciation of securities....................................         23.0
         Retained earnings............................................................         55.9
</TABLE>


     The consolidated financial statements include the accounts of American Life
and Casualty  Insurance  Company  ("American Life and Casualty") and Vulcan Life
Insurance  Company  ("Vulcan  Life").  The  Company,  through  its wholly  owned
subsidiary,  American Life Holding Company  ("American Life Holding"),  owns 100
percent of American Life and Casualty, which owns 98 percent of Vulcan Life.

     ADJUSTMENT TO ACTIVELY MANAGED FIXED MATURITY SECURITIES

     We classify  fixed maturity  securities  into three  categories:  "actively
managed" and  "trading  account"  (which we carry at  estimated  fair value) and
"held to maturity"  (which we carry at amortized  cost). We did not classify any
fixed maturity investments in the trading account or held to maturity categories
at September 30, 1996 or December 31, 1995.  When we adjusted the carrying value
of our actively managed fixed maturity securities to fair value (as described in
note 1 to the consolidated  financial  statements included in the Company's 1995
Form 10-K) at September 30, 1996, we also adjusted several related balance sheet
accounts as follows:
<TABLE>
<CAPTION>


                                                                                       Effect of fair value
                                                                             Balance  adjustment to actively
                                                                             before        managed fixed       Reported
                                                                           adjustment   maturity securities     amount
                                                                           ----------   -------------------     ------
                                                                                       (Dollars in millions)
<S>                                                                         <C>             <C>                <C>
Actively managed fixed maturity securities...............................   $4,897.8        $ 42.5             $4,940.3
Cost of policies purchased...............................................      398.7         (16.0)               382.7
Cost of policies produced................................................       59.9          (5.3)                54.6
Income tax assets .......................................................       32.8          (7.4)                25.4
Unrealized appreciation of fixed maturity securities.....................        -            13.8                 13.8
</TABLE>



                                                             8

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



     CHANGES IN INVESTMENT BORROWINGS

     As part  of its  investment  strategy,  the  Company  enters  into  reverse
repurchase  agreements and  dollar-roll  transactions  to increase its return on
investments  and improve its  liquidity.  We account for these  transactions  as
short-term  collateralized  borrowings.  Such borrowings averaged  approximately
$73.0 million and $156.3 million during the nine months ended September 30, 1996
and 1995,  respectively,  and were collateralized by investment  securities with
fair values approximately equal to the loan value. The weighted average interest
rate on short-term collateralized borrowings was 5.3 percent and 5.7 percent for
the nine months ended September 30, 1996 and 1995, respectively.

     CHANGES IN NOTES PAYABLE

     Effective  September  30,  1996,  the  Company  repaid the  $125.0  million
principal  balance  outstanding  under  the  senior  credit  facility  using the
proceeds from the sale of stock to Conseco.  As a result of the  repayment,  the
Company recognized an extraordinary  charge of $.8 million, net of an income tax
benefit of $.5 million.

     During the nine months ended  September  30, 1996,  $2.1 million  principal
amount of the Company's 6-1/4% Convertible Debentures due 2003 (the "Convertible
Debentures")  was redeemed and converted,  leaving $13.0 million  outstanding at
September 30, 1996.

     In  connection  with  the  Conseco  Transaction,   Conseco  guaranteed  the
Company's obligations under its senior subordinated notes due in 2004.

     See "Significant  Accounting Policies" above for a discussion of the change
in basis  resulting from the Conseco  Transaction  and the adoption of the "push
down" method of accounting.

     CHANGES IN CAPITAL STOCK

     Effective September 30, 1996, the Company issued  approximately 5.4 million
shares to Conseco for $125.0  million.  The proceeds  were used to repay amounts
outstanding under the Company's senior credit facility.

     See "Significant  Accounting Policies" above for a discussion of the change
in basis  resulting from the Conseco  Transaction  and the adoption of the "push
down" method of accounting.

     SERIES PREFERRED STOCK

     In connection with the Acquisition, the Company issued 57,000 shares ($57.0
million)  of 1994 Series  Preferred  Stock in a private  placement  transaction.
During the quarter ended  September 30, 1996,  Conseco  purchased all such stock
issued but not owned by Conseco for carrying value plus accrued dividends.

     Dividends on the 1994 Series  Preferred  Stock are cumulative  through 2005
and accrue annually at 13 percent,  payable in additional  shares of 1994 Series
Preferred Stock.  Thereafter,  dividends are payable quarterly at 15 percent per
annum in cash.  At  September  30, 1996,  the carrying  value of the 1994 Series
Preferred Stock includes $8.4 million of dividends accrued but undistributed.

     CONTINGENT  CONSIDERATION  PAYABLE  UPON   DETERMINATION  OF  SAVINGS  BANK
     LITIGATION

     In conjunction with the Acquisition, each common or equivalent share of the
Company outstanding  immediately prior to the Acquisition  received a contingent
payment right,  designed to provide holders with certain financial benefits that
the Company may receive from a favorable determination of the litigation against
the United States of America (the "Savings Bank Litigation"). This litigation is
described in the notes to the consolidated  financial statements included in the
1995 Form 10-K. At the  Acquisition  date,  we  established a liability of $30.1
million,  representing  the  consideration  that would be payable  either to the
holder of the Company's  1988 Series I and Series II Preferred  Stock (the "1988
Series  Preferred  Stock"),  or to  the  Company's  other  former  shareholders,
depending upon the outcome of the Savings Bank Litigation. Since the timing of a
final determination of the Savings Bank Litigation is uncertain,  the Company is
unable to predict when such $30.1 million amount will become payable.


                                                             9

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)





     On August 30,  1995,  the United  States  Court of Appeals  for the Federal
Circuit,  in banc,  affirmed the summary judgment of the Court of Federal Claims
in the  Company's  favor by a  decision  of nine to two.  On July 1,  1996,  the
Supreme Court  affirmed the summary  judgment of the Court of Federal  Claims in
the  Company's  favor by a decision of seven to two. A trial has been  scheduled
for  February  25, 1997,  in the Court of Federal  Claims to  determine  damages
related to the breach of contract by the United States of America.

     At September 30, 1996,  cumulative  dividends in arrears on the 1988 Series
Preferred Stock were $7.8 million, of which $5.5 million had been accrued.

     RELATED PARTY TRANSACTIONS

     The Company  receives  services  from Conseco under  agreements,  including
insurance services and investment management agreements.  Fees charged under all
such agreements totaled $11.4 million and $9.7 million for the nine months ended
September 30, 1996 and 1995, respectively.

     SUBSEQUENT EVENT

     In conjunction with the Company's efforts to reduce its operating  expenses
and improve its  profitability,  the Company has formulated a plan and is in the
process of closing its home office in Des Moines,  Iowa, and  consolidating  its
operations with Conseco in Carmel,  Indiana.  During the quarter ended September
30, 1996, the Company recorded a $4.3 million restructuring charge, which is the
estimated cost to complete the consolidation  based on management's  plan, which
is scheduled to be completed in November 1996.  Principal  items included in the
charge are  contract  termination  costs,  severance  and related  benefits  for
employee  reductions and other  expenses.  At September 30, 1996, the balance of
the restructuring  charge which was unpaid was $4.3 million, all of which should
be paid during 1996.




                                                            10

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



     ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATIONS.

     The following  discussion  addresses the  principal  factors  affecting the
Company's  earnings and  financial  condition,  including  liquidity and capital
resources.  Financial results for periods subsequent to September 30, 1996, will
reflect the adoption of a new basis of  accounting  under the "push down" method
and, accordingly, future results may not be comparable with results prior to the
Conseco  Transaction.  This  discussion  should be read in conjunction  with the
consolidated  financial  statements and notes thereto  included in the 1995 Form
10-K.

     RESULTS OF OPERATIONS

     Nine  Months  Ended  September 30,  1996  Compared  to  Nine  Months  Ended
     September 30, 1995

     Insurance policy income, which consists of premiums received on traditional
life insurance  products and policy fund and surrender  charges assessed against
investment-type  products,  decreased 24 percent,  to $33.0 million in the first
nine months of 1996.  This  decrease was primarily the result of a $13.3 million
reduction in life insurance  premiums  primarily related to group life insurance
business  coinsured  to an  unaffiliated  company at the end of 1995,  partially
offset by an increase in surrender charges earned on annuity policy withdrawals.
Surrender charges assessed against annuity withdrawals for the first nine months
of 1996 were $13.7  million  compared to $11.3 million for the first nine months
of 1995;  annuity policy  withdrawals were $576.6 million and $566.8 million for
the respective  periods.  See "Liquidity and Capital Resources" for a discussion
of withdrawals and surrenders.

     Net investment  income decreased 2.1 percent to $306.4 million in the first
nine  months of 1996 from $312.9  million in the first nine months of 1995.  The
average invested assets (amortized cost basis) increased to $5.0 billion in 1996
from $4.7  billion in 1995 while the yield  earned on  average  invested  assets
declined to 8.19 percent in 1996 from 8.91 percent in 1995.  Cash flows received
during  1995 and the first nine  months of 1996  (including  cash flows from the
sales of  investments)  were  invested  in  lower-yielding  securities  due to a
general decline in interest rates.

     Net realized  gains and net trading  income often  fluctuate from period to
period. The Company sold $1.1 billion of investments (principally fixed maturity
securities)  in the first nine months of 1996,  compared to  approximately  $1.7
billion in 1995,  generating  net realized gains of $9.8 million and net trading
gains of $.1 million in the first nine months of 1996,  compared to net realized
gains of $69.2  million  and net  trading  income of $1.1  million  in 1995.  In
addition,  during the first nine months of 1995 the Company  recorded a realized
loss of $6.0 million on the writedown of an investment as a result of changes in
conditions  which  caused the Company to  conclude  that the decline in its fair
value was other than temporary.  The declining  interest rate environment  since
the  Acquisition  date,  which  increased  the  market  value of fixed  maturity
securities,  contributed to the Company's ability to realize gains on investment
sales in 1995, and to a lesser extent, in 1996.

     Selling  securities at a gain and  reinvesting the proceeds at lower yields
may, absent other management action,  tend to decrease future investment yields.
We believe,  however,  that the  following  factors  would  mitigate the adverse
effect of such decreases on net income:  (i) the Company  recognizes  additional
amortization of the cost of policies purchased and the cost of policies produced
in the same period as the gain in order to reflect reduced future yields thereby
reducing  such  amortization  in future  periods  (see  amortization  related to
realized  gains below);  (ii) the Company can reduce  interest rates credited to
some  products  thereby  diminishing  the  effect of the yield  decrease  on the
investment  spread;  and (iii)  the  investment  portfolio  grows as a result of
reinvesting the realized gains.

     Insurance policy benefits and change in future policy benefits decreased 27
percent to $17.9 million in the first nine months of 1996  primarily as a result
of the  reinsuring  of the group  life  insurance  business  to an  unaffiliated
company at the end of 1995.

     Interest expense on annuities and financial products decreased 5.2 percent,
to $184.2  million in the first nine months of 1996  primarily due to: (i) lower
crediting  rates and (ii) the  expensing  in 1995 of  first-year  interest  rate
bonuses  of  approximately   $5.9  million  on  policies  issued  prior  to  the
Acquisition date as a result of the application of purchase accounting. Prior to
the Acquisition date, such first-year interest rate bonuses (related to policies
issued prior to the  Acquisition  date) were  capitalized  as a cost of policies
produced.  At September 30, 1996,  the weighted  average  crediting rate for the
Company's annuity  liabilities,  excluding  interest rate bonuses guaranteed for
the first year of the annuity contract, was 5.0 percent, compared to 5.4 percent
at September 30, 1995.

     Interest expense on notes payable decreased 16 percent, to $21.5 million in
the first nine months of 1996 due to scheduled  and  unscheduled  reductions  in
outstanding indebtedness and from lower interest rates on the borrowings.

     Interest  expense on investment  borrowings  decreased 57 percent,  to $2.9
million in the first nine months of 1996 due to a lower average balance of funds
borrowed and a lower average cost of funds.


                                                            11

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES


     Amortization related to operations  (consisting of amortization of the cost
of policies purchased for business in force at the Acquisition date and the cost
of policies  produced after the Acquisition  date) increased 11 percent to $29.4
million in the first nine  months of 1996.  Higher  amortization  of the cost of
policies  produced  reflected  an  increase  in the amount of  business in force
issued since the Acquisition date.

     Cost of policies produced represents the cost (primarily commissions, bonus
interest and certain  costs of policy  issuance and  underwriting)  which varies
with and is primarily related to the production of new business.  Costs deferred
may  represent  amounts paid in the period the new business is written  (such as
underwriting costs and first-year  commissions) or in periods after the business
is written (such as commissions paid in subsequent years in excess of the lowest
commission  paid each year the  policy is in force and bonus  interest  credited
through the first policy anniversary date).

     Cost of policies purchased  represents the portion of Partnership II's cost
to acquire the Company that is  attributable  to the right to receive cash flows
from existing  insurance  contracts.  Some costs incurred after the  Acquisition
date on policies  issued  prior to such date,  which  otherwise  would have been
deferred  had it not been for the  Acquisition  (because  they vary with and are
primarily  related to the production of the acquired  policies),  were expensed.
Examples include  commissions paid in excess of the lowest commissions paid each
year the  policy is in force and bonus  interest.  However,  such  amounts  were
considered  in   determining   the  cost  of  policies   purchased  and  related
amortization.

     Amortization  related to realized  gains  decreased  to $4.8 million in the
first nine months of 1996 as a result of lower realized gains in the period.

     Restructuring  expenses in 1996 include  expenses  incurred in  conjunction
with the  consolidation  of the  Company's  operations  with  Conseco in Carmel,
Indiana. Such expenses include contract termination costs, severance and related
benefits for employee reductions and other expenses.

     Other operating costs and expenses decreased 21 percent to $18.8 million in
the first nine  months of 1996 as a result of:  (i) non-  deferrable  commission
expense related to certain group life insurance  business which was coinsured to
an unaffiliated company at the end of 1995; and (ii) cost savings related to the
consolidation of the Company's operations with Conseco in Carmel, Indiana.

     Income tax expense decreased 26 percent, to $23.6 million in the first nine
months of 1996  primarily  due to the decrease in pretax income  resulting  from
decreased  realized gains. The effective tax rate of 38 percent in 1996 and 1995
exceeded  the  statutory  corporate  tax rate  (35  percent)  primarily  because
goodwill amortization cannot be deducted for federal income tax purposes.

     Extraordinary charge in the 1996 period represents the loss recognized, net
of income  taxes,  on the  repayment  of the $125.0  million  principal  balance
outstanding under the senior credit facility using the proceeds from the sale of
stock to Conseco.

     Third Quarter of 1996 Compared to Third Quarter of 1995

     Insurance policy income decreased 21 percent, to $10.9 million in the third
quarter of 1996.  This  decrease  was  primarily  the  result of a $3.6  million
reduction in life insurance  premiums  primarily related to group life insurance
business  that was  coinsured  to an  unaffiliated  company  at the end of 1995,
partially  offset by an increase in surrender  charges  earned on annuity policy
withdrawals.  Surrender  charges  assessed  against annuity  withdrawals for the
third  quarter of 1996 were $4.6 million  compared to $3.9 million for the third
quarter of 1995;  annuity  policy  withdrawals  were  $179.1  million and $172.0
million for the respective periods.  See "Liquidity and Capital Resources" for a
discussion of withdrawals and surrenders.

     Net investment  income decreased 2.6 percent to $102.7 million in the third
quarter of 1996 from $105.4  million in the third  quarter of 1995.  The average
invested assets  (amortized  cost basis)  increased to $5.0 billion in 1996 from
$4.8 billion in 1995, while the yield earned on average invested assets declined
to 8.15  percent in 1996 from 8.74  percent  in 1995 as a result of the  factors
discussed above for the nine month periods.

     Net realized  gains and net trading  income often  fluctuate from period to
period. The Company sold $.5 billion of investments  (principally fixed maturity
securities)  in the third quarter of 1996,  compared to $.4 billion in the third
quarter of 1995,  generating  net realized gains of $5.8 million and net trading
gains of $1.1  million in the third  quarter of 1996,  compared to net  realized
gains of $15.6  million  and net  trading  income  of $.3  million  in the third
quarter  of 1995.  In  addition,  during the third  quarter of 1995 the  Company
recorded a realized  loss of $4.5 million on the writedown of an investment as a
result of changes in  conditions  which caused the Company to conclude  that the
decline  in the fair  value of the  investment  was other  than  temporary.  The
declining  interest rate environment since the Acquisition date, which increased
the market value of fixed  maturity  securities,  contributed  to the  Company's
ability to realize gains on investment sales in 1995, and to a lesser extent, in
1996.


                                                            12

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



     Insurance policy benefits and change in future policy benefits decreased 21
percent  to $6.7  million  in the  third  quarter  of 1996  consistent  with the
explanation above for the nine month periods.

     Interest expense on annuities and financial products decreased 4.2 percent,
to $62.2  million in the third  quarter  of 1996  primarily  due to the  factors
described above for the nine month periods.

     Interest expense on notes payable decreased 13 percent,  to $7.2 million in
the third  quarter of 1996 as a result of the  factors  discussed  above for the
nine month periods.

     Interest  expense on investment  borrowings  decreased 52 percent,  to $1.1
million  in the third  quarter of 1996 due to a lower  average  balance of funds
borrowed and a lower average cost of funds.

     Amortization  related to operations  increased 20 percent, to $11.2 million
in the third quarter of 1996 consistent with the explanation  above for the nine
month periods.

     Amortization  related to realized  gains  decreased in the third quarter of
1996 as a result of lower realized gains in the period.

     Restructuring  expenses in 1996 include  expenses  incurred in  conjunction
with the consolidation of the Company's  operations with Conseco consistent with
the explanation above for the nine month periods.

     Other operating costs and expenses decreased 25 percent, to $5.8 million in
the third quarter of 1996  consistent  with the  explanation  above for the nine
month periods.

     Income tax  expense  decreased  22  percent,  to $7.3  million in the third
quarter of 1996  primarily due to the decrease in pretax  income.  The effective
tax rate of 39 percent in 1996 and 1995  exceeded the  statutory  corporate  tax
rate (35 percent) primarily because goodwill amortization cannot be deducted for
federal income tax purposes.

     Extraordinary charge in the 1996 period represents the loss recognized, net
of income  taxes,  on the  repayment  of the $125.0  million  principal  balance
outstanding under the senior credit facility using the proceeds from the sale of
stock to Conseco.

     SALES

     In accordance with generally accepted accounting principles,  the insurance
policy  income shown on our  consolidated  statement of  operations  consists of
premiums  we receive on  policies  which have life  contingencies  or  morbidity
features.  For annuity and  universal  life  contracts  without  such  features,
accounting  rules dictate that premiums  collected are not reported as revenues,
but rather as deposits to insurance liabilities. We recognize revenues for these
products in the form of investment income and surrender or other charges.

     Net premiums  collected in the nine months ended  September 30, 1996,  were
$537.9  million,  of which $529.4  million  were  recorded as deposits to policy
liability accounts. This compares to $647.0 million collected and $625.2 million
recorded  as  deposits to policy  liability  accounts  in the nine months  ended
September 30, 1995. Net premiums  collected declined in the first nine months of
1996  compared  to the first nine  months of 1995  primarily  due to a declining
interest  rate  environment   which  resulted  in  increased   competition  from
alternative  investments  such as  certificates  of  deposit,  mutual  funds and
variable annuity products.

     LIQUIDITY AND CAPITAL RESOURCES

     Insurance Operations

     The Company's annuity and life insurance  business  generally  provides the
insurance  subsidiaries  with positive cash flows from premium  collections  and
investment income. Cash flows from insurance subsidiary financing activities are
principally   the   result   of   premium   collections   from   annuities   and
interest-sensitive   insurance  contracts  and  the  related  benefit  payments,
including withdrawal and surrender payments.

     Withdrawals  and surrenders  have increased in recent years due to: (i) the
aging of the  Company's  annuity  business in force  resulting  in an  increased
amount of deferred annuity liabilities that could be surrendered without penalty
or with a  nominal  penalty;  (ii)  growth  in the  Company's  annuity  business
resulting  from the  substantial  volume of premium  collections in 1993 through
1995;  (iii)  increased  policyholder  utilization of the systematic  withdrawal
features  which  first  became  available  on  annuity  policies  in 1992;  (iv)
increased  competition  from  alternative  investments  such as  certificates of
deposit,  mutual funds and variable  annuity products as a result of a flattened
yield curve and declining  interest rates in 1995; and (v) to a certain  extent,
during  1995  and the  second  half of 1994,  reductions  in  American  Life and
Casualty's  ratings from two nationally  recognized  insurance  company  ratings
organizations as a result of the Acquisition and related financing transactions.
Approximately  one third of the 1995 increase in withdrawals  and surrenders was
attributable  to surrenders of a single  policy form  principally  issued during
1988 through 1990 in which the surrender  charge  declined from 4 percent at the
fifth policy  anniversary  date to zero percent at the sixth policy  anniversary
date.

                                                            13


<PAGE>

                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



     The trend of significant  increases in withdrawals and surrenders  subsided
in the first nine months of 1996 as policy  withdrawal  and  surrender  payments
increased  moderately to $585.1 million  compared to $580.5 million in the first
nine months of 1995.  This  increase was primarily due to an increase in annuity
penalty-free   partial   withdrawals.   Total   withdrawals  and  surrenders  by
policyholders  were 14.2 percent of the average cash values  outstanding  during
both the nine months ended  September 30, 1996,  and the year ended December 31,
1995.

     The following table summarizes the Company's  deferred annuity  liabilities
at September  30, 1996 and December 31, 1995,  and sales for the nine months and
year  then  ended,  respectively,  by  surrender  charge  category  (dollars  in
millions):
<TABLE>
<CAPTION>

                                                     September 30, 1996                           December 31, 1995
                                          ----------------------------------------     ------------------------------------
                                          Annuity                                      Annuity
Surrender charge percent                   sales    Percent  Liabilities   Percent      sales   Percent Liabilities Percent
------------------------                   -----    -------  -----------   -------      -----   ------- ----------- -------
<S>                                        <C>          <C>     <C>          <C>       <C>       <C>     <C>           <C>
No surrender charge...................     $   .2        *%     $  925.9      19%      $  .2       * %   $  986.1       21%
1 to 3.9 percent......................        -          -         419.0       9         -         -        352.3        7
4 to 6.9 percent......................        1.9        *         788.9      16         6.4       1        901.6       19
7 to 9.9 percent......................       42.9        9       1,358.3      28        64.4       9      1,100.6       23
10 to 11.9 percent....................      150.3       32         926.0      19       371.3      51      1,016.5       22
12 percent and greater................      280.3       59         410.2       9       285.9      39        359.3        8
                                           ------      ---      --------     ---     -------     ---     --------      ---

                                           $475.6      100%     $4,828.3     100%    $ 728.2     100%    $4,716.4      100%
                                           ======      ===      ========     ===     =======     ===     ========      ===
<FN>
* less than 1%
</FN>
</TABLE>

     Deferred  annuity  liabilities  that could be surrendered  without  penalty
increased from $508.8 million, or 14 percent of deferred annuity liabilities, at
December  31,  1993  to  $925.9  million,  or 19  percent  of  deferred  annuity
liabilities,  at September 30, 1996. This increase was primarily attributable to
the policy form discussed above whose  surrender  charge declined from 4 percent
at the  fifth  policy  anniversary  date to zero  percent  at the  sixth  policy
anniversary  date. Sales of this policy form peaked in the third quarter of 1989
and were  insignificant  after the third quarter of 1990. At September 30, 1996,
the aggregate account balances in force for this product were $489.2 million, of
which $452.5 million could be surrendered without penalty.

     The following table summarizes the Company's  deferred annuity  liabilities
in which the surrender  charge expires within the first  subsequent year and the
second subsequent year at December 31, 1994 and 1995, and September 30, 1996.
<TABLE>
<CAPTION>

                                                                Within
                                                          -------------------
                                                          first        second         Total
                                                       subsequent    subsequent    within next
                                                          year          year         2 years
                                                          ----          ----         -------
                                                                (Dollars in millions)
<S>                                                       <C>          <C>            <C>
December 31, 1994....................................     $456.0       $168.1         $624.1
December 31, 1995....................................      158.9         71.3          230.2
September 30, 1996...................................       70.1        157.5          227.6
</TABLE>

     Most of our assets are invested in fixed maturity securities, substantially
all of which are readily marketable. Although there is no present need or intent
to dispose of such investments,  we could liquidate  portions of our investments
or use them to facilitate  borrowings under reverse  repurchase  agreements,  if
such a need arose.  At September  30, 1996,  the  Company's  portfolio of bonds,
notes and redeemable  preferred  stocks had an aggregate net unrealized  gain of
$42.5 million.

     Parent Holding Companies

     Changes  in the  consolidated  balance  sheet  from  December  31,  1995 to
September  30,  1996,  reflect:  (i) a decrease  in the fair  value of  actively
managed fixed maturity  investments and its effects on the consolidated  balance
sheet  accounts;  (ii) an  increase  in retained  earnings  attributable  to the
Company's  operations;  (iii) the notes payable and capital  stock  transactions
described in the accompanying  notes to the consolidated  financial  statements;
and (iv) the change in basis resulting from the Conseco Transaction and adoption
of the "push down" method of accounting as described in the  accompanying  notes
to the consolidated financial statements.


                                                            14

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



     Excluding the effect of reporting fixed maturities at fair value, the ratio
of debt to total capital  decreased to 24 percent at September 30, 1996, from 48
percent at December 31, 1995. Including the effect of reporting fixed maturities
at fair value,  the ratio of debt to total  capital  decreased  to 23 percent at
September 30, 1996, from 36 percent at December 31, 1995. Such ratios  decreased
primarily as a result of the items discussed in the preceding paragraph.

     INVESTMENTS

     At September 30, 1996, the amortized cost and estimated fair value of fixed
maturity securities (all of which were actively managed) were as follows:
<TABLE>
<CAPTION>
                                                                                        Gross         Gross     Estimated
                                                                         Amortized    unrealized    unrealized    fair
                                                                           cost         gains         losses      value
                                                                           ----         -----         ------      -----
                                                                                          (Dollars in millions)
<S>                                                                      <C>           <C>            <C>        <C>
United States Treasury securities......................................  $   59.8      $  1.2         $ -       $   61.0
Obligations of states and political subdivisions.......................      32.9          .8            .1         33.6
Foreign government obligations.........................................      19.7         -              .4         19.3
Public utility securities..............................................     782.7        16.0           1.3        797.4
Other corporate securities.............................................   2,501.4        29.0          16.2      2,514.2
Mortgage-backed securities.............................................   1,501.3        19.8           6.3      1,514.8
                                                                         --------       -----         -----     --------

    Total fixed maturity securities ...................................  $4,897.8       $66.8         $24.3     $4,940.3
                                                                         ========       =====         =====     ========
</TABLE>

     The following  table sets forth the  investment  ratings of fixed  maturity
securities at September 30, 1996 (designated  categories include securities with
"+" or "-" rating  modifiers).  The category assigned is the highest rating by a
nationally  recognized  statistical rating  organization or, as to $84.5 million
fair value of fixed  maturities not rated by such firms,  the rating assigned by
the National Association of Insurance  Commissioners  ("NAIC"). For the purposes
of this table, NAIC Class 1 securities are included in the "A" rating;  Class 2,
"BBB"; Class 3, "BB" and Classes 4 to 6, "B and below."
<TABLE>
<CAPTION>

                                                                          Percent of
                                                                  --------------------------------
                                                                  Fixed maturity          Total
                              Investment rating                     securities         investments
                              -----------------                     ----------         -----------
                       <S>                                                <C>              <C>    
                       AAA......................................          33%               31%
                       AA.......................................          11                11
                       A........................................          27                25
                       BBB......................................          25                23
                                                                         ---               ---

                              Investment grade..................          96                90
                                                                         ---               ---

                       BB.......................................           3                 3
                       B+ and below.............................           1                 1
                                                                        ----               ---

                           Below investment grade...............           4                 4
                                                                        ----               ---

                              Total fixed maturity securities...         100%               94%
                                                                         ===                ==
</TABLE>

     At September 30, 1996, our below investment grade fixed maturity securities
had an amortized  cost of $183.0  million and an estimated  fair value of $183.1
million.

     The  Company's  investment  portfolio is subject to the risk of declines in
realizable  value. We attempt to mitigate this risk through the  diversification
and active management of our portfolio.  As of September 30, 1996, there were no
fixed maturity securities about which we had serious doubts as to the ability of
the issuer to comply with the  contractual  terms of its obligations on a timely
basis.

     Sales of investments  (principally  fixed maturity  securities)  during the
nine months ended September 30, 1996,  generated  proceeds of $1.1 billion,  net
realized  gains of $9.8 million and trading gains of $.1 million.  Proceeds from
sales of investments  during the first nine months of 1995 generated proceeds of
$1.7  billion,  net realized  gains of $69.2  million and trading  gains of $1.1
million. In addition,  during the first nine months of 1995 the Company recorded
a realized loss of $6.0 million on the writedown of an investment as a result of
changes in  conditions  which caused the Company to conclude that the decline in
the fair value of the investment was other than temporary.


                                                            15

<PAGE>

                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES


     At September 30, 1996, fixed maturity  securities included $1.5 billion (or
31 percent of all fixed maturity investments) of mortgage-backed  securities, of
which  $920.0  million were  collateralized  mortgage  obligations  ("CMOs") and
$594.8 million were pass-through securities. CMOs are securities backed by pools
of pass-through securities and/or mortgages that are segregated into sections or
"tranches".  These  securities  provide for  sequential  retirement of principal
rather than the  retirement  of  principal  on a pro rata share  basis,  such as
occurs on pass-through securities through regular monthly principal payments.

     The yield  characteristics of mortgage-backed  securities differ from those
of traditional fixed income  securities.  Interest and principal  payments occur
more frequently,  often monthly,  and mortgage-backed  securities are subject to
risks associated with variable prepayments. Prepayment rates are influenced by a
number of factors  which  cannot be  predicted  with  certainty,  including  the
relative  sensitivity of the mortgages backing the assets to changes in interest
rates,  a variety of economic,  geographic  and other  factors and the repayment
priority of the securities in the overall securitization structures.

     In  general,  prepayments  on the  underlying  mortgage  loans,  and on the
securities  backed by these  loans,  increase  when  prevailing  interest  rates
decline  significantly  below the interest rates on such loans.  Mortgage-backed
securities  purchased at a discount to par will  experience an increase in yield
when the  underlying  mortgages  prepay  faster than  expected.  Mortgage-backed
securities  purchased at a premium to par that prepay  faster than expected will
incur a reduction in yield.  When  interest  rates  decline,  the proceeds  from
prepayments  are likely to be  reinvested  at lower  rates than the  Company was
earning on the prepaid securities.  As interest rates rise, prepayments decrease
(because  fewer  underlying  mortgages are  refinanced).  When this occurs,  the
average maturity and duration of the mortgage-backed  securities increase.  This
lowers the yield on mortgage-backed  securities  purchased at a discount,  since
the discount is realized as income at a slower rate,  and increases the yield on
those  purchased  at a  premium,  as  a  result  of a  decrease  in  the  annual
amortization of the premium.

     The following table sets forth the par value,  amortized cost and estimated
fair value of mortgage-backed  securities including CMOs, summarized by interest
rates on the underlying collateral at September 30, 1996:
<TABLE>
<CAPTION>
                                                                                         Par        Amortized    Estimated
                                                                                        value         cost      fair value
                                                                                        -----         ----      ----------
                                                                                              (Dollars in millions)
<S>                                                                                   <C>           <C>          <C>
Below 7 percent.....................................................................  $  460.3       $  426.8    $   430.6
7 percent - 8 percent...............................................................     932.3          874.9        881.7
8 percent - 9 percent...............................................................     165.9          156.7        159.4
9 percent and above.................................................................      48.7           42.9         43.1
                                                                                      --------       --------     --------

           Total mortgage-backed securities.........................................  $1,607.2       $1,501.3     $1,514.8
                                                                                      ========       ========     ========
</TABLE>

     The amortized cost and estimated fair value of  mortgage-backed  securities
including  CMOs at September 30, 1996,  summarized by type of security,  were as
follows:
<TABLE>
<CAPTION>

                                                                                               Estimated fair value
                                                                                            -------------------------
                                                                                                        Percent of
                                                                            Amortized                  fixed maturity
Type                                                                          cost          Amount      securities
----                                                                          ----          ------      ----------
                                                                              (Dollars in millions)

<S>                                                                         <C>            <C>               <C>
Pass-throughs and sequential and targeted amortization classes............  $1,054.9       $1,059.7           21%
Support classes...........................................................     150.5          155.6            3
Accrual (Z tranche) bonds.................................................      24.2           24.7            1
Planned amortization classes and accretion directed bonds.................     148.4          150.1            3
Subordinated classes .....................................................     123.3          124.7            3
                                                                            --------       --------           --

                                                                            $1,501.3       $1,514.8           31%
                                                                            ========       ========           ==
</TABLE>

                                                            16

<PAGE>
                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES

     Pass-throughs and sequential and targeted amortization classes have similar
prepayment  variability.  Pass-throughs  have  historically  provided  the  best
liquidity   in   the   mortgage-backed    securities   market   and   the   best
price/performance  ratio when interest rates are volatile. This type of security
is also  frequently  used as collateral in the  dollar-roll  market.  Sequential
classes pay in a strict sequence; all principal payments received by the CMO are
paid to the  sequential  tranches in order of  priority.  Targeted  amortization
classes provide a modest amount of prepayment protection when prepayments on the
underlying  collateral  increase from those assumed at pricing;  they thus offer
slightly better call protection than sequential classes or pass-throughs.

     Planned  amortization and targeted  amortization classes are protected from
prepayment  risk;  this risk is absorbed by support  classes.  As such,  support
classes are usually  extremely  sensitive  to  prepayments.  Most of the support
classes we own are higher-  average-life  instruments  whose duration  generally
will not  lengthen  if interest  rates rise  further and will tend to shorten if
interest  rates  decline.  Since the par values of these bonds exceed  amortized
cost, higher prepayments will have the effect of increasing yields.

     Accrual bonds are CMOs  structured such that the payment of coupon interest
is deferred until principal  payments begin. On each accrual date, the principal
balance is increased by the amount of the interest (based upon the stated coupon
rate) that otherwise would have been payable. As such, these securities act much
like zero coupon bonds until cash payments begin. Cash payments typically do not
commence  until  earlier  classes in the CMO structure  have been  retired,  the
timing of which can be significantly  influenced by the prepayment experience of
the underlying  mortgage loan collateral.  Because of the zero-coupon element of
these  securities  and  the  potential  uncertainty  as to the  timing  of  cash
payments, their market values and yields are more sensitive to changing interest
rates than are other CMOs, pass-through securities or coupon bonds.

     Planned amortization classes and  accretion-directed  bonds are some of the
most stable and liquid  instruments in the  mortgage-backed  securities  market.
Planned  amortization  class  bonds  adhere  to a fixed  schedule  of  principal
payments,  provided that the underlying  mortgage  collateral  prepays within an
expected  range.  Changes  in  prepayment  rates are first  absorbed  by support
classes,  which insulate the planned  amortization classes from the consequences
of both faster  prepayments  (average life  shortening)  and slower  prepayments
(average life extension).

     Subordinated  CMO  classes  have  both  prepayment  and  credit  risk.  The
subordinated  classes  are  used  to  lend  credit  enhancement  to  the  senior
securities and as such,  both  prepayment and credit risk  associated  with this
class are generally higher than that of the senior  securities.  The credit risk
of subordinated  classes is derived from the negative leverage of owning a small
percentage of the underlying  mortgage loan collateral  while bearing a majority
of the risk of loss due to homeowners' defaults.

     The Company's  mortgage  loans are primarily  commercial  loans,  including
retail, multifamily residential,  office,  industrial,  nursing home, restaurant
and other  properties.  Less than 1 percent of the  mortgage  loan  balance  was
noncurrent  at  September  30, 1996.  There were no realized  losses on mortgage
loans in either the first nine months of 1996 or 1995.  At  September  30, 1996,
our loan loss reserve was $.5 million.

     Borrowings under reverse repurchase agreements and dollar-roll transactions
were $123.1  million at  September  30, 1996 and  averaged  approximately  $73.0
million  during  the  first  nine  months  of  1996.   These   borrowings   were
collateralized by pledged securities with fair values approximately equal to the
borrowings.

     STATUTORY INFORMATION

     Our  insurance  subsidiaries  are required to follow  statutory  accounting
practices  ("SAP")  prescribed or permitted by state insurance  regulators.  SAP
differs in many respects from generally accepted accounting principles ("GAAP").
Accordingly,  statutory  operating results and statutory capital and surplus may
differ   substantially  from  amounts  reported  in  our  GAAP  basis  financial
statements.  Our insurance subsidiaries do not employ surplus relief reinsurance
(which  some  other  firms  use to  increase  statutory  surplus),  nor have our
subsidiaries adopted any accounting practice not specifically  prescribed by SAP
which has the effect of increasing statutory surplus.

     After appropriate eliminations of intercompany accounts, the Company's life
insurance  subsidiaries  reported combined statutory net income of $19.2 million
for the nine months ended  September 30, 1996, and the following  amounts on the
combined statutory balance sheet at that date (dollars in millions):
<TABLE>
<CAPTION>
          
      <S>                                                                                   <C>    
      Statutory capital and surplus...................................................      $218.0
      Asset valuation reserve.........................................................        44.9
      Interest maintenance reserve ...................................................        22.8
                                                                                            ------

         Total........................................................................      $285.7
                                                                                            ======
</TABLE>

                                                            17

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



     At September 30, 1996,  American  Life and  Casualty's  surplus  included a
surplus note with a balance of $50.0  million.  The payment by American Life and
Casualty of dividends and other distributions,  including surplus note payments,
is subject to regulation by the Iowa Insurance  Division.  Dividends and surplus
note  payments  may be made only out of earned  surplus,  and all  surplus  note
payments  are  subject to prior  approval  by the Iowa  Insurance  Division.  At
September  30, 1996,  American  Life and  Casualty had earned  surplus of $113.2
million.   American   Life  and  Casualty  may  pay   dividends  or  make  other
distributions  without the prior approval of the Iowa Insurance Division as long
as such payments,  together with all other such payments within the preceding 12
months,  do not exceed the greater of: (i) American Life and Casualty's net gain
from  operations  (excluding  net  realized  capital  gains or  losses)  for the
preceding  calendar  year;  or (ii) 10 percent of its  statutory  surplus at the
preceding  December  31.  Under this  formula,  American  Life and  Casualty  is
entitled  to  distribute  up to $31.0  million as  dividends  and  surplus  note
payments  during 1996 without the prior approval of the Iowa Insurance  Division
($9.8 million had been distributed through September 30, 1996).







                                                            18

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES



                           PART II - OTHER INFORMATION



ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

a)   Exhibit.

     27.0  Financial Data Schedule.

b)   No reports on Form 8-K were filed for the quarter ended September 30, 1996.


                                                            19

<PAGE>


                  AMERICAN LIFE HOLDINGS, INC. AND SUBSIDIARIES






                                    SIGNATURE

     Pursuant to the  requirements  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.








                                         AMERICAN LIFE HOLDINGS, INC.


Dated: November 13, 1996                 By: /s/ ROLLIN M. DICK
                                            ------------------
                                            Rollin M. Dick,
                                            Executive Vice President and
                                              Chief Financial Officer
                                              (authorized officer and principal
                                              financial officer)

                                                            20






















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